-----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, DoExSn+t2ClPDDp9DxQ3+Z8cjVa2dYb+tBIpL6/JwNCYzG1tYy1OOVtDEV8ARhyV drDBzn4kQR5HvtxFG3B97A== 0000880224-03-000006.txt : 20030520 0000880224-03-000006.hdr.sgml : 20030520 20030520114136 ACCESSION NUMBER: 0000880224-03-000006 CONFORMED SUBMISSION TYPE: 40-F PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAPE POLYMER GROUP INC CENTRAL INDEX KEY: 0000880224 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 000000000 STATE OF INCORPORATION: A8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 40-F SEC ACT: 1934 Act SEC FILE NUMBER: 001-10928 FILM NUMBER: 03711628 BUSINESS ADDRESS: STREET 1: 110E MONTEE DE LIESSE STREET 2: ST LAURENT CITY: QUEBEC H4T 1N4 CANAD STATE: A8 BUSINESS PHONE: 5147310731 MAIL ADDRESS: STREET 1: 110 E MONTEE LIESSE CITY: ST LAURENT STATE: A8 ZIP: 00000 40-F 1 ipg40faif2002.txt 40-F/AIF/EXHS.1THRU3/CONSENT/CERTIFICATIONS/RESOLUTIONS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 40-F ANNUAL REPORT PURSUANT TO SECTION 13(a) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 2002 Commission file number: 1-10928 INTERTAPE POLYMER GROUP INC. (Exact name of Registrant as specified in its charter) Canada (Jurisdiction of incorporation or organization) 110E Montee de Liesse, St. Laurent, Quebec H4T 1N4 Canada (514) 731-0731 (Address and telephone number of Registrant's principal executive offices) Burgess H. Hildreth, 3647 Cortez Road West, Bradenton, Florida, 34219 941) 727-5788 (Name, address and telephone number of Agent for service in the United States) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each Exchange on which registered: Common Shares, without nominal or New York Stock Exchange par value The Toronto Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: -NONE- Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: -NONE- For annual reports, indicate by check mark the information filed with this form: X Annual Information Form X Audited Annual Financial Statements The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 2002 is: 33,821,074 Common Shares -0- Preferred Shares -1- Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to the registrant in connection with such rule. Yes _______ No X Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ Undertaking. Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities. Controls and Procedures. The Registrant maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. The principal executive officer and the principal financial officer of the Registrant, under the supervision and with the participation of Management, have evaluated the effectiveness of the Registrant's disclosure controls and procedures within ninety days prior to the filing of this Form 40-F and have concluded that Registrant's disclosure controls and procedures are adequate and effective to accomplish the purpose for which they were designed. Subsequent to the date of such evaluation, there were no significant changes in the Registrant's internal controls or any other factors that could significantly affect Registrant's internal controls. Further, there were no significant deficiencies or material weaknesses in Registrant's internal controls requiring corrective actions. Signature. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 40-F, and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized. -2- INTERTAPE POLYMER GROUP INC. (Registrant) /s/ Andrew M. Archibald (Signature) Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer, Secretary, Vice President, Administration Date: May 16, 2003 -3- CERTIFICATIONS I, Melbourne F. Yull, Chairman of the Board and Chief Executive Officer of Intertape Polymer Group Inc., certify that: 1. I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date")" and c. Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (and persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and -4- 6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By /s/ Melbourne F. Yull Melbourne F. Yull, Chairman of the Board and Chief Executive Officer Date: May 16, 2003 _______________________________________________________________________________ I, Andrew M. Archibald, Chief Financial Officer, Secretary, and Vice President, Administration of Intertape Polymer Group Inc., certify that: 1. I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date")" and c. Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (and persons performing the equivalent function): -5- a. All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ Andrew M. Archibald Andrew M. Archibald, Chief Financial Officer, Secretary, Vice President, Administration Date: May 16, 2003 -6- EXHIBIT INDEX
Exhibit No. Description Page No. 1 Annual Information Form dated May 16, 2003 8 2 Consent of Independent Chartered Accountants 36 3 Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002 37 4 2002 Annual Report, including: Audited Annual Consolidated Financial Statements (Pg. 22) Management's Discussion and Analysis for 2002 (Pg. 10) 5 Notice of Annual and Special Meeting of Shareholders and Management Proxy Circular 6 First Amending Agreement dated as of December 20, 2002, to Credit Agreement dated as of December 20, 2001 7 Second Amending Agreement dated as of March 14, 2003, to Credit Agreement dated as of December 20, 2001 8 Amendment No. 1 dated as of December 20, 2002 to Amended and Restated Note Agreement dated December 20, 2001 (US$137,000,000 Senior Secured Notes due March 31, 2008) 9 Amendment No. 2 dated as of March 28, 2003 to Amended and Restated Note Agreement dated December 20, 2001 (US$137,000,000 Senior Secured Notes due March 31, 2008) 10 Amendment No. 1 dated as of December 20, 2002, to Amended and Restated Note Agreement dated December 20, 2001 (US$25,000,000 Senior Secured Notes, Series A, Due 2005; (US$112,000,000 Senior Secured Notes, Series B, Due 2009) 11 Amendment No. 2 dated as of March 28, 2003, to Amended and Restated Note Agreement dated December 20, 2001 (US$25,000,000 Senior Secured Notes, Series A, Due 2005; US$112,000,000 Senior Secured Notes, Series B, Due 2009)
-7- EXHIBIT 1 Item 1. INTERTAPE POLYMER GROUP INC. ANNUAL INFORMATION FORM For the Year ended December 31, 2002 Dated: May 16, 2003 -8- INTERTAPE POLYMER GROUP INC. ANNUAL INFORMATION FORM Table of Contents Page Item 1. Cover Page 8 Item 2. Corporate Structure 11 2.1 Name and Incorporation 11 2.2 Intercorporate Relationships 11 Item 3. General Development of the Business 12 3.1 Three Year History 12 3.2 Significant Acquisitions and Significant Dispositions 14 3.3 Trends 15 3.4 Cautionary Statements and Risk Factors 15 Item 4. Narrative Description of the Business 19 General 19 Products 20 Sales and Marketing 24 Manufacturing; Quality Control 25 Equipment and Raw Materials 26 Research and Development; New Products 26 Trademarks and Patents 26 Competition 27 Environmental Regulation 27 Employees 28 Description of Property 28 Item 5. Selected Consolidated Financial Information 29 5.1 Annual Information 29 5.2 Dividends 30 Item 6. Management's Discussion and Analysis 30 -9- Item 7. Market For Securities 30 Item 8. Directors and Officers 31 Item 9. Additional Information 35
-10- Item 2. Corporate Structure 2.1 Name and Incorporation The business of Intertape Polymer Group Inc. ("Intertape Polymer Group" or the "Company") was established by Melbourne F. Yull, Intertape Polymer Group's Chairman of the Board and Chief Executive Officer, when Intertape Systems Inc., a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal. Intertape Polymer Group was incorporated under the Canada Business Corporations Act on December 22, 1989 under the name "171695 Canada Inc." On October 8, 1991, the Company filed a Certificate of Amendment changing its name to "Intertape Polymer Group Inc." A Certificate of Amalgamation was filed by the Company on August 31, 1993, and the Company was amalgamated with EBAC Holdings Inc. In February 1992, Intertape Polymer Group completed an initial public offering of its common shares at the offering price of $5.035 (US$4.25)(after giving effect to a 2:1 stock split on June 4, 1996). The Company completed a second public offering of its common shares in Canada and the United States in October 1995, at the offering price of $9.88 (US$7.30) (after giving effect to a 2:1 stock split on June 4, 1996). The Company then completed a public offering of 3,000,000 of its common shares in Canada on a "bought deal" basis in March 1999, at the offering price of $40.25 (US$26.31) per share. In March 2002, the Company completed a public offering of 5,100,000 of its common shares in Canada on a "bought deal" basis at the offering price of $15.50 (US$9.71) per share. The shareholders, at the Company's June 11, 2003 annual and special meeting will vote on the replacement of the Company's By-Law No. 1 with a new General By-Law 2003-1. The intent of the replacement by-law is to conform the Company's general by-laws with amendments to the Canadian Business Corporations Act enacted since the adoption of the general by-laws and to simplify the governance of the Company. 2.2 Intercorporate Relationships Intertape Polymer Group is a holding company which owns various operating companies in the United States and Canada. Intertape Polymer Inc., incorporated under the Canada Business Corporations Act ("IPI"), is the principal operating company for the Company's Canadian operations. Intertape, Inc., a Virginia corporation, formerly known as Intertape Polymer Corp. ("IPC"), is the principal operating company for the Company's United States and international operations. The table below lists for each of the subsidiaries of the Company their respective place of incorporation and the percentage of voting securities beneficially owned or over which control or direction is exercised directly or indirectly by Intertape Polymer Group. Certain subsidiaries, each of which represents not more than ten percent of consolidated assets and not more than ten percent of consolidated sales and operating revenues of the Company, and all of which, in the aggregate, represent not more than twenty percent of total consolidated assets and total consolidated sales and operating revenues of the Company at December 31, 2002, have been omitted. -11-
Corporation Place of Percentage of Incorporation Ownership or Control Intertape Polymer Group Inc. Canada Parent Intertape Polymer Inc. Canada 100% IPG Financial Services Inc. Delaware 100% IPG Holding Company of Nova Scotia Nova Scotia 100% IPG Finance LLC Delaware 100% Intertape Inc. Virginia 100% Central Products Company Delaware 100% Intertape Polymer Corp. Delaware 100% IPG Administrative Services Inc. Delaware 100% Intertape Woven Products Services S.A. de Mexico 100% IPG Holdings LP Delaware 100% Polymer International Corp. Virginia 100% IPG (US) Inc. Delaware 100% IPG (US) Holdings Inc. Delaware 100% IPG Technologies Inc. Delaware 100%
Item 3. General Development of the Business 3.1 Three Year History The Company commenced operations in 1981 and since has evolved into a recognized leader in the development and manufacture of specialized polyolefin plastic and paper packaging products and related packaging systems. Until recently, Intertape Polymer Group's business strategy has been one of growth. Commencing in the mid-1990's, the Company made several strategically important acquisitions to further its business plan to either develop or acquire new products to complete the "basket of products" approach to the Company's markets. Set forth below are the Company's most recent principal acquisitions, including its last acquisition as of August 31, 2000, when the Company purchased the assets of Olympian Tape Sales, Inc. d/b/a United Tape Company, which distributed various packaging products into the retail market. This acquisition established Intertape Polymer Group in the North American retail market and accelerated the development of this important channel of distribution. -12- Completed Acquisitions
Year Annual Cost of Acquisitions Company Location Products (US$ in millions) 1996 $ 5.3 Tape, Inc. Green Bay, Wisconsin Water-activated packaging tapes 1997 $ 42.9 American Tape Co. Marysville, Michigan Pressure-sensitive Richmond, Kentucky tapes, masking tapes 1998 $113.2 Anchor Continental, Inc. Columbia, South Carolina Pressure-sensitive Inc. tapes, masking and duct tapes Rexford Paper Company Milwaukee, Wisconsin Pressure-sensitive and water-activated tapes 1999 $111.3 Central Products Company Menasha, Wisconsin Pressure-sensitive Brighton, Colorado and water-activated carton sealing tapes Spinnaker Electrical Tape Pressure-sensitive Company Carbondale, Illinois electrical tapes 2000 $ 32.2(subject to adjustment) Olympian Tape Sales, Inc. Cumming, Georgia Distribution of packaging products
Since its last acquisition in 2000, the Company has transitioned from a period of rapid expansion to a period of operational consolidation and debt reduction. The Company has focused on implementing improvements aimed both at realizing the benefits of past acquisitions and optimizing the Company's efficiency and quality, including the completion of the integration of the information systems and customer service departments of its previously acquired companies. In 2001, the Company completed the implementation of its Regional Distribution Centers ("RDCs"). The streamlined operations of the five RDCs permitted the Company to close the approximately twenty-five leased warehouse facilities it was maintaining and consolidate product shipments through the RDCs. During 2002, the Company continued to monitor the operations of its RDCs and has re-assessed its overall RDC strategy. As a result, in its ongoing efforts to attain maximum efficiency, the Company has recently announced that it will consolidate three RDCs into a new facility in Danville, Virginia, adjacent to its existing manufacturing operations. This should result in higher product stock availability culminating in greater efficiencies and additional cost reductions for the Company. During 2001, Intertape Polymer Group took various cost reduction initiatives including reducing support functions and implementing organizational changes and plant rationalizations. This initiative included the closure of the Company's Flexible Intermediate Bulk Container (FIBC) manufacturing plant in Rayne, Louisiana, and expansion of its Mexican operations. In its efforts to remain a low cost producer, in 2002 the Company completed the consolidation of its U.S. based operations for FIBC production into its Piedras Negras facility in Mexico. The Company's facility located in Piedras Negras, Mexico, 150 miles southwest of San Antonio, Texas, is in an industrial park with adjacent buildings that will permit future growth, if required. The Company is the second largest producer of FIBCs in North America and this move reflects the Company's commitment to increase FIBC production from lower cost sources. -13- During 2002, the Company continued its participation in one joint venture, Fibope Portuguesa-Filmes Biorientados, S.A. ("Fibope"). Fibope produces shrink films in Portugal for the European market and has doubled its manufacturing capacity since 1995. Until 1998, the majority of the Company's growth came from the sale of internally developed products. The acquisitions in 1998 and thereafter further increased capacities and internal growth has also continued. The Company's Utah manufacturing facility, a 115,000 square foot plant, became operational in June 1998, was expanded in 1999, and was expanded further in 2001. Consistent with the Company's strategy, this plant is acting not only as a producer of shrink and stretch films, but also as a distribution center for all of the Company's products with the goal to increase sales in the western United States and western Canada. In December, 2001, Intertape Polymer Group completed the refinancing of both its bank credit facilities and long-term debt. The Company and its subsidiaries entered into a Credit Agreement dated December 20, 2001, providing for revolving credit facilities in the aggregate amount of up to US$145 million secured by all of the Company's tangible and intangible assets. Further, the Company entered into Amended and Restated Note Agreements each dated December 20, 2001, with respect to its US$137.0 million Senior Notes and US$137.0 million Series A and B Senior Notes, increasing the interest rates and granting the noteholders a security interest in the tangible and intangible assets of the Company. During 2001, Intertape Polymer Group reduced its short-term debt by US$12.9 million and long-term debt by US$9.6 million. During 2002, the Company further reduced its debt under the credit facilities and long-term notes by US$69.7 million ending the year with a balance of US$321.3 million. Also in 2002, as a result of the Company's continued commitment to further debt reductions, its lenders amended the debt agreements to provide for less restrictive financial covenants. Such Amendments are attached to Form 40-F as Exhibits 6 through 11, inclusive, to which this Annual Information Form is attached as Exhibit 1. Pursuant to the requirements of the Canadian Institute of Chartered Accountants, which are comparable to the applicable U.S. standards, Intertape Polymer Group performed a goodwill impairment test as of December 31, 2002, which resulted in a one-time non-cash charge to operating expenses of $70.0 million. In March, 2003, the bankers and noteholders further amended the Company's financial covenants to accommodate this impairment and the Company does not anticipate any impact on continuing operations. 3.2 Significant Acquisitions and Significant Dispositions While future acquisitions are possible and part of the Company's strategy for growth, no favorable opportunities presented themselves during 2002, and thus, no significant acquisitions were made. The Company also did not make any significant dispositions during 2002. -14- 3.3 Trends The Company anticipates that its gross profits and gross margins should continue to improve during 2003 based on certain factors. First, the Company intends to proceed with the implementation of additional cost reduction programs, as well as reaping the financial benefits of those already in place. One area the Company will address in 2003 is its overcapacity with respect to water-activated tape products. As a result of a continuing decline in demand for those products, Intertape Polymer Group will continue to carefully evaluate its costs and opportunities for savings. Second, the Company believes it will be able to accommodate increases in sales volume without the need for additional capital expansion. The Company has already notified its customers of impending price increases which, combined with other initiatives, such as sourcing initiatives, formulation changes and waste reduction programs, should enable Intertape Polymer Group to enhance the difference between its material costs and selling prices. Lastly, the Company plans to continue to reduce its debt in 2003. 3.4 Cautionary Statements and Risk Factors This Annual Information Form, including the Management's Discussion & Analysis incorporated herein by reference, contains certain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") concerning, among other things, discussions of the business strategy of Intertape Polymer Group and expectations concerning the Company's future operations, liquidity and capital resources. When used in this Annual Information Form, the words "anticipate", "believe", "estimate", "expect" and similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements, including statements regarding intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties. All statements other than statements of historical fact made in this Annual Information Form or in any document incorporated herein by reference are forward-looking statements. In particular, the statements regarding industry prospects and the Company's future results of operations or financial position are forward-looking statements. Forward-looking statements reflect the Company's current expectations and are inherently uncertain. Actual results may differ materially from those in the forward-looking statements as a result of various factors, including those factors set forth below and other factors discussed elsewhere in this Annual Information Form and in the Management's Discussion & Analysis included in the Company's Annual Report. In addition to the other information contained in this Annual Information Form, readers should carefully consider the cautionary statements and risk factors set forth below. Shortages in raw material decrease sales. In the past, there have been shortages from time to time in the supply of certain resins. In the event there are shortages, the Company's sales could decrease. -15- Increases in raw material costs reduces gross margins. The cost of raw materials began to rise in the third quarter of 2002. The Company has initiated a number of price increases to offset the increased costs, however, as a result of continued economic weakness, it has been difficult and may continue to be difficult, for the Company to pass on these increases. Future acquisitions of companies may have an adverse effect on our business, financial condition and operations. An important aspect of Intertape Polymer Group's business strategy is to acquire the assets of companies that will complement our existing products, expand our marketing area, improve distribution efficiencies, and enhance our technological capabilities. Financial risks to the Company in connection with future acquisitions include the use of its cash resources, incurring additional debt and liabilities, and potentially dilutive issuances of equity securities. Further, there are possible operational risks including difficulties assimilating the operations, products, technology, information systems and personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company's business. The Company's credit facilities and bank indebtedness contain covenants that under certain circumstances limit Management's discretion in certain business matters. The Amended and Restated Note Agreements entered into in December 2001, as amended, relating to the US$137 million Senior Notes and US$137 million Series A and B Senior Notes ("Note Agreements") and the Credit Agreement entered into in December 2001, as amended, relating to the Company's revolving credit facilities contain financial and operating covenants that limit Management's discretion in certain business matters which may restrict the Company's ability to take advantage of potential business opportunities as they arise. These covenants place restrictions on, among other things, the Company's ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments (including dividends and repurchases of the Company's common shares), and to sell or otherwise dispose of assets and merge or consolidate with other entities. The revolving credit facilities also require the Company to meet certain financial ratios and tests that may require the Company to take action to reduce its debt or act in a manner contrary to its business objectives. Failure by the Company to comply with the obligations in its revolving credit facilities and Note Agreements could result in an event of default which, if not cured or waived, could permit acceleration of the Company's indebtedness under the revolving credit facilities and Note Agreements and could allow the creditors and/or noteholders thereunder to exercise their security interests, both of which could have a material adverse effect on the Company. -16- New products may fail to attract customers. Intertape Polymer Group's business plan involves the introduction of new products, which are both developed internally and obtained through acquisition. In the event the market does not accept these products or competitors introduce similar products, the Company's ability to expand its markets and generate organic growth could be negatively impacted and there could be an adverse affect on its financial condition and operating results. The Company may not be able to compete successfully with its larger competitors. The larger competitors of Intertape Polymer Group have greater financial resources with which to overcome what the Company believes to be significant barriers to entry into the existing packaging market, including the high cost of vertical integration, the significant number of patents already issued in respect of various processes and equipment, and the difficulties and cost of developing an adequate distribution network. Compliance with environmental regulations could be costly. Intertape Polymer Group, like others in similar businesses, is subject to extensive environmental laws and regulations. The Company's policies and procedures have been designed to comply with these laws and regulations. Increasingly stringent environmental laws and regulations could necessitate the Company to make additional expenditures to achieve or maintain compliance. Achieving and maintaining compliance with present and future environmental laws and regulations could restrict the Company's ability to modify or expand its plants or to continue manufacturing. Compliance could also require the acquisition of additional equipment. Some of Intertape Polymer Group's plants have a history of industrial use. Soil and groundwater contamination has occurred at some of the Company's plants. Environmental laws impose liability on an owner, tenant, or operator of real property for the removal or remediation of hazardous or toxic substances, even if they were unaware of or not responsible for the contamination. Further, any company who arranges for the disposal or treatment of hazardous substances at a disposal facility may be liable for the costs of remediation of such substances at such facility whether or not the company owns or operates the facility. In accordance with environmental laws and regulations, the Company periodically investigates, remediates, and monitors soil and groundwater contamination at certain of its plants. Following implementation of recent legislation on contaminated sites in Quebec, the Company is investigating the contamination at its St. Laurent plant to determine whether further action is required. Currently the Company is remediating contamination at its Marysville, Michigan, and Columbia, South Carolina plants and has installed a hydraulic barrier at its St. Laurent, Quebec, plant to prevent off-site migration of contaminated groundwater, however it is not anticipated that the ultimate resolution of these matters will have a material adverse effect on the Company's business or results of operations. -17- Intertape Polymer Group obtains Phase I or similar environmental assessments for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections without soil sampling or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on the Company. Nevertheless, the Company's assessment may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company's properties could be affected in the future by the conditions of the land or operations in the vicinity of the properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of the Company's operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on the Company. Anti-takeover provisions in the Company's Shareholder Protection Rights Plan may prevent an acquisition. On August 24, 1993, the shareholders of Intertape Polymer Group approved a Shareholder Protection Rights Plan (the "Plan"). Under the Plan, one common share purchase right was issued on September 1, 1993 in respect of each outstanding common share and became issuable in respect of each common share issued thereafter. Although the Plan was to have expired on September 1, 1998, on May 21, 1998, the shareholders approved an amendment extending the term of the Plan to September 1, 2003. The shareholders at their June 11, 2003 meeting, will vote on the adoption of an amended and restated Plan which, among other things, would extend the Plan through the date immediately following the date of the Company's 2006 annual shareholders' meeting. The effect of the Plan is to require anyone who seeks to acquire 20% or more of Intertape Polymer Group's voting shares to make a bid complying with specific provisions of the Plan. Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price. The Company's exemptions under the Exchange Act as a foreign private issuer limits the protections and information afforded investors. Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act. As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer's equity securities within a period of less than six months). Because of these exemptions, purchasers of Intertape Polymer Group's securities are not afforded the same protections or information generally available to investors in public companies organized in the United States. Intertape Polymer Group previously filed its annual -18- reports on Form 20-F. Commencing with the year ended December 31, 2000, the Company files its annual report on Form 40-F. Intertape Polymer Group reports on Form 6-K with the Commission and publicly releases quarterly financial reports. Because Intertape Polymer Group is a Canadian company, it may be difficult for investors to effect service of process or enforce judgments against us. Intertape Polymer Group is a Canadian corporation, certain of its officers and directors, and its auditors are residents of Canada, and a portion of our assets are located outside of the United States. Accordingly, it may be difficult for investors to effect service of process within the United States upon Intertape Polymer Group or such persons, or to enforce against them judgments obtained in the United States predicated upon the civil liability provisions of the Securities Act. Item 4. Narrative Description of the Business General Intertape Polymer Group develops, manufactures and sells a variety of specialized polyolefin plastic packaging products. These products include INTERTAPE(TM) pressure-sensitive and water-activated tape, EXLFILM(R) shrink film ("EXLFILM(R)"), STRETCHFLEX(R) stretch wrap ("STRETCHFLEX(R)") and woven products. Most of the Company's products are derived from resins that are converted into films and adhesives. Resins also are combined with paper and converted into a variety of packaging products. Vertical integration, whereby the Company performs each step in the conversion of polyolefin resins and paper into its various products, and continuous capital expenditures to increase manufacturing efficiencies allow the Company to be among the low-cost producers of each product it manufactures. This vertical integration combined with the use of high speed production equipment provides competitive advantages to the Company in flexibility and control of the manufacturing process and in speed of delivery. Management considers all of its products to be within one operational segment because all products are made basically from similar extrusion processes and differ only in the final stages of manufacturing. The Company expanded its product offering with the 1999 acquisitions of Spinnaker Electrical Tape Company, a U.S. manufacturer of pressure-sensitive electrical tapes, and Central Products Company, a U.S. manufacturer of a natural rubber pressure-sensitive tape. Central Products Company also manufactured hot melt and acrylic pressure-sensitive tapes, and a line of water-activated carton sealing tapes, giving the Company what it now believes to be 75% of the water-activated tape market. The Company's revenues are derived primarily from sales of its products in the United States and Canada, with approximately 85% of the Company's 2002 revenues attributable to sales from manufacturing facilities in the United States. The Company's head office is located in Montreal, Quebec and the Company maintains approximately 2.6 million square feet of manufacturing facilities throughout the United States, Canada and Portugal. -19- Products INTERTAPE(TM) Carton Sealing Tape: Pressure-Sensitive and Water-Activated Tapes The Company produces a variety of pressure-sensitive plastic film carton sealing tape, ranging from commodity designed standard tape to tape tailored to meet customers' unique requirements. The product range encompasses tape with film thickness from 25 microns to 50 microns and adhesives formulated for manual as well as automatic applications. Carton sealing tape lends itself to use in high speed taping machines that replace other closure methods such as staples, hot melt glues and cold glues. The tape produced by the Company includes a wide range of customized colored and printed tape, as well as tape designed for cold temperature applications and label protection. The Company believes that it is one of the leading manufacturers of pressure-sensitive carton sealing tape and further believes that it is the only manufacturer in North America of all three types of adhesives; hot melt, acrylic, and natural rubber. Carton sealing tape is manufactured and sold under the INTERTAPE(TM) name to industrial distributors, leading retailers, and manufactured for sale under private labels. It is produced at the Company's Danville, St. Laurent, Richmond, and Brighton facilities and is primarily utilized by end-users for sealing corrugated cartons. Geographic territories in which the Company markets its products are serviced by sales personnel and manufacturers' representatives coordinated by regional managers. Distributors are appointed on a basis designed to achieve market penetration of both commodity and higher grade products. The Company markets carton sealing tapes, industrial tapes, equipment, and stretch and shrink films as a "basket of packaging and specialty products", an approach believed to be unique in the industry. This broad assortment of products is available from the Company's five RDCs and offers committed distribution partners opportunities for increased inventory turns, reduced storage space, and lower transaction costs. The Company's acquisition in 1993 of the assets of Interpack, a manufacturer of equipment used to apply pressure-sensitive tapes to seal corrugated boxes, enabled the Company to further enhance the mix of products it offered to its customers. The Company introduced a line of machines designed for the high-speed application of pressure-sensitive carton sealing tape in January 1994 and continues to enhance and improve its equipment designs. The acquisition of Tape, Inc. in 1996 and Central Products Company in 1999 added a complete range of water-activated adhesive tapes to the Company's product mix. This product line is generally sold through the same distribution network as pressure-sensitive carton sealing tape which has allowed the Company to increase its market penetration for this product. Water-activated tapes are used exclusively in the mail order business and the furniture and apparel industries where a strong mechanical bond is needed to seal large boxes that will be subject to rigorous handling during shipment. The Company believes it is the largest producer of this type of tape and has in excess of 70% of the North American market. The Company's principal competitors for the sale of carton sealing tape products are Minnesota Mining & Manufacturing Co. ("3M"), Shurtape Technologies, Inc., and Sekisui TA Industries, Inc. -20- INTERTAPE(TM) Masking Tapes: Performance and General Purpose The Company added masking tapes to its product line in December 1997 through the acquisition of American Tape Co. ("American Tape"), a leading manufacturer of these products and expanded its position in this product line with the acquisition of Anchor Continental, Inc. ("Anchor") in September 1998. Masking tapes are used for a variety of end-use applications which can be broadly described under two categories: general purpose and performance. General purpose applications include packaging and bundling, and residential and commercial paint applications. Performance applications include use in painting of aircraft, cars, buses and boats, where the properties of the tape, such as high temperature resistance and clean adhesive release, are individually designed for the customer's process. The Company's processing capabilities include solvent and synthetic rubber, hot melt and acrylic adhesive alternatives. The Company believes that its unique adhesive systems provide it with a competitive advantage in this market. The main competitors for the sale of masking tapes include 3M, Shurtape Technologies, Inc., and Tesa Tape Inc. INTERTAPE(TM) Reinforced Filament Tape: Performance and General Purpose In addition to masking tapes, the Company's purchases of American Tape and Anchor also introduced reinforced filament tapes and tensiled polypropylene tapes (MOPP) to the Company's product line. Reinforced, general and specialty products are manufactured at the Company's facilities in Richmond, Kentucky and Marysville, Michigan. These facilities produce filament tape using synthetic, natural rubber and hot melt adhesives coated on a variety of plastic films. The reinforcement is provided by fibreglass yarns laminated between the adhesive and backing layers. MOPP tapes are made from highly oriented polypropylene films and complement the reinforced filament products in several of the unitizing and bundling operations. Many of these filament tapes are odorless, stainless, and provide clean removal and are used in bundling, sealing, unitizing, palletizing and packaging, notably for household appliances. The Company's main competitor in the industrial filament tape market is 3M, and for commodity filament tapes the Company's main competitor is Tara Tape. Acrylic Coating In 1995, the Company completed a $7.0 million capital expenditure program for an acrylic coater and ancillary equipment design to apply acrylic based adhesives to a wide variety of substrates at its Danville, Virginia plant. These acrylic coatings, when applied to film tapes, offer extended shelf life as well as increased performance under the extremes of low and high temperatures. In addition, certain applications, such as mirror backing, utilize woven products as the base material to which acrylic coating is applied. In 2000 and 2001, a sixth BOPP extrusion line was commercialized enabling the Company to be completely self-sufficient in the production of film for pressure sensitive tapes for acrylic based adhesive tapes. -21- INTERTAPE(TM) Duct Tape The acquisition of Anchor provided the Company a significant capacity in the duct tape product line. Duct tapes are manufactured at the Columbia, South Carolina, facility. Approximately 75% of the duct tape volume consists of polyethylene-coated cloth. Aluminum foil type tape accounts for most of the non-polyethylene coated product sales of the Company's duct tape products. The main competitors are Tyco Adhesives and Shurtape Technologies, Inc. EXLFILM(R) Shrink Wrap EXLFILM(R) is a specialty plastic film which shrinks under controlled heat to conform to package shape as compared to other packaging forms that require unique machinery for different product sizes and shapes. The process provides versatility because it permits the over-wrapping of a variety of products of considerably different sizes and dimensions (such as printing and paper products, packaged foods, cassettes, toys, games and sporting goods, and hardware and housewares). The Company manufactures EXLFILM(R) at its plant in Truro, Nova Scotia, and at its Tremonton, Utah facility. The Company believes that its continued investment in equipment and product development will help it expand in this market. With the development of cross-linking technology, the Company has introduced a new line of high performance shrink film, EXLFILMPLUS(TM), which can be used to satisfy additional end user applications. The Company's shrink wrap products are sold through a select group of specialty distributors primarily to manufacturers of packaged goods and printing and paper products who package their products internally. In addition, the Company holds a 50% interest in FIBOPE, a manufacturer of shrink films in Portugal. FIBOPE utilizes similar manufacturing equipment as is currently operated by the Company in its Truro and Tremonton facilities. In addition to being served by the Company, the United States and Canadian markets for polyolefin shrink wrap are currently served by two large United States manufacturers, Sealed Air and Bemis Company, Inc., and to a lesser extent by foreign manufacturers. STRETCHFLEX(R) Stretch Wrap STRETCHFLEX(R) is a multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallet loads of various products to ensure a solid load for shipping. During 1999, the Company invested in upgrading all of its cast lines to new five-layer technology. This technology, combined with re-engineered film allows the Company to produce polyolefin stretch wrap that has higher performance while reducing manufacturing costs. In 2000, a seventh cast line was installed in the Danville, Virginia plant, further increasing the Company's production capacity of stretch films. The Company has the capacity to produce a total of 130 million pounds of STRETCHFLEX(R) annually at its Danville, Virginia plant and its facility in Tremonton, Utah. -22- The North American market for such polyolefin stretch wrap is served by a number of manufacturers, the largest of which are AEP, Tyco, and Linear Films, Inc. Industrial Electrical Tapes As a result of the Company's 1999 acquisition of certain assets of SETco, which included its Carbondale, Illinois, facility, the Company is now a manufacturer of specialty electrical and electronic tape. The new manufacturing capability and technology at the Carbondale, Illinois, facility, coupled with the Company's high temperature resistant products manufactured at its Marysville, Michigan, facility is providing the Company access to high margin markets. Competing manufacturers of industrial electrical tapes include 3M, and Permacel. Finally, the Company's acquisitions have positioned the Company as a stronger supplier of industrial tape, second only, in the estimation of management, to 3M in North America, with the additional capability to provide shrink and stretch wrap, a product line 3M does not offer. The Company's status as a low-cost, high value added single source supplier to its individual distributor customer base should, subject to economic factors, lead to sales growth in the future. Woven Products The Company produces a variety of finished products utilizing coated woven polyolefin fabrics, such as bags and lumber wrap, as well as coated woven polyolefin fabrics that are sold to other manufacturers which convert these fabrics into finished products, such as packaging, protective covers, pond liners, housewrap, recreational products, and temporary structures. NOVA-THENE(R) ProWrap lumber wrap is a polypropylene fabric which is extrusion coated and printed to customer specifications. It is used in the forest products industry to package kiln-dried cut lumber and other wood products. The Company believes that polypropylene products have certain advantages over traditional paper-plastic laminate and all polyethylene products, including superior strength, ease of application, durability, better appearance and the potential to be recycled. The Company also manufactures other coated woven polyolefin fabrics that it supplies to converters which produce finished products for specific application, such as temporary and permanent shelters, recreational products, protective covers, pond liners, and flame retardant brattice cloth. In 1999, the Company developed a new patented woven fabric, NOVA-SHIELD(TM), that meets the fire retardant specifications required for human occupancy and maintains the UV specifications for extended outdoor use. This product is used in applications where PVC was the primary fabric previously used. Further, the Company entered the metal wrap market with a patent pending wrap, NOVA-WRAP(TM), for steel and aluminum coils and sheets. -23- The Company manufactures NOVA-PAC(TM) sleeves for packaging fiberglass, cotton, synthetic fibers and other products. In addition, the Company competes with manufacturers of coated woven fabrics such as Amoco Fabrics and Fibers Company and Fabrene, Inc., which sell their products to converters. FIBCs The Company produces flexible intermediate bulk containers ("FIBCs"). To remain competitive, Intertape Polymer Group entered into a manufacturing agreement with the Professional Manufacturing Group in Piedras Negras, Mexico, an exclusive contract packager of FIBCs for the Company since February 2000. In 2002, the Company completed the consolidation of its FIBC production in Mexico. The Company believes this will increase the Company's FIBC production and should provide the Company with a lower cost alternative to its now closed Augusta, Georgia, facility, and its Rayne, Louisiana, manufacturing facility which closed during the second quarter of 2001. In 2002, Intertape Polymer Group also developed relationships overseas for production of FIBCs, one in Chennai, India, with Jumbo Bag, and the other in Yantai, China, with FCI. The consolidation of production and these new relationships should improve profit- ability by reducing costs while allowing the Company to increase its share of the market. During 2001, the Company also launched two new FIBC products, PALLET- FREE(TM), which has significant cost and performance advantages compared to traditional corrugated bulk containers which compete in the same bulk product markets, and NOVA-STAT(TM), a static-dissipative FIBC. The Company believes that both of these products have provided access to higher margin markets that require speciality high performance bags and intends to continue to aggressively market them. The market for FIBCs is highly competitive and is not dominated by any single manufacturer. Sales and Marketing As of December 31, 2002, the Company maintained a sales force of 106 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts. The Company's overall customer base is diverse, with no single customer accounting for more than 5% of total sales. Sales for facilities located in the United States and Canada accounted for approximately 83% and 17% of total sales, respectively, in 2000, and approximately 86% and 14% in 2001, and 85% and 15% in 2002. As a result of the combined effect of a world-wide slowing economy, increasing domestic capacity in Asia, and a strong US currency in 2001, the Company decided to withdraw from commodity export markets. Management does not expect that the Company will achieve more than 10% of its sales outside North America. Export sales currently represent less than 5% of total sales and are included in United States or Canadian sales depending on the manufacturing facility from which the sale originates. -24- The Company sales are primarily focused on distribution products and woven products. Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold into this segment include carton sealing, masking, duct and reinforced tapes, EXLFILM(R) and STRETCHFLEX(R). In order to enhance sales of its pressure-sensitive carton sealing tape, the Company also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. Prior to the acquisition of Interpack, these products were manufactured by others. The Company's EXLFILM(R) and STRETCHFLEX(R) products are sold through its existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries. The Company's woven products group sells its products directly to the end-users. It offers a line of lumberwrap, valve bags, FIBCs and specialty fabrics manufactured from plastic resins. The woven products group markets its products throughout North America. Manufacturing; Quality Control The Company's philosophy is, where efficient, to manufacture products from the lowest cost raw material and add value to such products by vertical integration. The majority of the Company's products are manufactured through a process which starts with a variety of polyolefin resins which are extruded into film for further processing. Wide width biaxially oriented polypropylene film is extruded in the Company's facilities and this film is then coated in high-speed equipment with in-house-produced adhesive and cut to various widths and lengths for carton sealing tape. The same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company manufactures acrylic solvent based rubber, "hot melt", aqueous acrylic, solvent acrylic, silicone and water-activated adhesives to respond to all demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with either polyethylene or aluminum foil type coated cloth. Intertape Polymer Group is the only North American supplier of all four technologies of carton sealing tape: hot melt, acrylic, water-activated, and natural rubber. Further, the Company is the only United States manufacturer of natural rubber carton sealing tape. This broad family of carton sealing tapes is further enhanced by the Company's tape application equipment which is made in the Montreal facility. The technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, also has been utilized by the Company to expand its product line into highly technical and sophisticated films. Extrusion of up to five layers of various resins is done in four of the Company's plants. These high value added films service the shrink and stretch wrap markets, both of which have high entry barriers. The Company maintains at each manufacturing facility a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and woven products it manufactures. At the end of 2002, four of the Company's plants were certified under the ISO-9002 quality standards program, and one has been certified under the ISO-9001 quality standards program. -25- Equipment and Raw Materials The Company purchases mostly custom designed manufacturing equipment, including extruders, coaters, finishing equipment, looms, printers, bag manufacturing machines and injection molds, from manufacturers located in the United States and Western Europe, and participates in the design and upgrading of such equipment. It is not dependent on any one manufacturer for such equipment. Polyolefin resins are a widely produced petrochemical product and are available from a variety of sources worldwide. The Company purchases raw materials from a limited number of vendors with whom, over time, it has developed long-term relationships. The Company believes that such long term relationships, together with the Company's centralized purchasing operations, have enhanced the Company's ability to obtain a continuity of supply of raw materials on competitively favorable purchase terms. Historically, fluctuations in raw material prices experienced by the Company have been passed on to its customers over time, however, the continued economic weakness has made it difficult. Research and Development; New Products Prior to 1992, research and development consisted of activities related to adapting new technologies as they emerged within the various manufacturing environments. Beginning in 1992, the Company decided to embark upon a program to develop new manufacturing processes, to enhance product performance and to develop new products throughout the Company. In 1994, the Company emphasized developing products for existing markets, and in 1996 established a corporate research and development group to undertake development of new products. Research and development expenses in 2000, 2001, and 2002 totaled US$5,109,000, US$4,182,000, and US$3,169,000, respectively. The Company has increased its emphasis on applied research which is more efficient in identifying new product opportunities, thus reducing research and development expenses. Research and development continues to focus on new products, technology developments, new product processes and formulations. The Company anticipates the introduction of several new products into its markets in 2003. Trademarks and Patents The Company markets its tape products under the trademark INTERTAPE(TM) and various private labels. The Company's valve or open mouth bags are marketed under the registered trademark NOVA-PAC(R). Its woven polyolefin fabrics are sold under the registered trademark NOVA-THENE(R). Its shrink wrap is sold under the registered trademark EXLFILM(R). Its stretch films are sold under the registered trademark STRETCHFLEX(R). FIBC's are sold under the registered trademark CAJUN(R) BAGS. The Company has approximately sixty-nine -26- active registered trademarks, principally in the United States and Canada, including trademarks acquired from American Tape, Anchor, Rexford Paper Company and Central Products Company. The Company currently has eight pending trademark applications. The Company does not have, nor does management believe it important to the Company's business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive advantage in profitable markets, primarily in woven products and shrink wrap. The Company currently has approximately 52 patents and approximately 7 patents pending. Competition The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Some of these competitors are larger companies with greater financial resources. Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market are currently publicly available. See "Products" for a discussion of the Company's main competitors. The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be: (i) the high cost of vertical integration which is necessary to operate competitively, (ii) the significant number of patents which already have been issued in respect of various processes and equipment, and (iii) the difficulties and expense of developing an adequate distribution network. Environmental Regulation The Company manufactures and sells a variety of specialized polyolefin plastic packaging products for industrial use at its manufacturing plants throughout North America and through its joint venture in Portugal. The Company is actively promoting environmental solutions, both in the development of its products and in its own manufacturing facilities. Furthermore, the Company's operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States Federal and state environmental laws applicable to the Company include statutes (i) intended to allocate the cost of remedying contamination among specifically identified parties as well as to prevent future contamination (the "Comprehensive Environmental Response, Compensation, and Liability Act"); (ii) imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health or welfare (the "Federal Clean Air Act"); (iii) governing the management, treatment, storage and disposal of hazardous wastes (the "Resource Conservation and Recovery Act"); and (iv) regulating the discharge of pollutants into protected waterways (the "Clean Water Act of 1972"). The Company's use in its manufacturing processes of hazardous substances and the generation of hazardous wastes not only by the Company but by prior occupants of Company facilities suggest that hazardous substances may be present at or near certain of the Company's facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental regulations applicable to it. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business. -27- Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations. Intertape is currently remediating contamination at its Marysville, Michigan, and Columbia, South Carolina plants, and has installed a hydraulic barrier at its St. Laurent, Quebec, plant to prevent off-site migration of contaminated groundwater. Following the implementation of recent legislation on contaminated sites in Quebec, the Company is investigating the contamination at its St. Laurent plant to determine whether additional action is required. In addition, though certain of the Company's facilities emit toluene and other pollutants, the emissions are within current permitted limitations. The Company believes that these emissions will meet the Maximum Available Control Technology requirements, although additional testing or modifications at the facility may be required. The Company believes that the ultimate resolution of these matters should not have a material adverse effect on the Company's business or results of operations. Employees As of December 31, 2002, the Company employed approximately 2700 people, 700 of whom held either sales-related, operating or administrative positions and 2000 of whom were employed in production. Approximately 65 hourly employees at the Montreal plant are unionized and are subject to a collective bargaining agreement which expired in November 2002. Negotiations were delayed by mutual agreement due to scheduling problems, but have now resumed and are expected to be successfully concluded in the first half of 2003. Approximately 80 hourly employees at the Green Bay plant are unionized and are subject to a collective bargaining agreement which expires on February 28, 2004. Approximately 170 hourly employees at the Marysville plant are unionized and subject to a collective bargaining agreement which expires on April 29, 2007. Approximately 140 hourly employees at the Menasha plant are unionized and subject to a collective bargaining agreement which expires on July 31, 2003. Finally, approximately 45 hourly employees at the Carbondale plant are unionized and subject to a collective bargaining agreement which expires on March 4, 2006. The Company has never experienced a work stoppage and considers its employee relations to be satisfactory. Description of Property The following table sets forth the principal manufacturing and distribution facilities owned or leased by the Company as of December 31, 2002: -28-
Location Use Products Area(sq. ft Title United States: Bradenton, Florida Corporate Offices N/A 20,800 Owned Bolingbrook, Illinois Distribution Tape/Packaging products 90,000 Leased to 3/31/04 Brighton, Colorado Manufacturing Pressure-sensitive carton sealing tapes 211,000 Leased to 1/1/14 Carbondale, Illinois Manufacturing Pressure-sensitive tapes electrical/electronic 193,500 Leased for $1 per acre per year until 2092 with a 99-year extension option Cerritos, California Distribution Tape/Packaging products 59,400 Leased to 12/1/2003 Columbia, South Carolina Manufacturing and Carton sealing tape, Distribution Pressure-sensitive masking and duct tapes 490,000 Owned Cumming, Georgia Distribution Packaging products 172,000 Leased to 8/31/05 w/option to renew to 2010 and option to purchase Danville, Virginia Manufacturing and Carton sealing tape, Distribution STRETCHFLEX(R) and acrylic coating 281,000 Owned Denver, Colorado Warehouse Storage for finished goods 100,000 Leased on 6-month basis Green Bay, Wisconsin Manufacturing and Water-activated adhesive Distribution tapes 156,000 Owned Marysville, Michigan Manufacturing High performance masking, filament tape, and specialty pressure-sensitive tape 250,000 Owned Menasha, Wisconsin Manufacturing Water-activated adhesive tapes 195,000 Owned Ontario, California Warehouse and Leased to 5/31/04 Distribution Packaging products 45,630 w/option to renew Richmond, Kentucky Manufacturing and Carton sealing, masking Distribution and reinforced tape 200,000 Owned Suwanee, Georgia Distribution Tape/Packaging products 109,000 Leased to 3/31/04 Tremonton, Utah Manufacturing and EXLFILM(TM), Distribution STRETCHFLEX(R) 115,000 Owned Canada: Lachine, Quebec Manufacturing Carton sealing equipment 15,000 Leased to 6/30/04 St. Laurent, Quebec Corporate Headquarters N/A 20,000 Leased to 6/30/05 St. Laurent, Quebec Slitting, Warehouse Carton sealing tape 40,000 Leased to 6/30/05 St. Laurent, Quebec Manufacturing and Distribution Carton sealing tape 25,000 Owned Truro, Nova Scotia Manufacturing Woven products, EXLFILM(TM) 260,000 Owned Mexico: Piedras Negras, Mexico Manufacturing FIBCs 161,026 Leased to 4/30/06
Item 5. Selected Consolidated Financial Information 5.1 Annual Information The table set forth below provides a summary of the financial data for the three most recently completed financial years: -29- Three-year data (in accordance with Canadian GAAP)
($ in thousands except per share amounts) For the years ended December 31 2002 2001 2000 US$ CDN$ US$ CDN$ US$ CDN$ Total Revenue $601,575 $944,714 $594,905 $921,448 $653,915 $971,325 Total Net Income/Loss (54,454) (85,517) (12,242) (18,962) 33,422 49,645 Per share: Basic (1.66) (2.61) (0.43) (0.67) 1.18 1.75 Diluted (1.66) (2.61) (0.43) (0.67) 1.16 1.72 Total Assets 703,344 1,110,510 801,989 1,279,654 845,040 1,273,560 Total Long-term liabilities 291,494 460,240 380,036 606,385 318,722 480,346 Cash dividends declared per share N/A N/A N/A N/A .106 .16
A discussion of the factors affecting the comparability of the above data and changes in accounting policies is contained in the Company's 2002 Annual Report and is attached to Form 40-F as Exhibit 4, to which this Annual Information Form is attached as Exhibit 1. 5.2 Dividends The Company has no written policy for the payment of dividends. So long as the payment does not result in a violation of the Company's covenants with its lenders and noteholders, currently there are no known restrictions that would prevent the Company from paying dividends. Item 6. Management's Discussion and Analysis Management's Discussion and Analysis is contained in the Company's 2002 Annual Report, Pages 10 to 19, and is attached to Form 40-F as Exhibit 4, to which this Annual Information Form is attached as Exhibit 1. Item 7. Market for Securities The Company's common shares are currently traded on the New York Stock Exchange and The Toronto Stock Exchange under the symbol "ITP". The common shares were listed on The Toronto Stock Exchange on January 6, 1993. The -31- Company's common shares were listed on the American Stock Exchange from February 21, 1992 to August 23, 1999, at which time they were listed on the New York Stock Exchange. The common shares are not traded on any other exchanges. Prior to the February 21, 1992 initial public offering of common shares, there was no public market for such shares. Item 8. Directors and Officers The following table sets forth the name, residence, position, and principal occupations for the last five (5) years of each Director of the Company as of the date hereof, as well as the date upon which each Director was first elected. Each Director serves for a term of one year and is elected at the annual shareholders' meeting. The next annual shareholders' meeting is to be held on June 11, 2003, at which time the current term of each Director will expire.
Name of Position and Occupation First Year as Municipality of Residence Director Melbourne F. Yull Director, Chairman of the Board Sarasota, Florida CEO of the Company 1989 Michael L. Richards Director Westmount, Quebec Attorney, Senior Partner, Stikeman Elliott LLP 1989 Thomas E. Costello Director Longboat Key, Florida Former CEO of xpedx , a subsidiary of International Paper Company from 1991 to 2002 (Since Retired) 2002 Ben J. Davenport, Jr. Director Chatham, Virginia Chairman & CEO, Chatham Oil Company; Chairman & CEO, First Piedmont Corporation 1994 L. Robbie Shaw Director Halifax, Nova Scotia Vice President, Nova Scotia Community College 1994 Gordon R. Cunningham Director Toronto, Ontario President, Cumberland Asset Management Corp. 1998 J. Spencer Lanthier Director Toronto, Ontario Former Chairman & CEO, KPMG Canada from 1993 to 1999 (Since Retired) 2001
-31- The following table sets forth the name, residence and position of each executive officer of the Company as of the date hereof:
Name and Municipality of Residence Position and Occupation Andrew M. Archibald, C.A. Chief Financial Officer, Secretary, Sarasota, Florida Vice President, Administration Jim Bob Carpenter Sarasota, Florida President, Woven Products, Procurement Victor DiTommaso, CPA Sarasota, Florida Vice President, Finance Piero Greco Laval, Quebec Treasurer Burgess H. Hildreth Sarasota, Florida Vice President, Human Resources James A. Jackson Sarasota, Florida Vice President, Chief Information Officer H. Dale McSween Sarasota, Florida President, Distribution Products Melbourne F. Yull Sarasota, Florida Chief Executive Officer Duncan R. Yull Sarasota, Florida Vice President, Sales, Distribution Products Gregory A. Yull Sarasota, Florida President-Film Products
The principal occupations of each executive officer for the last five (5) years is as follows: Andrew M. Archibald has been Chief Financial Officer, Secretary, and Vice President Administration since May 1995. He was Vice President Finance from May, 1995, to January 15, 1999. Prior thereto he served as Vice-President, Finance and Secretary of the Company since 1989. Jim Bob Carpenter has been President, Woven Products, since May 1, 1999. Prior to that he was the General Manager of Polypropylene Fince Oil & Chemical Co. Victor DiTommaso was elected Vice President, Finance on April 24, 2003. Prior to that he was the Senior Vice President of Information Technology since July, 2000, and Senior Vice President of Finance since July, 1998, of Walls Industries, Inc. -33- Piero Greco has been with the Company since January 2001 and was elected Treasurer on October 21, 2002. Prior to that he was Treasury Manager of Bombardier Inc. since October 1997. Burgess H. Hildreth has been Vice President, Human Resources, since October, 1998. Prior to that he was the Vice President Administration of Anchor Continental, Inc. since June, 1996. James A. Jackson has been Vice-President, Chief Information Officer, since September 1, 1998. Prior to that he was the Managing Partner of Spectrum Information Management Systems since 1996. H. Dale McSween has been President, Distribution Products, since December, 1999. Prior thereto he served as Executive Vice-President and Chief Operating Officer from May 1995. Melbourne F. Yull, established the business and has been the Company's Chief Executive Officer since 1992. Duncan R. Yull, a son of Melbourne F. Yull, has been Vice President Sales Distribution Products, since December, 1999. Prior to that he was a Regional Sales Manager for the Company until 1997 and was the Director of Sales until December, 1999. Gregory A. Yull, a son of Melbourne F. Yull, has been President, Film Products, since June, 1999. Prior to that he was Products Manager - Films since 1995. As of May 15, 2002, the directors and executive officers of the Company as a group owned beneficially, directly or indirectly, or exercise control or direction over, 853,569 common shares, representing approximately 9% of all common shares outstanding. In addition, the directors and executive officers as a group have 2,258,437 options to purchase common shares of the Company. The Board of Directors has established three committees, the Audit Committee, the Compensation Committee, and the Nominating & Governance Committee to facilitate the carrying out of its duties and responsibilities and to meet applicable statutory requirements. The Toronto Stock Exchange Guidelines for Corporate Governance (the "Guidelines") recommend that the Audit Committee be made up of outside directors only and that other board committees should be comprised generally of outside directors, a majority of whom should be unrelated directors. The Audit Committee complies with the Guidelines as it is composed of four outside directors, namely L. Robbie Shaw, Gordon R. Cunningham, Thomas E. Costello, and J. Spencer Lanthier. The Compensation Committee, as presently constituted, has one related director and three unrelated directors, namely Michael L. Richards, L. Robbie Shaw, Ben J. Davenport, Jr., and Gordon R. Cunningham. Mr. Richards is deemed to be a related director, inasmuch as the law firm of Stikeman Elliott LLP, of which he is a senior partner, provides legal services to the Company on a regular basis. The Company believes, however, that its relationship with Stikeman Elliott LLP does not inhibit Mr. Richards' ability to act impartially, nor his ability to act independently of the views of the management of the Company. The Nominating & Governance Committee is composed of all of the members of the Board, the majority of whom are unrelated directors. -33- The following is a summary description of the Committees of the Board of Directors and their mandates. Additional information regarding the Committees is contained in Management's Proxy Circular which is attached to Form 40-F as Exhibit 5, to which this Annual Information Form is attached as Exhibit 1. - Audit Committee: During 2002, the Audit Committee formalized its mandate into a written charter document. The mandate of the Audit Committee is to review the annual financial statements of the Company and to make recommendations to the Board of Directors with respect thereto. The Audit Committee also reviews the nature and scope of the annual audit as proposed by the external auditors and management and, with the external auditors and management, the adequacy of the internal accounting control procedures and systems within the Company. In addition, in accordance with its charter, the Audit Committee now has the sole authority to make recommendations to the Shareholders regarding the appointment or replacement of the Company's external auditors and shall approve their remuneration. The Audit Committee shall also require the external auditors to provide a report at least annually setting forth the auditor's internal quality-control procedures and all relationships between the external auditors and the Company, if any. The Audit Committee may consult with management on these issues, but it may not delegate its responsibility therefor. The Audit Committee has the authority to retain legal, accounting or other consultants for advice if it deems it to be necessary. - Compensation Committee: The Committee is responsible for the evaluation and approval of the director and officer compensation policies, plans and programs of the Company. The Compensation Committee is responsible for conducting annual reviews and making recommendations to the Board of Directors with respect to the compensation, including the granting of stock options, of all directors, officers, and key executives of the Company. The Chairman and Chief Executive Officer does not participate in the Board of Directors' deliberations concerning the recommendations on his compensation. - Nominating & Governance Committee: This Committee was created by the Company in 2002 and its charter states that the Committee is to: (i) assess on an annual basis the effectiveness of the Board as a whole as well as periodically evaluate the contribution of individual members of the Board; (ii) review, on a periodic basis, the size and composition of the Board and ensure that an appropriate number of unrelated directors sit on the Board; (iii) identify individuals qualified to become members of the Board as may be required and recommend to the Board new nominees for appointment; (iv) provide appropriate orientation to any new members of the Board; -34- (v) recommend to the Board corporate governance guidelines and ensure the sufficiency of such guidelines on a periodic basis; and (vi) review and advise the Board at least annually as to corporate governance issues. Item 9. Additional Information The Company, upon request to its Secretary, will provide to any person or entity: (1) when the securities of the Company are in the course of a distribution under a preliminary short form prospectus or a short form prospectus; (a) one copy of the Annual Information Form of the Company, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in the Annual Information Form; (b) one copy of the consolidated financial statements of the Company for its most recently completed financial year for which financial statements have been filed together with the accompanying report of the auditor and one copy of the most recent unaudited interim financial statements of the Company that have been filed, if any, for any period after the end of its most recently completed financial year; (c) one copy of the information circular of the Company in respect of its most recent annual meeting of shareholders that involved the election of directors or one copy of any annual filing prepared instead of that information circular, as appropriate; and (d) one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or the short form prospectus and are not required to be provided under clauses (a), (b) or (c); or (2) at any other time, one copy of any documents referred to in clauses (1)(a), (b) and (c) provided that the Company may require the payment of a reasonable charge if the request is made by a person or entity who is not a security holder of the Company. Additional information, including directors' and officers' remuneration and indebtedness, principal holders of the Company's securities, options to purchase securities, and interests of insiders in material transactions, if applicable, is contained in the Company's Notice of Annual and Special Meeting of Shareholders prepared for its June 11, 2003, annual and special meeting of shareholders. Additional financial information is provided in the Company's Consolidated Financial Statements for the fiscal year ended December 31, 2002. -35- Exhibit 2 CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS We consent to the incorporation of our report dated February 21, 2003, on our audits of the consolidated financial statements of Intertape Polymer Group Inc. as at December 31, 2002 and 2001 and for each of the years in the three- year period ended December 31, 2002, which report is included in this Annual Report on Form 40-F. (s) Raymond Chabot Grant Thornton Chartered Accountants General Partnership Montreal, Canada May 16, 2003 -36- Exhibit 3 CERTIFICATION PURSUANT TO 19 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002 The undersigned, Melbourne F. Yull, Chairman of the Board and Chief Executive Officer, and Andrew M. Archibald, Chief Financial Officer, Vice President Administration, and Secretary, hereby certify that this report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents in all material respects the financial condition and results of operations of Intertape Polymer Group Inc. as of and for the periods presented in this report. Date: May 16, 2003 /s/ Melbourne F. Yull Melbourne F. Yull, Chairman of the Board and Chief Executive Officer Date: May 16, 2003 /s/ Andrew M. Archibald Andrew M. Archibald, Chief Financial Officer, Secretary, and Vice President, Administration -37- CERTIFIED EXTRACT OF RESOLUTIONS OF THE BOARD OF DIRECTORS OF INTERTAPE POLYMER GROUP INC. ADOPTED ON MAY 16TH, 2003 "APPROVAL OF ANNUAL INFORMATION FORM WHEREAS the Chairman presented to the meeting a draft of an annual information form of the Corporation to be dated May 16, 2003. WHEREAS the Chairman informed the meeting that the Corporation proposes to file the annual information form with the securities commissions and other appropriate regulatory authorities in each of the provinces and territories of Canada in order to permit the Corporation to be able to qualify its securities for distribution through the use of a short form prospectus under National Instrument 44-101 - Short Form Prospectus Distributions. BE IT RESOLVED THAT: 1. the annual information form ("AIF") of the Corporation to be dated May 16, 2003, substantially in the form of the document presented to this meeting, be and the same is hereby approved, subject to such additions, deletions and changes therein as may be consented to by any one director or officer of the Corporation; 2. the Corporation be and it is hereby authorised to file the English and French (when and if available) language versions of the AIF, as the same may be amended from time to time, with the securities commissions and appropriate regulatory authorities in each of the provinces and territories of Canada in order to qualify the Corporation as an eligible issuer under National Instrument 44-101 - Short Form Prospectus Distributions; 3. any one director or officer of the Corporation be, and he is, hereby authorized and directed, for and on behalf of the Corporation, to file or cause to be filed the English and French (when and if available) language versions of the AIF under the securities legislation of any of the provinces and territories of Canada and to file such other documents and to do such other things as he may, in his sole discretion, consider necessary, appropriate or useful in connection with, or to carry out the provisions of this resolution; 4. the Corporation file with the United States Securities and Exchange Commission an Annual Report on Form 40-F (the "Form 40-F") covering the Corporation's fiscal year ended December 31, 2002, such Form 40-F to be substantially in the form of the draft presented to the Board of Directors, together with such changes or modifications as may be deemed necessary or appropriate by any director or officer of the Corporation with and upon the advice of counsel, and any director or officer of the Corporation be, and he is, hereby authorized, empowered and directed to execute in the name and on behalf of the Corporation, to procure all other necessary signatures to, and to file with the United States Securities and Exchange Commission, the Form 40-F and any all amendments or supplements thereto; 5. any director or officer of the Corporation be, and he is, hereby authorized and directed for and on behalf of the Corporation, to execute, whether under the corporate seal of the Corporation or otherwise, and to deliver all such certificates, undertakings and other documents and to do all such other acts and things as he may, in his sole discretion, consider necessary or advisable in connection with or to carry out the provisions of this resolution." I, the undersigned, Andrew M. Archibald, C.A., Chief Financial Officer, Secretary, Vice President Administration of Intertape Polymer Group Inc. hereby certify that the foregoing resolutions were duly adopted by the Board of Directors of Intertape Polymer Group Inc. on May 16, 2003 and that the said resolutions are, as of the date hereof, in full force and effect and have not been amended. IN WITNESS WHEREOF, I HAVE SIGNED in Montreal, Quebec, this 16th day of May, 2003. /s/Andrew M. Archibald Andrew M. Archibald, C.A. Chief Financial Officer, Secretary, Vice President Administration EX-4 3 annualreport2002.txt 2002 ANNUAL REPORT 2002 ANNUAL REPORT INTERTAPE POLYMER GROUP INC. [LOGO] IPG CORPORATE PROFILE Intertape Polymer Group Inc. (IPG) is an acknowledged leader in the packaging industry. Leveraging its advanced manufacturing technologies, extensive R&D capabilities and a comprehensive strategic acquisition program, the Company believes it has assembled the broadest and deepest range of products in the industry. IPG is widely-recognized for its development and manufacture of specialized polyolefin plastic and paper-based packaging products, as well as complementary packaging systems for industrial and retail use. Additionally, IPG is a woven and flexible intermediate bulk container (FIBC) manufacturer. Its performance products, including tapes and cloths, are designed for demanding aerospace, automotive and industrial applications and are sold to a broad range of industrial/specialty distributors, retail stores and large end-users in diverse industries. Through its innovative regional distribution center concept, IPG offers customers its extensive range of products with highly competitive distributor- customer transactional costs. This marketing advantage is unmatched in the industry, and has helped IPG establish a market position that clearly differentiates it from its competitors. Established in 1981 and headquartered in Montreal, Quebec and Sarasota/ Bradenton, Florida, IPG employs approximately 2,600 employees with operations in 19 locations, including 15 manufacturing facilities in North America and one in Europe. Intertape Polymer Group Inc. is a publicly traded company with its common shares listed on the New York Stock Exchange and The Toronto Stock Exchange under the stock symbol "ITP." TABLE OF CONTENTS Financial Highlights ......................................... 2 Message to Shareholders ............................ ......... 4 Consolidated Quarterly Statements of Earnings ................. 6 Adjusted Consolidated Earnings................................. 8 Management's Discussion & Analysis ............................10 Management's Responsibility for Financial Statements ..........20 Auditors' Report .................... .......... ..............21 Comments by Auditors ......................................... 21 Financial Statements Consolidated Earnings ..................................... 22 Consolidated Retained Earnings ........................... 22 Consolidated Cash Flows .................................. 23 Consolidated Balance Sheets .............................. 24 Notes to Consolidated Financial Statements ...........25 to 53 Intertape Polymer Group Locations ........................... 54 Other Information ............................................ 55 Notes ........................................................ 56 Corporate Headquarters 11OE Montee de Liesse Montreal, Quebec Canada, H4T 1N4 Investor Relations Tel: 866-202-4713 Fax: 941-727-3798 Web: www.intertapepolymer.com E-mail: itp$info@intertapeipg.com Safe Harbor Statement Certain statements and information set forth in this Annual Report, including statements regarding the business and anticipated financial performance of the Company, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Some of the factors that could cause such differences include, but are not limited to, inflation and general economic conditions, changes in the level of demand for the Company's products, competitive pricing pressures, and general market trends. Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's SEC filings. These and other factors should be considered carefully and undue reliance should not be placed on forward-looking statements. The Company undertakes no duty to update its forward-looking statements, including its earnings outlook. -1- FINANCIAL HIGHLIGHTS
2002 2001 2000 ____________________________________________________________________________ Operations Consolidated sales $601,575 $594,905 $653,915 Net earnings (loss) Cdn GAAP (54,454) (12,242) 33,422 Net earnings (loss) US GAAP (54,454) (12,242) 33,422 Cash flows from operations before changes In non-cash working capital items 30,281 3,874 57,932 ____________________________________________________________________________ Per Common Share Net earnings (loss) Cdn GAAP (1.66) (0.43) 1.18 Net earnings (loss) US GAAP (1.66) (0.43) 1.18 Cash flows from operations before changes in non-cash working capital items 0.92 0.49 2.05 Book value Cdn GAAP 8.67 10.32 10.98 Book value US GAAP 8.47 10.20 10.98 ____________________________________________________________________________ Financial Position Working capital 61,240 68,075 8,718 Total assets Cdn GAAP 703,344 801,989 845,040 Total assets US GAAP 705,187 802,901 845,040 Total long-term debt 312,766 362,973 286,216 Shareholders equity Cdn GAAP 293,093 294,090 309,642 Shareholders equity US GAAP 286,491 290,635 309,642 ____________________________________________________________________________ Selected ratios Working capital 1.52 1.53 1.04 Debt/capital employed Cdn GAAP 0.52 0.55 0.48 Debt/capital employed US GAAP 0.52 0.56 0.48 Return on equity Cdn GAAP (18.6)% (4.2)% 10.8% Return on equity US GAAP (19.0)% (4.2)% 10.8% ____________________________________________________________________________
-2- Stock Information Weighted average shares o/s (Cdn GAAP)+ 32,829 28,266 28,328 Weighted average shares o/s (US GAAP)+ 32,829 28,266 28,328 ____________________________________________________________________________ The Toronto Stock Exchange (cdn $) Market price at year end 6.49 13.25 11.00 High: 52 weeks 20.08 24.00 41.00 Low: 52 weeks 5.50 10.50 10.90 Volume: 52 weeks+ 14,651 20,490 14,053 ____________________________________________________________________________ New York Stock Exchange Market price at year end 4.12 8.30 7.31 High: 52 weeks 12.80 15.60 28.19 Low: 52 weeks 3.60 7.00 7.19 Volume: 52 weeks+ 13,705 13,695 4,929 ____________________________________________________________________________ The Toronto Stock Exchange (ccln $) High Low Close ADV* Q1 18.70 13.15 18.50 61,846 Q2 20.08 16.50 17.55 41,100 Q3 17.26 11.90 12.01 47,692 Q4 12.26 5.50 6.49 82,251 ____________________________________________________________________________ New York Stock Exchange High Low Close ADV* Q1 11.90 8.21 11.50 69,680 Q2 12.80 10.86 11.61 46,795 Q3 11.70 7.45 7.58 24,598 Q4 7.70 3.60 4.12 77,420
This data should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations. (In thousands of U.S. dollars except per share data, selected ratios and trading volume information.) * Average daily volume + in thousands -3- MESSAGE TO SHAREHOLDERS Dear Shareholders, Intertape Polymer Group Inc. (IPG or the Company) made significant strides during 2002, despite the weak economy that has affected all industries. While certainly not immune to this environment, management focused on growing the business, improving earnings and cash flows and strengthening the balance sheet. We confronted these macro economic challenges by implementing revenue growth strategies combined with decisive and significant cost reductions in all areas of operations. As a result, we are confident that we have laid the foundation for earnings and shareholder growth in 2003 and beyond. While fiscal 2002 revenues increased by only 1 % to $601.6 million, we were encouraged on two fronts. First, IPG's unit volume increased 6% year over year, double the growth in U.S. GDP in 2002. Despite the continued poor economy, we were able to maintain our gross margins through our strategy of offering the broadest range of products in our market, coupled with innovative new product introductions and cost saving initiatives. Secondly, fourth quarter sales, traditionally some 3% less than the third quarter, were higher than anticipated and came in approximately equal with the previous quarter - an indication that, everything else being equal, our 2003 expectations are unfolding as planned. Before the effect of the non-cash goodwill impairment charge of $70.0 million and related tax recovery, (fully addressed in the Management's Discussion & Analysis section of this report) after-tax earnings showed improvement, increasing to $10.2 million from comparable adjusted earnings of $9.7 million in 2001. There were no new acquisitions in 2002. Rather, we concentrated on consoli- dating and integrating our past acquisitions and on driving earnings through controlled volume and cost controls. We feel we can now generate strong top and bottom line growth by leveraging our full product line and by reaping the benefits of more efficient and cost effective manufacturing and distribution operations. In 2002, we announced annualized restructuring savings totaling $17.5 million pre-tax. The full impact of these reductions will be felt in 2004, although the majority will be realized by the end of the current year. We've completed the $3.0 million annual cuts as a result of the flexible intermediate bulk container (FIBC) consolidation. Operations in Rayne, Louisiana and Edmundston, New Brunswick were closed and centralized at our modern facility in Piedras Negras, Mexico, which has the capacity to integrate these functions and operate at a lower cost. We've also instituted measures to cut selling, general and administrative expenses by an annual $2.5 million. We are continuing to make progress with our aggressive marketing programs. With a solid understanding of our customers' needs, we have been proactive in developing new, breakthrough products that fill unique niches in their respective industries. Examples include our new Nova-Thene(TM) insulation facing and Nova-Wrap(TM) metal wrap. IPG has become known for its product diversity and with this improved product mix, combined with selective price increases, comes enhanced margins. Given our efforts to improve working capital, total debt declined by approximately $70.0 million in 2002. While approximately $46.0 million of this was from the proceeds derived from the stock offering during the second quarter of 2002, all of the bank debt reductions during the third and fourth quarters of 2002 were accomplished through working capital initiatives. In 2002, free cash flow has risen from $22.0 million in 2001 to close to $24.0 million last year, and should reach $30.0 million this year. -4- The Company also succeeded in holding financial expenses virtually steady in 2002 as compared to 2001 charges, adjusted for a non-recurring expense. This is significant given that the interest rate payable to the senior noteholders was increased by 225 basis points in 2001 for the duration of the term. Given our debt repayment commitments and the fact that the bulk of our debt is at a fixed rate, we expect to see these charges begin to decline. While we do not underestimate the challenges that lie ahead, we are proud of the significant operating and financial improvements that we have delivered in 2002. Despite the unknowns facing our world, management believes that 2003 will be a stronger year. Key drivers that should result in an improvement in value-added dollars and increase earnings include, unit volume growth, selling price increases, cost containment and continued balance sheet management. Rapidly changing raw material costs will be a factor at least through the first half of 2003 as they are impacted by the cost of energy, primarily oil and natural gas. We fully intend to pass on these increases in resin, polyethylene and polypropylene as well as focus on other areas to maintain our budgeted value- added dollars. IPG has become an acknowledged leader in the packaging industry. This is clearly the result of the continuing dedication of our valued employees and our ability to meet the needs of our growing customer base. I wish to use this opportunity to sincerely thank both these groups and to extend gratitude to our shareholders and debtholders. Our relationships with our bankers and lenders continue to be strong as evidenced by the support we received from them throughout the year. Today, IPG is a stronger company for all its stakeholders. We are in the enviable position of growing our sales while cutting costs. Our shareholders should benefit from the value creation strategies management has implemented while our debtholders should benefit from significantly enhanced credit quality. Finally, it gives me pleasure to welcome Thomas E. Costello to the Company's Board of Directors. Most recently he served as the CEO of a multinational, multi-billion dollar distributor of packaging and industrial products. Leaving the Board is Irvine Mermelstein who has served diligently for many years. Irv has been asked to undertake a specific mandate on behalf of IPG and in keeping with our corporate governance policy, has relinquished his seat. /s/ Melbourne F. Yull Melbourne F. Yull Chairman and Chief Executive Officer February 21, 2003 -5- CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS In thousands of US dollars, except per share amounts
1st Quarter ______________________________________ 2002 2001 2000 2002 _____________________________________________________________________________ Sales $146,737 $158,863 $169,358 $153,657 Cost of sales 113,321 120,089 131,117 119,713 Gross Profit 33,416 38,774 38,241 33,944 Selling, general and administrative expenses 20,299 21,858 20,032 20,454 Amortization of goodwill 0 1,743 1,550 0 Impairment of goodwill 0 0 0 0 Research and development 967 1,168 1,325 796 Financial expenses 8,983 8,436 5,995 7,872 _____________________________________________________________________________ 30,249 33,205 28,902 29,122 Gain on sale of interest in joint venture 0 0 (5,500) 0 _____________________________________________________________________________ 30,249 33,205 23.402 29,122 Earnings (loss) before income taxes 3,167 5,569 14,839 4,822 Income taxes (recovery) 348 1,392 4,155 534 _____________________________________________________________________________ Net earnings (loss) 2,819 4,177 10,684 4,288 _____________________________________________________________________________ Earnings (loss) per share Cdn GAAIP - Basic - US $ 0.09 0.15 0.38 0.13 Con GAAP - Diluted - US $ 0.09 0.15 0.37 0.13 US GAAP - Basic - US $ 0.09 0.15 0.38 0.13 US GAAP - Diluted - US $ 0.09 0.15 0.37 0.13 _____________________________________________________________________________ Average number of shares outstanding Cdn GAAP - Basic 30,155,360 27,983,417 28,300,781 33,622,896 Cdn GAAP - Diluted 30,505,692 28,675,701 28.879,770 34,249,454 US GAAP -Basic 30,155,360 27,983,417 28,300,781 33,622,896 US GAAP - Diluted 30,505,692 28,675,701 28,879,770 34,249,454 _____________________________________________________________________________ Note: In the 4th quarter of 2000, Canadian GAAP adopted the US GAAP definition of the diluted earnings per share retroactive.
-6-
2nd Quarter 3rd Quarter 4th Quarter ________________________ __________________________________ ________________________________ 2001 2000 2002 2001 2000 2002 2001 2000 ______________________________________________________________________________________________ $141,265 $167,231 $149,920 $148,602 $166,356 $151,261 $146,175 $150,970 114,549 126,513 121,532 122,544 121,612 121,764 118,906 121,305 ______________________________________________________________________________________________ 26,716 40,718 28,388 26,058 44,744 29,497 27,269 29,665 20,090 17,891 22,309 27,837 21,306 23,462 21,558 23,863 1,797 1,522 0 1,757 1,663 0 1,717 1,805 0 0 0 0 0 70,000 0 0 1,198 1,409 926 884 1,073 480 932 1,302 7,736 6,652 8,297 13,212 7,345 7,621 9,527 7,213 ______________________________________________________________________________________________ 30,821 27,474 31,532 43,690 31,387 101,563 33,734 34,183 0 0 0 0 0 0 0 0 ______________________________________________________________________________________________ 30,821 27,474 31,532 43,690 31,387 101,563 33,734 34,183 (4,105) 13,244 (3,144) (17,632) 13,357 (72,066) (6,465) (4,518) (1,392) 3,707 (357) (4,937) 3,741 (13,292) (5,455) (8,103) ______________________________________________________________________________________________ (2,713) 9,537 (2,787) (12,695) 9,616 (58,774) (1,010) 3,585 ______________________________________________________________________________________________ (0.10) 0.34 (0.08) (0.45) 0.34 (1.74) (0.03) 0.13 (0.10) 0.33 (0.08) (0.45) 0.33 (1.74) (0.03) 0.13 (0.10) 0.34 (0.08) (0.45) 0.34 (1.74) (0.03) 0.13 (0.10) 0.33 (0.08) (0.45) 0.33 (1.74) (0.03) 0.13 ______________________________________________________________________________________________ 28,119,535 28,297,621 33,701,307 28,346,102 28,342,803 33,821,074 28,496,884 28,380,530 28,119,535 28,716,590 33,701,307 28,346,102 28,763,582 33,821,074 28,496,884 28,565,564 28,119,535 28,297,621 33,701,307 28,346,102 28,342,803 33,821,074 28,496,884 28,380,530 28,119,535 28,716,590 33,701,307 28,346,102 28,763,582 33,821,074 28,496,884 28,565,564 ______________________________________________________________________________________________
-7- ADJUSTED CONSOLIDATED EARNINGS Adjustments for Non-Recurring Items and for the Change in Accounting Principle related to the Amortization of Goodwill* Years Ended December 31, (In millions of US dollars, except per share amounts)
As Reported 2002 2001 2000 _____________________________________________________________________________ $ $ $ Sales 601.6 594.9 653.9 Cost of sales 476.3 476.1 500.5 _____________________________________________________________________________ Gross Profit 125.3 118.8 153.4 Selling, general and administrative expenses 86.5 91.3 83.1 Amortization of goodwill 0.0 7.0 6.5 Impairment of goodwill 70.0 0.0 0.0 Research and development 3.2 4.2 5.1 Financial expenses 32.8 38.9 27.3 Gain on sale of interest in joint venture 0.0 0.0 (5.5) _____________________________________________________________________________ 192.5 141.4 116.5 Earnings (loss) before income taxes (67.2) (22.6) 36.9 _____________________________________________________________________________ Income taxes (recovery) (12.7) (10.4) 3.5 _____________________________________________________________________________ Net earnings (loss) (54.5) (12.2) 33.4 _____________________________________________________________________________ Earnings (losses) per share - As Reported 2002 2001 2000 _____________________________________________________________________________ Basic (1.66) (0.43) 1.18 Diluted (1.66) (0.43) 1.16 Adjustments for non-recurring items and amortization of goodwill 20O2 2001 2000 _____________________________________________________________________________ Gross Profit Items Implementation of RDCs 2.3 Additional Reserves 9.5 Asset writedowns 0.1 1.0 Inventory writedowns 0.2 3.2 Severance 0.6 1.2 _____________________________________________________________________________ Subtotal 0.9 7.7 9.5 SG&A Items Asset writedowns 0.8 Reserves for bad debt 7.0 Severance 1.2 3.0 _____________________________________________________________________________ Subtotal 1.2 10.8 Amortization of Goodwill* 7.0 6.5 Impairment of Goodwill 70.0 Financial Expenses Deferred refinancing costs 6.7 _____________________________________________________________________________
-8- ADJUSTED CONSOLIDATED EARNINGS Adjustments for Non-Recurring Items and for the Change in Accounting Principle related to the Amortization of Goodwill* Years Ended December 31, (In millions of US dollars, except per share amounts)
As Adjusted 2002 2001 2000 _____________________________________________________________________________ $ $ $ Sales 601.6 594.9 653.9 Cost of sales 475.4 468.4 491.0 _____________________________________________________________________________ Gross Profit 126.2 126.5 162.9 Selling, general and administrative expenses 85.3 80.5 83.1 Amortization of goodwill 0.0 0.0 0.0 Impairment of goodwill 0.0 0.0 0.0 Research and development 3.2 4.2 5.1 Financial expenses 32.8 32.2 27.3 Gain on sale of interest in joint venture 0.0 0.0 (5.5) _____________________________________________________________________________ 121.3 116.9 110.0 Earnings before income taxes 4.9 9.6 52.9 _____________________________________________________________________________ Income taxes (recovery) (5.3) (0.1) 7.7 _____________________________________________________________________________ Net earnings 10.2 9.7 45.2 _____________________________________________________________________________ Earnings per Share - As Adjusted 2002 2001 2000 _____________________________________________________________________________ Basic 0.31 0.34 1.59 Diluted 0.31 0.34 1.57
*See note 2 in the 2002 Notes to Consolidated Financial Statements Note: These tables reconcile consolidated earnings as reported in the accompanying Consolidated Financial Statements to adjusted consolidated earnings after the elimination of non-recurring terns and the amortization of goodwill. In addition to consolidated earnings, these tables also present the impact of eliminating non-recurring items on gross profits and gross margins, selling, general and administrative expenses, financial expenses and earnings per share. The Company has included these non-GAAP financial measures because it believes the measures permit more meaningful comparisons of its performance between the periods presented. -9- MANAGEMENT'S DISCUSSION & ANALYSIS CORPORATE OVERVIEW Intertape Polymer Group Inc. ("IPG" or "the Company") was founded in 1981 and is a recognized leader in the development and manufacture of specialized polyolefin plastic and paper packaging products and complementary packaging systems. The Company's business model and underlying strategies have been evolving since the mid-1990s. The key components to this strategy are as follows: Commencing in the mid-1990s, the Company made a series of strategic acquisitions in order to provide for products demanded by the industrial packaging market. Products include water-activated tapes, masking tapes, duct tapes, filament tapes and natural rubber adhesive tapes. The Company continued to develop new products, including shrink and stretch wrap films. The Company believes that it now offers the broadest range of packaging products in the industry and, as such, is unique amongst all its competitors. As soon as new products are either acquired or developed internally, the Company devotes research and development (R&D) capital to further broaden the range of products within each of these product lines. The effect of this portion of the strategy is to further strengthen the broadcast area of products by ensuring that the depth of product offerings is maximized. In 2000, the Company opened Regional Distribution Centers (RDCs) as part of an enhanced supply chain management strategy. Each RDC is stocked with a wide range of the Company's product lines in order to afford customers the ability to place one order and receive one shipment regardless of where IPG makes the product. The Company continues to develop and assess its RDC strategy to achieve maximum efficiency. On April 14, 2003, IPG announced that it was consolidating three existing RDCs into a new facility in Danville, Virginia, adjacent to existing manufacturing operations. As a result, stock availability will be higher, cycle times reduced and shipments to customers further consolidated, resulting in greater efficiencies and lower processing costs as well as increased inventory turns. Cost reductions will be generated in a number of areas, including occupancy, staffing, finished goods inventory and logistics. Examples of products sold through distributors are Intertape brand(TM) pressure-sensitive carton sealing tapes that include hot melt, acrylic and natural rubber adhesives; water-activated carton sealing tape; paper tapes; duct tapes; Exlfilm(R) brand shrink wrap and StretchFlex(R) brand stretch wrap. Examples of products sold directly to end-users include a wide range of Nova- Thene(TM) brand woven polyolefin products, Intertape brand(TM) flexible intermediate bulk containers (FIBC) and electrical specialty tapes. RESULTS OF OPERATIONS Sales IPG's consolidated sales increased by 1.1% to $601.6 million for the year 2002 from $594.9 million in 2001. Consolidated sales for 2001 were down 9.0% from sales of $653.9 million in 2000. For comparison purposes, the Company converts its product volume into standardized units, with one unit representing one square meter or pound, depending on the product. In 2002, despite the continuing slowdown in the North American economy, unit volume increased by 6.0% as compared to 2001 figures. At 2001 prices, this increase in unit volume would represent an increase of approximately $35.7 million in revenue. This contrasts with 2001, when the global economic slowdown, along with low-cost imports and declining consumption in certain industries, drove unit volume down by 6.8%, or the equivalent of approximately $44.6 million in revenues. The growth seen in 2002 is primarily attributable to the breadth of the product offering, new products, improved customer service and the Company's RDC strategy. Unit pricing for most of the Company's product lines declined in 2002. Overall, selling prices slipped by approximately 5.0%, which represents a decrease of approximately $29.7 1 million in revenues from 2001 levels. Selling prices declined in the first part of the year, as they had in both 2000 and 2001, as they continued to track a steady decline in raw materials costs. Raw material prices began to climb in the third quarter of 2002. While the Company initiated a number of price increases to counter this, continued economic weakness hampered its efforts to pass on these increases. In the first quarter of 2003, the Company informed its customers in writing and implemented select price increases aimed at normalizing this situation. Overall, the Company experienced negligible price reductions in the first quarter of 2003 of 0.1% while realizing strong non-retail unit growth of 7% compared to the fourth quarter of -10- 2002. The fourth quarter is always the strongest quarter of the year for retail sales. Accordingly, there was a decline in retail sector volumes in the first quarter of 2003 compared to the fourth quarter of 2002. Overall, sales in the first quarter of 2003 exceeded the corresponding period in 2002 by 4.7% due to an 8.2% increase in unit sales, offset by a 3.5% decline in selling prices. For 2003. the Company expects revenue growth of approximately 5%. U.S. GDP is forecast to rise slightly, indicating increased economic activity that should contribute to growth. The Company's revenue growth strategy is composed of a number of inter-related elements, including: - - A wide product line including the introduction of high growth new products and an improved product mix - - Competitive pricing in combination with selective price increases - - Increased retail penetration - - Improved market share in key product lines - - New customers, including export opportunities GROSS PROFIT AND GROSS MARGIN Gross profit was $125.3 million in 2002, up 5.5% from $118.8 million in 2001, which was in turn 22.6% lower than gross profit of $153.4 million for 2000. Gross profit represented 20.8% of sales in 2002, 20.0% in 2001, and 23.5% in 2000. The Company's adjusted gross profit (see tables beginning on page 8) remained virtually flat during 2002 at $126.2 million compared to a 2001 figure of $126.5 million, which itself was 22.3% less than an adjusted gross profit of $162.9 million in 2000. As a percentage of sales, adjusted gross profit was 21.0% for 2002, virtually identical to the 2001 figure of 21.3%. Adjusted gross profit for 2000 represented 24.9% of sales. Adjusted gross profit for 2002 reflects $0.9 million in non-recurring charges included in cost of sales, including $0.6 million in severance costs. In 2001, the factors that caused gross profit to decline from 2000 levels included lower sales as discussed above. In addition, $7.7 million in non- recurring charges included under cost of sales are excluded from the adjusted gross profit figure, as shown in the tables beginning on page 8. It should also be noted that $18.7 million generated by cost cutting measures taken by management to reduce labor and manufacturing overhead prevented gross profit from declining even further. Adjusted gross profit for 200O excludes $9.5 million in net non-recurring charges consisting of additional accounts receivable and inventory reserves of $15.0 million, less the impact of the reversal against earnings of $5.5 million in provisions established in prior years related to environmental, transfer pricing and employee-related benefits. These provisions were reduced to more appropriate levels based on third party studies. Value-added is the difference between material costs and selling prices, expressed as a percentage of sales. Historically, the Company has been able to maintain value-added percentages within a range of less than 0.75% because it passes on raw materials cost increases to the customer. During 2002, this situation changed as a direct result of a timing lag between raw material cost increases and full implementation of selling price increases, due to continued economic fragility. This caused value-added to decline by 5.0% in the second half of the year. In early 2003, the Company informed its customers in writing and implemented selected price increases aimed at stabilizing value-added levels. In the first quarter of 2003, the Company achieved an increase in gross profit and gross margin when compared to the fourth quarter of 2002. Gross margin improved 2.5 percentage points, from 19.5% to 22.0%. When compared to the first period in 2002, the gross margin was 0.8 percentage points lower. The Company is in the process of returning to the same level of gross margin as last year by increasing value-added and achieving manufacturing efficiencies. Based on information available at the current time, management anticipates that both gross profit and gross margins should increase during 2003. Management's expectations in this regard are based on the following: - - The world political uncertainty, a cold winter and poor financial results for most petro-chemical companies in 2002 have combined to create a volatile pricing situation for the Company's raw materials. Polyethylene and poly- propylene producers have announced price increase of approximately 50% for the first six months of 2003. The Company has informed its customers of coming price increases. The Company anticipates that such increases, combined with other initiatives such as sourcing initiatives, formulation changes and waste reduction programs, will enable it to enhance its value- added dollars. -11- - - The Company is proceeding with previously announced cost reduction initiatives of $17.5 million. The necessary steps were taken in the fourth quarter of 2002 to eliminate $3.0 million annually as a result of the FIBC consolidation and $2.5 million annually in selling, general and admini- strative (SG&A) expenses. A further $6.0 million in reductions should be accomplished during fiscal 2003, with the remainder anticipated in fiscal 2004. - - Based on current volume, the Company has capacity available and therefore can accommodate increases in sales volume without any need for additional capital expansion. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES For the year ended December 31, 2002, SG&A expenses amounted to $86.5 million, down $4.8 million from $91.3 million in 2001. SG&A expenses for 2000 were $83.1 million. As a percentage of sales, SG&A expenses were 14.4%, 15.4% and 12.7% for 2002, 2001 and 200O, respectively. Measures were implemented in 20O2 to reduce SG&A expenses by $2.5 million. These reductions should materialize fully in 2003, resulting in an improvement in these expenses as a percentage of sales. On an adjusted basis (see tables beginning on page 8), SG&A expenses increased by $4.8 million to $85.3 million for 2002 from $80.5 million in 2001. These figures compare to SG&A expenses of $83.1 million for 2000, which did not require adjustment. These adjusted SG&A figures represent 14.2% of sales for 2002, 13.5% for 2001 and 12.7% for 2000. Much of the increase for 2002 relates to higher unit sales within the retail distribution channel, which carries a much larger selling structure than sales that are not retail. Adjusted 2002 SG&A expenses are net of a non-recurring charge of $1.2 million related to severance costs. Adjusted SG&A expenses for 2001 exclude $10.8 million in non-recurring charges consisting of $7.0 million in additional reserves for bad debts due primarily to insufficient reserves related to the systems conversion of Central Products Company (CPC), $3.0 million worth of expense for severance costs and a further $0.8 million related to the required reductions in the value of certain assets. In the first quarter of 2003, the Company began to achieve the SG&A expense reductions initiated in late 2002. SG&A expenses for the first quarter of 2003 were 14.3% of sales compared to 15.5% of sales in the fourth quarter of 2002. The dollar value decrease was $1.5 million, of which $0.7 million was directly related to the SG&A cost reduction program. The balance of the dollar decline was the normal seasonal decline in the retail sector. OPERATING PROFIT This discussion presents the Company's operating profit and adjusted operating profit for 2002, 2001 and 2000. Operating profit is not a financial measure under generally accepted accounting principles (GAAP) in Canada or the United States. The Company has included this non-GAAP financial measure because it believes the measure permits a more meaningful comparison of its performance between the periods presented and because it is used by management in evaluating the Company's performance. Because "operating profit" and "adjusted operating profit" are not GAAP financial measures, companies may present similarly titled items determined with differing adjustments. Accordingly, the "operating profit" and "adjusted operating profit" presented in this discussion should not be used to evaluate the Company's performance by comparison to any similarly titled measures presented by other companies. Presented below is a table reconciling this non-GAAP financial measure with the most comparable GAAP measurement. The reader is urged to review this reconciliation. OPERATING PROFIT RECONCILIATION
(In millions of US dollars) 2002 2001 2000 ____________ __________ __________ $ $ $ Gross Profit - As Reported 125.3 118.8 153.4 Less: SG&A Expense Reported 86.5 91.3 83.1 ____________ __________ __________ Operating Profit 38.5 27.5 70.3 Non-recurring Items* Gross Profit Items* 0.9 7.7 9.5 SG&A Items* 1.2 10.8 ____________ __________ __________ Adjusted Operating Profit 40.9 46.0 79.8 ____________ __________ __________ ____________ __________ __________
*see tables beginning on page 8 for non-recurring items. Operating profit is defined as gross profit less SG&A expenses. Operating profit for 2002 amounted to $38.8 million compared to $27.5 million in 2001 and $70.3 million in 2000. When adjusted for all of the non-recurring items affecting cost of sales and SG&A expenses (see tables beginning on page 8), operating profits were $40.9 million or 6.8% of sales for 2002, $46.0 million or 7.7% of sales for 2001, and $79.8 million or 12.2% of sales for 2000. -12- Viewed on an adjusted basis, operating profits have fallen for a number of reasons. Value-added dollars decreased, although the decline was lessened by certain cost cutting programs. The decrease in operating profits for 2002 was mainly due to the increase in adjusted SG&A expenses discussed above. The pricing action mentioned earlier, combined with product initiatives leading to increased sales and ongoing cost reduction initiatives, should generate improved operating profits in 2003. IMPAIRMENT OF GOODWILL In accordance with the requirements of the Canadian Institute of Chartered Accountants (CICA), which are equivalent to the applicable U.S. standards, the Company performed a goodwill impairment test at December 31, 2002. For the purposes of the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it was a single reporting unit. The Company calculated the fair value of this reporting unit using the discounted cash flow method, and compared it with other methods including multiples of sales and EBITDA, and with historical transactions where appropriate. From these approaches, the fair market value was determined, resulting in a $70.0 million charge to operating expenses. This impairment relates to IPG's goodwill from acquisition activity during the period from 1996 through 2000 in light of current economic and market conditions. As this is a non-cash charge relating to past acquisitions, management does not expect this item to impact ongoing operations. RESEARCH AND DEVELOPMENT R&D remains an important function within the Company. Taken as a percentage of sales, R&D was 0.5%, 0.7%, and 0.8% for the years 2002 to 2000 respectively. The decrease in R&D expenditures is the result of an increased emphasis on applied research, which helps identify opportunities for new products more efficiently than prior to 2000. R&D continues to focus on new products, new technology developments, new product processes and formulations. We anticipate fiscal 2003 will see a steady rollout of significant new products into the Company's markets. EBITDA Earnings before interest, taxes, depreciation and amortization (EBITDA) were negative for 2002 at $5.7 million, compared to positive figures of $50.1 million for 2001 and $92.1 million for 2000, Adjusted EBITDA stood at $66.4 million for 2002, $68.6 million for 2001 and $101.6 million for 2000. The operating profit improvement in combination with the significant debt reduction positively impacted the debt-to-EBITDA ratio, which improved from 7.8 times in 2001 to 5.0 times in 2002. The Company's goal is to regain its NAIC-2 rating (a National Association of Insurance Commissioners rating that is equivalent to a Standard & Poor's BBB rating), the Company expects to reach a debt-to-EBITDA ratio of approximately three times during 2004, given its debt repayment commitments and continuing improvement in operating profit. A reconciliation of the Company's EBITDA, a non-GAAP financial measure, to GAAP net earnings (loss) is set out in the EBITDA reconciliation table below. EBITDA should not be construed as earnings before income taxes, net earnings (loss) or cash flows from operating activities as determined by generally accepted accounting principles. The Company has included this non-GAAP financial measure because it believes that it permits a more meaningful comparison of performance between the periods presented and because it is used by management and the Company's lenders in evaluating the Company's performance. EBITDA RECONCILIATION TO NET EARNINGS (LOSS) (In millions of US dollars)
2002 2001 2000 ____________ __________ __________ $ $ $ Net Earnings (Loss) - As Reported (54.5) (12.2) 33.4 Add Back: Financial Expenses 32.8 38.9 27.3 Income Taxes (12.7) (10.4) 3.5 Depreciation & Amortization 28.7 33.8 27.9 ____________ __________ __________ EBITDA (5.7) 50.1 92.1 Non-recurring Items* Gross Profit Items* 0.9 7.7 9.5 SG&A Items* 1.2 10.8 Other Items** 70.0 ____________ __________ __________ Adjusted EBITDA 66.4 68.6 101.6 ____________ __________ __________ ____________ __________ __________
* See tables beginning on page 8 for non-recurring items. ** For years 2000 and 2001 the Other non-recurring items related to Financial Expenses and Amortization does not impact Adjusted EBITDA. -13- FINANCIAL EXPENSES The accompanying table shows, on a retrospective basis, the impact of the 225 basis point (bps) increase on amounts owing to the Senior Secured Notes that came into effect on January 1, 2002 as if they had been in place during the entire three-year period. Management believes that this table provides a better comparison of the effect on financial expenses as a result of improved working capital management and the share issue in the first half of 2002. Table of Financial Expenses (In millions of US dollars)
2002 2001 2000 ____________ __________ __________ $ $ $ Financial Expenses - As Reported 32.8 38.9 27.3 ____________ __________ __________ Less: Non-recurring charge 6.7 As adjusted before ____________ __________ __________ non-recurring charges 32.8 32.2 27.3 Effect of 225bps increase in years prior to the rate increase (for comparative purposes only) 6.3 6.3 ____________ __________ __________ Financial expenses if the rate increase had taken place January 1, 2000 32.8 38.5 33.6 ____________ __________ __________ ____________ __________ __________
Based on the above, year over year financial expenses would have decreased by 14.8% in 2002, to $32.8 million compared to $38.5 million in 2001. In 2000, adjusted financial expenses would have amounted to $33.6 million. Financial expenses for 2001 include a non-recurring $6.7 million charge consisting of the write-off of certain deferred costs related to previous financing arrangements that were refinanced at the end of 2001, together with the fees paid to both the noteholders and the banks in relation to the refinancing. The Company's EBITDA for the first quarter of 2003 was $17.6 million and the EBITDA interest coverage (that is, EBITDA divided by financial expenses) was 2.28 times. INCOME TAX The Company's effective income tax rate was 19.0%, 45.9% and 9.5% for the years 2002, 2001 and 2000 respectively. The Company's statutory income tax rate was approximately 43.0% for the same period. In the past three years, the Company's statutory income tax rate has been impacted primarily by a lower rate on foreign-based income, manufacturing and processing deductions and transactions that resulted in permanent differences partly offset by a change in the valuation allowance. In addition, in 2002, the statutory income tax rate was impacted by the non-taxable portion of the charge for goodwill impairment. At December 31, 2002, the Company had accumulated approximately $44.3 million in Canadian operating loss carry-forwards expiring in 2007 through 2009, and $153.7 million in U.S. federal and state operating losses expiring in 2010 through 2022. In assessing the valuation of future income tax assets, management considers whether it is more likely than not that some or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets to be realized, net of the valuation allowance at December 31, 2002, as a result of the reversal of existing taxable temporary differences. Based on management's assessment, a $26.3 million valuation allowance was established for the year ended December 31, 2002, which is $10.8 million higher than the allowance established in 2001. NET EARNINGS - CANADIAN AND U.S. GAAP For fiscal 2002, the Company posted a net loss of $54.5 million compared to a net loss of $12.2 million in 2001 and net earnings of $33.4 million in 2000. Adjusted net earnings (see tables beginning on page 8) amounted to $10.2 million for 2002 compared to $9.7 million for 2001 and $45.2 million for 2000. The Company reported pre-tax losses of $67.2 million for 2002 and $22.6 million in 2001 and pre-tax earnings of $36.9 million in 2000. The adjusted figures (see tables beginning on page 8) show pre-tax earnings of $4.9 million for 2002, $9.6 million for 2001 and $52.9 million for 2000. Canadian GAAP net earnings conform in all material respects to amounts that would have to be reported had the financial statements been prepared under U.S. GAAP. For further details, see Note 21 to the consolidated financial statements. -14- In the case of IPG, net earnings are equal to earnings from continuing operations, as the Company had no discontinued operations, extraordinary items, or changes in accounting principles that resulted in a charge against earnings for these periods. EARNINGS PER SHARE - CANADIAN AND U.S. GAAP The Company reported losses per share of $1.66 in 2002, basic and diluted, and $0.43 in 2001, basic and diluted. In 2000, the Company had basic earnings per share (EPS) of $1.18 and diluted EPS of $1.16. The weighted-average number of common shares outstanding was 32.8 million shares for 2002, 28.3 million shares for 2001 and 28.3 million shares for 2000 for the purpose of the basic EPS calculation, and 28.7 million shares for the purpose of the diluted EPS calculation for 2000. The increase in the number of shares outstanding in 2002 was primarily due to the equity offering. The adjusted EPS (see tables beginning on page 8) for 2002 amounted to $0.31, basic and diluted, compared to $0.34, basic diluted, for 2001. Adjusted figures for 2000 show basic EPS of $1.59 and diluted EPS of $1.57. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS In 2002, the Company generated cash flows from operating activities of $35.2 million compared to $48.1 million in 2001 and $40.0 million in 2000. Cash flows from operations before changes in non-cash working capital items increased by $16.4 million to $30.3 million in 2002 from $13.9 million in 2001, primarily due to increased earnings adjusted for the non-cash goodwill impairment charge. In 2002, non-cash working capital items generated additional net cash flows of approximately $5.0 million. This was in part due to a $5.7 million decrease in receivables largely driven by a decrease in rebates owed to the Company. IPG also reduced its investment in inventories, which declined by $9.9 million from last year and by nearly $28.0 million from where they stood two years ago. This reduction is attributable to the implementation of the RDC strategy and the warehouse management system, which have resulted in better supply chain management practices. Cash flows generated by changes in these items were partly offset by a decrease of $11.4 million in accounts payable. In 2001, cash flows from operations before changes in non-cash working capital items decreased by $44.0 million to $13.9 million from $57.9 million in 2000 as a direct result of a decline in sales, which negatively impacted earnings. In spite of the shortfall in sales, the Company's management of certain balance sheet items generated $34.2 million in additional cash flows from changes in non-cash working capital items during 2001. This was a turn-around of $52.1 million compared to 2000, when changes in non-cash working capital items consumed $17.9 million of cash. The change was a direct result of the Company placing less emphasis on its acquisition strategy and more emphasis on completing the integration of its acquired business processes. Cash flows from investing activities were significantly different in 2002 and 2001 than in previous years. In 2002 and 2001, the Company had net property, plant and equipment expenditures of $11.7 million and $17.9 million respectively, and increased other assets by $5.2 million and $8.6 million respectively, for a total use and of cash of $16.9 million and $26.5 million respectively. The Company anticipates net property, plant and equipment expenditures in the range of $13.0 to $15.0 million for 2003. In contrast, the Company invested a net $54.5 million in 2000, consisting of $43.9 million in net property, plant and equipment expenditures and $28.2 million to complete the acquisition of Olympian Tape Sales, Inc. d/b/a United Tape Company (UTC), offset by funds provided by a $17.6 million reduction in other assets. Cash flows used in financing activities amounted to $20.0 million in both 2002 and 2001, the first fiscal periods since the Company embarked on its acquisition strategy in 1995 in which cash flows from operations were used to reduce debt. During 2002, the Company reduced bank debt by approximately $45.9 million and the amount due to the senior secured noteholders by $24.4 million. The Company also issued 5.1 million common shares from treasury for a consideration of $47.7 million and approximately 0.2 million shares totaling $2.0 million to partially fund its contribution to various pension funds and for the exercise of employee stock options. In 2001, $12.9 million in short-term bank indebtedness was repaid and $86.4 million was transferred to long-term debt as a result of the refinancing completed late in 2001. The Company also -15- reduced its long-term debt by $9.6 million. During the year, the Company issued $3.4 million of common shares related to the exercise of employees' stock options and funding of the U.S. employee stock ownership and retirement savings plan. It also used $0.9 million to purchase and cancel common shares. In 2000, financing activities generated cash flow of $17.2 million, primarily from a $26.5 million increase in short-term bank indebtedness, less $2.2 million used to repay long-term debt, $4.2 million used to purchase common shares for cancellation and $3.0 million used to pay dividends. Management is committed to further debt reductions, and believes this is achievable because of a reduced need for investment in property, plant and equipment and the continued management of working capital items. Free cash flows, defined as cash flows from operating activities less property, plant and equipment expenditures and dividends, improved to approximately $23.5 million in 2002 compared to $22.1 million in 2001. The Company expects to have free cash flows of in excess of $30.0 million in 2003. LIQUIDITY At year-end 2002, working capital stood at $61.2 million as compared to $68.1 million at the and of 2001. The Company considers that it has sufficient working capital and liquidity to meet the requirements of its day-to-day operations, given its operating margins and projected budgets. Quick assets, which are the total current assets excluding prepaid expenses and future income taxes, declined by $12.7 million in 2002 relative to 2001. This reflects the reduction in receivables and improved inventory control. Inventory turnover (sales divided by inventories) improved from 8.4 times in 2001 to 9.9 times in 2002. CAPITAL EXPENDITURES Total net property, plant and equipment expenditures were $11.7 million, $17.9 million and $43.9 million for the years 2002 to 2000 respectively. Property, plant and equipment expenditures came down in 2002 as many capital projects undertaken in recent years have now been completed. As of 2002, the focus of spending in this area is on machine efficiency projects to drive improved throughput and material usage. Investment in the management information systems area continued in 2002, with efforts focused on improving system utilization and the continued roll-out of the Company's warehouse management systems. In 2000 and 2001, capital spending on property, plant and equipment included the following projects: - - The expansion of the Company's Truro, Nova Scotia, plant. Completed in 2001, this expansion added much needed capacity for production of both traditional and new woven products, such as vinyl replacement products. As well, new printing capacity for woven products was brought on line in 2000. - - Installation of a sixth production line at the Company's Danville, Virginia, facility during 2000 and 2001. This enabled the Company to be completely self-sufficient in the production of film for pressure sensitive tapes for both hot-melt and acrylic based adhesives tapes. - - Installation of a seventh cast line for the production of stretch films in the Danville, Virginia, location in 2000 brought the Company's capacity in this product line to more than 100 million pounds. - - Other expenditures made in order to lower manufacturing costs and improve output of tape production facilities in Columbia, South Carolina, Marysville, Michigan, and Richmond, Kentucky, primarily in the areas of finishing and packaging. - - During 2000, the Company started to bring its entire payroll function in house. This was completed in the latter part of 2001. Management is projecting maximum property, plant and equipment expenditures in the range of $13.0 to $15.0 million for the year 2003. -16- BANK INDEBTEDNESS AND CREDIT FACILITIES Bank indebtedness consists of the utilized portion of the short-term revolving credit facilities and cheques issued which have not been drawn from the facilities, and is reduced by any cash and cash equivalent balances. As at December 31, 2002, bank indebtedness was $8.6 million compared to $28.0 million as at December 31, 2001. The Company has a short-term line of credit committed for three years in the amount of $50.0 million. This credit facility, Facility A, was put in place at the end of 2001. At year-end 2002, the credit facility availability was $23.2 million as compared to $11.0 million at the end of 2001. When combined with on- hand cash and cash equivalents, this provided the Company with total cash and credit availability of $41.4 million as at December 31, 2002. LONG-TERM DEBT In 2002, the Company reduced its indebtedness associated with long-term debt instruments by nearly $50.0 million. As part of the refinancing completed in late 2001, the balance of the then short-term debt was cancelled and new facilities, Facility B and Facility C, in the aggregate amount of $95.0 million with two-year and four-year terms were entered into. In 2002, the Company repaid and cancelled Facility B, the $35.0 million, two-year term bank facility which was due to be fully repaid by the end of 2003. At December 31, 2002, $60.0 million was drawn against Facility C compared to $86.4 million drawn against both Facility B and Facility C at the end of 2001. In addition, the amount owing on senior notes was reduced by $24.4 million during 2002 from an aggregate amount of $274.0 million to $249.6 million. The long-term bank debt and the senior noteholder debt are secured by a fixed charge against all assets and a second lien against receivables and inventory. In late 2002, the Company's lenders rewarded its efforts to reduce debt by agreeing to amend its financial covenants. They have also confirmed that the goodwill impairment charge taken for 2002 will have no negative repercussions with respect to the financial covenants for 20O2 and going forward. The Company is scheduled to reduce long-term debt by a further $29.3 million in 20O3. Approximately $4.0 million of this represents cash payments to senior secured noteholders and other non-bank debts. The remainder of approximately $25.3 million represents a reduction in Facility C. Facility C has quarterly reductions of $5.0 million, as wall as an annual excess cash flow repayment of approximately $5.3 million payable on April 30, 2003, based on 2002 excess cash flow calculations. Cash to cover these payments will be internally generated by operations and borrowed under Facility A, The Company does not anticipate having any difficulty in making its debt reduction payments. CAPITAL STOCK In the first quarter of 2002, the Company issued 5,100,000 common shares at a price of CDN $15.50 per share (US $9.71 per share after issue costs) for a cash infusion of US $47.7 million net of issue costs. The proceeds were used to repay long-term bank loans and senior secured noteholder debt. In 2002, 2001, and 2000, employees exercised stock options worth $0.3 million, $1.1 million, and $0.2 million respectively. Further, during 2002 and 2001, $1.7 million and $2.2 million worth of shares were issued in relation to funding the Company's U.S. employee stock ownership retirement savings plan. In 2000, as part of the financing of the purchase of certain assets of UTC, $4.0 million worth of shares were issued at $15.96 per share. During 1999, the Company announced that it had registered a Normal Course Issuer Bid (NCIB) in Canada. The NCIB was extended for one-year terms during 2000 and again during 2001 and 2002. There were no shares purchased for cancellation during 2002. In 2001 and 2000, 128,100 and 353,200 shares were purchased for cancellation. This resulted in a reduction in the stated value of the Company's issued common shares of $0.8 million and $2.4 million for the years 2001 and 2000 respectively. As part of the purchase price for the acquisition of CPC in 1999, the Company issued 300,000 share purchase warrants that permit the holder to purchase common shares of the Company at a price of $29.50 per share. These warrants expire on August 9, 2004. -17- BUSINESS ACQUISITIONS The Company's most recent acquisition was UTC, completed on September 1, 2000. There were no acquisitions in either 2002 or 2001. While acquisitions remain an important component of the strategy to provide the Company with new products and channels of distribution, there were no attractive opportunities presented to the Company during the period that met management's criteria. DIVIDEND ON COMMON SHARES No dividends were declared in either 2002 or 2001. On May 15, 2000, the Company declared an annual dividend of $0.106 per share (CDN $0.16) payable to shareholders of record at May 30, 2000. The dividend was paid on June 8, 2000, and amounted to approximately $3.0 million. CHANGES IN ACCOUNTING POLICIES STOCK-BASED COMPENSATION Effective January 1, 2002, the Company adopted, on a prospective basis, the new CICA recommendations with respect to stock-based compensation and other stock-based payments. This new standard establishes, among other things, financial accounting and reporting standards for stock-based employee compensation plans. Under this method, compensation cost is measured at the grant date based on the fair value of the award, and is recognized over the related service period. An entity that does not adopt the fair value method of accounting for its awards granted to employees is required to include in its financial statements pro forma disclosures of net earnings and earnings per share as if the fair value method of accounting had been applied. The Company has adopted the latter alternative treatment. The supplemental information required by this new recommendation is presented in Note 17 to the consolidated financial statements. GOODWILL AND OTHER INTANGIBLE ASSETS Effective January 1, 2002, the Company adopted the new CICA recommendations with respect to goodwill and other intangible assets. These standards are equivalent to the US standards. Under the new recommendation, goodwill and intangible assets determined to have an indefinite useful life are no longer amortized and are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired. Under these recommendations, the Company was required to complete a transitional goodwill impairment test as at January 1, 2002. Management completed this test and determined that no adjustment for impairment of goodwill was necessary as a result of the change in accounting policy. Adjusted net earnings and earnings per share for 2001 and 2000 shown in the tables beginning on page 8 exclude the amortization for goodwill recognized in those periods to account for this change in accounting policy. IMPACT OF ACCOUNTING PRONOUNCEMENTS NOT YET IMPLEMENTED IMPAIRMENT OF LONG-LIVED ASSETS In December 2002, the CICA issued a new handbook section providing guidance on the recognition, measurement and disclosure of the impairment of long-lived assets. This new section is more fully discussed in Note 2 to the consolidated financial statements. The Company does not expect any adjustment to the carrying value of its property, plant and equipment as a result of this change in accounting policy. DISPOSAL OF LONG-LIVED ASSETS In December 2002, the CICA also issued a revision of the hand book section on the disposal of long-lived assets and discontinued operations, which provides guidance on the recognition, measurement and disclosure of the disposal of long-lived assets. Details on this revision are given in Note 2 to the consolidated financial statements. The Company does not expect any significant impact upon adoption of this section. -18- ASSET RETIREMENT OBLIGATIONS In August 2001, the Financial Accounting Standards Board (FASB) issued a statement establishing standards for the recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. This statement is more fully described in Note 22 to the consolidated financial statements. The Company does not expect any significant impact upon adoption of this standard. EXIT OR DISPOSAL ACTIVITIES In June 2002, the FASB issued a statement addressing the recognition, measurement and reporting of costs that are associated with exit and disposal activities. This statement is more fully discussed under Note 22 to the consolidated financial statements. The Company has not yet determined the impact, if any, of this change on any future exit or disposal activity. DISCLOSURES BY A GUARANTOR In November 2002, the FASB issued an interpretation addressing the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation is more fully discussed in Note 22 to the consolidated financial statements. The Company is not a guarantor of any third-party, non- affiliated obligations. STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE In December 2002, the FASB issued an amendment providing alternative methods of transition for voluntary change to the fair value based method of accounting for stock-based employee compensation. This amendment is more fully discussed in Note 22 to the consolidated financial statements. The Company believes that this statement will not have a material impact on its financial statements. CONSOLIDATION OF VARIABLE INTEREST ENTITIES In January 2003, the FASB issued an interpretation to provide new guidance with respect to the consolidation of all previously unconsolidated entities, including special purpose entities. Because the Company does not have any unconsolidated subsidiaries, it does not believe that the adoption of the interpretation, required in fiscal 2003, will have any impact on its consolidated financial position or results of operations. -19- MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF INTERTAPE POLYMER GROUP INC. The consolidated financial statements of Intertape Polymer Group Inc. and the other financial information included in this annual report are the responsibility of the Company's Management and have been examined and approved by its Board of Directors. These consolidated financial statements have been prepared by Management in accordance with Canadian generally accepted accounting principles and include some amounts that are based on Management's best estimates and judgements. The selection of accounting principles and methods is Management's responsibility. The Company maintains internal control systems designed to ensure that the financial information produced is relevant and reliable. Management recognizes its responsibility for conducting the Company's affairs in a manner to comply with the requirements of applicable laws and established financial standards and principles, and for maintaining proper standards of conduct in its activities. The Board of Directors assigns its responsibility for the financial statements and other financial information to the audit committee, the majority of whom are non-management directors. The audit committee's role is to examine the financial statements and annual report and recommend that the Board of Directors approve them, to examine the internal control and information protection systems and all other matters relating to the Company's accounting and finances. In order to do so, the audit committee meets periodically with external auditors, to review their audit plans and discuss the results of their examination. This committee is responsible for recommending the appointment of the external auditors or the renewal of their engagement. The Company's external auditors, Raymond Chabot Grant Thornton, appointed by the shareholders at the Annual and Special Meeting, have audited the Company's financial statements and their report indicating the scope of their audit and their opinion on the financial statements follows. Sarasota, Florida and Montreal, Canada February 21, 2003 /s/ Melbourne F. Yull Melbourne F. Yull Chairman and Chief Executive Officer /s/ Andrew M. Archibald Andrew M. Archibald Chief Financial Officer, Secretary, Vice President, Administration -20- AUDITORS' REPORT TO THE SHAREHOLDERS OF INTERTAPE POLYMER GROUP INC. We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 2002 and 2001 and the consolidated statements of earnings, retained earnings and cash flows for each of the years in the three- year period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2002 and 2001 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2002 in accordance with Canadian generally accepted accounting principles. /s/Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal February 21, 2003 COMMENTS BY AUDITORS FOR AMERICAN READERS ON CANADA-U.S. REPORTING DIFFERENCES INTERTAPE POLYMER GROUP INC. In the United States of America, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of the Company's financial statements, such as the change in accounting for goodwill and other intangible assets as described in note 2 to the consolidated financial statements. Our report to the shareholders dated February 21, 2003 is expressed in accordance with Canadian reporting standards which does not require a reference to such change in accounting principles in the auditors' report when the change is properly accounted for and adequately disclosed in the consolidated financial statements. /s/Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal February 21, 2003 -21- CONSOLIDATED EARNINGS Years Ended December 31, (in thousands of US dollars, except per share amounts)
2002 2001 2000 _________ _______ ________ $ $ $ Sales 601,575 594,905 653,915 Cost of sales (Note 4) 476,330 476,089 500,547 _________ _______ ________ Gross profit 125,245 118,816 153,368 _________ _______ ________ Selling, general and administrative expenses (Note 4) 86,524 91,343 83,092 Amortization of goodwill 7,014 6,540 Impairment of goodwill (Note 13) 70,000 Research and development 3,169 4,182 5,109 Financial expenses (Note 5) 32,773 38,911 27,205 Gain on sale of interest in joint venture (Note 4) (5,500) _________ _______ ________ 192,466 141,450 116,446 _________ _______ ________ Earnings (loss) before income taxes (67,221) (22,634) 36,922 Income taxes (Note 6) (12,767) (10,392) 3,500 _________ _______ ________ Net earnings (loss) (54,454) (12,242) 33,422 _________ _______ ________ _________ _______ ________ Earnings (loss) per share (Note 7) Basic (1.66) (0.43) 1.18 _________ _______ ________ _________ _______ ________ Diluted (1.66) (0.43) 1.16 _________ _______ ________ _________ _______ ________
CONSOLIDATED RETAINED EARNINGS Years Ended December 31, (in thousands of US dollars)
2002 2001 2000 _________ _______ ________ $ $ $ Balance, beginning of year 104,567 116,966 88,422 Net earnings (loss) (54,454) (12,242) 33,422 _________ _______ ________ 50,113 104,724 121,844 _________ _______ ________ Dividends 3,006 Premium on purchase for cancellation of common shares 157 1,872 _________ _______ ________ 157 4,878 _________ _______ ________ Balance, end of year 50,113 104,567 116,966 _________ _______ ________ _________ _______ ________
The accompanying notes are an integral part of the consolidated financial statements. -22- CONSOLIDATED CASH FLOWS Years Ended December 31, (in thousands of US dollars)
2002 2001 2000 _________ _______ ________ $ $ $ OPERATING ACTIVITIES Net earnings (loss) (54,454) (12,242) 33,422 Non-cash items Depreciation and amortization 28,653 33,831 27,934 Impairment of goodwill 70,000 Loss on disposal of property, plant and equipment 1,280 Future income taxes (15,198) (9,165) 482 Write-off of debt issue expenses 2,165 Write-off of property, plant and equipment 1,594 Other non-cash items (715) (5,500) _________ _______ ________ Cash flows from operations before changes in non-cash working capital items 30,281 13,874 57,932 _________ _______ ________ Changes in non-cash working capital items Trade receivables 475 10,337 (6,897) Other receivables 5,186 (1,287) 3,003 Inventories 9,851 17,690 3,318 Parts and supplies (767) (1,626) 175 Prepaid expenses 1,567 (3,341) (1,809) Accounts payable and accrued liabilities (11,361) 12,431 (15,697) _________ _______ ________ 4,951 34,204 (17,907) _________ _______ ________ Cash flows from operating activities 35,232 48,078 40,025 _________ _______ ________ INVESTING ACTIVITIES Business acquisition (Note 8) (28,195) Property, plant and equipment (11,716) (25,942) (48,142) Proceeds on sale of property, plant and equipment 8,000 4,239 Other assets (5,213) (8,592) 17,637 _________ _______ ________ Cash flows from investing activities (16,929) (26,534) (54,461) _________ _______ ________ FINANCING ACTIVITIES Net change in bank indebtedness (19,525) (99,261) 26,468 Issue of long-term debt 86,400 Repayment of long-term debt (50,209) (9,634) (2,249) Issue of common shares 49,689 3,379 176 Common shares purchased for cancellation (922) (4,194) Dividends paid (3,006) _________ _______ ________ Cash flows from financing activities (20,045) (20,038) 17,195 _________ _______ ________ Net increase (decrease) in cash position (1,742) 1,506 2,759 Effect of currency translation adjustments 1,742 (1,506) (2,759) _________ _______ ________ Cash position, beginning and end of year - - - _________ _______ ________ _________ _______ ________ SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Interest paid 30,428 32,791 29,319 Income taxes paid 413 1,234 3,118
The accompanying notes are an integral part of the consolidated financial statements. -23- CONSOLIDATED BALANCE SHEETS December 31, (In thousands of US dollars)
2002 2001 _________ ________ $ $ ASSETS Current assets Trade receivables (net of allowance for doubtful accounts of $3,844, $6,670 in 2001) 86,169 86,529 Other receivables (Note 9) 10,201 13,654 Inventories (Note 10) 60,969 70,688 Parts and supplies 12,377 11,592 Prepaid expenses 7,884 9,450 Future income tax assets (Note 6) 2,397 4,025 _________ ________ 179,997 195,938 Property, plant and equipment (Note 11) 351,530 366,567 Other assets (Note 12) 13,178 11,680 Goodwill (Note 13) 158,639 227,804 _________ ________ 703,344 801,989 _________ ________ _________ ________ LIABILITIES Current liabilities Bank indebtedness (Note 14) 8,573 28,046 Accounts payable and accrued liabilities 80,916 91,507 Installments on long-term debt 29,268 8,310 _________ ________ 118,757 127,863 Future income taxes (Note 6) 4,446 21,588 Long-term debt (Note 15) 283,498 354,663 Other liabilities (Note 16) 3,550 3,785 _________ ________ 410,251 507,899 _________ ________ SHAREHOLDERS' EQUITY Capital stock and share purchase warrants (Note 17) 239,185 189,496 Retained earnings 50,113 104,567 Accumulated currency translation adjustments 3,795 27 _________ ________ 293,093 294,090 _________ ________ 703,344 801,989 _________ ________ _________ ________
The accompanying notes are an integral part of the consolidated financial statements. On behalf of the Board /s/J. Spencer Lanthier /s/L. Robbie Shaw J. Spencer Lanthier, Director L. Robbie Shaw, Director -24- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, (In US dollars; tabular amounts in thousands, except per share amounts) 1. GOVERNING STATUTES The Company, incorporated under the Canada Business Corporations Act, is based in Montreal, Canada, and in Sarasota, Florida. The common shares of the Company are listed on the New York Stock Exchange in the United States of America ("United States") and on The Toronto Stock Exchange in Canada. 2. ACCOUNTING POLICIES The consolidated financial statements are expressed in US dollars and were prepared in accordance with Canadian generally accepted accounting principles, which, in certain respects, differ from the accounting principles generally accepted in the United States, as shown in note 21. Accounting changes Stock-based compensation Effective January 1, 2002, the Company adopted, on a prospective basis, the new CICA recommendations with respect to Section 3870, Stock-based Compensation and Other Stock-based Payments. This new standard establishes, among other things, financial accounting and reporting standards for stock- based employee compensation plans. It defines a fair value method of accounting for its stock-based employee compensation plans. Under this method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the related service period. An entity that does not adopt the fair value method of accounting for its award granted to employees is required to include in its financial statements pro forma disclosures of net earnings and earnings per share as if the fair value method of accounting had been applied. The Company has adopted the latter alternative treatment. The supplementary information required by this new recommendation is presented in note 17. The Company has granted stock options as described in note 17. No compensation expense is recognized when stock options are granted. Any consideration paid by employees on exercise of stock options is credited to capital stock. Goodwill and other intangible assets Effective January 1, 2002, the Company adopted, or a retroactive basis, the new CICA recommendations with respect to Section 3062, Goodwill and Other Intangible Assets. These standards are equivalent to the US standards. Under the new recommendations, goodwill and intangible assets determined to have an indefinite useful life are no longer amortized and are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired. Under these recommendations, the Company was required to complete a transitional goodwill impairment test as at January 1, 2002. Management completed this test and determined no adjustment for impairment of goodwill was necessary as a result of the change in accounting policy. -25- 2. ACCOUNTING POLICIES (Continued) The following table presents a reconciliation of the net earnings (loss) and earnings (loss) per share as reported for the prior years to the corresponding financial information adjusted to exclude the amortization of goodwill recognized in those periods that is no longer taken as a result of applying Section 3062:
2002 2001 2000 _________ ________ ________ $ $ $ Net earnings (loss), as reported (54,454) (12,242) 33,422 Add: Amortization of goodwill (net of $0.7 and $0.6 million of income taxes for 2001 and 2000 respectively) 6,339 5,911 _________ ________ ________ Adjusted net earnings (loss) (54,454) (5,903) 39,333 _________ ________ ________ _________ ________ ________ Adjusted basic earnings (loss) per share (1.66) (0.21) 1.39 _________ ________ ________ _________ ________ ________ Adjusted diluted earnings (loss) per share (1.66) (0.21) 1.37 _________ ________ ________ _________ ________ ________
Accounting estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the recorded amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Principles of consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated. Investments in joint ventures have been proportionately consolidated based on the Company's ownership interest. Fair value of financial instruments The fair value of trade receivables, other receivables, bank indebtedness as well as accounts payable and accrued liabilities is equivalent to carrying amounts, given the short maturity period of such financial instruments. The fair value of receivables from joint ventures approximates the carrying amounts reported in the consolidated balance sheets. The fair value of long-term debt was established as described in note 15. -26- 2 - ACCOUNTING POLICIES (Continued) Foreign currency translation Reporting currency The accounts of the Company's operations having a functional currency other than the US dollar have been translated into the reporting currency using the current rate method as follows: assets and liabilities have been translated at the exchange rate in effect at year-end and revenues and expenses have been translated at the average rate during the year. All translation gains or losses of the Company's net equity investments in these operations have been included in the accumulated currency translation adjustments account in shareholders' equity. Changes in this account for all periods presented result solely from the application of this translation method. Foreign currency translation Transactions denominated in currencies other than the functional currency have been translated into the functional currency as follows: monetary assets and liabilities have been translated at the exchange rate in effect at the end of each year and revenue and expenses have been translated at the average exchange rate for each year, except for depreciation and amortization which are translated at the historical rate; non-monetary assets and liabilities have been translated at the rates prevailing at the transaction dates. Exchange gains and losses arising from such transactions are included in earnings. Cash and cash equivalents The Company's policy is to present cash and temporary investments having a term of three months or less with cash and cash equivalents. Inventories and parts and supplies valuation Raw materials are valued at the lower of cost and replacement cost. Work in process and finished goods are valued at the lower of cost and net realizable value. Cost is principally determined by the first in, first out method. The cost of work in process and finished goods includes the cost of raw materials, direct labour and manufacturing overhead. Parts and supplies are valued at the lower of cost and replacement cost. Property, plant and equipment Property, plant and equipment are stated at cost less applicable investment tax credits and government grants earned and are depreciated over their estimated useful lives principally as follows:
Methods Rates and periods ___________________________________________________________ Buildings Diminishing balance or straight-line 5% or 15 to 40 years Buildings under capital leases Straight-line 20 years Manufacturing equipment Straight-line 20 years Furniture, office and computer equipment, software and other Diminishing balance or straight-line 20% or 3 to 10 years(i)
(i) Effective January 1, 2002, as a result of an extensive review of the useful lives of the Company's various software, management decided to extend to 10 years the estimated useful lives of all enterprise level software. Prior to such revision, these assets were depreciated over a period of 7 years. The change in estimated useful life was applied prospectively commencing January 1, 2002 and has resulted in a decrease in depreciation expense and a corres- ponding increase in earnings before income taxes, net earnings, basic earnings per share and diluted earnings per share of approximately $1.4 million, $0.9 million, $0.04 and $0.04 respectively for the year ended December 31, 2002. -27- 2 - ACCOUNTING POLICIES (Continued) The Company follows the policy of capitalizing interest during the construc- tion and preproduction periods as part of the cost of significant property, plant and equipment. Normal repairs and maintenance are expensed as incurred, Expenditures which materially increase values, change capacities or extend useful lives are capitalized. Depreciation is not charged on new property, plant and equipment until they become operative. Deferred charges Debt issue expenses are deferred and amortized on a straight-line basis over the term of the related obligation. Other deferred charges are amortized on a straight-line basis over a five-year period. Environmental costs The Company expenses, on a current basis, recurring costs associated with managing hazardous substances and pollution in ongoing operations. The Company also accrues for costs associated with the remediation of environmental pollution when it becomes probable that a liability has been incurred and its share of the amount can be reasonably estimated. Pension plans and other retirement benefits The Company has defined benefit and defined contribution pension plans and other retirement benefit plans for its Canadian and American employees. The following policies are used with respect to the accounting for the defined benefit and other retirement benefit plans: - - The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and is charged to earnings as services are provided by the employees. The calculations take into account management's best estimate of expected plan investment performance, salary escalation, retirement ages of employees, participants' mortality rates and expected health care costs; - - For the purpose of calculating the expected return on plan assets, those assets are valued at the market-related value for certain plans and, for other plans, at fair value; - - Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service period of employees active at the date of amendment; - - The excess of the net actuarial gains (losses) over 10% of the greater of the benefit obligation and the market-related value or the fair value of plan assets is amortized over the average remaining service period of active employees. Income taxes The Company provides for income taxes using the liability method of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the financial statement values and tax values of assets and liabilities, using substantially enacted income tax rates expected to be in effect for the year in which the differences are expected to reverse. A valuation allowance as recognized to the extent the recoverability of future income tax assets is not considered more likely than not. -28- 2 - ACCOUNTING POLICIES (Continued) Revenue recognition Revenue is recorded when products are shipped to customers. Earnings per share In the year ended December 31, 2000, the Company adopted, on a retroactive basis, the new recommendations of the CICA with respect to Section 3500, Earnings Per Share. Under the new recommendations, the treasury stock method is used, instead of the current imputed earnings approach, for determining the dilutive effect of warrants and options. Previously reported diluted earnings per share amounts have been recalculated in accordance with the new requirements. This change in accounting policy has not resulted in differences in previously reported diluted earnings per share and has not impacted the establishment of the current year's diluted earnings per share. Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. New accounting pronouncements In December, 2002, the Canadian Institute of Chartered Accountants issued Handbook Section 3063, Impairment of Long-lived Assets. This new Section provides guidance on the recognition, measurement and disclosure of the impairment of long-lived assets. It replaces the write-down provisions in Property, Plant and Equipment, Section 3061. The Section requires an impairment loss for a long-lived asset to be held and used be recognized when its carrying amount exceeds the sum of the undiscounted cash flows expected from its use and eventual disposition. An impairment loss for a long-lived asset to be held and used should be measured as the amount by which its carrying amount exceeds its fair value. Section 3063 should be applied prospectively for years beginning on or after April 1, 2003. The Company does not expect any adjustments to the carrying value of its property, plant and equipment as a result of this change in accounting policy. In December, 2002, the Canadian Institute of Chartered Accountants issued revised Handbook Section 3475, Disposal of Long-lived Assets and Discontinued Operations. This new Section provides guidance on the recognition, measurement and disclosure of the disposal of long-lived assets. This Section should be applied to disposal activities initiated by an enterprise's commitment to a plan on or after May 1. 2003. The Company does not expect any significant impact upon adoption. -29- 3 - JOINT VENTURES The Company's pro rate share of its joint ventures' operations included in the consolidated financial statements is summarized as follows:
2002 2001 2000 __________ ________ ________ Earnings $ $ $ Sales 4,216 3,572 2,671 Gross profit 797 664 383 Financial expenses (income) 198 (7) (320) Net earnings (loss) (65) 110 136 Cash flows From operating activities 520 1,342 643 From investing activities (35) 86 (2,232) From financing activities 1,071 (956) 512 Balance sheets Assets Current assets 1,637 1,307 1,483 Long-term assets 6,051 6,122 7,119 Liabilities Current liabilities 1,459 2,925 2,885 Long-term debt 1,574 667 1,862
During the years ended December 31, 2002 and 2001, the Company had no sales to its joint ventures. The Company had sales of $2.8 million to its joint ventures in 2000. Also, the Company had no interest income from a joint venture for the years ended December 31, 2002 and 2001. The Company had interest income from joint ventures of $0.1 million in 2000. -30- 4 - INTEGRATION AND TRANSITION, ASSET WRITE-DOWNS AND OTHER NON-RECURRING ITEMS During 2002, management approved a plan for the consolidation of its operations related to the Flexible Intermediate Bulk Container division to be completed in June 2003. The plan involves the closing of two manufacturing plants and a reduction of 77 employees. The total charge for the restructuring is $2.1 million, including $1.8 million of termination benefits. Of the total charge, $0.9 million was recorded in the cost of goods sold and $1.2 million in the selling, general and administrative expenses. As at December 31, 20O2 the balance of $1.3 million is in accounts payable and accrued liabilities. For the year ended December 31, 2001, the Company recorded asset write-downs and non-recurring costs as a result of recent integrations, the startup of its Regional Distribution Centers, workforce reductions and debt refinancing. The total charge of $25.2 million includes $4.2 million of termination benefits. Cost of sales includes $7.7 million, selling, general and administrative expenses include $10.8 million and financial expenses include $6.7 million of such costs. During the year ended December 31, 2000, the Company realized a gain of $5.5 million on the sale of its interest in a joint venture. 5 - INFORMATION INCLUDED IN THE CONSOLIDATED STATEMENTS OF EARNINGS
2002 2001 2000 __________ ________ ________ $ $ $ Depreciation of property, plant and equipment 25,337 24,977 20,334 __________ ________ ________ __________ ________ ________ Amortization of debt issue expenses and other deferred charges 3,316 1,840 1,060 __________ ________ ________ __________ ________ ________ Financial expenses Interest on long-term debt 28,559 22,029 20,812 Interest on credit facilities 2,369 11,064 8,747 Refinancing costs 6,700 Interest income and other 2,310 18 (1,116) Interest capitalized to property, plant and equipment (465) (900) (1,238) __________ ________ ________ 32,773 38,911 27,205 __________ ________ ________ __________ ________ ________ Loss on disposal of property, plant and equipment 1,280 __________ ________ ________ __________ ________ ________
-31- 6 - INCOME TAXES The provision for income taxes consists of the following:
2002 2001 2000 __________ ________ ________ $ $ $ Current 2,431 (1,227) 3,018 Future (15,198) (9,165) 482 __________ ________ ________ (12,767) (10,392) 3,500 __________ ________ ________ __________ ________ ________
The reconciliation of the combined federal and provincial statutory income tax rate to the Company's effective tax rate is detailed as follows:
2002 2001 2000 __________ ________ ________ % % % Combined federal and provincial income tax rate 42.7 42.7 43.1 Manufacturing and processing (1.6) (8.6) 2.2 Foreign losses recovered (foreign income taxed) at lower rates (1.7) (6.4) (5.1) Goodwill impairment (33.0) Impact of other differences 28.8 86.7 (30.7) Change in valuation allowance (16.2) (68.5) __________ ________ ________ Effective income tax rate 19.0 45.9 9.5 __________ ________ ________ __________ ________ ________
-32- 6 - INCOME TAXES (Continued) The net future income tax liabilities are detailed as follows:
2002 2001 ________ ________ $ $ Future income tax assets Accounts payable and accrued liabilities 2,501 2,257 Tax credits and loss carry-forwards 77,890 55,372 Trade and other receivables 1,335 2,318 Inventories 296 Other 7,741 25 Valuation allowance (26,336) (15,498) ________ ________ 63,131 44,770 ________ ________ Future income tax liabilities Inventories 383 Property, plant and equipment 64,797 62,333 ________ ________ 65,180 62,333 ________ ________ Net future income tax liabilities 2,049 17,563 Net current future income tax assets 2,397 4,025 ________ ________ Net long-term future income tax liabilities 4,446 21,588 ________ ________ ________ ________
As at December 31, 2002, the Company has $44.3 million of Canadian operating loss carry-forwards expiring 2007 through 2009 and $153.7 million of US federal and state operating losses expiring 2010 through 2022. In assessing the realizability of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the future income tax assets, net of the valuation allowance, as at December 31, 2002 to be realized as a result of the reversal of existing taxable temporary differences. As part of the above analysis, the valuation allowance was increased by $10.8 million for the year ended December 31, 2002. -33- 7 - EARNINGS (LOSS) PER SHARE The following table provides a reconciliation between basic and diluted earnings (loss) per share:
2002 2001 2000 __________ __________ __________ $ $ $ Net earnings (loss) (54,454) (12,242) 33,422 __________ __________ __________ __________ __________ __________ Weighted average number of common shares outstanding 32,829,013 28,265,708 28,328,114 Effect of dilutive stock options and warrants(i) 387,738 __________ __________ __________ Weighted average number of diluted common shares outstanding 32,829,013 28,265,708 28,715,852 __________ __________ __________ __________ __________ __________ Basic earnings (loss) per share (1.66) (0.43) 1.18 Diluted earnings (loss) per share (1.66) (0.43) 1.16
(i) The following number of equity instruments were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented:
2002 2001 2000 _____________________ _____________________ _____________________ Number of instruments Number of instruments Number of instruments _____________________ _____________________ _____________________ Options 2,996,673 2,407,250 2,409,298 Warrants 300,000 300,000 300,000 _____________________ _____________________ _____________________ 3,296,673 2,707,250 2,709,298 _____________________ _____________________ _____________________ _____________________ _____________________ _____________________
-34- 8 - BUSINESS ACQUISITION Effective as of September 1, 2000, the Company acquired certain assets of Olympian Tape Sales, Inc, d/b/a United Tape Company ("UTC"). UTC was a manufacturer and distributor of certain packaging products into the retail market. UTC was a long-term customer of one particular product line of IPG. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets and liabilities based an their estimated fair value as of the acquisition date. The purchase price was paid for in both cash in the amount of $28.2 million and $4.0 million worth of common shares of Intertape stock from treasury. The terms of the UTC purchase also provide for additional amounts to be paid if certain specific events occur. This contingent consideration is payable in cash and will result in additional goodwill if paid. The Company has not recorded this liability as of December 31, 2002 as the outcome of the contingency is not yet determinable beyond a reasonable doubt. The operating results of the acquired business has been included in the consolidated financial statements from the effective date of acquisition. 9 - OTHER RECEIVABLES
2002 2001 __________ ________ $ $ Rebates receivable 363 3,088 Income and other taxes 6,199 4,903 Sales taxes 541 745 Other 3,098 4,918 __________ __________ 10,201 13,654 __________ __________ __________ __________
10 - INVENTORIES
2002 2001 __________ __________ $ $ Raw materials 14,998 15,520 Work in process 10,160 11,815 Finished goods 35,811 43,353 __________ __________ 60,969 70,688 __________ __________ __________ __________
-35- 11 - PROPERTY, PLANT AND EQUIPMENT
2002 _______ ________________ ___________ Accumulated Cost depreciation Net _______ ________________ ___________ $ $ $ Land 3,021 3,021 Buildings and related capital leases 59,854 17,510 42,344 Manufacturing equipment 385,315 118,066 267,249 Furniture, office and computer equipment, software and other 48,960 22,117 26,843 Manufacturing equipment under construction and software projects under development 12,073 12,073 _______ ________________ ___________ 509,223 157,693 351,530 _______ ________________ ___________ _______ ________________ ___________ 2001 _______ ________________ ___________ Accumulated Cost depreciation Net _______ ________________ ___________ $ $ $ Land 3,317 3,317 Buildings and related capital leases 59,425 15,241 44,184 Manufacturing equipment 370,195 101,609 268,586 Furniture, office and computer equipment, software and other 30,969 15,279 15,690 Manufacturing equipment under construction and software projects under development 34,790 34,790 _______ ________________ ___________ 498,696 132,129 366,567 _______ ________________ ___________ _______ ________________ ___________
-36- 12 - OTHER ASSETS
2002 2001 __________ _________ $ $ Debt issue expenses and other deferred charges, at amortized cost 10,397 8,879 Loans to officers and directors, including loans regarding the exercise of stock options, without interest, various repayment terms 886 1,059 Other receivables 1,145 430 Other, at cost 750 1,312 __________ _________ 13,178 11,680 __________ _________ __________ _________
13 - ACCOUNTING FOR GOODWILL In accordance with the specific requirements of CICA, Section 3062, Goodwill and Other Intangible Assets, the Company performed an impairment test as at December 31, 2002. Also in accordance with the specific requirements of the Section, the Company determined that it had one reporting unit. The Company calculated the fair value of this reporting unit using the discounted cash flows method, and compared with other methods including multiples of sales and earnings before interest, taxes, depreciation, and amortization (EBITDA) and, with historical transactions where appropriate. From these approaches, the fair market value was determined resulting in a charge to operating expenses of $70.0 million. This impairment relates to the prior acquisition activity of Intertape Polymer Group during the period from 1996 through 2000 in light of current economic and market conditions. The carrying amount of goodwill as at December 31, 2002 is detailed as follows:
$ ____________________ Balance as at December 31, 2002 228,639 Impairment 70,000 ____________________ Net balance as at December 31, 2002 158,639 ____________________ ____________________
-37- 14 - BANK INDEBTEDNESS AND CREDIT FACILITIES The bank indebtedness consists of the utilized portion of the short-term revolving bank credit facilities and cheques issued which have not been drawn from the facilities and is reduced by any cash and cash equivalent balances. As at December 31, 2002, the Company had: - - Bank loans under a US $50.0 million revolving credit facility (Facility A), extendible annually at the option of the lenders, converting to a two-year term loan if not extended by the lenders. The loan bears interest at various interest rates including US prime rate plus a premium varying between 0 and 275 basis points and LIBOR plus a premium varying between 75 and 350 basis points. As at December 31, 2002, the effective rate was approximately 6.08% (7.95% in 2001) and US$26.8 million (US$39.0 million in 2001) was utilized. - - An amount of US$2.8 million (US$5.5 million in 2001) of this credit facility is used for letters of credit. The credit facility is secured by a first ranking charge on the Company's accounts receivable and inventories. The credit facilities contain certain financial covenants, including limitations on debt as a percentage of tangible net worth above predefined levels and fixed charge coverage ratios. 15 - LONG-TERM DEBT Long-term debt consists of the following:
2002 2001 __________ _________ $ $ a) US$137,000,000 Series A and B Senior Notes 125,005 137,000 b) US$137,000,000 Senior Notes 124,616 137,000 c) Bank loans under revolving credit facilities 60,000 86,400 d) Other debt 3,145 2,573 __________ _________ 312,766 362,973 __________ _________ Less current portion of long-term debt 29,268 8,310 __________ _________ 283,498 354,663 __________ _________ __________ _________
-38- 15 - LONG-TERM DEBT (Continued) a) Series A and B Senior Notes Series A and B Senior Notes bearing interest at an average rate of 10.03% (10.03% in 2001) payable semi-annually. The Series A US$25.0 million Notes mature on May 31, 2005. The Series B US$112.0 million Notes are repayable in semi-annual installments of US$13.4 million starting in November 2005 and mature on May 31, 2009. The Series A and B Senior Notes are secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on the accounts receivable and inventories. The Series A and B Senior Notes contain the same financial covenants as the credit facilities. b) Senior Notes Senior Notes bearing interest at 9.07% (9.07% in 2001) payable semi-annually, repayable in semi-annual installments of US$16.5 million starting in September 2004 and maturing on March 31, 2008. Senior Notes are secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on the accounts receivable and inventories. The Senior Notes contain the same financial covenants as the credit facilities. c) Bank loans under revolving credit facilities Revolving reducing term loan (Facility B) was repaid and cancelled in October 2002 (US$26.4 million was utilized in 2001). The interest rate in effect at the time of the repayment was 5.76% (7.95% in 2001). Revolving reducing term loan (Facility C) in the amount of up to $60.0 million, reducing by $5.0 million on the last day of each quarter beginning the earlier of March 31. 2004 or the last day of the quarter following the repayment of Facility B, maturing on December 31, 2005, secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on all the accounts receivable and inventories. The repayment will begin in March 2003. This loan bears interest at US prime rate plus a premium varying between 75 and 320 basis points or LIBOR plus a premium varying between 150 and 395 basis points. As at December 31, 2002, the effective interest rate was approximately 5.80% (7.95% in 2001) and $60.0 million ($60.0 million in 2001) was utilized. d) Other debt Other debt consisting of government loans, mortgage loans in a joint venture, obligations related to capitalized leases and other loans at fixed and variable interest rates ranging from interest-free to 9.03% and requiring periodic principal repayments through 2007. -39- 15 - LONG-TERM DEBT (Continued) The Company has complied with the maintenance of financial ratios and with other conditions that are stipulated in the covenants pertaining to the various loan agreements. Long-term debt repayments are due as follows: $ ____________________ 2003 29,268 20O4 36,922 2005 89,060 2006 60,107 2007 60,108 Thereafter 37,301 ____________________ Total 312,766 ____________________ ____________________ Fair value For all debts with fixed interest rates, the fair value has been determined based on the discounted value of cash flows under the existing contracts using rates representing those which the Company could currently obtain for loans with similar terms, conditions and maturity dates. For the debts with floating interest rates, the fair value is closely equivalent to their carrying interest rates, the fair value is closely equivalent to their carrying amounts. The carrying amounts and fair values of the Company's long-term debt as at December 31, 2002 and 2001 are as follows: 2002 2001 _______________________ _______________________ Carrying Carrying Fair value amount Fair value amount ____________ __________ ____________ __________ $ $ $ $ Long-term debt 306,398 312,766 334,054 362,973 ____________ __________ ____________ __________ ____________ __________ ____________ __________ -40- 16 - OTHER LIABILITIES 2002 2001 __________ __________ $ $ Provision for future site rehabilitation costs 550 785 Other 3,000 3,000 __________ __________ 3,550 3,785 ____________________ ____________________ During the years ended December 31, 2002 and 2001, the Company reviewed certain provisions, which it had previously established in accounting for prior years' business acquisitions. This process included the obtaining from third parties environmental and transfer pricing studies. Furthermore, the Company holds letters of guarantee provided by the vendors against certain future related claims. As a result of the above, the Company reversed against earnings $0.8 million of provisions in 2002 and $0.7 million in 2001, which had been recorded in prior years for specific business acquisitions. A company-wide environmental reserve for on-going operations of $0.8 million was established in 2002. During 2002, $0.2 million in remediation costs were charged against this reserve. -41- 17 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS a) Capital stock - Authorized Unlimited number of shares without par value Common shares, voting and participating Class "A" preferred shares, issuable in series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution. The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series. b) Capital stock - Issued and fully paid The changes in the number of outstanding common shares and their aggregate stated value from January 1, 2000 to December 31, 2002 were as follows:
2002 2001 2000 __________________ ___________________ ___________________ Number Stated Number Stated Number Stated of shares value of shares value of shares value _________ _______ __________ _______ __________ _______ $ $ $ Balance, beginning of year 28,506,110 186,346 28,211,179 183,758 28,296,392 181,941 Shares issued for cash in public offering 5,100,000 47,691 Shares issued for business acquisitions 250,587 4,000 Shares issued to the USA Employees' Stock Ownership and Retirement Savings Plan 172,976 1,697 248,906 2,240 Shares purchased for cancellation (128,100) (765) (353,200) (2,359) Shares issued for cash upon exercise of stock options 41,988 301 174,125 1,113 17,400 176 __________ _______ __________ _______ __________ _______ Balance, end of year 33,821,074 236,035 28,506,110 186,346 28,211,179 183,758 _____________________________________________________________ _____________________________________________________________
-42- 17 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS (Continued) c) Share Purchase warrants 2002 2001 __________ __________ $ $ 300,000 share purchase warrants 3,150 3,150 __________ __________ __________ __________ The warrants, which expire on August 9, 2004, permit holders to purchase common shares of the Company at a price of $29.50 per share. d) Shareholders' protection rights plan On May 21, 1998, the shareholders approved the extension to September 2003 of a shareholders'protection rights plan originally established in 1993. The effect of the rights plan is to require anyone who seeks to acquire 20% or more of the Company's voting shares to make a bid complying with specific provisions. e) Stock options Under the Company's amended executive stock option plan, options may be granted to the Company's executives and directors for up to 3,361,661 shares of common stock. Options expire no later than 10 years after the date of granting. The plan provides that such options will vest and may be exercisable 25% per year over four years. All options were granted at a price equal to the average closing market values on the day immediately preceding the date the options were granted. -43- 17 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS (Continued) The changes in number of options outstanding were as follows:
2002 2001 2000 ____________________ ____________________ ______________________ Weighted Weighted Weighted average average average exercise Number of exercise Number of exercise Number of price options price options price options ________ __________ ________ _________ _________ ___________ $ $ $ Balance, beginning of year 10.06 2,407,250 12.89 2,797,036 15.76 2,217,224 Granted 9.88 688,500 9.79 386,000 10.37 1,183,000 Exercised 7.17 (41,988) 6.39 (174,125) 8.23 (17,400) Cancelled 9.19 (57,089) 16.56 (601,661) 16.84 (585,788) __________ _________ _________ Balance, end of year 10.02 2,996,673 10.06 2,407,250 12.89 2,797,036 __________ _________ _________ __________ _________ _________ Options exercisable at the end of the year 1,529,894 1,022,214 1,267,019 __________ _________ _________ __________ _________ _________
The following table summarizes information about options outstanding and exercisable at December 31, 2002:
Options Options outstanding exercisable ____________________________________ ____________________ Weighted Weighted Weighted average average average contractual exercise exercise Number life (in years) price Number price _________ _______________ ________ _________ _________ Range of exercise prices $ $ $4.30 to $6.41 179,500 1.1 5.67 164,500 5.78 $7.71 to $11.43 2,415,757 3.8 9.44 1,096,007 9.12 $11.92 to $17.19 364,916 3.4 14.63 235,887 15.65 $19.09 to $27.88 36,500 1.4 23.48 33,500 23.09 _________ __________ 2,996,673 3.6 10.02 1,529,894 10.07 _________ __________ _________ __________
-44- 17 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS (Continued) On January 10, 2001, the Company repriced 474,163 of unexercised stock options held by employees, other than directors and executive officers. The repriced options had exercise prices ranging from US$16.30 to US$23.26 (CA$26.01 to CA$37.11) and expire in 2003 and 2006. The revised exercise price was set at US$8.28 (CA$13.21), being the average of the closing price on The Toronto Stock Exchange and the New York Stock Exchange on January 9. 2001. All other terms and conditions of the respective options, including the percentage vesting and the vesting and expiry dates, remain unchanged. For years beginning on or after January 1, 2002, the Company is required to make pro forma disclosures of net earnings (loss), basic earnings (loss) per share and diluted earnings (loss) per share as if the fair value based method of accounting had been applied. The fair value of options granted was estimated using the Black-Scholes option-pricing model, taking into account the following weighted average assumptions: 2002 _____________ Expected life 5 years Expected volatility 50% Risk-free interest rate 4.57% Expected dividends $0.00 2002 _____________ $ The weighted average fair value per share of options granted is: 4.38 Accordingly, the Company's net loss and loss per share would have been increased to the pro forma amounts indicated in the following table: 2002 _____________ $ Net loss - as reported (54,454) Total stock-based employee compensation expense determined under fair value based method(i) 515 _____________ Pro forma net loss (54,969) _____________ Loss per share: Basic - as reported (1.66) _____________ Basic - pro forma (1.67) _____________ Diluted - as reported (1.66) _____________ Diluted - pro forma (1.67) _____________ (i) To determine the compensation cost, the fair value of stock options is recognized on a straight-line basis over the vesting periods. -45- 17 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS (Continued) The pro forma effect on net earnings and earnings per share is not representative of the pro forma effect on net earnings and earnings per share of future years because it does not take into consideration the pro forma compensation cost related to options awarded prior to January 1, 2002. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's amended executive stock option plan has characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 18 - COMMITMENTS AND CONTINGENCIES a) Commitments As at December 31, 2002, the Company had commitments aggregating approximately $23.5 million up to 2010 for the rental of offices, warehouse space, manufacturing equipment, automobiles and other. Minimum payments for the next five years are $9.0 million in 2003, $4.7 million in 2004, $2.8 million in 2005, $1.8 million in 2006 and $1.5 million in 2007. b) Contingencies The Company is party to various claims and lawsuits which are being contested. In the opinion of management, the outcome of such claims and lawsuits will not have a material adverse effect on the Company. 19 - PENSION AND POST-RETIREMENT BENEFIT PLANS The Company has several defined contribution plans and defined benefit plans for substantially all its employees in both Canada and the United States. These plans are generally contributory in Canada and non-contributory in the United States. Defined contribution plans In the United States, the Company maintains a savings retirement plan (401[k] Plan) for the benefit of certain employees who have been employed for at least 90 days. Contribution to these plans is at the discretion of the Company. The Company contributes as well to a multi-employer plan for employees covered by collective bargaining agreements. In Canada, the Company maintains a defined contribution plan for its salaried employees. The Company contributes to the plan amounts equal to 4% of each participant's eligible salary. The Company has expensed $2.6 million for these plans for the year ended December 31, 2002 ($2.3 million and $2.0 million for 2001 and 2000 respectively). -46- 19 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued) Defined benefit plans The Company has, in the United States, two defined benefit plans (hourly and salaried). Benefits for employees are based on compensation and years of service for salaried employees and fixed benefits per month for each year of service for hourly employees. In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit of $10.83 ($10.65 and $9.95 in 2001 and 2000 respectively) per month for each year of service. In the United States, the Company provides group health care and life insurance benefits to certain retirees. Information relating to the various plans is as follows:
Pension plans Other plans _____________________ _________________ 2002 2001 2002 2001 ______ ______ ____ ____ $ $ $ $ Accrued benefit obligations Balance, beginning of year 20,572 18,866 782 785 Current service cost 497 398 11 10 Interest cost 1,545 1,363 54 56 Benefits paid (834) (754) (38) (73) Plan amendments 1,136 340 Actuarial losses 1,140 420 31 4 Foreign exchange rate adjustment 15 (61) ______ ______ ____ ____ Balance, end of year 24,071 20,572 840 782 ------ ------ ---- ---- Plan assets Balance, beginning of year 15,450 16,931 Actual return on plan assets (2,439) (1,742) Employer contributions 991 1,075 Benefits paid (834) (754) Foreign exchange rate adjustment 13 (60) ______ ______ ____ ____ Balance, end of year 13,181 15,450 - - ______ ______ ____ ____ Funded status - deficit 10,890 5,122 840 782 Unamortized past service costs (1,931) (912) Unamorized net actuarial gain (loss) (10,480) (5,573) 83 118 Unamortized transition assets (obligation) 87 90 (38) (41) Accrued benefit liability _______ _______ ____ ____ (prepaid benefit) (1,434) (1,273) 885 859 _______ _______ ____ ____
-47- 19 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued) Accrued benefit expense
Pension plans Other plans _________________________ ______________________ 2002 2001 2000 2002 2001 2000 _____ _____ _____ _____ ____ ____ $ $ $ $ $ $ Current service cost 497 398 393 11 10 9 Interest cost 1,545 1,363 1,309 54 56 53 Expected return on plan assets (1,568) (1,652) (1,459) Amortization of past service costs 122 52 53 Amortization of transition obligation (asset) (3) (4) (4) (1) 4 4 Amortization of unrecog- nized loss (gain) 238 18 (21) (6) (14) ______ ______ ______ _____ _____ _____ Pension expense for the year 831 175 271 64 64 52 ______ ______ ______ _____ _____ _____
The significant assumptions which management considers to be the most likely and which were used to measure its accrued benefit obligations are as follows (weighted average assumptions as at December 31):
Pension plans Other plans _________________________________________________ 2002 2001 2000 2002 20O1 2000 _____ ______ _____ _____ _____ ________ Canadian plans Discount rate 7.00% 7.25% 7.50% -- -- -- Expected rate of return on plan assets 9.25% 9.25% 9.00% -- -- -- U.S. plans Discount rate 7.00% 7.25% 7.50% 7.00% 7.25% 7.50% Expected rate of return on plan assets 9.25% 9.25% 8.60% -- -- --
For measurement purposes, a 5.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002 (5.5% in 2001 and 5.0% in 2000) and deemed to remain constant through 2009. An increase or decrease of 1% of this rate would have the following impact: Increase Decrease of 1% of 1% ________ ________ $ $ Impact on net periodic cost 2 (2) Impact on accrued benefit obligation 33 (28) -48- 20 - SEGMENT DISCLOSURES The Company manufactures and sells an extensive range of specialized polyolefin plastic packaging products primarily in Canada and in the United States. All products have to be considered part of one reportable segment as they are made from similar extrusion processes and differ only in the final stages of manufacturing. A vast majority of the Company's products, while brought to market through various distribution channels, generally have similar economic characteristics. The following table presents sales by country based on the location of the manufacturing facilities:
2002 2001 2000 _______ _______ _______ $ $ $ Canada 119,101 127,878 117,799 United States 510,500 500,028 581,723 Other 3,817 3,563 2,443 Transfers between geographic areas (31,843) (36,564) (48,050) _______ _______ _______ Total sales 601,575 594,905 653,915 _______ _______ _______
The following table presents property, plant and equipment and goodwill by country based on the locations of assets:
2002 2001 2000 ________ _______ _______ $ $ $ Property, plant and equipment, net Canada 46,347 48,693 51,388 United States 299,564 312,501 316,900 Other 5,619 5,373 6,465 _______ _______ _______ Total property, plant and equipment, net 351,530 366,567 374,753 _______ _______ _______ Goodwill, net Canada 11,361 16,202 17,955 United States 147,278 211,602 216,302 _______ _______ _______ Total goodwill, net 158,639 227,804 234,257 _______ _______ _______
-49- 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA a) Net earnings and earnings per share Net earnings of the Company and earnings per share established under Canadian GAAP conform in all material respects to the amounts that would be reported if the financial statements would have been prepared under US GAAP. b) Consolidated balance sheets. Under Canadian GAAP, the financial statements are prepared using the proportionate consolidation method of accounting for joint ventures. Under US GAAP, these investments would be accounted for using the equity method. Note 3 to the consolidated financial statements provides details of the impact of proportionate consolidation on the Company's consolidated financial statements for 2002, 2001 and 2000, including the impact on the consolidated balance sheets. The other differences in presentation that would be required under US GAAP to the consolidated balance sheets, other than as disclosed below, are not viewed as significant enough to require further disclosure. c) Consolidated cash flows Canadian GAAP permits the disclosure of a subtotal of the amount of funds provided by operations before changes in non-cash working capital items to be included in the consolidated statements of cash flows. US GAAP does not permit this subtotal to be presented. d) Accounting for compensaltion programs The Company has chosen to continue to measure compensation costs related to awards of stock options using the intrinsic value based method of accounting. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44 (FIN 44), which became effective on July 1, 2000, requiring that the cancellation of outstanding stock options by the Company and the granting of new options with a lower exercise price (the replacement options) be considered as an indirect reduction of the exercise price of the stock options. Under FIN 44, the replacement options and any repriced options are subject to variable accounting from the cancellation date or date of grant, depending on which stock options were identified as the replacement options. Using variable accounting, the Company is required to recognize, at each reporting date, compensation expense for the excess of the quoted market price of the stock over the exercise prices of the replacement or repriced options until such time as the replacement options are exercised, forfeited or expire. The impact on the Company's financial results will depend on the fluctuations in the Company's stock price and the dates of the exercises, forfeitures or cancellations of the stock options. Depending on these factors, the Company could be required to record significant compensation expense during the life of the options which expire in 2006. -50- 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued) In November 2000, 300,000 and 50,000 replacement options were issued at exercise prices of US$10.13 (CA$15.50) and US$14.71 (CA$21.94) respectively, and in May and August 2001, 40,000 and 54,000 replacement options were issued for US$9.00 (CA$13.80) and US$11.92 (CA$18.80) respectively. In addition, in January 2001, 474,163 options were repriced at US$8.28 (CA$12.40) (see note 17). As at December 31, 2002, the Company's quoted market stock price was $4.12 (CA$6.49) per share. For the options subject to variable accounting, the compensation expense would not materially impact net loss reported in the consolidated statement of earnings for 2002 and 2001 under US GAAP. Under US GAAP, the Company is required to make pro forma disclosures of net earnings (loss), basic earnings (loss) per share and diluted earnings (loss) per share as if the fair value based method of accounting had been applied. The fair value of options granted in 2002, 2001 and 2000 was estimated using the Black-Scholes option-pricing model, taking into account the following weighted average assumptions: 2002 2001 2000 _______ ______________ _______ Expected life 5 years 5 years 5 years Expected volatility 50% 50% 45% Risk-free interest rate 4.57% 4.76% 5.96% Expected dividends $0.00 $0.00 to $0.18 $0.11 2002 2001 2000 _______ ______________ _______ $ $ $ The weighted average fair value per share of options granted is: 4.38 4.74 4.42 Accordingly, the Company's net earnings (loss) and earnings (loss) per share would have been reduced (increased) to the pro forma amounts indicated in the following table: 2002 2001 2000 _______ ______________ _______ $ $ $ Net earnings (loss) - as reported (54,454) (12,242) 33,422 Deduct: Total stock-based employee compensation expense determined under fair value based method 2,367 4,212 3,362 _______ ______________ _______ Pro forma net earnings (loss) (56,821) (16,454) 30,060 _______ ______________ _______ Earnings (loss) per share: Basic - as reported (1.66) (0.43) 1.18 _______ ______________ _______ Basic - pro forma (1.73) (0.58) 1.06 _______ ______________ _______ Diluted - as reported (1.66) (0.43) 1.16 _______ ______________ _______ Diluted - pro forma (1.73) (0.58) 1.05 _______ ______________ _______ -51- 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (continued) e) Accumulated pension benefit obligation Under US GAAP, if the accumulated pension benefit obligation exceeds the fair value of benefit plan assets, a liability must be recognized in the balance sheet that is at least equal to the unfunded accumulated benefit obligation. To the extent that the additional minimum liability is created by a plan improvement, an intangible asset can be established. Any additional minimum liability not covered by an intangible asset will cause a net of tax reduction in accumulated other comprehensive income. The following sets out the adjustments required to the Company's consolidated balance sheets to conform with US GAAP accounting for pension benefit obligations:
2002 2001 2000 _________ ___________ ___________ $ $ $ Future income tax assets would increase by 3,878 2,029 - Other assets would increase by 1,843 912 - Accounts payable and accrued liabilities would increase by 12,323 6,396 - Shareholders' equity would decrease by (6,602) (3,455) -
f) Consolidated comprehensive income As required under US GAAP, the Company would have reported the following consolidated comprehensive income: 2002 2001 2000 _________ ___________ ___________ $ $ $ Net earnings (loss) in accordance with US GAAP (54,454) (12,242) 33,422 Currency translation adjustments 3,768 (5,741) (2,722) Minimum pension liability adjustment, net of tax (Note 21 e)) (3,147) (3,455) _________ ___________ ___________ Consolidated comprehensive income (loss) (53,833) (21,438) 30,700 ___________________________________ -52- 22 - SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" that established standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. The statement provides for an initial recognition of the fair value of a liability for an asset retirement obligation in the period in which it is incurred when a reasonable estimate of fair value can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expense using a systematic and rational allocation method and is adjusted to reflect period-to-period changes in the liability resulting from passage of time and revisions to either timing or the amount of the original estimate of undiscounted cash flows. The statement is effective for fiscal years beginning after June 15, 2002 and the Company does not expect any significant impact upon adoption of this standard. In June 2002, the FASB issued SFAS No. 146, Accounting for Exit or Disposal Activities ("SFAS 146"). SFAS 146 addresses the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 supersedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain costs incurred in a Restructuring), and requires liabilities associated with exit and disposal activities of the Company that are initiated after December 31, 2002. The Company has not yet determined the impact, if any, of this change on any future exit or disposal activity. In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, which addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation requires a guarantor to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken. The FASB did not prescribe a specific approach for subsequently measuring the guarantor's recognized liability over the term of the related guarantee. This interpretation also incorporates, without change, the guidance in FASB Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others, which is being superseded by this document. Certain guarantee arrangements are completely excluded from the scope of the interpretation and others are only excluded from the recognition and measurement provisions. The additional disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and initial measurement provisions of this interpretation are applicable to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The Company is not a guarantor of any third party, non-affiliated obligations. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123 ("SFAS 148"). This amendment provides alternative methods of transition for voluntary change to the fair value based method of accounting for stock- based employee compensation. Additionally, prominent disclosures in both annual and interim financial statements are required for the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company believes that this statement will not have a material impact on its financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" to provide new guidance with respect to the consolidation of all previously unconsolidated entities, including special purpose entities. The Company does not have any unconsolidated subsidiaries, therefore the Company believes that the adoption of the interpretation, required in fiscal 2003, will not have any impact on the Company's consolidated financial position or results of operations. -53- Intertape Polymer Group Locations Corporate Offices Montreal, Quebec, Canada Sarasota, Florida, U.S,A. Brighton, Colorado, U.S,A. 3 4 Menasha, Wisconsin, U.S.A. 3 4 Carbondale, Illinois, U.S,A. 3 4 Ontario, California. U.S,A. 3 4 Columbia, South Carolina, U.S.A. 3 4 Piedras Negras, Mexico 2 3 Cumming, Georgia, U.S.A. 3 4 Porto, Portugal 3 4 Danville, Virginia, U.S.A. 1 2 3 4 Richmond, Kentucky, U.S.A. 3 4 Green Bay, Wisconsin, U.S,A. 3 4 St. Laurent, Quebec, Canada 1 2 3 4 Lachine, Quebec, Canada 3 4 Tremonton, Utah, U,S.A. 3 4 Los Angeles, California, U.S.A 1 Truro, Nova Scotia, Canada 2 3 4 Marysville, Michigan, U.S.A 2 3 4 4 Regional Distribution Center 3 ISO Certified 2 Distribution 1 Manufacturing Location Please note: On April 14, 2003 the Company announced the closing of the two Regional Distribution Centers (RDCs) in Atlanta and Chicago and the replace- ment of the existing RDC in Danville with a new facility. These changes are reflected in the above presentation. -54- Other Information BOARD OF DIRECTORS Duncan R. Yull Vice President Sales, Distribution Products Melbourne F Yull Chairman and Chief Executive Officer Gregory A. Yull President, Film Products L. Robbie Shaw* Vice President, Nova Scotia Piero Greco, C.A. Community College Treasurer Michael L. Richards Senior Partner, Stikeman Elliott LLP TRANSFER AGENT AND REGISTRAR J. Spencer Lanthier* Canada: CIBC Mellon Trust Company Currently serves as a Member of the 2001 University Street, 16th Floor Board of Several Publicly Montreal, Quebec, Canada H3A 4L8 Traded Companies Ben J. Davenport, Jr. USA: Mellon Investor Services L.L.C. Chairman, First Piedmont Corporation 85 Challenger Road, 2nd Floor Chairman and CEO, Chatham Oil Company Ridgefield Park, New Jersey, U.S.A. 07660 Gordon R. Cunningham* President, Cumberland Asset Management AUDITORS Canada: Raymond Chabot Grant Thornton Thomas E. Costello* 600 de la Gauchetlere West, Currently serves as a Member of the Suite 1900 Board of Several Publicly Traded Montreal, Quebec, Canada H3B 4L8 Companies *Member of Audit Committee U.S.A.: Grant Thornton International 130 E. Randolph Street HONORARY DIRECTORS Chicago, Illinois, U.S.A. 60601-6203 James A. Motley, Sr. Director, American National Bank and INVESTOR INFORMATION Trust Company American National Bancshares, Inc. Stock and Share Listing: Irvine Mermelstein Common shares are listed or the New Managing Partner, Market-Tek York Stock Exchange and The Toronto Stock Exchange, trading under the symbol ITP EXECUTIVE OFFICERS Shareholder and Investor Relations Melbourne F. Yull Chairman and Chief Executive Officer Shareholders and investors having inquiries or wishing to obtain copies Andrew M. Archibald, C.A. of the Company's Annual Report or Chief Financial Officer, Secretary, other U.S. Securities Exchange Vice President, Administration Commission filings should contact: Jim Bob Carpenter Mr Andrew M. Archibald, C.A President, Woven Products, Procurement Chief Financial Officer Intertape Polymer Group Inc. Burgess H. Hildreth 3647 Cortez Road West Vice President, Human Resources Bradenton, Florida 34210 (866) 202-4713 James A. Jackson Vice President, Chief Information Officer E-mail: itp$info@intertapeipg.com H. Dale McSween ANNUAL AND SPECIAL MEETING OF President, Distribution Products SHAREHOLDERS Victor DiTommaso, CPA The Annual and Special Meeting of Vice President, Finance Shareholders will be held Wednesday, June 11. 2003 at 4:00pm at the Sofitel Hotel, Picasso Ballroom, 1155 Sherbrooke Street West, Montreal, Quebec, Canada. EX-5 4 proxycircular.txt NOTICE OF MEETING/PROXY CIRCULAR AND CARD INTERTAPE POLYMER GROUP INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS to be held on June 11, 2003 LOGO INTERTAPE POLYMER GROUP INC. 110 E Montee de Liesse, St. Laurent, Quebec, H4T 1N4 NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that the Annual and Special Meeting (the "Meeting") of Shareholders of INTERTAPE POLYMER GROUP INC. (the "Corporation") will be held in the Picasso Room of the Hotel Sofitel Montreal, 1155 Sherbrooke Street West, Montreal, Quebec, on June 11, 2003, at 4:00 o'clock in the afternoon, for the purposes of: (1) receiving the consolidated financial statements for the year ended December 31, 2002, together with the auditors' report thereon; (2) electing a board of seven directors to serve until the next annual meeting of shareholders; (3) appointing auditors and authorizing the directors to fix their remuneration; (4) considering and, if deemed advisable, approving, ratifying and confirming amendments to the Corporation's general by-laws; (5) considering and, if deemed advisable, approving, ratifying and confirming the Corporation's amended and restated Shareholder Protection Rights Plan Agreement; and (6) transacting such other business as may properly be brought before the Meeting. The specific details of all matters proposed to be put before the Meeting are set forth in the accompanying Management Proxy Circular. Only holders of record of common shares of the Corporation at the close of business on May 7, 2003 will be entitled to vote at the Meeting. By Order of the Board of Directors, LOGO ANDREW M. ARCHIBALD, C.A. Chief Financial Officer, Secretary, Vice President, Administration St. Laurent, Quebec May 7, 2003 SHAREHOLDERS WHO ARE UNABLE TO BE PRESENT AT THE MEETING ARE REQUESTED TO COMPLETE AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. PROXIES MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE TRANSFER AGENT OF THE CORPORATION NOT LESS THAN 48 HOURS PRIOR TO THE MEETING. MANAGEMENT PROXY CIRCULAR Solicitation of Proxies This Management Proxy Circular (the "Circular"), which is being mailed to shareholders on or about May 16, 2003, is furnished in connection with the solicitation by the management of Intertape Polymer Group Inc. (the "Corporation") of proxies to be used at the Annual and Special Meeting of Shareholders of the Corporation (the "Meeting") to be held on June 11, 2003 at the time and place and for the purposes set forth in the accompanying notice of Annual and Special Meeting of Shareholders, or any adjournment thereof. The solicitation will be primarily by mail but may also be made by telephone or other means of telecommunication by regular employees of the Corporation at nominal cost. The cost of the solicitation will be borne by the Corporation. All dollar amounts set forth in this Circular are in Canadian dollars, except as otherwise indicated. Appointment of Proxyholders and Revocation of Proxies A shareholder may appoint as proxyholder a person other than the directors of the Corporation named in the accompanying form of proxy to attend and vote at the Meeting in his stead, and may do so by inserting the name of such other person, who need not be a shareholder, in the blank space provided in the form of proxy or by completing another proper form of proxy. In order for proxies to be recognized at the Meeting, the completed forms of proxy must be received at the office of the Corporation's Canadian transfer agent, CIBC Mellon Trust Company, 2001 University Street, 16th Floor, Montreal, Quebec, not less than 48 hours prior to the Meeting. A shareholder, or his attorney authorized in writing, who executed a form of proxy may revoke it in any manner permitted by law, including the depositing of an instrument of revocation in writing at the principal place of business of the Corporation, 110E Montee de Liesse, St. Laurent, Quebec H4T 1N4, at any time up to and including the last business day preceding the day of the Meeting or an adjournment thereof or with the Chairman of the Meeting or an adjournment thereof on the day of the Meeting but prior to the use of the proxy at the Meeting. Non-Registered Holders The information set forth in this section is important to the many shareholders who do not hold their common shares of the Corporation in their own names (the "Non-Registered Holders"). Non-Registered Holders should note that only proxies deposited by shareholders whose names appear on the records of the Corporation as the registered holders of shares can be recognized and acted upon at the Meeting. However, in many cases, common shares of the Corporation beneficially owned by a Non-Registered Holder are registered either: a) In the name of an intermediary (an "Intermediary") that the Non- Registered Holder deals with in respect of the common shares, such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or b) In the name of a clearing agency (such as The Canadian Depository for Securities Limited or "CSD") of which the Intermediary is a participant. In accordance with the requirements of National Instrument Policy 54-101 of the Canadian Securities Administrators, the Corporation has distributed copies of the Notice of Meeting, this Management Proxy Circular, the form of proxy and the 2002 Annual Report including management's discussion and analysis (collectively, the "Meeting Materials") to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders. Intermediaries are required to forward the Meeting Materials to Non- Registered Holders unless a Non-Registered Holder has waived the right to receive them. Very often, Intermediaries will use service companies to forward the Meeting Materials to Non-Registered Holders. Generally, Non-Registered Holders who have not waived the right to receive the Meeting Materials will either: 1. Be given a proxy which is signed by the Intermediary (typically by a facsimile, stamped signature) and already sets forth the number of common shares beneficially owned by the Non-Registered Holder but which is otherwise uncompleted. This form of proxy need not be signed by the Non-Registered Holder. The Non-Registered Holder who wishes to submit a proxy should properly complete the form of proxy and deposit it with CIBC Mellon Trust Company as described above; 2. More typically, be given a voting instruction form which must be completed and signed by the Non-Registered Holder in accordance with the directions on the CIBC Mellon Trust Company voting instruction form. The majority of brokers now delegate responsibility for obtaining instructions from clients to ADP Investor Communications Corporation ("ADP" formerly IICC). ADP typically mails a proxy form to the Non-Registered Holders and asks Non-Registered Holders to return the proxy form to ADP (the ADP form also allows completion of the voting instructions form by telephone.) ADP then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of shares to be represented at a shareholders' meeting. A Non-Registered Holder receiving a proxy form from ADP cannot use that proxy to vote shares directly at the Meeting. The proxy must be returned to ADP well in advance of the Meeting in order to have the shares voted. Shares held by brokers or their agents or nominees can be voted for or against resolutions only upon the instructions of the Non-Registered Holder. Without specific instructions, brokers and their agents and nominees are prohibited from voting shares for the broker's clients. The purpose of these procedures is to permit Non-Registered Holders to direct the voting of the common shares they beneficially own. Should a Non-Registered Holder who receives either a proxy or a voting instruction form wish to attend and vote at the Meeting in person (or have another person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should strike out the names of the persons named in the proxy and insert the Non-Registered Holder's (or such other person's) name in the blank space provided, or, in the case of a voting instruction form, follow the corresponding directions on the form. In either case, Non-Registered Holders should carefully follow the instructions of their Intermediaries and their service companies and ensure that instructions respecting the voting of their shares are communicated to the appropriate person. Exercise of Discretion by Proxyholders The persons whose names are printed on the accompanying form of proxy will, on a show of hands or any ballot that may be called for, vote or withhold from voting the shares in respect of which they are appointed in accordance with the direction of the shareholder appointing them. If no choice is specified by the shareholder, the shares will be voted for the election of the nominees for directors set forth in this Circular under the heading "Election of Directors", for the appointment of the auditors set forth in this Circular under the heading "Appointment and Remuneration of Auditors", for the approval of the amendments to be made to the Corporation's General By-Laws set forth in this Circular under the heading "Amendment to the General By-Laws of the Corporation" and for the approval of the amendment and restatement of the Corporation's Shareholder Protection Rights Plan set forth in this Circular under the heading "Amendment and Restatement to the Corporation's Shareholder Protection Rights Plan". The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the notice of the Meeting and to other matters which may properly come before the Meeting. As at the date hereof, management knows of no such amendment, variation or other matters to come before the Meeting. If any matters which are not now known should properly come before the Meeting, the persons named in the form of proxy will vote on such matters in accordance with their best judgment. Shareholder Proposals for 2004 Annual Meeting Shareholder proposals intended to be presented at the Corporation's 2004 Annual Meeting of Shareholders must be submitted for inclusion in the Corporation's proxy materials prior to March 1, 2004. Voting Shares and Principal Holders Thereof As at May 7, 2003, the Corporation had 33,821,074 common shares outstanding, being the only class of shares entitled to be voted at the Meeting. Each holder of such shares is entitled to one vote for each share registered in his name as at the close of business on May 7, 2003, being the date fixed by the Board of Directors of the Corporation for the determination of the registered holders of such shares who are entitled to receive the Notice of Annual and Special Meeting of Shareholders enclosed herewith (the "Record Date"). In the event that such a shareholder transfers the ownership of any of his shares after the Record Date, the transferee of such shares shall be entitled to vote at the Meeting if he produces properly endorsed share certificates or otherwise establishes proof of his ownership of the shares and demands, not later than ten days before the Meeting, that his name be included in the list of shareholders entitled to vote. This list of shareholders will be available for inspection on and after the Record Date during usual business hours at the registered office of the Corporation and at the Meeting. To the knowledge of the directors and officers of the Corporation, no person beneficially owns or exercises control or direction over shares carrying more than ten percent of the voting rights attached to all shares of the Corporation. Election of Directors The Articles of the Corporation stipulate that the Board of Directors shall consist of a minimum of one and a maximum of eleven directors. The entire Board of Directors currently consists of seven members all of whom, with the exception of Thomas E. Costello, were members of the Board prior to the last annual shareholders meeting held on May 22, 2002. Thomas E. Costello was appointed as a director of the Corporation on November 22, 2002 in order to fill the vacancy created by Irvine Mermelstein's resignation as a director. The following sets out information regarding each of the seven persons proposed by management as nominees for election as directors to hold office until the next succeeding annual meeting of shareholders of the Corporation or until their successors are elected or appointed.
As at May 7, 2003 Control or Direction of the Corporation is Exercised by Means of (1) ____________________________ Name Age Position or office Common Options to with Corporation Director Since Shares Purchase Shares Melbourne F. Yull(4) 62 Director, Chairman of the December 22, 1989(5) 543,449 869,000 Board and Chief Executive Officer Michael L. Richards(2)(4) 64 Director December 22, 1989(5) 77,600 38,000 Ben J. Davenport, Jr.(2)(4) 60 Director June 8, 1994 18,000 38,000 L. Robbie Shaw(2)(3)(4) 61 Director June 8, 1994 6,500 38,000 Gordon R. Cunningham(2)(3)(4) 58 Director May 21, 1998 15,000 29,000 J. Spencer Lanthier(3)(4) 62 Director June 20, 2001 2,000 20,000 Thomas E. Costello(3)(4) 63 Director November 22, 2002 0 12,500 _______ _________ 662,549 1,044,500
__________ (1) This information, not being within the knowledge of the Corporation, was furnished by the respective nominees individually. (2) Member of Compensation Committee. (3) Member of Audit Committee. (4) Member of Nominating & Governance Committee (5) Director of the predecessor company since 1981. Melbourne F. Yull, a resident of Sarasota, Florida was appointed Chairman of the Board and Chief Executive Officer on January 11, 1995, having been the President and a director of the Corporation or a predecessor thereof since 1981. Michael L. Richards, a resident of Westmount, Quebec, is a senior partner in the law firm Stikeman Elliott LLP, Montreal, Quebec. Ben J. Davenport, Jr., a resident of Chatham, Virginia, is the Chief Executive Officer of Chatham Oil Company, a distributor of oil, gasoline and propane. He also serves as Chairman and Chief Executive Officer of First Piedmont Corporation, a waste hauling business. L. Robbie Shaw, a resident of Halifax, Nova Scotia, is the Vice-President of Nova Scotia Community College. Gordon R. Cunningham, a resident of Toronto, Ontario, is President of Cumberland Asset Management Corp., a discretionary investment management firm. J. Spencer Lanthier, a resident of Toronto, Ontario currently serves as a member of the board of directors of several publicly traded corporations. From 1993 to 1999, Mr. Lanthier held the position of Chairman and Chief Executive Officer of KPMG Canada and was a member of the KPMG international executive committee and board of directors. Thomas E. Costello, a resident of Long Boat Key, Florida, was the Chief Executive Officer, from 1991 to 2002, of xpedx, a wholly-owned subsidiary of the International Paper Company. If any of the above nominees is for any reason unavailable to serve as a director, proxies in favour of management will be voted for another nominee in the discretion of the persons named in the form of proxy unless the shareholder has specified in the proxy that his shares are to be withheld from voting on the election of directors. The Board of Directors recommends a vote in favour of each of the nominees. Executive Compensation 1. Summary Compensation Table The following table sets forth all compensation paid in respect of the individuals who were, at December 31, 2002, the Chief Executive Officer and the other four most highly compensated executive officers of the Corporation (the "named executive officers").
SUMMARY COMPENSATION TABLE Long-Term Compensation Awards Securities Under Other Annual Options Granted Salary Bonus Compensation As At FY-End Name and Principal Position Year $ $ ($)(1) (#) ___________________________ ____ ______ _______ ____________ ________________ M.F. Yull 2002 U.S.$475,000 U.S.$100,000 U.S.$50,190 819,000 Chairman of the Board and 2001 U.S.$475,000 0 U.S.$42,828 668,000 Chief Executive Officer 2000 U.S.$515,793 0 Cdn $20,587 568,000 H.D. McSween 2002 U.S.$299,520 U.S.$ 25,000 U.S.$13,649 285,165 President-Distribution 2001 U.S.$300,498 0 U.S.$12,730 205,165 Products 2000 U.S.$300,544 0 U.S.$16,991 372,308 A.M. Archibald 2002 U.S.$238,796 0 U.S.$ 585 244,543 Chief Financial Officer, 2001 Cdn $350,144 0 Cdn $11,283 197,543 Secretary, Vice President 2000 Cdn $354,886 0 Cdn $17,000 354,688 Administration J.B. Carpenter 2002 U.S.$218,400 U.S.$15,000 U.S.$14,950 90,000 President - 2001 U.S.$220,040 0 U.S.$14,304 35,000 Woven Products 2000 U.S.$221,584 0 U.S.$ 9,125 60,000 D.R. Yull 2002 U.S.$193,558 U.S.$15,000 U.S.$21,063 159,800 Vice-President Sales & 2001 U.S.$178,156 0 U.S.$19,959 104,800 Marketing 2000 U.S.$154,005 0 U.S.$ 8,400 87,800 Distribution Products
__________ (1) The amounts in this column relate primarily to taxable benefits on employee loans, to the Corporation's contributions to the pension plan and to expenses incurred by the Corporation in connection with automobiles that it puts at the disposal of certain of the named executive officers. The aggregate compensation for all executive officers and directors of the Corporation who are not "named executive officers" for the fiscal year ended December 31, 2002 amounts to U.S.$565,602. 2. Executive Stock Option Plan The Corporation has established an ongoing Executive Stock Option Plan which has been amended from time to time since 1996 (the "Plan"). The Plan is administered by the Board of Directors. The shares offered under the Plan are common shares of the Corporation. The Board of Directors designates from time to time from the eligible executives those executives to whom options are to be granted and determines the number of shares covered by such options. Generally, participation in the Plan is limited to persons holding positions that can have an impact on the Corporation's long-term results. The number of common shares to which the options relate are determined by taking into account, inter alia, the market price of the common shares and each optionee's base salary. The exercise price payable for each common share covered by an option is determined by the Board of Directors but will not be less than the market value of the underlying common shares on the day preceding the effective date of the grant. The Plan provides that options issued thereunder shall vest 25% per year over four years. In 2002, the named executive officers who were granted stock options were M.F. Yull who was granted 125,000 options, H.D. McSween, who was granted 80,000 stock options, A.M. Archibald who was granted 47,000 stock options, J.B. Carpenter who was granted 55,000 stock options and D.R. Yull who was granted 55,000 stock options. The following table sets forth each grant of options to the named executive officers under the Plan during the financial year ended December 31, 2002. OPTION GRANTS DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 2002
% of the Total Number of Options That Were Granted Securities To Employees Under During the Market Value of the Options financial Year Exercise Price Common Shares on Granted ended Dec. 31, (S/Common The Date of Grant Name (#) 2002 Share) ($/Common Share) Expiration Date ______________ __________ ________________ ______________ ____________________ _______________ M.F. Yull 60,000 9.4% U.S.$ 9.92 U.S.$ 9.92 March 13, 2008 65,000 10.2% U.S.$10.15 U.S.$10.15 July 22, 2008 H.D. McSween 40,000 6.3% U.S.$ 9.92 U.S.$ 9.92 March 13, 2008 40,000 6.3% U.S.$10.15 U.S.$10.15 July 22, 2008 A.M. Archibald 25,000 3.9% Cdn $15.72 Cdn $15.72 March 13, 2008 22,000 3.5% Cdn $15.93 Cdn $15.93 July 22, 2008 J.B. Carpenter 30,000 4.7% U.S.$ 9.92 U.S.$ 9.92 March 13, 2008 25,000 3.9% U.S.$10.15 U.S.$10.15 July 22, 2008 D.R. Yull 30,000 4.7% U.S.$ 9.92 U.S.$ 9.92 March 13, 2008 25,000 3.9% U.S.$10.15 U.S.$10.15 July 22, 2008
As further highlighted in the table below, no options were exercised by any named executive officers, executive officers or senior officers of the Corporation in the financial year ended December 31, 2002. AGGREGATED OPTION EXERCISES DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 2002 AND FINANCIAL YEAR-END OPTION VALUES
Securities Aggregate Acquired Value on Exercise Realized Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable _______________ ___________ _________ _________________________ _________________________ M.F. Yull 0 0 440,000/375,000 1,829,280/1,545,000 H.D. McSween 0 0 146,665/138,500 604,260/570,620 A.M. Archibald 0 0 141,543/103,000 583,247/424,425 J.B. Carpenter 0 0 15,000/ 75,000 61,800/309,000 D.R. Yull 0 0 42,300/117,500 174,276/484,100
3. Pension Arrangements The Corporation maintains a defined contribution plan through its Canadian subsidiary, Intertape Polymer Inc. ("IPI"), for its salaried employees in Canada, including the named executive officers who are Canadian residents. Effective January 1, 2001, the Corporation amended and restated its USA Employees' Retirement Plan to be a combined employee stock ownership plan and 401 (k) plan, to change the name of the plan to the "Intertape Polymer Group Inc. USA Employees' Stock Ownership and Retirement Savings Plan" and to bring the plan into compliance with recent legislative changes. The Corporation may make annual discretionary matching contributions equal to a percentage of the contributions made by employees, but in no event shall such contributions exceed six percent of the employee's compensation deposited as elective contributions. A subsidiary of the Corporation contributes to a multi-employer plan for employees covered by collective bargaining agreements. The Corporation's expense for such retirement savings plans for the year ended December 31, 2002, was U.S.$2,585,000 (U.S.$2,295,000 in 2001 and U.S.$2,013,000 in 2000). 4. Employment Contracts and Termination of Employment The employment agreement which the Corporation entered into with M.F. Yull on July 1, 1998 was amended on November 7, 2000 and further amended on January 28, 2001. Pursuant to the terms of the employment agreement, as amended (the "Agreement"), M.F. Yull agreed to continue to serve as Chairman of the Board and Chief Executive Officer of the Corporation and its subsidiaries at a fixed annual gross salary of U.S.$475,000 for the year 2001 and subsequently at compensation levels to be reviewed annually by the Corporation in accordance with its internal policies. M.F. Yull's fixed annual gross salary for the year 2002 remained at U.S.$475,000 and his fixed annual gross salary for the year 2003 is U.S.$491,625. The Agreement provides inter alia for annual bonuses based on budgeted objectives of the Corporation. The Agreement also provides for the payment of 36 months of M.F. Yull's remuneration in the event of termination without cause or resignation within six months of a change of control of the Corporation. Further, it provides for all options for the acquisition of common shares of the Corporation previously granted to M.F. Yull to become immediately vested and exercisable in the event of his termination without cause, or his resignation within six months of a change of control of the Corporation, or his retirement at any time after his 60th birthday or in the event of his death, and that such options must be exercised within 36 months following the effective date of such termination, resignation, retirement or death. In addition to his participation in the pension plan of IPI, the Agreement provides that M.F. Yull will receive, upon his ceasing to be an employee for any reason, a defined benefit supplementary pension annually for life equal to two percent of his average annual gross salary for the final five years of his employment multiplied by his years of service with the Corporation. Furthermore, the Agreement provides that if during the term of M.F. Yull's employment a bona fide offer is made to all shareholders of the Corporation which, if accepted, would result in a change of control of the Corporation, then, subject to any applicable law, all of M.F. Yull's options which have not yet become vested and exercisable shall become vested and exercisable immediately. Upon expiry of such bona fide offer, if it does not result in a change of control of the Corporation, all of M.F. Yull's unexercised options which were not vested prior to such offer, shall immediately revert to their unvested status and to their former provisions with respect to the time of their vesting. The Corporation has entered into agreements dated as of January 28, 2001 with each of Messrs. A.M. Archibald, W.A. Barnes, J.B. Carpenter, B.H. Hildreth, J.A. Jackson, G.C. Jones, H.D. McSween, S. Nelson, E. Nugent, K.R. Rogers, D.R. Yull and G.A. Yull. These agreements provide that if, within a period of six months after a change in control of the Corporation, (a) the executive voluntarily terminates his employment with the Corporation, or (b) the Corporation terminates the executive's employment without cause, such executive will be entitled to a lump sum in the case of his resignation or an indemnity in lieu of notice in a lump sum in the case of his termination, equal to 12 to 24 months of such executive's remuneration at the effective date of such resignation or termination, depending on his seniority. In addition, all options for the acquisition of common shares of the Corporation previously granted to such executive shall become immediately vested and exercisable and must be exercised by such executive within 90 days following the effective date of such resignation or termination. Furthermore, these agreements also provide that if during the term of the executive's employment a bona fide offer is made to all shareholders of the Corporation which, if accepted, would result in a change of control of the Corporation, then, subject to any applicable law, all of the executive's options which have not yet become vested and exercisable shall become vested and exercisable immediately. Upon expiry of such bona fide offer, if it does not result in a change of control of the Corporation, all of the executive's unexercised options which were not vested prior to such offer, shall immediately revert to their unvested status and to their former provisions with respect to the time of their vesting. 5. Composition of Compensation Committee and Report on Executive Compensation The overall philosophy of the Corporation as regards compensation is to be competitive with similar manufacturing companies in order to attract and retain high-quality executives with the expertise and skills required in the business of the Corporation. The Compensation Committee is composed of four directors, being Ben J. Davenport, Jr., Michael L. Richards, L. Robbie Shaw and Gordon R. Cunningham. The Compensation Committee is appointed by the Board to discharge the Board's responsibilities relating to compensation of the Corporation's directors and officers. The Compensation Committee has overall responsibility for approving and evaluating the director and officer compensation plans, policies and programs of the Corporation. The Compensation Committee has the sole authority to retain any compensation consultant to be used to assist in the evaluation of director, CEO or senior executive compensation. The Compensation Committee annually reviews and approves the corporate goals and objectives relevant to the CEO's compensation, evaluates the CEO's performance in light of those goals and objectives and recommends to the Board the CEO's compensation level based on this evaluation. In determining the long-term incentive component of CEO compensation, the Compensation Committee will consider the Corporation's performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies and the awards given to the CEO in past years. Based on these recommendations, the Board fixes the CEO's compensation. The current CEO, M.F. Yull, does not participate in the Compensation Committee's or the Board of Directors' deliberations as regards to his compensation. The Compensation Committee is also responsible to undertake an annual review and to make recommendations to the Board with respect to the compensation of all other directors, all other officers and key executives of the Corporation, including awards to be granted under the Corporation's Executive Stock Option Plan described above. The recommendation for the granting of stock incentive awards to executive officers are submitted to the Board for approval. In arriving at its decisions, the Compensation Committee reviews industry comparisons for similar sized companies and for other companies in the packaging materials sector. The Compensation Committee also may use surveys from independent consultants from time to time to provide data to review in order to adjust its compensation policies. Three primary components comprise the Corporation's compensation program: basic salary, annual bonuses based on performance and long-term stock options. Each element of compensation fulfills a different role in the attraction, retention and motivation of qualified officers and employees. In accordance with the foregoing, base salaries are established at levels which will enable the Corporation and its subsidiaries to attract, retain and reward executive officers who can effectively contribute to the long-term success and objectives of the Corporation. The annual bonus program is formula- based and is measured against pre-determined performance targets. Stock options are granted periodically at the discretion of the Board of Directors and based on the aforementioned recommendations of the Compensation Committee. Options are granted to provide key employees who have responsibility for the management, growth and future success of the Corporation with an opportunity for rewards as a result of stock price increases. The amount and terms of outstanding options are taken into account when determining whether and how many new options will be granted. To encourage continued service, the options granted, if any, become exercisable over a four year period in four equal annual instalments, commencing on the 1st anniversary of the date of the grant. The options have no value if the stock price of the Corporation does not appreciate. It is felt that this approach closely aligns the interests of the executives and the shareholders. The above report has been submitted and approved by the following persons who are the current members of the Corporation's Compensation Committee: Ben J. Davenport, Jr., Michael L. Richards, L. Robbie Shaw and Gordon R. Cunningham 6. Performance Graph The following graphs illustrate changes over the past five year period in cumulative total shareholder return over the five-year period on the Corporation's common shares with the cumulative shareholder returns on the S&P/TSX Total Return Index (1st graph below) and on the S&P 500 (2nd graph below), assuming reinvestment of all dividends. FIVE-YEAR TOTAL RETURN ON $100 INVESTMENT (DIVIDENDS REINVESTED) (Based on the Corporation's activity on The Toronto Stock Exchange) (Canadian $) [GRAPH]
1997 1998 1999 2000 2001 2002 Intertape $100.00 $127.25 $133.65 $ 36.56 $ 44.03 $21.58 S&P 500 $100.00 $ 98.27 $129.16 $138.81 $109.94 $96.30
FIVE-YEAR TOTAL RETURN ON $100 INVESTMENT (DIVIDENDS REINVESTED) (Based on the Corporation's activity on The New York Stock Exchange*) (US $) [GRAPH]
1997 1998 1999 2000 2001 2002 Intertape $100.00 $116.99 $129.80 $ 34.16 $ 38.77 $19.23 S&P 500 $100.00 $128.34 $155.15 $141.14 $124.37 $96.88
__________ (* Since August 16, 1999, the Corporation has traded on the NYSE. Prior to that date the corporation traded on the AMEX.) 7. Compensation of Directors In 2002, directors of the Corporation, who were not officers of the Corporation, received an annual fee of U.S.$8,500 for their services as directors and a fee of U.S.$750 for each board meeting attended (U.S.$375 for telephone meetings). Furthermore, a total of 50,000 options to purchase common shares of the Corporation were granted to directors of the Corporation who were not officers of the Corporation. 45,000 of those options were granted at an exercise price of U.S.$9.92 and 5,000 of those options were granted at an exercise price of U.S.$4.85. 8. Indebtedness of Directors and Officers As listed in the table below, certain officers of the Corporation are currently indebted to the Corporation in respect of interest-free loans that are payable on demand by the Corporation. As at May 7, 2003, the aggregate indebtedness of all directors, executive officers and senior officers to the Corporation entered into in connection with such loans was Cdn$606,884 and U.S.$411,128. The following table summarizes the largest amount of such loans outstanding during the year ended December 31, 2002 and the amount outstanding as at May 7, 2003. TABLE OF INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS Largest Amount Oustanding Amount Involvement of the During FY-Ended Outstanding Corporation or its Dec. 31, 2002 as at May 7, 2003 Name and Principal Position subsidiaries ($) ($) ___________________________ _____________________________ _______________ _________________ M.F. Yull The Corporation is the Lender U.S.$416,398 U.S.$216,398 Chairman of the Board, Cdn $425,002 Cdn $415,277 Chief Executive Officer and a Director G.A. Yull The Corporation is the Lender U.S.$125,000 U.S.$125,000 President - Film Products A.M. Archibald The Corporation is the Lender Cdn $194,159 Cdn $160,255 Chief Financial Officer, Secretary, Vice President Administration Sal Vitale(1) The Corporation is the Lender Cdn $ 77,783 Cdn $ 0 Vice-President - Finance D.R. Yull - The Corporation is the Lender U.S.$ 59,730 U.S.$ 59,730 Vice-President Sales & Marketing - Distribution Products H.D. McSween The Corporation is the Lender Cdn $ 31,102 Cdn $ 31,102 President - Distribution Products J. Jackson The Corporation is the Lender U.S.$ 10,000 U.S.$ 10,000 Chief Information Officer
__________ (1) As a result of the Corporation moving its financial and accounting head office function from Montreal, Quebec to Bradenton, Florida, Sal Vitale decided to resign as Vice-President, Finance on November 22, 2002. 9. Directors' and Officers' Insurance The Corporation maintains directors' and officers' liability insurance covering liability, including defense costs, of directors and officers of the Corporation incurred as a result of acting as such directors or officers, provided they acted honestly and in good faith with a view to the best interests of the Corporation. The current limit of insurance is U.S.$25,000,000 and an annual premium of U.S.$205,000 was paid by the Corporation in the last completed financial year with respect to the period from December 2002 to December 2003. Claims payable to the Corporation are subject to a retention of up to U.S.$500,000 per occurrence. APPOINTMENT AND REMUNERATION OF AUDITORS Raymond Chabot Grant Thornton, Chartered Accountants, who have been the auditors of the Corporation since December 22, 1989 and the auditors of the predecessor company since 1981, will be nominated for appointment as the Corporation's auditors to hold office until the next annual meeting of shareholders at such remuneration as may be fixed by the Board of Directors. a majority of the votes of the shareholders present or represented by proxy at the Meeting is required for the approval of such matter. Representatives of Raymond Chabot Grant Thornton will be present at the Meeting and will have an opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions. AMENDMENT TO THE GENERAL BY-LAWS OF THE CORPORATION At its meeting of April 24, 2003, the Board of Directors of the Corporation passed a resolution (i) approving the repeal of the Corporation's existing general by-law (currently referred to as By-Law No. One), and (ii) enacting new General By-Law 2003-1 in replacement thereof. Generally, the purpose of the replacement of the Corporation's existing general by-law with General By-Law 2003-1 is to harmonize the Corporation's general by-laws with the amendments to the Canada Business Corporations Act that came into force on November 24, 2001 and to update and modernize the Corporation's general by-law in order (i) to avoid duplication with existing provisions of law provided under the Canada Business Corporations Act, and (ii) to simplify the governance of the Corporation. General By-Law 2003-1 will, among other things, provide greater flexibility to the Corporation in connection with the holding of meetings of shareholders by permitting it to hold such meetings by telephonic, electronic or other communications facilities. In order for the Corporation's existing general by-law to be repealed and General By-Law 2003-1 to be adopted, the affirmative vote of a majority of the votes cast by the holders of common shares, as a single class, present in person or by proxy at the Meeting, in respect of the resolution to (i) repeal the Corporation's existing general by-law (currently referred to as By-Law No. One), and (ii) enact General By-Law 2003-1 in replacement thereof, will be required. If this resolution is not approved at the Meeting then the Corporation's existing general by-law will remain in effect and General By-Law 2003-1 will not come into force. A copy of the resolution by which the Corporation's existing general by-law (currently referred to as By-Law No. One) will be repealed, and (ii) General By-Law 2003-1 in replacement thereof will be adopted, is attached to this Circular as Exhibit "A". A copy of new General By-Law 2003-1 is attached to this Circular as Exhibit "B" for your convenience. The Board of Directors recommends that the shareholders vote in favour of the resolution to (i) repeal the Corporation's existing general by-law (currently referred to as By-Law No. One), and (ii) enact new General By-Law 2003-1 in replacement thereof. Unless instructions are given to vote against the confirmation of such resolution, the persons whose names appear on the enclosed proxy will vote in favour of the aforementioned resolution. AMENDMENT AND RESTATEMENT TO THE CORPORATION'S SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT At the Meeting, the shareholders will be asked to consider and, if deemed advisable, to approve, ratify and confirm amendments to the Corporation's Shareholder Protection Rights Plan Agreement (the "Rights Plan"), that are being implemented by, and the terms and conditions of which, are set forth in the draft amended and restated Shareholder Protection Rights Plan Agreement (the "2003 Rights Agreement") to be entered into by and between the Corporation and CIBC Mellon Trust Company. If approved by the shareholders, the 2003 Rights Agreement will be approved by the Board of Directors immediately after the Meeting. The Rights Plan was originally approved by the shareholders at the annual and special meeting of shareholders of the Corporation held on August 24, 1993. At the annual and special meeting of shareholders held on May 21, 1998, the shareholders of the Corporation approved the extension of the term of the Rights Plan. The common share purchase rights (the "Rights") distributed pursuant to the Rights Plan now expire on September 1, 2003. If the amendments to the Rights Plan are approved by the shareholders, as such amendments are set forth in the 2003 Rights Agreement, the Rights will expire on the date immediately following the date of the Corporation's annual meeting of shareholders to be held in 2006. General Function of the 2003 Rights Agreement The 2003 Rights Agreement relies on the mechanism of the permitted bid to ensure that a person seeking control of the Corporation gives shareholders and the Board of Directors sufficient time to evaluate the bid. The permitted bid is also designed to alleviate the coercive potential of a bid. Permitted bids are common features in almost all Canadian and many United States shareholder rights plans, their purpose being to allow a potential bidder to avoid the dilutive features of a rights plan by making a bid in conformity with the conditions specified in the permitted bid provisions. In Canada, permitted bids are typically those made in accordance with corporate and securities laws and additional conditions tailored to the individual circumstances of the company. A summary of the permitted bid mechanism in the 2003 Rights Agreement, as well as a summary of the principal terms contained therein are attached to this Circular as Exhibit "C". Further, a copy of the full text of the 2003 Rights Agreement is attached to this Circular as Exhibit "D". Background and Objective In considering whether to extend the term and to amend the Rights Plan, the Board of Directors considered the following concerns inherent in the existing legislative framework governing take-over bids in Canada: (a) Time. A particular concern that arises in the context of a take-over bid is the widely held view that applicable securities legislation does not allow sufficient time for directors and shareholders to evaluate a take-over bid and to consider, develop or pursue other alternatives which could maximize shareholder value. Current Canadian legislation permits a take-over bid to expire in 35 days after the date of announcement of the bid which, in the view of Board of Directors (and other boards of directors) may not be sufficient to permit shareholders to properly consider the take-over bid in a reasoned manner. In order to counter this concern, the 2003 Rights Agreement provides a mechanism whereby the minimum expiry period for a permitted bid must be 60 days after the date of the bid. By extending the period in which a take-over bid will remain open, the Board of Directors is of the view that (i) shareholders will have a more adequate time-frame to evaluate the bid, and (ii) their will be greater opportunities for the Corporation to pursue alternatives to the take-over bid, such as identifying other potential bidders or conducting an orderly auction process. (b) Pressure to Tender. A shareholder may feel compelled to tender to a bid which the shareholder considers to be inadequate out of a concern that failing to tender may result in the shareholder being left with illiquid or minority discounted shares in the Corporation. This is particularly so in the case of a partial bid for less than all shares of a class, where the bidder wishes to obtain a control position but does not wish to acquire all of the common shares of the Corporation. The permitted bid concept in the Corporation's Rights Plan is intended to ensure that a shareholder can wait and tender after a public announcement has been made that more than 50% of the common shares have been tendered. The Corporation's Rights Plan requires that a bid remain open for acceptance for a further ten days following the public announcement that more than 50% of the common shares have been deposited under the bid. This provision should lessen the undue pressure to tender typically encountered by a shareholder of a corporation that is the subject of a take-over bid. (c) Unequal Treatment. Another concern that arises in the context of potential take-overs is the possibility that, in certain instances, control of a corporation may be acquired pursuant to a private agreement in which a small group of shareholders dispose of shares at a premium to market price which premium is not shared with other shareholders. In such a context not all shareholders receive equal treatment. Additionally, it may also be possible for a person to slowly accumulate shares through stock exchange acquisitions, which may result, over time, in an acquisition of control without payment of fair value for control or a fair sharing of a control premium among all shareholders. The Corporation's Rights Plan addresses these concerns as the Rights are triggered upon an acquisition of greater than 20% of the common shares of the Corporation. In light of the above and in recognition of the fact that the Corporation remains a widely-held corporation with no controlling shareholder, the Board of Directors is proposing the extension of the term of the Rights Plan. The Board of Directors determined that it is in the best interests of the Corporation to extend the term of the Rights under the Rights Plan to help ensure that any acquisition of control of the Corporation takes place in an open and fair manner for the shareholders. The Board of Directors believes that the Rights Plan will assist in achieving this objective. The Rights Plan encourages a potential bidder to negotiate with the Board of Directors, which empirical studies indicate, generally results in a higher price being paid to obtain control of a corporation. There are a number of Canadian and U.S. corporations which have adopted rights plans. The Rights Plan is designed to not interfere with the day-to-day operations of the Corporation and the existence of the Rights does not in any way alter the financial condition of the Corporation, impede its business plans, affect the indebtedness of the Corporation, impose any additional burdens on the Corporation, alter the Corporation's balance sheet or income statement, involve a sale, exchange or purchase of significant assets or incur a loss of earning power for the Corporation. In addition, the existence of the Rights does not restrict the ability of shareholders to trade their common shares. While the Board of Directors believes that the Rights Plan offers the aforementioned protections, it is not intended to prevent a take-over bid or to deter fair offers for the common shares of the Corporation. Rather, it is designed to encourage anyone seeking to acquire control of the Corporation to make an offer that treats all shareholders fairly and equally, that gives shareholders and the Corporation sufficient time to explore possible alternatives that may then present themselves and that recognizes the long term value of the common shares. The Corporation's Rights Plan focuses only on take-over bids where, in the opinion of the Board of Directors, it is prudent that shareholders be afforded protection in addition to that granted by applicable legislation. It does not apply to amalgamations, asset sales or similar transactions where shareholders already enjoy statutory safeguards, such as the right to vote on the approval of such transactions. The Board of Directors reviewed whether the Rights Plan might deter attempts to acquire control of the Corporation on terms not approved by the Board of Directors and make it less likely that shareholders would be given an opportunity to sell their common shares at a premium over the market price. The Board of Directors believes that the Rights Plan minimizes these concerns and that the protection which the Rights Plan affords shareholders overrides any concerns of this nature. In the context of their review of the Rights Plan, the Board of Directors also assessed whether the Rights Plan is consistent with what institutional investor guidelines and recent articles have set out as being current Canadian corporate practice. The Board of Directors determined that in addition to the extension of the term of the Rights Plan, the Rights Plan should be amended so that it would be consistent with corporate developments that have occurred in the past few years. Certain of the amendments in this regard reflected in the 2003 Rights Agreement are as follows: (a) Reduction of the Permitted Bid Period. Recently adopted or renewed rights plans have established a maximum acceptable permitted bid period of 60 days, the view being that 60 days allows sufficient time for shareholders to analyze the terms of a proposed bid in order to determine its adequacy and also for the board of directors to consider alternatives to such a bid if they believe it is inadequate. The Corporation's Rights Plan currently has a permitted bid period of 90 days. The proposed amendments to the Rights Plan, as such are set forth in the 2003 Rights Agreement, would reduce the permitted bid period to a period of 60 days. (b) Sunset Provisions of Rights Plans. Institutional investor guidelines have set out that the acceptable norm is for rights plans (and the underlying rights issued thereunder) to expire three years from the time that the rights plan was adopted or its term last extended. In the past, the Corporation's Rights Plan has set out that it would remain in effect, unless otherwise terminated earlier in accordance with its terms, for a five year period. The 2003 Rights Agreement sets out that the Rights Plan and the Rights issued thereunder will expire on the date immediately following the date of the Corporation's annual meeting of shareholders to be held in 2006 unless the Rights Plan is extended at or prior to that time by the Corporation's shareholders. This reduction in the "sunset provision" of the Rights Plan will give shareholders more frequent opportunities to review the terms of the Rights Plan in light of continuing market developments. (c) Other Amendments. In light of the recent views taken by institutional investors and other market participants, additional amendments of a more "technical" nature have been proposed. The amendments would affect certain of the key definitions of the Rights Plan, such as the definitions of "Permitted Bids" and "Pro Rata Acquisitions". Further, the amendments would also introduce the concept of a "Permitted Lock-up Agreement" into the Rights Plan. Exhibit "C" of this Circular provides a summary of the principal terms of the 2003 Rights Agreement. The Board of Directors is of the view that the 2003 Rights Agreement is consistent with rights plans that have been adopted by major Canadian corporations in the past few years and is in line with the guidelines and views that have been set out by institutional investors and other market participants. The amendments to the Rights Plan, as such are set forth in the 2003 Rights Agreement, do not in any way detract from or lessen the duty of the Board of Directors to act honestly and in good faith with a view to the best interests of the Corporation and to consider a take-over bid in accordance with such duty. The Board of Directors has no intention to secure the continuance of existing directors in office or to avoid an acquisition of control of the Corporation which is in the best interests of the Corporation and its shareholders. Pursuant to the role of the Board of Directors to negotiate in the best interests of the Corporation and to ensure the opportunity for any prospective acquiror to negotiate in good faith with the Board of Directors, the Rights may be redeemed by the Board of Directors prior to the occurrence of any transaction in or pursuant to which 20% or more of the outstanding common shares have been accumulated by an acquiror or group. In addition, the Board of Directors may until the occurrence of such event determine to waive the application of the provisions of the Rights Plan to any transaction that would otherwise be subject to those provisions. The proxy mechanism of the Canada Business Corporations Act is not affected by the 2003 Rights Agreement, and a shareholder may use his statutory rights to promote a change in the management or direction of the Corporation, including the right of shareholders holding not less than 5% of the outstanding common shares to requisition the Board of Directors to call a meeting of shareholders. The Corporation did not adopt the Rights Plan and is not proposing the amendments to the Rights Plan in response to or in anticipation of any pending or threatened take-over bid, or to deter take-over bids generally. As of the date of this Circular, the Board of Directors is not aware of any third party considering or preparing any proposal to acquire control of the Corporation. Amendment and Restatement of the Rights Plan In order for the term of the Rights Plan to be extended to the date of the Corporation's annual meeting of shareholders to be held in 2006, and in order for the other amendments to the Rights Plan to be adopted, the affirmative vote of a majority of the votes cast in respect of the resolution to approve, confirm and ratify the 2003 Rights Agreement, a copy of the full text of which resolution is attached to this Circular as Exhibit "E", by the holders of common shares, as a single class, present in person or by proxy at the Meeting will be required. The Rights Plan will become void and of no further force or effect on its current termination date if this resolution is not approved at the Meeting. The Corporation has not determined what further action, if any, it would take in the event that the resolution is not approved at the Meeting. The Board of Directors recommends that the shareholders vote in favour of the resolution that will approve the proposed amendments to the Rights Plan. Unless instructions are given to vote against the confirmation of such resolution, the persons whose names appear on the enclosed proxy will vote in favour of the aforementioned resolution. Executive Stock Option Plan In 1992, the Corporation established its ongoing Executive Stock Option Plan (the "Plan") in respect of the common shares of the Corporation. The purpose of the Plan is to promote a proprietary interest in the Corporation among the executives, the key employees and the non-management directors of the Corporation and its subsidiaries, in order to both encourage such persons to further the development of the Corporation and to assist the Corporation in attracting and retaining key personnel necessary for the Corporation's long term success. Currently the maximum number of common shares that may be issued under the Plan is 3,361,661. Interest of Management and Others in Material Transactions The management of the Corporation is unaware of any material interest of any director or officer of the Corporation, of any management nominee for election as a director of the Corporation or of any person who beneficially owns or exercises control or direction over shares carrying more than ten percent of the voting rights attached to all shares of the Corporation, or any associate or affiliate of any such person, in any transaction since the beginning of the last completed financial year of the Corporation or in any proposed transactions that has materially affected or will materially affect the Corporation or any of its affiliates. STATEMENT OF CORPORATE GOVERNANCE PRACTICES OF THE CORPORATION In 1995, the Toronto Stock Exchange (the "TSX") adopted a requirement that disclosure be made by each listed company of its corporate governance system by making reference to the TSX Guidelines for Corporate Governance (the "Guidelines"). and each listed company is also required to explain where its system of governance differs from the Guidelines. More recently, and in large part due to the problems encountered by U.S. companies such as Enron and WorldCom Inc., regulators in both Canada and the United States have brought forth new requirements in terms of corporate governance and accountability in connection with public companies. Heightened expectations on the part of investors and the public in general encouraged governments and regulators in both countries to propose and adopt new rules in these sectors and to revise and amend those rules that were already in effect. In Canada, the most important developments in the last year were (i) the introduction in Ontario of new legislation making changes to the governance and disclosure regimes, and (ii) the TSX's proposals for new requirements and guidelines pertaining to corporate governance. These new regimes are expected to come into effect in 2003. In the United States, the Act to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes (the "Sarbanes-Oxley Act of 2002") introduced a number of corporate governance requirements that affect participants in U.S. markets, including the Corporation. Meanwhile, the New York Stock Exchange has undertaken a major revision of its policies and such revisions are currently being reviewed by the SEC. The Corporation's Nominating & Governance Committee will continue to follow the progress of these developments with a view to recommending to the Board any changes to the Corporation's governance practices that may become necessary in order that the Corporation complies with the aforementioned requirements as they become effective. The following is a statement of the Corporation's existing corporate governance practices with specific reference to the Guidelines (as indicated in bold below) currently in effect: The board of directors of every corporation should explicitly assume responsibility for the stewardship of the Corporation and adopt a formal mandate setting out the board's stewardship responsibilities, and as part of the overall stewardship responsibility, the board should assume responsibility for the following matters: (a) adoption of a strategic planning process and the approval and review, on at least an annual basis of a strategic plan; (b) the identification of the principal risks of the corporation's business and overseeing the implementation of appropriate systems to manage these risks; (c) succession planning, including appointing, training and monitoring senior management; (d) communications policies for the corporation; and (e) the integrity of the corporation's internal control and management information systems. All the directors presently in office and proposed to be elected at the Meeting have served as directors in good standing of the Corporation since 1994, other than Mr. Cunningham who was elected in 1998, Mr. Lanthier who was elected in 2001 and Thomas E. Costello who was elected on November 22, 2002. Participation of directors is expected at all Board of Directors and Committee meetings to which they are called. Directors are asked to notify the Corporation if they will be unable to attend and attendance at meetings is duly recorded. All the directors have agreed to contribute to the evaluation of their collective as well as their individual performances. The mandate of the Board of Directors of the Corporation is to supervise the management of the business and affairs of the Corporation, including the development of major policy and strategy and the identification of the risks of the Corporation's business and implementation of the appropriate systems to manage these risks. The Board of Directors of the Corporation has explicitly assumed responsibility for the stewardship of the Corporation and has adopted a formal mandate setting out its stewardship responsibilities. Additionally, the Corporation has adopted a Code of Conduct and Business Ethics that all directors, management personnel and employees of the Corporation are expected to adhere to. All major decisions concerning, among other things, the Corporation's corporate status, capital, debt financing, securities distributions, investments, acquisitions, divestitures and strategic alliances, are subject to approval by the Board of Directors. In particular, capital investments and other outlays of an aggregate monetary amount of one million U.S. dollars or more are subject to the prior approval of the Board of Directors. The Board of Directors meets at least quarterly, and more frequently as required to consider particular issues or conduct specific reviews between quarterly meetings whenever appropriate. The Board of Directors periodically invites senior operating management to attend meetings of the Board of Directors to report on their business responsibilities. Governance responsibilities are undertaken by the Board of Directors as a whole, with certain specific responsibilities delegated to the Audit, the Compensation and the Nominating & Governance Committees as described below. For example, the Board of Directors has mandated the Compensation Committee and the Nominating & Governance Committee to develop a succession planning strategy for the Corporation which will include formalizing the Corporation's procedures related to the appointing, training and monitoring of senior management. The board of directors of every corporation should be constituted with a majority of individuals who qualify as unrelated directors. If the corporation has a significant shareholder, in addition to a majority of unrelated directors, the board should include a number of directors who do not have interests in or relationships with either the corporation or the significant shareholder and which fairly reflects the investment in the corporation by shareholders other than the significant shareholder. The application of the definition of "unrelated director" to the circumstances of each individual director should be the responsibility of the board which will be required to disclose whether the board has a majority of unrelated directors or, in the case of a corporation with a significant shareholder, whether the board is constituted with the appropriate number of directors which are not related to either the corporation or the significant shareholder. The Corporation's Board of Directors currently consists of seven directors, five of whom are unrelated directors in accordance with the definition of an unrelated director in the Guidelines. The Board of Directors has examined its size and determined that seven directors, five of whom are unrelated, is an appropriate number for continued effective decision-making for the Corporation. The Board of Directors is currently chaired by M.F. Yull who is also the Chief Executive Officer of the Corporation. The Board is of the view that this does not impair its ability to act independently of management due, inter alia, to the independence of the remaining members of the Board of Directors and due to the role of the Board of Directors in determining its own policies, procedures and practices, and ensuring that the appropriate information is made available to the Board of Directors. The Corporation does not have a significant shareholder as described in the Guidelines given that no shareholder of the Corporation has the ability to exercise a majority of the votes for the election of the Corporation's Board of Directors. Committees of the board of directors should generally be composed solely of non-management directors, a majority of whom are unrelated directors. The Board of Directors has established three committees, the Audit Committee, the Compensation Committee, and, as of October 21, 2002, the Nominating & Governance Committee to facilitate the carrying out of its duties and responsibilities and to meet applicable statutory requirements. The Guidelines recommend that the Audit Committee be made up of non-management and unrelated directors only and that other board committees should be comprised generally of non-management directors, a majority of whom should be unrelated directors. The following is a description of the Committees of the Board of Directors and their mandate: - - Audit Committee The Audit Committee is presently composed of four directors, being L. Robbie Shaw, Gordon R. Cunningham, J. Spencer Lanthier and Thomas E. Costello, all of whom are non-management directors and all of whom are unrelated directors, as such term is understood in reference to the Guidelines. The Audit Committee met six times during the period from January 1, 2002 to December 31, 2002. The basic mandate of the Audit Committee is to review the annual financial statements of the Corporation and to make recommendations to the Board of Directors in respect thereto. Further, the Committee reviews the nature and scope of the annual audit as proposed by the external auditors and management and, with the external auditors and management, the adequacy of the internal accounting control procedures and systems within the Corporation. During 2002, the Audit Committee formalized its mandate into a written charter document. The charter sets out that, in addition to its basic mandate, the Audit Committee will, on a going-forward basis, have the sole authority to recommend to the Corporation's shareholders the appointment or replacement of the Corporation's external auditors and shall approve all audit engagement fees and terms and all significant non-audit engagements with the external auditors. Further, the Audit Committee will require that the Corporation's external auditors provide a report at least annually regarding, inter alia, the auditors' internal quality-control procedures and all relationships between the external auditors and the Corporation. While the Audit Committee may consult with management on these issues, it shall not delegate its overall responsibility. The charter also sets out that the Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants for additional advice as may be required. - - Compensation Committee The Compensation Committee is presently composed of four directors, being Ben J. Davenport, Jr., Michael L. Richards, L. Robbie Shaw and Gordon R. Cunningham. The Compensation Committee met four times during the period from January 1, 2002 to December 31, 2002. Michael L. Richards is considered to be a related director given that the law firm Stikeman Elliott LLP, of which Mr. Richards is a senior partner, provides legal services to the Corporation on a regular basis. Nonetheless, given Mr. Richards' broad business experience, the Corporation feels he should continue to serve on the Compensation Committee. Further, the Corporation is of the view that its relationship with Stikeman Elliott LLP does not inhibit Mr. Richards' ability to act impartially, nor his ability to act independently of the views of management of the Corporation. The mandate of the Compensation Committee was described above under the heading "Report on Executive Compensation". - - Nominating & Governance Committee This past year the Corporation created a Nominating & Governance Committee that is composed of all of the members of the Board, a majority of whom are unrelated directors. The charter of the Nominating & Governance Committee sets out that the committee will, inter alia: (i) assess on an annual basis the effectiveness of the Board as a whole as well as periodically evaluate the contribution of individual members of the Board; (ii) review, on a periodic basis, the size and composition of the Board and ensure that an appropriate number of unrelated directors sit on the Board; (iii) identify individuals qualified to become members of the Board as may be required and recommend to the Board new nominees for appointment; (iv) provide appropriate orientation to any new members of the Board; (v) recommend to the Board corporate governance guidelines and ensure the sufficiency of such guidelines on a periodic basis; and (vi) review and advise the Board at least annually as to corporate governance issues. The board of directors of every corporation should appoint a committee of directors composed exclusively of non-management directors, a majority of whom are unrelated directors, with the responsibility for proposing to the full board new nominees to the board and for assessing directors on an ongoing basis. As aforementioned, this responsibility has been undertaken by the Nominating & Governance Committee of the Board, a majority of whom are unrelated directors, but one of whom is a member of management. Every board of directors should implement a process to be carried out by the nominating committee or other appropriate committee for assessing the effectiveness of the board as a whole, the committees of the board and the contribution of individual directors. As aforementioned, this responsibility has been undertaken by the Nominating & Governance Committee of the Board. Every corporation, as an integral element of the process for appointing new directors, should provide an orientation and education program for new recruits to the board, In addition, every corporation should provide continuing education for all directors. As aforementioned, this responsibility has been undertaken by the Nominating & Governance Committee of the Board. Every board of directors should examine its size and composition and undertake, where appropriate, a program to establish a board comprised of members who facilitate effective decision-making. As aforementioned, this responsibility has been undertaken by the Nominating & Governance Committee of the Board. A committee of the board of directors comprised solely of unrelated directors should review the adequacy and form of the compensation of senior management and directors, with such compensation realistically reflecting the responsibilities and risks of such positions. This responsibility forms part of the mandate of the Compensation Committee, as described above under the heading "Report on Executive Compensation". Every board of directors should expressly assume responsibility for, or assign to a committee of directors the general responsibility for, developing the corporation's approach to governance issues. This committee would, among other things, be responsible for the Corporation's response to these governance guidelines. As aforementioned, this responsibility has been undertaken by the Nominating & Governance Committee of the Board. The board of directors, together with the CEO, should develop position descriptions for the board and for the CEO, involving the definition of the limits to management's responsibilities. In addition, the board should approve or develop the corporate objectives which the CEO is responsible for meeting and assess the CEO against these objectives. This past year, the Corporation established written corporate governance guidelines to address the above issues. That being said, such guidelines do not contain formalized position descriptions for the Board and for the CEO, nor do they set out specific objectives which the CEO is responsible for meeting. The Board is of the view that due to its relatively small size, the need for these formalities is diminished because effective communication between the Board and management of the Corporation is otherwise achieved. That being said, the Compensation Committee has been mandated to conduct an annual review of the CEO's performance in order to ensure that the CEO is providing the best leadership for the Corporation in the long and short term. The audit committee should be composed only of unrelated directors. All of the members of the audit committee should be financially literate and at least one member should have accounting or related financial experience. The audit committee should have direct communication channels with the internal and external auditors to discuss and review specific issues as appropriate. The audit committee duties should include oversight responsibility for management reporting on internal control. The Audit Committee of the Corporation, as such was described previously, meets the above criteria. Every board of directors should implement structures and procedures that ensure that the board can function independently of management. The board of directors should implement a system which enables an individual director to engage an external adviser at the expense of the Corporation in appropriate circumstances. The engagement of the external adviser should be subject to the approval of an appropriate committee of the board. Non-management directors meet at least quarterly. Further, the Board and the Audit Committee have the power to hire independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining the approval of any officer of the Corporation in advance. Corporations should have a formalized process in order to communicate as required with shareholders and in order to address their feedback and queries. The fundamental objective of the Corporation's shareholder communication policy is to ensure an open, accessible and timely exchange of information with all shareholders respecting the business, affairs and performance of the Corporation, subject to the requirements of securities legislation in effect and other statutory and contractual obligations limiting the disclosure of such information. In order to facilitate the effective and timely dissemination of information to all of its shareholders, the Corporation releases its disclosed information through news wire services, the general media, telephone conferences with investment analysts and mailings to shareholders. APPROVAL OF DIRECTORS The contents and the sending of this Circular have been approved by the directors of the Corporation. LOGO ANDREW M. ARCHIBALD, C.A. Chief Financial Officer, Secretary, Vice President, Administration St. Laurent, Quebec - May 7, 2003 EXHIBIT A RESOLUTION OF THE SHAREHOLDERS OF INTERTAPE POLYMER GROUP INC. "BE IT RESOLVED: THAT the Corporation's existing general by-law (currently referred to as By-Law No. One) be repealed; THAT General By-Law 2003-1 in replacement thereof be adopted and General By-Law 2003-1 (a copy of which (i) is located at Exhibit "B" of this Circular, and (ii) has been tabled at this Meeting by the Secretary of the Corporation), be and it is hereby approved, ratified and confirmed; and THAT any director or officer of the Corporation be and he is hereby authorized for an on behalf of and in the name of the Corporation, to do all things and execute an deliver all such documents and instruments as may be necessary or desirable to carry out the foregoing." EXHIBIT B INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. GENERAL BY-LAW 2003-1 being a by-law relating generally to the transaction of the business and affairs of the Corporation (as amended and restated). DEFINITIONS 1. In this by-law and all other by-laws of the Corporation, unless the context otherwise specifies or requires: (a) "Act" means the Canada Business Corporations Act, and any statute that may be substituted therefor, as from time to time amended; (b) "articles" means the articles of the Corporation, as from time to time amended or restated; (c) "by-law" means this by-law and all other by-laws of the Corporation from time to time in force and effect; (d) words importing the singular number only shall include the plural and vice versa; words importing the masculine gender shall include the feminine and neuter genders and vice-versa; words importing persons shall include bodies corporate, corporations, companies, partnerships, syndicates, trusts and any number or aggregate of individuals; (e) the headings used in the by-laws are inserted for reference purposes only and are not to be considered or taken into account in construing the terms or provisions thereof or to be deemed in any way to clarify, modify or explain the effect of any such terms or provisions; and (f) all terms contained in the by-laws and which are defined in the Act shall have the meanings given to such terms in the Act. REGISTERED OFFICE 2. The Corporation may from time to time (i) by resolution of the board of directors change the location of the address of the registered office of the Corporation within the place specified in the articles and (ii) by articles of amendment change the place in which its registered office is situated to another place within Canada. CORPORATE SEAL 3. The Corporation may have one or more corporate seals which shall be such as the board of directors may by resolution from time to time adopt and change. DIRECTORS 4. Number and Powers. There shall be a board of directors consisting of such fixed number, or minimum and maximum number of directors as may be set out in the articles, but a corporation, any of the issued securities of which are or were part of a distribution to the public and remain outstanding and are held by more than one person, shall not have fewer than three (3) directors, at least two (2) of whom are not officers or employees of the corporation or its affiliates. The precise number of directors shall be determined from time to time by the board of directors. At least twenty-five percent (25%) of the directors shall be resident Canadians. However, if the Corporation has fewer than four (4) directors, at least one (1) director must be a resident Canadian. 5. Vacancies. If the number of directors is increased, the resulting vacancies shall be filled at a meeting of shareholders duly called for that purpose. Notwithstanding the provisions of this by-law and subject to the provisions of the Act, if a vacancy should otherwise occur in the board, the remaining directors, if constituting a quorum, may appoint a qualified person to fill the vacancy for the remainder of the term. In the absence of a quorum, the remaining directors shall forthwith call a meeting of shareholders to fill the vacancy pursuant to subsection 111(2) of the Act. Where a vacancy or vacancies exist in the board, the remaining directors may exercise all of the powers of the board so long as a quorum remains in office. 6. Term of Office. A director's term of office shall be from the meeting at which he is elected or appointed until the annual meeting next following or until his successor is elected or appointed, or until, if earlier, he dies or resigns, or is removed or disqualified pursuant to the provisions of the Act. 7. Vacation of Office. The office of a director shall ipso facto be vacated if: (a) he dies; (b) by notice in writing to the Corporation he resigns his office and such resignation, if not effective immediately, becomes effective in accordance with its terms; (c) he is removed from office in accordance with section 109 of the Act; or (d) he ceases to be qualified to be a director. 8. Election. Directors shall be elected by the shareholders by ordinary resolution in a general meeting on show of hands (subject to Section 32 below) unless a poll is demanded and if a poll is demanded such election shall be by ballot. A retiring director shall retain office until the adjournment or termination of the meeting at which his successor is elected unless such meeting was called for the purpose of removing him from office as a director in which case the director so removed shall vacate office forthwith upon the passing of the resolution for his removal. MEETINGS OF DIRECTORS 9. Place of Meeting. Subject to the articles, meetings of directors may be held at any place within or outside Canada as the directors may from time to time determine or the person convening the meeting may give notice. A meeting of the board of directors may be convened by the chairman of the board, if any, the president if any, or any director at any time. The secretary, if any, shall upon direction of any of the foregoing convene a meeting of the board of directors. Notice. Notice of the time and place for the holding of any such meeting shall be delivered, mailed, telegraphed, cabled or telexed to each director at his latest address as shown on the records of the Corporation not less than two (2) days (exclusive of the day on which the notice is delivered, mailed, telegraphed, cabled or telexed but inclusive of the day for which notice is given) before the date of the meeting; provided that meetings of the board of directors may be held at any time without notice if all the directors have waived notice. For the first meeting of the board of directors to be held immediately following the election of directors at an annual or special meeting of the shareholders, no notice of such meeting need be given to the newly elected or appointed director or directors in order for the meeting to be duly constituted, provided a quorum of the directors is present. A notice of a meeting of directors shall specify any matter referred to in subsection 115(3) of the Act that is to be dealt with at the meeting. Waiver of Notice. Notice of any meeting of the board of directors or any irregularity in any meeting or in the notice thereof may be waived by any director in writing or by telegram, cable or telex addressed to the Corporation or in any other manner, and such waiver may be validly given either before or after the meeting to which such waiver relates. The attendance of a director at a meeting of directors is a waiver of notice of the meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. Telephone or Electronic Participation. A director may, to the extent and in the manner permitted by law, participate in a meeting of directors or of a committee of directors by means of telephonic, electronic or other communication facilities that permits all participants to communicate adequately with each other during the meeting, but only if all the directors of the Corporation have consented to that form of participation. A director participating in such a meeting by such means is deemed for purposes of the Act to be present at that meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board and of committees of the board held while a director holds office. 10. Adjournment. Any meeting of the board of directors may be adjourned from time to time by the chairman of the meeting, with the consent of the meeting, to a fixed time and place and no notice of the time and place for the continuance of the adjourned meeting need be given to any director. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum present thereat. The directors who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. 11. Quorum and Voting. Subject to the articles, a majority of the number of directors in office at the time shall constitute a quorum for the transaction of business. Subject to subsection 117(1) of the Act, no business shall be transacted by the directors except at a meeting of directors at which a quorum of the board is present. Questions arising at any meeting of the board of directors shall be decided by a majority of votes cast. In case of an equality of votes, the chairman of the meeting, in addition to his original vote shall have a second or casting vote. Where the Corporation has only one director, that director may constitute the meeting. 12. Resolution in lieu of meeting. A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors, is as valid as if it had been passed at a meeting of directors or committee of directors. A copy of every such resolution shall be kept with the minutes of the proceedings of the directors or committee of directors. REMUNERATION OF DIRECTORS 13. Subject to the articles, the remuneration to be paid to the directors shall be such as the board of directors shall from time to time determine and such remuneration shall be in addition to the salary paid to any officer of the Corporation who is also a member of the board of directors. The directors may also by resolution award special remuneration to any director undertaking any special services on the Corporation's behalf other than the routine work ordinarily required of a director by the Corporation. The confirmation of any such resolution or resolutions by the shareholders shall not be required. The directors shall also be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation. SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL 14. The board of directors in their discretion may submit any contract, act or transaction for approval, ratification or confirmation at any annual meeting of the shareholders or at any special meeting of the shareholders called for the purpose of considering the same and any contract, act or transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or by the Corporation's articles or any other by-law) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved, ratified or confirmed by every shareholder of the Corporation. INDEMNITIES TO DIRECTORS AND OTHERS 15. Except in respect of an action by or on behalf of the Corporation or another body corporate (as hereinafter defined) and subject to the limitations contained in the Act, the Corporation shall indemnify each director and officer of the Corporation and each former director and officer of the Corporation and each person who acts or acted at the Corporation's request as a director or officer of another body corporate and any person who acts or acted in a similar capacity of another body corporate, and his heirs and legal representatives, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal, administrative, investigative or other proceeding to which he is involved because of that association with the Corporation or another body corporate, as the case may be, if (a) he acted honestly and in good faith with a view to the best interests of the Corporation or, as the case may be, to the best interests of another body corporate for which the individual acted as a director or officer or in a similar capacity at the Corporation's request; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. "another body corporate" as used herein means a body corporate of which the Corporation is or was a shareholder or creditor. OFFICERS 16. Appointment of Officers. Subject to the articles, the board of directors, annually or as often as may be required, may appoint from among themselves a chairman of the board and may appoint a president and a secretary and, if deemed advisable, may also appoint one or more vice-presidents, a treasurer and one or more assistant secretaries and/or one or more assistant treasurers. None of such officers, except the chairman of the board, need be a director of the Corporation. Any two (2) or more of such offices may be held by the same person. In case and whenever the same person holds the offices of secretary and treasurer he may, but need not, be known as the secretary- treasurer. The board of directors may from time to time designate such other offices and appoint such other officers, employees and agents as it shall deem necessary who shall have such authority and shall perform such functions and duties, as may from time to time be prescribed by resolution of the board of directors. 17. Remuneration and Removal of Officers. Subject to the articles, the remuneration of all officers, employees and agents elected or appointed by the board of directors may be determined from time to time by resolution of the board of directors. The fact that any officer, employee or agent is a director or shareholder of the Corporation shall not disqualify him from receiving such remuneration as may be so determined. The board of directors may by resolution remove any officer, employee or agent at any time, with or without cause. 18. Duties of Officers may be Delegated. In case of the absence or inability or refusal to act of any officer of the Corporation or for any other reason that the board of directors may deem sufficient, the board may delegate all or any of the powers of such officer to any other officer or to any director for the time being. 19. Chairman of the Board. The chairman of the board, if any, shall, if present, preside at all meetings of the board of directors and of shareholders. He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the board of directors. 20. President. The president, if any, shall be the chief executive officer of the Corporation and shall exercise general supervision over the business and affairs of the Corporation. In the absence of the chairman of the board, if any, the president shall, when present, preside at all meetings of the board of directors and shareholders; he shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and shall perform such other duties as may from time to time be assigned to him by resolution of the board of directors or as are incident to his office. 21. Vice-President. The vice-president or, if more than one, the vice- presidents in order of seniority, shall be vested with all the powers and shall perform all the duties of the president in the absence or inability or refusal to act of the president, provided, however, that a vice-president who is not a director shall not preside as chairman at any meeting of shareholders. The vice-president or, if more than one, the vice-presidents in order of seniority, shall sign such contracts, documents or instruments in writing as require his or their signatures and shall also have such other powers and duties as may from time to time be assigned to him or them by resolution of the board of directors. 22. Secretary. The secretary, if any, shall give or cause to be given notices for all meetings of the board of directors, of committees thereof, if any, and of shareholders when directed to do so and shall have charge, subject to the provisions of this by-law, of the records referred to in section 20 of the Act (except the accounting records) and of the corporate seal or seals, if any. He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the board of directors or as are incident to his office. 23. Treasurer. Subject to the provisions of any resolution of the board of directors, the treasurer, if any, shall have the care and custody of all the funds and securities of the Corporation and shall deposit the same in the name of the Corporation in such bank or banks or with such other depositary or depositaries as the board of directors may by resolution direct. He shall prepare, maintain and keep or cause to be kept adequate books of accounts and accounting records. He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the board of directors or as are incident to his office. He may be required to give such bond for the faithful performance of his duties as the board of directors in their uncontrolled discretion may require and no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any loss by reason of the failure of the Corporation to receive any indemnity thereby provided. 24. Assistant Secretary and Assistant Treasurer. The assistant secretary or, if more than one, the assistant secretaries in order of seniority, and the assistant treasurer or, if more than one, the assistant treasurers in order of seniority, shall respectively perform all the duties of the secretary and treasurer, respectively, in the absence or inability to act of the secretary or treasurer as the case may be. The assistant secretary or assistant secretaries, if more than one, and the assistant treasurer or assistant treasurers, if more than one, shall sign such contracts, documents or instruments in writing as require his or their signatures respectively and shall have such other powers and duties as may from time to time be assigned to them by resolution of the board of directors. MANAGING DIRECTOR 25. The board of directors may from time to time appoint from their number a managing director who is a resident Canadian and may delegate to him any of the powers of the board of directors except as provided in subsection 115(3) of the Act. The managing director shall conform to all lawful orders given to him by the board of directors of the Corporation and shall at all reasonable times give to the directors or any of them all information they may require regarding the affairs of the Corporation. Any agent or employee appointed by the managing director shall be subject to discharge by the board of directors. COMMITTEES 26. The board of directors may from time to time appoint from their number one or more committees consisting of one or more individuals and delegate to such committee or committees any of the powers of the directors except as provided in subsection 115(3) of the Act. Unless otherwise ordered by the board, a committee of directors shall have power to fix its quorum, to elect its chairman and to regulate its proceedings. If any of the issued securities of the Corporation are or were part of a distribution to the public, remain outstanding and are held by more than one person, the Corporation shall have an Audit Committee composed of not fewer that three (3) directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates. The members of the Audit Committee shall be appointed annually by the board of directors from its number. The Audit Committee shall have the powers and duties provided in the Act and such other powers and duties as may be specified by the board of directors. SHAREHOLDERS' MEETINGS 27. Annual Meeting. Subject to compliance with section 133 of the Act, the annual meeting of the shareholders shall be convened on such day in each year and at such time as the board of directors may by resolution determine. 28. Special Meetings. Other meetings of the shareholders may be convened by order of the chairman of the board, the president or a vice-president who is a director or by the board of directors, to be held at such time and place as may be specified in such order. Special meetings of shareholders may also be called by written requisition to the board of directors signed by shareholders holding between them not less than five percent (5%) of the outstanding shares of the capital of the Corporation entitled to vote thereat. Such requisition shall state the business to be transacted at the meeting and shall be sent to the registered office of the Corporation. Except as otherwise provided in subsection 143(3) of the Act, it shall be the duty of the board of directors on receipt of such requisition, to cause the meeting to be called by the secretary of the Corporation. If the board of directors does not, within twenty-one (21) days after receiving such requisition call a meeting, any shareholder who signed the requisition may call the meeting. 29. Place of Meetings. Meetings of shareholders of the Corporation shall be held at the registered office of the Corporation or at such other place in Canada as may be specified in the notice convening such meeting. Notwithstanding the foregoing, a meeting of shareholders may be held outside Canada if all the shareholders entitled to vote at that meeting so agree, and a shareholder who attends a meeting of shareholders held outside Canada is deemed to have so agreed except when he attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held. 30. Telephone or Electronic Participation. Any person entitled to attend a shareholders' meeting may, to the extent permitted by the Act, participate in the meeting by means of telephonic, electronic or other communication facilities that permits all participants to communicate adequately with each other during the meeting provided that the Corporation makes available such communication facilities and that all the directors of the Corporation have consented to that form of participation. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of shareholders held while the directors who gave such consent continue to hold office. A person participating in such a meeting by such means is deemed for purposes of the Act to be present at that meeting. 31. Notice. A printed, written or typewritten notice stating the day, hour and place of meeting and, subject to subsection 135(6) of the Act, the general nature of the business to be transacted shall be served to each person who is entitled to vote at such meeting, each director of the Corporation and the auditor of the Corporation, either personally or by sending such notice by prepaid mail not less than twenty-one (21) days or more than fifty (50) days before the meeting. If such notice is served by mail it shall be directed to the latest address as shown in the records of the Corporation, of the intended recipient. Notice of any meeting of shareholders or any irregularity in any such meeting or in the notice thereof may be waived by any shareholder, the duly appointed proxy of any shareholder, any directors or the auditor of the Corporation in writing, by telegram, cable or telex addressed to the Corporation or by any other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. 32. Voting. Voting at a meeting of shareholders shall be by show of hands except where a ballot is demanded by a shareholder entitled to vote at the meeting. A shareholder may demand a ballot either before or after any vote by show of hands. Notwithstanding the foregoing, any person participating in a shareholders' meeting by means of telephonic, electronic or other communication facilities in accordance with Section 30 above, may vote, to the extent permitted by the Act, by means of the telephonic, electronic or other communication facilities that the Corporation has made available for that purpose. 33. Omission of Notice. The accidental omission to give notice of any meeting to or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at any meeting of shareholders. 34. Record Date. The board of directors may by resolution fix in advance a date and time as the record date for the determination of the shareholders entitled to receive notice of and vote at a meeting of the shareholders, but such record date shall not precede by more than fifty (50) days or by less than twenty-one (21) days the date on which the meeting is to be held. If the directors fail to fix in advance such a record date, the record date for the determination of the shareholders entitled to receive notice of and vote at a meeting of shareholders shall be at the close of business on the day immediately preceding the day on which notice of the meeting is given or sent. 35. Votes. Every question submitted to any meeting of shareholders shall be decided in the first instance, unless a ballot is demanded, on a show of hands and in case of an equality of votes the chairman of the meeting shall not, both on a show of hands and on a ballot, have a second or casting vote in addition to the vote or votes to which he may be entitled as a shareholder. Notwithstanding the foregoing, any person participating in a shareholders' meeting by means of telephonic, electronic or other communication facilities in accordance with Section 30 above, may vote, to the extent permitted by the Act, by means of the telephonic, electronic or other communication facilities that the Corporation has made available for that purpose. At any meeting, unless a ballot is demanded, a declaration by the chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of votes recorded in favour of or against the motion. In the absence of the chairman of the board, the president and every vice-president who is a director, the shareholders present entitled to vote shall choose another director as chairman of the meeting and if no director is present or if all the directors present decline to take the chair then the shareholders present shall choose one of their number to be chairman. If at any meeting a ballot is demanded on the election of a chairman or on the question of adjournment or termination it shall be taken forthwith without adjournment. If a ballot is demanded on any other question or as to the election of directors it shall be taken in such manner and either at once or later at the meeting or after adjournment as the chairman of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn. Where a person holds shares as a personal representative, such person or his proxy is the person entitled to vote at all meetings of shareholders in respect of the shares so held by him. Where a person mortgages or hypothecates his shares, such person or his proxy is the person entitled to vote at all meetings of shareholders in respect of such shares unless, in the instrument creating the mortgage or hypothec, he has expressly empowered the person holding the mortgage or hypothec to vote in respect of such shares, in which case, subject to the Corporation's articles, such holder or his proxy is the person entitled to vote in respect of the shares. Where two (2) or more persons hold the same share or shares jointly, any one of such persons present at a meeting of shareholders has the right, in the absence of the other or others, to vote in respect of such share or shares, but if more than one of such persons are present or represented by proxy and vote, they shall vote together as one on the share or shares jointly held by them. 36. Proxies. A shareholder, including a shareholder that is a body corporate, entitled to vote at a meeting of shareholders may by means of a proxy appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend and act at the meeting in the manner and to the extent authorized by the proxy and with the authority conferred by the proxy. An instrument appointing a proxyholder shall be in writing and shall be executed by the shareholder or his attorney authorized in writing or, if the shareholder is a body corporate, either under its seal or by an officer or attorney thereof, duly authorized. A proxy is valid only at the meeting in respect of which it is given or any adjournment thereof. Unless the Act requires another form, an instrument appointing a proxyholder may be in the following form: "The undersigned shareholder of - hereby appoints - of - or failing him, - of - as the nominee of the undersigned to attend and act for and on behalf of the undersigned at the - meeting of the shareholders of the said Corporation to be held on the - day of - 20 - , and at any adjournment thereof to the same extent and with the same power as if the undersigned were personally present at the said meeting or such adjournment thereof. Dated the - day of - , 20 ______________________________________________________________________________ Signature of Shareholder NOTE: This form of proxy must be signed by a shareholder or his attorney authorized in writing or, if the shareholder is a body corporate, either under its seal or by an officer or attorney thereof duly authorized." The directors may from time to time pass regulations regarding the deposit of instruments appointing a proxyholder at some place or places other than the place at which a meeting or adjourned meeting of shareholders is to be held and for particulars of such instruments to be telegraphed, cabled, telexed or sent in writing before the meeting or adjourned meeting to the corporation or any agent of the Corporation for the purpose of receiving such particulars and providing that instruments appointing a proxyholder so lodged may be voted upon as though the instruments themselves were produced at the meeting or adjourned meeting and votes given in accordance with such regulations shall be valid and shall be counted. The chairman of any meeting of shareholders may, subject to any regulations made as aforesaid, in his discretion accept telegraphic, telex, cable or written communication as to the authority of anyone claiming to vote on behalf of and to represent a shareholder notwithstanding that no instrument of proxy conferring such authority has been lodged with the Corporation, and any votes given in accordance with such telegraphic, telex, cable or written communication accepted by the chairman of the meeting shall be valid and shall be counted. 37. Adjournment. The chairman of the meeting may with the consent of the meeting adjourn any meeting of shareholders from time to time to a fixed time and place. If a meeting of shareholders is adjourned less than thirty (30) days, it is not necessary to give notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of thirty (30) days or more, notice of the adjourned meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for an aggregate of more than ninety (90) days, the requirements of subsection 149(1) of the Act relating to mandatory solicitation of proxies do not apply. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. If the original meeting was adjourned for lack of a quorum, at the adjourned meeting the shareholders present in person or their duly appointed proxyholders so present shall form the quorum; if the original meeting was adjourned for any other reason, the quorum requirement for the adjourned meeting shall be the same as that for the original meeting. Any business may be brought before or dealt with at any adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling same. 38. Quorum. One (1) person present and holding or representing by proxy at least one (1) issued and outstanding voting share of the Corporation shall be a quorum for any meeting of shareholders for the choice of a chairman of the meeting and for the adjournment of the meeting; subject to section 36 herein, for all other purposes a quorum for any meeting (unless a different number of shareholders and/or a different number of shares are required to be represented by the Act or by the articles or by any other by-law) shall be persons present being not less than three (3) in number and holding or representing by proxy at least ten percent (10%) of the shares entitled to be voted at such meeting. If a quorum is present at the opening of a meeting of the shareholders, the shareholders present may proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting. Where the Corporation has only one shareholder or only one holder of any class or series of shares, the shareholder present in person or by proxy constitutes a meeting. 39. Resolution in Lieu of Meeting. Except where a written statement is submitted by a director under subsection 110(2) of the Act or by an auditor under subsection 168(5) of the Act, a resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders. A copy of every such resolution shall be kept with the minutes of the meetings of shareholders. SHARES 40. Certificates. Share certificates (and the form of stock transfer power on the reverse side thereof) shall (subject to compliance with section 49 of the Act) be in such form and be signed by such director(s) or officer (s) as the board of directors may from time to time by resolution determine. 41. Registrar and Transfer Agent. The board of directors may from time to time by resolution appoint or remove one or more registrars and/or branch registrars (which may but need not be the same person) to keep the register of security holders and/or one or more transfer agents and/or branch transfer agents (which may but need not be the same person) to keep the register of transfer, and (subject to section 50 of the Act) may provide for the registration of issues and the registration of transfers of the securities of the Corporation in one or more places and such registrars and/or branch registrars and/or transfer agents and/or branch transfer agents shall keep all necessary books and registers of the Corporation for the registration of the issuance and the registration of transfers of the securities of the Corporation for which they are so appointed. All certificates issued after any such appointment representing securities issued by the Corporation shall be countersigned by or on behalf of one of the said registrars and/or branch registrars and/or transfer agents and/or branch transfer agents, as the case may be. 42. Surrender of Share Certificates. No transfer of a share issued by the Corporation shall be recorded or registered unless or until the certificate representing the share to be transferred has been surrendered and cancelled or, if no certificate has been issued by the Corporation in respect of such share, unless or until a duly executed share transfer power in respect thereof has been presented for registration. 43. Defaced, Destroyed, Stolen or Lost Certificates. If the defacement, destruction or apparent destruction, theft, or other wrongful taking or loss of a share certificate is reported by the owner to the Corporation or to a registrar, branch registrar, transfer agent or branch transfer agent of the Corporation (hereinafter, in this paragraph, called the "Corporation's transfer agent") and such owner gives to the Corporation or the Corporation's transfer agent a written statement verified by oath or statutory declaration as to the defacement, destruction or apparent destruction, theft, or other wrongful taking or loss and the circumstances concerning the same, a request for the issuance of a new certificate to replace the one so defaced, destroyed, wrongfully taken or lost and a bond of a surety company (or other security approved by the board of directors) in such form as is approved by the board of directors or by the chairman of the board, the president, a vice-president, the secretary or the treasurer of the Corporation, indemnifying the Corporation (and the Corporation's transfer agent, if any), against all loss, damage or expense, which the Corporation and/or the Corporation's transfer agent may suffer or be liable for by reason of the issuance of a new certificate to such shareholder, a new certificate may be issued in replacement of the one defaced, destroyed or apparently destroyed, stolen or otherwise wrongfully taken or lost, if such issuance is ordered and authorized by any one of the chairman of the board, the president, a vice- president, the secretary or the treasurer of the Corporation or by resolution of the board of directors. DIVIDENDS 44. Subject to the relevant provisions of the Act, the board of directors may from time to time by resolution declare and the Corporation may pay dividends on its issued shares, subject to the relevant provisions, if any, of the articles. NOTICE 45. Shares Registered in More Than One Name. All notices or other documents required to be sent to a shareholder by the Act, the regulations under the Act, the articles or the by-laws of the Corporation shall, with respect to any shares in the capital of the Corporation registered in more than one name, be given to whichever of such persons is named first in the records of the Corporation and any notice or other document so given shall be sufficient notice or delivery of such document to all the holders of such shares. 46. Persons Becoming Entitled by Operation of Law. Every person who by operation of law, transfer or by any other means whatsoever shall become entitled to any shares in the capital of the Corporation shall be bound by every notice or other document in respect of such shares which prior to his name and address being entered on the records of the Corporation shall have been duly given to the person or persons from whom he derives his title to such shares. 47. Deceased Shareholder. Any notice or other document delivered or sent by post or left at the address of any shareholder as the same appears in the records of the Corporation shall, notwithstanding that such shareholder be then deceased and whether or not the Corporation has notice of his decease, be deemed to have been duly served in respect of the shares held by such shareholder (whether held solely or with other persons) until some other person be entered in his stead in the records of the Corporation as the holder or one of the holders thereof and such service shall for all purposes be deemed a sufficient service of such notice or other document on his heirs, executors or administrators and all persons, if any, interested with him in such shares. 48. Signatures to Notices. The signature of any director or officer of the Corporation to any notice may be written, stamped, typewritten or printed or partly written, stamped, typewritten or printed. 49. Computation of Time. Where a given number of days' notice or notice extending over any period is required to be given under any provisions of the articles or by-laws of the Corporation, the day of service or posting of the notice shall, unless it is otherwise provided, be counted in such number of days or other period and such notice shall be deemed to have been given or sent on the day of service or posting. 50. Proof of Service. A certificate of any officer of the Corporation in office at the time of the making of the certificate or of a transfer officer of any transfer agent or branch transfer agent of shares of any class of the Corporation as to facts in relation to the mailing or delivery or service of any notice or other documents to any shareholder, director, officer or auditor or publication of any notice or other document shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation, as the case may be. CHEQUES, DRAFTS, NOTES, ETC. 51. All cheques, drafts or orders for the payment of money and all notes, acceptances and bills of exchange shall be signed by such officer or officers or other person or persons, whether or not officers of the Corporation, and in such manner as the board of directors may from time to time designate by resolution. CUSTODY OF SECURITIES 52. All securities, including warrants, owned by the Corporation shall be lodged, in the name of the Corporation, with a chartered bank or a trust company or in a safety deposit box or, if so authorized by resolution of the board of directors, with such other depositaries or in such other manner as may be determined from time to time by the board of directors. All securities, including warrants, belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation, and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship and shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected. EXECUTION OF CONTRACTS, ETC. 53. Contracts, documents or instruments in writing requiring the signature of the Corporation may be signed by two (2) persons, one of whom holds the office of chairman of the board, president, managing director, vice-president or director and the other of whom holds one of the said offices or the office of secretary, treasurer, assistant secretary or assistant treasurer or any other office created by by-law or by resolution of the board. All contracts, documents or instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The board of directors is authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the Corporation either to sign contracts, documents or instruments in writing generally or to sign specific contracts, documents or instruments in writing. Where the Corporation has only one director and officer being the same person, that person may sign all such contracts, documents or other written instruments. The corporate seal, if any, may, when required, be affixed to contracts, documents or instruments in writing signed as aforesaid or by an officer or officers, person or persons appointed as aforesaid by resolution of the board of directors. The term "contracts, documents or instruments in writing" as used in this by-law shall include deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property, real or personal, immoveable or moveable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, warrants, bonds, debentures or other securities and all paper writings. In particular, without limiting the generality of the foregoing, two (2) persons, one of whom holds the office of chairman of the board, president, managing director, vice-president or director and the other of whom holds one of the said offices or the office of secretary, treasurer, assistant secretary or assistant treasurer or any other office created by by-law or by resolution of the board are hereby authorized to sell, assign, transfer, exchange, convert or convey all shares, bonds, debentures, rights, warrants or other securities owned by or registered in the name of the Corporation and to sign and execute, under the seal of the Corporation or otherwise, all assignments, transfers, conveyances, powers of attorney and other instruments that may be necessary for the purpose of selling, assigning, transferring, exchanging, converting or conveying or enforcing or exercising any voting rights in respect of any such shares, bonds, debentures, rights, warrants or other securities. Where the Corporation has only one director and officer, being the same person, that person may perform the functions and exercise the powers herein contemplated. The signature or signatures of any officer or director of the Corporation and/or of any other officer or officers, person or persons appointed as aforesaid by resolution of the board of directors may, if specifically authorized by resolution of the directors, be printed, engraved, lithographed or otherwise mechanically reproduced upon all contracts, documents or instruments in writing or, subject to section 49 of the Act, bonds, debentures or other securities of the Corporation executed or issued by or on behalf of the Corporation and all contracts, documents or instruments in writing or bonds, debentures or other securities of the corporation on which the signatures of any of the foregoing officers, directors or persons shall be so reproduced, by authorization by resolution of the board of directors, shall, subject to section 49 of the Act, be deemed to have been duly signed by such officers, shall be as valid to all intents and purposes as if they had been signed manually and notwithstanding that the officers, directors or persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of the delivery or issue of such contracts, documents or instruments in writing or bonds, debentures or other securities of the Corporation. DECLARATIONS 54. The chairman of the board, if appointed, the president, the vice- presidents, secretary and/or treasurer, the assistant secretaries and/or assistant treasurers, comptroller, accountant, chief clerk, or any one of them, is authorized and empowered to appear and make answer for the Corporation to all writs, orders and interrogatories upon articulated facts issued out of any court and to declare for and on behalf of the corporation any answer to writs of attachment by way of garnishment in which the Corporation is garnishee, and to make all affidavits and sworn declarations in connection therewith or in connection with any or all judicial proceedings to which the Corporation is a party and to make demands of abandonment or petitions for winding up or bankruptcy orders upon any debtor of the Corporation and to attend and vote at all meetings of creditors of any of the Corporation's debtors and grant proxies in connection therewith. FISCAL YEAR 55. The fiscal period of the Corporation shall terminate on such day in each year as the board of directors may from time to time by resolution determine. CERTIFICATE The undersigned, Andrew M. Archibald, Chief Financial Officer, Secretary, and Vice President, Administration of INTERTAPE POLYMER GROUP INC. - LE GROUPE INTERTAPE POLYMER INC. (the "Corporation"), hereby certifies that the foregoing document is a true and complete copy of GENERAL BY-LAW 2003-1 of the Corporation, as (i) restated after amendment by the board of directors on October 7, 1991, the amendment having been confirmed by the shareholders on October 30, 1991, and (ii) restated after amendment by the board of directors on April 24, 2003, the amendment having been confirmed by the shareholders on June 11, 2003. The undersigned further certifies that the said by-law has not been further amended as of the date hereof. DATED this 11th day of June, 2003. LOGO Andrew M. Archibald Chief Financial Officer, Secretary, Vice President, Administration EXHIBIT C SUMMARY OF THE PRINCIPAL TERMS OF THE 2003 RIGHTS AGREEMENT This summary is qualified in its entirety by reference to the text of the 2003 Rights Agreement, a copy of which is attached to this Circular as Exhibit "D". Capitalized terms used in this summary without express definition have the meanings ascribed thereto in the 2003 Rights Agreement. Issue of Rights The Corporation issued one right (a "Right") in respect of each common share outstanding at the close of business on September 1, 1993 (the "Record Time"). The Corporation will issue Rights on the same basis for each common share issued after the Record Time but prior to the earlier of the Separation Time and the Expiration Time (both defined below). Rights Certificates and Transferability Before the Separation Time, the Right will be evidenced by certificates for the common shares which are not transferable separate from the common shares. From and after the Separation Time, the Rights will be evidenced by separate Rights Certificates which will be transferable separate from and independent of the common shares. Exercise of Rights Rights are not exercisable before the Separation Time. After the Separation Time and before the Expiration Time, each Right entitles the holder to acquire one common share for the Exercise Price of $100 (subject to certain anti-dilution adjustments). This Exercise Price is a price in excess of the estimated maximum value of the common shares during the term of the Rights Plan as determined by the Board of Directors. Upon the occurrence of a Flip-In Event (defined below) prior to the Expiration Time (defined below), each Right (other than any Right held by an "Acquiring Person" (defined below), which will become null and void as a result of such Flip-In Event) may be exercised to purchase that number of common shares which have an aggregate Market Price equal to twice the Exercise Price of the Rights for a price equal to the Exercise Price. Effectively, this means a shareholder of the Corporation (other than the Acquiring Person) can acquire additional common shares from treasury at half their Market Price. Definition of "Acquiring Person" Subject to certain exceptions, an Acquiring Person is a person who is the Beneficial Owner (defined below) of 20% or more of the outstanding common shares. Definition of "Beneficial Ownership" A person is a Beneficial Owner if such person or its affiliates or associates or any other person acting jointly or in concert: (a) owns the securities in law or equity; and (b) has the right to acquire (immediately or within 60 days) the securities upon the exercise of any convertible securities or pursuant to any agreement, arrangement or understanding. However, a person is not a Beneficial Owner under the Rights Plan where: (a) the securities have been deposited or tendered pursuant to a take- over bid, unless those securities have been taken up or paid for; (b) by reason of the holders of such securities having agreed to deposit or tender such securities to a take-over bid pursuant to a Permitted Lock-Up Agreement; (c) such person (including a fund manager, trust company, pension fund administrator, trustee or non-discretionary client accounts of registered brokers or dealers) is engaged in the management of investment funds for others, as long as that person: (i) holds those common shares in the ordinary course of its business for the account of others; (ii) holds not more than 30% of the common shares; and (iii) is not making a take-over bid or acting jointly or in concert with a person who is making a take-over bid; or (d) such person is a registered holder of securities as a result of carrying on the business of or acting as a nominee of a securities depository. Definition of "Separation Time" Separation Time occurs on the tenth business day after the earlier of: (a) the first date of public announcement that a Flip-In Event has occurred; (b) the date of the commencement or announcement of the intent of a person to commence a take-over bid (other than a Permitted Bid or Competing Bid) or such later date as determined by the board; and (c) the date on which a Permitted Bid or Competing Bid ceases to qualify as such or such later date as determined by the board. Definition of "Expiration Time" Expiration Time occurs on the date being the earlier of: (a) the time at which the right to exercise Rights is terminated under the terms of the Rights Plan; and (b) the date immediately after the Corporation's annual meeting of shareholders to be held in 2006. Definition of a "Flip-In Event" A Flip-In Event occurs when a person becomes an Acquiring Person. Upon the occurrence of a Flip-In Event, any Rights that are beneficially owned by an Acquiring Person or any of its related parties to whom the Acquiring Person has transferred its Rights will become null and void as a result of which the Acquiring Person's investment in the Corporation will be greatly diluted if a substantial portion of the Rights are exercised after a Flip-In Event occurs. DEFINITION OF "PERMITTED BID" A Permitted Bid is a take-over bid made by a person (the "Offeror") pursuant to a take-over bid circular that complies with the following conditions: (a) the bid is made to all registered holders of common shares (other than common shares held by the Offeror) on identical terms and conditions; (b) the Offeror agrees that no common shares will be taken up or paid for under the bid for 60 days following the commencement of the bid and that no common shares will be taken up or paid for unless more than 50% of the outstanding common shares held by shareholders other than the Offeror and certain related parties have been deposited pursuant to the bid and not withdrawn; (c) the Offeror agrees that the common shares may be deposited to and withdrawn from the take-over bid at any time before its expiry; and (d) if, on the date specified for take-up and payment, the condition in paragraph (b) above is satisfied, the bid shall remain open for an additional period of at least ten business days to permit the remaining shareholders to tender their common shares. Definition of "Competing Bid" A Competing Bid is a take-over bid that: (a) is made while another Permitted Bid is in existence; and (b) satisfies all the requirements of a Permitted Bid except that the common shares under a Competing Bid may be taken up on the later of 35 days after the Competing Bid was made and 60 days after the earliest date on which any other Permitted Bid or Competing Bid that was then in existence was made. Definition of "Permitted Lock-Up Agreement" A Permitted Lock-Up Agreement is an agreement between a person making a take-over bid and one or more shareholders (each, a "Locked-up Person") under which the Locked-up Persons agree to deposit or tender their common shares to such take-over bid and which provides: (a) (i) no limit on the right of the Locked-up Persons to withdraw its shares in order to deposit them to a Competing Bid (or terminate the agreement in order to support another transaction) where the price or value represented under the Competing Bid (or other transaction) exceeds the price or value represented under the original take-over bid; or (ii) limits such right to withdraw its shares in order to deposit them to a Competing Bid (or terminate the agreement in order to support another transaction) where the price or value represented under the Competing Bid (or other transaction) exceeds the price or value represented under the original take-over bid by as much as or more than an amount specified under the original take-over bid, and the specified amount is not more than 7% of the price or value represented under the original take-over bid, and the Competing Bid (or other transaction) is made for the same number of common shares as the original take-over bid; and (b) for no "break-up" fee or "top-up" fee in excess of the greater of: (i) 2.5% of the price or value payable under the original take-over bid to Locked-up Persons; and (ii) 50% of the amount by which the price or value payable to Locked-up Persons under a Competing Bid (or other transaction) exceeds the price or value payable to Locked-up Persons under the original take-over bid, shall be payable by such Locked-up Persons in the event that the original take-over bid is not successfully completed or if any Locked-up Person fails to tender their common shares under the original take-over bid. Redemption of Rights The Rights may be redeemed by the board at its option with the prior approval of the shareholders at any time before a Flip-In Event occurs at a redemption price of $0.00001 per Right. In addition, the Rights will be redeemed automatically in the event of a successful Permitted Bid, Competing Bid or a bid for which the board has waived the operation of the Rights Plan. Waiver Before a Flip-In Event occurs, the board may waive the application of the Flip-In provisions of the Rights Plan to any prospective Flip-In Event which would occur by reason of a take-over bid made by a take-over bid circular to all registered holders of common shares. However, if the board waives the Rights Plan with respect to a particular bid, it will be deemed to have waived the Rights Plan with respect to any other take-over bid made by take- over bid circular to all registered holders of common shares before the expiry of that first bid. Other waivers of the "Flip-In" provisions of the Rights Plan will require prior approval of the shareholders of the Corporation. The board may also waive the "Flip-In" provisions of the Rights Plan in respect of any Flip-In Event provided that the board has determined that the Acquiring Person became an Acquiring Person through inadvertence and has reduced its ownership to such a level that it is no longer an Acquiring Person. Term of the Rights Plan Unless otherwise terminated, the Rights Plan will expire on the date immediately after the Corporation's annual meeting of shareholders to be held in 2006. Amending Power Except for minor amendments to correct typographical errors and amendments to maintain the validity of the Rights Plan as a result of a change of law, shareholder or rights holder approval is required for amendments to the Rights Plan. RIGHTS AGENT CIBC Mellon Trust Company. RIGHTSHOLDER NOT A SHAREHOLDER Until a Right is exercised, the holders thereof as such, will have no rights as a shareholder of the Corporation. EXHIBIT D INTERTAPE POLYMER GROUP INC. and CIBC MELLON TRUST COMPANY as Rights Agent ______________________________________________________________________________ AMENDED AND RESTATED SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT June 11, 2003 ______________________________________________________________________________ STIKEMAN ELLIOTT LLP TABLE OF CONTENTS ARTICLE 1 INTERPRETATION 1.1 Certain Definitions 1 1.2 Currency 8 1.3 Headings 8 1.4 Number and Gender 9 1.5 Acting Jointly or in Concert 9 1.6 Statutory References 9 ARTICLE 2 THE RIGHTS 2.1 Legend on Common Share Certificates9 2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights 9 2.3 Adjustments to Exercise Price; Number of Rights 11 2.4 Date on Which Exercise is Effective 14 2.5 Execution, Authentication, Delivery and Dating of Rights Certificates 15 2.6 Registration, Registration of Transfer and Exchange 15 2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates 15 2.8 Persons Deemed Owners 16 2.9 Delivery and Cancellation of Rights Certificates 16 2.10 Agreement of Rights Holders 16 2.11 Rights Certificate Holder not Deemed a Shareholder 17 ARTICLE 3 ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 Flip-in Event 17 ARTICLE 4 THE RIGHTS AGENT 4.1 General 18 4.2 Merger or Amalgamation or Change of Name of Rights Agent 18 4.3 Duties of Rights Agent 19 4.4 Change of Rights Agent 19 ARTICLE 5 MISCELLANEOUS 5.1 Redemption and Waiver 20 5.2 Expiration 21 5.3 Issuance of New Rights Certificates 21 5.4 Supplements and Amendments 22 5.5 Fractional Rights and Fractional Shares 23 5.6 Rights of Action 23 5.7 Notice of Proposed Actions 23 5.8 Notices 23 5.9 Successors 24 5.10 Benefits of this Agreement 24 5.11 Governing Law 24 5.12 Severability 24 5.13 Effective Date 24 5.14 Determinations and Actions by the Board of Directors 24 5.15 Rights of Board, Corporation and Offeror 24 5.16 Regulatory Approvals 25 5.17 Declaration as to Non-Canadian and Non-U.S. Holders 25 5.18 Time of the Essence 25 5.19 Execution in Counterparts 25 SCHEDULE SCHEDULE 2.2(3)........................................................26 SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT THIS AMENDED AND RESTATED SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT dated June 11, 2003 between Intertape Polymer Group Inc. (the "Corporation"), a corporation amalgamated under the Canada Business Corporations Act, and CIBC Mellon Trust Company (formerly known as The R-M Trust Company), a trust company incorporated under the laws of Canada, as Rights Agent (the "Rights Agent", which term shall include any successor Rights Agent hereunder). WITNESSES THAT: WHEREAS the Corporation and the Rights Agent entered into a shareholder protection rights plan agreement dated as of August 24, 1993, such shareholder protection rights plan agreement which was subsequently amended and restated on May 21, 1998 (the "Corporation's Shareholder Protection Rights Plan Agreement"); and WHEREAS the shareholders of the Corporation have determined to amend and restate the Corporation's Shareholder Protection Rights Plan Agreement as set out herein (the amended and restated Corporation's Shareholder Protection Rights Plan Agreement being referred to herein as the "Rights Plan"); NOW THEREFORE, in consideration of the foregoing premises and the respective covenants and agreements set forth herein, the parties hereby agree as follows: ARTICLE 1 INTERPRETATION 1.1 Certain Definitions. For purposes of the Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" means, any Person who is the Beneficial Owner of twenty percent (20%) or more of the outstanding Voting Shares of the Corporation; provided, however, that the term "Acquiring Person" shall not include: (i) the Corporation or any Subsidiary of the Corporation; (ii) any Person who becomes the Beneficial Owner of twenty percent (20%) or more of the outstanding Voting Shares of the Corporation as a result of one or any combination of: (A) Corporate Acquisitions, (B) Permitted Bid Acquisitions, (C) Corporate Distributions, (D) Exempt Acquisitions, or (E) Convertible Security Acquisitions; provided, however, that if a Person shall become the Beneficial Owner of twenty percent (20%) or more of the Voting Shares of the Corporation then outstanding by reason of one or more or any combination of the operation of a Corporate Acquisition, Permitted Bid Acquisition, Corporate Distribution, Exempt Acquisition or Convertible Security Acquisition and, after such Corporate Acquisition, Permitted Bid Acquisition, Corporate Distribution, Exempt Acquisition or Convertible Security Acquisition, becomes the Beneficial Owner of an additional one percent (1%) or more of the outstanding Voting Shares of the Corporation other than pursuant to Corporate Acquisitions, Permitted Bid Acquisitions, Corporate Distributions, Exempt Acquisitions or Convertible Security Acquisitions, then as of the date of such acquisition, such Person shall become an Acquiring Person; (iii) for a period of ten (10) days after the Disqualification Date (as hereinafter defined), any Person who becomes the Beneficial Owner of twenty percent (20%) or more of the outstanding Voting Shares of the Corporation as a result of such Person becoming disqualified from relying on Clause 1.1(e)(3) hereof solely because such Person makes or proposes to make a Take-over Bid in respect of securities of the Corporation alone or by acting jointly or in concert with any other Person (the first date of public announcement (which, for the purposes of this definition, shall include, without limitation, a report filed pursuant to section 101 of the Securities Act (Ontario)) by such Person or the Corporation of a current intent to commence such a Take-over Bid being herein referred to as the "Disqualification Date"); and (iv) an underwriter or member of a banking or selling group that acquires Voting Shares of the Corporation from the Corporation in connection with a distribution of securities (including, for greater certainty, by way of private placement of such securities) to the public. (b) "Affiliate" when used to indicate a relationship with a specified Person, means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. (c) "Agreement" means this agreement as amended, modified or supplemented from time to time. (d) "Associate" when used to indicate a relationship with a specified Person, means any relative of such specified Person who has the same home as such specified Person, or any Person to whom such specified Person is married or with whom such specified Person is living in a conjugal relationship outside marriage, or any relative of such spouse or other Person who has the same home as such specified Person. (e) A Person shall be deemed the "Beneficial Owner", and to have "Beneficial Ownership" of, and to "Beneficially Own": (i) any securities of which such Person or any Affiliate or Associate of such Person is the owner in law or equity; (ii) any securities as to which such Person or any of such Person's Affiliates or Associates has the right to acquire (A) upon the exercise of any Convertible Securities, or (B) pursuant to any agreement, arrangement or understanding, in each case if such right is exercisable immediately or within a period of 60 days thereafter whether or not on condition or the happening of any contingency (other than customary agreements with and between underwriters and banking group or selling group members with respect to a distribution of securities or pursuant to a pledge of securities in the ordinary course of business); and (iii) any securities that are Beneficially Owned within the meaning of Clause 1.1(e)(i) or (ii) hereof by any other Person with whom such Person is acting jointly or in concert; provided, however, that a Person shall not be deemed the "Beneficial Owner", or to have "Beneficial Ownership" of, or to "Beneficially Own", any security as a result of the existence of any one or more of the following circumstances: (1) such security has been deposited or tendered, pursuant to a Take- over Bid made by such Person or made by any Affiliate or Associate of such Person or made by any other Person acting jointly or in concert with such Person, unless such deposited or tendered security has been taken up or paid for, whichever shall first occur; (2) by reason of the holder of such security having agreed to deposit or tender such security to a Take-over Bid made by such Person or any of such Person's Affiliates or Associates or any other Person referred to in Clause (iii) of this definition pursuant to a Permitted Lock-Up Agreement, but only until such time as the securities are taken up or paid for under the Take-over Bid; (3) such Person or any Affiliate or Associate of such Person or any other Person acting jointly or in concert with such Person, holds such security; provided that (i) the ordinary business of any such Person (the "Fund Manager") includes the management of investment funds for others (which others may include or be limited to one or more employee benefit plans or pension plans) and/or includes the acquisition or holding of securities for a non-discretionary account of a Client (as defined below) by a dealer or broker registered under applicable securities laws to the extent required, and such security is held by the Fund Manager in the ordinary course of such business in the performance of such Fund Manager's duties for the account of any other Person (a "Client"), (ii) such Person (the "Trust Company") is licensed to carry on the business of a trust company under applicable law and, as such, acts as trustee or administrator or in a similar capacity in relation to the estates of deceased or incompetent Persons or in relation to other accounts and holds such security in the ordinary course of such duties for the estate of any such deceased or incompetent Person (each an "Estate Account") or for such other accounts (each an "Other Account"), (iii) the Person (the "Statutory Body") is an independent Person established by statute for purposes that include, and the ordinary business or activity of such person includes, the management of investment funds for employee benefit plans, pension plans, insurance plans of various public bodies and the Statutory Body holds such security for the purposes of its activities as such, (iv) the ordinary business of any such Person includes acting as an agent of the Crown in the management of public assets (the "Crown Agent"), or (v) the Person, any of such Person's Affiliates or Associates or any other Person acting jointly or in concert with such Person holds such security, provided that the Person is the administrator or the trustee of one or more pension funds or plans (each a "Pension Fund") registered under the laws of Canada or any province thereof or the United States or any state thereof (the "Independent Person"), or is a Pension Fund and holds such securities for the purposes of its activities as an Independent Person or as a Pension Fund, and further provided that such Person does not hold more than thirty percent (30%) of the Voting Shares of the Corporation; provided, however, that in any of the foregoing cases no one of the Fund Manager, the Trust Company, the Statutory Body, the Crown Agent, the Independent Person or the Pension Fund makes or announces a current intention to make a Take-over Bid in respect of securities of the Corporation alone or by acting jointly or in concert with any other Person (other than pursuant to a distribution by the Corporation or by means of ordinary market transactions (including prearranged trades entered in the ordinary course of business of such Person) executed through the facilities of a stock exchange or organized over-the-counter market); (4) such Person is a Client of the same Fund Manager as another Person on whose account the Fund Manager holds such security, or such Person is an Estate Account or an Other Account of the same Trust Company as another Person on whose account the Trust Company holds such security, or such Person is a Pension Fund with the same Independent Person as another Pension Fund; (5) such Person is a Client of a Fund Manager and such security is owned at law or in equity by the Fund Manager, or such Person is an Estate Account or an Other Account of a Trust Company and such security is owned at law or in equity by the Trust Company, or such Person is a Pension Fund and such security is owned at law or in equity by the Independent Person; or (6) such Person is a registered holder of securities as a result of carrying on the business of, or acting as a nominee of, a securities depository. For purposes of this Agreement, the percentage of Voting Shares Beneficially Owned by any Person, shall be and be deemed to be the product of one hundred (100) and the number of which the numerator is the number of votes for the election of all directors generally attaching to the Voting Shares Beneficially Owned by such Person and the denominator of which is the number of votes for the election of all directors generally attaching to all outstanding Voting Shares. Where any Person is deemed to Beneficially Own unissued Voting Shares, such Voting Shares shall be deemed to be issued and outstanding for the purpose of calculating the percentage of Voting Shares Beneficially Owned by such Person. (f) "Board of Directors" means, at any time, the duly constituted board of directors of the Corporation. (g) "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in Montreal are authorized or obligated by law to close. (h) "Canadian Dollar Equivalent" of any amount which is expressed in United States dollars shall mean on any date the Canadian dollar equivalent of such amount determined by multiplying such amount by the U.S. - Canadian Exchange Rate in effect on such date. (i) "CBCA" means the Canada Business Corporations Act R.S.C. 1985, c. C-44, and the regulations thereunder, and any comparable or successor laws or regulations thereto. (j) "close of business" on any given date means the time on such date (or, if such date is not a Business Day, the time on the next succeeding Business Day) at which the office of the transfer agent for the Common Shares in the City of Montreal (or, after the Separation Time, the office of the Rights Agent in the City of Montreal) is closed to the public. (k) "Common Shares", when used with reference to the Corporation, means the common shares without par value in the capital of the Corporation. (l) "Competing Bid" means a Take-over Bid that: (i) is made while another Permitted Bid is in existence, and (ii) satisfies all the components of the definition of a Permitted Bid, except that the requirements set out in Clause (ii) of the definition of a Permitted Bid shall be satisfied if the Take-over Bid shall contain, and the take up and payment for securities tendered or deposited thereunder shall be subject to, an irrevocable and unqualified condition that no Voting Shares shall be taken up or paid for pursuant to the Competing Bid prior to the close of business on the date that is no earlier than the date which is the later of thirty-five (35) days after the date the Competing Bid is made or sixty (60) days after the earliest date on which any other Permitted Bid or Competing Bid that is then in existence was made and only if at that date, more than fifty percent (50%) of the then outstanding Voting Shares held by Independent Shareholders have been deposited or tendered to the Competing Bid and not withdrawn. (m) "controlled": a corporation is "controlled" by another Person if: (i) securities entitled to vote in the election of directors carrying more than fifty percent (50%) of the votes for the election of directors are held, other than by way of security only, by or for the benefit of the other Person; and (ii) the votes carried by such securities are entitled, if exercised, to elect a majority of the board of directors of such corporation; and "controls", "controlling" and "under common control with" shall be interpreted accordingly. (n) "Convertible Security" means at any time: (i) any right (regardless of whether such right constitutes a security) to acquire Voting Shares from the Corporation; and (ii) any securities issued by the Corporation from time to time (other than the Rights) carrying any exercise, conversion or exchange right; in each case pursuant to which the holder thereof may acquire Voting Shares or other securities which are convertible into or exercisable or exchangeable for Voting Shares. (o) "Convertible Security Acquisition" means the acquisition of Voting Shares upon the exercise, conversion or exchange of Convertible Securities received by a Person pursuant to a Permitted Bid Acquisition, Exempt Acquisition or a Corporate Distribution. (p) "Corporate Acquisition" means an acquisition by the Corporation or a Subsidiary of the Corporation or the redemption by the Corporation of Voting Shares of the Corporation which by reducing the number of Voting Shares of the Corporation outstanding increases the proportionate number of Voting Shares Beneficially Owned by any Person. (q) "Corporate Distribution" means an acquisition as a result of: (i) a stock dividend or a stock split or other event pursuant to which a Person receives or acquires Voting Shares on the same pro rata basis as all other holders of Voting Shares of the same class; or (ii) any other event pursuant to which all holders of Voting Shares of the Corporation are entitled to receive Voting Shares or Convertible Securities on a pro rata basis, including, without limiting the generality of the foregoing, pursuant to the receipt or exercise of rights issued by the Corporation and distributed to all the holders of a class of Voting Shares to subscribe for or purchase Voting Shares or Convertible Securities of the Corporation, provided that such rights are acquired directly from the Corporation and not from any other Person and provided further that the Person in question does not thereby acquire a greater percentage of Voting Shares, or Convertible Securities representing the right to acquire Voting Shares of such class, than the percentage of Voting Shares of the class Beneficially Owned immediately prior to such acquisition. (r) "Disqualification Date" has the meaning ascribed thereto in Section 1.1(a)(iii) hereof. (s) "Effective Date" has the meaning ascribed thereto in Section 5.13 hereof. (t) "Election to Exercise" has the meaning ascribed thereto in Section 2.2(4) hereof. (u) "Exempt Acquisition" means an acquisition: (i) in respect of which the Board of Directors has waived the application of Section 3.1 hereof pursuant to the provisions of Section 5.1(2), 5.1(3) or 5.1(4) hereof; (ii) which was made on or prior to the Record Time; (iii) which was made pursuant to a dividend reinvestment plan of the Corporation or other similar share purchase plan made available to the holders of shares of the Corporation generally; (iv) pursuant to a distribution to the public by the Corporation of Voting Shares or Convertible Securities made pursuant to a prospectus provided that the Person in question does not thereby acquire a greater class percentage of Voting Shares, or Convertible Securities representing the right to acquire Voting Shares of such class, than the percentage of Voting Shares of the class Beneficially Owned immediately prior to such acquisition; or (v) pursuant to an issuance and sale by the Corporation of Voting Shares or Convertible Securities by way of a private placement by the Corporation, provided that (x) all necessary stock exchange approvals for such private placement have been obtained and such private placement complies with the terms and conditions of such approvals, and (y) the purchaser does not become the Beneficial Owner of more than 25% of the Voting Shares outstanding immediately prior to the private placement (and in making this determination, the securities to be issued to such purchaser on the private placement shall be deemed to be held by such purchaser but shall not be included in the aggregate number of outstanding Voting Shares immediately prior to the private placement). (v) "Exercise Price" means, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right. Until adjustment thereof in accordance with the terms hereof, the Exercise Price shall be $100. (w) "Expiration Time" means the earlier of: (i) the Termination Time, and (ii) the close of business on the date immediately following the date of the Corporation's annual meeting of shareholders to be held in 2006. (x) "Flip-in Event" means a transaction in or pursuant to which any Person becomes an Acquiring Person. (y) "Independent Shareholders" means holders of Voting Shares of the Corporation, but shall not include (i) any Acquiring Person or any Offeror, or any Affiliate or Associate of such Acquiring Person or such Offeror, or any Person acting jointly or in concert with such Acquiring Person or such Offeror, or (ii) any employee benefit plan, stock purchase plan, deferred profit sharing plan or any similar plan or trust for the benefit of employees of the Corporation or a Subsidiary of the Corporation, unless the beneficiaries of any such plan or trust direct the manner in which the Voting Shares are to be voted or direct whether the Voting Shares are to be tendered to a Take-over Bid; and shall include any Person referred to in Clause 1.1(e)(3) hereof (other than any Person who pursuant to Clause 1.1(e)(3) is deemed to Beneficially Own the Voting Shares). (z) "Market Price" per share of any securities on any date of determination means the average of the daily closing prices per share of such securities (determined as described below) on each of the twenty (20) consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if an event of a type analogous to any of the events described in Section 2.3 hereof shall have caused the closing prices used to determine the Market Price on any Trading Days not to be fully comparable with the closing price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day, each such closing price so used shall be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in order to make it fully comparable with the closing price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day. The closing price per share of any securities on any date shall be (i) the closing board lot sale price or, if such price is not available, the average of the closing bid and asked prices, for each share as reported by the stock exchange on which the greater number of shares has been traded on such day or if the shares are listed only on one (1) stock exchange at that time, that stock exchange, or (ii) if for any reason none of such prices is available on such day or the securities are not listed or admitted to trading on any stock exchange, the closing board lot sale price or, if such price is not available, the average of the closing bid and asked prices, for each share as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the securities exchange in Canada or the United States on which the securities are primarily traded, or (iii) if not so listed, the last quoted price, or if not so quoted, the average of the high bid and low asked prices for each share of such securities in the over- the-counter market, or (iv) if on any such date the securities are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities selected in good faith by the Board of Directors; provided, however, that if on any such date the securities are not traded in the over-the-counter market, the closing price per share of such securities on such date shall mean the fair value per share of such securities on such date as determined in good faith by a nationally or internationally recognized investment dealer or investment banker. The Market Price shall be expressed in Canadian dollars and if initially determined in respect of any day forming part of the twenty (20) consecutive trading day period in United States dollars, such amount shall be translated into Canadian dollars at the Canadian Dollar Equivalent thereof. (aa) "Offer to Acquire" shall include: (i) an offer to purchase, a public announcement of an intention to make an offer to purchase, or a solicitation of an offer to sell; and (ii) an acceptance of an offer to sell, whether or not such offer to sell has been solicited; or any combination thereof, and the Person accepting an offer to sell shall be deemed to be making an Offer to Acquire to the Person that made the offer to sell. (bb) "Offeror" means a Person who has announced a current intention to make, or who makes and has outstanding, a Take-over Bid. (cc) "Offeror's Securities" means Voting Shares of the Corporation Beneficially Owned by an Offeror, any Affiliate or Associate of such Offeror or any Person acting jointly or in concert with the Offeror. (dd) "Permitted Bid" means a Take-over Bid that is made by means of a Take-over Bid circular and which also complies with the following additional provisions: (i) the Take-over Bid shall be made to all registered holders of Voting Shares (other than the Voting Shares held by the Offeror); (ii) the Take-over Bid shall contain, and the take up and payment for securities tendered or deposited thereunder shall be subject to, an irrevocable and unqualified condition that no Voting Shares shall be taken up or paid for pursuant to the Take-over Bid prior to the close of business on the date which is not less than sixty (60) days following the date of the Take-over Bid and that no Voting Shares shall be taken up or paid for pursuant to the Take-over Bid unless, at such date, more than fifty percent (50%) of the then outstanding Voting Shares held by Independent Shareholders have been deposited to the Take-over Bid and not withdrawn; (iii) the Take-over Bid shall contain an irrevocable and unqualified provision that, unless the Take-over Bid is withdrawn, Voting Shares of the Corporation may be deposited pursuant to such Take-over Bid at any time during the period of time described in Clause (ii) of this Section 1.1(dd) and that any Voting Shares deposited pursuant to the Take-over Bid may be withdrawn at any time until taken up and paid for; and (iv) the Take-over Bid shall contain an irrevocable and unqualified provision that should the condition referred to in Clause (ii) of this Section 1.1(dd) be met: (A) the Offeror will make a public announcement of that fact on the date the Take-over Bid would otherwise expire; and (B) the Take-over Bid will be extended for a period of not less than ten (10) Business Days from the date it would otherwise expire. (ee) "Permitted Bid Acquisitions" means share acquisitions made pursuant to a Permitted Bid or a Competing Bid. (ff) "Permitted Lock-Up Agreement" means an agreement between a Person and one or more holders (each a "Locked-up Person") of Voting Shares or Convertible Securities (the terms of which are publicly disclosed and a copy of which is made available to the public (including the Corporation) not later than the date the Lock-up Bid (as defined below) is publicly announced or, if the agreement was entered into after the date of the Lock-up Bid, not later than the date the agreement was entered into), pursuant to which such Locked-up Persons agree to deposit or tender Voting Shares or Convertible Securities to a Take-over Bid (the "Lock-up Bid") made by the Person or any of such Person's Affiliates or Associates or any other Person referred to in Clause (iii) of the definition of Beneficial Owner and where the agreement: (i) (A) permits the Locked-up Person to withdraw Voting Shares or Convertible Securities in order to tender or deposit Voting Shares or Convertible Securities to another Take-over Bid (or terminate the agreement in order to support another transaction) that represents an offering price for each Voting Share or Convertible Security that exceeds, or provides a value for each Voting Share or Convertible Security that is greater than, the offering price or value represented by or proposed to be represented by the Lock-up Bid, provided that the other Take-over Bid or transaction is made for at least the same number of Voting Shares or Convertible Securities as the Lock-up Bid; or (B) permits the Locked-up Person to withdraw Voting Shares or Convertible Securities in order to tender or deposit the Voting Shares or Convertible Securities to another Take-over Bid (or terminate the agreement in order to support another transaction) that represents an offering price for each Voting Share or Convertible Security that exceeds, or provides a value for each Voting Share or Convertible Security that is greater than, the offering price or value represented by or proposed to be represented by, the Lock-up Bid by as much or more than a specified amount (the "Specified Amount") and the Specified Amount is not greater than 7% of the offering price or value that is represented by the Lock-up Bid, provided that the other Take-over Bid or transaction is made for at least the same number of Voting Shares or Convertible Securities as the Lock-up Bid; and (ii) provides for no "break-up" fees, "top-up" fees, penalties, payments, expenses or other amounts that exceed in the aggregate the greater of: (A) the cash equivalent of 2.5% of the price or value payable under the Lock-up Bid to the Locked-up Person, and (B) 50% of the amount by which the price or value payable under another Take-over Bid or another transaction to a Locked-up Person exceeds the price or value of the consideration that such Locked-up Person would have received under the Lock-up Bid, to be payable, directly or indirectly, by such Locked-up Person pursuant to the agreement in the event that the Lock-up Bid is not successfully concluded or if any Locked-up Person fails to tender Voting Shares or Convertible Securities pursuant thereto; and, for greater certainty, the agreement may contain a right of first refusal or require a period of delay to give the Offeror an opportunity to at least match a higher consideration in another Take-over Bid or transaction or contain any other similar limitation on a Locked-up Person's right to withdraw Voting Shares or Convertible Securities from the agreement, so long as any such limitation does not preclude the exercise by the Locked-up Person of the right to withdraw Voting Shares or Convertible Securities in sufficient time to tender to the other Take-over Bid or to support the other transaction. (gg) "Person" means any individual, firm, partnership, limited partnership, limited liability company or partnership, association, trust, trustee, executor, administrator, legal or personal representative, government, governmental body, entity or authority, group, body corporate, corporation, unincorporated organization or association, syndicate, joint venture or any other entity, whether or not having legal personality, and any of the foregoing in any derivative, representative or fiduciary capacity and pronouns have a similar extended meaning. (hh) "Record Time" means the close of business on September 1, 1993. (ii) "Redemption Price" has the meaning ascribed thereto in Section 5.1(1) hereof. (jj) "regular periodic cash dividends" means cash dividends paid at regular intervals in any fiscal year of the Corporation to the extent that such cash dividends do not exceed, in the aggregate, the greatest of: (i) two hundred percent (200%) of the aggregate amount of cash dividends declared payable by the Corporation on its Common Shares in its immediately preceding fiscal year; and (ii) one hundred percent (100%) of the aggregate consolidated net income of the Corporation, before extraordinary items, for its immediately preceding fiscal year. (kk) "Right" means a right issued pursuant to this Agreement. (ll) "Rights Certificate" has the meaning ascribed thereto in Section 2.2(3) hereof. (mm) "Rights Register" has the meaning ascribed thereto in Section 2.6(1) hereof. (nn) "Securities Act (Ontario)" means the Securities Act (Ontario), and the regulations and rules thereunder, and any comparable or successor laws, regulations and rules thereto. (oo) "Separation Time" means the close of business on the tenth (10th) Trading Day after the earlier of (i) the Stock Acquisition Date, (ii) the date of the commencement of, or first public announcement of the intent of any person (other than the Corporation or any Subsidiary of the Corporation) to commence, a Take-over Bid (other than a Permitted Bid or Competing Bid) or such later date as may be determined by the Board of Directors and (iii) the date on which a Permitted Bid or Competing Bid ceases to qualify as such or such later date as may be determined by the Board of Directors provided that, if any Take-over Bid referred to in Clause (ii) of this Section 1.1(oo) or any Permitted Bid or Competing Bid referred to in Clause (iii) of this Section 1.1(oo) expires, is cancelled, terminated or otherwise withdrawn prior to the Separation Time, such Take-over Bid, Permitted Bid or Competing Bid, as the case may be, shall be deemed, for the purposes of this Section 1.1(oo), never to have been made and provided further that if the Board of Directors determines pursuant to Sections 5.1(2), (3) or (4) hereof to waive the application of Section 3.1 hereof to a Flip-in Event, the Separation Time in respect of such Flip-in Event shall be deemed never to have occurred. (pp) "Stock Acquisition Date" means the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to section 101 of the Securities Act (Ontario)) by the Corporation or an Offeror or Acquiring Person of facts indicating that a Person has become an Acquiring Person. (qq) "Subsidiary": a corporation shall be deemed to be a Subsidiary of another corporation if: (i) it is controlled by: (A) that other; (B) that other and one or more corporations each of which is controlled by that other; or (C) two or more corporations each of which is controlled by that other; or (ii) it is a Subsidiary of a corporation that is that other's Subsidiary. (rr) "Take-over Bid" means an Offer to Acquire Voting Shares of the Corporation or securities convertible into or exchangeable for or carrying a right to purchase Voting Shares of the Corporation where the Voting Shares of the Corporation subject to the Offer to Acquire, together with the Voting Shares of the Corporation into which the securities subject to the Offer to Acquire are convertible, exchangeable or exercisable, and the Offeror's Securities, constitute in the aggregate twenty percent (20%) or more of the outstanding Voting Shares of the Corporation at the date of the Offer to Acquire. (ss) "Termination Time" means the time at which the right to exercise Rights shall terminate pursuant to Sections 5.1(1) or (5) hereof. (tt) "Trading Day", when used with respect to any securities, means a day on which the principal Canadian stock exchange or American stock exchange or market on which such securities are listed or admitted to trading is open for the transaction of business or, if the securities are not listed or admitted to trading on any Canadian stock exchange or American stock exchange or market, a Business Day. (uu) "U.S. - Canadian Exchange Rate" shall mean on any date: (i) if on such date the Bank of Canada sets an average noon spot rate of exchange for the conversion of one United States dollar into Canadian dollars, such rate; and (ii) in any other case, the rate for such date for the conversion of one United States dollar into Canadian dollars which is calculated in the manner which shall be determined by the Board of Directors from time to time acting in good faith. (vv) "Voting Shares" means the Common Shares and any other shares of capital stock or voting interests of the Corporation entitled to vote generally in the election of all directors. 1.2 Currency. All sums of money which are referred to in this Agreement are expressed in Canadian dollars, unless otherwise specified. 1.3 Headings. The division of this Agreement into Articles, Sections and Clauses and the insertion of headings, subheadings and a table of contents are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 1.4 Number and Gender. Wherever the context so requires, terms used herein importing the singular number only shall include the plural and vice-versa and words importing only one gender shall include all others. 1.5 Acting Jointly or in Concert. For the purposes of this Agreement, a Person is acting jointly or in concert with every Person who is a party to an agreement, commitment or understanding, whether formal or informal, with the first Person or any Associate or Affiliate of the first Person to acquire or make an Offer to Acquire Voting Shares of the Corporation (other than customary agreements with and between underwriters or banking group members or selling group members with respect to a distribution of securities or to a pledge of securities in the ordinary course of business). 1.6 Statutory References. Unless the context otherwise requires or except as expressly provided herein, any reference herein to a specific part, section, clause or Rule of any statute or regulation shall be deemed to refer to the same as it may be amended, re-enacted or replaced or, if repealed and there shall be no replacement therefor, to the same as it is in effect on the date of this Agreement. ARTICLE 2 THE RIGHTS 2.1 Legend on Common Share Certificates. (1) Certificates issued for Common Shares after the Record Time but prior to the close of business on the earlier of the Separation Time and the Expiration Time shall evidence one Right for each Common Share represented thereby and, commencing as soon as reasonably practicable after the effective date of this Agreement, shall have impressed on, printed on, written on or otherwise affixed to them, a legend in substantially the following form: Until the Separation Time (as defined in the Rights Agreement referred to below), this certificate also evidences and entitles the holder thereof to certain rights described in a Shareholder Protection Rights Plan Agreement, dated August 24, 1993, as amended and restated from time to time (the "Rights Agreement"), between Intertape Polymer Group Inc. and CIBC Mellon Trust Company, a copy of which is on file at the principal executive offices of the Corporation the terms of which are incorporated herein by reference. Under certain circumstances set out in the Rights Agreement, the rights may be redeemed, may expire, may become null and void (if, in certain cases, they are "Beneficially Owned" by an "Acquiring Person") or may be evidenced by separate certificates and no longer evidenced by this certificate. Upon written request, copy of the Rights Agreement will be mailed within five days to the holder of this Certificate. (2) Until the earlier of the Separation Time and the Expiration Time, certificates representing Common Shares that are issued and outstanding at the Record Time shall evidence one Right for each Common Share evidenced thereby notwithstanding the absence of the foregoing legend. Following the Separation Time, Rights will be evidenced by Rights Certificates issued pursuant to Section 2.2 hereof. 2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights. (1) Right to entitle holder to purchase one Common Share prior to adjustment. Subject to adjustment as herein set forth and subject to Section 3.1(1) hereof, each Right will entitle the holder thereof, from and after the Separation Time and prior to the Expiration Time, to purchase, for the Exercise Price as at the Business Day immediately preceding the date of exercise of the Right, one Common Share (which price and number of Common Shares are subject to adjustment as set forth below and are subject to Section 3.1(1) hereof). Notwithstanding any other provision of this Agreement, any Rights held by the Corporation or any of its Subsidiaries shall be void. (2) Rights not exercisable until Separation Time. Until the Separation Time, (i) the Rights shall not be exercisable and no Right may be exercised, and (ii) for administrative purposes each Right will be evidenced by the certificates for the associated Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and will be transferable only together with, and will be transferred by a transfer of, such associated Common Shares. (3) Delivery of Rights Certificate and disclosure statement. From and after the Separation Time and prior to the Expiration Time, (i) the Rights shall be exercisable, and (ii) the registration and transfer of the Rights shall be separate from, and independent of, Common Shares. Promptly following the Separation Time, the Corporation will prepare and the Rights Agent will mail to each holder of record of Rights as of the Separation Time (other than an Acquiring Person and, in respect of any Rights Beneficially Owned by such Acquiring Person which are not held of record by such Acquiring Person, the holder of record of such Rights (a "Nominee")) at such holder's address as shown by the records of the Corporation (the Corporation hereby agreeing to furnish copies of such records to the Rights Agent for this purpose), (A) a certificate (a "Rights Certificate") in substantially the form of Schedule 2.2(3) hereto appropriately completed, representing the number of Rights held by such holder at the Separation Time, and having such marks of identifi- cation or designation and such legends, summaries or endorsements printed thereon as the Corporation may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law, rule, regulation or judicial or administrative order or with any rule or regulation made pursuant thereto or with any rule or regulation of any self-regulatory organization, stock exchange or quotation system on which the Rights may from time to time be listed or traded, or to conform to usage, and (B) a disclosure statement describing the Rights, provided that a Nominee shall be sent the materials provided for in (A) and (B) in respect of all Common Shares held of record by it which are not Beneficially Owned by an Acquiring Person. In order for the Corporation to determine whether any Person is holding Common Shares which are Beneficially Owned by another Person, the Corporation may require such first mentioned Person to furnish it with such information and documentation as the Corporation considers advisable. (4) Exercise of Rights. Rights may be exercised in whole or in part on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent (at its principal stock transfer office in the City of Montreal, or at its principal stock transfer office in the cities designated from time to time for that purpose by the Corporation) the Rights Certificate evidencing such Rights together with an election to exercise such Rights (an "Election to Exercise") substantially in the form attached to the Rights Certificate duly completed and executed, accompanied by payment by certified cheque, banker's draft or money order payable to the order of the Corporation, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for Common Shares in a name other than that of the holder of the Rights being exercised, all of the above to be received before the Expiration Time by the Rights Agent at its principal office in any of the cities listed on the Rights Certificate. (5) Duties of Rights Agent upon receipt of Election to Exercise. Upon receipt of a Rights Certificate, which is accompanied by (i) a completed and duly executed Election to Exercise, and (ii) payment as set forth in Section 2.2(4) above, the Rights Agent (unless otherwise instructed by the Corporation) will thereupon promptly: (A) requisition from the transfer agent for the Common Shares certificates representing the number of Common Shares to be purchased (the Corporation hereby irrevocably authorizing its transfer agent to comply with all such requisitions); (B) when appropriate, requisition from the Corporation the amount of cash to be paid in lieu of issuing fractional Common Shares; (C) after receipt of such certificates, deliver the same to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such registered holder; (D) when appropriate, after receipt, deliver such cash (less any amounts required to be withheld) to or to the order of the registered holder of the Rights Certificate; and (E) tender to the Corporation all payments received on exercise of the Rights. (6) Partial Exercise of Rights. In case the holder of any Rights shall exercise less than all of the Rights evidenced by such holder's Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised will be issued by the Rights Agent to such holder or to such holder's duly authorized assigns. (7) Duties of the Corporation. The Corporation covenants and agrees that it will: (a) take all such action as may be necessary and within its power to ensure that all Common Shares or other securities delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Exercise Price), be duly and validly authorized, executed, issued and delivered and fully paid and non-assessable; (b) take all such action as may be necessary and within its power to ensure compliance with the provisions of Section 3.1 hereof including, without limitation, all such action to comply with any applicable requirements of the CBCA, the Securities Act (Ontario) and any applicable comparable securities legislation of each of the provinces of Canada and any other applicable law, rule or regulation, in connection with the issuance and delivery of the Rights Certificates and the issuance of any Common Shares or other securities upon exercise of Rights; (c) use reasonable efforts to cause, from and after such time as the Rights become exercisable, all Common Shares issued upon exercise of Rights to be listed upon issuance on the principal stock exchange on which the Common Shares were traded prior to the Stock Acquisition Date; (d) cause to be reserved and kept available out of its authorized and unissued Common Shares, the number of Common Shares that, as provided in this Agreement, will from time to time be sufficient to permit the exercise in full of all outstanding Rights; (e) pay when due and payable any and all Canadian and, if applicable, United States, federal and provincial transfer taxes and charges (not including any income or capital taxes of the holder or exercising holder or any liability of the Corporation to withhold tax) which may be payable in respect of the original issuance or delivery of the Rights Certificates, provided that the Corporation shall not be required to pay any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares or other securities in a name other than that of the registered holder of the Rights being transferred or exercised; and (f) after the Separation Time, except as permitted by Sections 5.1 or 5.4 hereof, not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. 2.3 Adjustments to Exercise Price; Number of Rights. The Exercise Price, the number and kind of Common Shares or other securities subject to purchase upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 2.3: (a) Adjustment to Exercise Price upon changes to share capital. In the event the Corporation shall at any time after the Record Time: (i) declare or pay a dividend on the Common Shares payable in Common Shares (or other securities exchangeable for or convertible into or giving a right to acquire Common Shares or other securities) other than the issue of Common Shares or such exchangeable or convertible securities to holders of Common Shares in lieu of but not in an amount which exceeds the value of regular periodic cash dividends; (ii) subdivide or change the outstanding Common Shares into a greater number of Common Shares; (iii) combine or change the outstanding Common Shares into a smaller number of Common Shares; or (iv) issue any Common Shares (or other securities exchangeable for or convertible into or giving a right to acquire Common Shares or other securities) in respect of, in lieu of or in exchange for existing Common Shares, except as otherwise provided in this Section 2.3; the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of Common Shares, or other securities, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Exercise Price then in effect, the aggregate number and kind of Common Shares or other securities, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Common Share transfer books of the Corporation were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 2.3 and Section 3.1 hereof, the adjustment provided for in this Section 2.3 shall be in addition to and, shall be made prior to, any adjustment required pursuant to Section 3.1 hereof. (b) Adjustment to Exercise Price upon issue of rights, options and warrants. In case the Corporation shall at any time after the Record Time fix a record date for the issuance of rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within forty- five (45) calendar days after such record date) to subscribe for or purchase Common Shares (or shares having the same rights, privileges and preferences as Common Shares ("equivalent common shares")) or securities convertible into or exchangeable for or carrying a right to purchase Common Shares or equivalent common shares at a price per Common Share or per equivalent common share (or having a conversion price or exchange price or exercise price per share, if a security convertible into or exchangeable for or carrying a right to purchase Common Shares or equivalent common shares) less than ninety percent (90%) of the Market Price per Common Share on such record date, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such record date, plus the number of Common Shares that the aggregate offering price of the total number of Common Shares and/or equivalent common shares so to be offered (and/or the aggregate initial conversion, exchange or exercise price of the convertible or exchangeable securities or rights so to be offered, including the price required to be paid to purchase such convertible or exchangeable securities or rights so to be offered) would purchase at such Market Price per Common Share, and the denominator of which shall be the number of Common Shares outstanding on such record date, plus the number of additional Common Shares and/or equivalent common shares to be offered for subscription or purchase (or into which the convertible or exchangeable securities are initially convertible, exchangeable or exercisable). In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a certificate filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Such adjustment shall be made successively whenever such a record date is fixed and, in the event that such rights or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. For purposes of this Agreement, the granting of the right to purchase Common Shares (or equivalent common shares) (whether from treasury shares or otherwise) pursuant to any dividend or interest reinvestment plan and/or any Common Share purchase plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and/or the investment of periodic optional payments and/or employee benefit, stock option or similar plans (so long as such right to purchase is in no case evidenced by the delivery of rights or warrants) shall not be deemed to constitute an issue of rights, options or warrants by the Corporation; provided, however, that, in the case of any dividend or interest reinvestment plan, the right to purchase Common Shares (or equivalent common shares) is at a price per share of not less than ninety percent (90%) of the current market price per share (determined as provided in such plans) of the Common Shares. (c) Adjustment to Exercise Price upon Corporate Distributions. In case the Corporation shall at anytime after the Record Time fix a record date for a distribution to all holders of Common Shares (including any such distribution made in connection with a merger, amalgamation, arrangement, plan, compromise or reorganization in which the Corporation is the continuing or successor corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend or a regular periodic cash dividend paid in Common Shares, but including any dividend payable in securities other than Common Shares), assets or subscription rights, options or warrants (excluding those referred to in Section 2.3(b) above), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Market Price per Common Share on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights, options or warrants applicable to a Common Share and the denominator of which shall be such Market Price per Common Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed. (d) De minimis threshold for adjustment to Exercise Price. Notwith- standing anything herein to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Exercise Price; provided, however, that any adjustments which by reason of this Section 2.3(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2.3 shall be made to the nearest cent or to the nearest one-hundredth of a Common Share or other share, as the case may be. Notwithstanding the first sentence of this Section 2.3(d), any adjustment required by this Section 2.3 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment or (ii) the Expiration Time. (e) Corporation may provide for alternate means of adjustment. Subject to the prior consent of the holders of Voting Shares or Rights obtained as set forth in Section 5.4(2) or (3) hereof, as applicable, in the event the Corporation shall at any time after the Record Time issue any shares of capital stock (other than Common Shares), or rights or warrants to subscribe for or purchase any such capital stock, or securities convertible into or exchangeable for any such capital stock, in a transaction referred to in Sections 2.3(a)(i) or (iv) or 2.3(b) or (c) above, if the Board of Directors acting in good faith determines that the adjustments contemplated by Sections 2.3(a), (b) and (c) above in connection with such transaction will not appropriately protect the interests of the holders of Rights, the Corporation shall be entitled to determine what other adjustments to the Exercise Price, number of Rights and/or securities purchasable upon exercise of Rights would be appropriate and, notwithstanding Sections 2.3(a), (b) and (c) above, such adjustments, rather than the adjustments contemplated by Sections 2.3(a), (b) and (c) above, shall be made. The Corporation and the Rights Agent shall amend this Agreement as appropriate to provide for such adjustments. (f) Adjustment to Rights exercisable into shares other than Common Shares. If as a result of an adjustment made pursuant to Section 3.1 hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares other than Common Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Exercise Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Shares contained in Sections 2.3(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), and (l) above and below, as the case may be, and the provisions of this Agreement with respect to the Common Shares shall apply on like terms to any such other shares. (g) Rights to evidence right to purchase Common Shares at adjusted Exercise Price. Each Right originally issued by the Corporation subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of Common Shares purchasable from time to time hereunder upon exercise of such Right, all subject to further adjustment as provided herein. (h) Adjustment to number of Common Shares purchasable upon adjustment to Exercise Price. Unless the Corporation shall have exercised its election as provided in Section 2.3(i) below, upon each adjustment of the Exercise Price as a result of the calculations made in Sections 2.3(b) and (c) above, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of Common Shares (calculated to the nearest one ten-thousandth) obtained by (A) multiplying (x) the number of shares purchasable upon exercise of a Right immediately prior to this adjustment by (y) the Exercise Price in effect immediately prior to such adjustment of the Exercise Price, and (B) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price. (i) Election to adjust number of Rights upon adjustment to Exercise Price. The Corporation shall be entitled to elect on or after the date of any adjustment of the Exercise Price to adjust the number of Rights, in lieu of any adjustment in the number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of Common Shares for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the Exercise Price. The Corporation shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter but, if Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment, of the number of Rights pursuant to this Section 2.3(i), the Corporation shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 5.5 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Corporation, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and may bear, at the option of the Corporation, the adjusted Exercise Price and shall be registered in the names of the holders of record of Rights Certificates on the record date for the adjustment specified in the public announcement. (j) Rights Certificates may contain Exercise Price before adjustment. Irrespective of any adjustment or change in the Exercise Price or the number of Common Shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price per share and the number of shares which were expressed in the initial Rights Certificates issued hereunder. (k) Corporation may in certain cases defer issues of securities. In any case in which this Section 2.3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Corporation may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of Common Shares and other securities of the Corporation, if any, issuable upon such exercise over and above the number of Common Shares and other securities of the Corporation, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (l) Corporation has discretion to reduce Exercise Price for tax reasons. Notwithstanding anything in this Section 2.3 to the contrary, the Corporation shall be entitled to make such reductions in the Exercise Price, in addition to those adjustments expressly required by this Section 2.3, as and to the extent that in their good faith judgment, the Board of Directors shall determine to be advisable in order that any (A) consolidation or subdivision of the Common Shares, (B) issuance of any Common Shares at less than the Market Price, (C) issuance of securities convertible into or exchangeable for Common Shares, (D) stock dividends or (E) issuance of rights, options or warrants, referred to in this Section 2.3 hereafter made by the Corporation to holders of its Common Shares, shall not be taxable to such shareholders. 2.4 Date on Which Exercise is Effective. Each person in whose name any certificate for Common Shares is issued upon the exercise of Rights, shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered (together with a duly completed Election to Exercise) and payment of the Exercise Price for such Rights (and any applicable transfer taxes and other governmental charges payable by the exercising holder hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Share transfer books of the Corporation are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Share transfer books of the Corporation are open. 2.5 Execution, Authentication, Delivery and Dating of Rights Certificates (1) The Rights Certificates shall be executed on behalf of the Corporation by its Chairman, President or any of its Vice-Presidents and by its Secretary or one of its Assistant Secretaries. The signature and attestation of any of these officers on the Rights Certificates may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Corporation shall bind the Corporation, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature and delivery of such Rights Certificates. (2) Promptly after the Corporation learns of the Separation Time, the Corporation will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by the Corporation to the Rights Agent for countersignature and a disclosure statement as described in Section 2.2(3), and the Rights Agent shall manually or by facsimile signature countersign and send such Rights Certificates and disclosure statement to the holders of the Rights pursuant to Section 2.2(3) hereof. No Rights Certificate shall be valid for any purpose until countersigned by the Rights Agent as aforesaid. (3) Each Rights Certificate shall be dated the date of countersignature thereof. 2.6 Registration, Registration of Transfer and Exchange. (1) The Corporation will cause to be kept a register (the "Rights Register") in which, subject to such reasonable regulations as it may prescribe, the Corporation will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the Rights Register for the Corporation and registering Rights and transfers of Rights as herein provided. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will have the right to examine the Rights Register at all reasonable times. After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate and subject to the provisions of Section 2.6(3) below and the other provisions of this Agreement, the Corporation will execute and the Rights Agent will countersign, register and deliver, in the name of the holder or the designated transferee or transferees as required pursuant to the holder's instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificates so surrendered. (2) All Rights issued upon any registration of transfer or exchange of Rights Certificates shall be the valid obligations of the Corporation, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration of transfer or exchange. (3) Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Corporation or the Rights Agent, as the case may be, duly executed by the registered holder thereof or such holder's attorney duly authorized in writing. As a condition to the issuance of any new Rights Certificate under this Section 2.6, the Corporation or the Rights Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and the Corporation may require payment of a sum sufficient to cover any other expenses (including the fees and expenses of the Rights Agent) in connection therewith. 2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates. (1) If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, the Corporation shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered. (2) If there shall be delivered to the Corporation and the Rights Agent prior to the Expiration Time (i) evidence to their reasonable satisfaction of the destruction, loss or theft of any Rights Certificate, and (ii) such indemnity or other security as may be required by them to save each of them and any of their agents harmless then, in the absence of notice to the Corporation or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, the Corporation shall execute and upon its request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen. (3) As a condition to the issuance of any new Rights Certificate under this Section 2.7, the Corporation or the Rights Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and the Corporation may require payment of a sum sufficient to cover any other expenses (including the fees and expenses of the Rights Agent) in connection therewith. (4) Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence an original additional contractual obligation of the Corporation, whether or not the destroyed lost or stolen Rights Certificate shall be at any time enforceable by anyone, and the holder thereof shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other holders of Rights duly issued by the Corporation. 2.8 Persons Deemed Owners. Prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) for registration of transfer, the Corporation, the Rights Agent and any agent of the Corporation or the Rights Agent shall be entitled to deem and treat the person in whose name a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever. As used in this Agreement, unless the context otherwise requires, the term "holder" of any Rights shall mean the registered holder of such Rights (or, prior to the Separation Time, the associated Common Shares). 2.9 Delivery and Cancellation of Rights Certificates. All Rights Certificates surrendered upon exercise or for redemption, registration of transfer or exchange shall, if surrendered to any person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. The Corporation may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously countersigned and delivered hereunder which the Corporation may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights Agent. No Rights Certificate shall be countersigned in lieu of or in exchange for any Rights Certificates cancelled as provided in this Section 2.9 except as expressly permitted by this Agreement. The Rights Agent shall, subject to applicable laws, destroy all cancelled Rights Certificates and deliver a certificate of destruction to the Corporation. 2.10 Agreement of Rights Holders. Every holder of Rights, by accepting the same, consents and agrees with the Corporation and the Rights Agent and with every other holder of Rights: (a) to be bound by and subject to the provisions of this Agreement, as amended or supplemented from time to time in accordance with the terms hereof, n respect of all Rights held; (b) that prior to the Separation Time each Right will be transferable only together with, and will be transferred by a transfer of, the Common Share certificate representing such Right; (c) that after the Separation Time, the Rights Certificates will be transferable only on the Rights Register as provided herein; (d) that prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) for registration of transfer, the Corporation, the Rights Agent and any agent of the Corporation or the Rights Agent shall be entitled to deem and treat the person in whose name the Rights Certificate (or prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on such Rights Certificate or the associated Common Share certificate made by anyone other than the Corporation or the Rights Agent) for all purposes whatsoever, and neither the Corporation nor the Rights Agent shall be affected by any notice to the contrary; (e) that such holder of Rights has waived his right to receive any fractional Rights or any fractional shares upon exercise of Right; (f) that, in accordance with Section 5.4 hereof, without the approval of any holder of Rights and upon the sole authority of the Board of Directors acting in good faith this Agreement may be supplemented or amended from time to time pursuant to and as provided herein; and (g) that notwithstanding anything in this Agreement to the contrary, neither the Corporation nor the Rights Agent shall have any liability to any holder of a Right or any other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation, or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation. 2.11 Rights Certificate Holder not Deemed a Shareholder. No holder, as such, of any Rights or Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose whatsoever the holder of any Common Share or any other share or security of the Corporation which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed or deemed to confer upon the holder of any Right or Rights Certificate, as such, any of the rights, titles, benefits or privileges of a holder of Common Shares or any other shares or securities of the Corporation or any right to vote at any meeting of shareholders of the Corporation whether for the election of directors or otherwise or upon any matter submitted to holders of shares of the Corporation at any meeting thereof, or to give or withhold consent to any action of the Corporation, or to receive notice of any meeting or other action affecting any holder of Common Shares or any other shares or securities of the Corporation except as expressly provided herein, or to receive dividends, distributions or subscription rights, or otherwise, until the Right or Rights evidenced by Rights Certificates shall have been duly exercised in accordance with the terms and provisions hereof. ARTICLE 3 ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 Flip-in Event. (1) Subject to Section 3.1(2) below, and Sections 5.1(2), (3) and (4) hereof, in the event that prior to the Expiration Time a Flip-in Event shall occur, the Corporation shall take such action as may be necessary to ensure and provide within eight (8) Business Days of such occurrence, or such longer period as may be required to satisfy all applicable requirements of the Securities Act (Ontario), and the securities legislation of each other province of Canada that, except as provided below, each Right shall thereafter constitute the right to purchase from the Corporation upon exercise thereof in accordance with the terms hereof that number of Common Shares of the Corporation having an aggregate Market Price on the date of the occurrence of such Flip-in Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such Right to be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in the event that after such date of occurrence an event of a type analogous to any of the events described in Section 2.3 hereof shall have occurred with respect to such Common Shares). (2) Notwithstanding anything in this Agreement to the contrary, upon the occurrence of any Flip-in Event, any Rights that are Beneficially Owned by (i) an Acquiring Person, or any Affiliate or Associate of an Acquiring Person, or any Person acting jointly or in concert with an Acquiring Person or any Affiliate or Associate of such Acquiring Person, or any Affiliate or Associate of such Person so acting jointly or in concert, or (ii) a transferee or other successor in title of Rights, directly or indirectly, of an Acquiring Person (or of any Affiliate or Associate of an Acquiring Person) or of any Person acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of an Acquiring Person (or of any Affiliate or Associate of such Person so acting jointly or in concert) who becomes a transferee or successor in title concurrently with or subsequent to the Acquiring Person becoming such, shall become null and void without any further action, and any holder of such Rights (including transferees or successors in title) shall not have any rights whatsoever to exercise such Rights under any provision of this Agreement and shall not have thereafter any other rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. ARTICLE 4 THE RIGHTS AGENT 4.1 General. (1) The Corporation hereby appoints the Rights Agent to act as agent for the Corporation in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Corporation may from time to time appoint such Co-Rights Agents ("Co-Rights Agents") as it may deem necessary or desirable. In the event the Corporation appoints one or more Co- Rights Agents, the respective duties of the Rights Agent and Co-Rights Agents shall be as the Corporation may determine. The Corporation also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or wilful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability, which right to indemnification will survive the termination of this Agreement. The Corporation agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. (2) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any certificate for Voting Shares or Common Shares or any Rights Certificate or certificate for other securities of the Corporation, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. 4.2 Merger or Amalgamation or Change of Name of Rights Agent. (1) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or amalgamated or with which it may be consolidated, or any corporation resulting from any merger, amalgamation, statutory arrangement or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any corporation succeeding to the shareholder or stockholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 4.4. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement. (2) In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. 4.3 Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Corporation and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Corporation) and the opinion of such counsel will be full and complete authorisation and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion; (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems it necessary or desirable that any fact or matter be proved or established by the Corporation prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a Person believed by the Rights Agent to be the Chairman of the Board, the President or any Vice President of the Corporation and delivered to the Rights Agent; and such certificate will be full authorisation to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate; (c) The Rights Agent will be liable hereunder only for its own negligence, bad faith or wilful misconduct; (d) The Rights Agent will not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the certificates for Voting Shares or Common Shares or the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and will be deemed to have been made by the Corporation only; (e) The Rights Agent will not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorisation, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Common Share certificate or Rights Certificate (except its countersignature thereof); nor will it be responsible for any breach by the Corporation of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Subsection 3.1(2)) or any adjustment required under the provisions of Section 2.3 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights after receipt of the certificate contemplated by Section 2.3 describing any such adjustment); nor will it by any act hereunder be deemed to make any representation or warranty as to the authorisation of any Common Shares to be issued pursuant to this Agreement or any Rights or as to whether any Common Shares will, when issued, be duly and validly authorised, executed, issued and delivered and fully paid and non-assessable; (f) The Corporation agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement; (g) The Rights Agent is hereby authorised and directed to accept instructions with respect to the performance of its duties hereunder from any Person believed by the Rights Agent to be the Chairman of the Board, the President, any Vice President, or the Treasurer or the Controller of the Corporation, and to apply to such Persons for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such Person; (h) The Rights Agent and any shareholder or stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in Common Shares, Rights or other securities of the Corporation or become pecuniarily interested in any transaction in which the Corporation may be interested, or contract with or lend money to the Corporation or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Corporation or for any other legal entity; and (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Corporation resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. 4.4 Change of Rights Agent. The Rights Agent may resign and be discharged from its duties under this Agreement upon 90 days' notice (or such lesser notice as is acceptable to the Corporation) in writing mailed to the Corporation and to each transfer agent of Common Shares by registered or certified mail, and to the holders of the Rights in accordance with Section 5.8. The Corporation may remove the Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Rights in accordance with Section 5.8. If the Rights Agent should resign or be removed or otherwise become incapable of acting, the Corporation will appoint a successor to the Rights Agent. If the Corporation fails to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of any Rights (which holder shall, with such notice, submit such holder's Rights Certificate for inspection by the Corporation), then the holder of any Rights may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Corporation or by such a court, shall be a corporation incorporated under the laws of Canada or a province thereof authorised to carry on the business of a trust company. After appointment, the successor Rights Agent will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Corporation will file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares, and mail a notice thereof in writing to the holders of the Rights. Failure to give any notice provided for in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. ARTICLE 5 MISCELLANEOUS 5.1 Redemption and Waiver. (1) Subject to the prior consent of the holders of Voting Shares or Rights obtained as set forth in Section 5.4(2) or Section 5.4(3) hereof, as applicable, the Board of Directors acting in good faith may, at any time prior to the occurrence of a Flip-in Event, elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $0.00001 per Right appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in the event that an event of the type described in Section 2.3 hereof shall have occurred (such redemption price being herein referred to as the "Redemption Price"). (2) Subject to the prior consent of the holders of Voting Shares obtained as set forth in Section 5.4(2) hereof, the Board of Directors may, at any time prior to the occurrence of a Flip-in Event as to which the application of Section 3.1 hereof has not been waived pursuant to this Section 5.1, if such Flip-in Event would occur by reason of an acquisition of Voting Shares otherwise than pursuant to a Take-over Bid made by means of a Take-over Bid circular to all registered holders of Voting Shares and otherwise than in the circumstances set forth in Section 5.1(4) hereof, waive the application of Section 3.1 hereof to such Flip-in Event. In such event, the Board of Directors shall extend the Separation Time to a date at least ten (10) Business Days subsequent to the meeting of shareholders called to approve such waiver. (3) The Board of Directors acting in good faith, may, prior to the occurrence of a Flip-in Event, and upon prior written notice delivered to the Rights Agent, determine to waive the application of Section 3.1 hereof to a Flip-in Event that may occur by reason of a Take-over Bid made by means of a Take-over Bid circular to all registered holders of Voting Shares; provided that if the Board of Directors waives the application of Section 3.1 hereof to a particular Flip-in Event pursuant to this Section 5.1(3), the Board of Directors shall be deemed to have waived the application of Section 3.1 hereof to any other Flip-in Event occurring by reason of any Take-over Bid made by means of a Take-over Bid circular to all registered holders of Voting Shares prior to the expiry of any Take-over Bid in respect of which a waiver is, or is deemed to have been granted, pursuant to this Section 5.1(3). (4) The Board of Directors may, prior to the close of business on the tenth (10th) day following the Stock Acquisition Date, determine, upon prior written notice delivered to the Rights Agent, to waive or to agree to waive the application of Section 3.1 hereof to a Flip-in Event, provided that both of the following conditions are satisfied: (a) the Board of Directors has determined that a Person became an Acquiring Person by inadvertence and without any intention to become, or knowledge that Person would become, an Acquiring Person; and (b) such Acquiring Person has reduced its Beneficial Ownership of Voting Shares (or has entered into a contractual arrangement with the Corporation, acceptable to the Board of Directors, to do so within thirty (30) days of the date on which such contractual arrangement is entered into) such that at the time the waiver becomes effective pursuant to this Section 5.1(4) it is no longer an Acquiring Person; and in the event of such a waiver, for the purposes of this Agreement, the Flip-in Event shall be deemed never to have occurred. (5) Where a Person acquires pursuant to a Permitted Bid, a Competing Bid or an Exempt Acquisition under Section 5.1(3) above, outstanding Voting Shares, then the Corporation shall immediately upon the consummation of such acquisition redeem the Rights at the Redemption Price. (6) If the Corporation is obligated under Section 5.1(5) above to redeem the Rights, or if the Board of Directors elects under Section 5.1(1) above or Section 5.1(8) below to redeem the Rights, the right to exercise the Rights will thereupon, without further action and without notice, terminate and each Right will after redemption be null and void and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. (7) Within ten (10) days after the Corporation is obligated under Section 5.1(5) above to redeem the Rights, or the Board of Directors elects under Section 5.1(1)) above or Section 5.1(8) below to redeem the Rights, the Corporation shall give notice of redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last address as they appear upon the Rights Register or, prior to the Separation Time, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The Corporation may not redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 5.1 and other than in connection with the purchase of Common Shares prior to the Separation Time. (8) Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or otherwise terminated after the Separation Time has occurred and prior to the occurrence of a Flip-in Event, the Board of Directors may elect to redeem all the outstanding Rights at the Redemption Price. (9) Notwithstanding the Rights being redeemed pursuant to Section 5.1(8) above, all the provisions of this Agreement shall continue to apply as if the Separation Time had not occurred and Rights Certificates representing the number of Rights held by each holder of record of Common Shares as of the Separation Time had not been mailed to each such holder and for all purposes of this Agreement the Separation Time shall be deemed not to have occurred and the Rights shall remain attached to outstanding Voting Shares, subject to and in accordance with the provisions of this Agreement. 5.2 Expiration. No person shall have any rights whatsoever pursuant to or arising out of this Agreement or in respect of any Right after the Expiration Time, except the Rights Agent as specified in Section 4.1(1) hereof. 5.3 Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Corporation may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the number or kind or class of shares purchasable upon exercise of Rights made in accordance with the provisions of this Agreement. 5.4 Supplements and Amendments. (1) The Corporation may from time to time supplement or amend this Agreement without the approval of any holders of Rights or Voting Shares to correct any clerical or typographical error or to maintain the validity of the Agreement as a result of a change in any applicable legislation or regulations or rules thereunder. Notwithstanding anything in this Section 5.4 to the contrary, no supplement or amendment shall be made to the provisions of article 4 hereof except with the written concurrence of the Rights Agent to such supplement or amendment. (2) Subject to Section 5.4(1) above, the Corporation may, with the prior consent of the holders of the Voting Shares obtained as set forth below, at any time prior to the Separation Time amend, vary or rescind any of the provisions of this Agreement and the Rights (whether or not such action would materially adversely affect the interests of the holders of Rights generally). Such consent shall be deemed to have been given if provided by the holders of Voting Shares at a meeting of the holders of Voting Shares, which meeting shall be called and held in compliance with applicable laws and regulatory requirements and the requirements in the articles and by-laws of the Corporation. Subject to compliance with any requirements imposed by the foregoing, consent shall be deemed to have been given if the proposed amendment, variation or revision is approved by the affirmative vote of a majority of the votes cast by all holders of Voting Shares (other than any holder of Voting Shares who is an Offeror pursuant to a Take-over Bid that is not a Permitted Bid or Competing Bid with respect to all Voting Shares Beneficially Owned by such Person), represented in person or by proxy at the meeting. (3) The Corporation may, with the prior consent of the holders of Rights, at any time after the Separation Time and before the Expiration Time, amend, vary or rescind any of the provisions of this Agreement and the Rights (whether or not such action would materially adversely affect the interests of the holders of Rights generally). (4) Any approval of the holders of Rights shall be deemed to have been given if the action requiring such approval is authorized by the affirmative votes of the holders of Rights present or represented at and entitled to be voted at a meeting of the holders of Rights and representing a majority of the votes cast in respect thereof. For the purposes hereof, each outstanding Right (other than Rights which are void pursuant to the provisions hereof) shall be entitled to one vote, and the procedures for the calling, holding and conduct of the meeting shall be those, as nearly as may be, which are provided in the Corporation's by-laws and the CBCA with respect to a meeting of shareholders of the Corporation. (5) The Corporation shall be required to provide the Rights Agent with notice in writing of any such amendment, variation or deletion to this Agreement as referred to in this Section 5.4 within 5 days of effecting such amendment, variation or deletion. (6) Any supplements or amendments made by the Corporation to this Agreement pursuant to Section 5.4(1) above which are required to maintain the validity of this Agreement as a result of any change in any applicable legislation or regulations or rules thereunder shall: (a) if made before the Separation Time, be submitted to the shareholders of the Corporation at the next meeting of shareholders and the shareholders may, by the majority referred to in Section 5.4(2) above confirm or reject such amendment; and (b) if made after the Separation Time, be submitted to the holders of Rights at a meeting to be called for on a date not later than immediately following the next meeting of shareholders of the Corporation and the holders of Rights may, by resolution passed by the majority referred to in Section 5.4(4) above, confirm or reject such amendment. A supplement or amendment of the nature referred to in this Section 5.4(6) shall be effective from the date of the resolution of the Board of Directors adopting such supplement or amendment until it is confirmed or rejected or until it ceases to be effective (as described in the next sentence) and, where such supplement or amendment is confirmed, it continues in effect in the form so confirmed. If such supplement or amendment is rejected by the shareholders or the holders of Rights or is not submitted to the shareholders or holders of Rights as required, then such supplement or amendment shall cease to be effective from and after the termination of the meeting at which it was rejected or to which it should have been but was not submitted or from and after the date of the meeting of holders of Rights that should have been but was not held, and no subsequent resolution of the Board of Directors to amend, vary or delete any provision of this Agreement to substantially the same effect shall be effective until confirmed by the shareholders or holders of Rights, as the case may be. 5.5 Fractional Rights and Fractional Shares. (1) The Corporation shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. Any such fractional Right shall be null and void and the Corporation will not have any obligation or liability in respect thereof. (2) The Corporation shall not be required to issue fractions of Common Shares or other securities upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares or other securities. In lieu of issuing fractional Common Shares or other securities, the Corporation shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided, an amount in cash equal to the same fraction of the Market Price of one Common Share. The Rights Agent shall have no obligation to make any payments in lieu of fractional Common Shares unless the Corporation shall have provided the Rights Agent with the necessary funds to pay in full all amounts payable in accordance with Section 2.2(5). 5.6 Rights of Action. Subject to the terms of this Agreement, all rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective registered holders of the Rights; and any registered holder of any Rights, without the consent of the Rights Agent or of the registered holder of any other Rights, may, on such holder's own behalf and for such holder's own benefit and the benefit of other holders of Rights enforce, and may institute and maintain any suit, action or proceeding against the Corporation to enforce such holder's right to exercise such holder's Rights in the manner provided in such holder's Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. 5.7 Notice of Proposed Actions. In case the Corporation shall propose after the Separation Time and prior to the Expiration Time to effect the liquidation, dissolution or winding-up of the Corporation or the sale of all or substantially all of the Corporation's assets, then, in each such case, the Corporation shall give to each holder of a Right, in accordance with Section 5.8 hereof, a notice of such proposed action, which shall specify the date on which such liquidation, dissolution, winding up, or sale is to take place, and such notice shall be so given at least twenty (20) Business Days prior to the date of taking of such proposed action. 5.8 Notices. (1) Notices or demands authorized or required by this Agreement to be given or made by the Rights Agent or by the holder of any Rights to or on the Corporation shall be sufficiently given or made if delivered or sent by first- class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Intertape Polymer Group Inc. 110E Montee de Liesse Ville St-Laurent, Quebec H4T 1N4 Attention: President and Chief Executive Officer Telephone: (514) 731-7591 Telecopier: (514) 731-5039 (2) Any notice or demand authorized or required by this Agreement to be given or made by the Corporation or by the holder of any Rights to or on the Rights Agent shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Corporation) as follows: CIBC Mellon Trust Company 2001 University 16(th) Floor Montreal, Quebec H3A 2A6 Attention: Manager Telephone: (514) 285-3603 Telecopier: (514) 285-3640 (3) Notices or demands authorized or required by this Agreement to be given or made by the Corporation or the Rights Agent to or on the holder of any Rights shall be sufficiently given or made if delivered or sent by first- class mail, postage prepaid, addressed to such holder at the address of such holder as it appears upon the Rights Register or, prior to the Separation Time, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. 5.9 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Corporation or the Rights Agent shall bind and enure to the benefit of their respective successors and assigns hereunder. 5.10 Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Corporation, the Rights Agent and the holders of the Rights any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Corporation, the Rights Agent and the holders of the Rights. 5.11 Governing Law. This Agreement and each Right issued hereunder shall be deemed to be a contract made under the laws of the Province of Quebec and for all purposes shall be governed by and construed in accordance with the laws of such Province. 5.12 Severability. If any Section, Clause, term or provision hereof or the application thereof to any circumstances or any right hereunder shall, in any jurisdiction and to any extent, be invalid or unenforceable, such Section, Clause, term or provision or such right shall be ineffective only in such jurisdiction and to the extent of such invalidity or unenforceability in such jurisdiction without invalidating or rendering unenforceable or ineffective the remaining Sections, Clauses, terms and provisions hereof or rights hereunder in such jurisdiction or the application of such Section, Clause, term or provision or rights hereunder in any other jurisdiction or to circumstances other than those as to which it is specifically held invalid or unenforceable. 5.13 Effective Date. This Agreement is effective and in full force and effect in accordance with its terms and conditions as of and from August 24, 1993 (the "Effective Date"). 5.14 Determinations and Actions by the Board of Directors. All actions, calculations and determinations (including all omissions with respect to the foregoing) which are done or made by the Board of Directors, in good faith, in relation to or in connection with this Agreement, shall not subject the Board of Directors or any director of the Corporation to any liability to the holders of the Rights. 5.15 Rights of Board, Corporation and Offeror. Without limiting the generality of the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to recommend that holders of Voting Shares reject or accept any Take-over Bid or take any other action (including, without limitation, the commencement, prosecution, defence or settlement of any litigation and the submission of additional or alternative Take-over Bids or other proposals to the holders of Voting Shares of the Corporation) with respect to any Take-over Bid or otherwise that the Board of Directors believes is necessary or appropriate in the exercise of its fiduciary duties. 5.16 Regulatory Approvals. This Agreement shall be subject in any jurisdiction to the receipt of any required prior or subsequent approval or consent from any governmental or regulatory authority in such jurisdiction including any securities regulatory authority or stock exchange. 5.17 Declaration as to Non-Canadian and Non-U.S. Holders. If in the opinion of the Board of Directors (who may rely upon the advice of counsel) any action or event contemplated by this Agreement would require compliance with the securities laws or comparable legislation of a jurisdiction outside Canada and the United States of America, the Board of Directors acting in good faith may take such actions as it may deem appropriate to ensure such compliance. In no event shall the Corporation or the Rights Agent be required to issue or deliver Rights or securities issuable on exercise of Rights to Persons who are citizens, residents or nationals of any jurisdiction other than Canada or the United States in which such issue or delivery would be unlawful without registration of the relevant Persons or securities for such purposes, or (until such notice is given as required by law) without advance notice to any regulatory or self-regulatory body. 5.18 Time of the Essence. Time shall be of the essence in this Agreement. 5.19 Execution in Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement. INTERTAPE POLYMER GROUP INC By: By: CIBC MELLON TRUST COMPANY By: By: SCHEDULE 2.2(3) FORM OF RIGHTS CERTIFICATE Certificate No. ------------------ ------------------ Rights THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES ( SPECIFIED IN SECTION 3.1(2) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, ANY PERSON ACTING JOINTLY OR IN CONCERT WITH AN ACQUIRING PERSON OR THEIR RESPECTIVE ASSOCIATES AND AFFILIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND THEIR RESPECTIVE TRANSFEREES SHALL BECOME VOID WITHOUT ANY FURTHER ACTION. RIGHTS CERTIFICATE This certifies that ----------------------------------------- or registered assigns, is the registered holder of the number of Rights set forth above each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Amended and Restated Shareholder Protection Rights Plan Agreement dated August 24, 1993, as amended and restated from time to time (the "Rights Agreement"), between Intertape Polymer Group Inc., a Corporation amalgamated under the Canada Business Corporations Act (the "Corporation"), and CIBC Mellon Trust Company (formerly known as The R-M Trust Company), a trust company incorporated under the laws of Canada, as rights agent (the "Rights Agent", which term shall include any successor Rights Agent under the Rights Agreement) to purchase from the Corporation at any time after the Separation Time (as such term is defined in the Rights Agreement) and prior to the Expiration Time (as such term is defined in the Rights Agreement) (or such earlier expiration time as is provided in the Rights Agreement) one fully paid common share of the Corporation (a "Common Share") at the Exercise Price referred to below, upon presentation and surrender of this Rights Certificate together with the Form of Election to Exercise duly executed and submitted to the Rights Agent at its principal office in the City of Montreal. The Exercise Price shall initially be $100 (Canadian) per Right and shall be subject to adjustment in certain events as provided in the Rights Agreement. In certain circumstances described in the Rights Agreement, each Right evidenced hereby may entitle the registered holder thereof to purchase or receive assets, debt securities or other equity securities of the Corporation (or a combination thereof) all as provided in the Rights Agreement. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Rights Agent, the Corporation and the holders of the Rights. Copies of the Rights Agreement are on file at the registered head office of the Corporation and are available upon written request. This Rights Certificate, with or without other Rights Certificates, upon surrender at any of the offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights entitling the holder to purchase a like aggregate number of Common Shares as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights Certificate may be, and under certain circumstances are required to be, redeemed by the Corporation at a redemption price of $0.00001 per Right. No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced hereby. No holder of this Rights Certificate, as such, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Common Shares or of any other securities of the Corporation which may at any time be issuable upon the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof any of the rights of a shareholder of the Corporation or any right to vote for the election of directors or upon any matter submitted to shareholders of the Corporation at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders of the Corporation (except as expressly provided in the Rights Agreement), or to receive dividends, distributions or subscription rights, or otherwise until the Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been manually countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Corporation. INTERTAPE POLYMER GROUP INC. Date: ------------------------------------ By: Title: By: Title: Countersigned: CIBC MELLON TRUST COMPANY By ------------------------------------ (To be attached to each Rights Certificate) FORM OF ELECTION TO EXERCISE TO: INTERTAPE POLYMER GROUP INC. The undersigned hereby irrevocably elects to exercise ------------------ - ----------- whole Rights represented by the attached Rights Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such Shares be issued to: ______________________________________________________________________________ (NAME) ______________________________________________________________________________ (ADDRESS) ______________________________________________________________________________ (CITY AND STATE OR PROVINCE) If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: ______________________________________________________________________________ (NAME) ______________________________________________________________________________ (ADDRESS) ______________________________________________________________________________ (CITY AND STATE OR PROVINCE) ______________________________________________________________________________ SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER Dated --------------------------------------------------------- Signature Guaranteed ________________________________________________________________________________ Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signature must be guaranteed by a Canadian chartered bank, a Canadian trust company or a member of a recognized stock exchange or a member of the Securities Transfer Association Medallion Program (Stamp). To be completed if true The undersigned hereby represents, for the benefit of all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof or any Person acting jointly or in consent with any of the foregoing or any Affiliate or Associate of such Person (as defined in the Rights Agreement). ______________________________________________________________________________ Signature NOTICE In the event the certification set forth in the Form of Election to Exercise is not completed, the Corporation will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and accordingly such Rights shall be null and void. FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate) FOR VALUE RECEIVED hereby sells, assigns and transfers unto --------------------------------------------------- ______________________________________________________________________________ (Please print name and address of transferee) the Rights represented by this Rights Certificate, together with all right, title and interest therein and does hereby irrevocably constitute and appoint - ------------------------------------------------------ as attorney to transfer the within Rights on the books of the Corporation, with full power of substitution. Dated ------------------------------------------------------ Signature Guaranteed ______________________________________________________________________________ Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signature must be guaranteed by a Canadian chartered bank, a Canadian trust company or a member of a recognized stock exchange or a member of the Securities Transfer Association Medallion Program (Stamp). To be completed if true The undersigned hereby represents, for the benefit of all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof or any Person acting jointly or in consent with any of the foregoing (as defined in the Rights Agreement). ______________________________________________________________________________ Signature NOTICE In the event the certification set forth in the Form of Assignment is not completed, the Corporation will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and accordingly such Rights shall be null and void. EXHIBIT E RESOLUTION OF THE SHAREHOLDERS OF INTERTAPE POLYMER GROUP INC. "BE IT RESOLVED: THAT the amended and restated Shareholder Protection Rights Plan Agreement between the Corporation and CIBC Mellon Trust Company (a copy of which (i) is attached as Exhibit "D" of this Circular, and (ii) has been tabled at this Meeting by the Secretary of the Corporation), be and it is hereby approved, ratified and confirmed; THAT any director or officer of the Corporation be and he is hereby authorized for an on behalf of and in the name of the Corporation, to do all things and execute an deliver all such documents and instruments as may be necessary or desirable to carry out the foregoing." INTERTAPE POLYMER GROUP INC. PROXY The Management of the Corporation Solicits this Proxy The undersigned shareholder of INTERTAPE POLYMER GROUP INC. (the "Corporation") hereby appoints Melbourne F. Yull, failing whom, Michael L. Richards, or instead of the foregoing,___________________________________________________________, as the proxyholder of the undersigned to attend and act for and on behalf of the undersigned at the Annual and Special Meeting of Shareholders of the Corporation to be held on June 11, 2003, and at any adjournment thereof to the same extent and with the same power as if the undersigned were present in person thereat and with authority to vote and act in the said proxyholder's discretion with respect to amendments or variations to matters referred to in the notice of the Meeting and with respect to other matters which may properly come before the Meeting. This proxy is solicited by and on behalf of the Management of the Corporation. The said proxyholder is specifically directed to vote or withhold from voting the shares registered in the name of the undersigned as indicated below: (1) ELECTION OF DIRECTORS ___ FOR all nominees listed below WITHHOLD AUTHORITY to vote as a group (except as marked ____ for all nominees listed below to the contrary below) as a group (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.) Melbourne F. Yull, Michael L. Richards, Ben J. Davenport, Jr., L. Robbie Shaw, Gordon R. Cunningham, J. Spencer Lanthier, Thomas E. Costello. (2) VOTE FOR __ WITHHOLD FROM VOTING __ in respect of the appointment of Raymond Chabot Grant Thornton as auditors of the Corporation and authorizing the directors to fix their remuneration. (3) VOTE FOR __ VOTE AGAINST __ the resolution approving, ratifying and confirming the amendments to the Corporation's General By-Laws. (4) VOTE FOR __ VOTE AGAINST __ the resolution approving, ratifying and confirming the Corporation's amended and restated Shareholder Protection Rights Plan Agreement. Date:__________________________________ Signature______________________________ Notes: (1) This form of proxy must be executed by the shareholder or his attorney authorized in writing or, if the shareholder is a corporation, under the corporate seal or by an officer or attorney thereof duly authorized. Joint holders should each sign. Executors, administrators, trustees, etc., should so indicate when signing. If undated, this proxy is deemed to bear the date it was mailed to the shareholder. (2) A shareholder may appoint as proxyholder a person (who need not be a shareholder) other than the persons designated in this form of proxy to attend and act on his behalf at the Meeting by inserting the name of such other person in the space provided or by completing another proper form of proxy. (3) The shares represented by this proxy will, on a show of hand or any ballot that may be called for, be voted or withheld from voting in accordance with the instructions given by the shareholder; in the absence of any contrary instructions, this proxy will be voted "FOR" the itemized matters. PROXY Please complete and return in the envelope provided. FORMULAIRE DE PROCURATION Veuillez completer et poster dans l'enveloppe ci-jointe. EX-6 5 firstamendcreditagr.txt FIRST AMENDMENT CREDIT AGREEMENT FIRST AMENDING AGREEMENT to the Credit Agreement dated as of December 20, 2001, entered into in the City of Montreal, Province of Quebec, as of December 20, 2002, AMONG: INTERTAPE POLYMER INC., INTERTAPE POLYMER CORP. and each of the other parties listed in Schedule "K" hereto as joint and several Facility A Borrowers (hereinafter collectively called the "Facility A Borrowers") PARTIES OF THE FIRST PART AND: IPG HOLDINGS LP (hereinafter called the "Facility B/C Borrower") PARTY OF THE SECOND PART AND: INTERTAPE POLYMER GROUP INC., IPG FINANCE LLC and IPG HOLDING COMPANY OF NOVA SCOTIA (as Guarantors) PARTIES OF THE THIRD PART AND: THE LENDERS, AS DEFINED IN THE CREDIT AGREEMENT (the "Lenders") PARTIES OF THE FOURTH PART AND: THE TORONTO-DOMINION BANK, AS CANADIAN ADMINISTRATION AGENT FOR THE LENDERS PARTY OF THE FIFTH PART AND: TORONTO DOMINION (TEXAS), INC., AS US ADMINISTRATION AGENT FOR THE LENDERS PARTY OF THE SIXTH PART WHEREAS the parties hereto, other than IPG Financial Services Inc., are parties to a Credit Agreement dated as of December 20, 2001 (the "Credit Agreement"); WHEREAS Facility B has been repaid in full and cancelled; WHEREAS the Borrowers have requested that IPG Financial Services Inc. be designated a joint and several Facility A Borrower; WHEREAS the Borrowers have requested a deferral of IPG's obligation to provide audits under Section 13.22 of the Credit Agreement; WHEREAS the Borrowers have requested certain changes to the financial covenants set forth in the Credit Agreement; WHEREAS, pursuant to the provisions of Section 13.20 of the Credit Agreement, the designation of IPG Financial Services Inc. as a Facility A Borrower under the Credit Agreement is conditional upon it being designated a "Restricted Subsidiary" under the Note Agreements; WHEREAS, pursuant to the provisions of section 10.5(d) of the Inter- Creditor Agreement, each of the Lenders and each of the holders of Notes shall approve a change to the said financial covenants; and WHEREAS each of the Lenders has agreed with the Borrowers to the amend- ments contemplated hereby and, as such, has complied with the provisions of the Credit Agreement and the Inter-Creditor Agreement, as evidenced by their signature on this Agreement; NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS: I. INTERPRETATION All of the words and expressions which are capitalized herein shall have the meanings ascribed to them in the Credit Agreement unless otherwise indicated herein. II. AMENDMENTS 1. IPG Financial Services Inc. is hereby designated as a joint and several Facility A Borrower. Schedules "D", "J", "K", "L" and "N" to the Credit Agree- ment are hereby deleted and respectively replaced by Schedules "D", "J","K", "L" and "N" hereto. 2. Section 13.22 of the Credit Agreement is hereby amended and replaced by the following: "IPG shall provide, at its expense and upon the written request of the Agent, an accounts receivable and inventory audit of its Restricted Subsidiaries and/or an appraisal of the Restricted Subsidiaries' equip- ment and inventory, such audit and/or appraisal to be performed by an independent third party acceptable to the Lenders." 3. Section 13.11 of the Credit Agreement is hereby amended and replaced by the following: "IPG shall maintain: 13.11.1 at all times during the Term, a ratio of Total Debt to Consoli- dated Total Capitalization not exceeding the following: Period Ratio _________________________________________________________________ On or prior to March 30, 2002: 0.59:1 From March 31, 2002 to June 29, 2002: 0.585:1 From June 30, 2002 to September 29, 2002: 0.58:1 From September 30, 2002 to December 30, 2002: 0.575:1 From December 31, 2002 to June 29, 2003: 0.55:1 From June 30, 2003 to December 30, 2003: 0.525:1 On December 31, 2003 and thereafter during the Term: 0.50:1 13.11.2 at the end of each fiscal quarter of IPG during the Term, a Consolidated ratio of Net Income Available for Fixed Charges to Fixed Charges for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) of not less than: Period Ratio _________________________________________________________________ On or prior to December 31, 2002 1.75:1 On March 31, 2003 and June 30, 2003: 1.85:1 On September 30, 2003 and thereafter: 2.00:1 13.11.3 at all times during the Term, a minimum Consolidated Net Worth equal to the sum total of US $275,000,000 and (i) 50% of positive Consolidated Net Income for the period commencing October 1, 2001 through the end of IPG's most recently ended fiscal quarter (i.e. without any deduction for net losses) plus (ii) an amount equal to the aggregate net proceeds of any issuance of equity Securities during the Term to any Person other than a member of the Restricted Group; 13.11.4 at the end of each fiscal quarter of IPG during the Term, a ratio of Total Debt to EBITDA for the immediately preceding period of four consecu- tive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) not exceeding the lesser of: (a) Period Ratio __________________________________________________________________ On December 31, 2001: 6.00:1 On March 31, 2002: 5.75:1 On June 30, 2002: 5.50:1 On September 30, 2002 5.25:1 On December 31, 2002: 5.25:1 On March 31, 2003: 5.25:1 On June 30, 2003: 5.00:1 On September 30, 2003: 4.75:1 On December 31, 2003: 4.50:1 On March 31, 2004 4.25:1 On June 30, 2004: 4.00:1 On September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005: 3.50:1 On September 30, 2005 and December 31, 2005 3.25:1 or (b) beginning with the March 31, 2002 results (i.e. commencing with the ratio to be applicable in respect of the period ending June 30, 2002), the actual ratio of Total Debt to EBITDA reported to the Agent in respect of the previous fiscal quarter, plus 0.25, with equal step down as per the above grid to apply to the following quarters, provided that such revised ratio shall not be less than 3.25:1. For example, if the applicable ratio in respect of the period ending March 31, 2002 was 4.25:1, the applicable ratio in respect of the period ending June 30, 2002 would be 4.50:1 rather than 5.50:1; and 13.11.5 [intentionally omitted]. In calculating EBITDA for the purposes of this Section 13.11 or any other provision of this Agreement, (1) the Consolidated severance expenses and other unusual non-recurring expenses accrued or otherwise incurred by IPG and its Restricted Subsidiaries during the fiscal year 2001 prior to October 1, 2001, and (2) any charge to earnings resulting from the re-pricing of stock options as may be applicable under GAAP, shall all be added to the EBITDA for the relevant period (including on a trailing 4 quarter basis or trailing 2 quarter basis as required). For greater certainty and without limiting any provision of this Agreement, each of the Borrowers, LLC and IPG acknowledge that the failure to respect any of the foregoing financial ratios at any time during the Term constitutes a material breach of this Agreement." 4. Section 14.3 of the Credit Agreement is hereby amended and replaced by the following: "Permit any of the Facility B/C Borrower or any of its Subsidiaries, including Canco and LLC, or IPG Financial Services Inc. to carry on any business, other than (i) taking such steps as may be necessary to maintain its existence or to hold Securities of Restricted Subsidiaries, (ii) provided no Default shall have occurred and be continuing and that no Event of Default shall have occurred which has not been waived, LLC may lend money to IPG (US) Inc., (iii) performing any action required here- under or in respect hereof or under or in respect of any of the Security Documents, the Note Agreements or the Notes; and (iv) the incurrence of any Indebtedness permitted by subsection 14.2.4, and, with respect to the Facility B/C Borrower and IPG Financial Services Inc., Indebtedness permitted hereunder." III. CONDITIONS, EFFECTIVE DATE AND UNDERTAKINGS Save as set provided below, this First Amending Agreement shall become effective as of December 20, 2002 (the "Effective Date"), provided that each of the following conditions has been satisfied: 1. The Borrowers shall pay all fees and costs, including legal fees associated with this Agreement, incurred by the Agent as contemplated by the provisions of Section 13.15 of the Credit Agreement. The Borrowers shall also pay to each Lender a fee equal to the product of its Commitment multiplied by 10 basis points; 2. The Lenders shall be satisfied that the holders of the Notes have consented hereto and made a similar amendment to the financial covenants set forth in the Note Agreements, the whole in form and in substance satisfactory to the Agent and the Lenders' counsel; and 3. No Default shall have occurred and be continuing and no Event of Default shall have occurred which has not been waived. Without limiting the generality of the foregoing, the Restricted Group shall have delivered to the Agent the post-closing opinions of Morgan Lewis and Virginia counsel to the Restricted Group. Notwithstanding the foregoing, the amendments made pursuant to sections 1 and 4 of article II shall only become effective when the following additional conditions have been met: 1. IPG Financial Services Inc. and its shareholders shall have executed and delivered the Security contemplated by Section 13.13 of the Credit Agreement, including a pledge of the Securities issued by it. The opinion to be delivered in accordance with the undertaking below shall also cover such Security; 2. The Borrowers shall provide the opinion of its counsel, in form and substance acceptable to the Agent and the Lenders' counsel, with respect to the power, capacity, and authority of IPG Financial Services Inc. to enter into this First Amending Agreement and to perform its obligations hereunder, as well as with respect to the enforceability of this First Amending Agreement and the Security granted pursuant to the provisions of the previous paragraph hereof; 3. The Lenders shall be satisfied that IPG Financial Services Inc. has been designated as a "Restricted Subsidiary" under the Note Agreements, the whole in form and in substance satisfactory to the Agent and the Lenders' counsel; and 4. After having given effect to the designation of IPG Financial Services Inc. as a Facility A Borrower, no Default shall have occurred and be continuing and no Event of Default shall have occurred which has not been waived. The Agent shall confirm when the foregoing conditions to the amendments made pursuant to sections 1 and 4 of article II have been met. The Borrowers hereby undertake to do the following by no later than January 31, 2003: 1. To provide the opinion of its counsel, in form and substance acceptable to the Agent and the Lenders' counsel, with respect to the power, capacity, and authority of each member of the Restricted Group to enter into this First Amending Agreement and to perform its obligations hereunder, as well as with respect to the enforceability of this First Amending Agreement and the effect thereof on the enforceability of the Security; 2. To comply with the provisions of the post-closing undertaking described in subsection 11.1.21 of the Credit Agreement; and 3. To fulfill the above conditions with respect to the amendments made in sections 1 and 4 of article II. IV. MISCELLANEOUS 1. All of the provisions of the Credit Agreement which are not amended hereby shall remain in full force and effect. The Borrowers hereby represent and warrant that the organizational chart attached hereto is current and accurate in all respects. 2. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York. 3. Each member of the Restricted Group acknowledges having taken cognizance of the provisions of the foregoing First Amending Agreement and agrees that the Guarantees and Security executed by it (A) remain enforceable against it in accordance with their terms, and (B) continue to guarantee or secure, as applicable, all of the obligations of the Persons specified in such Guarantees and Security Documents in connection with the Credit Agreement, as amended by this First Amending Agreement. 4. The parties acknowledge that they have required that the present agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto be drawn up in English. Les parties reconnaissent avoir exige la redaction en anglais de la presente convention ainsi que de tous documents executes, avis donnes et procedures judiciaires intentees, directement ou indirectement, relativement ou a la suite de la presente convention. IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT ON THE DATE AND AT THE PLACE FIRST HEREINABOVE MENTIONED. INTERTAPE POLYMER INC. INTERTAPE POLYMER CORP. Per: /s/Andrew M. Archibald Per: /s/Gregory S. Yull Andrew M. Archibald, CFO Gregory S. Yull, President Address: 110E Montee de Liesse Address: 3647 Cortez Road West St. Laurent, Quebec Bradenton, FL 34210 H4T 1N4 Attention: President Attention: Chief Financial Officer Telephone: (941) 727-5788 Telephone: (514) 731-7591 Fax: (941) 727-5293 Fax: (514) 731-5477 IPG (US) HOLDINGS INC. IPG (US) INC. Per: /s/ H. Dale McSween Per: /s/Jim Bob Carpenter H. Dale McSween, President Jim Bob Carpenter, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 IPG ADMINISTRATIVE SERVICES INC. CENTRAL PRODUCTS COMPANY Per: /s/ H. Dale McSween Per: /s/H. Dale McSween H. Dale McSween, President H. Dale McSween, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 INTERTAPE INC. INTERTAPE POLYMER MANAGEMENT CORP. Per: /s/Gregory A. Yull Per: /s/Burgess H. Hildreth Gregory A. Yull, President Burgess H. Hildreth, Vice President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 POLYMER INTERNATIONAL CORP. INTERNATIONAL CONTAINER SYSTEMS, INC. Per: /s/Burgess H. Hildreth Per: /s/Burgess H. Hildreth Burgess H. Hildreth, President Burgess H. Hildreth, Vice President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 UTC ACQUISITION CORP. INTERTAPE INTERNATIONAL CORP. Per: /s/Burgess H. Hildreth Per: /s/Burgess H. Hildreth Burgess H. Hildreth, President Burgess H. Hildreth, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 COIF HOLDING INC. FIBC HOLDING INC. Per: /s/Burgess H. Hildreth Per: /s/Jim Bob Carpenter Burgess H. Hildreth, Secretary Jim Bob Carpenter, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 CAJUN BAG & SUPPLY CORP. INTERPACK MACHINERY INC. Per: /s/Jim Bob Carpenter Per: /s/H. Dale McSween Jim Bob Carpenter, President H. Dale McSween, President Address: 3647 Cortez Road West Address: 110E Montee de Liesse Bradenton, FL 34210 St. Laurent, Quebec H4T 1N4 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (514) 731-7591 Fax: (941) 727-5293 Fax: (514) 731-5477 SPUNTECH FABRICS INC. IPG HOLDING COMPANY OF NOVA SCOTIA Per: /s/Piero Greco Per: /s/Andrew M. Archibald Piero Greco, Vice President Andrew M. Archibald, Vice President Address: 110E Montee de Liesse Finance St. Laurent, Quebec H4T 1N4 Address: 110E Montee de Liesse Attention: President St. Lurent, Quebec H4T 1N4 Telephone: (514) 731-7591 Attention: President Fax: (514) 731-5477 Telephone: (514) 731-7591 Fax: (514) 731-5477 IPG HOLDINGS LP, represented by its INTERTAPE POLYMER GROUP INC. Per: /s/Andrew M. Archibald Per: /s/Andrew M. Archibald Andrew M. Archibald, CFO Andrew M. Archibald, CFO, Vice Address: 110E Montee de Liesse President Administration & Secretary St. Laurent, Quebec H4T 1N4 Address: 110E Montee de Liesse Attention: General Partner St. Lurent, Quebec H4T 1N4 Telephone: (514) 731-7591 Attention: Chief Financial Officer Fax: (514) 731-5477 Telephone: (514) 731-7591 Fax: (514) 731-5477 IPG FINANCE LLC IPG FINANCIAL SERVICES INC. Per: /s/Andrew M. Archibald Per: /s/Andrew M. Archibald Andrew M. Archibald, President Andrew M. Archibald, President Address: 1403 Foulk Road, Foulkstone Address: 3647 Cortez Road West Plaza Bradenton, FL 34210 Wilmington, DE 19899 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (302) 478-1160 Fax: (941) 727-5293 IPG TECHNOLOGIES INC. Per: /s/Andrew M. Archibald Andrew M. Archibald, Secretary Address: 2000 South Beltline Blvd. Columbia, SC 29201 Attention: President Telephone: (803) 799-8800 Fax: (803) 988-7919 THE TORONTO-DOMINION BANK, as THE TORONTO-DOMINION BANK, as Lender Canadian Agent Per: /s/Nigel Sharpley Per: /s/J-F Godin Nigel Sharpley, VP Loan Syndications, J-F Godin, VP Corporate Credit and Agency Investment Banking Address: 66 Wellington Street West Per:/s/Yves Bergeron 38th Floor Managing Director, Corporate Credit Toronto, Ontario M5K 1A2 and Investment Banking Attention: VP Loan, Syndications, Agency Address: 500 St. Jacques Street West Telephone: (416) 983-5030 9th Floor Fax: (416) 982-5535 Montreal, Quebec H2Y 1S1 Attention: Jean-Francois Telephone: (514) 289-0102 Fax: (416) 289-0788 THE TORONTO-DOMINION BANK, TORONTO DOMINION (TEXAS), INC., as US NTERNATIONAL BANKING FACILITY, New Agent York Branch, as Lender Per:/s/Lyne Chasin Per:/s/Lyne Chasin Lyne Chasin, Vice President Lyne Chasin, Vice President Address: 31 West 52nd Street Address: 909 Fannin, Suite 1700 New York, New York, 10019-6101 Houston, Texas, 77010 Attention: Lynn Chasin Attention: Lynn Chasin Telephone: (713) 427-8531 Telephone: (713) 427-8531 Fax: (713) 951-9921 Fax: (713) 951-9921 COMERICA BANK, a Michigan Banking NATIONAL BANK OF CANADA, as Lender Corporation as Lender Per:/s/Darlene Persons Per:/s/Darlene Persons Darlene Persons, First Vice President Darlene Persons, First Vice President Address: 500 Woodward Avenue, Address:1155 Metcalfe Street Suite 23rd Floor 5th Floor Detroit, Michigan, 48226 Montreal, Quebec, H3B 4S9 Attention: Darlene P. Persons Attention: Linda Gross Telephone:313-222-9125 Telephone: (514) 394-8049 Fax:313-222-3377 Fax: (514) 394-6073 NATIONAL BANK OF CANADA, NEW YORK COMERICA BANK CANADA BRANCH, as Lender BRANCH, as Lender Per:/s/Yvon LaPlante Vice President and Manager /s/Jeffrey Forgach Assistant Vice President Per:/s/Rob Rosen Address: 125 West 55th Street, Address: Suite 2210, South Tower 23rd Floor Royal Bank Plaza New York, New York, 10019 200 Bay Street, P.O. Box 61 Attention: Auggie Marchetti, Toronto, Ontario, M5J 2J2 Vice-President Attention:Rob Rosen Telephone: (212) 632-8539 Telephone: (416) 367-3113 #232 Fax: (212) 632-5809 Fax: (416) 367-2460 SCHEDULE D SUBSIDIARIES 1. Restricted Subsidiaries Intertape Polymer Inc. ("IPI") IPG Holdings LP IPG (US) Holdings Inc. IPG Holding Company of Nova Scotia IPG Finance LLC IPG (US) Inc. Central Products Company IPG Administrative Services Inc. Intertape Polymer Corp. Intertape Inc. Intertape Polymer Management Corp. Polymer International Corp. International Container Systems, Inc. Intertape International Corp. FIBC Holding Inc. COIF Holding Inc. IPG Technologies Inc. UTC Acquisition Corp. Interpack Machinery Inc. Spuntech Fabrics Inc. Cajun Bag & Supply Corp. IPG Financial Services Inc. 2. Operating Restricted Subsidiaries Intertape Polymer Inc. IPG (US) Holdings Inc. IPG (US) Inc. Central Products Company IPG Administrative Services Inc. Intertape Polymer Corp. Intertape Inc. Intertape Polymer Management Corp. Polymer International Corp. International Container Systems, Inc. Intertape International Corp. FIBC Holding Inc. COIF Holding Inc. IPG Technologies Inc. UTC Acquisition Corp. Interpack Machinery Inc. Spuntech Fabrics Inc. Cajun Bag & Supply Corp. IPG Financial Services Inc. 3. Inactive Subsidiaries IPG Technologies Acquisition Corp. (has no stock issued; in process of dissolving) SCHEDULE J UNRESTRICTED SUBSIDIARIES Intertape Woven Products, S.A. de C.V. Intertape Woven Product Services, S.A. de C.V. Drumheath Indemnity Ltd. ("Drumheath") Interpack International Ltd. Intertape Polymer Exports, Inc. INACTIVE SUBSIDIARIES IPG Technologies Acquisition Corp. (no stock issued; in process of dissolving) SCHEDULE K LIST OF FACILITY A BORROWERS 1. Canadian Borrowers: a) Intertape Polymer Inc. b) Interpack Machinery Inc. c) Spuntech Fabrics Inc. 2. US Borrowers: a) IPG (US) Holdings Inc. b) IPG (US) Inc. c) Central Products Company d) IPG Administrative Services Inc. e) Intertape Polymer Corp. f) Intertape Inc. g) Intertape Polymer Management Corp. h) Polymer International Corp. i) International Container Systems, Inc. j) Intertape International Corp. k) FIBC Holding Inc. l) COIF Holding Inc. m) IPG Technologies Inc. n) UTC Acquisition Corp. o) Cajun Bag & Supply Corp. p) IPG Financial Services Inc. SCHEDULE L LIST OF GUARANTORS 1. Facility A Intertape Polymer Group Inc. IPG Holdings LP IPG Finance LLC IPG Holding Company of Nova Scotia 2. Facility C Intertape Polymer Group Inc. IPG (US) Holdings Inc. IPG Holding Company of Nova Scotia IPG Finance LLC IPG (US) Inc. Central Products Company IPG Administrative Services Inc. Intertape Polymer Corp. Intertape Inc. Intertape Polymer Management Corp. Polymer International Corp. International Container Systems, Inc. Intertape International Corp. FIBC Holding Inc. COIF Holding Inc. IPG Technologies Inc. UTC Acquisition Corp. Interpack Machinery Inc. Spuntech Fabrics Inc. Cajun Bag & Supply Corp. IPG Financial Services Inc. SCHEDULE N LOCATION OF ASSETS, HEAD OFFICES AND TAX IDENTIFICATION NUMBERS
Name of Subsidiary State of Chief Executive Other Places Tax ID Incorporation/ Office Where Collateral Number is Located Intertape Polymer Inc. Canada St. Laurent, PQ St. Laurent, PQ; (corporate Truro, NS; headquarters) Edmundston, NB 123157695 IPG Holdings LP Delaware St. Laurent, PQ None 59-3479359 IPG (US) Holdings Inc. Delaware Bradenton, FL None 59-3479333 IPG Holding Company of Nova Scotia Canada Halifax, Nova Scotia None 87-0666567 IPG Finance LLC Delaware Wilmington, DE None 59-3480659 IPG (US) Inc. Delaware Bradenton, FL None 59-3479361 Central Products Company Delaware Bradenton, FL Carbondale, IL Menasha, WI Brighton, CO Green Bay, WI Columbia, SC Richmond, KY Marysville, MI Cumming, GA Ontario, CA 39-1831503 IPG Administrative Services Inc.Delaware Wilmington, DE All manufacturing locations 57-1089148 Intertape Polymer Corp. Delaware Wilmington, DE warehouses 57-1088158 Intertape Inc. Virginia Danville, VA Danville, VA Tremonton, UT 54-1411730 Intertape Polymer Management Corp. Florida Bradenton, FL Bradenton, FL 59-3514328 Polymer International Corp. Virginia Bradenton, FL None 59-1091227 International Container Systems, Inc. Florida Bradenton, FL Bradenton, FL 59-3360203 Intertape International Corp. Delaware Bradenton, FL None 58-2387174 FIBC Holding Inc. Delaware Bradenton, FL None 57-1089150 COIF Holding Inc. Delaware Bradenton, FL None 57-1089149 IPG Technologies Inc. Delaware Columbia, SC Columbia, SC 57-1089148 UTC Acquisition Corp. Delaware Bradenton, FL None 59-3395373 Interpack Machinery Inc. Canada St. Laurent, PQ None 119557353 Spuntech Fabrics Inc. Canada Truro, Nova Scotia None 892293234 Cajun Bag & Supply Corp. Delaware Bradenton, FL Rayne, LA 58-2255977 IPG Financial Services Inc. Delaware Wilmington, DE None 522212513
ORGANIZATIONAL CHART See the attached. EX-7 6 secondamendcreditagr.txt SECOND AMENDMENT CREDIT AGREEMENT SECOND AMENDING AGREEMENT to the Credit Agreement dated as of December 20, 2001, as amended by a First Amending Agreement dated as of December 20, 2002, entered into in the City of Montreal, Province of Quebec, as of March 14, 2003, AMONG: INTERTAPE POLYMER INC., INTERTAPE POLYMER CORP. and each of the other joint and several Facility A Borrowers (hereinafter collectively called the "Facility A Borrowers") PARTIES OF THE FIRST PART AND: IPG HOLDINGS LP (hereinafter called the "Facility B/C Borrower") PARTY OF THE SECOND PART AND: INTERTAPE POLYMER GROUP INC., IPG FINANCE LLC and IPG HOLDING COMPANY OF NOVA SCOTIA (as Guarantors) PARTIES OF THE THIRD PART AND: THE LENDERS, AS DEFINED IN THE CREDIT AGREEMENT (the "Lenders") PARTIES OF THE FOURTH PART AND: THE TORONTO-DOMINION BANK, AS CANADIAN ADMINISTRATION AGENT FOR THE LENDERS PARTY OF THE FIFTH PART AND: TORONTO DOMINION (TEXAS), INC., AS US ADMINISTRATION AGENT FOR THE LENDERS PARTY OF THE SIXTH PART WHEREAS the parties hereto are parties to a Credit Agreement dated as of December 20, 2001, as amended by a First Amending Agreement (the "First Amending Agreement") dated December 20, 2002 (the "Credit Agreement"); WHEREAS the portion of the First Amending Agreement relating to the desig- nation of IPG Financial Services Inc. as a Facility A Borrower has not yet come into effect; WHEREAS the Borrowers have requested certain changes to the manner in which some of the financial covenants set forth in the Credit Agreement are calculated; WHEREAS, pursuant to the provisions of section 10.5(d) of the Inter- Creditor Agreement, each of the Lenders and each of the holders of Notes shall approve such a change to the said financial covenants; and WHEREAS each of the Lenders has agreed with the Borrowers to the amendments contemplated hereby and, as such, has complied with the provisions of the Credit Agreement and the Inter-Creditor Agreement, as evidenced by their signature on this Agreement; NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS: I. INTERPRETATION All of the words and expressions which are capitalized herein shall have the meanings ascribed to them in the Credit Agreement unless otherwise indicated herein. II. AMENDMENT The definition of "Consolidated Net Worth" contained in subsection 1.1.39 of the Credit Agreement is hereby amended and replaced by the following: "Consolidated Net Worth" means, as of the date of any determination thereof, the Consolidated total shareholders' equity of the Restricted Group as of such date, determined on a Consolidated basis, but in any event excluding any amount of such shareholders' equity allocable or attributable to (i) Minority Interests, and (ii) all Investments (other than Permitted Investments) by any member of the Restricted Group. For the purposes of the calculation of the ratios under subsections 13.11.1 and 13.11.3 only and provided that such impairment charges do not exceed US$75,000,000, any non-cash goodwill impairment charges taken in the last fiscal quarter of 2002 as determined in accordance with the accounting rules under FASB 142 and CICA 3062 and CICA 1581 and in accordance with GAAP shall be added back to the Consolidated total shareholders' equity of the Restricted Group as of such date to the extent that the impairment charges have been deducted therefrom;". III. CONDITIONS AND EFFECTIVE DATE Save as set provided below, this Second Amending Agreement shall become effective as of March 14, 2003 (the "Effective Date"), provided that each of the following conditions has been satisfied: 1. The Borrowers shall pay all fees and costs, including legal fees associated with this Agreement, incurred by the Agent as contemplated by the provisions of Section 13.15 of the Credit Agreement. The Borrowers shall also pay to each Lender a fee equal to the product of its Commitment multiplied by the greater of (i) 10 basis points or (ii) the fee in basis points payable to the holders of the Notes under the amending agreements described in section III(2) hereof; 2. The Lenders shall be satisfied that the holders of the Notes have consented hereto in writing and made an amendment to the financial covenants set forth in sections 5.6 and 5.8(a) of the Note Agreements, the whole in form and in substance satisfactory to the Agent and the Lenders' counsel; and 3. No Default shall have occurred and be continuing and no Event of Default shall have occurred which has not been waived. IV. MISCELLANEOUS 1. All of the provisions of the Credit Agreement which are not amended hereby shall remain in full force and effect. 2. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York. 3. Each member of the Restricted Group acknowledges having taken cognizance of the provisions of the foregoing Second Amending Agreement and agrees that the Guarantees and Security executed by it (A) remain enforceable against it in accordance with their terms, and (B) continue to guarantee or secure, as applicable, all of the obligations of the Persons specified in such Guarantees and Security Documents in connection with the Credit Agreement, as amended by this Second Amending Agreement. 4. The Lenders hereby approve the amendments to the Note Agreements annexed hereto as Annex "A". 5. The parties acknowledge that they have required that the present agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto be drawn up in English. Les parties reconnaissent avoir exige la redaction en anglais de la presente convention ainsi que de tous documents executes, avis donnes et procedures judiciaires intentes, directement ou indirectement, relativement ou a la suite de la presente convention. IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT ON THE DATE AND AT THE PLACE FIRST HEREINABOVE MENTIONED. INTERTAPE POLYMER INC. INTERTAPE POLYMER CORP. Per: /s/Andrew M. Archibald Per: /s/Gregory S. Yull Andrew M. Archibald, CFO Gregory S. Yull, President Address: 110E Montee de Liesse Address: 3647 Cortez Road West St. Laurent, Quebec Bradenton, FL 34210 H4T 1N4 Attention: President Attention: Chief Financial Officer Telephone: (941) 727-5788 Telephone: (514) 731-7591 Fax: (941) 727-5293 Fax: (514) 731-5477 IPG (US) HOLDINGS INC. IPG (US) INC. Per: /s/ H. Dale McSween Per: /s/Jim Bob Carpenter H. Dale McSween, President Jim Bob Carpenter, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 IPG ADMINISTRATIVE SERVICES INC. CENTRAL PRODUCTS COMPANY Per: /s/ H. Dale McSween Per: /s/H. Dale McSween H. Dale McSween, President H. Dale McSween, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 INTERTAPE INC. INTERTAPE POLYMER MANAGEMENT CORP. Per: /s/Gregory A. Yull Per: /s/Burgess H. Hildreth Gregory A. Yull, President Burgess H. Hildreth, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 POLYMER INTERNATIONAL CORP. INTERNATIONAL CONTTAINER SYSTEMS, INC. Per: /s/Burgess H. Hildreth Per: /s/Burgess H. Hildreth Burgess H. Hildreth, President Burgess H. Hildreth, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 UTC ACQUISITION CORP. INTERTAPE INTERNATIONAL CORP. Per: /s/Burgess H. Hildreth Per: /s/Burgess H. Hildreth Burgess H. Hildreth, President Burgess H. Hildreth, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 COIF HOLDING INC. FIBC HOLDING INC. Per: /s/Burgess H. Hildreth Per: /s/Jim Bob Carpenter Burgess H. Hildreth, Secretary Jim Bob Carpenter, President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 CAJUN BAG & SUPPLY CORP. INTERPACK MACHINERY INC. Per: /s/Jim Bob Carpenter Per: /s/H. Dale McSween Jim Bob Carpenter, President H. Dale McSween, President Address: 3647 Cortez Road West Address: 110E Montee de Liesse Bradenton, FL 34210 St. Laurent, Quebec H4T 1N4 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (514) 731-7591 Fax: (941) 727-5293 Fax: (514) 731-5477 SPUNTECH FABRICS INC. IPG HOLDING COMPANY OF NOVA SCOTIA Per: /s/Piero Greco Per: /s/Andrew M. Archibald Piero Greco, Vice President Andrew M. Archibald, Vice President Address: 110E Montee de Liesse Finance St. Laurent, Quebec H4T 1N4 Address: 110E Montee de Liesse Attention: President St. Lurent, Quebec H4T 1N4 Telephone: (514) 731-7591 Attention: President Fax: (514) 731-5477 Telephone: (514) 731-7591 Fax: (514) 731-5477 IPG HOLDINGS LP, represented by its INTERTAPE POLYMER GROUP INC. Per: /s/Andrew M. Archibald Per: /s/Andrew M. Archibald Andrew M. Archibald, CFO Andrew M. Archibald, CFO, Vice Address: 110E Montee de Liesse President Administration & Secretary St. Laurent, Quebec H4T 1N4 Address: 110E Montee de Liesse Attention: General Partner St. Lurent, Quebec H4T 1N4 Telephone: (514) 731-7591 Attention: Chief Financial Officer Fax: (514) 731-5477 Telephone: (514) 731-7591 Fax: (514) 731-5477 IPG FINANCE LLC IPG FINANCIAL SERVICES INC. Per: /s/Andrew M. Archibald Per: /s/Andrew M. Archibald Andrew M. Archibald, President Andrew M. Archibald, President Address: 1403 Foulk Road, Foulkstone Address: 3647 Cortez Road West Plaza Bradenton, FL 34210 Wilmington, DE 19899 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (302) 478-1160 Fax: (941) 727-5293 IPG TECHNOLOGIES INC. Per: /s/Andrew M. Archibald Andrew M. Archibald, Secretary Address: 2000 South Beltline Blvd. Columbia, SC 29201 Attention: President Telephone: (803) 799-8800 Fax: (803) 988-7919 THE TORONTO-DOMINION BANK, as THE TORONTO-DOMINION BANK, as Lender Canadian Agent Per: /s/Nigel Sharpley Per: /s/J-F Godin Nigel Sharpley, VP Loan Syndications, J-F Godin, VP Corporate Credit and Agency Investment Banking Address: 66 Wellington Street West Per:/s/Yves Bergeron 38th Floor Managing Director, Corporate Credit Toronto, Ontario M5K 1A2 and Investment Banking Attention: VP Loan, Syndications, Agency Address: 500 St. Jacques Street West Telephone: (416) 983-5030 9th Floor Fax: (416) 982-5535 Montreal, Quebec H2Y 1S1 Attention: Jean-Francois Telephone: (514) 289-0102 Fax: (416) 289-0788 THE TORONTO-DOMINION BANK, TORONTO DOMINION (TEXAS), INC., as US NTERNATIONAL BANKING FACILITY, New Agent York Branch, as Lender Per:/s/Diane Bailey Per:/s/Diane Bailey Diane Bailey, Manager Syndications Diane Bailey, Manager Syndications and Credit Administration and Credit Administration Address: 31 West 52nd Street Address: 909 Fannin, Suite 1700 New York, New York, 10019-6101 Houston, Texas, 77010 Attention: Lynn Chasin Attention: Lynn Chasin Telephone: (713) 427-8531 Telephone: (713) 427-8531 Fax: (713) 951-9921 Fax: (713) 951-9921 COMERICA BANK, a Michigan Banking NATIONAL BANK OF CANADA, as Lender Corporation as Lender Per:/s/Darlene Persons Per:/s/Darlene Persons Darlene Persons, First Vice President Darlene Persons, First Vice President Address: 500 Woodward Avenue, Address:1155 Metcalfe Street Suite 23rd Floor 5th Floor Detroit, Michigan, 48226 Montreal, Quebec, H3B 4S9 Attention: Darlene P. Persons Attention: Linda Gross Telephone:313-222-9125 Telephone: (514) 394-8049 Fax:313-222-3377 Fax: (514) 394-6073 NATIONAL BANK OF CANADA, NEW YORK COMERICA BANK CANADA BRANCH, BRANCH, as Lender as Lender Per:/s/Yvon LaPlante Per:/s/Rob Rosen Vice President and Manager Address: Suite 2210, South Tower /s/Jeffrey Forgach Royal Bank Plaza Assistant Vice President 200 Bay Street, P.O. Box 61 Address: 125 West 55th Street, Toronto, Ontario, M5J 2J2 23rd Floor Attention: Rob Rosen New York, New York, 10019 Telephone: (416) 367-3113 #232 Attention: Auggie Marchetti, Fax: (416) 367-2460 Vice-President Telephone: (212) 632-8539 Fax: (212) 632-5809 ANNEX "A" [TO BE ATTACHED] EX-8 7 note137amend1.txt FIRST AMENDMENT $137 NOTE AGREEMENT IPG HOLDINGS LP __________________________________________________________ AMENDMENT NO. 1 TO AMENDED AND RESTATED NOTE AGREEMENT __________________________________________________________ Dated as of December 20, 2002 U.S. $137,000,000 SENIOR SECURED NOTES DUE MARCH 31, 2008 IPG HOLDINGS LP U.S. $137,000,000 SENIOR SECURED NOTES DUE MARCH 31, 2008 AMENDMENT NO. 1 TO AMENDED AND RESTATED NOTE AGREEMENT As of December 20, 2002 To each of the Persons Named in Annex 1 hereto (collectively, the "Current Noteholders"): Ladies and Gentlemen: IPG HOLDINGS LP, a limited partnership formed under the laws of that State of Delaware (the "Issuer"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "General Partner"), and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "Parent" and, together with the Issuer and the General Partner herein referred to, collectively, as the "Obligors" and, individually, as an "Obligor") hereby, jointly and severally, agree with each of the Current Noteholders as follows: 1. PRIOR ISSUANCE OF NOTES, ETC. Pursuant to that certain Amended and Restated Note Agreement, dated as of December 20, 2001 (as in effect immediately prior to giving effect to the amendments provided by this Agreement, the "Existing Note Agreement" and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the "Note Agreement"), the Obligors and the Current Noteholders agreed to amend and restate the terms of those certain separate Note Agreements, each dated as of June 1, 1998, by and among the Obligors and each of the purchasers named in Schedule I thereto, pursuant to which the Issuer issued U.S. $137,000,000 in aggregate principal amount of its 6.82% Senior Guaranteed Notes due March 31, 2008 (as amended and restated pursuant to the terms of the Existing Note Agreement, the "Notes"). The register kept by the Company for the registration and transfer of the Notes indicates that each of the Current Noteholders is currently a holder of the Notes indicated on Annex 1. 2, REQUEST FOR CONSENT TO AMENDMENTS The Obligors request that each of the Current Noteholders agree to the amendments (the "Amendments") to the Existing Note Agreement provided for by this Agreement. 3. WARRANTIES AND REPRESENTATIONS To induce the Current Noteholders to enter into this Agreement and to agree to the Amendments, the Obligors represent and warrant as follows: 3.1 Organization and Authority. Each of the Obligors: (a) is a corporation, partnership, or other entity, duly organized or formed, validly existing and (to the extent applicable) in good standing under the laws of its jurisdiction of incorporation or organi- zation; and (b) has all requisite power and authority to enter into and perform its obligations under this Agreement and the Note Agreement. 3.2 Transactions are Legal and Authorized. Each of the execution and delivery of this Agreement by the Obligors, the consummation of each of the transactions contemplated thereby and compli- ance by the Obligors with all of the provisions of this Agreement and the Note Agreement (a) will not violate any law or any order, judgment, decree or ruling of any court or governmental authority or agency applicable to the Obligors and (b) will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the constitutive documents of any Obligor or any indenture or other material agreement or instrument to which any Obligor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any material property of any Obligor. The execution and delivery of this Agreement has been duly authorized by proper action on the part of each of the Obligors. Each of this Agreement and the Note Agreement constitutes the legal, valid and binding obligation of each of the Obligors, enforceable in accordance with its respective terms, except as enforceability thereof may be subject to the effect of any applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally. 3.3 No Material Adverse Change. Since the date of the most recent audited consolidated financial statements of the Parent provided to each of the Current Noteholders, there has been no event or circumstance which has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.4 Renewal Request. The Facility A Borrowers (as such term is defined in the Bank Credit Agreement) have taken all necessary and appropriate action in accordance with section 2.4 of the Bank Credit Agreement to request the extension of the Conversion Date (as such term is defined in the Bank Credit Agreement) for an additional period of 364 days. Bank Facility A is in full force and effect as of the date hereof and the Facility A Borrowers thereunder have the right to borrow and reborrow not less than an aggregate of $50,000,000 thereunder until at least December 20, 2004. 3.5 Full Disclosure. Neither the financial statements and other certificates previously provided to the Current Noteholders pursuant to the provisions of the Existing Note Agreement nor the statements made in this Agreement nor any other written statements in final form furnished by or on behalf of the Obligors to any Current Noteholder in connection with the proposal and negotiation of the Amendments, taken as a whole, contain any untrue statement of a material fact or omit a material fact necessary to make the statements taken as a whole contained therein and herein not misleading. There is no fact relating to any event or circumstance that has occurred or arisen since December 20, 2001 that the Obligors have not disclosed to each of the Current Noteholders in writing that has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.6 Other Agreements. Upon (a) the execution and delivery hereof and the effectiveness of the Amendments as provided herein and (b) execution and delivery of the Bank Amendment (as defined below) and the amendment to the 1999 Note Agreement and the effectiveness of said amendments as provided therein, neither any Obligor nor any Restricted Subsidiary is in violation in any respect of any term in any agreement, or other instrument to which it is a party or by which it or any of its property may be bound except for such violations that, in the aggregate for all such violations or defaults, could not reasonably be expected to result in a Material Adverse Change. 3.7 No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of this Agreement and the effectiveness of the Amendments provided herein, would constitute a Default or an Event of Default. 4. AMENDMENTS 4.1 Amendments to Existing Note Agreement. Subject to Section 4.2 below, the Existing Note Agreement is hereby amended in the manner specified in Exhibit A to this Agreement. 4.2 Effectiveness of Amendments. The Amendments contemplated by Section 4.1 above and Exhibit A shall become effective (the "Effective Date"), if at all, upon the date of the satisfaction in full of the following conditions precedent (unless waived in writing by the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes): (a) a counterpart of this Agreement shall have been executed and delivered by each of the Obligors and the Current Noteholders; (b) the representations and warranties set forth in Section 3 hereof shall be true and correct on such date; (c) the Obligors shall have paid the reasonable fees and expenses of Bingham McCutchen LLP, special counsel to the Current Noteholders, as provided in Section 6 hereof; (d) the Obligors shall have paid to each Current Noteholder an amendment fee in an amount equal to one tenth of one percent (0.10%) of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date; (e) the Obligors shall have entered into an amendment to the 1999 Note Agreement, in form and substance reasonably satisfactory to the Current Noteholders, providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments; and (f) the Obligors and the applicable Restricted Subsidiaries shall have entered into an amendment to the Credit Agreement, in form and substance reasonably satisfactory to the Current Noteholders (the "Bank Amendment"), providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments, and all conditions to the effectiveness of the Bank Amendment shall have been satisfied. 4.3 No Other Amendments; Confirmation. Except as expressly provided herein, (a) no terms or provisions of any agreement are modified or changed by this Agreement, (b) the terms of this Agreement shall not operate as a waiver by any Current Noteholder of, or otherwise prejudice any Current Noteholder's rights, remedies or powers under, the Existing Note Agreement or any other Financing Document or under any applicable law, and (c) the terms and provisions of the Existing Note Agreement and each other Financing Document shall continue in full force and effect, without modification or amendment. 4.4 Additional Covenants. The Company hereby undertakes to do the following by no later than January 31, 2003: (a) To execute all such documents, instruments and agreements as may be reasonably required by the holders of the Notes to designate IPG Financial Services Inc. as a Restricted Subsidiary under the Note Agreement and the other Financing Documents, as applicable; (b) To provide the opinion of its counsel, in form and substance acceptable to the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes with respect to (i) the power, capacity, and authority of each member of the Restricted Group to enter into this Agreement and to perform its obligations hereunder, as well as with respect to the enforceability of this Agreement, and (ii) the designation of IPG Financial Services Inc. as a Restricted Subsidiary under the Note Agreement and the other applicable Financing Documents and the effect thereof on the enforceability of the Collateral; and (c) To comply with the provisions of the post-closing undertaking described in Section 4.6(e) of the Existing Note Agreement. 5. DEFINED TERMS Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Existing Note Agreement or in Exhibit A hereto. 6. EXPENSES Whether or not the Amendments set forth herein or contemplated hereby become effective, the Obligors jointly and severally agree to pay on the Effective Date (or if an invoice is delivered subsequent to the Effective Date or if the Amendments provided for herein do not become effective, promptly and in any event within thirty (30) days of receiving any statement or invoice therefor) all fees, expenses and costs relating to this Agreement, including, but not limited to, the reasonable fees of the Current Noteholders' special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Agreement and any other documents related hereto. Nothing in this Section shall limit the Obligors' obligations pursuant to Section 9.4 of the Existing Note Agreement. 7. MISCELLANEOUS 7.1 Part of Note Agreement, Future References, etc. This Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Agreement, all terms, conditions and covenants contained in the Existing Note Agreement and the other Financing Documents are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Agreement may refer to the Note Agreement without making specific reference to this Agreement, but nevertheless all such references shall include this Agreement unless the context otherwise requires. 7.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 7.3 Duplicate Originals, Execution in Counterpart. Two (2) or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and each set of counterparts that, collectively, show execution by each Obligor and each consenting Current Noteholder shall constitute one duplicate original. 7.4 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Obligors and the Current Noteholders and their respective successors and assigns. [Remainder of page intentionally left blank; next page is signature page.] If each Current Noteholder is in agreement with the foregoing, please so indicate by signing the applicable acceptance on a counterpart hereof and returning such counterpart to the Company, whereupon this Agreement shall become binding among each of the Obligors and the Current Noteholders in accordance with its terms. Very truly yours, INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/Andrew Archibald Name: Andrew Archibald Title: Chief Financial Officer, Secretary, Treasurer and Vice President Administration IPG HOLDINGS LP By: Intertape Polymer Inc., its General Partner By: /s/Andrew Archibald Name: Andrew Archibald Title: Chief Financial Officer INTERTAPE POLYMER INC. By: /s/Salvatore Vitale Name: Salvatore Vitale Title: Assistant Secretary ACCEPTED AND AGREED: NEW YORK LIFE INSURANCE COMPANY By: /s/A. Post Howland Name: A. Post Howland Title: Investment Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Investment Management LLC, its Investment Manager By: /s/A. Post Howland Name: A. Post Howland Title: Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT By: New York Life Investment Management LLC, its Investment Manager By: /s/A. Post Howland Name: A. Post Howland Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/Kevin Kraska Name: Kevin Kraska Title: Vice President U.S. PRIVATE PLACEMENT FUND By: Prudential Private Placement Investors, L.P., Investment Advisor By: Prudential Private Placement Investors, Inc., its General Partner By: /s/Kevin Kraska Name: Kevin Kraska Title: Vice President THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation By: /s/David A. Barras Name: David A. Barras Title: Its Authorized Representative MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Adviser By: /s/Emeka Onukwugha Name: Emeka Onukwugha Title: Managing Director CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. (authorized agent) By: /s/Debra J. Height Name: Debra J. Height Title: Managing Director LIFE INSURANCE COMPANY OF NORTH AMERICA By: CIGNA Investments, Inc. (authorized agent) By: /s/Debra J. Height Name: Debra J. Height Title: Managing Director PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Deborah Svolboda Name: Deborah Svoboda Epp Title: Counsel By: /s/James Fifield Name: James Fifield Title: Counsel PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Deborah Svoboda Name: Deborah Svoboda Epp Title: Counsel By: /s/James Fifield Name: James Fifield Title: Counsel CGU LIFE INSURANCE COMPANY OF AMERICA, a Delaware corporation (formerly known as Commercial Union Life Insurance Company of America) By: Principal Capital Management, LLC, a Delaware limited liability company, its attorney in fact By: /s/Deborah Svoboda Name: Deborah Svoboda Epp Title: Counsel By: /s/James Fifield Name: James Fifield Title: Counsel JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/Robert E. Whalen, II Name: Robert E. Whalen, II Title: Vice President JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, Successor by Merger to AH (MICHIGAN) LIFE INSURANCE COMPANY By: /s/Robert E. Whalen, II Name: Robert E. Whalen, II Title: Vice President RELIASTAR LIFE INSURANCE COMPANY, f/k/a NORTHERN LIFE INSURANCE COMPANY By: ING Investment Management LLC, as agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY, as Successor by Merger to RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President MODERN WOODMEN OF AMERICA By:/s/Michael Dau Name: Michael Dau Title: Manager, Securities Division CLARICA LIFE INSURANCE COMPANY - U.S. By: /s/John N. Whelihan Name: John N. Whelihan Title: Vice President, U.S. Private Placements - for President By: /s/Richard Gordon Name: Richard Gordon Title: Vice President, U.S. Public Bonds - for Secretary ANNEX 1 CURRENT NOTEHOLDERS AND ORIGINAL PRINCIPAL AMOUNTS Name of Current Noteholder Original Principal Amount of Notes Held New York Life Insurance Company $ 7,000,000 New York Life Insurance and Annuity Corporation $10,000,000 New York Life Insurance and Annuity Corporation, Institutionally Owned Life Insurance Separate Account $ 5,000,000 The Prudential Insurance Company of America $14,600,000 $ 3,000,000 U.S. Private Placement Fund $ 4,400,000 The Northwestern Mutual Life Insurance Company $22,000,000 Massachusetts Mutual Life Insurance Company $10,000,000 $ 4,000,000 Connecticut General Life Insurance Company $ 5,000,000 $ 3,000,000 $ 3,000,000 Life Insurance Company of North America $ 3,000,000 Principal Life Insurance Company $10,000,000 Principal Life Insurance Company, on behalf of one or more separate accounts $ 1,500,000 CGU Life Insurance Company of America $ 1,500,000 Jefferson-Pilot Life Insurance Company $10,000,000 Jefferson-Pilot Financial Insurance Company, successor by merger to AH (Michigan) Life Insurance Company $ 5,000,000 Northern Life Insurance Company $ 4,000,000 ReliaStar Life Insurance Company $ 2,000,000 ReliaStar Life Insurance Company, as successor by merger to ReliaStar United Services Life Insurance Company $ 2,000,000 Modern Woodmen of America $ 5,000,000 Clarica Life Insurance Company $ 2,000,000 EXHIBIT A AMENDMENTS TO EXISTING NOTE AGREEMENT 1. Section 5.7(a) of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "(a) Fixed Charge Coverage. The Parent will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Parent) of Net Income Available for Fixed Charges to Fixed Charges in each case for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than the amount set forth for the applicable quarter end in the table below: If such fiscal quarter ends: Minimum Ratio On or prior to December 31, 2002 1.75:1 From January 1, 2003 to June 30, 2003 1.85:1 From July 1, 2003 to December 31, 2003 2.00:1 From January 1, 2004 to December 31, 2004 2.50:1 From January 1, 2005 and thereafter 3.00:1" 2. Section 5.8 of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "5.8 Leverage Ratios. "(a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below: If such time is: The applicable ratio is: On or prior to March 30, 2002 0.59:1 From March 31, 2002 to June 29, 2002 0.585:1 From June 30, 2002 to September 29, 2002 0.58:1 From September 30, 2002 to December 30, 2002 0.575:1 From December 31, 2002 to June 29, 2003 0.55:1 From June 30, 2003 to December 30, 2003 0.525:1 On December 31, 2003 and at any time thereafter 0.50:1 (b) Total Debt to EBITDA. The Parent will not permit the ratio of Total Debt as at the end of each fiscal quarter of the Parent to EBITDA for the period of the four fiscal quarters of the Parent ended on such date (taken as a single accounting period) to exceed for each such date prior to June 30, 2002, the ratio applicable to such date in the table set forth below, and if such date is on or after June 30, 2002, the lesser of (i) the Experience-Based Ratio at such date and (ii) the ratio applicable to such date in the table set forth below: If such date is: The applicable ratio is: On December 31, 2001 6.00:1 On March 31, 2002 5.75:1 On June 30, 2002 5.50:1 On September 30, 2002, December 31, 2002 and March 31, 2003 5.25:1 On June 30, 2003 5.00:1 On September 30, 2003 4.75:1 On December 31, 2003 4.50:1 On March 31, 2004 4.25:1 On June 30, 2004 4.00:1 On September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005 3.50:1 On September 30, 2005 and at any time thereafter 3.25:1 As used in this Section 5.8(b), the term "Experience-Based Ratio" means, as at the last day of any fiscal quarter of the Parent, the greater of (a) 3.25:1 and (b) the sum of (i) 0.25 plus (ii) the actual ratio of Total Debt as at the end of the fiscal quarter of the Parent ended on such date to EBITDA for the period of the four fiscal quarters of the Parent most recently ended on the last day of such fiscal quarter (taken as a single accounting period)." 3. Section 5.18(k) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows: "(k) Additional Undertakings. (i) Prior to June 30, 2002, at the expense of the Parent, an accounts receivable and inventory audit of its Restricted Subsidiaries, which audit shall have been performed by an independent third party acceptable to the Banks, and (ii) in the event the ratio of Total Debt as at June 30, 2002 to EBITDA for the period of four fiscal quarters of the Parent ended on such date is not less than or equal to 5.0:1, at the request of the Majority Noteholders at any time after June 30, 2002, an appraisal of the Restricted Subsidiaries' equipment and inventory, such appraisal to be performed by an independent third party acceptable to the Majority Noteholders; and" EX-9 8 note137amend2.txt SECOND AMENDMENT $137 NOTE AGREEMENT IPG HOLDINGS LP __________________________________________________________ AMENDMENT NO. 2 TO AMENDED AND RESTATED NOTE AGREEMENT __________________________________________________________ Dated as of March 28, 2003 U.S. $137,000,000 SENIOR SECURED NOTES DUE MARCH 31, 2008 IPG HOLDINGS LP U.S. $137,000,000 SENIOR SECURED NOTES DUE MARCH 31, 2008 AMENDMENT NO. 2 TO AMENDED AND RESTATED NOTE AGREEMENT As of March 28, 2003 To each of the Persons Named in Annex 1 hereto (collectively, the "Current Noteholders"): Ladies and Gentlemen: IPG HOLDINGS LP, a limited partnership formed under the laws of that State of Delaware (the "Issuer"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "General Partner"), and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "Parent" and, together with the Issuer and the General Partner herein referred to, collectively, as the "Obligors" and, individually, as an "Obligor") hereby, jointly and severally, agree with each of the Current Noteholders as follows: 1. PRIOR ISSUANCE OF NOTES, ETC. Pursuant to that certain Amended and Restated Note Agreement, dated as of December 20, 2001, as amended by that certain Amendment No. 1 to Amended and Restated Note Agreement dated December 20, 2002 (as in effect immediately prior to giving effect to the amendments provided by this Agreement, the "Existing Note Agreement" and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the "Note Agreement"), the Obligors and the Current Noteholders agreed to amend and restate the terms of those certain separate Note Agreements, each dated as of June 1, 1998, by and among the Obligors and each of the purchasers named in Schedule I thereto, pursuant to which the Issuer issued U.S. $137,000,000 in aggregate principal amount of its 6.82% Senior Guaranteed Notes due March 31, 2008 (as amended and restated pursuant to the terms of the Existing Note Agreement, the "Notes"). 2. REQUEST FOR CONSENT TO AMENDMENTS The Obligors request that each of the Current Noteholders (a) agree to the amendments (the "Amendments") to the Existing Note Agreement provided for by this Agreement, and (b) consent to the release of the Liens held by the Collateral Trustees (for the benefit of the Current Noteholders and the Banks) securing the Specified Assets (as defined below). 3. WARRANTIES AND REPRESENTATIONS To induce the Current Noteholders to enter into this Agreement and to agree to the Amendments, the Obligors represent and warrant as follows: 3.1 Organization and Authority. Each of the Obligors: (a) is a corporation, partnership, or other entity, duly organized or formed, validly existing and (to the extent applicable) in good standing under the laws of its jurisdiction of incorporation or organization; and (b) has all requisite power and authority to enter into and perform its obligations under this Agreement and the Note Agreement. 3.2 Transactions are Legal and Authorized. Each of the execution and delivery of this Agreement by the Obligors, the consummation of each of the transactions contemplated thereby and compliance by the Obligors with all of the provisions of this Agreement and the Note Agreement (a) will not violate any law or any order, judgment, decree or ruling of any court or governmental authority or agency applicable to the Obligors and (b) will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the constitutive documents of any Obligor or any indenture or other material agreement or instrument to which any Obligor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any material property of any Obligor. The execution and delivery of this Agreement has been duly authorized by proper action on the part of each of the Obligors. Each of this Agreement and the Note Agreement constitutes the legal, valid and binding obligation of each of the Obligors, enforceable in accordance with its respective terms, except as enforceability thereof may be subject to the effect of any applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally. 3.3 No Material Adverse Change. Since the date of the most recent audited consolidated financial statements of the Parent provided to each of the Current Noteholders, there has been no event or circumstance which has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.4 Specified Assets. The Specified Assets (as defined below) have no book value as of the date hereof. 3.5 Full Disclosure. Neither the financial statements and other certificates previously provided to the Current Noteholders pursuant to the provisions of the Existing Note Agreement nor the statements made in this Agreement nor any other written statements in final form furnished by or on behalf of the Obligors to any Current Noteholder in connection with the proposal and negotiation of the Amendments, taken as a whole, contain any untrue statement of a material fact or omit a material fact necessary to make the statements taken as a whole contained therein and herein not misleading. There is no fact relating to any event or circumstance that has occurred or arisen since December 20, 2001 that the Obligors have not disclosed to each of the Current Noteholders in writing that has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.6 Other Agreements. Upon (a) the execution and delivery hereof and the effectiveness of the Amendments as provided herein and (b) execution and delivery of the Bank Amendment (as defined below) and the amendment to the 1999 Note Agreement and the effectiveness of said amendments as provided therein, neither any Obligor nor any Restricted Subsidiary is in violation in any respect of any term in any agreement, or other instrument to which it is a party or by which it or any of its property may be bound except for such violations that, in the aggregate for all such violations or defaults, could not reasonably be expected to result in a Material Adverse Change. 3.7 No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of this Agreement and the effectiveness of the Amendments provided herein, would constitute a Default or an Event of Default. 4. AMENDMENTS 4.1 Amendments to Existing Note Agreement. Subject to Section 4.2 below, the Existing Note Agreement is hereby amended in the manner specified in Exhibit A to this Agreement. 4.2 Effectiveness of Amendments. The Amendments contemplated by Section 4.1 above and Exhibit A shall become effective (the "Effective Date"), if at all, upon the date of the satisfaction in full of the following conditions precedent (unless waived in writing by the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes): (a) a counterpart of this Agreement shall have been executed and delivered by each of the Obligors and the Current Noteholders; (b) the representations and warranties set forth in Section 3 hereof shall be true and correct on such date; (c) the Obligors shall have paid the reasonable fees and expenses of Bingham McCutchen LLP, special counsel to the Current Noteholders, as provided in Section 7 hereof; (d) the Obligors shall have paid to each Current Noteholder an amendment fee in an amount equal to (i) 0.10% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if any non-cash losses attributable to the impairment of goodwill for the fiscal year ended December 31, 2002 (the "Goodwill Writedown") is less than or equal to $40,000,000, (ii) 0.25% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if the Goodwill Writedown is greater than $40,000,000, but less than or equal to $55,000,000 or (iii) 0.50% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if the Goodwill Writedown is greater than $55,000,000, but less than or equal to $75,000,000; (e) the Obligors shall have entered into an amendment to the 1999 Note Agreement, in form and substance reasonably satisfactory to the Current Noteholders, providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments; (f) the Obligors and the applicable Restricted Subsidiaries shall have entered into an amendment to the Credit Agreement, in form and substance reasonably satisfactory to the Current Noteholders (the "Bank Amendment"); and (g) the Goodwill Writedown shall not be more than $75,000,000. 4.3 No Other Amendments; Confirmation. Except as expressly provided herein, (a) no terms or provisions of any agreement are modified or changed by this Agreement, (b) the terms of this Agreement shall not operate as a waiver by any Current Noteholder of, or otherwise prejudice any Current Noteholder's rights, remedies or powers under, the Existing Note Agreement or any other Financing Document or under any applicable law, and (c) the terms and provisions of the Existing Note Agreement and each other Financing Document shall continue in full force and effect, without modification or amendment. 5. CONSENTS 5.1 Consent to Bank Amendment. In accordance with Section 10.5(d) of the Intercreditor Agreement, each of the Current Noteholders hereby consents to the amendments set forth in the Bank Amendment attached hereto as Exhibit B. 5.2 Consent to Sale of Assets. The Issuer has advised the Current Noteholders that the General Partner desires to enter into a transaction (the "Transaction") pursuant to which it would sell certain of its assets as specified on Exhibit C hereto (such assets to be sold referred to herein as the "Specified Assets") as permitted pursuant to Section 5.12 of the Existing Note Agreement. The Specified Assets are subject to Liens in the favor of the Collateral Trustees pursuant to the Security Documents. In order to effect the Transaction, each of the Current Noteholders hereby consents to the release of the Liens securing the Specified Assets held by the Collateral Trustees (for the benefit of the Current Noteholders and the Banks) and hereby directs the Collateral Trustees to release such Liens. 6. DEFINED TERMS Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Existing Note Agreement or in Exhibit A hereto. 7. EXPENSES Whether or not the Amendments set forth herein or contemplated hereby become effective, the Obligors jointly and severally agree to pay on the Effective Date (or if an invoice is delivered subsequent to the Effective Date or if the Amendments provided for herein do not become effective, promptly and in any event within thirty (30) days of receiving any statement or invoice therefor) all fees, expenses and costs relating to this Agreement, including, but not limited to, the reasonable fees of the Current Noteholders' special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Agreement and any other documents related hereto. Nothing in this Section shall limit the Obligors' obligations pursuant to Section 9.4 of the Existing Note Agreement. 8. MISCELLANEOUS 8.1 Part of Note Agreement, Future References, etc. This Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Agreement, all terms, conditions and covenants contained in the Existing Note Agreement and the other Financing Documents are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Agreement may refer to the Note Agreement without making specific reference to this Agreement, but nevertheless all such references shall include this Agreement unless the context otherwise requires. 8.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 8.3 Duplicate Originals, Execution in Counterpart. Two (2) or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and each set of counterparts that, collectively, show execution by each Obligor and each consenting Current Noteholder shall constitute one duplicate original. 8.4 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Obligors and the Current Noteholders and their respective successors and assigns. [Remainder of page intentionally left blank; next page is signature page.] If each Current Noteholder is in agreement with the foregoing, please so indicate by signing the applicable acceptance on a counterpart hereof and returning such counterpart to the Issuer, whereupon this Agreement shall become binding among each of the Obligors and the Current Noteholders in accordance with its terms. Very truly yours, INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/Andrew M. Archibald Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer IPG HOLDINGS LP By: Intertape Polymer Inc., its General Partner By: /s/Andrew M. Archibald Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer INTERTAPE POLYMER INC. By: /s/Jim Bob Carpenter Name: Jim Bob Carpenter Title: President ACCEPTED AND AGREED: NEW YORK LIFE INSURANCE COMPANY By: /s/A. Post Howland Name: A. Post Howland Title: Investment Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Investment Management LLC, its Investment Manager By: /s/A. Post Howland Name: A. Post Howland Title: Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT By: New York Life Investment Management LLC, its Investment Manager By: /s/A. Post Howland Name: A. Post Howland Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/Yvonne M. Guajardo Name: Yvonne M. Guajardo Title: Vice President U.S. PRIVATE PLACEMENT FUND By: Prudential Private Placement Investors, L.P., Investment Advisor By: Prudential Private Placement Investors, Inc., its General Partner By: /s/Yvonne M. Guajardo Name: Yvonne M. Guajardo Title: Vice President THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation By: /s/Richard A. Strait Name: Richard A. Strait Title: Its Authorized Representative MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Adviser By: /s/Mark A. Ahmed Name: Mark A. Ahmed Title: Managing Director CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. (authorized agent) By: /s/Deborah B. Wiacek Name: Deborah B. Wiacek Title: Managing Director LIFE INSURANCE COMPANY OF NORTH AMERICA By: CIGNA Investments, Inc. (authorized agent) By: /s/Deborah B. Wiacek Name: Deborah B. Wiacek Title: Managing Director PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Debra Svoboda Name: Debra Svoboda Epp Title: Counsel By: /s/Christopher J. Henderson Name: Christopher J. Henderson Title: Counsel PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Debra Svoboda Name: Debra Svoboda Epp Title: Counsel By: /s/Christopher J. Henderson Name: Christopher J. Henderson Title: Counsel AVIVA LIFE INSURANCE COMPANY OF AMERICA, a Delaware corporation (formerly known as Commercial Union Life Insurance Company of America) By: Principal Capital Management, LLC, a Delaware limited liability company, its attorney in fact By: /s/Debra Svoboda Name: Debra Svoboda Epp Title: Counsel By: /s/Christopher J. Henderson Name: Christopher J. Henderson Title: Counsel JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/Robert E. Whalen Name: Robert E. Whalen, II Title: Vice President JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, Successor by Merger to AH (MICHIGAN) LIFE INSURANCE COMPANY By: /s/Robert E. Whalen Name: Robert E. Whalen, II Title: Vice President RELIASTAR LIFE INSURANCE COMPANY, f/k/a NORTHERN LIFE INSURANCE COMPANY By: ING Investment Management LLC, as agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY, as Successor by Merger to RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President MODERN WOODMEN OF AMERICA By: /s/Nick S. Coin Name: Nick S. Coin Title: Treasurer & Investment Manager CLARICA LIFE INSURANCE COMPANY - US By: /s/E. John Fromelt Name: E. John Fromelt Title: President, Midland Advisors Company, as Agent for Clarica Life Insurance Company - US EXHIBIT A AMENDMENTS TO EXISTING NOTE AGREEMENT 1. Section 5.6 of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "5.6 Consolidated Net Worth. The Parent will, at all times, keep and maintain Consolidated Net Worth at an amount not less than the sum of (a) US$275,000,000 plus (b) an amount equal to the greater of (i) zero (0) and (ii) 50% of Consolidated Net Income of the Parent and its Restricted Subsidiaries for the period from October 1, 2001 to the end of the Parent's then most recently ended fiscal quarter plus (c) an amount equal to the aggregate net proceeds of any issuance after the Effective Date of equity securities by any member of the Restricted Group to Persons not members of the Restricted Group minus, (d) solely for purposes of determining compliance with this Section 5.6 at any time during the period from December 31, 2002 to March 30, 2006, an amount equal to the lesser of (x) $75,000,000 and (y) the amount of any non-cash impairment charges taken in accordance with FAS 142 and CICA 3062 and CICA 1581 for the Parent's fiscal year ended December 31, 2002 in conformity with GAAP." 2. Section 5.8(a) of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "(a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below: If such time is: The applicable ratio is: On or prior to March 30, 2002 0.59:1 From March 31, 2002 to June 29, 2002 0.585:1 From June 30, 2002 to September 29, 2002 0.58:1 From September 30, 2002 to December 30, 2002 0.575:1 From December 31, 2002 to June 29, 2003 0.60:1 From June 30, 2003 to December 30, 2003 0.585:1 From December 31, 2003 to June 29, 2004 0.56:1 From June 30, 2004 to December 30, 2004 0.535:1 From December 31, 2004 to June 29, 2005 0.51:1 On June 30, 2005 and at any time thereafter 0.50:1" 3. Section 8.1 of the Existing Note Agreement is hereby amended by adding the following new definition in the proper alphabetical order: "CICA 1581" means Handbook Section 1581, "Business Combinations" promulgated by the Canadian Institute of Chartered Accountants (CICA). "CICA 3062" means Handbook Section 3062, "Goodwill and Other Intangible Assets" promulgated by the Canadian Institute of Chartered Accountants (CICA). "FAS 142" means SFAS No. 142 "Goodwill and Other Intangible Assets" promulgated by the Financial Accounting Standards Board in July 2001. EXHIBIT B [BANK AMENDMENT] EXHIBIT C SPECIFIED ASSETS 1. AD-SL Bag machine, model 2341, serial 29353, manufactured by Windmoeller & Hoelscher of Lengerich, West Germany (1980's) for the manufacture of square-bottom, square-top, closed-top valve bags for packaging polyolefin resins and other free-flowing solids. 2. Bags can be made from polyolefin 'scrim' or film. A tube-forming section and backseam extruder is included for use with non-tubular input material. 3. Approximate production rate: up to 100 bags / minute 4. A transformer is included to operate the machine at 600V, 3-phase; or the machine can be operated at 480V, 3-phase without this transformer. Power requirement is approximately 200 kW. 5. Machine includes a DC variable speed main drive c/w Reliance 'Max-Pack' speed controller EX-10 9 finalamend1to25112.txt FIRST AMENDMENT $25/$112 NOTE AGREEMENT IPG HOLDINGS LP __________________________________________________________ AMENDMENT NO. 1 TO AMENDED AND RESTATED NOTE AGREEMENT __________________________________________________________ Dated as of December 20, 2002 U.S. $25,000,000 SENIOR SECURED NOTES, SERIES A DUE 2005 U.S. $112,000,000 SENIOR SECURED NOTES, SERIES B DUE 2009 IPG HOLDINGS LP U.S. $25,000,000 SENIOR SECURED NOTES, SERIES A DUE 2005 U.S. $112,000,000 SENIOR SECURED NOTES, SERIES B DUE 2009 AMENDMENT NO. 1 TO AMENDED AND RESTATED NOTE AGREEMENT As of December 20, 2002 To each of the Persons Named in Annex 1 hereto (collectively, the "Current Noteholders"): Ladies and Gentlemen: IPG HOLDINGS LP, a limited partnership formed under the laws of that State of Delaware (the "Issuer"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "General Partner"), and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "Parent" and, together with the Issuer and the General Partner herein referred to, collectively, as the "Obligors" and, individually, as an "Obligor") hereby, jointly and severally, agree with each of the Current Noteholders as follows: 1. PRIOR ISSUANCE OF NOTES, ETC. Pursuant to that certain Amended and Restated Note Agreement, dated as of December 20, 2001 (as in effect immediately prior to giving effect to the amendments provided by this Agreement, the "Existing Note Agreement" and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the "Note Agreement"), the Obligors and the Current Noteholders agreed to amend and restate the terms of those certain separate Note Agreements, each dated as of June 1, 1999, by and among the Obligors and each of the purchasers named in Schedule I thereto, pursuant to which the Issuer issued U.S. $25,000,000 in aggregate principal amount of its 7.66% Senior Guaranteed Notes, Series A due May 31, 2005 (the "Series A Notes") and U.S. $112,000,000 in aggregate principal amount of its 7.81% Senior Guaranteed Notes, Series B due May 31, 2009 (the "Series B Notes", the Series A Notes and the Series B Notes, each as amended and restated pursuant to the terms of the Existing Note Agreement, herein collectively referred to as the "Notes"). The register kept by the Company for the registration and transfer of the Notes indicates that each of the Current Noteholders is currently a holder of the Notes indicated on Annex 1. 2. REQUEST FOR CONSENT TO AMENDMENTS The Obligors request that each of the Current Noteholders agree to the amendments (the "Amendments") to the Existing Note Agreement provided for by this Agreement. 3. WARRANTIES AND REPRESENTATIONS To induce the Current Noteholders to enter into this Agreement and to agree to the Amendments, the Obligors represent and warrant as follows: 3.1 Organization and Authority. Each of the Obligors: (a) is a corporation, partnership, or other entity, duly organized or formed, validly existing and (to the extent applicable) in good standing under the laws of its jurisdiction of incorporation or organization; and (b) has all requisite power and authority to enter into and perform its obligations under this Agreement and the Note Agreement. 3.2 Transactions are Legal and Authorized. Each of the execution and delivery of this Agreement by the Obligors, the consummation of each of the transactions contemplated thereby and compliance by the Obligors with all of the provisions of this Agreement and the Note Agreement (a) will not violate any law or any order, judgment, decree or ruling of any court or governmental authority or agency applicable to the Obligors and (b) will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the constitutive documents of any Obligor or any indenture or other material agreement or instrument to which any Obligor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any material property of any Obligor. The execution and delivery of this Agreement has been duly authorized by proper action on the part of each of the Obligors. Each of this Agreement and the Note Agreement constitutes the legal, valid and binding obligation of each of the Obligors, enforceable in accordance with its respective terms, except as enforceability thereof may be subject to the effect of any applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally. 3.3 No Material Adverse Change. Since the date of the most recent audited consolidated financial state- ments of the Parent provided to each of the Current Noteholders, there has been no event or circumstance which has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.4 Renewal Request. The Facility A Borrowers (as such term is defined in the Credit Agreement) have taken all necessary and appropriate action in accordance with section 2.4 of the Credit Agreement to request the extension of the Conversion Date (as such term is defined in the Credit Agreement) for an additional period of 364 days. Bank Facility A is in full force and effect as of the date hereof and the Facility A Borrowers thereunder have the right to borrow and reborrow not less than an aggregate of $50,000,000 thereunder until at least December 20, 2004. 3.5 Full Disclosure. Neither the financial statements and other certificates previously provided to the Current Noteholders pursuant to the provisions of the Existing Note Agreement nor the statements made in this Agreement nor any other written statements in final form furnished by or on behalf of the Obligors to any Current Noteholder in connection with the proposal and negotiation of the Amendments, taken as a whole, contain any untrue statement of a material fact or omit a material fact necessary to make the statements taken as a whole contained therein and herein not misleading. There is no fact relating to any event or circumstance that has occurred or arisen since December 20, 2001 that the Obligors have not disclosed to each of the Current Noteholders in writing that has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.6 Other Agreements. Upon (a) the execution and delivery hereof and the effectiveness of the Amendments as provided herein and (b) execution and delivery of the Bank Amendment (as defined below) and the amendment to the 1998 Note Agreement and the effectiveness of said amendments as provided therein, neither any Obligor nor any Restricted Subsidiary is in violation in any respect of any term in any agreement, or other instrument to which it is a party or by which it or any of its property may be bound except for such violations that, in the aggregate for all such violations or defaults, could not reasonably be expected to result in a Material Adverse Change. 3.7 No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of this Agreement and the effectiveness of the Amendments provided herein, would constitute a Default or an Event of Default. 4. AMENDMENTS 4.1 Amendments to Existing Note Agreement. Subject to Section 4.2 below, the Existing Note Agreement is hereby amended in the manner specified in Exhibit A to this Agreement. 4.2 Effectiveness of Amendments. The Amendments contemplated by Section 4.1 above and Exhibit A shall become effective (the "Effective Date"), if at all, upon the date of the satisfaction in full of the following conditions precedent (unless waived in writing by the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes): (a) a counterpart of this Agreement shall have been executed and delivered by each of the Obligors and the Current Noteholders; (b) the representations and warranties set forth in Section 3 hereof shall be true and correct on such date; (c) the Obligors shall have paid the reasonable fees and expenses of Bingham McCutchen LLP, special counsel to the Current Noteholders, as provided in Section 6 hereof; (d) the Obligors shall have paid to each Current Noteholder an amendment fee in an amount equal to one tenth of one percent (0.10%) of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date; (e) the Obligors shall have entered into an amendment to the 1998 Note Agreement, in form and substance reasonably satisfactory to the Current Noteholders, providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments; and (f) the Obligors and the applicable Restricted Subsidiaries shall have entered into an amendment to the Credit Agreement, in form and substance reasonably satisfactory to the Current Noteholders (the "Bank Amendment"), providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments, and all conditions to the effectiveness of the Bank Amendment shall have been satisfied. 4.3 No Other Amendments; Confirmation. Except as expressly provided herein, (a) no terms or provisions of any agreement are modified or changed by this Agreement, (b) the terms of this Agreement shall not operate as a waiver by any Current Noteholder of, or otherwise prejudice any Current Noteholder's rights, remedies or powers under, the Existing Note Agreement or any other Financing Document or under any applicable law, and (c) the terms and provisions of the Existing Note Agreement and each other Financing Document shall continue in full force and effect, without modification or amendment. 4.4 Additional Covenants. The Company hereby undertakes to do the following by no later than January 31, 2003: (a) To execute all such documents, instruments and agreements as may be reasonably required by the holders of the Notes to designate IPG Financial Services Inc. as a Restricted Subsidiary under the Note Agreement and the other Financing Documents, as applicable; (b) To provide the opinion of its counsel, in form and substance acceptable to the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes with respect to (i) the power, capacity, and authority of each member of the Restricted Group to enter into this Agreement and to perform its obligations hereunder, as well as with respect to the enforceability of this Agreement, and (ii) the designation of IPG Financial Services Inc. as a Restricted Subsidiary under the Note Agreement and the other applicable Financing Documents and the effect thereof on the enforceability of the Collateral; and (c) To comply with the provisions of the post-closing undertaking described in Section 4.6(e) of the Existing Note Agreement. 5. DEFINED TERMS Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Existing Note Agreement or in Exhibit A hereto. 6. EXPENSES Whether or not the Amendments set forth herein or contemplated hereby become effective, the Obligors jointly and severally agree to pay on the Effective Date (or if an invoice is delivered subsequent to the Effective Date or if the Amendments provided for herein do not become effective, promptly and in any event within thirty (30) days of receiving any statement or invoice therefor) all fees, expenses and costs relating to this Agreement, including, but not limited to, the reasonable fees of the Current Noteholders' special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Agreement and any other documents related hereto. Nothing in this Section shall limit the Obligors' obligations pursuant to Section 9.4 of the Existing Note Agreement. 7. MISCELLANEOUS 7.1 Part of Note Agreement, Future References, etc. This Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Agreement, all terms, conditions and covenants contained in the Existing Note Agreement and the other Financing Documents are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Agreement may refer to the Note Agreement without making specific reference to this Agreement, but nevertheless all such references shall include this Agreement unless the context otherwise requires. 7.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 7.3 Duplicate Originals, Execution in Counterpart. Two (2) or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and each set of counterparts that, collectively, show execution by each Obligor and each consenting Current Noteholder shall constitute one duplicate original. 7.4 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Obligors and the Current Noteholders and their respective successors and assigns. [Remainder of page intentionally left blank; next page is signature page.] If each Current Noteholder is in agreement with the foregoing, please so indicate by signing the applicable acceptance on a counterpart hereof and returning such counterpart to the Company, whereupon this Agreement shall become binding among each of the Obligors and the Current Noteholders in accordance with its terms. Very truly yours, INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/Andrew M. Archibald Name: Andrew Archibald Title: Chief Financial Officer, Secretary, Treasurer Vice President Administration IPG HOLDINGS LP By: Intertape Polymer Inc., its General Partner By: /s/Andrew M. Archibald Name: Andrew Archibald Title: Chief Financial Officer INTERTAPE POLYMER INC. By: /s/ Salvatore Vitale Name: Salvatore Vitale Title: Assistant Secretary ACCEPTED AND AGREED: PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/ Deborah Svoboda Name: Deborah Svoboda Epp Title: Counsel By: /s/James C. Fifield Name: James C. Fifield Title: Counsel PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Debra Svoboda Name: Debra Svoboda Epp Title: Counsel By: /s/James C. Fifield Name: James C. Fifield Title: Counsel THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation By: /s/David A. Barras Name: David A. Barras Title: Its Authorized Representative NEW YORK LIFE INSURANCE COMPANY By: /s/A. Post Howland Name: A. Post Howland Title: Investment Vice President J. ROMEO & CO. By: /s/Michael Kurzyna Name: Michael Kurzyna Title: Vice President HARE & CO. By: /s/Suzanne E. Walton Name: Suzanne E. Walton Title: Authorized IM Representative JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/Robert E. Whalen, II Name: Robert E. Whalen, II Title: Vice President C.M. LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Sub-Adviser By: /s/Emeka O. Onukwugha Name: Emeka O. Onukwugha Title: Managing Director MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Adviser By: /s/Emeka O. Onukugha Name: Emeka Onukwugha Title: Managing Director CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. (authorized agent) By: /s/Debra J. Height Name: Debra J. Height Title: Managing Director RELIASTAR LIFE INSURANCE COMPANY, f/k/a NORTHERN LIFE INSURANCE COMPANY By: ING Investment Management LLC, as agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President SECURITY-CONNECTICUT LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President ANNEX 1 CURRENT NOTEHOLDERS AND ORIGINAL PRINCIPAL AMOUNTS
Name of Current Noteholder Original Principal Original Principal Amount of Series A Amount of Series B Notes Held Notes Held Principal Life Insurance Company $10,000,000 -- Principal Life Insurance Company, on behalf of one or more separate accounts $15,000,000 -- The Northwestern Mutual Life Insurance Company -- $25,000,000 New York Life Insurance Company -- $20,000,000 J. Romeo & Co. -- $11,600,000 $ 7,600,000 Hare & Co. -- $ 800,000 Jefferson-Pilot Life Insurance Company -- $20,000,000 Massachusetts Mutual Life Insurance Company -- $ 8,200,000 C.M. Life Insurance Company -- $ 1,800,000 Connecticut General Life Insurance Company -- $ 5,900,000 $ 4,100,000 Northern Life Insurance Company -- $ 3,000,000 ReliaStar Life Insurance Company -- $ 1,000,000 ReliaStar Life Insurance Company of New York -- $ 2,000,000 Security-Connecticut Life Insurance Company -- $ 1,000,000
EXHIBIT A AMENDMENTS TO EXISTING NOTE AGREEMENT 1. Section 5.7(a) of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "(a) Fixed Charge Coverage. The Parent will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Parent) of Net Income Available for Fixed Charges to Fixed Charges in each case for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than the amount set forth for the applicable quarter end in the table below: If such fiscal quarter ends: Minimum Ratio On or prior to December 31, 2002 1.75:1 From January 1, 2003 to June 30, 2003 1.85:1 From July 1, 2003 to December 31, 2003 2.00:1 From January 1, 2004 to December 31, 2004 2.50:1 From January 1, 2005 and thereafter 3.00:1" 2. Section 5.8 of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "5.8 Leverage Ratios. (a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below: If such time is: The applicable ratio is: On or prior to March 30, 2002 0.59:1 From March 31, 2002 to June 29, 2002 0.585:1 From June 30, 2002 to September 29, 2002 0.58:1 From September 30, 2002 to December 30, 2002 0.575:1 From December 31, 2002 to June 29, 2003 0.55:1 From June 30, 2003 to December 30, 2003 0.525:1 On December 31, 2003 and at any time thereafter 0.50:1 (b) Total Debt to EBITDA. The Parent will not permit the ratio of Total Debt as at the end of each fiscal quarter of the Parent to EBITDA for the period of the four fiscal quarters of the Parent ended on such date (taken as a single accounting period) to exceed for each such date prior to June 30, 2002, the ratio applicable to such date in the table set forth below, and if such date is on or after June 30, 2002, the lesser of (i) the Experience-Based Ratio at such date and (ii) the ratio applicable to such date in the table set forth below: If such date is: The applicable ratio is: On December 31, 2001 6.00:1 On March 31, 2002 5.75:1 On June 30, 2002 5.50:1 On September 30, 2002, December 31, 2002 and March 31, 2003 5.25:1 On June 30, 2003 5.00:1 On September 30, 2003 4.75:1 On December 31, 2003 4.50:1 On March 31, 2004 4.25:1 On June 30, 2004 4.00:1 On September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005 3.50:1 On September 30, 2005 and at any time thereafter 3.25:1 As used in this Section 5.8(b), the term "Experience-Based Ratio" means, as at the last day of any fiscal quarter of the Parent, the greater of (a) 3.25:1 and (b) the sum of (i) 0.25 plus (ii) the actual ratio of Total Debt as at the end of the fiscal quarter of the Parent ended on such date to EBITDA for the period of the four fiscal quarters of the Parent most recently ended on the last day of such fiscal quarter (taken as a single accounting period)." 3. Section 5.18(k) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows: "(k) Additional Undertakings. (i) Prior to June 30, 2002, at the expense of the Parent, an accounts receivable and inventory audit of its Restricted Subsidiaries, which audit shall have been performed by an independent third party acceptable to the Banks, and (ii) in the event the ratio of Total Debt as at June 30, 2002 to EBITDA for the period of four fiscal quarters of the Parent ended on such date is not less than or equal to 5.0:1, at the request of the Majority Noteholders at any time after June 30, 2002, an appraisal of the Restricted Subsidiaries' equipment and inventory, such appraisal to be performed by an independent third party acceptable to the Majority Noteholders; and" EX-11 10 finalamend2to25112note.txt SECOND AMENDMENT $25/$112 NOTE AGREEMENT IPG HOLDINGS LP __________________________________________________________ AMENDMENT NO. 2 TO AMENDED AND RESTATED NOTE AGREEMENT __________________________________________________________ Dated as of March 28, 2003 U.S. $25,000,000 SENIOR SECURED NOTES, SERIES A DUE 2005 U.S. $112,000,000 SENIOR SECURED NOTES, SERIES B DUE 2009 IPG HOLDINGS LP U.S. $25,000,000 SENIOR SECURED NOTES, SERIES A DUE 2005 U.S. $112,000,000 SENIOR SECURED NOTES, SERIES B DUE 2009 AMENDMENT NO. 2 TO AMENDED AND RESTATED NOTE AGREEMENT As of March 28, 2003 To each of the Persons Named in Annex 1 hereto (collectively, the "Current Noteholders"): Ladies and Gentlemen: IPG HOLDINGS LP, a limited partnership formed under the laws of that State of Delaware (the "Issuer"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "General Partner"), and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "Parent" and, together with the Issuer and the General Partner herein referred to, collectively, as the "Obligors" and, individually, as an "Obligor") hereby, jointly and severally, agree with each of the Current Noteholders as follows: 1. PRIOR ISSUANCE OF NOTES, ETC. Pursuant to that certain Amended and Restated Note Agreement, dated as of December 20, 2001, as amended by that certain Amendment No. 1 to Amended and Restated Note Agreement dated December 20, 2002 (as in effect immediately prior to giving effect to the amendments provided by this Agreement, the "Existing Note Agreement" and, as amended pursuant to this Agreement and as may be further amended, restated or otherwise modified from time to time, the "Note Agreement"), the Obligors and the Current Noteholders agreed to amend and restate the terms of those certain separate Note Agreements, each dated as of June 1, 1999, by and among the Obligors and each of the purchasers named in Schedule I thereto, pursuant to which the Issuer issued U.S. $25,000,000 in aggregate principal amount of its 7.66% Senior Guaranteed Notes, Series A due May 31, 2005 (the "Series A Notes") and U.S. $112,000,000 in aggregate principal amount of its 7.81% Senior Guaranteed Notes, Series B due May 31, 2009 (the "Series B Notes", the Series A Notes and the Series B Notes, each as amended and restated pursuant to the terms of the Existing Note Agreement, herein collectively referred to as the "Notes"). 2. REQUEST FOR CONSENT TO AMENDMENTS The Obligors request that each of the Current Noteholders (a) agree to the amendments (the "Amendments") to the Existing Note Agreement provided for by this Agreement, and (b) consent to the release of the Liens held by the Collateral Trustees (for the benefit of the Current Noteholders and the Banks) securing the Specified Assets (as defined below). 3. WARRANTIES AND REPRESENTATIONS To induce the Current Noteholders to enter into this Agreement and to agree to the Amendments, the Obligors represent and warrant as follows: 3.1 Organization and Authority. Each of the Obligors: (a) is a corporation, partnership, or other entity, duly organized or formed, validly existing and (to the extent applicable) in good standing under the laws of its jurisdiction of incorporation or organization; and (b) has all requisite power and authority to enter into and perform its obligations under this Agreement and the Note Agreement. 3.2 Transactions are Legal and Authorized. Each of the execution and delivery of this Agreement by the Obligors, the consummation of each of the transactions contemplated thereby and compliance by the Obligors with all of the provisions of this Agreement and the Note Agreement (a) will not violate any law or any order, judgment, decree or ruling of any court or governmental authority or agency applicable to the Obligors and (b) will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the constitutive documents of any Obligor or any indenture or other material agreement or instrument to which any Obligor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any material property of any Obligor. The execution and delivery of this Agreement has been duly authorized by proper action on the part of each of the Obligors. Each of this Agreement and the Note Agreement constitutes the legal, valid and binding obligation of each of the Obligors, enforceable in accordance with its respective terms, except as enforceability thereof may be subject to the effect of any applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally. 3.3 No Material Adverse Change. Since the date of the most recent audited consolidated financial statements of the Parent provided to each of the Current Noteholders, there has been no event or circumstance which has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.4 Specified Assets. The Specified Assets (as defined below) have no book value as of the date hereof. 3.5 Full Disclosure. Neither the financial statements and other certificates previously provided to the Current Noteholders pursuant to the provisions of the Existing Note Agreement nor the statements made in this Agreement nor any other written statements in final form furnished by or on behalf of the Obligors to any Current Noteholder in connection with the proposal and negotiation of the Amendments, taken as a whole, contain any untrue statement of a material fact or omit a material fact necessary to make the statements taken as a whole contained therein and herein not misleading. There is no fact relating to any event or circumstance that has occurred or arisen since December 20, 2001 that the Obligors have not disclosed to each of the Current Noteholders in writing that has resulted in or could reasonably be expected to result in a Material Adverse Change. 3.6 Other Agreements. Upon (a) the execution and delivery hereof and the effectiveness of the Amendments as provided herein and (b) execution and delivery of the Bank Amendment (as defined below) and the amendment to the 1998 Note Agreement and the effectiveness of said amendments as provided therein, neither any Obligor nor any Restricted Subsidiary is in violation in any respect of any term in any agreement, or other instrument to which it is a party or by which it or any of its property may be bound except for such violations that, in the aggregate for all such violations or defaults, could not reasonably be expected to result in a Material Adverse Change. 3.7 No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of this Agreement and the effectiveness of the Amendments provided herein, would constitute a Default or an Event of Default. 4. AMENDMENTS 4.1 Amendments to Existing Note Agreement. Subject to Section 4.2 below, the Existing Note Agreement is hereby amended in the manner specified in Exhibit A to this Agreement. 4.2 Effectiveness of Amendments. The Amendments contemplated by Section 4.1 above and Exhibit A shall become effective (the "Effective Date"), if at all, upon the date of the satisfaction in full of the following conditions precedent (unless waived in writing by the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes): (a) a counterpart of this Agreement shall have been executed and delivered by each of the Obligors and the Current Noteholders; (b) the representations and warranties set forth in Section 3 hereof shall be true and correct on such date; (c) the Obligors shall have paid the reasonable fees and expenses of Bingham McCutchen LLP, special counsel to the Current Noteholders, as provided in Section 7 hereof; (d) the Obligors shall have paid to each Current Noteholder an amendment fee in an amount equal to (i) 0.10% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if any non-cash losses attributable to the impairment of goodwill for the fiscal year ended December 31, 2002 (the "Goodwill Writedown") is less than or equal to $40,000,000, (ii) 0.25% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if the Goodwill Writedown is greater than $40,000,000, but less than or equal to $55,000,000 or (iii) 0.50% of the outstanding principal balance of the Notes held by such Current Noteholder on the Effective Date if the Goodwill Writedown is greater than $55,000,000, but less than or equal to $75,000,000; (e) the Obligors shall have entered into an amendment to the 1998 Note Agreement, in form and substance reasonably satisfactory to the Current Noteholders, providing for amendments to the provisions thereof which are substantially the same as those reflected in the Amendments; (f) the Obligors and the applicable Restricted Subsidiaries shall have entered into an amendment to the Credit Agreement, in form and substance reasonably satisfactory to the Current Noteholders (the "Bank Amendment"); and (g) the Goodwill Writedown shall not be more than $75,000,000. 4.3 No Other Amendments; Confirmation. Except as expressly provided herein, (a) no terms or provisions of any agreement are modified or changed by this Agreement, (b) the terms of this Agreement shall not operate as a waiver by any Current Noteholder of, or otherwise prejudice any Current Noteholder's rights, remedies or powers under, the Existing Note Agreement or any other Financing Document or under any applicable law, and (c) the terms and provisions of the Existing Note Agreement and each other Financing Document shall continue in full force and effect, without modification or amendment. 5. CONSENTS 5.1 Consent to Bank Amendment. In accordance with Section 10.5(d) of the Intercreditor Agreement, each of the Current Noteholders hereby consents to the amendments set forth in the Bank Amendment attached hereto as Exhibit B. 5.2 Consent to Sale of Assets. The Issuer has advised the Current Noteholders that the General Partner desires to enter into a transaction (the "Transaction") pursuant to which it would sell certain of its assets as specified on Exhibit C hereto (such assets to be sold referred to herein as the "Specified Assets") as permitted pursuant to Section 5.12 of the Existing Note Agreement. The Specified Assets are subject to Liens in the favor of the Collateral Trustees pursuant to the Security Documents. In order to effect the Transaction, each of the Current Noteholders hereby consents to the release of the Liens securing the Specified Assets held by the Collateral Trustees (for the benefit of the Current Noteholders and the Banks) and hereby directs the Collateral Trustees to release such Liens. 6. DEFINED TERMS Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Existing Note Agreement or in Exhibit A hereto. 7. EXPENSES Whether or not the Amendments set forth herein or contemplated hereby become effective, the Obligors jointly and severally agree to pay on the Effective Date (or if an invoice is delivered subsequent to the Effective Date or if the Amendments provided for herein do not become effective, promptly and in any event within thirty (30) days of receiving any statement or invoice therefor) all fees, expenses and costs relating to this Agreement, including, but not limited to, the reasonable fees of the Current Noteholders' special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Agreement and any other documents related hereto. Nothing in this Section shall limit the Obligors' obligations pursuant to Section 9.4 of the Existing Note Agreement. 8. MISCELLANEOUS 8.1 Part of Note Agreement, Future References, etc. This Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Agreement, all terms, conditions and covenants contained in the Existing Note Agreement and the other Financing Documents are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Agreement may refer to the Note Agreement without making specific reference to this Agreement, but nevertheless all such references shall include this Agreement unless the context otherwise requires. 8.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 8.3 Duplicate Originals, Execution in Counterpart. Two (2) or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and each set of counterparts that, collectively, show execution by each Obligor and each consenting Current Noteholder shall constitute one duplicate original. 8.4 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Obligors and the Current Noteholders and their respective successors and assigns. [Remainder of page intentionally left blank; next page is signature page.] If each Current Noteholder is in agreement with the foregoing, please so indicate by signing the applicable acceptance on a counterpart hereof and returning such counterpart to the Issuer, whereupon this Agreement shall become binding among each of the Obligors and the Current Noteholders in accordance with its terms. Very truly yours, INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/Andrew M. Archibald Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer IPG HOLDINGS LP By: Intertape Polymer Inc., its General Partner By: /s/Andrew M. Archibald Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer INTERTAPE POLYMER INC. By: /s/Jim Bob Carpenter Name: Jim Bob Carpenter Title: President ACCEPTED AND AGREED: PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Deborah Svoboda Name: Deborah Svoboda Epp Title: Counsel By:/s/Christopher J. Henderson Name: Christopher J. Henderson Title: Counsel PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/Deborah Svoboda Name: Deborah Svoboda Epp Title: Counsel By: /s/Christopher J. Henderson Name: Christopher J. Henderson Title: Counsel THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation By: /s/Richard A. Strait Name: Richard A. Strait Title: Its Authorized Representative NEW YORK LIFE INSURANCE COMPANY By: /s/A.Post Howland Name: A. Post Howland Title: Investment Vice President J. ROMEO & CO. By: /s/Michael Kurzyna Name: Michael Kurzyna Title: Vice President HARE & CO. By: /s/Suzanne Walton Name: Suzanne Walton Title: Authorized IM Representative JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/Robert E. Whalen, II Name: Robert E. Whalen, II Title: Vice President C.M. LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Sub-Adviser By: /s/Mark A. Ahmed Name: Mark A. Ahmed Title: Managing Director MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: David L. Babson & Company Inc. as Investment Adviser By: /s/Mark A. Ahmed Name: Mark A. Ahmed Title: Managing Director CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. (authorized agent) By: /s/Deborah B. Wiacek Name: Deborah B. Wiacek Title: Managing Director RELIASTAR LIFE INSURANCE COMPANY, f/k/a NORTHERN LIFE INSURANCE COMPANY By: ING Investment Management LLC, as agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President SECURITY-CONNECTICUT LIFE INSURANCE COMPANY By: ING Investment Management LLC, as Agent By: /s/James V. Wittich Name: James V. Wittich Title: Senior Vice President EXHIBIT A AMENDMENTS TO EXISTING NOTE AGREEMENT 1. Section 5.6 of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "5.6 Consolidated Net Worth. The Parent will, at all times, keep and maintain Consolidated Net Worth at an amount not less than the sum of (a) US$275,000,000 plus (b) an amount equal to the greater of (i) zero (0) and (ii) 50% of Consolidated Net Income of the Parent and its Restricted Subsidiaries for the period from October 1, 2001 to the end of the Parent's then most recently ended fiscal quarter plus (c) an amount equal to the aggregate net proceeds of any issuance after the Effective Date of equity securities by any member of the Restricted Group to Persons not members of the Restricted Group minus, (d) solely for purposes of determining compliance with this Section 5.6 at any time during the period from December 31, 2002 to March 30, 2006, an amount equal to the lesser of (x) $75,000,000 and (y) the amount of any non-cash impairment charges taken in accordance with FAS 142 and CICA 3062 and CICA 1581 for the Parent's fiscal year ended December 31, 2002 in conformity with GAAP." 2. Section 5.8(a) of the Existing Note Agreement is hereby amended and restated to read in its entirety as follows: "(a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below: If such time is: The applicable ratio is: On or prior to March 30, 2002 0.59:1 From March 31, 2002 to June 29, 2002 0.585:1 From June 30, 2002 to September 29, 2002 0.58:1 From September 30, 2002 to December 30, 2002 0.575:1 From December 31, 2002 to June 29, 2003 0.60:1 From June 30, 2003 to December 30, 2003 0.585:1 From December 31, 2003 to June 29, 2004 0.56:1 From June 30, 2004 to December 30, 2004 0.535:1 From December 31, 2004 to June 29, 2005 0.51:1 On June 30, 2005 and at any time thereafter 0.50:1" 3. Section 8.1 of the Existing Note Agreement is hereby amended by adding the following new definition in the proper alphabetical order: "CICA 1581" means Handbook Section 1581, "Business Combinations" promulgated by the Canadian Institute of Chartered Accountants (CICA). "CICA 3062" means Handbook Section 3062, "Goodwill and Other Intangible Assets" promulgated by the Canadian Institute of Chartered Accountants (CICA). "FAS 142" means SFAS No. 142 "Goodwill and Other Intangible Assets" promulgated by the Financial Accounting Standards Board in July 2001. EXHIBIT B [BANK AMENDMENT] EXHIBIT C SPECIFIED ASSETS 1. AD-SL Bag machine, model 2341, serial 29353, manufactured by Windmoeller & Hoelscher of Lengerich, West Germany (1980's) for the manufacture of square-bottom, square-top, closed-top valve bags for packaging polyolefin resins and other free-flowing solids. 2. Bags can be made from polyolefin 'scrim' or film. A tube-forming section and backseam extruder is included for use with non-tubular input material. 3. Approximate production rate: up to 100 bags / minute 4. A transformer is included to operate the machine at 600V, 3-phase; or the machine can be operated at 480V, 3-phase without this transformer. Power requirement is approximately 200 kW. Machine includes a DC variable speed main drive c/w Reliance 'Max-Pack' speed controller. -----END PRIVACY-ENHANCED MESSAGE-----