-----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, AeQ4TqkOyM1SIJ5Huuri+Hr+Zns68Ldkev7CaaGKck8H+8NyHlcqhmC8rPzoqS5i vunSaOW5Ex7StmUlh9Efcg== 0001047469-98-022001.txt : 19980529 0001047469-98-022001.hdr.sgml : 19980529 ACCESSION NUMBER: 0001047469-98-022001 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980528 SROS: AMEX 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: 20-F SEC ACT: SEC FILE NUMBER: 001-10928 FILM NUMBER: 98632702 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 20-F 1 FORM 20-F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 1997 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 (Address of principal executive offices) Securities registered pursuant Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Shares, without nominal or American Stock Exchange par value 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- The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 1997 is: 25,019,921 Common Shares -0- Preferred Shares Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 X Item 18 ----- ----- TABLE OF CONTENTS
ITEM CAPTION PAGE - ----- ------- ---- CAUTIONARY STATEMENTS AND RISK FACTORS . . . . . . . . . . . . . . . . . -ii- PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . -1- ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . -17- ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . -18- ITEM 4. CONTROL OF REGISTRANT . . . . . . . . . . . . . . . . . . . . . -18- ITEM 5. NATURE OF TRADING MARKET. . . . . . . . . . . . . . . . . . . . -18- ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . -19- ITEM 7. TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- ITEM 8. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . -22- ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . -25- ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT. . . . . . . . . . . . . . -26- ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . -30- ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . -32- ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS . . . . . . . . -34- PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35- PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35- ITEM 15. DEFAULTS FROM SENIOR SECURITIES . . . . . . . . . . . . . . . . -35- -i- ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES. . . . . . . . . . . . . . . . . . . -36- PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36- ITEM 17. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . -36- ITEM 18. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . -36- ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . . . . . . . -36- SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
-ii- CAUTIONARY STATEMENTS AND RISK FACTORS This Annual Report 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 Inc. (the "Company" or "Intertape Polymer Group") and expectations concerning the Company's future operations, liquidity and capital resources. When used in this Annual Report, 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. 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 Report. In addition to the other information contained in this Annual Report, readers should carefully consider the following cautionary statements and risk factors. IMPLEMENTATION OF BUSINESS STRATEGY The Company's business strategy includes, among other things, increasing manufacturing capacity, developing new products, improving distribution efficiencies, and expanding into new geographic markets. There can be no assurance that the Company will be able to fully implement its strategy or that the anticipated results of this strategy will be realized. Implementation of this strategy could also be affected by a number of factors beyond the Company's control such as manufacturing difficulties, disruption of distribution systems, or general or local economic conditions. Any material failure to implement its strategy could have a material adverse effect on the Company's business, financial condition and results of operations. RAW MATERIAL PRICES AND AVAILABILITY A substantial portion of the cost of manufacturing the Company's products is the cost of raw materials, primarily petroleum based resins. Historically, there have been fluctuations in these raw material prices due to factors which are beyond the Company's control, and in some instances price movements have been volatile when associated with outside influences. There can be no assurance that the Company will be able to pass on raw material price increases in the future. Further, in the past, there have been shortages from time to time in the supply of certain resins. There can be no assurances that the Company will not be subject to such shortages in the future. EXCHANGE RATE RISKS The Company's result of operations are reported in Canadian dollars. Due to the geographic mix of the Company's business, any weakening in the value of the Canadian dollar relative to the U.S. dollar would result in increased consolidated earnings for the Company, expressed in Canadian -iii- dollars. These earnings, however, on an earnings per share basis, would be negatively impacted when translated into U.S. dollars. Since the trading price in the United States of the Common Shares will be quoted in U.S. dollars, any weakening of the Canadian dollar relative to the U.S. dollar could result in a decline in the market value and trading price of the Common Shares measured in U.S. dollars. The exchange rate between Canadian dollars and U.S. dollars has varied significantly over the last five years. NEW PRODUCT DEVELOPMENT The Company is developing returnable plastic cases for the transportation and retail display of fruits and vegetables and other new products. Any new product involves risk and, as in the case of stretch wrap, may require significant capital expenditures. There can be no assurance that the returnable plastic cases, or any other new products, will produce revenues or profits for the Company, and that expenditures thereon will not have a material adverse effect on the Company's results of operations. -iv- PART I ITEM 1. DESCRIPTION OF BUSINESS. GENERAL Intertape Polymer Group develops, manufactures and sells a variety of specialized polyolefin plastic packaging products for industrial use. These products include pressure sensitive and water activated carton sealing tape, masking and reinforced filament pressure sensitive tapes, acrylic coating, EXLFILM-TM- shrink wrap ("EXLFILM-TM-"), STRETCHFLEX-TM- stretch wrap ("STRETCHFLEX-TM-") and woven products. Most of the Company's products are derived from resins which 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 a low-cost producer 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 the same extrusion processes and differ only in the final stages of manufacturing. The Company's most recent expansion of its product offering occurred with the December, 1997 acquisition of American Tape Co. ("American Tape"), a leading U.S. manufacturer of masking, reinforced filament and printable and non-printable flat back tapes, as well as certain specialty tapes. The Company's revenues are derived primarily from sales of its products in the United States and Canada, with approximately 80% of the Company's 1997 revenues attributable to sales in the United States. The Company is headquartered in Montreal, Quebec and maintains 1.8 million square feet of manufacturing facilities throughout the United States, Canada and Portugal. The registered office of the Company is located at 1155 Rene-Levesque Boulevard West, Suite 4000, Montreal, Quebec, Canada H3B 3V2, and its principal executive offices are located at 110E Montee de Liesse St. Laurent, Quebec, Canada H4T 1N4. The Company's telephone number at its principal executive offices is (514) 731-0731. HISTORY The Company's business was established in 1981 by Melbourne F. Yull, Intertape Polymer Group's Chairman of the Board and Chief Executive Officer, when Intertape Systems Inc. ("Systems"), a predecessor of the Company, established a pressure sensitive tape manufacturing facility in Montreal. Intertape Polymer Group was incorporated under the laws of Canada in 1989 and in February, 1992, completed an initial public offering of its common shares at the offering price -1- of $5.035 (US$4.25)(after giving effect to a 2:1 stock split on June 4, 1996). The Company's shares are listed on the American Stock Exchange and, since January, 1993, on the Toronto Stock Exchange. 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 $19.75 (US$14.60). The Company has pursued a strategy of aggressive growth through both substantial capital investments and acquisitions (See "Acquisition History" below). When the Company commenced operations in 1981, it converted purchased films into pressure-sensitive carton sealing tapes. Originally intended as a local manufacturer, management of the Company decided in the mid-1980's to take advantage of the extraordinary growth in demand for carton sealing tapes by significantly expanding its output of such product and, thereby, its customer base. Following adoption of this new business plan and over the next few years, the output of the Montreal plant doubled and a new facility was constructed in Danville, Virginia in 1987. The Virginia plant was "upstream integrated" to include film extrusion, thereby reducing material cost. The market for carton sealing tape has continued to grow and the Danville facility is five times larger (measured in capacity) today than at the date of its construction. Even as the Company was growing its customer base in pressure sensitive tapes, it pursued an aggressive policy of new product development to leverage its pressure sensitive tape products. In 1992, the Company developed a new variety of speciality shrink films and purchased and installed manufacturing equipment to produce such films. The ability to manufacture its own shrink films enabled the Company to participate in the shrink film market estimated to be U.S.$500 million annually. Further, it strengthened the Company's position with its customers. The Company's entry into the stretch wrap market began with the Company's concurrent development of stretch wrap products with the processes to manufacture such products. The Company entered the stretch wrap market (estimated at U.S.$1 billion annual sales in 1996) utilizing its existing customer base and distribution network. To broaden the product line and provide one-stop shopping with a "basket of products", the Company has made a series of acquisitions. Interpak Machinery Inc., a designer of automatic carton sealing equipment, was acquired by the Company in 1993. In acquiring Interpak, the Company gained technology for systems capable of utilizing large volumes of high value carton sealing tapes. Tape Inc. was acquired in 1996 to provide a complete line of water activated tapes. American Tape was acquired in 1997 bringing to the Company products including high performance masking, filament and speciality products, which mesh well with the Company's related product lines. The combination of these various product lines enables the Company to offer the market place a range of products to service its customers' needs. The Company also markets products directly to the end user. Polymer International (N.S.) Inc. ("Polymer International") and International Container Systems, Inc. ("International Container") were acquired in 1989. Polymer International manufactures a wide range of coated, woven polyolefin fabrics; International Container manufactures returnable plastic cases for the beverage -2- industry. Since acquiring Polymer International, sales of the Company's woven product line have increased five-fold, assisted in part by the development of lumber wrap and other products. In addition, two small companies (Cajun Bag & Supply Co. and Augusta Bag & Supply Co.) were purchased to produce flexible intermediate bulk containers ("FIBC's") utilizing the Company's fabric as the prime raw material. The Company also participates in two joint ventures: Fibope Portuguesa-Filmes Biorientados, S.A. ("Fibope") and IFCO-U.S., L.L.C. ("IFCO"). Fibope produces shrink films in Portugal for the European market and has doubled its manufacturing capacity since 1995. IFCO is a provider of returnable plastic cases for the produce industry. The majority of the Company's growth comes from the sale of internally developed products. Capacity increases are ongoing throughout the organization and all product lines. The Company's newest manufacturing facility, a 115,000 square foot plant in Utah, is expected to be operational by June 1998. Consistent with the Company's strategy, this plant will act not only as a producer of shrink and stretch films but also as a distribution center for all of the Company's products to increase sales in the western United States and western Canada. The Company is a holding company which owns various operating companies in the United States and in Canada. Intertape Polymer Inc., a Canadian corporation ("IPI"), is the principal operating company for the Company's Canadian operations. Intertape Polymer Corp., a Virginia corporation ("IPC"), is the principal holding and operating company for the Company's United States and international operations including, most notably, each of the businesses referenced in the acquisition table set forth above. As of April 13, 1998, the Company had 25,125,016 common shares outstanding. Unless the context otherwise requires, the terms "Intertape Polymer Group" and the "Company" are used to refer to Intertape Polymer Group Inc. together with all of its wholly-owned subsidiaries and joint ventures. Where the context requires, such terms also include the predecessors of Intertape Polymer Group. All dollar amounts referenced in this Annual Report are in Canadian Dollars unless otherwise indicated. ACQUISITION HISTORY In addition to internally generated growth, the Company has engaged in a series of acquisitions. The Company believes it now ranks among the leading developers and manufacturers of industrial plastic packaging products in North America. The following table illustrates the principal acquisitions completed by the Company. -3- COMPLETED ACQUISITIONS
Cost of Year Acquisition Company Location Products - ---- ----------- -------------------- --------------- ---------------- ($ in millions) 1989 $82.4 Polymer International Tampa, Florida Holding company Corp. and its subsidiaries: - Polymer Truro, Nova Woven fabrics International Scotia - International Tampa, Florida Transport & Container(1) display cases 1993 $ 6.6 Interpak Machinery Inc. Toronto, Canada Equipment used to seal corrugated boxes Cajun Bag & Supply Co. Crowley, FIBCs Louisiana 1995 $3.9 IFCO-U.S., L.L.C.(2) Tampa, Florida Distributor of returnable plastic containers Fibope Portugesa-Filmes Porto, Portugal EXLFILM-TM- Biorientados S.A.(3) 1996 $12.1 Augusta Bag & Supply Augusta, FIBCs Co. Georgia Tape, Inc. Green Bay, Water activated Wisconsin carton sealing tape 1997 $65.7 American Tape Co. Marysville, Pressure Michigan sensitive tapes, Richmond, masking tapes Kentucky
- ---------------------- (1) The Company originally purchased a 67% interest in this company. In 1994, the Company conducted a tender offer for all the outstanding shares it did not already own, the cost of this tender offer was $2.6 million. (2) The Company acquired a 20% interest in this joint venture. (3) The Company acquired a 50% interest in this joint venture. BUSINESS STRATEGY The Company's overall objective is to gain market share in large niche markets which it believes are growing at rates faster than the economy as a whole. The Company's strategies for achieving this objective are as follows: -4- - SOLIDIFY THE COMPANY'S POSITION AS A LOW-COST MANUFACTURER. The Company has pursued a vertically integrated manufacturing strategy as a means of controlling the costs of its manufacturing inputs and, in connection therewith, has made substantial investments in high-speed production equipment and various forms of manufacturing automation. For example, during the past several years the Company has installed various extrusion lines of equipment for the making of film for pressure sensitive carton sealing tapes. This allows the Company to buy resin as a basic raw material to produce its own films and adhesives rather than purchase them from other manufacturers at greater cost. In addition, the Company continually undertakes initiatives to reduce waste at its production facilities as a means of further controlling its manufacturing costs. - INCREASE MANUFACTURING CAPACITY. The Company believes that increasing manufacturing capacity at its existing plants will contribute to its ability to increase market share in its current markets. Over the past four years, the Company has achieved an increase in its coating capability at its Danville plant, an increase in its output of woven products from its Truro facility and a doubling of the EXLFILM-TM- production capacity at its Truro facility. In addition, the Company is scheduled to commence EXLFILM-TM- and STRETCHFLEX-TM- manufacturing operations at its new facility located in Tremonton, Utah during the second quarter of 1998. - DEVELOP NEW PRODUCTS. The Company has been increasing its investment in research and development and believes that it can take advantage of its manufacturing strengths and distribution network by introducing new products and product line extensions which complement its existing product base. The Company introduced in 1996 a new stretch wrap product line sold under the STRETCHFLEX-TM- trademark. The Company is also continuing market and feasibility studies for the introduction of a system which employs reusable plastic produce containers in the distribution of fruits and vegetables to food retailers. The Company has developed several other new products, such as truck and rail car flexible covers, and product line extensions, such as new acrylic coatings and new varieties of EXLFILM-TM- shrink films, each of which it is in the process of introducing. In addition, with the acquisition of American Tape, the Company now offers a complete line of masking tape products. - DEVELOP CENTRAL DISTRIBUTION CENTERS. The Company is in the process of installing in both its Danville and Tremonton an enhanced facilities warehouse distribution systems which will increase efficiency in the storage, shipping and inventory management of all its products located in those facilities. This US$2.0 million investment will increase the level of service that the Company provides to its customers as well as reduce its operating costs in these areas. - EVALUATE FUTURE COMPLEMENTARY ACQUISITIONS. The Company is continually evaluating the attractiveness of other companies, technologies or products that could complement the Company's existing product lines and manufacturing and distribution strengths. The -5- Company considers complementary companies, technologies and products as potential acquisition targets, and evaluates the merits of each such potential acquisition. The Company's recent completion of its purchase of American Tape is an example of such an acquisition, providing the Company with masking, reinforced filament and printable and non-printable flat back tapes as well as other specialty tapes not previously manufactured by the Company but which can be integrated into the Company's distribution system to broaden the range of products offered to its customers. - EXPAND SALES INTO NEW GEOGRAPHIC MARKETS. The Company intends to continue to exploit the breadth of its product lines, distribution network and strong market position by entering into new markets in both North America and abroad. The Company was able to use its joint venture arrangement with a Portuguese manufacturer of shrink films as a springboard to market some of its North American manufactured products in Europe. In addition, with the acquisition of American Tape, the Company gained a market presence throughout the world in high performance masking tapes. The Company believes that it can leverage this market position in the sale of its other products. The Company expects to increase its penetration in all markets either by enhancing its internal marketing efforts or through joint ventures or acquisitions. PRODUCTS CARTON SEALING TAPE: PRESSURE SENSITIVE AND WATER ACTIVATED TAPE 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. Carton sealing tape is manufactured and sold under the INTERTAPE-TM- name to industrial distributors and manufactured for other customers for sale under private labels. It is produced at the Company's Danville, Montreal, and Richmond facilities and is 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. In 1994, the Company commenced efforts to utilize its expanded production capacity and field support to begin to penetrate the United States west coast and the western Canadian market and continues to increase its sales force for these markets. The -6- Company expects the addition of a centralized warehouse distribution system in the new Tremonton, Utah facility will enhance these efforts. In addition, the Company exports this product to Europe, Asia, Central America and South America. The Company's acquisition in 1993 of the assets of Interpak Machinery Inc., 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 has continued to design and introduce new equipment. In 1996, the acquisition of Tape, Inc. 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 of this product. The Company's principal competitors for the sale of carton sealing tape products include Minnesota Mining & Manufacturing Co. ("3M") and Central Products Company, Inc. ("Central"), a division of Spinnaker Industries, Inc. MASKING TAPES: PERFORMANCE AND GENERAL PURPOSE The Company added masking tapes to its product line in December 1997 through the acquisition of American Tape, a leading manufacturer of these products. Masking tapes are used for a variety of end-use applications which can be broadly described under two categories: general purpose and high performance. General purpose applications include packaging and bundling, 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, Anchor Continental, Inc. ("Anchor"), Shuford Mills, Inc., Industrias Tuk, S.A. de C.V., and Tesa Tape Inc. ("Tesa"). REINFORCED FILAMENT TAPE: PERFORMANCE AND GENERAL PURPOSE In addition to masking tapes, the Company's purchase of American Tape also introduced reinforced filament tapes and flat back tapes to the Company's product line. Reinforced, general and specialty products are manufactured at the Company's facilities in Richmond, Kentucky and Marysville, Michigan facilities which were acquired in the American Tape acquisition. These -7- facilities produce filament tape using synthetic, natural rubber and hot melt adhesives coated on a variety of plastic filaments. The reinforcement is provided by fibreglass yarns laminated between two plastic substrates. 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 this market is 3M, and for commodity filament tapes the Company's main competitors are Anchor, Tesa and RJM Manufacturing, Inc. ACRYLIC COATING In 1995, the Company completed a $10.0 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 plant. These acrylic coatings, when applied to filmic tapes, offer extended shelf life as well as increased performance under the extremes of low and high temperatures. When acrylic coating is applied to polypropylene film, the finished product broadens the Company's line of pressure sensitive carton sealing tape. In addition, certain applications, such as mirror backing, utilize woven products as the base material to which acrylic coating is applied. EXLFILM-TM- SHRINK WRAP EXLFILM-TM- 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-TM- at its plant in Truro, Nova Scotia and maintains additional extruders for EXLFILM-TM- production there. In addition, in connection with its intention to expand into the western United States, the Company expects that EXLFILM-TM- production at its new Tremonton, Utah facility will begin during the second quarter of 1998. The Company believes that its continual investment in equipment will help it expand its exploitation of niches in this market. The Company's shrink wrap products are sold through its existing industrial distribution base 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, W.R. Grace & Co. and E.I. DuPont de Nemours & Co., and to a lesser extent by foreign manufacturers. -8- STRETCHFLEX-TM- STRETCH WRAP STRETCHFLEX-TM- 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 and is also used in agriculture as a bale wrap. The Company produces STRETCHFLEX-TM- at its Danville plant and has the capacity to produce 60 million pounds of polyolefin stretch wrap annually. Although excess capacity exists in the stretch wrap market, management believes the performance capabilities of the Company's film accounts for operations at its Danville plant being at capacity. The Company's high level of production at Danville, combined with its western oriented marketing initiatives, prompted the Company to include additional extruders for stretch wrap production in the Tremonton facility. The North American market for such polyolefin stretch wrap is served by a number of manufacturers, the largest of which are Tenneco Inc. and Linear Films, Inc. 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. Depending on the needs of the customer, the Company produces valve bags or open mouth bags. Valve bags have a one way self-closing filler valve inserted into one corner and are used for packaging pelletized and granular chemicals and other materials. Open mouth bags, which require a secondary closure method such as stitching, are used primarily for packaging of compressed material such as mineral fibers. NOVA-THENE-Registered Trademark- lumber wrap is a polyolefin fabric which is extrusion coated and printed to customer specifications. It is used in the forest products industry to package kiln-dried cut lumber. The Company believes that polyolefin products have certain advantages over traditional paper-plastic laminate products, including superior strength, ease of application, durability, better appearance and the potential to be recycled. The Company added FIBCs to its product line in 1993 with the acquisition of Cajun Bag & Supply Co. ("Cajun Bag"). To facilitate production of seamless FIBCs in the Crowley, Louisiana plant, the Company installed circular weaving equipment in 1994 in its Truro plant. The Company made additional investments in the Crowley plant in 1995 to reduce costs, increase capacity and reduce turnover. In 1996, the Company opened an FIBC plant in Edmundston, New Brunswick, Canada to meet the growing demands of the industry and purchased the assets of Augusta Bag & Supply Co. ("Augusta Bag") to add further capacity, expand market share and acquire unique manufacturing methods. In 1997, the Company initiated an organizational review of the operations of certain facilities manufacturing FIBCs and, during the latter half of 1997, approved a restructuring -9- plan designed to improve efficiency and reduce operating costs. Specifically, while the Company will continue to produce the fabrics used to make FIBCs, the Company has decided to outsource the conversion process due to enhanced foreign competition. As a consequence, the Company has incurred a one-time charge against earnings in respect of write-downs of certain assets employed in these operations as well as goodwill associated with the Cajun Bag and Augusta Bag acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Restructuring Charges" in the Annual Report attached hereto as Exhibit 4. The Company also manufactures other coated woven polyolefin fabrics that it supplies to converters which produce finished products for specific application, such as synthetic fiber packaging, recreational products, protective covers, pond liners, and flame retardant brattice cloth. The markets for these products are diverse and considered by management to be too small to justify the cost of further vertical integration to the finished product stage. The Company's NOVA-THENE-Registered Trademark- lumber wrap line competes with products manufactured by partially integrated manufacturers and by secondary converters. 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. The market for FIBCs is highly competitive and is not dominated by any single manufacturer. SOFT DRINK TRANSPORT AND DISPLAY CASES The Company is engaged in the design, development and sale of reusable plastic soft drink transport and display cases. These cases are manufactured for the Company by independent contractors located throughout North America. This approach is consistent with the Company's goal of being a low-cost producer in each market it serves, as management believes the savings to its customers on freight exceed any potential savings from in-house manufacturing. RETURNABLE PLASTIC CASES The Company has entered into a joint venture agreement with Schoeller International Logistics Beteiligungsgesellschaft GmbH to develop a system of returnable plastic cases for the transportation and retail display of fruits and vegetables in the United States and Canada as an alternative to the use of corrugated boxes and wooden crates. The system is in effect in Europe and the Company is currently experimenting with the patented containers by means of a growing number of roll-out programs in North America. SALES AND MARKETING As of January 1998, the Company maintained a sales force of 96 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts. The -10- Company's overall customer base is diverse, with no single customer accounting for more than 5% of total sales. There are no long term contracts with any customers. Sales to customers in the United States and Canada accounted for approximately 78% and 22% of total sales, respectively, in 1996 and approximately 80% and 20% of total sales, respectively, in 1997. The Company has also continued to develop its sales efforts in Europe, Asia, Central America and South America. Management does not intend to 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. The Company sales are focused in two distinct areas: 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 and reinforced tapes, EXLFILM-TM- and STRETCHFLEX-TM-. 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 the Interpak Machinery Inc., these products were manufactured by others. The Company's EXLFILM-TM- and STRETCHFLEX-TM- 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 Company's woven products group sells its products directly to the end-users. It offers a line of lumberwrap, valve bags, FIBCs and speciality 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. About 80% of the Company's products are manufactured through a process which starts with a variety of polyolefin resins and extrudes them into film for further processing. Over 50 million pounds of wide width biaxially oriented polypropylene film is extruded annually in the Company's facilities. 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 and "Hot Melt" adhesives to respond to all demands. Masking tapes utilize the same process with paper as the coating substrate. 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. -11- A wide variety of woven products are also part of the Company's family of products. The first manufacturing step in the production of woven products is film extrusion utilizing various resins and additives. These speciality films are slit in line and woven on wide width looms. They are then coated with a variety of resins to provide unique properties for large niche markets. Printing, bag making and FIBC converting enhance the value added on certain products. The Company also designs and sells specialty cases for the reusable containers market. Propriety molds and raw materials are provided to outside contractors which produce cases on an exclusive basis. Continuing product development, investment in new capital equipment and advanced engineering provide the basis that enables the Company to compete in its marketplace. The Company maintains 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 1997, five of the Company's plants were certified under ISO-9002 quality standards program. 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. 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. Management decided to embark upon a program, beginning in 1992, 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. Expenditures for research and development in 1995, 1996 and 1997 totaled $1,104,000, $1,763,000 and $2,228,000, respectively. -12- The Company currently maintains active research and development programs in three areas: woven products, pressure sensitive products and specialty films. In woven products, the emphasis is on developing polyolefin fabrics that can replace vinyl fabrics. Targeted end-use areas include truck tarps, protective coverings and billboards. Research and development in pressure sensitive products is focused on improving the Company's cost base and product line in solvent, hot melt and acrylic based general purpose performance products. In specialty films, the Company has recently introduced Exfilm Plus, a cross-linked heat shrinkable film, and IP72, a low-shrink force product. The Company believes that the development of these products will allow the Company to expand into the specialty film market which previously was not accessible using conventional products. Research and development is an important factor generating internal growth for the Company. TRADEMARKS AND PATENTS The Company markets its carton sealing tape under the registered trademark INTERTAPE-TM- and various private labels. The Company's valve or open mouth bags are marketed under the registered trademark NOVA-PAC-Registered Trademark-. Its woven polyolefin fabrics are sold under the registered trademark NOVA-THENE-Registered Trademark-. Its shrink wrap is sold under the trademark EXLFILM-TM-. Its stretch films are sold under the trademark STRETCHFLEX-TM-. FIBC's are sold under the trademarks LeGRAND SACK-Registered Trademark- and CAJUN BAGS-Registered Trademark-. The Company has over two dozen registered trademarks, principally in the United States and Canada, including trademarks acquired from American Tape. 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, woven products, stretch wrap or shrink wrap. 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. 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. -13- 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 regulation. 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. Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations. THE WISCONSIN FACILITY Since the Company's acquisition of Tape, Inc. ("Tape") in 1996, the Company and the former shareholders of Tape have been conducting an investigation into three areas of contamination in the soil and groundwater on the Green Bay, Wisconsin facility purchased in the acquisition, particularly the former drum storage area and the current and former press areas. Under the terms of the acquisition agreement, the former shareholders of Tape are responsible for the investigation and remediation of these matters, as well as reimbursement to the Company of certain costs associated with overseeing the work to a maximum of $1,000,000. To date, the former shareholders estimate the cost of the recommended remedial alternative will be approximately $100,000 and have incurred costs of approximately $50,000. The Company believes that ultimate resolution of these matters should not have a material adverse effect on the Company's business or results of operations. -14- MICHIGAN FACILITY The Company's environmental due diligence review conducted in connection with the acquisition of American Tape, revealed certain issues associated with American Tape's use of chemical solvents at its Marysville facility in the tape-making process. These solvents (primarily toluene) are stored in tanks on site, emitted into the air and, when mixed with other wastes from the manufacturing process, shipped off-site as wastes for disposal. Management undertook a comprehensive plan of investigation and remediation at the facility, focusing on the site's approximately fifteen underground storage tanks which contained a variety of hazardous substances. Remediation of six 10,000 gallon tanks is expected to continue for two to three years. The Company, however, anticipates that the full cost of remediation will be funded through amounts available under a US$ 2.0 million escrow fund established by the sellers at closing. In addition, the Michigan facility emits toluene and other pollutants, but 86% of the toluene used is recaptured under existing solvent recovery systems. While these emissions do not currently exceed permitted limits, they may exceed limits being phased in over the next five years under Title V of the Clean Air Act Amendments of 1990. To satisfy future Title V requirements, in 1997, American Tape entered into an Administrative Order and Consent with the Michigan Department of Environmental Quality under which it agreed to install a regenerative thermal oxidizer to increase the capture rate from 86% to 95%, and budgeted $2.2 million for such purchase and installation. The Company believes that ultimate resolution of these matters should not have a material adverse effect on the Company's business or results of operations. EMPLOYEES As of February 1997, the Company employed approximately 1,785 people, 439 of whom held either sales-related, operating or administrative positions and 1,346 of whom were employed in production. Although approximately 64 hourly employees at the Montreal plant are unionized, the collective bargaining agreement to which they are subject expired in November 1997 and has not been renegotiated as of the date hereof. Approximately 79 hourly employees at the Edmundston plant became unionized in February 1997 and are subject to a collective bargaining agreement which expires in October 2000. Approximately 87 hourly employees at the Green Bay plant are unionized and a collective bargaining agreement is in place that expires in February 1999. Finally, approximately 184 hourly employees at the Marysville plant are unionized and subject to a collective bargaining agreement which expires in May 1999. The Company has never experienced a work stoppage and considers its employee relations to be satisfactory. AMERICAN TAPE ACQUISITION On December 16, 1997 the Company acquired from STC Corp., a publicly traded multinational company based in Seoul, South Korea, all the outstanding capital stock of American -15- Tape Co., a leading manufacturer and marketer of high performance and general purpose masking, reinforced filament pressure sensitive and other specialty tapes. The Company paid US$122 million for the acquisition, including costs, consisting of US$46 million in cash and US$76 million in assumed indebtedness, substantially all of which was refinanced. The Company acquired American Tape principally to improve and increase the Company's product base, increase production capacity, enhance its customer base and strengthen the Company's competitive position in the market. In connection with the acquisition, the Company inherited two manufacturing facilities: one in Marysville, Michigan, and one in Richmond, Kentucky. While the Michigan facility is profitable, the Kentucky facility had experienced production problems and has only recently achieved break even status. The Company's strong technical expertise is expected to improve production efficiencies at both manufacturing facilities. The Company anticipates that it will benefit from certain synergies resulting from the American Tape acquisition. Specifically, high performance masking tape represents a new opportunity for the Company, while general purpose masking tape and reinforced filament tape may be sold through the Company's existing distribution channels. The Company believes the acquisition of American Tape has further improved the Company's status as a single source basket-of-products supplier to its distributor customers. Finally, the acquisition of American Tape has 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 lead to continued strong sales growth in the intermediate future. -16- ITEM 2. DESCRIPTION OF PROPERTY. The following table illustrates the principal manufacturing and distribution facilities owned or leased by the Company as at December 31, 1997:
AREA LOCATION USE PRODUCTS (SQ. FT.) TITLE - ---------------------------------------------------------------------------------------------------------------------------------- UNITED STATES: - ---------------------------------------------------------------------------------------------------------------------------------- Augusta, Georgia Manufacturing FIBCs 41,000 Leased to July 1999 - ---------------------------------------------------------------------------------------------------------------------------------- Augusta, Georgia Warehouse FIBCs 20,000 Leased to October 2000 - ---------------------------------------------------------------------------------------------------------------------------------- Crowley, Manufacturing and FIBCs 180,000 Leased to December 1998 Louisiana Warehouse - ---------------------------------------------------------------------------------------------------------------------------------- Danville, Manufacturing and Carton sealing tape, 281,000 Capital lease to August 2007 Virginia Distribution STRETCHFLEX-TM- with option to purchase for acrylic coating nominal amount - ---------------------------------------------------------------------------------------------------------------------------------- Green Bay, Manufacturing and Water activated carton sealing 156,000 Owned Wisconsin Warehouse tape - ---------------------------------------------------------------------------------------------------------------------------------- Marysville, Manufacturing High performance masking and 250,000 Owned Michigan filament tape - ---------------------------------------------------------------------------------------------------------------------------------- Rayne, Manufacturing and FIBCs 83,000 Leased to September 1998 Louisiana Corporate offices - ---------------------------------------------------------------------------------------------------------------------------------- Richmond, Manufacturing Carton sealing, masking and 200,000 Owned Kentucky reinforced tape - ---------------------------------------------------------------------------------------------------------------------------------- Secaucus, New Former corporate N/A N/A Leased and to be closed prior to Jersey offices of American June 1998 Tape - ---------------------------------------------------------------------------------------------------------------------------------- Tampa, Corporate offices Display and crate operations 4,000 Leased to February 2003 Florida - ---------------------------------------------------------------------------------------------------------------------------------- Tremonton, Manufacturing and EXLFILM-TM-, 115,000 Owned Utah Distribution STRETCHFLEX-TM-(1) - ---------------------------------------------------------------------------------------------------------------------------------- CANADA: - ---------------------------------------------------------------------------------------------------------------------------------- Edmundston, Manufacturing FIBCs 65,000 Owned New Brunswick - ---------------------------------------------------------------------------------------------------------------------------------- Lachine, Manufacturing Carton sealing equipment 13,000 Leased to July 1999 Quebec - ---------------------------------------------------------------------------------------------------------------------------------- St. Laurent, Slitting, Carton sealing tape 60,000 Leased to March 1999 Quebec Warehouse and Corporate offices - ---------------------------------------------------------------------------------------------------------------------------------- St. Laurent, Manufacturing Carton sealing tape 25,000 Owned Quebec - ---------------------------------------------------------------------------------------------------------------------------------- Truro, Manufacturing Woven products, 260,000 Owned Nova Scotia EXLFILM-TM- - ----------------------------------------------------------------------------------------------------------------------------------
(1) Operations are anticipated to commence during the second quarter of 1998. -17- ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to, nor is the Company's property the subject of, any pending material litigation, or any litigation which, if adversely determined, would have a material effect, individually or in the aggregate, on the business or financial condition of the Company. The Company is not aware of any material proceedings being contemplated by governmental authorities. ITEM 4. CONTROL OF REGISTRANT. To the knowledge of the Company, there is no person who, or corporation that, beneficially owns or exercises control or direction over shares carrying more than 10% of the voting rights attached to all shares of the Corporation: As of May 13, 1998, the directors and officers of the Company as a group owned beneficially, directly or indirectly, 1,684,330 Common Shares, representing approximately 6.7% of all Common Shares outstanding. SHAREHOLDER PROTECTION RIGHTS PLAN On August 24, 1993, the shareholders of the Company approved a Shareholders' Protection Rights Plan (the "Rights Plan"). Under the Rights 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. The rights expire on September 1, 1998, unless terminated earlier by the Company's Board of Directors. An amendment to extend the term of the Rights Plan has been proposed by the Board of Directors and will be submitted to the Shareholders for approval at the annual meeting to be held on May 21, 1998. If approved, the term of the Rights Plan will expire on September 1, 2003. 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. ITEM 5. NATURE OF TRADING MARKET. The Company's Common Shares currently trade on the American Stock Exchange and The Toronto Stock Exchange. The Common Shares were listed on The Toronto Stock Exchange on January 6, 1993. 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. As of May 13, 1998, 28.9% of the Company's Common Shares are held in the United States by 44 record holders in the United States. The following table sets forth high and low sales price information for trading of the Common Shares on the American Stock Exchange in 1996 and 1997: -18-
Period High Low - ------ ---- --- U.S.$ U.S.$ 1st Quarter 1996 19.44 14.94 2nd Quarter 1996 21.81 18.81 3rd Quarter 1996 22.88 16.63 4th Quarter 1996 24.13 20.63
Period High Low - ------ ---- --- U.S$ U.S$ 1st Quarter 1997 25.00 19.88 2nd Quarter 1997 21.00 18.38 3rd Quarter 1997 24.75 20.75 4th Quarter 1997 25.00 19.81
The following table sets forth high and low sales price information for trading of the Common Shares on The Toronto Stock Exchange in 1996 and 1997:
Period High Low - ------ ---- --- CDN.$ CDN.$ 1st Quarter 1996 26.50 20.25 2nd Quarter 1996 30.25 25.75 3rd Quarter 1996 31.15 23.00 4th Quarter 1996 33.00 28.00
Period High Low - ------ ---- --- CDN.$ CDN.$ 1st Quarter 1997 33.85 27.50 2nd Quarter 1997 29.20 25.25 3rd Quarter 1997 34.30 28.50 4th Quarter 1997 34.45 27.00
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS. There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including, but not limited to, foreign exchange controls, or that affect the remittance of dividends, interest or other payments to nonresident holders of the Common Shares, other than withholding tax requirements. Any such remittances, however, are subject to withholding tax. -19- There is no limitation imposed by Canadian law or by the charter or other constituent documents of the Company on the right of nonresident or foreign owners to hold or vote Common Shares, other than the Rights Plan discussed in ITEM 4 above or as provided in the INVESTMENT CANADA ACT (Canada) (the "INVESTMENT CANADA ACT"). The following summarizes the principal features of the INVESTMENT CANADA ACT. The INVESTMENT CANADA ACT requires certain "non-Canadian" (as defined in the INVESTMENT CANADA ACT) individuals, governments, corporations and other entities who wish to acquire control of a "Canadian business" (as defined in the INVESTMENT CANADA ACT) to file either a notification or an application for review with the Director of Investments appointed under the INVESTMENT CANADA ACT. The INVESTMENT CANADA ACT requires that in certain cases an acquisition of control of a Canadian business by a "non-Canadian" must be reviewed and approved by the Minister responsible for the INVESTMENT CANADA ACT on the basis that the Minister is satisfied that the acquisition is "likely to be of net benefit to Canada", having regard to criteria set forth in the INVESTMENT CANADA ACT. With respect to acquisitions of voting shares, generally only those acquisitions of voting shares of a corporation that constitute acquisitions of control of such corporation are reviewable under the INVESTMENT CANADA ACT. THE INVESTMENT CANADA ACT provides detailed rules for the determination of whether control has been acquired. For example, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control. Certain reviewable acquisitions of control may not be implemented before being approved by the Minister. If the Minister does not ultimately approve a reviewable acquisition which has been completed, the non-Canadian person or entity may be required, among other things, to divest itself of control of the acquired Canadian business. Failure to comply with the review provisions of the INVESTMENT CANADA ACT could result in, among other things, a court order directing the disposition of assets of shares. ITEM 7. TAXATION. CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. RESIDENTS The following is a summary of the principal Canadian federal income tax considerations generally applicable to a person who is a U.S. Holder. In this summary, a "U.S. Holder" means a person who, for the purposes of the CANADA-UNITED STATES TAX CONVENTION (1980) (the "Convention"), is a resident of the United States and not of Canada and who, for the purposes of the INCOME TAX ACT (Canada) (the "Canadian Tax Act"), deals at arms's length with the Company, does not use or hold and is not deemed to use or hold the Common Shares in carrying on business in Canada and who holds his Common Shares as capital property. Generally, Common Shares will be considered to be capital property to a U.S. Holder provided the U.S. Holder does not hold the Common Shares in the course of carrying on a business and has not acquired the Common Shares in one or more transactions considered to be an adventure in the nature of trade. This summary is not applicable to a U.S. Holder that is a "financial institution" for purposes of the mark-to-market -20- rules in the Canadian Tax Act and to Insurers who carry on an insurance business in Canada and elsewhere whose Common Shares are "designated insurance property". The summary is based upon the Convention, the current provisions of the Canadian Tax Act, the regulations thereunder, and proposed amendments to the Canadian Tax Act and regulations publicly announced by or on behalf of the Minister of Finance, Canada, prior to the date hereof. It does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial decision or action. The discussion does not take into account the tax laws of the various provinces or territories of Canada. It is intended to be a general description of the Canadian federal income tax considerations and does not take into account the individual circumstances of any particular shareholder. This summary is of a general nature only: U.S. Holders should consult their own tax advisors with respect to the income tax consequences to their holding and disposing of Common Shares having regard to their particular circumstances. DIVIDENDS. U.S. Holders will be subject to a 15% withholding tax on the gross amount of dividends paid or deemed to be paid by the Company. In the case of a U.S. Holder that is a corporation which beneficially owns at least 10% of the voting stock of the Company, the applicable withholding tax rate on dividends is 5%. A purchase of Common Shares by the Company (other than by a purchase in the open market in the manner in which shares are normally purchased by a member of the public) will give rise to a deemed dividend equal to the amount paid by the Company on the purchase in excess of the paid-up capital of such shares, determined in accordance with the Canadian Tax Act. Any such deemed dividend will be subject to non-resident withholding tax, as described above, and will reduce the proceeds of disposition to a holder of Common Shares for the purposes of computing the amount of his capital gain or loss arising on the disposition. DISPOSITIONS. A U.S. Holder will not be subject to tax under the Canadian Tax Act in respect of any capital gain arising on a disposition of Common Shares (including on a purchase by the Company) unless such shares constitute taxable Canadian property and the U.S. Holder is not entitled to relief under the Convention. Generally, Common Shares will not constitute taxable Canadian property of a U.S. Holder unless, at any time during the five year period immediately preceding the disposition of the Common Shares, the U.S. Holder, persons with whom the U.S. Holder did not deal at arm's length or to any combination thereof, owned or had a right to acquire not less than 25% of the issued shares of any class or series of a class of the capital stock of the Company. In any event, under the Convention, gains derived by a U.S. Holder from the disposition of Common Shares will generally not be taxable in Canada unless the value of the Company's shares is derived principally from real property situated in Canada. -21- Common Shares will constitute taxable Canadian property of a U.S. Holder that is a former Canadian resident who made an election under the Canadian Tax Act to be deemed not to dispose of such shares on the U.S. Holder's departure from Canada. Such U.S. Holders may not be eligible to claim the exemption provided in the Convention for gains realized on a disposition of Common Shares if they were resident in Canada at any time during the ten year preceding the disposition. ITEM 8. SELECTED FINANCIAL DATA. Set forth below are selected and consolidated financial data for each of the years ended December 31, 1993, 1994, 1995, 1996 and 1997, which data have been derived from consolidated financial statements that been audited by Raymond Chabot Grant Thornton, General Partnership, independent chartered accountants, a member firm of Grant Thornton International.
Year Ended December 31, ------------------------------------------------------------ 1993 1994 1995 1996 1997 -------- -------- -------- -------- -------- (in thousands of Canadian dollars, except per share amounts) INCOME STATEMENT DATA Amounts Under Canadian GAAP (1) Sales $134,521 $176,973 $225,378 $271,277 $348,270 Cost of Sales 97,302 125,485 159,195 192,748 251,856 -------- -------- -------- -------- -------- Gross Profit 37,219 51,488 66,183 78,529 96,414 -------- -------- -------- -------- -------- Selling, general and administrative expenses 16,069 22,400 26,071 32,895 41,754 Research and Development 496 976 1,104 1,763 2,228 Amortization of goodwill 1,280 1,440 1,760 1,780 2,360 Financial expenses 2,966 3,289 3,194 1,695 3,247 20,811 28,105 32,129 38,133 49,589 -------- -------- -------- -------- -------- Earnings before restructuring, income taxes and non-controlling interest 46,825 Restructuring charges 27,116 Earnings before income taxes and non-controlling interest 16,408 23,383 34,054 40,396 19,709 Income taxes 6,720 9,050 12,500 11,800 6,110 -------- -------- -------- -------- -------- Earnings before non-controlling interest 9,688 14,333 21,554 28,596 13,599 Non-controlling interest 65 (36) -- -- -- -------- -------- -------- -------- -------- Net earnings $9,623 $14,369 $21,554 $28,596 $13,599 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings per share before restructuring: Basic $1.30 Fully diluted 1.26 Earnings per share: Basic $0.48 $0.71 $1.02 $1.18 $0.55 Fully diluted $0.46 $0.68 $0.97 $1.13 $0.53
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Year Ended December 31, ------------------------------------------------------------ 1993 1994 1995 1996 1997 -------- -------- -------- -------- -------- (in thousands of Canadian dollars, except per share amounts) U.S. GAAP Earnings Reconciliation (1) Net earnings according to Canadian GAAP $9,623 $14,369 $21,554 $28,596 $13,599 Net earnings before the following U.S. GAAP adjustments 9,623 14,369 21,554 28,596 13,599 Deferred preproduction and product development costs 644 691 530 282 Decrease in the income tax expense for the period with respect to the income tax effects of the above (232) (249) (191) (102) Difference in the determination of income taxes 180 180 180 180 -------- -------- -------- -------- -------- Net earnings according to U.S. GAAP 10,215 14,991 22,073 28,956 13,599 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings per share according to U.S. GAAP before restructuring charge Basic $1.30 Diluted $1.26 Earnings per share according to U.S. GAAP Basic $0.50 $0.74 $1.04 $1.20 $0.55 Diluted $0.50 $0.72 $1.00 $1.15 $0.53
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Year Ended December 31, ------------------------------------------------------------ 1993 1994 1995 1996 1997 -------- -------- -------- -------- -------- (in thousands of Canadian dollars, except per share amounts) BALANCE SHEET DATA Amounts Under Canadian GAAP(2) Working capital $ 23,215 $ 44,390 $ 95,672 $ 81,018 $ 60,054 Total assets 165,693 207,572 300,540 348,578 596,043 Long-term debt 32,294 51,667 54,680 64,026 230,067 Total liabilities 67,801 94,491 102,521 115,671 345,941 Shareholders' equity 97,892 113,081 198,019 232,907 250,102
- -------------------------- (1) In certain respect, Canadian GAAP differ from US GAAP. For a more extensive discussion of the differences between Canadian GAAP and U.S. GAAP, see Note 20 to the consolidated financial statements set forth in the 1997 Annual Report to Shareholders which is attached as Exhibit 4 to, and incorporated by reference in, this Annual Report on Form 20-F. Starting in fiscal 1997, any U.S. GAAP reconciling matters, for the statements of earnings, were assessed to be not material enough to require separate disclosure. (2) Under Canadian GAAP, the financial statements are prepared using the proportionate consolidation method of accounting for joint ventures. Under U.S. GAAP, these investments would be accounted for using the equity method. See Note 20 to the consolidated financial statements set forth in the 1997 Annual Report to Shareholders which is attached as Exhibit 4 to, and incorporated by reference in, this Annual Report on Form 20-F. The other differences in presentation that would be required under U.S. GAAP to the consolidated balance sheets are not viewed as significant enough to require further disclosure. The following table sets forth certain exchange rates, expressed in United States dollars per Canadian dollar, determined by the noon buying rates in New York city for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York. On May 7, 1998, the noon buying rate was CDN. $1.00 = U.S. $0.6944. -24-
Year Ended December 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ------ ------ ------ ------ ------ (All amounts in United States dollars) Exchange rate at end of period $0.7544 $0.7128 $0.7323 $0.7297 $0.6999 Average exchange rate during period $0.7751 $0.7302 $0.7305 $0.7296 $0.7221 Highest exchange rate during period $0.8046 $0.7632 $0.7527 $0.7477 $0.7487 Lowest exchange rate during period $0.7439 $0.7103 $0.7023 $0.7271 $0.6962
The Company has no written policy for the payment of dividends. On March 8, 1993, the company paid its first dividend of CDN. $0.05 or U.S. $0.04 per common share to shareholders of record on March 19, 1993. On March 14, 1994, the Company declared a dividend of CDN. $0.06 or U.S. $0.04 per common share to shareholders of record on March 23, 1994. Dividends totaling CDN. $1.2 Million were paid on March 31, 1994. On March 14, 1995, the Company declared a dividend of CDN. $0.07 or U.S. $0.05 per common share to Shareholders of record on March 23, 1995. Dividends totaling CDN. $1.4 Million were paid on March 30, 1995. On February 28, 1996, the Company declared a dividend of CDN. $0.085 or U.S. $0.06 per common share to Shareholders of record on March 8, 1996. Dividends totaling CDN. $2.0 Million were paid on March 22, 1996. On March 4, 1997, the Company declared a dividend of CDN. $0.10 or U.S.$0.073 per common share to Shareholders of record on March 13, 1997. Dividends totaling CDN. $2.5 Million were paid on March 27, 1997. On March 10, 1998, the Company declared a dividend of CDN. $0.13 or U.S. $0.092 per common share to Shareholders of record on March 20, 1998. Dividends totaling CDN. $3.3 Million were paid on March 31, 1998. ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Reference is made to "Management's Discussion and Analysis" on Pages 7 through 16 of Registrant's 1997 Annual Report to Shareholders, which is incorporated herein by reference and which is included as Exhibit 4 to this Annual Report on Form 20-F. -25- ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT. The name and office with the Company of each person who is, or has been chosen to become, a Director or executive officer of the Company as of the date hereof are set forth in the following table.
Name Age Position - ---- --- -------- Melbourne F. Yull 57 Chairman of the Board, Chief Executive Officer and Director H. Dale McSween 48 Executive Vice President and Chief Operating Officer Andrew M. Archibald 52 Vice-President, Finance and Administration, Chief Financial Officer and Secretary Lloyd W. Jones 60 Vice-President Kenneth R. Rogers 61 Vice-President, Sales and Marketing Richard Gerrior 51 Vice President, Manufacturing, Truro Eric E. Baker 64 Director Michael L. Richards 59 Director James A. Motley, Sr. 69 Director Irvine Mermelstein 71 Director L. Robbie Shaw 54 Director Ben J. Davenport, Jr. 55 Director Gordon R. Cunningham 53 Director(1) (1) Nominee
MELBOURNE F. YULL, founder of the Company, has been the Chief Executive Officer and a director of the Company since 1981. He was President from 1981 to June 1994 and has been Chairman of -26- the Board since then. Mr. Yull has over 27 years experience in the packaging industry, primarily related to both extrusion and coating. H. DALE MCSWEEN has served as Executive Vice-President and Chief Operating Officer since May 1995. Prior thereto he was Senior Vice-President since 1990. From 1987 to 1989 Mr. McSween was the President and Chief Executive Officer of Polymer International (N.S.) Incorporated. The Company indirectly acquired all of the shares of Polymer International during 1989, and it became part of Intertape Polymer Inc. in January 1990 in the context of a corporate reorganization. From 1982 to 1987, Mr. McSween was the Director of Sales and Marketing of Polymer International. ANDREW M. ARCHIBALD has been Vice-President Finance and Administration, Chief Financial Officer and Secretary since May 1995. Prior thereto he served as Vice-President, Finance and Secretary of the Company since 1989. Prior to 1989 he was an audit and financial consulting service partner with Raymond, Chabot, Martin, Pare, Chartered Accountants. LLOYD W. JONES has been Vice-President since June 1994. Previously he was Vice-President Manufacturing since 1990. He was also President and a director of International Container Systems, Inc. from 1989 to 1994. International Container was a public company which was merged with Polymer International Corp. ("PIC") in late 1994. Mr. Jones is President of PIC. KENNETH R. ROGERS has been Corporate Vice-President, Sales and Marketing since 1997. He was previously Vice-President, Sales and Marketing of the Company since 1987. From 1984 to 1987, Mr. Rogers was Marketing Manager of Devon Tape Company, a tape manufacturer based in New Jersey. RICHARD GERRIOR has been Vice-President, Manufacturing Truro since 1990. From 1968 to 1989 he served in various manufacturing management positions with Polymer International. ERIC E. BAKER, has served as a director of the Company since 1984. He was Chairman of the Board from 1984 to June 1994. He is the President of Almiria Capital Corp., a venture capital company and was the President of its predecessor, Altamira Capital Corp. since 1984. MICHAEL L. RICHARDS has served as a Director of the Company and its predecessor, Systems, since 1981. Mr. Richards is a Senior Partner at the law firm of Stikeman, Elliott, Montreal, Quebec. JAMES A. MOTLEY, SR., has been a director of the Company since February 1992. He is a Director of American Bank and Trust Company and American National Bank Shares, Inc. and was formerly Chairman of the Board and Chief Executive Officer of the same firms. IRVINE MERMELSTEIN, a director of the Company since March 1994, is a resident of Tucson, Arizona and Halifax, Nova Scotia, and is the managing partner of Market-Tek, management consultants. -27- L. ROBBIE SHAW, a resident of Halifax, Nova Scotia, has been a director of the Company since June 1994. He has been Vice-President Marketing and Public Affairs of Nova Scotia Power since 1993. Prior to that, Mr. Shaw was Managing Partner for Atlantic Canada of Peat Marwick Stevenson Kellogg, a management consulting firm. BEN J. DAVENPORT, JR. has been a director of the Company since June 1994. He is a resident of Chatham, Virginia, and has been since 1983 the President of Chatham Oil Company, a distributor of oil, gasoline and propane. He also is the Chairman of the Board and Chief Executive Officer of First Piedmont Corporation, a waste hauling business. GORDON R. CUNNINGHAM has been nominated as a director. He is a partner with Connor Capital Management Corp. Prior to that Mr. Cunningham was President and Chief Executive Officer of London Life Insurance Co. and President and Chief Executive Officer of London Insurance Group. STATEMENT OF COMPANY GOVERNANCE PRACTICES In 1995, The Toronto Stock Exchange adopted a requirement that disclosure be made by each listed company of its corporate governance system by making reference to The Toronto Stock Exchange Guidelines for Corporate Governance (the "Guidelines"). Compliance with the Guidelines is not mandatory but each listed corporation is required to explain where its system of governance differs from the Guidelines. MANDATE OF THE BOARD The mandate of the Board of Directors is to supervise the management of the business and affairs of the Company, including the development of major policy and strategy. The Board meets at least quarterly, and more frequently as required to consider particular issues or conduct specific reviews between quarterly meetings whenever appropriate. Governance responsibilities are undertaken by the Board as a whole, with certain specific responsibilities delegated to the audit and compensation committees as described below. COMPOSITION OF THE BOARD The Company's Board currently consists of seven directors, four of whom are unrelated directors in accordance with the definition of an unrelated director in the Guidelines. The Board has considered its size for the 1998 fiscal year and proposes increasing its number to eight directors. CHAIR OF THE BOARD The Board is chaired by a director who is also the Chief Executive Officer of the Company. 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 and the role of the Board -28- in determining its own policies, procedures and practices, and ensuring that the appropriate information is made available to the Board. COMMITTEES The Board has established two committees, the Audit Committee and the Compensation 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 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 three outside directors. The Compensation Committee, as presently constituted, does not comply with the Guidelines as it is composed of two related directors and two unrelated directors and the Board has decided not to modify its composition for the reasons outlined below. The following is a description of the Committees of the Board and their mandate: - Audit Committee: The mandate of the Committee is to review the annual financial statements of the Company and to make recommendations to the Board of Directors in respect thereto. The Committee also reviews the nature and scope of the annual audit as proposed by the auditors and management and, with the auditors and management, the adequacy of the internal accounting control procedures and systems within the Company. The Committee also makes recommendations to the Board regarding the appointment of independent auditors and their remuneration and reviews any proposed change in accounting practices or policies. - Compensation Committee: The Committee is responsible for the determination and administration of the compensation policies and levels for the executive officers of the Company and its subsidiaries. The recommendations of the Committee are communicated to the Board of Directors. The compensation of the Chief Executive Officer and the recommendation for the granting of stock options to executive officers are submitted to the Board of Directors for approval. The Chairman and Chief Executive Officer is a member of this Committee. The Board of Directors considers his participation in the Committee as essential and feels he should continue to serve on the Committee provided the other members are outside directors. Mr. Yull does not, however, participate in the Committee's or the Board's deliberations concerning the recommendation on his own compensation. DECISIONS REQUIRING BOARD APPROVAL All major decisions concerning, among other things, the Company'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 dollars or more are subject to the prior approval of the Board of Directors. -29- DIRECTOR RECRUITMENT AND BOARD EFFECTIVENESS All the directors presently in office and proposed to be elected (other than Mr. Cunningham) at the next annual meeting of shareholders have served as directors in good standing of the Company since 1994 and the majority of them have served since it became a reporting issuer in 1992. The Board of Directors has not adopted a formal policy for the recruitment of directors. Participation of directors is expected at all Board of Directors and Committee meetings to which they are called. Directors are asked to notify the Company if they are 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. SHAREHOLDER COMMUNICATION AND FEEDBACK The fundamental objective of the Company's shareholder communication policy is to ensure open, accessible and timely exchange of information with all shareholders respecting the business, affairs and performance of the Company, 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 shareholders, the Company releases its disclosed information through news wire services, the general media, telephone conferences with investment analysts and mailings to shareholders. DIRECTORS' AND OFFICERS' INSURANCE The Company maintains directors' and officers' liability insurance covering liability, including defense costs, of directors and officers of the Company incurred as a result of acting as such directors and officers, provided they acted honestly and in good faith with a view to the best interests of the Company. The current limit of insurance is $15,000,000 and an annual premium of $90,000 was paid by the Company in the last completed financial year with respect to the period from October 1997 to October 1998. Claims payable to the Company are subject to a retention of $250,000 per occurrence. ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS. Under most circumstances, the Company's bonus policy provides for the payment of bonuses to its officers based on the performance of the Company. Bonuses are paid to certain officers if the net income of their respective divisions reaches a certain percentage of the budgeted net income. Such bonuses are set at 0% of the salary of the particular executive if net income equals 80% of budgeted net income, increasing on a straight line basis to a maximum of 50% (60% with respect -30- to the Chief Executive Officer) as net income increases to 100% of budgeted net income. Bonuses are paid yearly after the receipt of the audited financial statements of the Company. The Company provided certain executive officers with non-cash compensation, including the use of a car or a car allowance and the reimbursement of related expenses, during the year ended December 31, 1997. Such non-cash compensation for the Company's officers did not exceed an aggregate of $50,000 for that year. The aggregate compensation paid by the Company for the year ended December 31, 1997, to all directors and executive officers as a group, for services in all capacities, was $1,610,290. In addition, in 1998, the Company has paid director fees of $54,000 earned in 1997. The aggregate amount accrued or set aside by the Company for the year ended December 31, 1997 to provide pension, retirement or similar benefits, to all directors and executive officers as a group was $653,000. The following table sets forth all compensation paid in 1997 in respect of the individuals who were, at December 31, 1997, the Chief Executive Officer and the other four (4) most highly compensated executive officers of the Corporation (the "named executive officers").
Annual Compensation ------------------------------------------- Other Annual Name Salary $ Bonus $ Compensation $ (1) ---- -------- ------- ------------------ M. F. Yull U.S. 303,270 U.S. Nil U.S. 30,326 D. McSween 238,082 Nil 16,099 A. M. Archibald 189,520 Nil 7,001 K. Rogers 197,605 Nil 9,204 L. W. Jones U.S. 213,628 U.S. Nil U.S. 8,704
- --------------- (1) Perquisites and other personal benefits do not exceed the lesser of $50,000 and 10% of the total of the annual salary and bonus for any of the named executive officers. The amounts in this column related to taxable benefits on employee loans and company contribution to the pension plan. -31- ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES. EXECUTIVE STOCK OPTION PLAN In the context of its initial public offering, the Company established an ongoing Executive Stock Option Plan. The ongoing Executive Stock Option Plan of the Company is designed to promote a proprietary interest in the Company among its executives, to encourage the executives to further the development of the Company and to assist the Company in attracting and retaining executives necessary for the Company's long-term success. The Executive Stock Option Plan is administered by the Board of Directors. The shares offered under the Executive Stock Option Plan are common shares of the Company. The total number of shares reserved for issuance under the Plan and any other insider stock option or stock purchase plan will not exceed 10% of the issued and outstanding common shares of the Company from time to time. The Board of Directors designates from time to time from the eligible executives those to whom options are granted and determines the number of shares covered by such options. Generally, participation in the Plan will be limited to persons holding positions that can have a significant impact on the Company's long-term results. The number of common shares to which the options relate will be 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 will be determined by the Board of Directors, but will not be less than the lowest price allowed from time to time by the applicable regulatory authorities or any stock exchange on which the common shares are listed. The Plan provides that options issued thereunder shall vest 25% per year over four years. The Plan was amended in 1996 to comply with new rules adopted by The Toronto Stock Exchange and to allow the granting of options to existing and future directors of the Company who are not part of management. The directors of the Company have now adopted a further amending resolution effective as of May 28, 1997: (i) authorizing the Board of Directors of the Company to grant, from time to time, on an annual basis, up to 2,000 options to the directors of the Company who are not part of management; and (ii) specifying that any new non-management director will receive a Grant of 5,000 options upon becoming a director. On February 28, 1996, options to purchase 324,100 common shares were granted to executive officers, directors and employees at an exercise price of CDN. $22.50 or U.S. $16.30 per share. Of such 324,100 options, 227,200 were granted to executive officers of the Company. None of these options has been exercised. On August 2, 1996, options to purchase 20,000 common shares were granted to an executive officer and an employee, at an exercise price of CDN. $24.78 or U.S. $17.84 per share. Of such 10,000 were granted to an executive officer of the Company. -32- As of May 13, 1998, there were outstanding options to purchase a total of 2,004,284 of the Company's common shares, of which options to purchase a total of 1,309,234 common shares are held by the directors and officers as a group. The following table sets forth the exercise price and expiration date for all of the currently outstanding options:
Number of Option Shares Exercise Price Expiration Date - ------------- -------------- --------------- CDN.$ U.S.$ 146,700 $5.035 $4.25 February, 2002 92,050 $6.125 $4.813 January, 2003 5,600 $7.730 $6.022 July, 2003 150,000 $7.915 $6.040 October, 2003 100,000 $8.585 $6.406 December, 2003 39,850 $10.465 $7.710 March, 2004 8,500 $11.175 $8.260 October, 2004 94,900 $11.175 $8.135 January, 2005 49,034 $12.095 $8.575 March, 2005 100,000 $14.890 $10.860 June, 2005 290,100 $22.500 $16.300 February 2006 20,000 $24.780 $17.840 August, 2006 339,900 $26.51 $19.09 May, 2003 299,000 $29.03 $20.59 December, 2003 274,650 $32.92 $23.26 March, 2004 - ---------- 2,004,284 - --------- - ---------
-33- ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS. INDEBTEDNESS TO THE COMPANY Officers of the Company are currently indebted to the Company in respect of interest-free loans granted during 1991 for the purpose of purchasing Common Shares of the Company upon the exercise of options. Such loans are repayable not later than September 30, 1999. As of April 14, 1998, the aggregate indebtedness of all officers to the Company entered into in connection with the purchase of Common Shares was $399,531. The following table summarizes the largest amount of the loans outstanding since January 1, 1997, and the amount outstanding on April 14, 1998.
Largest amount Name and Municipality outstanding since Amount outstanding of residence January 1, 1997 on April 14, 1998 - ------------ --------------- ----------------- Melbourne F. Yull $ 369,218 $ 369,218 Westmount, Quebec H. Dale McSween $ 30,313 $ 30,313 Beaconsfield, Quebec Andrew M. Archibald $ 32,853 $ Nil Westmount, Quebec Richard Gerrior $ 9,175 $ Nil Truro, Nova Scotia
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT On March 10, 1992, the Company entered into an employment agreement with Melbourne F. Yull. Pursuant to the terms of the employment agreement, Mr. Yull agreed to continue to serve as Chief Executive Officer of the Company and its subsidiaries initially at a fixed annual gross salary and subsequently at compensation levels to be reviewed annually by the Company in accordance with its internal policies. The agreement provides INTER ALIA for annual bonuses based on budgeted objectives of the Company. The agreement also provides for the payment of 24 months of Mr. Yull's remuneration in the event of termination without cause or resignation within six months of a change of control. On June 13, 1989, predecessors of Intertape Polymer Inc. entered into an employment agreement with Lloyd W. Jones, whereby he agreed to act as President of a subsidiary as well as in such other positions within the Intertape Polymer group as would be agreed upon between the parties. The agreement is renewed yearly for an additional one-year term and Mr. Jones' -34- compensation is agreed upon on an annual basis, including the salary and the basis for the determination of the annual bonus. The Company has entered into change-in-control letter agreements dated August 8, 1996 with Messrs. McSween, Archibald, Rogers and Jones. These letter agreements provide that if, within a period of six months after a change in control of the Company, (a) an executive voluntarily terminates his employment with the Company, or (b) the Company terminates an executive's employment without cause, such executive will be entitled to receive 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 fifteen months of such executive's remuneration at the effective date of such resignation or termination. In addition, all options for the acquisition of common shares of the Company previously granted to such executive under the Plan shall become immediately vested and exercisable and must be exercised within 90 days following the effective date of such resignation or termination. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS The management of the Company is unaware of any material interest of any director or officer of the Company, of any management nominee for election as a director of the Company or of any person who beneficially owns or exercises control or direction over shares carrying more than 10% of the voting rights attached to all shares of the Company or any associate or affiliate of any such person, in any transaction since the beginning of the last completed fiscal year of the Company or in any proposed transaction that has materially affected or will materially affect the Company or any of its affiliates. PART II Not Applicable PART III ITEM 15. DEFAULTS FROM SENIOR SECURITIES. None Reportable -35- ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES. None Reportable PART IV ITEM 17. FINANCIAL STATEMENTS. Reference is made to the Company's Financial Statements, and the notes thereto, together with the Auditors' Report, on Pages 17 through 42 of Registrant's 1997 Annual Report to Shareholders which is incorporated herein by reference and which is included as Exhibit 4 to this Annual Report on Form 20-F, and to the Financial Statement Schedules, together with the Auditor's Report thereon, included as part of this Annual Report on Form 20-F. ITEM 18. FINANCIAL STATEMENTS. Not Applicable ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
(a) (1) FINANCIAL STATEMENTS PAGE(S) -------------------- ------- Auditors' Report A-1** Consolidated Earnings 18* Consolidated Retained Earnings 18* Consolidated Changes in Cash Resources 19* Consolidated Balance Sheet 20* Notes 1-20 to the Financial Statements 21-42* (a) (2) FINANCIAL STATEMENT SCHEDULES ----------------------------- Auditors' Report F-1** Schedule II - Valuation and Qualifying Accounts F-2** (b) EXHIBITS 1 Renewal of operating line of credit between Intertape Polymer Inc. and the National Bank of Canada dated April 29, 1996 *** -36- 2.1 Fourth Lease Amendment between Intertape Polymer Corp. and Danville Industrial Development Incorporated dated February 1, 1993 *** 2.2 Fifth Lease Amendment between Intertape Polymer Corp. and Danville Industrial Development Incorporated dated September 6, 1995 *** 2.3 Loan Agreement between Intertape Polymer Corp., Intertape Polymer Inc., Intertape Polymer Group Inc. and Danville Industrial Development and American National Bank and Trust Company *** 3 [Deleted] 4 Registrant's 1997 Annual Report to Shareholders 5 Consent of Independent Auditors 6 Note agreements between Intertape Polymer Group Inc. and various institutions dated January 1, 1996 *** 7 Amended Memorandum of lease between Intertape *** Polymer Corp. and Danville Industrial Development, Inc. dated May 14, 1996 8 Loan modification agreement between Danville Industrial Development Incorporated, American National Bank and Trust Company, Intertape Polymer Corp., Intertape Polymer Inc. and Intertape Polymer Group Inc. dated July, 1996 *** 9 Loan documents between Danville Industrial Development, Incorporated and American National Bank and Trust Company, dated August 15, 1996. *** 10 Acquisition Agreement between Intertape Polymer Group Inc. and STC Corp. dated December 16, 1997. -37- 11 Loan Documents between IPG Holdings, L.P. and Toronto Dominion Bank dated December 15, 1997 and Guaranty by Intertape Polymer Group Inc. 12 Revolving Credit Facility between IPG Holdings, L.P. and Comerica Bank dated December 15, 1997 and Guaranty by Intertape Polymer Group Inc.
- ----------------------------- * The financial statements filed as part of this report are incorporated herein by reference to the 1997 Annual Report to Shareholders which is included as Exhibit 4 to this Annual Report on Form 20-F. References to page numbers are references to the applicable page in the 1997 Annual Report. ** References are to pages in this Annual Report on Form 20-F. *** Previously filed as an exhibit to registrant's Annual Report on Form 20-F, Commission File No. 1-10928, and incorporated herein by reference. -38- SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERTAPE POLYMER GROUP INC. (Registrant) /s/ Andrew M. Archibald, C.A. ---------------------------------------- (Signature) Name: Andrew M. Archibald, C.A. Title: Vice-President, Finance and Administration, Chief Financial Officer and Secretary Date: May 19, 1998 -39-
EXHIBIT INDEX ------------- 1 Renewal of operating line of credit between Intertape Polymer Inc. and the National Bank of Canada dated April 29, 1996 *** 2.1 Fourth Lease Amendment between Intertape Polymer Corp. and Danville Industrial Development Incorporated dated February 1, 1993 *** 2.2 Fifth Lease Amendment between Intertape Polymer Corp. and Danville Industrial Development Incorporated dated September 6, 1995 *** 2.3 Loan Agreement between Intertape Polymer Corp., Intertape Polymer Inc., Intertape Polymer Group Inc. and Danville Industrial Development and American National Bank and Trust Company *** 3 [Deleted] 4 Registrant's 1997 Annual Report to Shareholders 5 Consent of Independent Auditors 6 Note agreements between Intertape Polymer Group Inc. and various institutions dated January 1, 1996 *** 7 Amended Memorandum of lease between Intertape *** Polymer Corp. and Danville Industrial Development, Inc. dated May 14, 1996 8 Loan modification agreement between Danville Industrial Development Incorporated, American National Bank and Trust Company, Intertape Polymer Corp., Intertape Polymer Inc. and Intertape Polymer Group Inc. dated July, 1996 *** 9 Loan documents between Danville Industrial Development, Incorporated and American National Bank and Trust Company, dated August 15, 1996. *** -40- 10 Acquisition Agreement between Intertape Polymer Group Inc. and STC Corp. dated December 16, 1997. 11 Loan Documents between IPG Holdings, L.P. and Toronto Dominion Bank dated December 15, 1997 and Guaranty by Intertape Polymer Group Inc. 12 Revolving Credit Facility between IPG Holdings, L.P. and Comerica Bank dated December 15, 1997 and Guaranty by Intertape Polymer Group Inc.
- ----------------------------- *** Previously filed as an exhibit to registrant's Annual Report on Form 20-F, Commission File No. 1-10928, and incorporated herein by reference. -41- 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, 1997 and 1996 and the consolidated statements of earnings, retained earnings and changes in cash resources for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing standards in Canada. 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, 1997 and 1996 and the results of its operations and the changes in its financial position for the years ended December 31, 1997, 1996 and 1995 in accordance with generally accepted accounting principles in Canada. Generally accepted accounting principles in Canada differ in some respects from those applicable in the United States of America (See Note 20). Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal, Canada March 10, 1998 AUDITORS' REPORT To the Board of Directors of Intertape Polymer Group Inc. Our examination of the Consolidated Financial Statements referred to in our report dated March 10, 1998 appearing on page 17 of the 1997 Annual Report to the shareholders of Intertape Polymer Group Inc. (which report and Consolidated Financial Statements are incorporated by reference in this Annual Report on Form 20-F) also included an examination of the Financial Statement Schedule referred to in Part IV of this Form 20-F. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related Consolidated Financial Statements taken as a whole. Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal, Canada March 10, 1998 CONSENT OF INDEPENDENT AUDITORS We have issued our reports, dated March 10, 1998 on the Consolidated Financial Statements and the Financial Statement Schedule of Intertape Polymer Group Inc. referred to in Items 8 and 17 of this Annual Report on Form 20-F and we hereby consent to the use of such reports in this Annual Report on Form 20-F. We also consent to the reference to us under the heading "Item 8 - Selected Financial Data" in such Annual Report. Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal, Canada May , 1998 SCHEDULE II INTERTAPE POLYMER GROUP INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
AMOUNTS BALANCE AT ADDITIONS ASSUMED BEGINNING OF CHARGED TO UNDER BALANCE AT YEAR EXPENSE DEDUCTIONS ACQUISTIONS END OF YEAR DESCRIPTION ------------ ---------- ---------- ----------- ----------- ALLOWANCE FOR DOUBTFUL ACCOUNTS Year ended December 31, 1997 $764 $455 $162 $878 $1,935 --- --- --- --- ----- Year ended December 31, 1996 $689 $217 $142 - $ 764 --- --- --- ----- Year ended December 31, 1995 $286 $475 $ 72 - $ 689 --- --- --- -----
EX-99.1 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER 4, 1997 BY AND AMONG INTERTAPE POLYMER GROUP INC. IPG (US) ACQUISITION CORPORATION AND STC CORP. TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . .1 1.2. Other Terms . . . . . . . . . . . . . . . . . . . . . . . .7 ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 ARTICLE III CONSIDERATION AND ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . . . .8 3.1. Consideration . . . . . . . . . . . . . . . . . . . . . . .8 3.2. Allocation. . . . . . . . . . . . . . . . . . . . . . . . .8 3.3. Adjustment of Purchase Price. . . . . . . . . . . . . . . .8 ARTICLE IV LETTER OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE V CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2. Documents to be Delivered by Seller to Buyer. . . . . . . 11 5.3. Documents to be Delivered by IPG and Buyer to Seller. . . 12 5.4. Other Actions at the Closing. . . . . . . . . . . . . . . 12 ARTICLE VI REPRESENTATIONS AND WARRANTIES RELATING TO SELLER . . . . . . . . . . . . . . 12 6.1. Corporate Organization. . . . . . . . . . . . . . . . . . 12 6.2. Stock Ownership . . . . . . . . . . . . . . . . . . . . . 12 6.3. Authorization of Agreement; No Violation. . . . . . . . . 13 6.4. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 13 6.5. No Brokers and Finders. . . . . . . . . . . . . . . . . . 13 ARTICLE VII REPRESENTATIONS AND WARRANTIES RELATING TO STC TAPE . . . . . . . . . . . . . 13 7.1. Corporate Organization. . . . . . . . . . . . . . . . . . 14 7.2. Stock Ownership . . . . . . . . . . . . . . . . . . . . . 14 7.3. Subsidiaries and Other Equity Investments . . . . . . . . 14 7.4. Financial Statements. . . . . . . . . . . . . . . . . . . 14 7.5. No Undisclosed Liabilities. . . . . . . . . . . . . . . . 14 7.6. Absence of Certain Changes. . . . . . . . . . . . . . . . 15 7.7. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE VIII REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY . . . . . . . . . . . 19 8.1. Corporate Organization. . . . . . . . . . . . . . . . . . 19 8.2. Capitalization; Stock Ownership . . . . . . . . . . . . . 19 8.3. Subsidiaries and Other Equity Investments . . . . . . . . 19 8.4. No Violation. . . . . . . . . . . . . . . . . . . . . . . 20 8.5. Financial Statements. . . . . . . . . . . . . . . . . . . 21 8.6. No Undisclosed Liabilities. . . . . . . . . . . . . . . . 21 8.7. Absence of Certain Changes. . . . . . . . . . . . . . . . 22 8.8. Title to and Condition of Properties and Assets . . . . . 24 8.9. Inventory . . . . . . . . . . . . . . . . . . . . . . . . 24 8.10. Real Property . . . . . . . . . . . . . . . . . . . . . . 25 8.11. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 27 8.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . 28 8.13. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 29 8.14. Proprietary Rights. . . . . . . . . . . . . . . . . . . . 30 8.15. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 30 8.16. Compliance with Laws. . . . . . . . . . . . . . . . . . . 31 8.17. Environmental Matters . . . . . . . . . . . . . . . . . . 31 8.18. Governmental Authorizations and Regulations . . . . . . . 32 8.19. SEC Filings . . . . . . . . . . . . . . . . . . . . . . . 32 8.20. Employee Benefit Plans and Arrangements . . . . . . . . . 33 8.21. Labor Matters . . . . . . . . . . . . . . . . . . . . . . 34 8.22. Foreign Corrupt Practices Act . . . . . . . . . . . . . . 35 8.23. Accounting Practices. . . . . . . . . . . . . . . . . . . 35 8.24. Business Relationships; Receivables . . . . . . . . . . . 35 8.25. Affiliates' Relationships to and Transactions with the Company . . . . . . . . . . . . . . . . . . . . 36 8.26. Corporate Name. . . . . . . . . . . . . . . . . . . . . . 36 8.27. Corporate Matters. . . . . . . . . . . . . . . . . . . . .36 8.28. [Intentionally omitted.] . . . . . . . . . . . . . . . . .36 8.29. Insurance. . . . . . . . . . . . . . . . . . . . . . . . .36 8.30. Product Warranties . . . . . . . . . . . . . . . . . . . .37 8.31. Barter Agreements. . . . . . . . . . . . . . . . . . . . .37 8.32. Certain Employee Matters . . . . . . . . . . . . . . . . .37 8.33. No Other Representations and Warranties. . . . . . . . . .37 ARTICLE IX REPRESENTATIONS AND WARRANTIES BY IPG AND BUYER. . . . . . . . . . . . . . . .38 9.1. Corporate Organization . . . . . . . . . . . . . . . . . .38 9.2. Authorization of Agreement; No Violation . . . . . . . . .38 9.3. Corporate Authority. . . . . . . . . . . . . . . . . . . .38 9.4. Litigation . . . . . . . . . . . . . . . . . . . . . . . .39 9.5. No Brokers and Finders . . . . . . . . . . . . . . . . . .39 9.6. Representations Concerning the Intertape Shares. . . . . .39 9.7. Purchase for Investment. . . . . . . . . . . . . . . . . .40 ARTICLE X COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 10.1. Access, Information and Documents. . . . . . . . . . . . .40 10.2. Conduct of Business Pending Closing. . . . . . . . . . . .41 10.3. Noncompetition; Confidentiality. . . . . . . . . . . . . .44 10.4. Exclusivity. . . . . . . . . . . . . . . . . . . . . . . .46 10.5. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .46 10.6. Consents and Approvals . . . . . . . . . . . . . . . . . .46 10.7. Industrial Site Recovery Act . . . . . . . . . . . . . . .46 10.8. [Intentionally omitted.] . . . . . . . . . . . . . . . . .46 10.9. Resignation of Directors and Officers. . . . . . . . . . .46 10.10. Use of Name. . . . . . . . . . . . . . . . . . . . . . . .47 10.11. Lockup . . . . . . . . . . . . . . . . . . . . . . . . . .47 10.12. Restructuring. . . . . . . . . . . . . . . . . . . . . . .47 10.13. Notification . . . . . . . . . . . . . . . . . . . . . . .47 10.14. Letter of Credit . . . . . . . . . . . . . . . . . . . . .47 10.15. Availability of Funds Under Contingent Payment Agreement. . . . . . . . . . . . . . . . . . . . . . . .47 10.16. Certain Environmental Compliance . . . . . . . . . . . . .47 10.17. Consent of Union . . . . . . . . . . . . . . . . . . . . .47 10.18. Forms 5500 . . . . . . . . . . . . . . . . . . . . . . . .48 10.19. Termination of Benefit Plans . . . . . . . . . . . . . . .48 ARTICLE XI COVENANTS OF IPG AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . . .48 11.1. Confidential Information . . . . . . . . . . . . . . . . .48 11.2. Consents and Approvals . . . . . . . . . . . . . . . . . .48 11.3. Environmental Audits . . . . . . . . . . . . . . . . . . .48 11.4. Board Seat . . . . . . . . . . . . . . . . . . . . . . . .48 11.5. Indemnification of Directors and Officers of the Company. . . . . . . . . . . . . . . . . . . . . . . . .49 ARTICLE XII HSR COVENANT OF IPG, BUYER AND SELLER . . . . . . . . . . . . . . . . . . . . 49 ARTICLE XIII CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO SELL THE STOCK . . . . . . . .50 13.1. Accuracy of Representations and Warranties . . . . . . . .50 13.2. Compliance with Covenants. . . . . . . . . . . . . . . . .50 13.3. Consents and Approvals . . . . . . . . . . . . . . . . . .50 13.4. Officer's Certificates . . . . . . . . . . . . . . . . . .50 13.5. Opinion of Counsel . . . . . . . . . . . . . . . . . . . .50 13.6. Registration Rights. . . . . . . . . . . . . . . . . . . .50 13.7. [Intentionally omitted.] . . . . . . . . . . . . . . . . .50 13.8. Guarantees . . . . . . . . . . . . . . . . . . . . . . . .51 13.9. Company Restructuring. . . . . . . . . . . . . . . . . . .51 13.10. October Financial Statements . . . . . . . . . . . . . . .51 13.11. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .51 ARTICLE XIV CONDITIONS PRECEDENT TO IPG'S AND BUYER'S OBLIGATIONS TO PURCHASE THE STOCK. .51 14.1. Accuracy of Representations and Warranties . . . . . . . .51 14.2. Compliance with Covenants. . . . . . . . . . . . . . . . .51 14.3. Consents and Approvals . . . . . . . . . . . . . . . . . .51 14.4. Officer's Certificates . . . . . . . . . . . . . . . . . .51 14.5. [Intentionally omitted.] . . . . . . . . . . . . . . . . .52 14.6. Opinion of Counsel . . . . . . . . . . . . . . . . . . . .52 14.7. No Litigation. . . . . . . . . . . . . . . . . . . . . . .52 14.8. Employment Agreements. . . . . . . . . . . . . . . . . . .52 14.9. Resignations . . . . . . . . . . . . . . . . . . . . . . .52 14.10. Environmental and Safety Audits. . . . . . . . . . . . . .52 14.11. Physical Properties. . . . . . . . . . . . . . . . . . . .53 14.12. Due Diligence Investigation. . . . . . . . . . . . . . . .53 14.13. October Financial Statements . . . . . . . . . . . . . . .53 14.14. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .53 14.15. Title Insurance. . . . . . . . . . . . . . . . . . . . . .53 14.16. Financing. . . . . . . . . . . . . . . . . . . . . . . . .53 14.17. Restructuring. . . . . . . . . . . . . . . . . . . . . . .53 14.18. Environmental Compliance . . . . . . . . . . . . . . . . .53 14.19. Contracts in Respect of Environmental Remediation. . . . .53 ARTICLE XV CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE STOCK PURCHASE . . . . .54 15.1. No Injunction. . . . . . . . . . . . . . . . . . . . . . .54 15.2. HSR Act Waiting Period . . . . . . . . . . . . . . . . . .54 ARTICLE XVI TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 16.1. Termination by Buyer and IPG . . . . . . . . . . . . . . .54 16.2. Termination by Seller. . . . . . . . . . . . . . . . . . .54 16.3. Termination by Mutual Consent. . . . . . . . . . . . . . .55 16.4. Termination by IPG or Seller . . . . . . . . . . . . . . .55 16.5. Effect of Termination. . . . . . . . . . . . . . . . . . .55 ARTICLE XVII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. . . . . . .56 ARTICLE XVIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 18.1. Seller's Obligation to Indemnify . . . . . . . . . . . . .57 18.2. Buyer's Obligations to Indemnify . . . . . . . . . . . . .59 18.2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 18.3. Method of Asserting Claims . . . . . . . . . . . . . . . .60 18.4. Disputes . . . . . . . . . . . . . . . . . . . . . . . . .63 ARTICLE XIX [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE XX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 20.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .65 20.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . .67 20.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . .67 20.4. Public Announcements . . . . . . . . . . . . . . . . . . .67 20.5. Waiver; Remedies Cumulative. . . . . . . . . . . . . . . .67 20.6. Amendment. . . . . . . . . . . . . . . . . . . . . . . . .68 20.7. Third Party Beneficiaries. . . . . . . . . . . . . . . . .68 20.8. Definition of Knowledge. . . . . . . . . . . . . . . . . .68 20.9. No Assignment; Binding Effect. . . . . . . . . . . . . . .68 20.10. Headings . . . . . . . . . . . . . . . . . . . . . . . . .68 20.11. Invalid Provisions . . . . . . . . . . . . . . . . . . . .68 20.12. Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .68 20.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . .69 20.14. Updating Disclosure Schedules. . . . . . . . . . . . . . .69
STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November 5, 1997, by and among INTERTAPE POLYMER GROUP INC., a Canadian corporation ("IPG"), IPG (US) ACQUISITION CORPORATION, a Delaware corporation and a subsidiary of IPG ("Buyer") and STC CORP., a Korean corporation ("Seller"). W I T N E S S E T H : WHEREAS, Seller owns all of the outstanding shares of capital stock of STC Tape Inc., a Delaware corporation ("STC Tape"); and WHEREAS, STC Tape owns all of the outstanding shares of capital stock of American Tape Co., a Delaware corporation (the "Company"); and WHEREAS, IPG desires to cause Buyer, its wholly-owned subsidiary, to purchase from Seller, and Seller desires to sell to Buyer, all of the outstanding capital stock of STC Tape, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. DEFINED TERMS. When used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1. All Section numbers used in this Agreement refer to sections of this Agreement unless otherwise specifically described. All references to Schedules and Exhibits in this Agreement are references to schedules and exhibits to this Agreement. "Affiliate" means, with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person. "Benefit Plan" means any written Plan under which any employee, former employee or director of the Company or any Company Subsidiary or any beneficiary thereof is covered, is eligible for coverage or has benefit rights by virtue of such Person'S employment, engagement or other relationship with the Company or any Company Subsidiary. "Business Combination" means any (i) merger, consolidation, business combination or similar transaction relating to the Company or any of its subsidiaries or (ii) any sale or other disposition of capital stock of or other equity interests (or securities convertible into, or exercisable or exchangeable for capital stock or other equity interests) in the Company or any of its subsidiaries (whether by the Company, the Seller or any of its Affiliates thereof) or (iii) any sale, dividend or other disposition of all or any material portion of the assets and properties of the Company or any of its subsidiaries. "Claim Notice" means written notification pursuant to Section 18.1(b) of a Third Party Claim as to which indemnity under Section 18.1 or 18.2 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim against the Indemnifying Party under Section 18.1 or 18.2, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim. "Closing" has the meaning given to it in Section 5.1. "Closing Date" has the meaning given to it in Section 5.1. "Code" means the Internal Revenue Service Code of 1986, as amended. "Company Indebtedness" means the difference, at the Closing Date, between (x) the aggregate amount of the Company's interest-bearing indebtedness (excluding trade accounts payable) and (y) the amount of any cash and cash equivalents, where the interest bearing indebtedness is calculated in a manner consistent with Schedule 1 hereto. "Company Restructuring" has the meaning given to it in Section 10.12. "Company Subsidiary" means (i) any corporation that is an issuer of any shares of capital stock owned beneficially or of record by the Company or any Company Subsidiary or (ii) any other business entity of which the Company or any Company Subsidiary owns any capital or profit interests. "Contract" means any written note, bond, mortgage, indenture, lease, license, franchise, contract, agreement or other binding understanding, arrangement or commitment evidenced by an agreement in writing. "Creditors" means the entities listed in Schedule 1 hereto. "Dispute Notification" has the meaning given to it in Section 18.4(b)(iv). "Dispute Period" means the period ending 90 calendar days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnifying Notice. "Dispute Resolution Consultant" has the meaning given to it in Section 18.4(b)(v). 2 "Eight Key Employees" means InJin Choi, Kiwhan Lee, Koh-Hoon Lee, Alex H.S. Yoo, Keith Bong, Lawrence Lawson, Hee Chung Park and Shane Betts. "Environment" means all air, surface water, groundwater, or land, including land surface or subsurface, including all fish, wildlife, biota and all other natural resources. "Environmental Claim" means any and all administrative or judicial actions, suits, orders, claims, liens, notices, notices of violations, investigations, complaints, requests for information, proceedings, or other written communication, whether criminal or civil, (collectively, "Claims") pursuant to or relating to any applicable Environmental Law by any person (including but not limited to any Governmental Entity, private person and citizens' group) based upon, alleging, asserting, or claiming any (i) violation of or liability under any Environmental Law, (ii) violation of any Environmental Permit, or (iii) liability for investigatory costs, cleanup costs, removal costs, remedial costs, response costs, natural resource damages, property damage, personal injury, fines, or penalties arising out of, based on, resulting from, or related to the presence, Release, or threatened Release into the Environment, of any Hazardous Materials at any location, including but not limited to any off-Site location to which Hazardous Materials or materials containing Hazardous Materials were sent for handling, storage, treatment, or disposal. "Environmental Clean-up Site" means any location which is listed or proposed for listing on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System, or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding, or investigation related to or arising from any alleged violation of any Environmental Law, or at which there has been a Release, threatened or suspected Release of a Hazardous Material. "Environmental Costs and Liabilities" means any and all out-of-pocket losses, liabilities, obligations, damages, fines, penalties, judgment, actions, claims, costs and expenses (including, without limitation, reasonable out-of-pocket costs, fees, disbursements and expenses of legal counsel, experts, engineers and consultants and the reasonable out-of-pocket cost-effective expenses of investigation and feasibility studies and such reasonable out-of-pocket cost-effective expenses to clean up, remove, treat, or in any other way address any Hazardous Materials) arising from or under any Environmental Law. "Environmental Law" means any and all current and future, federal, state, local, provincial and foreign, civil and criminal laws, statutes, ordinances, orders, codes, rules, regulations, Environmental Permits, policies, guidance documents, judgments, decrees, injunctions, or agreements with any Governmental Entity, relating to the protection of health and the Environment, and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of Hazardous Materials, whether now existing or subsequently amended or enacted, including but not limited to: the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 ET 3 SEQ.; the Hazardous Material Transportation Act 49 U.S.C. Section 1801 ET SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and the state analogies thereto, including but not limited to the Michigan Natural Resources and Environmental Protection Act, M.C.L.A. 324.20101 ET SEQ., as amended or superseded from time to time; and any common law doctrine, including but not limited to, negligence, nuisance, trespass, personal injury, or property damage related to or arising out of the presence of, Release of, or exposure to a Hazardous Material. "Environmental Permit" means any federal, state, local, provincial, or foreign permits, licenses, approvals, consents or authorizations required by any Governmental Entity under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental Entity under any applicable Environmental Law. "Environmental Response Action" has the meaning given to it in Section 18.4(b). "Environmental Response Action Notice" has the meaning given to it in Section 18.4(b)(i). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "ERISA Affiliate" means any Person who is, or at any time was, a member of a controlled group (within the meaning of Section 412(n)(6) of the Code) that includes, or at any time included, the Company or any Company Subsidiary, or any predecessor of any of the foregoing. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Financial Statements" has the meaning given to it in Section 8.5. "GAAP" means United States generally accepted accounting principles as currently in effect. "Governmental Entity" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, or any other instrumentality of the United States, any foreign country, or any foreign or domestic state, province, county, city or other political subdivision. "Guarantees" means the guarantee agreements or other written assurances listed in Schedule 2. "Hazardous Material" means petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive materials, underground storage tanks, asbestos or 4 asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, ionizing and non-ionizing radiation including radon and electromagnetic frequency radiation; and any other chemicals, materials, substances or wastes in any amount or concentration which are now or hereafter become defined as or included in the definition of "HAZARDOUS SUBSTANCES," "HAZARDOUS MATERIALS," "HAZARDOUS WASTES," "EXTREMELY HAZARDOUS WASTES," "RESTRICTED HAZARDOUS WASTES," "TOXIC SUBSTANCES," or words of similar import, under any Environmental Law. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "Indemnified Environmental Losses" has the meaning given to it in Section 18.1(a)(ii). "Indemnified Party" means any Person claiming indemnification under any provision of Article XVIII. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article XVIII. "Indemnity Notice" means written notification pursuant to Section 18.3 of a claim for indemnity under Article XVIII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim. "Intellectual Property" means domestic and foreign patents, patent applications, inventions, invention disclosures, trademark and service mark applications, registered trademarks, registered service marks, computer programs and software and related codes and applications, databases, copyrights, trademarks, service marks, brand marks, brand names, trade names, material trade secrets, know-how, proprietary information, formulae and processes and all other similar items of intellectual property. "IRS" means the Internal Revenue Service. "Laws" has the meaning given to it in Section 8.16. "Lien" means any adverse claim, restriction on voting or transfer or pledge, lien, charge, mortgage, encumbrance or security interest of any kind. "Loss" means any and all damages, fines, fees, penalties, deficiencies, losses and expenses (including without limitation all removal, remedial and response costs, interest, court costs, fees of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment). 5 "Material Adverse Effect" means a material adverse effect on the business, results of operations or financial condition of a specified Person and its subsidiaries taken as a whole, as the case may be. "Net Operating Income" means the net operating income of the Company computed as described in Section 3.3 hereof. "Permit" means any license, franchise, permit, consent, concession, order, approval, authorization or registration from, of or with a Governmental Entity. "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Entity. "Plan" means any written bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan or policy of any kind, including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Purchase Price" has the meaning given to in Section 3.1. "Real Property" has the meaning given to it in Section 8.10(a). "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dispersing, dumping, or disposing of a Hazardous Material into the Environment. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the Closing Date between IPG and Seller substantially in the form of Exhibit B. "Resolution Period" means the period ending (30) calendar days following receipt by an Indemnified Party of a Dispute Notice. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Site" means any of the real properties currently or previously owned, leased or operated by the Company, any Company Subsidiaries or any Affiliates thereof, or any entities previously owned by the Company, including all soil, subsoil, surface waters and groundwater thereat. "Stock" has the meaning given to it in Article II. 6 "Tax" (including with correlative meaning, the terms "Taxes" and "Taxable") means all forms of taxation, whenever created or imposed, whether imposed by a local, municipal, state, foreign, federal or other governmental body or authority, and, without limiting the generality of the foregoing, shall include income, gross receipts, ad valorem, excise, value-added, sales, use, transfer, franchise, license, stamp, occupation, withholding, employment, payroll, property, environmental or other taxes, duties, fees, levies, premiums, or other governmental charges, whether disputed or not, together with any interest, penalty, additions to tax or additional amounts with respect thereto imposed by any Taxing Authority. "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any federal, state, local or foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. "Tax Return" means any return, report, or statement of any nature, including an information return, report or statement required to be filed with any Taxing Authority. "Third Party Claim" has the meaning given to it in Section 18.3(a). "Trion-American Tape Agreements" means the following agreements by and between Trion Capital Corporation and the Company, each dated as of December 10, 1996: (i) the Equipment Lease; (ii) the Space License Agreement; (iii) the Supply Contract; (iv) the Management Agreement and (v) the Shrink Film Sublease. "WARN Act" has the meaning given to it in Section 8.21(d). 1.2. OTHER TERMS. Other terms may be defined elsewhere in this Agreement and, for the purposes of this Agreement, those other terms shall have the meanings specified in those other portions unless the context requires otherwise. Meanings specified in this Agreement shall be applicable to both the singular and plural forms of such terms and to the masculine, feminine and neuter genders, as the context requires. All amounts specified herein are in U.S. dollars. ARTICLE II PURCHASE AND SALE OF STOCK 2.1. Subject to the terms and conditions set forth in this Agreement, at the Closing, Buyer agrees to purchase and accept delivery from Seller of, and Seller agrees to sell, assign, transfer and deliver to Buyer, free and clear of all Liens, subscriptions, options, warrants, calls, proxies, rights, commitments, restrictions or agreements of any kind, 160 shares of the common stock of STC Tape (the "Stock"), representing all of the issued and outstanding capital stock of STC Tape. 2.2. Notwithstanding the foregoing, Seller may elect, between the date hereof and Closing, to transfer the Stock to STC International, Inc., a Bahamian corporation and a 7 wholly-owned subsidiary of Seller ("STC International"). In such event, (x) the representations and warranties contained in Section 6.2 hereof shall be made directly by STC International, and the representations and warranties of Seller in such Section 6.2 shall be deemed to be representations and warranties relating to STC International's ownership of the Stock (y) all other representations and warranties of Seller contained in this Agreement shall be deemed to be made by each of Seller and STC International, and (z) all the covenants and agreements of Seller to be performed in connection with the transactions contemplated by this Agreement shall be performed by Seller and/or STC International, as applicable, PROVIDED that any failure to perform any covenant or agreement of Seller and/or STC International set forth in or contemplated by this Agreement shall be deemed the nonperformance by Seller. IPG and Buyer agree to pay the Purchase Price (as hereinafter defined), as requested by Seller, to Seller, provided that Seller hereby agrees to indemnify, defend and hold harmless each of IPG and Buyer from and against any and all losses (including, without limitation, any tax liability) suffered, incurred or sustained, or to which either of them become subject, resulting from or arising out of the payment of all or any portion of the Purchase Price to Seller rather than to STC International as hereinabove contemplated. ARTICLE III CONSIDERATION AND ALLOCATION 3.1. CONSIDERATION. As consideration for the Stock, Buyer will (A) at the Closing, (i) deliver to Seller certificates representing such number of shares of the common stock of IPG, par value $.01 per share (the "Intertape Shares"), as shall equal the dollar amount, which may be up to or equal to $8 million, of the Purchase Price which Seller shall have elected to receive pursuant to a written notice to such effect given by Seller to IPG at least five days prior to Closing, and (ii) pay to Seller cash in an amount equal to the difference between $43 million and the aggregate value of the Intertape Shares delivered to Seller pursuant to the foregoing clause (A)(i) hereof, by wire transfer or delivery of other available funds (the sum of (i) and (ii) being the "Purchase Price"). In determining the number of Intertape Shares to be delivered by IPG to Seller, the value of each Intertape Share shall be deemed to be $22.920. 3.2. ALLOCATION. IPG, Buyer and Seller agree to allocate 100% of the Purchase Price to the Stock. 3.3. ADJUSTMENT OF PURCHASE PRICE. (a) Seller will cause each of STC Tape and the Company to prepare, and Coopers & Lybrand, the Company's certified public accountants, to audit in respect of the Company (only), financial statements (collectively, the "October Financial Statements") of each of STC Tape and the Company as of October 25, 1997 (the October Financial Statements as they relate to STC Tape, the "STC Tape October Financial Statements" and as such October Financial Statements relate to the Company, the "Company October Financial Statements"). Seller, IPG and Buyer agree, and Seller 8 agrees to instruct Coopers & Lybrand that, the October Financial Statements will be prepared in accordance with GAAP consistently applied, with the following exceptions: (i) The STC Tape October Financial Statements shall not include any of its subsidiaries, but shall be done on a stand-alone basis; (ii) The Company October Financial Statements shall not include any Company Subsidiaries other than ATC International, Inc., a Barbados foreign sale corporation; and (iii) The Company October Financial Statements shall give effect to the cancellation of the lease between the Company and Trion Capital Corporation, a Delaware corporation ("Trion Capital"), relating to the shrink film business, and the transfer of all tangible and intangible assets from Trion Capital contemplated by step 4 of the Restructuring set forth in Exhibit J hereto. During the course of such audit, Seller shall instruct Coopers & Lybrand to keep Grant Thornton International ("Grant Thornton"), Buyer's certified public accountants, and Ernst & Young LLP ("E&Y") regularly informed as to its progress. Seller shall also instruct Coopers & Lybrand to deliver to Seller, IPG, Buyer, Grant Thornton and E&Y copies of the draft Company October Financial Statements together with the draft opinion of Coopers & Lybrand with respect to such audit, and to make available to Grant Thornton and E&Y the work papers of the Coopers & Lybrand auditors, subject to such customary requirements as Coopers & Lybrand may impose on such access to working papers. In addition, Seller shall instruct each of STC Tape and the Company to provide Grant Thornton and E&Y access to all books and records of STC Tape and the Company (respectively) as Grant Thornton and E&Y may reasonably request. Buyer, within five days following delivery of the draft October Financial Statements to it, may object in writing to such draft October Financial Statements, with such objection specifying the reasons therefor. If within five days following delivery of the draft October Financial Statements, Buyer shall not have given Seller notice of Buyer's objection to the draft October Financial Statements, such October Financial Statements shall be deemed final and binding. Coopers & Lybrand will then deliver the audited financial statements together with their opinion thereon. If Buyer gives notice of objection, IPG, Buyer and Seller shall cooperate in good faith to resolve the dispute. Failing such resolution, the issues in dispute will be submitted to Deloitte & Touche LLP, certified public accountants (the "Accountants") for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants copies of such workpapers and other documents and information relating to the disputed issues as the Accountants may request and as are available to that party (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties; and (iii) IPG and Buyer, on the one hand, and Seller, on the other hand, will each bear 50% of the fees of the Accountants for such determination. After resolution Coopers & Lybrand will then deliver copies of the audited October 9 Financial Statements with their opinion to Seller, IPG, Buyer, Grant Thornton and E&Y. Such October Financial Statements audited by Coopers & Lybrand shall be used for no other purpose. The STC Tape October Financial Statements shall be delivered simultaneously with the Company October Financial Statements. (b) Following agreement by each of IPG and Buyer, on the one hand, and Seller, on the other hand, in respect of the October Financial Statements, IPG, Buyer and Seller shall compute Company Indebtedness and Net Operating Income. Net Operating Income shall be calculated in accordance with the methodology used to calculate net operating income shown on the unaudited income statement of the Company for the period ended August 23, 1997, attached as Exhibit A hereto. The parties agree that the net operating income on Exhibit A is calculated excluding (i) loan agency fees, (ii) bank charges, (iii) interest expenses, (iv) amortization, (v) provision for taxes, (vi) bonus accruals, (vii) expenses associated with this transaction, and (viii) income or expense allocations from ATC Tape Philippines Inc. or the Trion-American Tape Agreements, but including prior period adjustments that should have been included in net operating income if recorded in the prior year except for the prior period inventory adjustment of $160,000. At Closing, the Purchase Price shall be: (i) adjusted, dollar for dollar, to the extent that the Company Indebtedness as of the Closing Date is greater than $75,000,000 (resulting in a downward adjustment), or, correspondingly, is less than $75,000,000 (resulting in an upward adjustment); and (ii) decreased, dollar for dollar, to the extent that the Net Operating Income for the ten month period ended October 25, 1997 is less than $4,500,000. (c) At the Closing Buyer shall loan the funds necessary to STC Tape which in turn will pay any remaining management fee (the "Management Fee"), due from STC Tape to Seller, which amount is approximately $2,585,105. STC Tape shall withhold from such amount and pay to the United States Internal Revenue Service any amounts necessary to be withheld under applicable provisions of the Code and as agreed among IPG, Buyer and Seller. The loan to STC Tape by Buyer shall reduce the Purchase Price to the extent of such loan. ARTICLE IV LETTER OF CREDIT Seller shall cause to be issued one or more irrevocable letters of credit, in form and substance reasonably acceptable to both IPG and Buyer, on the one hand, and Seller, on the other hand, for the benefit of IPG and Buyer. The letters of credit shall be issued by a bank chosen by Seller and reasonably acceptable to Buyer (the "Letter of Credit Bank"), which shall be a Korean bank with a New York City branch or New York City correspondent office. The letters of credit shall initially be in face amounts equal to the maximum potential liability of Seller to IPG or Buyer, as provided in Article XVIII hereof, other than those indemnification provisions for which there is 10 no dollar limit (E.G., the letter of credit with respect to corporate income taxes shall have an initial face amount of $750,000). The letters of credit shall be delivered by Seller to Buyer at the Closing, shall be held by Buyer for the benefit of Buyer and IPG, and may be drawn against only as provided in Article XVIII hereof. The face amount of each Letter of Credit shall be reduced from time to time as, and to the extent that, either (a) the Letter of Credit is drawn upon, or (b) the relevant indemnification provision has expired pursuant to Article XVIII and the amount of pending unresolved claims made is less than the remaining amount of the Letter of Credit. For ease of reference, the Letters of Credit referred to in this Article IV are sometimes referred to singularly as the "Letter of Credit". ARTICLE V CLOSING 5.1. CLOSING. The closing of the purchase and sale of the Stock (the "Closing") shall take place at the office of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178 at 10:00 a.m. (New York time) on November 21, 1997, or on such other date upon which the parties shall mutually agree (the "Closing Date"), provided that all consents, approvals, orders, authorizations, registrations, declarations and filings under all Laws of any Governmental Entity required to be obtained in connection with the transactions contemplated hereby, including, but not limited to, under the HSR Act, shall have been so given, provided for or obtained. 5.2. DOCUMENTS TO BE DELIVERED BY SELLER TO BUYER. At the Closing, Seller will deliver to Buyer: (i) stock certificates for the Stock, free and clear of all Liens, subscriptions, options, warrants, calls, proxies, rights, commitments, restrictions or agreements of any kind, which certificates shall be duly endorsed to Buyer or accompanied by duly executed stock powers in form satisfactory to Buyer; (ii) a certificate of Seller in the form of Exhibit F certifying as to the accuracy of Seller's representations and warranties at and as of the Closing and that Seller has performed and complied with all of the terms, provisions and conditions to be performed and complied with by Seller at or before the Closing; (iii) a certificate of the Secretary of Seller in the form of Exhibit G certifying as to certain corporate matters, together with all of the attachments referred to therein; and (iv) such other certificates and documents as Buyer or its counsel may reasonably request. 11 5.3. DOCUMENTS TO BE DELIVERED BY IPG AND BUYER TO SELLER. At the Closing, IPG and/or Buyer will deliver to Seller: (i) the Purchase Price as set forth in Section 3.1; (ii) if the Purchase Price includes more than $3,000,000 in Intertape Shares, a Registration Rights Agreement in the form attached as Exhibit B hereto; (iii) certificates of IPG and Buyer in the forms of Exhibit H-1 and H-2 certifying as to the accuracy as of the Closing Date of IPG's and Buyer's representations and warranties and that each of IPG and Buyer has performed and complied with all of the terms, provisions and conditions to be performed and complied with by it at or before the Closing; (iv) certificates of the Secretary of IPG and Buyer, respectively, in the forms of Exhibit I-1 and I-2 certifying as to certain corporate matters, together with all of the attachments referred to therein; and (v) such other certificates and documents as Seller or its counsel may reasonably request. 5.4. OTHER ACTIONS AT THE CLOSING. Prior to, but effective at, Closing, Buyer shall cause the Creditors to release and fully discharge Seller (pursuant to a form of release and discharge acceptable to Seller) as of the Closing Date from Seller's obligations under the Guarantees. ARTICLE VI REPRESENTATIONS AND WARRANTIES RELATING TO SELLER As an inducement to IPG and Buyer to enter into and deliver this Agreement, Seller makes the following representations and warranties to IPG and Buyer: 6.1. CORPORATE ORGANIZATION. Seller is a corporation duly organized, validly existing and in good standing under the laws of Korea and has the corporate power and authority to carry on its business as now being conducted and as proposed to be conducted and to sell the Stock. 6.2. STOCK OWNERSHIP. Except as set forth in Schedule 6.2, Seller owns of record and beneficially all of the issued and outstanding shares of capital stock of STC Tape, free and clear of all Liens, subscriptions, options, warrants, calls, proxies, rights, commitments, restrictions or agreements of any kind and has full power and legal right to sell, assign, transfer and deliver the same. Except as set forth in Schedule 6.2, Seller is not a party to any voting trust, proxy or other agreement with respect to any capital stock of the Company. Assuming Buyer has the requisite power and authority to be the lawful owner of the Stock, upon delivery to Buyer of certificates representing the 12 Stock, and upon Seller's receipt of the Purchase Price, good and valid title to the Stock will pass to Buyer, free and clear of all Liens, subscriptions, options, warrants, calls, proxies, rights, commitments, restrictions or agreements of any kind other than those created by Buyer. 6.3. AUTHORIZATION OF AGREEMENT; NO VIOLATION. Seller has the requisite corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby in accordance with the terms of this Agreement. Seller has duly authorized the execution, delivery and performance of this Agreement and the sale of the Stock to Buyer and the consummation of the other transactions contemplated hereby. No other corporate proceedings on the part of Seller are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller and, assuming this Agreement constitutes the legal, valid and binding obligation of Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated hereby (i) will violate or conflict with the Certificate of Incorporation or By-Laws of Seller, or (ii) is prohibited by or, except for filings under the HSR Act, requires Seller to obtain any consent, authorization or approval, or make any registration or filing with or from any Person, except such consents, authorizations and approvals the non-receipt of which, individually or in the aggregate, would result in a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. 6.4. LITIGATION. Except as set forth in Schedule 6.4, there are no actions, suits, proceedings or investigations, either at law or in equity, or before any Governmental Entity in any United States or foreign jurisdiction, of any kind now pending or, to the best of Seller's knowledge, threatened or proposed in any manner involving Seller, STC Tape, the Company or any Company Subsidiary or any of their respective properties or assets of STC Tape, the Company or any Company Subsidiary that would in any manner materially impair Seller's ability to perform its obligations hereunder. 6.5. NO BROKERS AND FINDERS. Except as set forth in Schedule 6.5, neither Seller, STC Tape nor the Company has incurred any liability for brokerage or other commissions or finders' fees relative to this Agreement or to the transactions herein contemplated. ARTICLE VII REPRESENTATIONS AND WARRANTIES RELATING TO STC TAPE As an inducement to Buyer to enter this Agreement, Seller and STC Tape make the following representations and warranties to IPG and Buyer: 13 7.1. CORPORATE ORGANIZATION. STC Tape is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has the corporate power and authority to carry on its business as now being conducted and as proposed to be conducted. 7.2. STOCK OWNERSHIP. Except as set forth in Schedule 7.2, Seller owns of record and beneficially all of the issued and outstanding shares of capital stock of the Company, free and clear of all Liens, subscriptions, options, warrants, calls, proxies, rights, commitments, restrictions or agreements of any kind and has full power and legal right to sell, assign, transfer and deliver the same. Except as set forth in Schedule 7.2, Seller is not a party to any voting trust, proxy or other agreement with respect to any capital stock of the Company. 7.3. SUBSIDIARIES AND OTHER EQUITY INVESTMENTS. Except as set forth in Schedule 7.3, STC Tape does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, association or other business organization. 7.4. FINANCIAL STATEMENTS. (a) STC Tape has delivered (with respect to (i) below) and will have delivered prior to Closing (with respect to (ii) below) to IPG and Buyer copies of the following financial statements (the financial statements referenced in (ii) below being included in the October Financial Statements and (i) and (ii) together, the "STC Tape Unconsolidated Financial Statements"): (i) The unaudited unconsolidated balance sheet of STC Tape as of December 31, 1996 and related unconsolidated statements of income and retained earnings for the fiscal year ended on that date; and (ii) The unaudited unconsolidated balance sheet of STC Tape as of October 25, 1997 and related unconsolidated statements of income and retained earnings and changes in financial position for the ten month period ended on that date, together with supporting notes, certified by the President and the Chief Financial Officer of STC Tape. (b) All of such STC Tape unconsolidated Financial Statements referenced in (i) above are complete and correct and present fairly and accurately the financial position of STC Tape as at the date of said balance sheet. The STC Tape unconsolidated October Financial Statements referenced in (ii) above are complete and correct and present fairly and accurately the financial position of STC Tape as at the date of said balance sheet and the results of the operations and changes in financial position of STC Tape for the period then ended in conformity with GAAP applied as described in Section 3.3 of this Agreement. 7.5. NO UNDISCLOSED LIABILITIES. (a) Except as set forth on Schedule 8.6, and except as and to the extent reflected, disclosed or reserved against in the STC Tape's 1996 financial statements (including the notes 14 thereto), STC Tape does not have any liabilities, whether absolute, accrued, contingent or otherwise, material to the business operations, assets or financial condition of STC Tape which were required by GAAP (consistently applied) to be disclosed in STC Tape's statement of condition as of December 31, 1996 or the notes thereto. Except as set forth on Schedule 8.6, and except as and to the extent reflected, disclosed or reserved against in the STC Tape October Financial Statements (including the notes thereto), STC Tape does not have any liabilities, whether absolute, accrued, contingent or otherwise, material to the business operations, assets or financial conditions of STC Tape which were required by GAAP (consistently applied) to be disclosed in STC Tape's statement of conditions as of October 25, 1997 or in the notes thereto. (b) Since October 25, 1997, except for the transactions specified on Schedule J, STC Tape has not incurred any liabilities, whether absolute, accrued, contingent or otherwise, other than liabilities and obligations incurred in the ordinary course of business after October 25, 1997 and which do not, or could not reasonably be expected to, individually or in the aggregate, cause a Material Adverse Effect on the business of STC Tape and its subsidiaries taken as a whole. 7.6. ABSENCE OF CERTAIN CHANGES. Since October 25, 1997 (except (i) for the execution and delivery of this Agreement, and (ii) as set forth in Schedule 8.7, neither STC Tape nor any of its subsidiaries has: (i) had any change in its condition (financial or otherwise), operations (present or prospective), business (present or prospective), properties, assets, or liabilities, which has resulted in or could reasonably be expected to result in a Material Adverse Effect on STC Tape and its subsidiaries taken as a whole; (ii) issued, sold or otherwise disposed of, or agreed to issue, sell or otherwise dispose of, any capital stock or any other security of STC Tape or any of its subsidiaries, or granted or agreed to grant any option, warrant or other right to subscribe for or to purchase any capital stock or any other security of STC Tape or any of its subsidiaries; (iii) declared, set aside or paid any dividend or made any distribution (whether in cash, property or stock) with respect to any of its capital stock or redeemed, purchased or otherwise acquired, or agreed to redeem, purchase or otherwise acquire, any of its capital stock; (iv) suffered any damage, destruction or loss of physical property (not covered by insurance, except that all deductibles shall be taken into account as an unreimbursed loss and recorded in liabilities) materially or adversely affecting its condition (financial or otherwise) or operations (present or prospective); (v) (x) suffered any loss, which loss has resulted in or could reasonably be expected to result in, a Material Adverse Effect to STC Tape and its subsidiaries taken as a 15 whole, or (y) waived any right,which waiver has resulted in or could reasonably be expected to result in, a Material Adverse Effect to STC Tape and its subsidiaries taken as a whole; (vi) other than in the ordinary course of business, sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any assets (having a fair market value at the time of sale, transfer or disposition of $25,000 or more in the aggregate), or canceled, or agreed to cancel, any debts or claims; (vii) mortgaged, pledged or subjected to any lien or agreed to mortgage, pledge or subject to any lien any of its properties or assets; (viii) incurred or agreed to incur any indebtedness for borrowed money; (ix) paid or obligated itself to pay in excess of $25,000 in the aggregate for fixed assets; (x) entered into, renewed, extended or terminated any license or franchise Contracts or any distributor Contracts to which it is a party, in each case where such action has resulted or could reasonably be expected to result in a Material Adverse Effect on STC Tape and its subsidiaries taken as a whole; (xi) made or permitted any material amendment, renewal, extension or termination of any material Contract or Permit to which it is a party other than in the ordinary course of business; (xii) made any material change, or announced any material change, in the terms, including, but not limited to, price, payment terms or off-invoice allowances and discounts, of the sale of any product (or component thereof) or services; or made any change, or announcement of any change, in the form or manner of distribution of any product (or component thereof) other than changes which, singly or in the aggregate, have not resulted in and could not reasonably be expected to result in a Material Adverse Effect on the STC Tape and its subsidiaries taken as a whole; (xiii) lost any major customer or had any material order canceled or knows of any threatened cancellation of any material order (for purposes of this clause (xiii), a major customer being any of the twenty largest, by purchase order volume, of STC Tape's customers at the year ended December 31, 1996 and at the ten month period ended October 25, 1997, and a material order being a purchase order equal to or in excess of $50,000); (xiv) increased, or agreed to increase, the compensation or bonuses or special compensation of any kind of any of its key employees (which term shall be deemed to include all officers) over the rate being paid to them on August 15, 1997 other than normal 16 merit and/or cost-of-living increases pursuant to customary arrangements consistently followed, or adopted or increased any benefit under any insurance, pension or other Benefit Plan, payment or arrangement made to, for or with any such key employee; (xv) had any resignation or termination of employment of any of its key employees; (xvi) experienced any lockouts, labor strikes or work stoppages or knows of any impending or threatened lockouts, labor strikes or work stoppages; (xvii) experienced any shortage or difficulty in obtaining any raw material such that STC Tape in respect of any of its products will be required to terminate operations within four weeks' time or institute an extraordinary price increase; (xviii) made any change in its accounting methods or practices; (xix) made any charitable or political contribution or pledge in excess of $5,000 in the aggregate; or (xx) entered into any transaction not in the ordinary course of its business which has resulted, or which reasonably could be expected to result, in a Material Adverse Effect on STC Tape or its subsidiaries taken as a whole. 7.7. TAX MATTERS. Except as set forth in Schedule 8.11: (a) STC Tape and its subsidiaries have duly and timely (including extensions) filed all Tax Returns required to be filed by each of them through the date hereof, and each such Tax Return is complete and correct in all respects. All Taxes, including estimated Taxes, due and payable by the STC Tape and each of its subsidiaries (whether or not shown on any Tax Return) have been paid. All monies required to be withheld by STC Tape and its subsidiaries from Seller, Affiliates of Seller, employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld, and either duly and timely paid to the appropriate Taxing Authorities or (if not yet due for payment) set aside in accounts for such purposes. Neither STC Tape nor any of its subsidiaries will have any liability for Taxes for any taxable period ending on or before the Closing Date in excess of the sum of (i) the provision for current Taxes set forth on the October Financial Statements (including both the STC Tape October Financial Statement and the Company Financial Statement), plus (ii) Taxes arising in the ordinary course of business of STC Tape or any of its subsidiaries during the period beginning on October 25, 1997 and ending at the close of business on the Closing Date. For purposes of this Section 7.7(a), a taxable period beginning on or before and ending after the Closing Date shall be considered to end at the close of business on the Closing Date and the allocation of Taxes between the pre-Closing period and the post-Closing period shall be made on the basis of an interim closing of the books as of the end of the Closing Date. To avoid any doubt, 17 any Taxes resulting from or attributable to the Company Restructuring shall be deemed to have occurred outside of the ordinary course of business in the pre-Closing period. (b) No Taxing Authority is now asserting, or to the best knowledge of STC Tape, any of its subsidiaries or Seller, threatening to assert against the STC Tape or any of its subsidiaries, any deficiency or claim for Taxes. Schedule 7.7 lists all income Tax Returns filed by or with respect to STC Tape and each of its subsidiaries for all taxable periods ending on or after December 1991, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. Seller has delivered (or has caused STC Tape and each of its subsidiaries to deliver) to Buyer complete and correct copies of all income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, STC Tape and each of its subsidiaries for all taxable periods ending on or after December 1991. (c) Neither STC Tape nor any of its subsidiaries is a party to any agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. (d) Neither STC Tape nor any of its subsidiaries (i) is a party to or is bound by any obligations under any Tax sharing, Tax indemnity or similar agreement or arrangement, (ii) has made and is subject to any election under Section 341(f) of the Code, (iii) has made and is subject to any election or deemed election under Section 338 or Section 336(e) of the Code or the regulations thereunder, (iv) has agreed to and is required to make, and reasonably expects that it might have to make, any adjustment under Section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (v) has ever entered into any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code, (vi) is or has at any time been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code, (vii) is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, (viii) has liability for Taxes of any other Person, whether as a transferee or successor, by contract or otherwise, (ix) has or is projected to have any amounts includable in its taxable income under section 951 of the Code, (x) is or has been a shareholder, directly or indirectly, in any passive foreign investment company or (xi) has any deferred gain or loss arising out of any deferred intercompany transaction or any other income which will or might be reportable in a period ending after the Closing Date which is attributable to a transaction or event occurring in a period ending on or before the Closing Date. 18 ARTICLE VIII REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY As an inducement to Buyer to enter into this Agreement, Seller makes the following representations and warranties to IPG and Buyer: 8.1. CORPORATE ORGANIZATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to carry on its business as now being conducted and as proposed to be conducted (which is intended to be consistent with past practice) and to own and operate the properties and assets now owned and being operated by it. Seller has delivered to Buyer complete and correct copies of the Company's Certificate of Incorporation and By-Laws as in effect on the date hereof. The Company is duly qualified or licensed to do business and is in good standing as a foreign corporation in each of the jurisdictions set forth in Schedule 8.1. The Company is not required to be qualified or licensed to do business as a foreign corporation in any other jurisdiction, except where the failure to be so qualified or licensed would not result in a Material Adverse Effect upon the Company. Schedule 8.1 sets forth a true and complete list of the names and titles of the directors and officers of the Company and each Company Subsidiary. 8.2. CAPITALIZATION; STOCK OWNERSHIP. The authorized capital stock of the Company consists of 10,000 shares of common stock, without par value, of which 160 shares are issued and outstanding and none are held in treasury. All of the Stock has been duly authorized and validly issued and is fully paid and non-assessable and none of the shares of Stock have been issued in violation of, and are subject to, any purchase option, call, right of first refusal, right of first offer, preemptive, subscription or similar rights under any provision of applicable law, the charter or other constitutive or governing documents of the Company, any Contract to which the Company is subject, bound or a party or otherwise. Except as set forth in Schedule 8.2, the Company is not a party to or bound by any Contract to issue, sell or otherwise dispose of or redeem, purchase or otherwise acquire any capital stock or any other security of the Company or any other security exercisable or exchangeable for or convertible into any capital stock or any other security of the Company, and, except for this Agreement, there is no outstanding option, warrant or other agreement or right to subscribe for or purchase any capital stock or any other security of the Company or any other security exercisable for or convertible into any capital stock or any other security of the Company. There are no outstanding notes, bonds, mortgages, debentures or other indebtedness having the right to vote on any matters on which stockholders of the Company may vote. 8.3. SUBSIDIARIES AND OTHER EQUITY INVESTMENTS. Except as set forth in Schedule 8.3, neither the Company nor any Company Subsidiary owns, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, association or other business organization. With respect to each Company Subsidiary, Schedule 8.3 sets forth a true and complete list of (i) its name and jurisdiction of incorporation or organization, (ii) the jurisdictions in which it 19 is duly qualified or licensed to do business as a foreign corporation or foreign business entity, (iii) if a corporation, its authorized capital stock, (iv) if a corporation, the number of shares of each class of stock thereof outstanding, (v) if a corporation, the number of shares of each such class and percentage of outstanding voting stock owned by the Company or any Company Subsidiary, (vi) if a business entity other than a corporation, the profit or capital interests owned by the Company or any Company Subsidiary, and (vii) the names and titles of its members, managers, partners, directors and officers. Seller has delivered to Buyer complete and correct copies of the constitutional documents of each Company Subsidiary as in effect on the date hereof. Except as set forth in Schedule 8.3, no capital stock or any other security (including any debt security) of any Company Subsidiary is held by any Person other than the Company or a Company Subsidiary. Each Company Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the power and authority to carry on its business as now being conducted and as proposed to be conducted (which is intended to be consistent with past practice) and to own and operate the properties and assets now owned and being operated by it. Each Company Subsidiary is duly qualified or licensed to do business and is in good standing in each of the respective jurisdictions listed in Schedule 8.3. Except as set forth in Schedule 8.3, no Company Subsidiary is required to be qualified or licensed to do business as a foreign corporation or foreign business entity in any other jurisdiction, except where the failure to be so qualified or licensed would not result in a Material Adverse Effect upon the Company. All outstanding securities or ownership interests of each Company Subsidiary owned by the Company or a Company Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable, subject to no Lien and are freely transferable and none of such securities or ownership interests were issued in violation of any preemptive or other right. Except as set forth in Schedule 8.3, neither the Company nor any Company Subsidiary is a party to or bound by any Contract to issue, sell or otherwise dispose of or redeem, purchase or otherwise acquire any capital stock or any other security of any Company Subsidiary or any other security exercisable or exchangeable for or convertible into any capital stock or any other security of any Company Subsidiary, and there is no outstanding option, warrant or other right to subscribe for or to purchase, or Contract with respect to, any capital stock or any other security of any Company Subsidiary or any other security exercisable or convertible into any capital stock or any other security of any Company Subsidiary. 8.4. NO VIOLATION. Except as set forth in Schedule 8.4, neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated hereby (i) will violate or conflict with the Certificate of Incorporation or By-Laws of the Company or any Company Subsidiary, (ii) will result in any breach of or default under any provision of any Contract to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound or to which any property or asset of any of them is subject, (iii) is prohibited by or requires the Company or any Company Subsidiary to obtain or make any consent, authorization, approval, registration or filing with or from any Person, except any applicable filings required under the HSR Act, (iv) will cause any acceleration of maturity of any note, instrument or other obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound or with respect to which the Company or any Company Subsidiary is an obligor or guarantor or (v) will result in the creation or imposition of 20 any Lien upon or give to any other Person any interest or right (including any right of termination or cancellation) in or with respect to any of the properties, assets, business or Contracts of the Company or any Company Subsidiary, except for those violations and conflicts, breaches, defaults, consents, authorizations, approvals, registrations, filings, accelerations and Liens (as referenced in (i) through (v) above) which, singly or in the aggregate, would not result in a Material Adverse Effect upon the Company. 8.5. FINANCIAL STATEMENTS. (a) Seller has delivered (with respect to (i) below) and will have delivered prior to Closing (with respect to (ii) below) to IPG and Buyer copies of the following financial statements (the financial statements referenced in (i) being the "Company's 1996 Financial Statements" and the financial statements referenced in (ii) below being included in the October Financial Statements: (i) The audited consolidated balance sheets of the Company and its Company Subsidiaries as of December 31, 1996 and related consolidated statements of income and retained earnings and changes in financial position for the fiscal year ended on that date, together with supporting notes and schedules and the report thereon of Coopers & Lybrand; and (ii) the audited balance sheet of the Company as at October 25, 1997 and related statements of income and retained earnings and changes in financial position for the ten month period ended on that date, together with supporting notes and schedules, and the report thereon of Coopers & Lybrand. (b) All of such Financial Statements referenced in (i) above are complete and correct and present fairly and accurately the separate and consolidated financial positions of the Company and each of its consolidated Company Subsidiaries as at the date of said balance sheet and the separate and consolidated results of the operations and changes in financial position of the Company and each of its consolidated Company Subsidiaries for the period then ended in conformity with GAAP consistently applied. The October Financial Statements referenced in (ii) above are complete and correct and present fairly and accurately the financial position of the Company as at the date of said balance sheet and the results of the operations and changes in financial position of the Company for the period then ended in conformity with GAAP applied as described in Section 3.3 of this Agreement. 8.6. NO UNDISCLOSED LIABILITIES. (a) Except as set forth on Schedule 8.6, and except as and to the extent reflected, disclosed or reserved against in the Company's 1996 Financial Statements (including the notes thereto), neither the Company nor any Company Subsidiary has any liabilities, whether absolute, accrued, contingent or otherwise, material to the business operations, assets or financial condition of the Company and the Company Subsidiaries taken as a whole which were required by GAAP 21 (consistently applied) to be disclosed in the Company's consolidated statement of condition as of December 31, 1996 or the notes thereto. Except as set forth on Schedule 8.6, and except as and to the extent reflected, disclosed or reserved against in the October Financial Statements (including the notes thereto), neither the Company nor any Company Subsidiary has any liabilities, whether absolute, accrued, contingent or otherwise, material to the business operations, assets or financial conditions of the Company and the Company Subsidiaries taken as a whole which were required by GAAP (consistently applied) to be disclosed in the Company's statement of conditions as of October 25, 1997 or in the notes thereto. (b) Since October 25, 1997, the Company has not incurred any liabilities, whether absolute, accrued, contingent or otherwise, other than liabilities and obligations incurred in the ordinary course of business after October 25, 1997 and which do not, or could not reasonably be expected to, individually or in the aggregate, cause a Material Adverse Effect on the business of the Company and the Company Subsidiaries taken as a whole. 8.7. ABSENCE OF CERTAIN CHANGES. Since October 25, 1997 (except (i) for the execution and delivery of this Agreement, and (ii) as set forth in Schedule 8.7), neither the Company nor any Company Subsidiary has: (i) had any change in its condition (financial or otherwise), operations (present or prospective), business (present or prospective), properties, assets, or liabilities, which has resulted in or could reasonably be expected to result in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole; (ii) issued, sold or otherwise disposed of, or agreed to issue, sell or otherwise dispose of, any capital stock or any other security of the Company or any Company Subsidiary, or granted or agreed to grant any option, warrant or other right to subscribe for or to purchase any capital stock or any other security of the Company or any Company Subsidiary; (iii) declared, set aside or paid any dividend or made any distribution (whether in cash, property or stock) with respect to any of its capital stock or redeemed, purchased or otherwise acquired, or agreed to redeem, purchase or otherwise acquire, any of its capital stock; (iv) suffered any damage, destruction or loss of physical property (not covered by insurance, except that all deductibles shall be taken into account as an unreimbursed loss and recorded in liabilities) materially or adversely affecting its condition (financial or otherwise) or operations (present or prospective); (v) (x) suffered any loss, which loss has resulted in or could reasonably be expected to result in, a Material Adverse Effect to the Company and the Company Subsidiaries taken as a whole, or (y) waived any right, which waiver has resulted in or could 22 reasonably be expected to result in, a Material Adverse Effect to the Company and the Company Subsidiaries taken as a whole; (vi) other than in the ordinary course of business, sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any assets (having a fair market value at the time of sale, transfer or disposition of $25,000 or more in the aggregate), or canceled, or agreed to cancel, any debts or claims; (vii) mortgaged, pledged or subjected to any lien or agreed to mortgage, pledge or subject to any lien any of its properties or assets; (viii) incurred or agreed to incur any indebtedness for borrowed money; (ix) paid or obligated itself to pay in excess of $25,000 in the aggregate for fixed assets; (x) entered into, renewed, extended or terminated any license or franchise Contracts or any distributor Contracts to which it is a party, in each case where such action has resulted or could reasonably be expected to result in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole; (xi) made or permitted any material amendment, renewal, extension or termination of any material Contract or Permit to which it is a party other than in the ordinary course of business; (xii) made any material change, or announced any material change, in the terms, including, but not limited to, price, payment terms or off-invoice allowances and discounts, of the sale of any product (or component thereof) or services; or made any change, or announcement of any change, in the form or manner of distribution of any product (or component thereof) other than changes which, singly or in the aggregate, have not resulted in and could not reasonably be expected to result in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole; (xiii) lost any major customer or had any material order canceled or knows of any threatened cancellation of any material order (for purposes of this clause (xiii), a major customer being any of the twenty largest, by purchase order volume, of the Company's customers at the year ended December 31, 1996 and at the ten month period ended October 25, 1997, and a material order being a purchase order equal to or in excess of $50,000); (xiv) increased, or agreed to increase, the compensation or bonuses or special compensation of any kind of any of its key employees (which term shall be deemed to include all officers) over the rate being paid to them on August 15, 1997 other than normal 23 merit and/or cost-of-living increases pursuant to customary arrangements consistently followed, or adopted or increased any benefit under any insurance, pension or other Benefit Plan, payment or arrangement made to, for or with any such key employee; (xv) had any resignation or termination of employment of any of its key employees (including without limitation those listed in Exhibit K hereto); (xvi) experienced any lockouts, labor strikes or work stoppages or knows of any impending or threatened lockouts, labor strikes or work stoppages; (xvii) experienced any shortage or difficulty in obtaining any raw material such that the Company in respect of any of its products will be required to terminate operations within four weeks' time or institute an extraordinary price increase; (xviii) made any change in its accounting methods or practices; (xix) made any charitable or political contribution or pledge in excess of $5,000 in the aggregate; or (xx) entered into any transaction not in the ordinary course of its business which has resulted, or which reasonably could be expected to result, in a Material Adverse Effect on the Company. 8.8. TITLE TO AND CONDITION OF PROPERTIES AND ASSETS. (a) The Company and the Company Subsidiaries have good and marketable title to all of their respective properties and assets reflected as owned in the balance sheet of the Company included in the October Financial Statements (except as thereafter sold or otherwise disposed of in the ordinary course of business) subject to no conditional sales contract, Lien, or right of possession in favor of any third party, except for Permitted Liens (as defined in Section 8.10) and except as set forth in Schedule 8.8. Subsequent to October 25, 1997, neither the Company nor any Company Subsidiary has sold or disposed of any material amount of their respective properties or assets or obligated themselves to do so except in the ordinary course of business. (b) The facilities, machinery, information systems and other equipment of the Company and the Company Subsidiaries listed in Exhibit D hereto are in good operating condition and repair, subject only to the ordinary wear and tear of those businesses. 8.9. INVENTORY. A copy of Report No. AR4201 dated October 25, 1997 generated by the Company in the ordinary course of its business has been delivered to Buyer and shall be deemed to be included within Schedule 8.9. All inventory listed thereon consists of a quality and quantity useable and saleable in the ordinary course of business and is valued in accordance with generally accepted accounting principles at the lower of cost or market (consistently applied) with provision (which management of the Company believes to be adequate) for obsolescence, shrinkage, 24 excess quantities, defective materials and deterioration. Except as set forth in Schedule 8.9, all inventory of the Company is located on premises owned or leased by the Company as reflected in this Agreement. Neither the Company nor any private label customer nor customer for which products of unique sizes are manufactured by the Company is in material breach of the terms of any obligation to the other, no valid grounds exist for any set-off of amounts billable to such customers on the completion of orders to which work-in-process for such customers relates, and, except as set forth in Schedule 8.9, no such customer has 25% or more of its receivables outstanding more than 30 days past due. All work-in-process (including without limitation work-in-process for private label customers and customers for which products of unique sizes are manufactured by the Company) is of a quality ordinarily produced in accordance with the requirements of the orders to which such work-in-process is identified, and will require no rework with respect to services performed prior to Closing, except to the extent labor attributable to such rework has been reasonably taken into consideration in valuing the work-in-process in the balance sheet of the Company included in the October Financial Statements. 8.10. REAL PROPERTY. (a) Schedule 8.10(a) contains an accurate and complete list, as of the date of this Agreement, of (i)(A) all fee interests in real property and buildings, improvements and structures owned by the Company or any Company Subsidiary and (B) all leasehold estates (the "Leasehold Estates") in real property and buildings, improvements and structures owned by the Company or any Company Subsidiary (all of such fee interests, Leasehold Estates, buildings, improvements and structures, together with all easements, rights of way, privileges, appurtenances and other rights pertaining thereto, being the "Real Property"), (ii) the location of such Real Property, and (iii) all Liens which pertain to such Real Property, except the following ("Permitted Liens"): (1) those items that secure liabilities that are reflected on the balance sheet of the Company included in the October Financial Statements or the notes thereto or that secure liabilities incurred in the ordinary course of business after the date of such balance sheet, (2) statutory liens for amounts not yet delinquent or which are being contested in good faith, (3) such encumbrances, security interests, pledges and title imperfections that are not in the aggregate material to the business, operations, assets, and financial condition of the Company and the Company Subsidiaries taken as a whole, and (4) with respect to owned real property, title imperfections noted in existing title insurance of the Company. Schedule 8.10(a) also identifies each of the operative documents creating a Leasehold Estate (the "Real Property Leases"). The applicable Company or Company Subsidiary has good and indefeasible title in fee simple (or as otherwise specified in Schedule 8.10(a)) to all of the Real Property set forth in Schedule 8.10(a) and owns all Leasehold Estates set forth in Schedule 8.10(a). Except as disclosed in Schedule 8.10(a), the consummation of the transactions contemplated by this Agreement will not prevent the Company or any Company Subsidiary, as the case may be, from using or possessing all Real Property listed in Schedule 8.10(a) substantially in the same manner such Real Property was used or possessed by the Company or any Company Subsidiary, as the case may be, immediately prior to the Closing Date. The Company or a Company Subsidiary, as the case may be, has such title or such Leasehold Estate in all Real Property listed in Schedule 8.10(a) as is required for the conduct 25 of the business of the Company or the Company Subsidiary, as the case may be, as presently conducted, in each case free and clear of all Liens. (b) Except as set forth in Schedule 8.10(b), no party holding an interest superior to any Leasehold Estate has given notice of or made a claim with respect to any material breach or default by the Company or any Company Subsidiary with respect to such superior interest, other than in respect of a breach or default which has been cured. (c) Except as set forth on Schedule 8.10(c), none of the rights of the Company or any Company Subsidiary under any of the Real Property Leases will be subject to termination or modification as the result of the consummation of the transactions contemplated by this Agreement. (d) Neither the Company nor any Company Subsidiary is obligated under or a party to, any option, right of first refusal, right of first offer or any other contractual right to offer, purchase, acquire, sell, assign or dispose of any Real Property listed in Schedule 8.10(a). (e) Except as set forth in Schedule 8.10(e), none of the Eight Key Employees has received written notice (which shall not include constructive notice) of any condemnation, zoning or other land-use regulation proceedings, including, without limitation, resolutions of intent, which would materially detrimentally affect the use and operation of all or any portion of any Real Property for its present or intended purpose or the value of all or any material portion of the Real Property and the business conducted thereon having been instituted or threatened. (f) Except as set forth in Schedule 8.10(f), to the knowledge of the Company, there are no pending or threatened material interruptions (except in the ordinary course) of any utility services to any portion of the Real Property. (g) Except as set forth in Schedule 8.10(g), none of the Eight Key Employees has received written notice (which shall not include constructive notice) from any Governmental Entity having jurisdiction over all or any portion of the Real Property regarding any material adverse change in the specific application to the Real Property of any applicable laws, regulations, statutes, rules or restrictions relating to a change in the permitted use of all or any portion of the Real Property or the business conducted thereon, or written notice from adjacent landowners regarding unrecorded easements and/or agreements or encroachments in respect of all or any portion of the Real Property that would materially adversely affect the applicable Real Property or the use thereof by the Company or any Company Subsidiary, or any tenant or other occupant thereof or the business conducted thereon. (h) Except as set forth in Schedule 8.10(h), the use being made of each building that constitutes Real Property is in substantial conformity with the certificate of occupancy issued for the facilities located on such Real Property. Except as set forth in Schedule 8.10(h), all required certificates and Permits of such type have been issued and are in full force and effect, other than those certificates and Permits the nonissuance or noneffectiveness of which would not, singly or in the 26 aggregate, result in a Material Adverse Effect upon the Company and the Company Subsidiaries taken as a whole. (i) Except as set forth in Schedule 8.10(i), none of the Company, any Company Subsidiary, any Real Property or the present use thereof by the Company or any Company Subsidiary is in material violation of any building, fire, zoning or health code or any other Law that would result in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole. (j) Except as set forth in Schedule 8.10(j), subsequent to October 25, 1997, none of the Eight Key Employees has received actual written notice from any Governmental Entity that Seller, STC Tape, the Company or any Company Subsidiary is in violation of any applicable Law relating to any portion of the Real Property requiring the performance of any work, repairs, construction, alterations or installations on or in connection with any portion of the Real Property, which notice has not been complied with and which would have a Material Adverse Effect upon such Real Property. 8.11. TAX MATTERS. Except as set forth in Schedule 8.11: (a) The Company and each Company Subsidiary have duly and timely (including extensions) filed all Tax Returns required to be filed by each of them through the date hereof, and each such Tax Return is complete and correct in all respects. All Taxes, including estimated Taxes, due and payable by the Company and each Company Subsidiary (whether or not shown on any Tax Return) have been paid. All monies required to be withheld by the Company and each Company Subsidiary from Seller, Affiliates of Seller, employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld, and either duly and timely paid to the appropriate Taxing Authorities or (if not yet due for payment) set aside in accounts for such purposes. Neither the Company nor any Company Subsidiary will have any liability for Taxes for any taxable period ending on or before the Closing Date in excess of the sum of (i) the provision for current Taxes set forth on the unaudited consolidated and consolidating balance sheets as of October 25, 1997 provided pursuant to Section 8.5(a)(ii), plus (ii) Taxes arising in the ordinary course of business of the Company or any Company Subsidiary during the period beginning on October 25, 1997 and ending at the close of business on the Closing Date. For purposes of this Section 8.11(a), a taxable period beginning on or before and ending after the Closing Date shall be considered to end at the close of business on the Closing Date and the allocation of Taxes between the pre-Closing period and the post-Closing period shall be made on the basis of an interim closing of the books as of the end of the Closing Date. To avoid any doubt, any Taxes resulting from or attributable to the Company Restructuring shall be deemed to have occurred outside of the ordinary course of business in the pre-Closing period. (b) No Taxing Authority is now asserting, or to the best knowledge of the Company, any Company Subsidiary or Seller, threatening to assert against the Company or any Company Subsidiary, any deficiency or claim for Taxes. Schedule 8.11 lists all income Tax Returns filed by or with respect to the Company and each Company Subsidiary for all taxable periods ending 27 on or after December 1991, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. Seller has delivered (or has caused the Company and each Company Subsidiary to deliver) to Buyer complete and correct copies of all income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company and each Company Subsidiary for all taxable periods ending on or after December 1991. (c) Neither the Company nor any Company Subsidiary is a party to any agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. (d) Neither the Company nor any Company Subsidiary (i) is a party to or is bound by any obligations under any Tax sharing, Tax indemnity or similar agreement or arrangement, (ii) has made and is subject to any election under Section 341(f) of the Code, (iii) has made and is subject to any election or deemed election under Section 338 or Section 336(e) of the Code or the regulations thereunder, (iv) has agreed to and is required to make, and reasonably expects that it might have to make, any adjustment under Section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (v) has ever entered into any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code, (vi) is or has at any time been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code, (vii) is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, (viii) has liability for Taxes of any other Person, whether as a transferee or successor, by contract or otherwise, (ix) has or is projected to have any amounts includable in its taxable income under section 951 of the Code, (x) is or has been a shareholder, directly or indirectly, in any passive foreign investment company or (xi) has any deferred gain or loss arising out of any deferred intercompany transaction or any other income which will or might be reportable in a period ending after the Closing Date which is attributable to a transaction or event occurring in a period ending on or before the Closing Date. 8.12. CONTRACTS. (a) Except as set forth in Schedule 8.12(a), neither the Company nor any Company Subsidiary is currently a party to any of the following written Contracts: (i) employment, severance, termination, consulting or similar Contracts; (ii) Contracts containing covenants obligating the Company or such Company Subsidiary not to compete or other covenants restricting the development, manufacture, marketing, distribution or sale of any product or service of the Company (or any Company Subsidiary); (iii) Affiliate Contracts; 28 (iv) Contracts other than with affiliates under which the Company or any Company Subsidiary agrees to manage, or be managed by, another entity, in whole or material part; (v) Contracts pursuant to which the Company acquires material rights or transfers to another Person material rights with respect to Proprietary Rights (including any licenses or material agreements under which the Company or any Company Subsidiary is licensee or licensor of any such Proprietary Rights including the name "American Tape"); (vi) Contracts excluding operating leases under which the Company or any Company Subsidiary has borrowed any money in excess of $10,000 from, or issued any note, bond, debenture or other evidence of indebtedness in excess of $10,000 to, any Person; (vii) Contracts (including so-called take-or-pay or keepwell agreements) under which the Company or any Company Subsidiary has directly or indirectly guaranteed indebtedness, liabilities or obligations of any Person (in each case other than in the ordinary course of business); (viii) Contracts under which the Company or any Company Subsidiary has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person, where the amount involved exceeds $10,000; (ix) Contracts containing a provision requiring the consent of the other Person thereto upon a change in control of ownership of the Company or any Company Subsidiary; (x) powers of attorney; (xi) Contracts to do business with any Governmental Entity involving aggregate annual payments in excess of $50,000. (b) Each Contract listed in Schedule 8.12(a) is in full force and effect. Neither the Company nor any Company Subsidiary, nor to the best of Seller's knowledge, any other party is in material default in the observance or the performance of any material term or obligation to be performed by it under any Contract listed in Schedule 8.12(a). Schedule 8.12(b) sets forth a list of all requirements contracts to which the Company or any Company Subsidiary is a party. Seller has delivered to IPG and Buyer true and complete copies (except where certain confidential information has been redacted) of all Contracts listed in Schedule 8.12(a) as in effect on the date hereof. 8.13. LITIGATION. Except as set forth in Schedule 8.13, there are no actions, suits, proceedings or investigations, either at law or in equity, or before any commission or other administrative authority in any United States or foreign jurisdiction, of any kind now pending or, to 29 the best of Seller's knowledge, threatened involving the Company or any Company Subsidiary or any of their respective properties or assets of the Company or any Company Subsidiary that could, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole. 8.14. PROPRIETARY RIGHTS. (a) Schedule 8.14 lists all Proprietary Rights in which the Company now has any interest, specifying whether such Proprietary Rights are owned, controlled, used or held (under license or otherwise) by the Company or its Subsidiaries, and also indicating which of such Proprietary Rights are registered or for which applications for registration have been filed. All Proprietary Rights shown as registered by the Company or its Subsidiaries in Schedule 8.14 have been properly registered, all pending applications have been properly made and filed and all annuity, maintenance, renewal and other fees relating to registrations or applications are current. The Company and Subsidiaries are not infringing and have not infringed any Proprietary Rights of another in the operation of the business of the Company, nor, to the Company's knowledge, is any other person infringing the Proprietary Rights of the Company. All Proprietary Rights of the Company and its Subsidiaries are valid, enforceable and in good standing, and there are no equitable defenses to enforcement based on any act or omission of Company or its Subsidiaries except where the failure of such representation and warranty to be true would not have a material adverse effect on the Business. The consummation of the transactions contemplated hereby will not impair any Proprietary Rights owned or used by the Company or its Subsidiaries. "Proprietary Rights" shall mean (i) all trademarks, business identifiers, trade dress, service marks, trade names and brand names, all registrations thereof and applications therefor and all goodwill associated with the foregoing; (ii) all copyrights, copyright registrations and copyright applications, and all other rights associated with the foregoing and the underlying works of authorship; (iii) all patents and patent applications, and all international proprietary rights associated therewith; (iv) all contracts or agreements granting any right, title, license or privilege to the Proprietary Rights of any third party; (v) all inventions, mask works and mask work registrations, know-how, discoveries, improvements, designs, trade secrets, shop and royalty rights; and (vi) all claims for infringement brought by the Company for any of the foregoing. (b) Except as listed on Schedule 8.14, there is no Litigation pending or, to the Company's knowledge, threatened to challenge the Company's or the Company Subsidiaries' right, title and interest with respect to its continued use and right to preclude others from using any Proprietary Rights owned by the Company or the Company Subsidiaries. Since January 1, 1997, none of the Eight Key Employees has received written notice from any Person which alleges that the Company or any of the Company Subsidiaries is infringing the rights of such Person with respect to a registered patent or a registered trademark. 8.15. BANK ACCOUNTS. Schedule 8.15 sets forth the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company or any of its Subsidiaries maintains a safe deposit box, lock box or checking, savings, custodial or 30 other account of any nature, the type and number of each such account and the signatories therefore, a description of any compensating balance arrangements, and the names of all persons authorized to draw thereon, make withdrawals therefrom or have access thereto. 8.16. COMPLIANCE WITH LAWS. The Company and the Subsidiaries have complied with and are in compliance in all material respects with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, Permits, judgments, orders and decrees (collectively, "Laws") applicable to any of them or any of their respective properties, assets, operations and businesses except such failures of compliance that individually or in the aggregate do not and will not materially and adversely affect the property, operations, financial condition or prospects of the Company and the Company Subsidiaries taken as a whole. Except as set forth in Schedule 8.16, the respective businesses of the Company and the Company Subsidiaries are not being conducted, and no properties or assets of the Company or any Company Subsidiary relating thereto are owned or are being used by the Company or any Company Subsidiary, in violation of any Law or Permit of any Governmental Entity or any judgment, order or decree, except for such violations which do not and cannot reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect on the Company and the Company Subsidiaries, taken as a whole. 8.17. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 8.17: (i) the Company and each Company Subsidiary have obtained and hold all necessary Environmental Permits and each of these are fully and freely transferable to Purchaser; (ii) the Company and each Company Subsidiary are in compliance with all terms, conditions and provisions of (a) all applicable Environmental Laws and (b) all Environmental Permits; (iii) there are no past, pending or threatened Environmental Claims against the Company or any Company Subsidiary and neither the Seller nor the Company are aware of any facts or circumstances which could reasonably be expected to form the basis for any Environmental Claim against the Company; (iv) no Releases of Hazardous Materials have occurred at, from, in, to, on, adjacent to or under any Site and no Hazardous Materials are present in, on, about or migrating to or from any Site that could give rise to an Environmental Claim against the Company or any Company Subsidiary; (v) neither the Company, nor any Company Subsidiary, nor any entity previously owned by the Company, has transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which is an Environmental Clean-up Site; 31 (vi) no Site other than the Marysville Site is a current or proposed Environmental Clean-up Site; (vii) there are no Liens arising under or pursuant to any Environmental Law with respect to any Site and there are no facts, circumstances, or conditions that could reasonably be expected to restrict, encumber, or result in the imposition of special conditions under any Environmental Law with respect to the ownership, occupancy, development, use, or transferability of any Site; (viii) there are no (a) underground storage tanks, active or abandoned, (b) polychlorinated-biphenyl-containing equipment, (c) lead-based-paint containing materials, or (d) asbestos-containing material at any Site; (ix) there have been no environmental investigations, studies, audits, tests, reviews or other analyses which relate to one or more of the Sites and which were conducted by, on behalf of, or which are in the possession of the Seller, the Company, any of the Company Subsidiaries, affiliates, lenders, insurers or guarantors, which have not been delivered to Buyer prior to execution of this Agreement; (x) there are no claims or actions by the Company or any Company "Affiliate against any insurance carrier with respect to Environmental Costs and Liabilities at any of the Real Properties, any currently or formerly utilized Site, or any off-Site location where Hazardous Material was shipped for treatment, storage or disposal; and (xi) the balance, as of November 3, 1997, and an itemized accounting of the intended use (if any) of remaining available funds balance under the Contingent Payment Agreement dated July 25, 1990 by STC of America, Inc., STC Tape Co., the Company and NBD Bank, N.A. (the "Contingent Payment Agreement"), for certain environmental remediation expenses at the Marysville, Michigan facility, is set forth in Schedule 8.17. 8.18. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. The Company and the Company Subsidiaries hold all Permits the absence of which, individually or in the aggregate, could have a Material Adverse Effect on the business of the Company and the Company Subsidiaries (the "Material Permits"). Such Material Permits are valid and none of the Eight Key Employees has received any written notice to the effect that any Governmental Entity intended to cancel, terminate or not renew any Material Permit. 8.19. SEC FILINGS. Neither the Company nor any Company Subsidiary has ever issued any security covered by a registration statement filed with the SEC pursuant to the Securities Act or the Investment Company Act of 1940, as amended, and no security issued by the Company or any Company Subsidiary has ever been registered pursuant to the Exchange Act. 32 8.20. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. All Benefit Plans are listed in Schedule 8.20 and copies of all documentation relating to such Benefit Plans have been delivered or made available to Buyer (including copies of Benefit Plans, summary plan descriptions, trust agreements, the three most recent annual returns, representative employee communications, and IRS determination letters, all where applicable). Except as disclosed in Schedule 8.20: (i) each Benefit Plan and the administration thereof complies, and has at all times complied, in all material respects with the requirements of all applicable law, including ERISA and the Code, and each Benefit Plan intended to qualify under Section 401(a) of the Code has at all times since its adoption been so qualified, and each trust which forms a part of any such plan has at all times since its adoption been tax-exempt under Section 501(a) of the Code; (ii) no Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code; (iii) no direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company or any Company Subsidiary under Title IV of ERISA with respect to any Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA Affiliate; (iv) all Benefit Plans subject to Title IV of ERISA have been funded in accordance with the amount determined in each such Plan's annual actuarial report; (v) no "reportable event" (within the meaning of Section 4043 of ERISA) has occurred within the most recent five calendar years with respect to any Benefit Plan or any Plan maintained by an ERISA Affiliate which is subject to Title IV of ERISA; (vi) no Benefit Plan is a multiemployer plan within the meaning of Section 3(37) of ERISA; (vii) neither the Company, and Company Subsidiary nor any ERISA Affiliate has been assessed with any liability for any Tax imposed under Section 4971 through 4980B of the Code or civil liability under Section 502(i) or (l) of ERISA; (viii) no benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested or payable by reason of any transaction contemplated under this Agreement; (ix) no Tax has been incurred under Section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto) within the past three calendar years; 33 (x) no Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or any State Laws requiring continuation of benefits coverage following termination of employment; (xi) no suit, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought or, to the knowledge of Seller, threatened against or with respect to any Benefit Plan within the past three calendar years; and (xii) all contributions to Benefit Plans that were required to be made under such Benefit Plans have been made, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, all of which accruals under unfunded Benefit Plans are as disclosed in Schedule 8.20, and each of the Company and each Company Subsidiary has performed all material obligations required to be performed under all Benefit Plans. 8.21. LABOR MATTERS. Except as set forth on Schedule 8.21: (a) (i) Neither the Company nor any Company Subsidiary is a party to any labor or collective bargaining agreement, and no employees of Company or any Company Subsidiary are represented by any labor organization; (ii) within the preceding three years, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the knowledge of Seller, threatened in writing to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority; and (iii) within the preceding three years, to the knowledge of Seller, there have been no organizing activities involving the Company or any Company Subsidiary with respect to any group of employees of the Company or any Company Subsidiary. (b) There are no strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances or other material labor disputes pending or threatened in writing against the Company or any Company Subsidiary. There are no unfair labor practice charges, grievances or complaints pending or, to the knowledge of Seller, threatened in writing by or on behalf of any employee or group of employees of the Company or any Company Subsidiary. (c) Except as set forth in Schedule 8.21(c), there are no complaints, charges or claims against the Company or any Company Subsidiary pending or, to the knowledge of Seller threatened to be brought or filed with any Governmental Entity based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by the Company or any Company Subsidiary. (d) The Company and each Company Subsidiary are in material compliance with all Laws relating to the employment of labor, including all such Laws relating to wages, hours, 34 Worker Adjustment Retraining and Notification Act of 1988, as amended ("WARN Act"), collective bargaining, discrimination, civil rights, safety and health, workers' compensation and the collection and payment of withholding and/or social security Taxes and any similar Tax. (e) Since December 31, 1996, there has been no "mass layoff" or "plant closing" (as defined by the WARN Act) with respect to the Company or any Company Subsidiary. 8.22. FOREIGN CORRUPT PRACTICES ACT. Neither the Company or any Company Subsidiary nor any director, officer, agent, employee or other Person acting on behalf of the Company or any Company Subsidiary has violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or paid or made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment which constitutes a violation of any U.S. criminal statute. 8.23. ACCOUNTING PRACTICES. The Company and each Company Subsidiary has kept books and records and has maintained internal accounting controls sufficient to permit management to operate the business in a reasonably prudent manner. 8.24. BUSINESS RELATIONSHIPS; RECEIVABLES. (a) Schedule 8.24(a) lists (without identifying by name) the twenty largest Persons whose purchases of goods or services (determined on an accrual basis) from the Company and the Company Subsidiaries during the year ended December 31, 1996, the twenty largest expected Persons during the year ending December 31, 1997 and the sales volume and the accounts receivables balances at December 31, 1996 and October 25, 1997. The Company will provide IPG and Buyer with comments, specific as to the conduct of business and the nature of the business relationship between each such customer and the Company, two days before the Closing by providing the report from the Company's system screen number 0016, which follows screen number 032002, for the twenty largest customers. (b) Except as set forth in Schedule 8.24(a), no Person listed on Schedule 8.24 has terminated or substantially decreased the extent of, or given written notice to Seller, the Company or any Company Subsidiary of the termination or substantial reduction of, or of the intent to terminate or substantially decrease the extent of such Person's business relationship with the any of the Company or any Company Subsidiary. (c) Except as set forth in Schedule 8.24(b), all accounts receivable of the Company and each Company Subsidiary (i) arose from bona fide transactions in the ordinary course of business and are payable on the Company's normal trade terms, and (ii) are, to the knowledge of Seller, legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms. 35 8.25. AFFILIATES' RELATIONSHIPS TO AND TRANSACTIONS WITH THE COMPANY. (a) NO ADVERSE INTERESTS. Except as disclosed in Schedule 8.25(a), no Affiliate has any material direct or indirect interest in (i) any entity which does business with the Company or is competitive with the Company's business or (ii) any property, asset or right which is used by the Company in the conduct of its business. (b) OBLIGATIONS. All material obligations of any Affiliate to the Company, and all obligations of the Company to any Affiliate, are listed on Schedule 8.25(b). 8.26. CORPORATE NAME. The Company and each Company Subsidiary (i) have the right to use their respective names as the name of a corporation in each jurisdiction in which the Company or any such Company Subsidiary does business and (ii) have not received or given any written notice of conflict during the past five years with respect to the rights of others regarding the corporate names of the Company or any Company Subsidiary. To the knowledge of Seller, no Person other than the Company and the Company Subsidiaries is presently authorized to use the name of the Company or any Company Subsidiary. 8.27. CORPORATE MATTERS. Complete and correct copies of the minute books and stock transfer books and ledgers of the Company and each Company Subsidiary have been delivered to Buyer. Such minute books correctly reflect all material corporate actions taken by the directors and shareholders of such companies and such stock transfer books and ledgers correctly reflect all issuances and transfers of capital stock of such companies. The original minute books and stock transfer books and ledgers of the Company and each Company Subsidiary and the corporate and business records and books of such companies will be in the exclusive control and custody of such companies at the Closing. 8.28. [Intentionally omitted.] 8.29. INSURANCE. (a) Schedule 8.29(a) contains a list and description of all insurance policies maintained by or on behalf of the Company and each Company Subsidiary on the assets on their respective operations and personnel, including those Comprehensive General Liability and environmental impairment liability policies issued to former owners of the Real Property under which the Company may assert claims. Such description includes the insurance carrier, the amount of premiums thereunder, the type of coverage and the expiration dates of the current premium periods thereunder. Such insurance is of the kinds, covering such risks and in such amounts and with such deductibles and exclusions, as are consistent with past business practice of the Company and each Company Subsidiary and are reasonable for the business, assets and properties of the Company and each Company Subsidiary. All such policies are in full force and effect. 36 (b) Except as set forth in Schedule 8.29(b), neither Seller, the Company nor any Company Subsidiary has received any notice of cancellation or termination with respect to any material insurance policy thereof and there are no pending disputes or controversies between the Company or any Company Subsidiary, on the one hand, and the carrier of any such insurance policy, on the other. 8.30. PRODUCT WARRANTIES. Except for warranties as to conformance to specifications and product returns in the ordinary course of business, and except as set forth in Schedule 8.30: (i) neither the Company nor any Company Subsidiary has any unexpired, expressed, product warranty with respect to any product that it manufactures or sells or that it has heretofore manufactured or sold; (ii) neither the Company nor any Company Subsidiary has received any written notice of any claim based on any product warranty; and (iii) Seller does not know or have any reasonable ground to know of any claim (actual or threatened) based on any product warranty of which neither the Company nor any Company Subsidiary has received notice. Neither the Company nor any Company Subsidiary makes any other warranties expressed or implied, with respect to any of the products that any of them manufactures or sells. 8.31. BARTER AGREEMENTS. Except as disclosed in Schedule 8.31, there are no outstanding barter Contracts or arrangements with respect to the business of the Company or any Company Subsidiary nor is the Company or any Company Subsidiary liable for any outstanding barter obligations nor the owner of any outstanding barter receivables. 8.32. CERTAIN EMPLOYEE MATTERS. No employee, agent, consultant or contractor associated with any of the members of management or key personnel of the Company or any Company Subsidiary who has contributed to or participated in the conception and development of proprietary rights of any of the Company or any Company Subsidiary has asserted or, to the knowledge of Seller, threatened any claim against the Company or any Company Subsidiary in connection with such Person's involvement in the conception and development of such proprietary rights. 8.33. NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the representations and warranties of Seller contained in this Agreement, Seller makes no representation or warranty, express or implied, written or oral, and Seller hereby disclaims any such representation or warranty (including without limitation any warranty of merchantability or of fitness for a particular purpose), whether made by Seller or the Company or any of their officers, directors, employees, agents or representatives, with respect to Seller, STC Tape or the Company or the execution and delivery of this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing, neither Seller, STC Tape nor the Company makes any representation or warranty to Buyer or IPG with respect to any projections, estimates or budgets of future revenues or expenses or expenditures, or future results of operations, or any other information or documents, heretofore delivered to or made available to Buyer or IPG or their respective counsel, accountants or advisors with respect to the Company, except as expressly covered by a representation and warranty contained in this Agreement. 37 ARTICLE IX REPRESENTATIONS AND WARRANTIES BY IPG AND BUYER As an inducement to Seller to enter into this Agreement, each of IPG and Buyer makes the representations and warranties to Seller set forth below in Sections 9.1 (as to IPG), 9.3, 9.4, 9.5, 9.6, 9.7 and 9.8, and Buyer makes the representations and warranties set forth below in Sections 9.1 (as to Buyer), 9.2, 9.4 (as to Buyer) 9.5 (as to Buyer), 9.7 (as to Buyer) and 9.8. 9.1. CORPORATE ORGANIZATION. IPG is a corporation duly organized, validly existing and in good standing under the laws of Canada and has the corporate power and authority to carry on its business as now being conducted and as proposed to be conducted. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has the corporate power and authority to carry on its business as now being conducted and as proposed to be conducted and to acquire and own the Stock. 9.2. AUTHORIZATION OF AGREEMENT; NO VIOLATION. Buyer has the requisite corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby in accordance with the terms of this Agreement. Buyer has duly authorized the execution, delivery and performance of this Agreement and the purchase of the Stock from Seller and the consummation of the other transactions contemplated hereby. No other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and, assuming this Agreement constitutes the legal, valid and binding obligation of Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated hereby (i) will violate or conflict with the Certificate of Incorporation or By-Laws of Buyer, or (ii) is prohibited by or, except for filings under the HSR Act requires Buyer to obtain or make any consent, authorization, approval, registration or filing with or from any Person. Buyer has delivered to Seller copies of its Certificate of Incorporation and all amendments thereto and a copy of its By-laws, which are true and complete copies of such instruments as in effect on the date of this Agreement. 9.3. IPG has the requisite corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby in accordance with the terms of this Agreement. IPG has duly authorized the execution, delivery and performance of this Agreement and the issuance of the Intertape Shares to Seller and the consummation of the other transactions contemplated hereby. No other corporate proceedings on the part of IPG are necessary to authorize this Agreement, the issuance of the Intertape Shares to Seller or the other transactions 38 contemplated hereby. This Agreement has been duly executed and delivered by IPG and, assuming this Agreement constitutes the legal, valid and binding obligation of Seller, it constitutes the legal, valid and binding obligation of IPG, enforceable against IPG in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated hereby (i) will violate or conflict with the Certificate of Incorporation or By-Laws of IPG, or (ii) is prohibited by or, except for filings under the HSR Act requires IPG to obtain or make any consent, authorization, approval, registration or filing with or from any Person. IPG has delivered to Seller copies of its Certificate of Incorporation and all amendments thereto and a copy of its By-laws, which are true and complete copies of such instruments as in effect on the date of this Agreement. 9.4. LITIGATION. Except as set forth in Schedule 9.4, there are no actions, suits, proceedings or investigations, either at law or in equity, or before any Governmental Entity in any United States or foreign jurisdiction, of any kind now pending or, to the best of Buyer's and IPG's knowledge, threatened or proposed in any manner involving Buyer or IPG or any of their respective properties or assets that would in any manner impair either Buyer's or IPG's ability to perform its obligations hereunder. 9.5. NO BROKERS AND FINDERS. Except as set forth in Schedule 9.5, neither IPG nor the Buyer has incurred any liability for brokerage or other commissions or finders' fees relative to this Agreement or to the transaction herein contemplated. 9.6. REPRESENTATIONS CONCERNING THE INTERTAPE SHARES. (a) IPG has delivered to Seller copies of the audited balance sheets of IPG and its consolidated subsidiaries as of December 31, 1996 and the related consolidated statements of income and retained earnings and cash flows for the year then ended. Except as set forth in the notes thereto, all such financial statements were prepared in accordance with GAAP and fairly present in all material respects the consolidated financial condition and results of operations of IPG and its consolidated subsidiaries as of the date thereof and for the period covered thereby. Except as disclosed in such financial statements, the SEC Reports (as defined below) and/or in a document incorporated therein by reference, IPG does not have any liabilities which are, in the aggregate, material to the business, operations or financial condition of IPG and its subsidiaries taken as a whole, except liabilities incurred in the ordinary course of business consistent with past practice since June 30, 1997. (b) IPG has filed all forms, reports and documents required to be filed with the Securities and Exchange Commission (the "SEC") since December 31, 1996 and has made available to Seller in the form filed with the SEC (i) its Annual Report on Form 20-F for the fiscal year ended December 31, 1996 and its Quarterly Reports on Form 6-K for the fiscal quarters ended March 31, 1997 and June 30, 1997, (ii) all proxy statements relating to IPG's meetings of stockholders held 39 since December 31, 1996, (iii) all reports on Form 6-K filed by IPG with the SEC since December 31, 1996 and (iv) all amendments and supplements to all such reports (collectively, the "SEC Reports"). The SEC Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "Act") or the Securities Exchange Act of 1934, as amended, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such amending or superseding filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Since June 30, 1997 there has not been (i) any material adverse change in the business, financial condition or results of operations of IPG and its subsidiaries taken as a whole, or (ii) any uninsured damage to, destruction or loss of assets or property of IPG that could reasonably be expected to have a Material Adverse Effect. (d) Except as disclosed in the SEC Reports and/or in documents incorporated therein by reference, there are no actions or proceedings or, to the knowledge of IPG, any governmental or regulatory authority investigations, pending or, to the knowledge of IPG, threatened, against IPG or any of its assets and properties which could reasonably be expected to result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated hereby, adversely affecting the ability of IPG or Buyer to consummate the transactions or to perform their respective obligations hereunder, or have a Material Adverse Effect on IPG and its subsidiaries taken as a whole. 9.7. PURCHASE FOR INVESTMENT. Buyer is acquiring the Stock for investment purposes and not with a view towards distribution. IPG acknowledges that the shares of Stock have not been registered, and in connection with the transactions contemplated hereby will not be registered, under the Act or any state blue sky law and, therefore, cannot be resold unless they are registered under the Act or unless an exemption from registration is available. ARTICLE X COVENANTS OF SELLER 10.1. ACCESS, INFORMATION AND DOCUMENTS. Pending the Closing, Seller will cause the Company and each Company Subsidiary to give to Buyer and to its agents and representatives (including, but not limited to, accountants, lawyers and appraisers) reasonable access during normal working hours to any and all of the properties, assets, books, records and other documents of the Company and each Company Subsidiary to enable Buyer to make such examination of the business, properties, assets, books, records, and other documents of the Company and each Company Subsidiary as Buyer may determine, and Seller will furnish, and will cause the Company and each Company Subsidiary to furnish, to Buyer such information and copies of such documents and records as Buyer shall reasonably request. 40 10.2. CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof until the Closing, except as set forth on Schedule 10.2 or as otherwise specifically contemplated hereby or consented to by Buyer in writing: (i) Seller will cause the Company and each Company Subsidiary to maintain itself at all times as a corporation or other business organization duly organized, validly existing and in good standing under the laws of the jurisdiction under which it is incorporated or organized; (ii) Seller will cause the Company and each Company Subsidiary to carry on their respective businesses and operations in a businesslike manner consistent with past practice, and will not permit the Company or any Company Subsidiary to engage in any activity or transaction or make any commitment to purchase or spend other than in the ordinary course of its business as heretofore conducted; PROVIDED, HOWEVER, without the written consent of IPG and Buyer, Seller will not permit the Company or any Company Subsidiary to make any commitment to purchase or spend involving $25,000 or more other than for (a) the purchase of raw materials, (b) approved capital expenditures as set forth in Schedule 10.2(ii) and (c) transaction expenses as contemplated by Section 10.5 and 20.3; (iii) Seller will not permit the Company or any Company Subsidiary to declare, set aside or pay any dividend or make any distribution (whether in cash, property or stock) with respect to any of its capital stock or redeem, purchase or otherwise acquire, or agree to redeem, purchase or otherwise acquire, any of its capital stock; (iv) Seller will not permit the Company or any Company Subsidiary to increase, or agree to increase, the compensation or bonuses or special compensation of any kind of any of its key employees (which term shall be deemed to include all officers) over the rate being paid to them on August 15, 1997 other than normal merit and/or cost-of-living increases pursuant to customary arrangements consistently followed, or adopt or increase any benefit under any insurance, pension or other Benefit Plan, payment or arrangement made to, for or with such key employee; (v) Seller will cause the Company and each Company Subsidiary to continue to carry all insurance policies listed in Schedule 8.29(a) or suitable replacements therefor, in full force and effect. After the Closing, Seller shall cooperate with Buyer, the Company and the Company Subsidiaries to give them the benefit of any rights which Seller or any of its Affiliates may have under such insurance policies covering claims relating to the Company and the Company Subsidiaries for the period ending at the close of business on the Closing Date; (vi) Seller will cause the Company and each Company Subsidiary to use reasonable business efforts to preserve its business organization intact, to keep available to 41 Buyer the services of its employees and independent contractors and to preserve for Buyer its relationships with suppliers, licensees, distributors and customers and others having business relationships with it; (vii) Seller will not permit the Company or any Company Subsidiary to sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwise dispose of, any assets (having a fair market value at the time of sale, transfer or disposition of $25,000 or more in the aggregate), or cancel or agree to cancel any debts or claims, other than in the ordinary course of business, or mortgage, pledge or subject to any lien or agree to mortgage, pledge or subject to any lien any of its properties or assets, or pay or obligate itself to pay in excess of $25,000 in the aggregate for fixed assets; (viii) Seller will not permit the Company or any Company Subsidiary to amend its constitutional documents; (ix) Except for the Company Restructuring, Seller will not, and will not permit the Company or any Company Subsidiary to, take any action that would, or that could reasonably be expected to, result in any of the conditions precedent set forth in Articles XIII, XIV and XV not being satisfied; (x) Seller will not cause or permit the Company or any Company Subsidiary to issue, sell or otherwise dispose of, or agree to issue, sell or otherwise dispose of any capital stock or any other security of the Company or any Company Subsidiary, or grant or agree to grant any option, warrant or other right to subscribe for or to purchase any capital stock or any other security of the Company or any Company Subsidiary; (xi) Except for the Company Restructuring, Seller will not cause or permit the Company or any Company Subsidiary to acquire or agree to acquire, by merging or consolidating with, or by purchasing any equity interest in or a substantial portion of the assets of, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in any such case, except in the ordinary course of business; (xii) Except as required by law or in the ordinary course of business consistent with past practice except for [specify employment agreements and Stay-Pay Plan], Seller will not cause or permit the Company or any Company Subsidiary to adopt any plan, arrangement or policy which would become a Benefit Plan or amend any such plans to the extent such adoption or amendment would result in an increase in the benefits payable to any current or former employee of the Company or any Company Subsidiary without the prior consent of IPG and Buyer, such consent not to be unreasonably withheld; 42 (xiii) Seller will not cause or permit the Company or any Company Subsidiary to incur or agree to incur any indebtedness for borrowed money outside of existing lines of credit; (xiv) Seller will not cause or permit the Company or any Company Subsidiary to make or permit any material amendment, renewal, extension or termination of any material Contract or Permit to which it is a party other than in the ordinary course of business; (xv) Seller will not cause or permit the Company or any Company Subsidiary to cancel or forgive any indebtedness other than trade accounts receivable for an amount greater than $10,000 individually or in the aggregate or settle any outstanding material litigation for an amount greater than $50,000 individually or in the aggregate or waive, release or compromise any outstanding material claim or right except in the ordinary course of business consistent with past practice; (xvi) Except for the Company Restructuring and except in the ordinary course of business consistent with past practice, Seller will not cause or permit the Company or any Company Subsidiary to engage in any transaction or enter into any Contract or other commercial arrangement with any Affiliate of Seller, the Company or any Company Subsidiary; (xvii) Seller will not cause or permit the Company or any Company Subsidiary to permit, allow or suffer any of its assets to become subjected to any Lien other than a Permitted Lien, except for liens in ordinary course of business, right-of-way or other similar restriction of any nature whatsoever except for liens pursuant to existing, disclosed Contracts; (xviii)Seller will not cause or permit the Company or any Company Subsidiary to make any change in its accounting methods or practices; (xix) Seller will not cause or permit the Company or any Company Subsidiary to make material changes in any method of marketing, management or operation; collection or credit extension policies; or cash management methods, practices or procedures; (xx) Seller will not cause or permit the Company or any Company Subsidiary to enter into or renew, extend or amend in any material respect any lease or sublease of real property; (xxi) Seller will not cause or permit the Company or any Company Subsidiary to agree, whether in writing or otherwise, to do any of the foregoing; and 43 (xxii) Without limiting the foregoing, Seller will cause the Company to consult with IPG and Buyer regarding all significant developments, transactions and proposals relating to the business or operations or any of the assets or liabilities of the Company or any Company Subsidiary. 10.3. NONCOMPETITION; CONFIDENTIALITY. Subject to the Closing, and as an inducement to Buyer to execute this Agreement and complete this transactions contemplated hereby, and in order to preserve the goodwill associated with the business of Company being acquired pursuant to this Agreement, Seller covenants and agrees as follows: (a) COVENANT NOT TO COMPETE. For a period for five years from the date of Closing (the "Period"), Seller will not directly or indirectly: (i) engage in, continue in or carry on any business which competes with the tape and shrink film business of the Company or any of its Subsidiaries as conducted on the date hereof (the "Business") or is substantially similar thereto, including owning or controlling any financial interest in any corporation, partnership, firm or other business organization which is so engaged; (ii) consult with, advise or assist in any way, whether or not for consideration, any corporation, partnership, firm or other business organization which is now or becomes a competitor of the Company or Buyer in any aspect with respect to the Business, including, but not limited to, advertising or otherwise endorsing the products of any such competitor; soliciting customers or otherwise serving as an intermediary for any such competitor; loaning money or rendering any other form of financial assistance to or engaging in any form of business transaction on other than an arm's length basis with any such competitor; or (iii) offer employment to an employee of the Company, without the prior written consent of Buyer; provided, however, that the foregoing shall not prohibit (a) the ownership by Seller of securities of corporations which are listed on a national securities exchange or traded in the national over-the-counter market in an amount which shall not exceed 5% of the outstanding shares of any such corporation or (b) any offer by Seller to employ a person in a business which does not compete with the business of IPG or the Company or which is for a position outside the United States, Mexico or Canada. The parties agree that Buyer may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any person, corporation, firm or entity that purchases all or part of the business of the Company. 44 The parties agree that the geographic scope of this covenant not to compete shall extend to any city, county or other political subdivision of any country in North America, each of which is deemed to be separately named herein. Recognizing the specialized nature of the business transferred to Buyer and the scope of competition, Seller acknowledges the geographic scope of this covenant not to compete to be reasonable. The parties intend that the covenant contained in this Section 10.3 shall be construed as a series of separate covenants, one for each city, county or political subdivision of each country in North America, each of which is deemed to be separately named herein, each for a series of one-year periods within the Period. Except for geographic coverage and periods of effectiveness, each such separate covenant shall be identical in terms. If in any judicial proceeding a court shall refuse to enforce any of the separate covenants deemed included in this Section 10.3(a), then such unenforceable covenant shall be deemed eliminated for the purpose of that proceeding to the extent necessary to permit the remaining separate covenants to be enforced. In the event a court of competent jurisdiction determines that the provisions of this covenant not to compete are excessively broad as to duration, geographic scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable in such jurisdiction. (b) COVENANT OF CONFIDENTIALITY. Except as necessary in connection with its indemnification obligations hereunder, Seller shall not at any time subsequent to the Closing, except as explicitly requested by Buyer, (i) use for any purpose, (ii) disclose to any person, or (iii) keep or make copies of documents, tapes, discs or programs containing, any confidential information concerning the Company. For purposes hereof, "confidential information" shall mean and include, without limitation, all Trade Rights in which the Company has an interest, all customer lists and customer information, and all other information concerning the Company's processes, apparatus, equipment, packaging, products, marketing and distribution methods, not previously disclosed to the public directly by the Company. If at any time after Closing, the Seller should discover that it is in possession of any records containing the confidential information of the Company, then the Seller shall immediately turn such records over to the Company, which shall upon request make available to the Seller any information contained therein which is not confidential information. Seller agrees that it will not assert a waiver or loss of confidential or privileged status of the information based upon such possession or discovery. (c) Seller agrees that the provisions and restrictions contained in this Section 10.3 are necessary to protect the legitimate continuing interests of IPG and Buyer in acquiring the Stock, and that any violation or breach of these provisions will result in irreparable injury to IPG and Buyer for which a remedy at law would be inadequate. Seller, IPG and Buyer agree that in the event of a violation or breach and regardless of any other provision contained in this Agreement, Buyer shall be entitled to injunctive and other equitable relief as a court may grant after considering the intent of this Section 10.3, and IPG and Buyer shall not be entitled to any other form of relief from such violation or breach. 45 10.4. EXCLUSIVITY. Except for the Company Restructuring, prior to the termination of this Agreement, Seller will not cause or permit the Company to engage in any Business Combination other than the Acquisition contemplated hereby, and will not authorize or permit any of its subsidiaries, affiliates or representatives (including, without limitation, directors, officers, legal, financial and other advisors) to take, directly or indirectly, any action to initiate, assist, solicit, negotiate, encourage, accept or otherwise pursue any offer or inquiry from any person or entity to engage in any Business Combination other than the acquisition contemplated hereby (and other than the merger of the Company and its subsidiaries) or otherwise attempt to consummate any Business Combination other than the acquisition contemplated hereby. 10.5. TRANSFER PRICING. Seller shall promptly engage Coopers & Lybrand, at Seller's sole expense to document the transfer pricing practices of the Company, STC Tape and STC America Inc., an affiliate of the Company and to prepare and deliver a report thereon, prior to the Closing, to each of Seller, the Company, IPG and Buyer. 10.6. CONSENTS AND APPROVALS. Seller shall use its best efforts to obtain prior to the Closing all consents, approvals, orders, authorizations, registrations, declarations and filings under all Laws of any Governmental Entity or of any other Person required to be obtained by Seller in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 10.7. INDUSTRIAL SITE RECOVERY ACT. Seller shall cause the Company to fully comply with and meet all obligations under the New Jersey Industrial Site Recovery Act ("ISRA"), including but not limited to making all filings with the New Jersey Department of Environmental Protection ("NJDEP"), conducting any and all investigation and remediation activities required by the NJDEP, and satisfying any financial assurance requirements thereunder. Prior to all such filings, investigations and/or remediation activities, Seller shall provide Buyer with all reports (including but not limited to draft and final consultant reports, workplans and sampling data), consult with Buyer thereon and give reasonable consideration to Buyer's comments regarding investigation, remediation and filings with NJDEP. Buyer shall review such reports, workplans and data and provide comments to the Company in a prompt manner. Seller shall notify Buyer and shall give Buyer the opportunity to attend any meetings with NJDEP or inspections by NJDEP. Seller shall conduct at its own sole cost and expense any and all investigation, environmental testing and remediation required by the NJDEP pursuant to ISRA, including but not limited to any additional sampling of soil and groundwater at the Real Properties subject to ISRA. 10.8. [Intentionally omitted.] 10.9. RESIGNATION OF DIRECTORS AND OFFICERS. Prior to or at the Closing, Seller will cause each of the directors and officers of the Company and each Company Subsidiary to resign as a director and/or officer of the Company or the Company Subsidiary effective at the Closing. 46 10.10. USE OF NAME. Seller will not use the name "American Tape" or any protected logos associated therewith or any derivatives thereof in any way whatsoever at any time after the Closing. 10.11. LOCKUP. Seller shall not, directly or indirectly, sell or otherwise transfer any of the Intertape Shares during the 180-day period following the Closing Date. Seller may pledge all or any portion of the Intertape Shares during such period to secure borrowings, provided that Seller requires the lender to agree, and the lender does agree not to sell such Intertape Shares during the lockup period; and the Intertape Shares are legended to restrict such sale. 10.12. RESTRUCTURING. Seller will cause each of the transactions listed in Exhibit J (collectively, the "Restructuring") to occur prior to Closing, on terms and conditions, and pursuant to documentation, reasonably acceptable to Buyer. Seller shall furnish to Buyer, at least one week prior to the date of the Closing, copies of the draft documentation pursuant to which such transactions shall be consummated for Buyer's review. 10.13. NOTIFICATION. Between the date of this Agreement and the Closing Date, Seller or the Company will promptly notify Buyer in writing if Seller or the Company becomes aware of any fact or condition that causes or constitutes a breach of any of the representations or warranties, or would preclude Seller from performing any of the covenants contained herein as of the date of this Agreement. 10.14. LETTER OF CREDIT. Seller shall arrange for the issuance by the Letter of Credit Bank of the Letter of Credit. 10.15. AVAILABILITY OF FUNDS UNDER CONTINGENT PAYMENT AGREEMENT Seller covenants and agrees that any and all funds available under and in accordance with the Contingent Payment Agreement as of Closing will be for the sole and exclusive benefit of the Company, no portion of the balance reflected in Schedule 8.17 having been expended between the date of this Agreement and Closing. 10.16. CERTAIN ENVIRONMENTAL COMPLIANCE. Prior to Closing, Seller will (i) cause the Company to report to appropriate authorities the July 1997 discovery of contamination at the Marysville, Michigan facility during the repair of a city water main, and (ii) cause the Company to comply with all requirements of "Stipulation for Entry of Final Order by Consent, AQD No. 10-1997," entered on July 7, 1997 with the Michigan Department of Environmental Quality ("MDEQ"), as amended by letter from Diane Kavanaugh Vetort, MDEQ, to Frederick J. Dindoffer, counsel for Company, dated October 20, 1997, including without limitation all recordkeeping, reporting and testing requirements therein. 10.17. CONSENT OF UNION. Prior to Closing, Seller will cause the Company to obtain the written consent of Local 1149, United Automobile Aerospace and Agricultural Implement 47 Workers of America to the First Amendment to the American Tape Company Hourly Employees' Pension Plan. 10.18. FORMS 5500. Prior to Closing, Seller shall cause the Company to promptly file all Forms 5500 relating to the Company's Benefit Plans and not timely filed herewith. 10.19. TERMINATION OF BENEFIT PLANS. Prior to Closing, Seller shall cause each of the (x) American Tape Company Long Term Incentive Plan and (y) American Tape Company Short Term Management Incentive Plan to be terminated, effective as of the Closing Date. ARTICLE XI COVENANTS OF IPG AND BUYER 11.1. CONFIDENTIAL INFORMATION. Each of IPG and Buyer shall preserve and maintain all confidential information, proprietary information and trade secrets of the Company and the Company Subsidiaries received or confirmed in documentary form by Buyer or IPG or their representatives from Seller, the Company or any Company Subsidiary and shall not disclose to any third Person or use any such confidential information, proprietary information or trade secret, except that Buyer and IPG shall be free to use and disclose all or any of such proprietary information and trade secrets which: (i) were already in its possession at the time of disclosure to it; (ii) are a matter of public knowledge; (iii) have been or are hereafter published other than through Buyer or IPG; (iv) are required to be disclosed by any Law; or (v) are lawfully obtained by Buyer or IPG from a third Person without restrictions of confidentiality. The covenants of Buyer and IPG contained in this Section 11.1 shall terminate at the Closing but shall continue indefinitely if there is no Closing. 11.2. CONSENTS AND APPROVALS. Each of Buyer and IPG shall use its best efforts to obtain prior to the Closing all consents, approvals, orders, authorizations and filings under Laws of any Governmental Entity or of any other Person required to be obtained by either Buyer or IPG in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 11.3. ENVIRONMENTAL AUDITS. Buyer and IPG will promptly retain a firm engaged in the regular business of environmental engineering to conduct (at Buyer's and IPG's expense) such environmental, engineering and safety audits of Company's operations and the Real Estate occupied by Company as Buyer and IPG in their discretion shall consider necessary or appropriate. 11.4. BOARD SEAT. Subject to his continued employment by the Company or an affiliate thereof, IPG shall elect and appoint Mr. I. J. Choi as a member of the Board of Directors of IPG for a term of two years. On and after the Closing, IPG shall cause the Company (or an affiliate thereof) to provide an office (which office shall be located in the State of New Jersey and within reasonable proximity to New York) to Mr. Choi for the tenure of his employment. 48 11.5. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY. (a) Buyer shall not, and IPG agrees to preclude Buyer from taking any action to, cause STC Tape to approve any amendment to the Certificate of Incorporation or By-laws of the Company existing on the date hereof (provided no amendment has been made to either thereof since August 15, 1997 altering the indemnification provisions contained therein) which amendment would have the effect of reducing or limiting, in any manner whatsoever, the indemnification rights (including without limitation, any rights to advancement of expenses) of those individuals who are serving as directors or officers of the Company on the date hereof, or who have served in such capacities at any time during the preceding three years. (b) In the event IPG, Buyer or any of their respective successors or assigns (i) causes the Company to reorganize or consolidate with or merge into or enter into another business combination transaction with any other Person where the Company is not the resulting, continuing or surviving corporation or entity of such consolidation, merger or transaction, or (ii) causes the Company to liquidate, dissolve or transfer all or substantially all of its properties and assets to any other Person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Company continue, or cause to be continued, the indemnification rights provided to the directors and officers of the Company as described in (a) above. (c) IPG shall cause the directors' and officers' insurance coverage of IPG to be amended, immediately upon Closing, to include STC Tape and the Company, thereby providing the same coverage to directors and officers of STC Tape and the Company as is made available to the other U.S. employees of subsidiary companies of IPG. A summary description of such insurance coverage has been delivered by IPG to Seller. (d) IPG agrees to promptly advance legal expenses (which expenses shall be reasonable) to each of the Eight Key Employees in connection with the defense of any action asserted against any of such Eight Key Employees in his or her capacity as such for actions or inactions prior to the Closing, provided the Company shall have declined to assume the defense of any such action or shall have been precluded from assuming the defense of any such action because of a conflict of interests, and further provided that the Company shall have agreed to the officer's or director's selection of counsel, which agreement shall not be unreasonably withheld. ARTICLE XII HSR COVENANT OF IPG, BUYER AND SELLER To the extent such filings have not been completed prior to the execution of this Agreement, each of IPG, Buyer and Seller shall, in cooperation with the other, promptly file or cause to be filed any reports or notifications that may be required to be filed by it under the HSR Act, with the Federal Trade Commission and the Antitrust Division of the Department of Justice, and shall furnish to the others all such information in its possession as may be necessary for the completion of 49 the reports or notifications to be filed by the other. Prior to making any communication, written or oral, with the Federal Trade Commission, the Antitrust Division of the Department of Justice or any other governmental agency or authority or members of their respective staffs with respect to this Agreement or the transactions contemplated hereby, each of IPG, Buyer and Seller shall consult with the other. ARTICLE XIII CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO SELL THE STOCK The obligation of Seller to sell the Stock is subject to the fulfillment prior to or at the Closing of the following conditions, unless waived in writing by Seller: 13.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by IPG and Buyer herein qualified as to materiality shall be true and correct in all respects and those not so qualified shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of the Closing Date, except for changes permitted or contemplated by this Agreement. 13.2. COMPLIANCE WITH COVENANTS. Each of IPG and Buyer shall have performed or complied in all material respects with all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement to be performed or complied with by it prior to or at the Closing Date. 13.3. CONSENTS AND APPROVALS. All consents, approvals, orders, authorizations, registrations, declarations and filings required to be obtained or made prior to the Closing Date shall have been made or obtained. 13.4. OFFICER'S CERTIFICATES. Seller shall have received such certificates of Buyer and of IPG, dated the Closing Date and signed by an executive officer of Buyer and of IPG, to evidence satisfaction of the conditions set forth in this Article XIII as may be reasonably requested by Seller. 13.5. OPINION OF COUNSEL. Seller shall have received an opinion, dated the Closing Date, of Morgan, Lewis & Bockius LLP, counsel for Buyer and IPG, in form and substance reasonably satisfactory to Seller. 13.6. REGISTRATION RIGHTS. Buyer, IPG and Seller shall have entered into the Registration Rights Agreement, provided the Purchase Price shall include the delivery to Seller of $3,000,000 or more of Intertape Shares. 13.7. [Intentionally omitted.] 50 13.8. GUARANTEES. The Seller shall have received from the Creditors releases of the Guarantees, which releases shall be satisfactory in form and substance to Seller, IPG and Buyer. 13.9. COMPANY RESTRUCTURING. The Company Restructuring shall have been consummated. 13.10. OCTOBER FINANCIAL STATEMENTS. Seller shall have received and been satisfied with, in its sole discretion, the October Financial Statements and the accompanying opinion of Coopers & Lybrand. 13.11. TRANSFER PRICING. Seller shall have received and been satisfied with, in its sole discretion, the report of Coopers & Lybrand concerning, and the implications of, the transfer pricing practices of the Company (as contemplated by Section 10.5 of this Agreement). ARTICLE XIV CONDITIONS PRECEDENT TO IPG'S AND BUYER'S OBLIGATIONS TO PURCHASE THE STOCK The obligation of Buyer to purchase the Stock is subject to the fulfillment prior to or at the Closing of the following conditions, unless waived in writing by Buyer: 14.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by Seller herein qualified as to materiality shall be true and correct in all respects and those not so qualified shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of the Closing Date, except for changes permitted or contemplated by this Agreement and except for representations and warranties that are made as of a specific date or time, which, if qualified as to materiality shall be true and correct in all respects, and if not so qualified shall be true and correct in all material respects only as of such specific date or time. 14.2. COMPLIANCE WITH COVENANTS. Seller shall have performed or complied in all material respects with all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement to be performed or complied with by it prior to or at the Closing Date. 14.3. CONSENTS AND APPROVALS. All consents, approvals, orders, authorizations, registrations, declarations and filings required to be obtained or made prior to the Closing Date shall have been made or obtained. 14.4. OFFICER'S CERTIFICATES. IPG and Buyer shall have received such certificates of Seller, dated the Closing Date and signed by an executive officer of Seller to evidence satisfaction of the conditions set forth in this Article XIV as may be reasonably requested by Buyer. 51 14.5. [Intentionally omitted.] 14.6. OPINION OF COUNSEL. IPG and Buyer shall have received opinions, dated the Closing Date, of (Korean) counsel for Seller, and of Pitney Hardin Kipp & Szuch, United States counsel for the Company, in form and substance reasonably satisfactory to IPG and Buyer. 14.7. NO LITIGATION. There shall not be pending or threatened by any Governmental Entity any suit, action or proceeding (or by any other Person any suit, action or proceeding which has a reasonable likelihood of success), (i) challenging or seeking to restrain or prohibit the purchase of the Stock contemplated by this Agreement or any of the other transactions contemplated by this Agreement or seeking to obtain from Buyer in connection with the purchase of the Stock contemplated by this Agreement any damages that are material in relation to Buyer taken as a whole, (ii) seeking to prohibit or limit the ownership or operation by Buyer, the Company or any of their respective subsidiaries of any material portion of the business or assets of Buyer, the Company or any of their respective subsidiaries, or to compel Buyer, the Company or any of their respective subsidiaries to dispose of or hold separate any material portion of the business or assets of Buyer, the Company or any of their respective subsidiaries, in each case as a result of the purchase of the Stock contemplated by this Agreement or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on the ability of Buyer to acquire or hold, or exercise full rights of ownership of, the Stock, including the right to vote the Stock on all matters properly presented to the stockholders of the Company or (iv) seeking to prohibit Buyer from effectively controlling in any material respect the business or operations of the Company or any of the Company Subsidiaries. 14.8. EMPLOYMENT AGREEMENTS. The Company shall (A) have entered into (i) employment agreements with each of Messrs. I. J. Choi (three year term), Kiwhan Lee (two year term), Alex H.S. Yoo (two-year term), Koh-Hoon Lee (two year term) and Keith Bong (two year term) in the forms of Exhibits P, Q, R, S and T hereto, respectively, and (ii) noncompetition agreements with [key employees not covered by clause (i) to be specified] in the form of Exhibit U hereto and (B) have offered written "stay pay" plans to each of the individuals listed in Schedule 14.8 in the form of Exhibit V hereto. 14.9. RESIGNATIONS. Buyer shall have received resignations, effective as of the Closing, from each officer and director of the Company and each Company Subsidiary. 14.10. ENVIRONMENTAL AND SAFETY AUDITS. The results of the engineering, environmental and safety audits conducted by IPG and Buyer shall not have disclosed any past or present condition, process or practice with respect to the Company or any property owned by the Company which is not in full compliance with all applicable environmental laws or laws related to health and safety or which otherwise requires repair or remediation. 52 14.11. PHYSICAL PROPERTIES. There shall have occurred no material damage to or destruction or loss (not covered by insurance) of any of the Company's or any Company Subsidiary's facilities, machinery, equipment or other assets. 14.12. DUE DILIGENCE INVESTIGATION. IPG and Buyer shall have completed its due diligence investigation of the Company, the Company Subsidiaries and the business, the results of which shall be reasonably acceptable to Buyer in its sole discretion. 14.13. OCTOBER FINANCIAL STATEMENTS. IPG and Buyer shall have received and been satisfied with, in their sole discretion, the October Financial Statements and the accompanying opinion of Coopers & Lybrand. 14.14. TRANSFER PRICING. IPG and Buyer shall have received and been satisfied with, in their sole discretion, the report of Coopers & Lybrand concerning, and the implication of, the transfer pricing practices of the Company and its subsidiaries, STC Tape and STC America, Inc. (as contemplated by Section 10.5 of this Agreement). 14.15. TITLE INSURANCE. Buyer shall have obtained, at IPG's or Buyer's expense, a policy or policies of title insurance in form satisfactory to it and its special counsel, insuring in amounts deemed satisfactory by Buyer, fee simple interests in each of the Real Properties. 14.16. FINANCING. IPG and/or Buyer shall have received financing and consents from Buyer's lenders, on terms and conditions satisfactory to Buyer in its sole discretion, to enable Buyer to consummate the transactions contemplated hereby. 14.17. RESTRUCTURING. The Company Restructuring shall have been consummated. 14.18. ENVIRONMENTAL COMPLIANCE. IPG and Buyer shall be satisfied, in their sole discretion, after discussion with appropriate authorities, if desired, that, as a result of the environmental compliance actions taken by the Company as contemplated by Section 10.16 hereof, that no material penalties will be issued to the Company for related past non-compliance by the Company. 14.19. CONTRACTS IN RESPECT OF ENVIRONMENTAL REMEDIATION. IPG and Buyer shall be satisfied, in their sole discretion, as to the amount of funds needed to be expended in connection with the regenerative thermal oxidizer. 53 ARTICLE XV CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE STOCK PURCHASE The respective obligations of each party hereto to effect the sale and purchase of the Stock contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date of the following conditions, any or all of which may be waived in writing by Buyer and IPG, on the one hand, or Seller, on the other hand, in whole or in part, to the extent permitted by applicable law. 15.1. NO INJUNCTION. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated or enforced any Law or preliminary or permanent injunction which is in effect and which prohibits, enjoins or otherwise restrains the consummation of the transactions contemplated hereby; PROVIDED, that the parties shall use commercially reasonable efforts to cause any such Law or preliminary or permanent injunction or order to be vacated or lifted. 15.2. HSR ACT WAITING PERIOD. Any applicable waiting period under the HSR Act relating to the transactions contemplated hereby shall have expired or terminated and no action shall have been instituted by the Department of Justice or the Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, other than an action which shall have been withdrawn or terminated. ARTICLE XVI TERMINATION 16.1. TERMINATION BY BUYER AND IPG. Buyer and IPG may, without liability to Seller, terminate this Agreement by notice to Seller (i) at any time prior to the Closing if default shall be made by Seller in the observance or in the due and timely performance of any of the terms hereof to be performed by Seller and Seller does not cure the default within five business days after Buyer and IPG deliver written notice thereof, (ii) at the Closing if any of the conditions precedent to the performance of Buyer's and IPG's obligations at the Closing shall not have been fulfilled, or (iii) if at any time prior to Closing, Buyer and IPG, in their reasonable opinion, determines that compliance with any request for additional information made by the Federal Trade Commission or the Department of Justice pursuant to the HSR Act would be unduly burdensome or expensive. 16.2. TERMINATION BY SELLER. Seller may, without liability to either Buyer or IPG, terminate this Agreement by notice to IPG (i) at any time prior to the Closing if default shall be made by either Buyer or IPG in the observance or in the due and timely performance of any of the terms hereof to be performed by it and Buyer and IPG do not cure the default within five business days after Seller delivers written notice thereof to IPG, or (ii) at the Closing if any of the conditions precedent to the performance of Seller's obligations at the Closing shall not have been fulfilled. 54 16.3. TERMINATION BY MUTUAL CONSENT. The parties may terminate this Agreement by mutual written consent. 16.4. TERMINATION BY IPG OR SELLER. Either IPG or Seller may terminate this Agreement, without liability to the other parties hereto, if (i) the sale and purchase of the Stock contemplated by this Agreement shall not have been consummated by 5:00 p.m. Eastern time on November 30, 1997, (ii) any Governmental Entity of competent jurisdiction shall have issued any judgment, injunction, order or decree prohibiting, enjoining or otherwise restraining the transactions contemplated by this Agreement and such judgment, injunction, order or decree shall have become final and nonappealable (PROVIDED, that the party seeking to terminate this Agreement pursuant to this Section 16.4 shall have used commercially reasonable efforts to remove such judgment, injunction, order or decree) or (iii) any Law promulgated or enacted by any Governmental Entity after the date of this Agreement which prohibits the consummation of the transactions contemplated hereby shall be in effect. 16.5. EFFECT OF TERMINATION. If this Agreement is terminated, this Agreement shall no longer be of any force or effect and there shall be no liability on the part of any party or its respective directors, officers or shareholders, except in any such case (i) in accordance with the expense provisions of Section 20.3, the public announcement provisions of Section 20.4, the no brokers or finders provisions of Sections 6.5 and 9.5, the provisions of this Section 16.5 and the confidentiality provisions of Sections 10.3 and 11.1, which shall survive any such termination and (ii) to the extent such termination results from the willful breach by such party of any of its representations, warranties, covenants or agreements contained in this Agreement. If this Agreement shall be terminated, each party will (i) redeliver all documents, work papers and other materials of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, to the party furnishing the same, and (ii) destroy all documents, work papers and other materials developed by its accountants, agents and employees in connection with the transactions contemplated hereby which embody confidential information, proprietary information or trade secrets furnished by any party hereto or deliver such documents, work papers and other materials to the party furnishing the same or excise such information or secrets therefrom and all information received by any party hereto with respect to the business of any other party or any of its subsidiaries (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any Governmental Entity) shall not at any time be used for personal advantage or disclosed by such party to any third Person to the detriment of the party furnishing such information or any of its subsidiaries. 55 ARTICLE XVII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS (a) Notwithstanding any right of any party (whether or not exercised) to invesitgate the accuracy of the representations and warranties of the other party contained in this Agreement, Seller on the one hand, and Buyer and IPG, on the other hand, have the right to rely fully upon the representations, warranties, covenants and agreements of the other contained in this Agreement as, and for the periods, set forth below. (b) The representations and warranties contained in Sections 6.4, 7.4, 7.5(a), 8.5, 8.6(a), 8.8(a), 8.9, 8.10(a), 8.10(b), 8.10(f), 8.10(h), 8.10(i), 8.12(a)(viii), 8.14(a), 8.21, 8.24(b), 8.24(c), 8.25, 8.26, 8.27, 8.29, 8.30, 8.31, 8.32 and 9.4 do not survive the Closing. (c) The representations and warranties contained in Sections 8.12(a)(i) and 8.12(a)(xi) do not survive the Closing except to the extent of the nondisclosure in this Agreement of a Contract which involves an annual aggregate payment of $100,000 or more. (d) The representations and warranties contained in Section 8.12(a)(iv) do not survive the Closing except to the extent of the nondisclosure in this Agreement of a Contract which involves an annual aggregate payment of $50,000 or more. (e) The representations, warranties, covenants and agreements contained in Sections 7.6(i), 7.6(iv), 7.6(v)(x), 7.6(xiii), 7.6(xv), 7.6(xvi), 7.6(xvii), 8.7(i), 8.7(iv), 8.7(v)(x), 8.7(xiii), 8.7(xv), 8.7(xvi), 8.7(xvii), 8.10(g) and 8.10(j) survive the Closing until March 31, 1998, but only as to breaches thereof which have not been disclosed prior to the Closing. (f) The representations and warranties contained in Sections 8.8(b), 8.12(a)(ii), 8.12(a)(iii), 8.16 and 8.18 survive the Closing until March 31, 1998, but only to the extent that a breach of such representations and warranties results in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole. (g) The representations, warranties, covenants and agreements contained in Sections 8.12(a)(v), 8.12(a)(vii), 8.12(a)(ix), 8.12(a)(x) and 8.12(b) survive the Closing until March 31, 1998, but only to the extent that the Contracts or other matters required to be disclosed thereby and not disclosed have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole. (h) The representations, warranties, covenants and agreements contained in Sections 6.1, 6.2, 6.3, 6.5, 7.1, 7.2, 7.3, 7.5(b), 7.6(ii), 7.6(iii), 7.6(v)(y), 7.6(vi), 7.6(vii), 7.6(viii), 7.6(ix), 7.6(x), 7.6(xi), 7.6(xii), 7.6(xiv), 7.6(xviii), 7.6(xix), 7.6(xx), 8.1, 8.2, 8.3, 8.4, 8.6(b), 8.7(ii), 8.7(iii), 8.7(v)(y), 8.7(vi), 8.7(vii), 8.7(viii), 8.7(ix), 8.7(x), 8.7(xi), 8.7(xii), 8.7(xiv), 8.7(xviii), 56 8.7(xix), 8.7(xx), 8.13, 8.14(b), 8.15, 8.19, 8.22, 8.24(a), 9.1, 9.2, 9.3, 9.5 and 9.6 survive the Closing until March 31, 1998. (i) The representations and warranties contained in Sections 7.7, 8.11 and 8.33 survive the Closing until the fourth anniversary of the Closing Date. (j) The representations and warranties contained in Section 8.12(a)(vi) survive the Closing until March 31, 1998 to the extent not reflected in the calculation of Company Indebtedness at the Closing. (k) The representations and warranties contained in Section 8.17 survive the Closing until three and one half years following the Closing Date. (l) The representations and warranties contained in Section 8.20 survive the Closing until March 31, 1998 as they relate to penalties (without regard to whether such penalties, individually or in the aggregate, have a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole), and as to all other matters only to the extent that a breach of such representations and warranties results in a Material Adverse Effect on the Company and the Company Subsidiaries taken as a whole. (m) The representations and warranties contained in Sections 8.10(c), 8.10(d), 8.10(e) and 8.23 survive the Closing until March 31, 1998, but only to the extent that such representations and warranties were breached after October 25, 1997. ARTICLE XVIII INDEMNIFICATION 18.1. SELLER'S OBLIGATION TO INDEMNIFY. (a) Subject to the limitations set forth in Section 18.1(b), Seller shall indemnify IPG, Buyer, and each of their respective officers, directors, employees, agents and Affiliates (each, an "Indemnified Party") in respect of, and hold each of them harmless from and against the following, without duplication: (i) any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to liabilities for taxes (including all penalties relating thereto) owing by the Company, STC Tape or any of their respective subsidiaries (A) incurred in connection with the Restructuring, or (B) imposed in connection with STC Tape's and the Company's transfer pricing policies; provided however, that Seller shall be notified of and have the right to defend (at Seller's expense), with Buyer, any audit or assessment and appeal thereof; 57 (ii) 50% of the first $2,400,000 in Losses (i.e., a maximum liability of $1,200,000), and 75% of any and all Losses in excess of $2,400,000, suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to noncompliance with any Environmental Law at Seller's currently or formerly utilized Sites and off-Site locations to which Hazardous Materials were shipped for treatment, storage, handling or disposal arising, in whole or in part, from pre-Closing conditions or actions, except and excluding any and all expenses and actions required to be taken in connection with the July 7, 1997 Stipulation For Entry of Final Order by Consent with the Michigan Department of Environmental Quality, including without limitation installation of the regenerative thermal oxidizer (all losses under this clause (ii), "Indemnified Environmental Losses"); (iii) any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to liabilities for Taxes (including all penalties relating thereto) which also constitute a breach of the representations and warranties contained in the last two sentences of Sections 7.7(a) and 8.11(a); (iv) any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to penalties (which term is specifically intended to exclude all non-penalty Losses) arising from any failure of Seller, STC Tape, the Company or any Company Subsidiary to comply with any legal or regulatory requirements relating to Benefit Plans, Environmental matters and OSHA matters applicable to Seller, STC Tape, the Company or any Company Subsidiary prior to Closing (all penalties under this clause (iv), "Indemnified Penalties"); and (v) any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, not covered by any of the preceding four clauses, and resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Seller (or STC International) contained in this Agreement; PROVIDED, HOWEVER, that the maximum aggregate amount payable by Seller as a result of all claims asserted under clause (i) above shall have no dollar limit; the maximum aggregate amount payable by Seller as a result of all claims asserted under clause (ii) above shall be limited to the Environmental Cap (as such term is defined below); the maximum aggregate amount payable by Seller as a result of all claims asserted under clause (iii) above shall be $750,000; the maximum aggregate amount payable by Seller as a result of all claims asserted under clause (iv) above shall be $1,000,000; provided that such limitation shall be reduced to $750,000 once Seller provides evidence to IPG and Buyer's satisfaction that the Company has reported the water main break in Michigan to Michigan regulatory authorities by mailing the letter on such issue previously reviewed and approved by Buyer's counsel to the addresses thereof; and the maximum aggregate amount payable by Seller as a result of all claims asserted under clause (v) above shall be $1,000,000. 58 The Environmental Cap shall initially be $1,200,000, but shall be increased prior to Closing if, and to the extent, appropriate to cover Indemnified Environmental Losses as identified in the McLaren-Hart Phase II Report. The Environmental Cap shall be adjusted upward only by mutual agreement of Buyer and Seller prior to Closing, provided the parties shall negotiate in good faith to agree upon the amount (if any) of such upward adjustment. The Environmental Cap shall further be adjusted, downward by one-half of the amount, if any, that the Company shall recover (after the date hereof and whether before or after the Closing) from the escrow under the Contingent Payment Agreement. (b) Any claims under (a)(i) and (iii) above for Losses shall be made by written notice by the Indemnified Party to Seller (a "Claim Notice"), delivered in accordance with Section 20.1 hereunder prior to the fourth anniversary of the Closing. Any claims under (a)(ii) above shall be made by delivery by IPG or Buyer of a Claim Notice to Seller (in accordance with Section 20.1 hereof) prior to the date which is three and one-half years following the Closing Date. Any claims under (a)(iv) and (v) shall be made by delivery by IPG and Buyer of a Claim Notice to Seller (in accordance with Section 20.1 hereof) prior to the first anniversary of the Closing Date. Any claims under (a)(ii) above for Indemnified Environmental Losses shall be resolved pursuant to Section 18.4(b). In each such instance the Claim Notice shall contain a description and a statement of the amount of the Loss in respect of which the claim is asserted. (c) In determining claims for indemnification by any Indemnified Party pursuant to any of clauses (i), (iii), (iv) and (v) of paragraph (a) above, no claim shall be payable (x) unless with respect to any individual claim, such claim involves a Loss (excluding legal fees) in excess of $25,000; and (y) until, and then only to the extent that, the Indemnified Party has suffered, incurred, sustained or become subject to Losses pursuant to clauses (i), (iii), (iv) or (v) of paragraph (a) above taken together, in excess of $200,000 in the aggregate. 18.2. BUYER'S OBLIGATIONS TO INDEMNIFY. Buyer shall indemnify Seller, its officers and directors in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to the breach of any representation or warranty of IPG or Buyer contained in this Agreement or the nonfulfillment of or failure to perform any of the covenants or agreements on the part of IPG or Buyer contained in this Agreement, provided, however, in no event shall IPG's or Buyer's aggregate liability under this Section 18.2 exceed $1,000,000. 18.2A (a) MITIGATION. Notwithstanding anything to the contrary contained in this Agreement, the amounts of indemnity otherwise payable as a result of any claim under Section 18.1 with respect to any Loss shall be offset, and reduced, to the extent of any amount of any recoveries made by an Indemnified Party under any policy of insurance and to the extent of any specific reserves on the October Financial Statements to which the Loss relates. To the extent the Indemnified Party has an opportunity to recover from a third party and elects to do so, any recoveries realized from such action, less the cost (including legal fees) of obtaining such recoveries, also shall be an offset to the amount of indemnity otherwise payable hereunder, it being understood and agreed, however, that the 59 Indemnified Party shall not be obligated by the provisions of this Section or otherwise to institute any action against a third party. To the extent that IPG, Buyer, the Company or STC Tape has a right to proceed against third parties to recover any amounts which a Buyer Indemnified Party claims as an indemnified Loss against Seller or STC International and does not so proceed against such third party, Seller shall be subrogated to the rights of Buyer, the Company and STC Tape and may proceed, at its own expense, against such third party or parties. (b) CONSEQUENTIAL DAMAGES. No amounts of indemnity otherwise payable hereunder shall be so paid to the extent such amounts constitute consequential damages. (c) NO OTHER CLAIMS. Except to the extent provided for in Section 18.1, the rights of IPG and Buyer to injunctive relief under Section 10.3 shall be the exclusive remedy of IPG and Buyer with respect to the nonperformance by Seller of any covenant or agreement contained in this Agreement. The rights of IPG and Buyer under Section 18.1(a) shall be the exclusive remedy of IPG and Buyer and each other Buyer Indemnified Party with respect to the monetary remedies provided for IPG or Buyer against Seller or STC International contained in this Agreement. IPG and Buyer, on behalf of themselves and each other Buyer Indemnified Party, hereby waive and release Seller and each Seller Indemnified Party from any statutory or other rights of contribution or indemnity (except as set forth in Section 18.1) relating to the transactions contemplated by this Agreement. Except to the extent provided for in Section 18.2, the exclusive remedy of Seller with respect to the nonperformance by IPG or Buyer of any covenant or agreement contained in this Agreement shall be injunctive relief. The rights of Seller under Section 18.2 shall be the exclusive remedy of Seller or STC International and each other Seller Indemnified Party with respect to the monetary remedies provided for Seller against IPG or Buyer contained in this Agreement (excluding, however, the Registration Rights Agreement). Seller, on behalf of itself and each other Seller Indemnified Party (excluding, however, those employees referenced in Section 10.2, to the extent of such employees' rights thereunder) hereby waives and releases IPG, Buyer and each other Buyer Indemnified Party from any statutory or other rights of contribution or indemnity (except as set forth in Section 18.2) relating to the transactions contemplated by this Agreement. 18.3. METHOD OF ASSERTING CLAIMS. (a) In the event any claim or demand in respect of which any Indemnified Party might seek indemnity under Section 18.1 or Section 18.2 is asserted against or sought to be collected from such Indemnified Party by a Person other than Buyer, IPG or any Affiliate of Seller, Buyer or IPG (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to defend has been materially prejudiced by such failure of the Indemnified Party. The Indemnifying Party will notify the Indemnified Party as soon as practicable within the Dispute Period whether the Indemnifying Party 60 disputes its liability to the Indemnified Party hereunder and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim. (i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 18.3, then the Indemnifying Party will have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party will not be indemnified in full pursuant to Section 18.1 or Section 18.2). The Indemnifying Party will have full control of such defense and proceedings, including any compromise or settlement thereof; PROVIDED, HOWEVER, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this Section 18.3(a)(i) file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests; and PROVIDED FURTHER, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 18.3, and except as provided in the preceding sentence, the Indemnified Party will bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 18.3 with respect to such Third Party Claim. (ii) If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to this Section 18.3, or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be prosecuted by the Indemnified Party in good faith or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; PROVIDED, HOWEVER, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the 61 Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this Section 18.3, if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this Section 18.3 or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party will reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 18.3, and the Indemnifying Party will bear its own costs and expenses with respect to such participation. (iii) If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to a Third Party Claim or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim, the Loss in the amount specified in the Claim Notice will be conclusively deemed a liability of the Indemnifying Party, and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration as provided for in Section 18.4. (b) In the event any Indemnified Party should have a claim not involving a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party hereunder and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by litigation in a court of competent jurisdiction. 62 (c) LETTER OF CREDIT. At any time and from time to time that IPG or Buyer shall assert a claim for indemnification hereunder and there remain amounts available under the letter of credit relating to such claim: (i) the remaining face amount of such letter of credit shall not thereafter be reduced below an amount equal to the aggregate amount of the pending unresolved claims to which such letter of credit relates, and (ii) upon final resolution, pursuant to Section 18.4(a) or (b), as applicable, of any such claim in favor of Buyer, Buyer may draw against the letter of credit in an amount equal to the amount of the claim by delivering a drawing certificate executed by each of IPG and Buyer, on the one hand, and by Seller, on the other hand, to the Letter of Credit Bank. (d) ADJUSTMENT OF PURCHASE PRICE. Any reimbursement by Seller in connection with a claim made by Buyer or IPG pursuant to this Agreement will be deemed a reduction in the Purchase Price and shall occur by IPG or Buyer obtaining such reimbursement in accordance with the provisions of this Agreement. 18.4. DISPUTES. (a) RESOLUTION OF DISPUTES BETWEEN THE PARTIES. Any controversy or claim arising out of or relating to this Agreement shall be determined by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association, and (i) the number of arbitrators shall be three; (ii) the place of arbitration shall be Honolulu, Hawaii; and (iii) the language of the arbitration shall be English. (b) ENVIRONMENTAL CLAIMS. Notwithstanding anything to the contrary elsewhere in this Agreement, Buyer shall determine the manner of resolution of, and shall otherwise control the management and implementation of any part of the defense, response, proceedings or settlement relating to any Losses for which Seller has an indemnity obligation under Section 18.1(a)(ii), which involves or relates to the investigation, study, sampling, testing, abatement, monitoring, cleanup, removal, remediation, or other response action relating to noncompliance with Environmental Law at any Site or off-Site ("Environmental Response Action"); provided, however, that such defense, response, proceeding or settlement in accordance with the following procedures: (i) Buyer shall provide written notice to Seller (each such notice an "Environmental Response Action Notice") setting forth with reasonable particularity the nature of the condition or event giving rise to the related Environmental Response Action Notice, the nature of the activities undertaken or to be undertaken by Buyer with respect thereto (to the extent then determinable), and the estimated cost associated with such activities (to the extent then estimable). In circumstances where Buyer must take immediate 63 Environmental Response Action to address an imminent threat to human health or the Environment, or to satisfy requirements under any Environmental Law or requirements established by a Governmental Entity, Buyer shall provide in advance, if practicable, an Environmental Response Action Notice to Seller that describes the time period within which such immediate action must be taken by Buyer and the necessity and basis for taking such immediate action ("Immediate Environmental Response Action Notice"). If Seller does not or is unable to respond within the time period described in such Immediate Environmental Response Action Notice, Buyer, in its best judgment, may take appropriate Environmental Response Action ("Immediate Environmental Response Action"), provided, however, that Seller, by not responding within such time period, does not waive its right to the proceeding in (ii)-(vi) below. (ii) Seller shall within ninety (90) days after receipt of an Environmental Response Action Notice, notify Buyer in writing that Seller, in whole or in part, approves or objects to the Environmental Response Action set forth in the Environmental Response Action Notice. Seller agrees that its approval of the activities undertaken or to be undertaken pursuant to the Environmental Response Action Notices will not be unreasonably withheld. (iii) If Seller notifies Buyer that it approves of all or part of the Environmental Response Action set forth in the related Environmental Response Action Notice, the Losses (or the part thereof so approved by Seller) associated with the Environmental Response Action shall be conclusively deemed Losses for which Seller has an indemnity obligation and Seller shall pay the amount of such Losses to Buyer on demand and in accordance with the provisions of Section 18.3 of this Agreement. (iv) In the event Seller objects to all or any part of an Environmental Response Action Notice or an Immediate Environmental Response Action Notice on a timely basis, in accordance with Section 18.3(b)(ii), Seller shall notify Buyer in writing of their specific disagreement (and the basis therefor) regarding such Environmental Response Action or Immediate Environmental Response Action. If Seller's objection relates to the nature of Buyer's proposed activities or response to the relevant condition or event, Seller shall provide an alternative proposal describing in reasonable detail the proposed activities or response, including estimated costs associated therewith ("Dispute Notification"), within ninety (90) days of its receipt of the related Environmental Response Action Notice or Immediate Environmental Response Action Notice. Buyer and Seller shall thereafter negotiate in good faith in an attempt to reach agreement as to the disputed Environmental Response Action Notice or Immediate Environmental Response Action Notice. (v) In the event that Buyer and Seller are unable to resolve the dispute within 30 days after commencing negotiations pursuant to (iv) above, Buyer and Seller shall immediately refer the dispute for compromise or resolution to an independent environmental consulting firm that is (A) mutually acceptable to the Buyer and Seller; (B) does business in the region where the Site at issue is located, (C) is qualified in environmental matters relating 64 to the operations conducted at the Site, but (D) who will not be engaged or has not been engaged to perform such Environmental Response Action or Immediate Environmental Response Action (the "Dispute Resolution Consultant"), it being understood that the decision of such Dispute Resolution Consultant shall be binding on both Buyer and Seller. In the event that Buyer and Seller are unable to agree upon a Dispute Resolution Consultant by the 25th day of such 30-day period, the Dispute Resolution Consultant shall be chosen by the thirtieth (30th) day by the American Arbitration Association ("AAA") pursuant to the criteria in Section 18.4(b)(v)(B)-(D). (vi) The Dispute Resolution Consultant shall render its decision no later than 90 days after being selected by Buyer and Seller or by the AAA, provided that the decision date may be extended by mutual agreement of Buyer and Seller. The party against whom the Dispute Resolution Consultant finds shall pay the fees and expenses of the Dispute Resolution Consultant, except if there is no clear losing position, Buyer and Seller shall each pay one-half of such costs. ARTICLE XIX [INTENTIONALLY OMITTED] ARTICLE XX MISCELLANEOUS 20.1. NOTICES. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered Personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: If to Buyer and/or IPG to: Intertape Polymer Group Inc. 110E Montee de Liesse St.-Laurent, Quebec H4T IN4 Canada Attn.: Mr. Andrew M. Archibald Facsimile No.: (514) 731-5477 65 with a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178-0060 Attn.: Nancy H. Corbett, Esq. Facsimile No.: (212) 309-6273 If to Seller to: STC Corp. STC Building 32 Munrae-dong 3-ga Yongdungpo-gu, Seoul South Korea Attn: Mr. Injin Choi Facsimile No.: 011-82-2-675-1595 with a copy to: Mr. I.J. Choi 420 Pinehill Road Leonia, NJ 07605 and a copy to: Ronald H. Janis, Esq. Pitney, Hardin, Kipp & Szuch P.O. Box 1945 Morristown, NJ 07962-1945 Facsimile No.: (973) 966-1550 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section 20.1, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 20.1, be deemed given upon confirmed receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section 20.1, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 20.1). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 66 20.2. ENTIRE AGREEMENT. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof, and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. 20.3. EXPENSES. (a) Except as otherwise expressly provided below, Buyer and IPG on the one hand, and Seller, the Company and STC Tape and affiliates thereof on the other hand, shall bear and pay their own costs and expenses incurred in connection with the negotiation, execution, and closing of this Agreement and the transactions contemplated hereby. (b) To the extent that STC Tape or the Company incurs prior to Closing and pays after Closing costs or expenses in connection with this transaction for attorneys, investment advisors, accountants (other than Coopers & Lybrand for its audit work on the October Financial Statements) or filing fees, in connection with this transaction collectively greater than $350,000, Seller will reimburse IPG or Buyer for such expenses. To the extent that STC Tape and/or the Company incur and pay such expenses in an amount up to $350,000 prior to the Closing, the expenses paid on or before the Closing shall be deemed cash and cash equivalents in the calculation of Company Indebtedness. (c) With respect to the costs incurred by the Company or STC Tape for engaging Coopers & Lybrand to perform the audit of the October Financial Statements, all expenses in excess of $25,000 shall be borne and paid by Buyer and IPG. The costs of Coopers & Lybrand for such audit work in excess of $25,000 shall be excluded from the calculation of Net Operating Income. To the extent that such fees of Coopers & Lybrand are paid on or prior to the Closing and exceed $25,000, the excess over $25,000 shall be deemed to be cash or cash equivalents for purposes of the calculation of Company Indebtedness. (d) In the event that the transaction does not close for any reason whatsoever, the costs incurred by the Company and STC Tape for engaging Coopers & Lybrand to perform the audit of the October Financial Statements to the extent that such costs exceeds $25,000 will be reimbursed to the Company by IPG and Buyer and IPG and Buyer agree, on demand, to reimburse the Company in cash for the documented amount in excess of $25,000, paid by the Company and STC Tape to Coopers & Lybrand for such audit. 20.4. PUBLIC ANNOUNCEMENTS. The form of press release to be issued immediately upon execution of this Agreement is attached as Exhibit W. The text of any other press release in respect of the transactions herein contemplated shall be agreed upon collectively by Seller, IPG and Buyer. 20.5. WAIVER; REMEDIES CUMULATIVE. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving 67 such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by law or otherwise afforded, will be cumulative and not alternative. 20.6. AMENDMENT. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto. 20.7. THIRD PARTY BENEFICIARIES. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnification under Section 11.5 or Article XVIII. 20.8. DEFINITION OF KNOWLEDGE. As used in this Agreement, the expression "to the knowledge" of Seller means the actual knowledge of one or more of the Eight Key Employees. 20.9. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto and any attempt to do so will be void, except (i) for assignments and transfers by operation of law and (ii) that Buyer may assign any or all of its rights, interests and obligations hereunder (including, without limitation, its rights under Article II) to a wholly-owned subsidiary or an Affiliate of Buyer, PROVIDED that any such subsidiary or Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained herein. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 20.10. HEADINGS. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 20.11. INVALID PROVISIONS. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 20.12. LAW. The governing law of this Agreement shall be the substantive law of the State of New York. 68 20.13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 20.14. UPDATING DISCLOSURE SCHEDULES. Each party hereto has endeavored in good faith to provide disclosure schedules which are complete and correct as of the date hereof. Each party shall have the right, until November 14, 1997, to amend or supplement its disclosure schedules in order to provide corrected or additional information. Such amended or supplemental disclosure schedules shall be treated for all purposes as though they were delivered contemporaneously herewith. Thereafter, the parties shall continue to update the disclosure schedules for new and additional information so that the representations and warranties are true and correct as of the date of Closing. 69 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each of IPG, Buyer and Seller as of the date first above written. IPG: INTERTAPE POLYMER GROUP INC. By: [Illegible] ----------------------------- Name: Title: BUYER: IPG (US) ACQUISITION CORPORATION By: [Illegible] ----------------------------- Name: Title: SELLER: STC CORP. By: [Illegible] ----------------------------- Name: Title: EX-99.2 3 EURODOLLAR REVOLVING NOTE EURODOLLAR REVOLVING NOTE TAX I.D. NO. 59-3479359 $33,000,000 Detroit, Michigan December 15, 1997 On or before January 31, 1999 FOR VALUE RECEIVED, the undersigned, IPG HOLDINGS LP, a Delaware limited partnership (herein called "Borrower"), promises to pay to the order of COMERICA BANK, a Michigan banking corporation (herein called "Bank"), in lawful currency of the United States of America at the main office of Bank, THIRTY THREE MILLION DOLLARS ($33,000,000), or so much of said sum as has been advanced and is then outstanding under this Note, together with interest thereon as hereinafter set forth. This Note is a note under which Advances, repayments and re-Advances may be made from time to time, subject to the terms and conditions of this Note; provided however, in no event shall Bank be obligated to make any Advances or re-Advances hereunder (or refunds or conversions of existing Advances) in the event that and so long as any Event of Default, or any condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default, shall have occurred and be continuing hereunder. Each of the Advances made hereunder shall bear interest at the Eurodollar-based Rate or the Prime-based Rate, as elected by Borrower, or as otherwise determined under this Note. Interest on the unpaid balance of each outstanding Prime-based Advance shall be payable monthly, commencing on January 1, 1998, and on the first Business Day of each succeeding month thereafter. Interest accruing at the Prime-based Rate shall be computed on the basis of a year of 360 days, and shall be assessed for the actual number of days elapsed, and in such computation, effect shall be given to any change in the Prime-based Rate as a result of any change in the Prime-based Rate on the date of each such change. Interest on each Eurodollar-based Advance shall be payable on the last day of the Interest Period applicable thereto; provided, however, in the event that the Interest Period applicable to any such Eurodollar-based Advance is more than three (3) months, interest on such Eurodollar-based Advance shall also be payable at intervals of three (3) months from the date of such Advance. Interest accruing at the Eurodollar-based Rate shall be computed on the basis of a 360 day year and shall be assessed for the actual number of days elapsed from the first day of the Interest Period applicable thereto but not including the last day thereof. From and after the occurrence of any Event of Default hereunder, or any condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default, and so long as any such Event of Default or such condition or event remains unremedied or uncured thereafter, the indebtedness outstanding under this Note shall bear interest at a per annum rate of three percent (3%) above the otherwise Applicable Interest Rate, which interest shall be payable upon demand. - 1 - The amount and date of each Advance, its Applicable Interest Rate, its Interest Period, if any, and the amount and date of any repayment shall be noted on Bank's records, which records shall be conclusive evidence thereof, absent manifest error; provided, however, any failure by Bank to make any such notation, or any error in any such notation, shall not relieve Borrower of its obligations to repay Bank the amount of any Advances, all accrued and unpaid interest thereon, and all other amounts payable by Borrower to Bank under or pursuant to this Note. The Borrower may request an Advance hereunder, including the refunding or conversion of an outstanding Advance, upon the delivery to Bank of a Request for Advance executed by an authorized representative of Borrower, subject to the following: (a) no Event of Default, and no condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default, shall have occurred and be continuing under this Note; (b) each such Request for Advance shall set forth the information required on the Request for Advance form annexed hereto as Exhibit "A"; (c) each such Request for Advance shall be delivered to Bank by 11:00 a.m. (Detroit, Michigan time) three (3) Business Days prior to the proposed date of Advance in the case of Eurodollar-based Advances, and by 11:00 a.m. (Detroit, Michigan time) on the proposed date of Advance in the case of Prime-based Advances; (d) the principal amount of each Eurodollar-based Advance, plus the amount of any outstanding indebtedness to be then combined therewith having the same Applicable Interest Rate and Interest Period shall be at least Five Hundred Thousand Dollars ($500,000), and if greater, in integral multiples of One Hundred Thousand Dollars ($100,000); (e) the proposed date of any refunding or conversion of any outstanding Eurodollar-based Advance shall only be on the last day of the Interest Period applicable thereto; (f) a Request for Advance, once delivered to Bank, shall not be revocable by Borrower. If, as to any outstanding Eurodollar-based Advance, Bank shall not receive a timely Request for Advance in accordance with the foregoing requesting the refunding of such Advance as a Eurodollar-based Advance, the principal amount of such Advance which is not then repaid shall be automatically converted to a Prime-based Advance on the last day of the Interest Period applicable thereto, subject in all respects to the terms and conditions of this Note. The foregoing shall not in any way whatsoever limit or otherwise affect any of Bank's rights or remedies under this Note upon the occurrence of any Event of Default hereunder, or any condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default. - 2 - Borrower may prepay all or part of the outstanding balance of any Prime-based Advance under this Note at any time. Borrower may prepay all or part of any Eurodollar-based Advance on the last day of the Interest Period applicable thereto, provided that the amount of any such partial prepayment shall be at least One Hundred Thousand Dollars ($100,000), or, if greater, in integral multiples thereof, the aggregate balance of Eurodollar-based Advances outstanding after such prepayment shall be at least One Hundred Thousand Dollars ($100,000), and the unpaid portion of such Eurodollar-based Advance which is refunded or converted shall be subject to the limitations set forth in this Note. Any prepayment made in accordance with this paragraph shall be without premium or penalty. Any other prepayment shall be otherwise restricted by and subject to the terms of this Note. Subject to the definition of an "Interest Period" hereunder, in the event that any payment under this Note becomes due and payable on any day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to the extent applicable, interest shall continue to accrue and be payable thereon during such extension at the rates set forth in this Note. All payments to be made by Borrower to Bank under or pursuant to this Note shall be in immediately available funds, without setoff or counterclaim, and in the event that any payments submitted hereunder are in funds not available until collected, said payments shall continue to bear interest until collected. Borrower hereby authorizes Bank to charge any account of Borrower with Bank for all sums due hereunder when due in accordance with the terms hereof. If Borrower makes any payment of principal with respect to any Eurodollar-based Advance on any day other than the last day of the Interest Period applicable thereto (whether voluntarily, by acceleration, or otherwise), or if Borrower fails to borrow any Eurodollar-based Advance after notice has been given by Borrower to Bank in accordance with the terms of this Note requesting such Advance, or if Borrower fails to make any payment of principal or interest in respect of a Eurodollar-based Advance when due, Borrower shall reimburse Bank on demand for any resulting loss, cost or expense incurred by Bank as a result thereof, including, without limitation, any such loss, cost or expense incurred in obtaining, liquidating, employing or redeploying deposits from third parties, whether or not Bank shall have funded or committed to fund such Advance. Such amount payable by Borrower to Bank may include, without limitation, an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, refunded or converted, for the period from the date of such prepayment or of such failure to borrow, refund or convert, through the last day of the relevant Interest Period, at the applicable rate of interest for said Advance(s) provided under this Note, over (b) the amount of interest (as reasonably determined by Bank) which would have accrued to Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Calculation of any amounts payable to Bank under this paragraph shall be made as though Bank shall have actually funded or committed to fund the relevant Eurodollar-based Advance through the purchase of an underlying deposit in an amount equal to the amount of such Advance and having a maturity comparable to the relevant Interest Period; provided, however, that Bank may fund any Eurodollar-based Advance in any manner it deems fit and the foregoing assumptions shall be utilized only for the purpose of the calculation of amounts payable under this paragraph. Upon - 3 - the written request of Borrower, Bank shall deliver to Borrower a certificate setting forth the basis for determining such losses, costs and expenses, which certificate shall be conclusively presumed correct, absent manifest error. For any Interest Period for which the Applicable Interest Rate is the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending Office which maintains books separate from those of the rest of Bank, Bank shall have the option of maintaining and carrying the relevant Eurodollar-based Advance on the books of such Eurodollar Lending Office. If, with respect to any Interest Period, Bank determines that, (a) by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in Eurodollars in the applicable amounts or for the relative maturities are not being offered to Bank for such Interest Period, or (b) if the rate of interest referred to in the definition of "Eurodollar-based Rate" upon the basis of which the rate of interest for a Eurodollar-based Advance is to be determined does not accurately or fairly cover or reflect the cost to Bank of making or maintaining a Eurodollar- based Advance hereunder, then Bank shall forthwith give notice thereof to the Borrower. Thereafter, until Bank notifies Borrower that such circumstances no longer exist, the right of Borrower to request a Eurodollar-based Advance and to convert an Advance to or refund an Advance as a Eurodollar-based Advance shall be suspended. If, after the date hereof, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by Bank (or its Eurodollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, shall make it unlawful or impossible for the Bank (or its Eurodollar Lending Office) to make or maintain any Advance with interest at the Eurodollar-based Rate, Bank shall forthwith give notice thereof to Borrower. Thereafter, (a) the right of Borrower to request a Eurodollar-based Advance and to convert an Advance to or refund an Advance as a Eurodollar-based Advance shall be suspended, and thereafter, Borrower may select only the Prime-based Rate as the Applicable Interest Rate hereunder, and (b) if Bank may not lawfully continue to maintain an outstanding Advance to the end of the then current Interest Period applicable thereto, the Prime- based Rate shall be the Applicable Interest Rate for the remainder of such Interest Period with respect to such outstanding Advance. If the adoption after the date hereof, or any change after the date hereof in, any applicable law, rule or regulation of any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or its Eurodollar Lending Office) with any request or directive (whether or not having the force of law) made by any such authority, central bank or comparable agency after the date hereof: (a) shall subject Bank (or its Eurodollar Lending Office) to any tax, duty or other charge with respect to this Note or any Advance hereunder or shall change the basis of taxation of payments to Bank (or its Eurodollar Lending Office) of the principal of or interest on any Advance or any other amounts due under this Note in respect thereof (except for changes in the rate of tax on the overall net income of Bank or its Eurodollar Lending Office imposed by the jurisdiction in which Bank's principal executive office or Eurodollar Lending Office is located); or - 4 - (b) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by Bank (or its Eurodollar Lending Office) or shall impose on Bank (or its Eurodollar Lending Office) or the foreign exchange and interbank markets any other condition affecting any Advance under this Note; and the result of any of the foregoing is to increase the cost to Bank of maintaining any part of the indebtedness hereunder or to reduce the amount of any sum received or receivable by Bank under this Note by an amount deemed by the Bank to be material, then Borrower shall pay to Bank, within fifteen (15) days of Borrower's receipt of written notice from Bank demanding such compensation, such additional amount or amounts as will compensate Bank for such increased cost or reduction. The Bank shall use reasonable efforts to advise Borrower of any event described in this paragraph within a reasonable time. A certificate of Bank, prepared in good faith and in reasonable detail by Bank and submitted by the Bank to the Borrower, setting forth the basis for determining such additional amount or amounts necessary to compensate Bank shall be conclusive and binding for all purposes, absent manifest error in computation. In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to the Bank, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Bank with any guideline, request or directive of any such authority (whether or not having the force of law), including any risk-based capital guidelines, affects or would affect the amount of capital required or expected to be maintained by the Bank (or any corporation controlling the Bank), and the Bank determines that the amount of such capital or any reserve requirements (including any marginal, special, supplemental or emergency reserve requirements imposed with respect to any category of extensions of credit or assets which include "Eurocurrency Liabilities" as defined in Regulation D of the Federal Reserve System) to which Bank or its Eurodollar Lending Office is increased by or based upon the existence of any obligations of the Bank hereunder or the making or maintaining any Advances hereunder and such increase has the effect of reducing the rate of return on the Bank's (or such controlling corporation's) capital as a consequence of such obligations or the making or maintaining such Advances hereunder to a level below that which the Bank (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy) by an amount deemed by the Bank to be material, then the Borrower shall pay to the Bank, within fifteen (15) days of Borrower's receipt of written notice from Bank demanding such compensation, additional amounts sufficient to compensate the Bank (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which the Bank reasonably determines to be allocable to the existence of any obligations of the Bank hereunder or to the making or maintaining any Advances hereunder. A certificate of Bank as to the amount of such compensation, prepared in good faith and in reasonable detail by the Bank and submitted by the Bank to the Company, shall be conclusive and binding for all purposes absent manifest error in computation. - 5 - Upon the occurrence and during the continuance of any Event of Default, Bank may at any time and from time to time, without notice to the Borrower (any requirement for such notice being expressly waived by the Borrower), set off and apply against any and all of the indebtedness of Borrower to Bank any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the credit or the account of the Borrower and any property of the Borrower from time to time in possession of Bank, irrespective of whether or not Bank shall have made any demand hereunder and although such obligations may be contingent and unmatured. The rights of Bank under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Bank may otherwise have. Upon the occurrence of any Event of Default, Bank may declare this Note due forthwith and collect, deal with and dispose of all or any part of any security in any manner permitted or authorized by the Indiana Uniform Commercial Code or other applicable law (including public or private sale) and after deducting expenses (including reasonable attorneys' fees and expenses), Bank may apply the proceeds and any deposits or credits in part or full payment of any of said liabilities, whether due or not, in any manner or order Bank elects. For the purposes of this Note, the following terms have the following meanings: "Advance" means a borrowing requested by Borrower and made by Bank under this Note, including any refunding or conversions of such borrowing, and shall include a Eurodollar-based Advance and a Prime-based Advance. "Applicable Interest Rate" means the Eurodollar-based Rate or the Prime-based Rate, as selected by Borrower from time to time subject to the terms and conditions of this Note. "Business Day" means any day, other than a Saturday, Sunday or holiday, on which Bank is open for all or substantially all of its domestic and international business (including dealings in foreign exchange) in Detroit, Michigan. "Eurodollar-based Advance" means an Advance which bears interest at the Eurodollar-based Rate. "Eurodollar-based Rate" means a per annum interest rate which is equal to the sum of one and one-quarter percent (1-1/4%), plus the the per annum interest rate at which Bank's Eurodollar Lending Office offers deposits to prime banks in the eurodollar market in an amount comparable to the relevant Eurodollar-based Advance and for a period equal to the relevant Interest Period at or about 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical) two (2) Business Days prior to the first day of such Interest Period. "Eurodollar Lending Office" means Bank's office located in the Grand Cayman Islands, British West Indies, or such other branch of Bank, domestic or foreign, as it may hereafter designate as its Eurodollar Lending Office by notice to Borrower. "Event of Default" means the occurrence of any one of the following: - 6 - (a) Borrower shall fail to pay the principal or interest under any Advance or shall fail to pay any other amount owing by Borrower to Bank, whether under this Note or otherwise, when due in accordance with the terms hereof or thereof; (b) any representation, warranty, certification or statement made or deemed to have been made by Borrower herein or in any certificate, financial statement or other document or agreement delivered to Bank pursuant hereto shall prove to be untrue in any material respect; (c) Borrower shall fail to observe or perform any condition, covenant or agreement of Borrower set forth in the Loan Agreement or any other loan or security agreement or other agreement with Bank, other than as provided in subparagraph (a) above, and Borrower shall fail to cure such failure within any grace or cure period provided with respect thereto; (d) Borrower shall make any assignment for the benefit of creditors, or there shall be commenced any bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against Borrower, or the entry of any judgment, levy, attachment, garnishment or other process, or the filing of any lien against the Borrower, which proceeding, if involuntary, judgment, levy, attachment, garnishment or other process shall not be discharged, dismissed, vacated or otherwise stayed by the Borrower within forty-five (45) days after the commencement or filing thereof, as applicable; (e) Borrower shall have defaulted in the payment when due and payable (whether at maturity, by reason of acceleration or otherwise), after the expiration of any applicable cure period, of the principal of or interest on any indebtedness of Borrower for borrowed money in excess of Five Million Dollars ($5,000,000) or the maturity of any such indebtedness shall have been accelerated in accordance with the provisions of any indenture, contract, agreement or instrument providing for the creation of or concerning or otherwise governing or evidencing such indebtedness, or any event or condition shall have occurred and be continuing which, with the giving of notice or the passage of time, or both, would permit any holder or holders of such indebtedness, any trustee or agent acting on behalf of such holder or holders, or any other person, to accelerate the maturity of such indebtedness. "Interest Period" means a period of 1, 2, 3 or 6 months; as selected by Borrower pursuant to the terms of this Note, commencing on the day a Eurodollar-based Advance is made, provided that: (a) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day, except that if the next succeeding Business Day falls in another calendar month, the Interest Period shall end on the next preceding Business Day, and when an Interest Period begins on a day which has no numerically corresponding day in the calendar month during - 7 - which such Interest Period is to end, it shall end on the last Business Day of such calendar month, and (b) no Interest Period shall extend beyond the maturity date of this Note. "Loan Agreement" shall mean that certain Revolving Credit Agreement of even date herewith among Borrower and Bank. "Prime-based Advance" shall mean an Advance which bears interest at the Prime-based Rate. "Prime Rate" means the per annum interest rate established by Bank as its prime rate for its borrowers, as such rate may vary from time to time, which rate is not necessarily the lowest rate on loans made by Bank at any such time. "Prime-based Rate" shall mean a per annum interest rate which is equal to the greater of (i) the Prime Rate; or (ii) the rate of interest equal to the sum of (a) one percent (1%) and (b) the rate of interest equal to the average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers (the "Overnight Rates"), as published by the Federal Reserve Bank of New York, or, if the overnight Rates are not so published for any day, the average of the quotations for the Overnight Rates received by Bank from three (3) Federal funds brokers of recognized standing selected by Bank, as the same may be changed from time to time. Effect shall be given to any change in the Prime-based Rate as a result of any change in the Prime Rate or Overnight Rates on the date of any such change in the Prime Rate or Overnight Rates, as applicable. "Request for Advance" means a Request for Advance issued by Borrower under this Note in the form annexed to this Note as Exhibit "A". Borrower agrees to make all payments to Bank of any and all amounts due and owing by Borrower to Bank hereunder, including, without limitation, the payment of principal and interest on any Advance, on the date provided for such payment, in United States Dollars in immediately available funds at any the office of Bank located in the State of Michigan, or such other address as Bank may notify Borrower in writing. No delay or failure of Bank in exercising any right, power or privilege hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege. The rights of Bank under this Agreement are cumulative and not exclusive of any right or remedies which Bank would otherwise have, whether by other instruments or by law. - 8 - This Note has been deemed to have been delivered at Detroit, Michigan, and shall be governed by and construed and enforced in accordance with the laws of the State of Michigan. Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. BORROWER AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS HEREUNDER. THE BORROWER ACKNOWLEDGES THAT ANY APPROVAL OR EXTENSION OF CREDIT PURSUANT TO THIS NOTE IS EXTENDED BY THE BANK FROM ITS PRINCIPAL OFFICE IN DETROIT, MICHIGAN. IPG HOLDINGS LP By Intertape Polymer, Inc. By: [signature] ________________________________________ Its: [illegible] ________________________________________ - 9 - EXHIBIT "A" REQUEST FOR ADVANCE The undersigned hereby requests COMERICA BANK ("Bank") to make a(an) ____________________________ * Advance to the undersigned on ________________, _____, in the amount of ________________________ Dollars ($__________) under the Promissory Note dated as of December 15, 1997, issued by the undersigned to said Bank in the face amount of Thirty Three Million Dollars ($33,000,000) (herein called "Note"). The Interest Period for the requested Advance, if applicable, shall be ____________________ **. The last day of the Interest Period for the amounts being converted or refunded hereunder, if applicable, is ____________________, 19_____. The undersigned certifies that no Event of Default, or any condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default, has occurred and is continuing under the Note, and none will exist upon the making of the Advance requested hereunder. The undersigned further certifies that upon advancing the sum requested hereunder, the aggregate principal amount outstanding under the Note will not exceed the face amount thereof. If the amount advanced to the undersigned under the Note shall at any time exceed the face amount thereof, the undersigned will pay such excess amount on demand. The undersigned hereby authorizes said Bank to disburse the proceeds of this Request for Advance by crediting the account of the undersigned with Bank separately designated by the undersigned or as the undersigned may otherwise direct, unless this Request for Advance is being submitted for a conversion or refunding, in which case it shall refund or convert that portion stated above of the existing outstandings under the Note. Dated this _____ day of ________________________, _____. IPG HOLDINGS LP By Intertape Polymer, Inc. Its General Partner By:________________________________________ Its:________________________________________ _________________________ * Insert Eurodollar-based or Prime-based Advance. ** Insert one 1, 2, 3 or 6 months. - 10 - EX-99.3 4 CREDIT AGREEMENT IPG HOLDINGS LP, AS BORROWER -and- INTERTAPE POLYMER GROUP INC., AS GUARANTOR -and- THE TORONTO-DOMINION BANK, AS ADMINISTRATIVE AGENT AND LENDER as of December 15, 1997 - ------------------------------------------------------------------------------ CREDIT AGREEMENT US $100,000,000 - ------------------------------------------------------------------------------ HEENAN BLAIKIE 1250 Rene Levesque Blvd. West Suite 2500 Montreal (Quebec) H3B 4Y1 Telephone: (514) 846-1212 Telecopier: (514) 846-3427 TABLE OF CONTENTS 1 INTERPRETATION ........................................................ 2 1.1 DEFINITIONS ................................................. 2 1.2 INTERPRETATION ..............................................19 1.3 CURRENCY ....................................................20 1.4 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ....................20 1.5 DIVISION AND TITLES .........................................20 2 THE CREDIT ............................................................20 2.1 THE FACILITIES ..............................................20 2.2 FACILITY A ..................................................20 2.3 FACILITY B ..................................................21 3 PURPOSE ...............................................................21 3.1 PURPOSE OF THE ADVANCES .....................................21 4 INTERPRETATION ........................................................21 4.1 NOTICE OF BORROWING .........................................21 4.2 LIBOR ADVANCES AND CONVERSIONS ..............................22 4.3 LETTERS OF CREDIT ...........................................22 4.4 CURRENCY ....................................................23 4.5 OPERATION OF ACCOUNTS .......................................23 4.6 LIMITATIONS ON ADVANCES .....................................23 4.7 NETTING .....................................................23 5 INTEREST AND FEES .....................................................23 5.1 INTEREST ON THE US PRIME RATE BASIS .........................23 5.2 PAYMENT OF INTEREST ON THE US PRIME RATE BASIS ..............24 5.3 INTEREST ON THE LIBOR BASIS .................................24 5.4 PAYMENT OF INTEREST ON THE LIBOR BASIS ......................24 5.5 LIMITS TO THE DETERMINATION OF LIBOR ........................25 5.6 FIXING OF LIBOR .............................................25 5.7 INTEREST ON THE LOAN ........................................25 5.8 ARREARS OF INTEREST .........................................25 5.9 MAXIMUM INTEREST RATE .......................................25 5.10 FEES ........................................................25 5.11 INTEREST ACT ................................................26 6 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS .......................26 6.1 MARKET FOR LIBOR ADVANCES ...................................26 6.2 SUSPENSION OF LIBOR ADVANCE OPTION ..........................27 6.3 LIMITS ON THE LETTERS OF CREDIT AND LIBOR ADVANCES ..........27 7 CHANGES IN CIRCUMSTANCES, INCREASED FEES AND INDEMNIFICATION ..........27
7.1 ILLEGALITY, INCREASED COSTS .................................27 7.2 INDEMNITY ...................................................29 7.3 WITHHOLDING TAXES ...........................................29 7.4 SURVIVAL ....................................................29 8 PAYMENT, REPAYMENT AND PREPAYMENT......................................30 8.1 REPAYMENT OF THE LOAN .......................................30 8.2 PREPAYMENT, REDUCTION AND CANCELLATION OF THE CREDIT ........30 8.3 PAYMENT OF LOSSES RESULTING FROM A PREPAYMENT ...............30 8.4 IMPUTATION OF PREPAYMENTS ...................................31 8.5 CURRENCY OF PAYMENTS ........................................31 8.6 PAYMENTS BY THE BORROWER TO THE LENDER ......................31 8.7 PAYMENT ON A BUSINESS DAY ...................................31 8.8 PAYMENTS BY LENDER TO THE BORROWER ..........................31 8.9 APPLICATION OF PAYMENTS .....................................31 8.10 NO SET-OFF OR COUNTERCLAIM BY BORROWER ......................32 8.11 DEBIT AUTHORIZATION .........................................32 9 CONDITIONS PRECEDENT ..................................................32 9.1 INITIAL ADVANCE UNDER THE CREDIT ............................32 9.2 CONDITIONS PRECEDENT TO ANY ADVANCE .........................34 10 REPRESENTATIONS AND WARRANTIES ........................................34 10.1 INCORPORATION ...............................................35 10.2 AUTHORIZATION ...............................................35 10.3 COMPLIANCE OF THIS AGREEMENT ................................35 10.4 BUSINESS ....................................................36 10.5 FINANCIAL STATEMENTS ........................................36 10.6 TITLE TO ASSETS .............................................36 10.7 LITIGATION ..................................................36 10.8 TAXES .......................................................37 10.9 INSURANCE ...................................................37 10.10 NO ADVERSE CHANGE ...........................................37 10.11 REGULATORY APPROVALS ........................................37 10.12 COMPLIANCE WITH LAWS ........................................37 10.13 FOREIGN ASSETS CONTROL REGULATIONS, ETC. ....................37 10.14 PENSION AND EMPLOYMENT LIABILITIES, COMPLIANCE WITH ERISA ...38 10.15 PRIORITY ....................................................39 10.16 COMPLETE AND ACCURATE INFORMATION ...........................39 10.17 EVENT OF DEFAULT ............................................39 10.18 AGREEMENTS WITH THIRD PARTIES ...............................40 10.19 ENVIRONMENT .................................................40 10.20 SURVIVAL OF REPRESENTATIONS AND WARRANTIES ..................41 11 POSITIVE COVENTANTS ...................................................41 11.1 PRESERVATION OF JURIDICAL PERSONALITY .......................41 11.2 PRESERVATION OF LICENSES ....................................41
11.3 COMPLIANCE WITH APPLICABLE LAWS .............................41 11.4 MAINTENANCE OF ASSETS .......................................42 11.5 BUSINESS ....................................................42 11.6 INSURANCE ...................................................42 11.7 PAYMENT OF TAXES AND DUTIES .................................42 11.8 ACCESS AND INSPECTION .......................................42 11.9 MAINTENANCE OF ACCOUNT ......................................43 11.10 PERFORMANCE OF OBLIGATIONS ..................................43 11.11 MAINTENANCE OF RATIOS .......................................43 11.12 PAYMENT OF LEGAL FEES AND OTHER EXPENSES ....................43 11.13 FINANCIAL REPORTING .........................................44 11.14 NOTICE OF CERTAIN EVENTS ....................................46 11.15 ACCURACY OF REPORTS .........................................47 11.16 LENDER'S OPTION TO OBTAIN IMPROVED TERMS AND CONDITIONS .....47 11.17 DESIGNATION OF RESTRICTED SUBSIDIARIES ......................47 12 NEGATIVE COVENANTS ....................................................47 12.1 LIQUIDATION, AMALGAMATION, MERGERS, CONSOLIDATIONS AND SALE OF ASSETS ..............................................48 12.2 LIMITATIONS ON DEBT .........................................49 12.3 BORROWER'S BUSINESS .........................................50 12.4 CHARGES .....................................................51 12.5 RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS ..............51 12.6 TRANSACTIONS WITH AFFILIATES ................................52 12.7 TERMINATION OF PENSION PLANS ................................53 12.8 OWNERSHIP OF SUBSIDIARIES ...................................53 13 EVENTS OF DEFAULT AND REALIZATION .....................................53 13.1 EVENT OF DEFAULT ............................................53 13.2 REMEDIES ....................................................55 13.3 BANKRUPTCY AND INSOLVENCY ...................................56 13.4 APPLICATION OF PROCEEDS .....................................56 13.5 NOTICE ......................................................56 13.6 COSTS .......................................................56 13.7 RELATIONS WITH THE BORROWER .................................57 14 JUDGMENT CURRENCY .....................................................57 14.1 RULES OF CONVERSION .........................................57 14.2 DETERMINATION OF AN EQUIVALENT CURRENCY .....................57 15 ASSIGNMENT ............................................................58 15.1 ASSIGNMENT BY THE BORROWER ..................................58 15.2 ASSIGNMENTS AND TRANSFERS BY THE LENDER .....................58 15.3 TRANSFER AGREEMENT ..........................................59 15.4 NOTICE ......................................................59 15.5 SUB-PARTICIPATIONS ..........................................59 15.6 GENERAL .....................................................60
TABLE OF CONTENTS 16 RELATIONSHIP WITH AND BETWEEN THE LENDERS .............................60 16.1 ALLOCATION AS BETWEEN THE LENDERS ...........................60 16.2 ACCOUNT OPERATIONS ..........................................61 16.3 SHARING OF INFORMATION ......................................61 16.4 LIABILITY OF THE LENDERS ....................................61 16.5 INTERLENDER AGREEMENT .......................................61 17 MISCELLANEOUS .........................................................62 17.1 NOTICES .....................................................62 17.2 AMENDMENT AND WAIVER ........................................62 17.3 DETERMINATIONS FINAL ........................................62 17.4 ENTIRE AGREEMENT ............................................62 17.5 INDEMNIFICATION AND COMPENSATION ............................63 17.6 BENEFIT OF AGREEMENT ........................................63 17.7 COUNTERPARTS ................................................63 17.8 APPLICABLE LAW ..............................................63 17.9 SEVERABILITY ................................................63 17.10 FURTHER ASSURANCES ..........................................64 17.11 GOOD FAITH AND FAIR CONSIDERATION ...........................64 17.13 INDEMNITY ...................................................64 17.13 JURISDICTION AND SERVICE IN RESPECT OF THE GUARANTOR AND THE BORROWER ...........................................65 17.14 UNDERTAKING AND REPRESENTATION OF THE TORONTO-DOMINION BANK ..............................65 17.15 LANGUAGE ....................................................65 18 FORMAL DATE ...........................................................66 18.1 FORMAL DATE .................................................66 SCHEDULE "A" -- LIST OF LENDERS AND PARTICIPATIONS SCHEDULE "B" -- NOTICE OF BORROWING AND CERTIFICATE SCHEDULE "C" -- IPG GUARANTEE SCHEDULE "D" -- TRANSFER AGREEMENT SCHEDULE "E" -- RESTRICTED SUBSIDIARIES SCHEDULE "F" -- OFFICER'S CERTIFICATE SCHEDULE "G" -- OPINION SCHEDULE "H" -- LITIGATION SCHEDULE "I" -- ERISA AFFILIATES AND PLANS SCHEDULE "I-1" -- ERISA DISCLOSURE SCHEDULE "J" -- EXISTING SECURITY SCHEDULE "K" -- INTERLENDER AGREEMENT
CREDIT AGREEMENT entered into in the City of New York, State of New York, as of December 15, 1997, BETWEEN: IPG HOLDINGS LP, a limited partnership constituted in accordance with the laws of the State of Delaware, having its registered office c/o RL&F Service Corp, One Rodney Square, Tenth floor, Tenth and King Streets, in the City of Wilmington, State of Delaware (hereinafter called the "BORROWER"), represented herein by its general partner, INTERTAPE POLYMER INC., having its principal place of business at 110E Montee de Liesse, in the City of St. Laurent, Province of Quebec PARTY OF THE FIRST PART AND: INTERTAPE POLYMER GROUP INC., a company constituted in accordance with the laws of Canada, having its principal place of business at 110E Montee de Liesse, in the City of St. Laurent, Province of Quebec (hereinafter called the "GUARANTOR") PARTY OF THE SECOND PART AND: THE TORONTO-DOMINION BANK, a banking corporation organized under the laws of Canada, acting by and through its Houston Agency, having an office at 909 Fannin Street, Suite 1700, in the City of Houston, State of Texas, 77010, acting as administrative agent and as Lender (hereinafter called the "LENDER") PARTY OF THE THIRD PART WHEREAS the Borrower wishes to borrow certain amounts from the Lender and the Lender has agreed to lend such amounts to the Borrower, subject to and in accordance with the provisions hereof; NOW THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS: 1 INTERPRETATION 1.1 DEFINITIONS The following words and expressions, when used in this Agreement, in the Schedules hereto or in any deed or agreement supplementary hereto, unless the contrary is stipulated, have the following meaning: 1.1.1 "ADVANCE" means any advance by the Lender under this Agreement, including direct Advances by way of US Prime Rate Advances and Libor Advances, and indirect Advances by way of Letters of Credit; 1.1.2 "AFFILIATE" means any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Guarantor, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Guarantor or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Guarantor or a Subsidiary. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise; 1.1.3 "AGREEMENT", "CREDIT AGREEMENT", "THESE PRESENTS", "HEREIN", "HEREBY", "HEREUNDER" and other similar expressions refer collectively to this Credit Agreement and the Schedules hereto and include any deed or document which is supplementary or accessory or which is made in order to complete this Agreement; 1.1.4 "ASSIGNMENT" means an assignment of all or a portion of the Lender's rights and obligations under this Agreement in accordance with Sections 15.2 and 15.3, and "ASSIGNEE" has the meaning ascribed to it in subsection 15.2.1; 1.1.5 "ATC" means American Tape Corporation; 1.1.6 "AVAILABLE CASH" means cash and Cash Equivalents which are freely available to the Guarantor or the Restricted Subsidiaries, in that there are no restrictions of any nature whatsoever on the Guarantor's or the Restricted Subsidiaries' access thereto including any restrictions arising out of any (i) agreement, (ii) incorporating, constituting or charter documents, (iii) foreign exchange or currency controls, (iv) Law, (v) Charge, or (vi) otherwise; 2 1.1.7 "BRANCH" means the office of the Lender located at 909 Fannin, Suite 1700, Houston, Texas, 77010, or any other office designated by the Lender from time to time by notice to the Borrower; 1.1.8 "BUSINESS DAY" means any day, except Saturdays, Sundays and other days which in New York, New York, London (England) or Montreal, Quebec, are holidays or a day upon which banks in such locations are generally not open for business; 1.1.9 "CAPITALIZED LEASE" means any lease (i) the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its Subsidiaries in accordance with GAAP or (ii) for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet; 1.1.10 "CAPITALIZED RENTALS" of any Person means as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. 1.1.11 "CASH EQUIVALENTS" means, as of the date of any determination thereof, Investments of the type described in clauses 1.1.75.2, 1.1.75.3 and 1.1.75.4 of the definition of the term "Restricted Investments". 1.1.12 "CDN. $" means the lawful currency of Canada; 1.1.13 "CHARGE" means any right to any property, or the income or benefits flowing therefrom, which secures an obligation due to a Person or a claim of such Person, whether such interest is based on the common law, statute or contract, and includes any security interest, hypothec, pledge, pawn, mortgage, privilege, prior claim, lien, charge, assignment, transfer, cession, encumbrance, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, consignment or bailment for security purposes. The term "Charge" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Guarantor or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Charge; 3 1.1.14 "CLOSING DATE" means December 15, 1997; 1.1.15 "CODE" means the Internal Revenue Code of 1986, as amended; 1.1.16 "CONSOLIDATED" means produced by aggregating the relevant financial statements or accounts of the Subsidiaries (or other Persons which, in accordance with GAAP, are to be included in such computation) of a Person on a line-by-line basis (i.e.: adding together corresponding items of assets, liabilities, revenues and expenses) with the relevant financial statements or accounts of such Person, eliminating inter-company balances and transactions and providing for any Minority Interests, all as determined in accordance with GAAP; for greater certainty, the Consolidated ratios contemplated by Section 11.11 with respect to the Guarantor shall include its Restricted Subsidiaries as well as all Unrestricted Subsidiaries the Debt of which is guaranteed by the Guarantor; 1.1.17 "CONSOLIDATED ASSETS" means, as of the date of any determination thereof, the Consolidated total assets of the Guarantor and its Restricted Subsidiaries determined in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries); 1.1.18 "CONSOLIDATED CURRENT LIABILITIES" means as of the date of any determination thereof such liabilities of the Guarantor and its Restricted Subsidiaries on a Consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries); 1.1.19 "CONSOLIDATED NET INCOME" for any period means the gross revenues of the Guarantor and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a Consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: 1.1.19.1 any gains or losses (i) on the sale or other disposition of Investments or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses or (ii) attributable to any non-recurring or extraordinary items including, without limitation, any discontinuance of operations; 1.1.19.2 the proceeds of any life insurance policy; 1.1.19.3 net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; 4 1.1.19.4 net earnings and losses of any corporation (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner by the Guarantor or any Restricted Subsidiary, realized by such corporation prior to the date of such acquisition; 1.1.19.5 net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Guarantor or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Guarantor or a Restricted Subsidiary prior to the date of such consolidation or merger; 1.1.19.6 net earnings of any business entity (other than a Restricted Subsidiary) in which the Guarantor or any Restricted Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Guarantor or such Restricted Subsidiary in the form of cash distributions; 1.1.19.7 any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Guarantor or any other Restricted Subsidiary; 1.1.19.8 earnings resulting from any reappraisal, revaluation or write-up of assets; 1.1.19.9 any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; 1.1.19.10 any gain arising from the acquisition of any Securities of the Guarantor or any Restricted Subsidiary; and 1.1.19.11 any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period; 1.1.20 "CONSOLIDATED NET WORTH" means, as of the date of any determination thereof, the consolidated total shareholders' equity of the Guarantor and its Restricted Subsidiaries, determined in accordance with GAAP, but, in any event (a) excluding any amount of such shareholders' equity allocable or attributable to (i) Minority Interests and (ii) all Restricted Investments by the Guarantor or any Restricted Subsidiary; 5 1.1.21 "CONSOLIDATED TOTAL CAPITALISATION" means, as of the date of any determination thereof, the sum of (i) the aggregate principal amount of Consolidated Funded Debt then outstanding PLUS (ii) Consolidated Net Worth; 1.1.22 "CURRENT DEBT" of any Person means as of the date of any determination thereof all Debt of such Person other than Funded Debt of such Person; 1.1.23 "CREDIT" has the meaning ascribed thereto in Section 2.1 hereof; 1.1.24 "DEBT" of any Person means, as of the date of any determination thereof (without duplication): 1.1.24.1 all Indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of Indebtedness of such Person; 1.1.24.2 obligations secured by any Charge upon property owned by such Person or created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under any such arrangement in the event of default are limited to repossession or sale of property including, without limitation, obligations secured by Charges arising from the sale or transfer of notes or accounts receivable, but, in all events, excluding trade payables and accrued expenses constituting Consolidated Current Liabilities; 1.1.24.3 Capitalized Rentals; 1.1.24.4 reimbursement obligations in respect of credit enhancement instruments including letters of credit (excluding, however, short-term letters of credit and surety bonds issued in commercial transactions in the ordinary course of business); and 1.1.24.5 (without duplication of any of the foregoing) Guarantees of obligations of others of the character referred to hereinabove in this definition; 1.1.25 "DEFAULT" means an event or circumstances, the occurrence or non-occurrence of which would, with the giving of a notice, lapse of time or combination thereof, constitute an Event of Default unless remedied within the prescribed delays or renounced to in writing by the Lender; 6 1.1.26 "DESIGNATED PERIOD" means, with respect to the Libor Advance, a period designated by the Borrower in accordance with Section 4.2; 1.1.27 "DISBURSEMENT PERIOD" means, with respect to each of the Facilities, the period from the date of the satisfaction of the conditions precedent set out in Section 9.1 until: 1.1.27.1 with respect to Facility A, the expiry of the Term; and 1.1.27.2 with respect to Facility B, five (5) Business Days following the Closing Date; 1.1.28 "EBITDA" means, during a fiscal period, the Consolidated Net Income of the Guarantor plus Interest Expense, taxes, depreciation and amortization, calculated on a Consolidated basis in accordance with GAAP; 1.1.29 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. 1.1.30 "ERISA AFFILIATE" means any corporation, trade or business that is, along with the Borrower or the Guarantor, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. 1.1.31 "EXTENSION REQUEST" means a request by the Borrower and the Guarantor to extend the Term for an additional 12 months, the whole in accordance with the provisions of Section 2.2; 1.1.32 "EVENT OF DEFAULT" means one or more of the events described in Section 13.1; 1.1.33 "FACILITY A" means the portion of the Advances available pursuant to subsection 2.1.1; 1.1.34 "FACILITY B" means the portion of the Advances available pursuant to subsection 2.1.2; 1.1.35 "FEES" means the fees payable to the Lender in accordance with the provisions of Section 5.10; 1.1.36 "FIRST CURRENCY" has the meaning ascribed to it in Section 14.1; 7 1.1.37 "FIXED CHARGES" for any period means on a Consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Guarantor and its Restricted Subsidiaries, and (ii) all Interest Expense on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Guarantor and its Restricted Subsidiaries. 1.1.38 "FUNDED DEBT" of any Person means all Debt of such Person having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP; 1.1.39 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means the generally accepted accounting principles acknowledged by the Canadian Institute of Chartered Accountants and published in the Canadian Institute of Chartered Accountants' Handbook; 1.1.40 "GUARANTEES" by any Person means all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (c) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation, or (d) otherwise to assure the owner of the Indebtedness or obligation of the Primary Obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guarantee in respect of any Indebtedness for borrowed money which has been guaranteed, and a Guarantee in respect of any other obligation or liability or any dividend, shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. 1.1.41 "GUARANTOR" means INTERTAPE POLYMER GROUP INC., and any Person who succeeds to all, or substantially all, of the assets and business of INTERTAPE POLYMER GROUP INC.; 8 1.1.42 "INDEBTEDNESS" of any Person means and includes all obligations of such Person which in accordance with GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (a) obligations of such Person for borrowed money or which has been incurred in connection with the acquisition of property or assets, (b) obligations secured by any Charge upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (c) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, (d) Capitalized Rentals and (e) Guarantees of obligations of others of the character referred to in this definition. 1.1.43 "INTEREST EXPENSE" for any period means all interest and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. Computations of Interest Expense on a PRO FORMA basis for Indebtedness having a variable interest rate shall be calculated at the rate in effect on the date of any determination; 1.1.44 "INVESTMENTS" means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, Indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; PROVIDED, HOWEVER, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business; 1.1.45 "IPG GUARANTEE" means the Guarantee by the Guarantor of the obligations of the Borrower to the Lender, in the form of Schedule "C"; 1.1.46 "LAWS" or "LAW" means all applicable provisions of all laws, ordinances, decrees, orders, rules, regulations and directives of governmental bodies, and all applicable provisions of treaties as well as all ordinances and other decrees of tribunals and arbitrators; 1.1.47 "LENDER" means The Toronto-Dominion Bank, acting through its Houston Agency, and any Assignee, in accordance with the provisions of Section 15.2; 1.1.48 "LETTER OF CREDIT" means a stand-by letter of credit or a letter of guarantee issued by the Lender in accordance with the provisions hereof; 1.1.49 "LIBOR" means, with respect to any Designated Period relating to a Libor Advance, the interest rate which the Lender or any Assignee, in accordance 9 with its normal practice, would be prepared to offer to the major banks in the London interbank market for delivery on the first day of each of the relevant Rollover Dates for a period equal to the Designated Period, based on the number of days included in such periods, in respect of US Dollar deposits in amounts comparable to each Selected Amount, to become due at or about the expiry of such Designated Period, determined at or about 11:00 A.M., London, England time, two Business Days prior to a drawdown date or Rollover Date in accordance with Section 5.6; 1.1.50 "LIBOR ADVANCE" means, at any time, the part of the Advances with respect to which the Borrower has chosen to pay interest on the Libor Basis; 1.1.51 "LIBOR BASIS" means the basis of calculation of interest on the Advances or any part thereof, in accordance with the provisions of Sections 5.3, 5.5 and 5.6; 1.1.52 "LIKE ASSETS" means, as of the date of any determination thereof, capital assets, used or to be used by the Guarantor or any Restricted Subsidiary in the lines of business in which the Guarantor or such Restricted Subsidiary is engaged as of the Closing Date or in a business reasonably related thereto; 1.1.53 "LLC DOCUMENTS" has the meaning ascribed to it in subsection 9.1.3; 1.1.54 "LOAN" means, at any time, the aggregate of the Advances outstanding in accordance with the provisions hereof, including the face amount of any Letters of Credit issued in accordance with the provisions hereof, together with any other amount in principal, interest and accessory costs payable to the Lender by the Borrower pursuant hereto; 1.1.55 "LONG-TERM LEASE" means any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years; 1.1.56 "MARGIN" means, with respect to Sections 4.3, 5.1 and 5.10: 10 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Ratio of Total Debt to Consolidated Total Standby Fee with respect US Prime Rate plus Libor plus; Capitalization to Facility A Letter of Credit Fee - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 30% .12% 0% .95% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 35% .12% 0% 1.0% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 40% .15% 0% 1.025% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 50% .20% 0% 1.062% - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
The foregoing grid also shows the amount of the Standby Fee referred to in Section 5.10 and the fees payable in respect of Letters of Credit in accordance with the provisions of Section 4.3, and will be applicable provided that the ratio of Total Funded Debt to EBITDA remains below 4:1 at all times, failing which each of the Margins indicated above other than those dealing with Standby Fees will increase by .25%, and the applicable Margin dealing with Standby Fees will increase by .05%. In addition, once all Loans under Facility B have been repaid and the Borrower has no further right to borrow under Facility B, the above grid will be replaced by the following: - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Ratio of Total Debt to Consolidated Total Standby Fee with respect US Prime Rate plus Libor plus; Capitalization to Facility A Letter of Credit Fee - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 30% .12% 0% .40% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 35% .12% 0% .50% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 40% .15% 0% .55% - --------------------------------------------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO 50% .20% 0% .625% - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
The foregoing grid also shows the amount of the Standby Fee referred to in Section 5.10 and the fees payable in respect of Letters of Credit in accordance with the provisions of Section 4.3, and will be applicable provided that the ratio of Total Funded Debt to EBITDA remains below 4:1 at all times, failing which each of the Margins indicated above other than those dealing with Standby Fees will increase by .25%, and the applicable Margin dealing with Standby Fees will increase by .05%; 1.1.57 "MATERIAL ADVERSE CHANGE" means a material adverse change in the business, assets, liabilities, financial position, operating results or business prospects of the Guarantor or any of the Restricted Subsidiaries, or in the ability of the 11 Borrower or the Guarantor to perform any of its obligations under this Agreement or under the IPG Guarantee; 1.1.58 "MATERIAL DEBT" means any Debt which has or relates to, in the aggregate, an unpaid principal amount (or aggregate liability) of more than US $5,000,000 or an equivalent amount of money in any other currency; 1.1.59 "MINORITY INTERESTS" means any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Guarantor and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock; 1.1.60 "MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA; 1.1.61 "NET INCOME AVAILABLE FOR FIXED CHARGES" for any period means the sum of Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (a) all provisions for any Federal, state, provincial or other income taxes made by the Guarantor and its Restricted Subsidiaries during such period, (b) Fixed Charges of the Guarantor and its Restricted Subsidiaries during such period and (c) all amortization expenses. 1.1.62 "NOTE AGREEMENT" means the agreements entered into by the Guarantor dated as of January 1, 1996, with respect to the issuance and sale of three series of senior notes in an aggregate principal amount of US $33,000,000, and "NOTES" means the Notes issued thereunder; 1.1.63 "NOTICE OF BORROWING" means a notice transmitted to the Lender by the Borrower in accordance with the provisions of Sections 4.1, 4.2 or 4.3; 1.1.64 "PARTICIPATION" means the portion of the Credit for which the Lender is responsible, as set out in Schedule "A" hereof; 1.1.65 "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. 1.1.66 "PERMITTED CHARGES" means the CB/ATC Temporary Charges (as defined in subsection 9.1.1) and 12 1.1.66.1 any Charge created by law that is assumed in the ordinary course of business and in order to exercise same, which has not at such date been registered in accordance with applicable Laws against the Guarantor or its Restricted Subsidiaries, which relates to obligations which are not yet due, which is not related to any loan of money or obtention of credit and which, in the aggregate, do not affect in a material way the use, the income or the benefits flowing from the property so charged in the conduct of the business of such Person; any Charge resulting from judgments or decisions which the Borrower has, at such date, appealed or in respect of which it has sought revision and obtained a suspension of execution pending the appeal or the revision; any Charge for taxes, assessments or governmental claims or other impositions not yet due or matured or in respect of which the validity at such date has been contested in good faith by the Borrower before a competent tribunal or other governmental body in accordance with the provisions of Section 11.7; or which relates to a deposit of monies or securities in the ordinary course of business with respect to any Charge referred to in this paragraph, or to secure workman's compensation, surety or appeal bonds or security for costs of litigation; 1.1.66.2 any right of a municipality, governmental body or other public authority pursuant to any lease, license, franchise, grant or permit obtained by the Guarantor or a Restricted Subsidiary, or any right resulting from a legislative provision, to terminate such lease, license, franchise, grant or permit, or requiring an annual or periodic payment as a condition of its extension; 1.1.66.3 any real right granted by the Guarantor or a Restricted Subsidiary to a public body, or to a municipal or governmental authority or public utility, or which may be imposed by one or the other, when required by such body or authority with respect to the operations of the Guarantor or a Restricted Subsidiary or in the ordinary course of its business; 1.1.66.4 real rights granted in favour of municipal authorities or public utilities on real property acquired from time to time by the Guarantor or a Restricted Subsidiary during the Term which do not adversely affect the value or marketability of the Guarantor's or a Restricted Subsidiary's real property; 1.1.66.5 minor title defects, homologated lines, zoning and building by-laws, ordinances, regulations and other governmental restrictions on the use of property which customarily exist on properties of Persons 13 engaged in similar activities and similarly situated and which do not, in any event, materially impair their use in the operation of the businesses carried on by the Guarantor or the relevant Restricted Subsidiary; 1.1.66.6 Charges securing Indebtedness of a Restricted Subsidiary to the Guarantor or to another Wholly-owned Restricted Subsidiary, or Charges on shares of stock of Unrestricted Subsidiaries; 1.1.66.7 Charges on assets of the Guarantor or any Restricted Subsidiary relating to so-called "operating lines" or short-term or revolving bank facilities to the extent that such assets consist of inventory or receivables of the Guarantor or any Restricted Subsidiary; 1.1.66.8 Charges incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with (and within twelve months of) the acquisition after the Closing Date of fixed assets useful and intended to be used in carrying on the business of the Guarantor or a Restricted Subsidiary, including Charges existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Guarantor or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Charges were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, provided that (a) the Charges shall attach solely to the fixed assets acquired or purchased, (b) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Charges on such fixed assets whether or not assumed by the Guarantor or a Restricted Subsidiary shall not exceed an amount equal to the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Guarantor), and (c) all such Indebtedness shall have been incurred within the other applicable limitations of subsection 11.11.1 and Section 12.2; 1.1.66.9 security which is already encumbering assets acquired by the Guarantor or a Restricted Subsidiary prior to the date hereof and described in Schedule "J"; provided that after giving effect to the incurrence of all Debt secured by such Charges, (a) the aggregate Secured Priority Debt (as defined in subsection 12.2.1 (c)) shall not exceed 20% of Consolidated Net Worth, and, together with the aggregate 14 Unsecured Priority Debt (as defined in subsection 12.2.1 (c)), shall not exceed an amount equal to Cdn. $60,000,000 and (b) all such Debt shall have been incurred within the other applicable limitations of subsection 11.11.1 and Section 12.2; provided further, however, that except for the Charges permitted by subsection 1.1.66.7, the Guarantor will not, and will not permit any Restricted Subsidiary to, incur or maintain any such operating lines or short-term or revolving bank facilities secured by Charges on any assets of the Guarantor or any Restricted Subsidiary; 1.1.67 "PERSON" means a moral person, a physical person, a joint venture, a partnership, a limited liability company, a trust, an entity without juridical personality, a government or any ministry, organization or intermediary of such government; 1.1.68 "PLAN" means a "pension plan," as such term is defined in ERISA, established or maintained by the Guarantor, a Restricted Subsidiary or any ERISA Affiliate or as to which the Guarantor, a Restricted Subsidiary or any ERISA Affiliate contributed or is a member or otherwise may have any liability; 1.1.69 "PRIORITY DEBT" shall have the meaning set forth in subsection 12.2.1(c); 1.1.70 "QUALIFYING EU JURISDICTION" means any country (other than Greece) which as of the Closing Date is a member of the European Union. 1.1.71 "RENTALS" means and includes as of the date of any determination thereof all fixed payments (including all such payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Guarantor or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Guarantor or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues; 1.1.72 "REPORTABLE EVENT" has the same meaning as in ERISA; 1.1.73 "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Borrower or the Guarantor with responsibility for the administration of the relevant portion of this Agreement; 1.1.74 "RESTRICTED GROUP" means, as of the date of determination thereof, the Guarantor and its Restricted Subsidiaries; 15 1.1.75 "RESTRICTED INVESTMENTS" means all Investments, other than: 1.1.75.1 Investments by the Guarantor and its Restricted Subsidiaries in and to Restricted Subsidiaries, including, without limitation, Investments (a) directly out of the cash proceeds to the Guarantor of the concurrent sale of shares of capital stock of the Guarantor or (b) pursuant to a direct share exchange offer by the Guarantor, and including any investment in a corporation which, after giving effect to such investment, will become a Restricted Subsidiary; 1.1.75.2 Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Guarantor or any Restricted Subsidiary, is accorded a rating of at least A-2 by Standard & Poor's Corporation or at least Prime-2 by Moody's Investors Service, Inc.; 1.1.75.3 Investments in (a) direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America or (b) direct obligations of Canada or any agency or instrumentality of Canada, the payment or guarantee of which constitutes a full faith and credit obligation of Canada, in either case, maturing in twelve months or less from the date of acquisition thereof; 1.1.75.4 Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States, any state thereof or Canada or any province thereof, having capital, surplus and undivided profits aggregating at least US $500,000,000 (or its equivalent in Canadian currency) and whose long-term certificates of deposit are, at the time of acquisition thereof by the Guarantor or a Restricted Subsidiary, rated A- or better by Standard & Poor's Corporation or A3 or better by Moody's Investors Service, Inc. or Investments in Eurodollar Certificates of deposit maturing within one year after the acquisition thereof and issued by a bank in western Europe or England having capital, surplus and undivided profits of at least US $1,000,000,000 (or its equivalent in such country's local currency); and 1.1.75.5 loans and advances (including, without limitation, loans or advances to employees of the Guarantor for the purchase by such employee of shares of stock of the Guarantor by such employee) 16 in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Guarantor or any Restricted Subsidiary provided that the aggregate amount of all such loans or advances shall at no time exceed US $2,000,000; 1.1.76 "RESTRICTED PAYMENTS" means, for any period, 1.1.76.1 the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of the Guarantor or any Restricted Subsidiary; 1.1.76.2 the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock of any class or of any warrants, rights or options to purchase or acquire any shares of capital stock of the Guarantor or any Restricted Subsidiary; and 1.1.76.3 any payment or distribution, directly or indirectly, by the Guarantor or a Restricted Subsidiary in respect of its capital stock; PROVIDED, HOWEVER, that "Restricted Payments" shall not include any such dividends, purchases, redemptions, retirements or other distribution by a Restricted Subsidiary to the Guarantor or to a Wholly-owned Restricted Subsidiary; 1.1.77 "RESTRICTED SUBSIDIARY" means and includes 1.1.77.1 each of the Borrower and its Subsidiaries, including IPG Holding Company of Nova Scotia ("CANCO") and IPG Finance LLC notwithstanding the fact that they might be Unrestricted Subsidiaries under the Note Agreement; 1.1.77.2 IPG (US) Acquisition Corporation, IPG (US) Holdings Inc., IPG (US) Inc. and ATC, notwithstanding the fact that they might be Unrestricted Subsidiaries under the Note Agreement; and 1.1.77.3 any Subsidiary of the Guarantor any of whose Debt is guaranteed by the Guarantor, notwithstanding the fact that such Subsidiary might be an Unrestricted Subsidiary under the Note Agreement; 1.1.77.4 Intertape Polymer Corp., Polymer International Corp., Intertape Polymer Inc., any other Subsidiary so described in Schedule "E" hereto and any other Subsidiary (a) which is organized 17 under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction thereof; (b) which conducts substantially all of its business and has substantially all of its assets within the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction; (c) of which more than 80% (by number of votes) of the Voting Stock is beneficially owned by the Guarantor or any wholly-owned Restricted Subsidiary, and (d) which has been designated by the Board of Directors of the Guarantor as a Restricted Subsidiary in accordance with Section 11.17; 1.1.78 "ROLLOVER DATE" means, with respect to a Libor Advance, the date of any such Advance, or the first day of any Designated Period; 1.1.79 "SECOND CURRENCY" has the meaning ascribed to it in Section 14.1; 1.1.80 "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended; 1.1.81 "SELECTED AMOUNT" means, with respect to the Libor Advance, the amount in respect of which the Borrower, has asked, in accordance with Section 4.2, that the interest payable thereon be calculated on the Libor Basis; 1.1.82 "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Guarantor; 1.1.83 "SUBSIDIARY" means any moral Person in respect of which the majority of the issued and outstanding capital stock granting a right to vote in all circumstances is at the relevant time owned by the Guarantor or one or more of its Subsidiaries and includes a limited partnership which would be an Affiliate; 1.1.84 "TERM" means the term commencing on the date hereof and terminating: 1.1.84.1 with respect to Facility A, on December 2, 1999, subject to extension following an Extension Request (as defined in Section 2.2) which is accepted by the Lender; 1.1.84.2 with respect to Facility B, on January 31, 1999; 1.1.85 "TOTAL DEBT" means all Debt of the Guarantor and the Restricted Subsidiaries (and for greater certainty, includes any Debt of an Unrestricted Subsidiary Guaranteed by the Guarantor) on a Consolidated basis, less Available Cash; 18 1.1.86 "TRANSFER AGREEMENT" means the form of transfer agreement annexed hereto as Schedule "D"; 1.1.87 "UNRESTRICTED SUBSIDIARY" means any Subsidiary which is not a Restricted Subsidiary; 1.1.88 "US PRIME RATE" means, on any day, the rate of interest, expressed as an annual rate, publicly announced or posted by the Lender or any Assignee as being its reference rate then in effect for determining interest rates on demand commercial loans granted in the United States of America in US Dollars to clients of the Lender or an Assignee, whether or not any such loans are actually made; 1.1.89 "US PRIME RATE BASIS" means the basis of calculation of interest on the US Dollar Advances, or any part thereof, in accordance with the provisions of Sections 5.1, and 5.2; 1.1.90 "US PRIME RATE ADVANCE" means, at any time, the part of the US Dollar Advances with respect to which the Borrower has chosen, or, in accordance with the provisions hereof, is obliged, to pay interest on the US Prime Rate Basis; 1.1.91 "US DOLLARS" or "US $" means the lawful currency of the United States of America in same day immediately available funds or, if such funds are not available, the form of currency of the United States of America which is ordinarily used in the settlement of international banking operations on the day on which any payment or any calculation must be made pursuant to this Agreement; 1.1.92 "US DOLLAR ADVANCES" means, at any time, the total of all Loans in US Dollars, and includes the amount of all Letters of Credit denominated in US Dollars; 1.1.93 "VOTING STOCK" means Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions); 1.1.94 "WHOLLY-OWNED" when used in connection with any Subsidiary means a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) shall be owned by the Borrower, the Guarantor and/or one of its Wholly-owned Restricted Subsidiaries. 1.2 INTERPRETATION Unless stipulated to the contrary, the words used herein which indicate the singular include the plural and vice versa and the words indicating masculine include the feminine and vice versa. In addition, (a) the word "INCLUDES" (or "INCLUDING") shall be interpreted to mean "INCLUDES 19 (OR INCLUDING) WITHOUT LIMITATION", and (b) where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such person. 1.3 CURRENCY Unless the contrary is indicated, all amounts referred to herein are expressed in US Dollars. 1.4 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Unless the Lender shall otherwise expressly agree or unless otherwise expressly provided herein, all of the terms of this Agreement which are defined under the rules constituting Generally Accepted Accounting Principles shall be interpreted, and all financial statements to be prepared hereunder shall be prepared, in accordance with Generally Accepted Accounting Principles. 1.5 DIVISION AND TITLES The division of this Agreement into Articles, Sections and subsections and the insertion of titles are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 2 THE CREDIT 2.1 THE FACILITIES Subject to the provisions hereof, the Lender agrees to make available to the Borrower, individually and not jointly and severally or solidarily with any future Assignee, its Participation in the Credit, which Credit consists of: 2.1.1 a maximum amount of $50,000,000 under Facility A; and 2.1.2 a maximum amount of $50,000,000 under Facility B; for a total of up to US $100,000,000 (the "CREDIT"). 2.2 FACILITY A All Advances borrowed under Facility A may be repaid and re-borrowed by the Borrower at all times during the Term. The Lender may, in its absolute discretion, agree to extend the Term in respect of Facility A for a further period of 12 months, provided that the Borrower 20 makes a request to the Lender not more than 90 days prior to the then-current expiry of the Term (the "EXTENSION REQUEST"). The Lender undertakes to respond to such request within a delay not exceeding 45 days from receipt thereof. If the Lender fails to so respond, the Lender shall be deemed to have refused to grant any such extension. 2.3 FACILITY B All Advances available to the Borrower under Facility B may be drawn by way of one single Advance during the Disbursement Period, and may not be re-borrowed by the Borrower during the Term. However, the Borrower may convert from one form of Advance to another subject to the provisions of this Agreement. 3 PURPOSE 3.1 PURPOSE OF THE ADVANCES All Advances made by the Lender to the Borrower in accordance with the provisions hereof (a) under Facility A, shall be used by the Borrower (directly or indirectly) exclusively to acquire the shares of ATC and for general corporate or business purposes, and (b) under Facility B, shall be used by the Borrower, directly or indirectly, exclusively to refinance existing Funded Debt of ATC and for general corporate or business purposes. No proceeds of any Advance will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any "margin stock", as defined in Federal Reserve System Board of Governors Regulation U. 4 ADVANCES, CONVERSIONS AND OPERATION OF ACCOUNTS 4.1 NOTICE OF BORROWING Subject to the applicable provisions of this Agreement, at all times during the relevant Disbursement Period, the Borrower shall be entitled to draw upon the Credit, on one or more occasions, up to the maximum amount of the Credit, provided that at least one (1) Business Day prior to the day on which any US Prime Rate Advance is required, the Borrower shall have provided to the Lender an irrevocable telephone notice at or before 10:00 A.M., New York time, on any Business Day, followed by the delivery on the same day of a written notice of confirmation substantially in the form of Schedule "B". Notices in respect of Libor Advances and Letters of Credit shall be made in accordance with the provisions of Sections 4.2 and 4.3, respectively. 21 4.2 LIBOR ADVANCES AND CONVERSIONS On any Business Day during the Term, upon an irrevocable telephone notice to the Lender given prior to 10:00 A.M., NEW YORK time at least three Business Days prior to the date of a proposed Libor Advance or a Rollover Date, followed by the delivery on the same day of a written notice of confirmation substantially in the form annexed hereto as Schedule "B", the Borrower may request that a Libor Advance be made, that one or more Advances not borrowed as Libor Advances be converted into one or more Libor Advances or that a Libor Advance or any part thereof be extended, as the case may be. The Lender shall determine the LIBOR which will be in effect on the date of the Advance or the Rollover Date, as the case may be (which in such case must be a Business Day), with respect to the Selected Amount or to each of the Selected Amounts, as the case may be, having a maturity: 4.2.1 under Facility A, of 30, 60, 90 or 180 days; and 4.2.2 under Facility B, of 30, 60 or 90 days; from the date of the Advance or the Rollover Date, as the case may be. However, if the Borrower has not delivered a notice to the Lender in a timely manner in accordance with the provisions of this Section 4.2, the Borrower shall be deemed to have chosen to have the interest on the amount of such Advance calculated on the US Prime Rate Basis. 4.3 LETTERS OF CREDIT As part of the Credit available hereunder, the Borrower may cause to be issued by the Lender one or more Letters of Credit in a maximum aggregate amount outstanding at any time not exceeding: 4.3.1 Under Facility A, US $10,000,000; and 4.3.2 Under Facility B, US $20,000,000; and for a duration not exceeding the lesser of one (1) year from the date of issuance or the remaining duration of the Term, subject to the signature by the Borrower of the Lender's standard documentation then currently used in connection with letters of credit. The Borrower shall pay non-refundable fees in respect of any such Letters of Credit equal to the rate per annum indicated in the definition of "Margin" multiplied by the face amount thereof, subject to a minimum fee for each Letter of Credit in an amount of $250, payable in advance. The Guarantor expressly acknowledges that it will remain liable hereunder irrespective of the fact that it has not executed such documentation together with the Borrower. For greater certainty, each of the Borrower and the Guarantor acknowledge that any Letters of Credit issued under Facility B must be issued during the relevant Disbursement Period, since Facility B is not revolving in nature. 22 4.4 CURRENCY Subject to the provisions of Section 2.1, at any time during the relevant Disbursement Period the Borrower may borrow, on one or more occasions, up to the maximum amount of the Credit in US Dollars. 4.5 OPERATION OF ACCOUNTS The Lender shall maintain in its books at the Branch a record of the Loan, including the Letters of Credit issued by the Lender at the request of the Borrower, attesting as to the total of the Borrower's indebtedness to the Lender in accordance with the provisions hereof. These accounts or registers shall constitute, in the absence of manifest error, PRIMA FACIE proof of the total amount of the indebtedness of the Borrower to the Lender in accordance with the provisions hereof, of the date of any Advance made to the Borrower and of the total of all amounts paid by the Borrower from time to time with respect to principal and interest owing on the Loan and the fees and other sums exigible in accordance with the provisions hereof. 4.6 LIMITATIONS ON ADVANCES Any amount of the Credit available under Facility A and Facility B shall cease to be available at the expiry of the Term. 4.7 NETTING On the date of any Advance or on a Rollover Date, the Lender shall be entitled to net amounts payable on such date by the Lender to the Borrower against amounts payable on such date by the Borrower to the Lender. 5 INTEREST AND FEES 5.1 INTEREST ON THE US PRIME RATE BASIS The principal amount of the US Dollar Advances which at any time and from time to time remains outstanding and in respect of which the Borrower has chosen or, in accordance with the provisions hereof, is obliged to pay interest on the US Prime Rate Basis, shall bear interest, calculated daily, on the daily balance of such Loan, from the date of the Advance up to and including the day preceding the date of repayment in full (whether in accordance with Article 8 or Article 14, as the case may be) of the US Dollar Advances at the annual rate (calculated based on a 365 or 366 day year, as the case may be) applicable to each of such days which corresponds to the US Prime Rate at the close of business on each of such days, plus the Margin; provided that in the event that the US Prime Rate is, for any period, less than the Federal Funds Effective Rate plus the Margin then applicable to Libor Advances, US Base Rate 23 shall be deemed to be equal to the Federal Funds Effective Rate plus the greater of .50% or the Margin then applicable to Libor Advances. For the purposes hereof, the term "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate per annum (calculated based on a 360 day year) equal, for each day during such period, to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, for any day on which such rate is not so published for such day by the Federal Reserve Bank of New York, the average of the quotations for such day for such transactions received by the Lender from three Federal Funds brokers of recognized standing selected by the Lender. If for any reason the Lender shall have determined (which determination shall be conclusive, absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including without limitation, the inability or failure of the Lender to obtain sufficient bids or publications in accordance with the terms hereof, the Lender's US Prime Rate will apply. 5.2 PAYMENT OF INTEREST ON THE US PRIME RATE BASIS The interest payable in accordance with Section 5.1 and calculated in the manner hereinabove described is payable to the Lender monthly, in arrears, on the last day of each month. 5.3 INTEREST ON THE LIBOR BASIS The principal amount of the Libor Advances which at any time and from time to time remains outstanding shall bear interest, calculated daily, on the daily balance of such Libor Advances, from each Rollover Date, at the annual rate (calculated based on a 360-day year) applicable to each of such days which corresponds to the LIBOR applicable to each Selected Amount, plus the Margin, and shall be effective as and from each Rollover Date up to and including the date prior to the next Rollover Date. 5.4 PAYMENT OF INTEREST ON THE LIBOR BASIS The interest payable in accordance with the provisions of Section 5.3 and calculated in the manner hereinabove set out on the amount outstanding from time to time is payable to the Lender, in arrears, 5.4.1 on the next Rollover Date when the Designated Period is 30 to 90 days, 5.4.2 when the Designated Period exceeds 90 days, on the first Business Day following each period of 90 days during such Designated Period and at the next Rollover Date, if the Designated Period is more than 90 days and is not a multiple of 90 days. 24 5.5 LIMITS TO THE DETERMINATION OF LIBOR Nothing herein contained shall be interpreted as authorizing the Borrower, with respect to the determination of LIBOR, to choose a Selected Amount with respect to each Designated Period of less than US $1,000,000 or a greater amount other than in whole multiples of US $100,000. 5.6 FIXING OF LIBOR LIBOR shall be transmitted to the Borrower by the Lender at approximately 11:00 A.M., New York time, two Business Days prior to: 5.6.1 the date on which the Libor Advance is to be made; or 5.6.2 the relevant Rollover Date. 5.7 INTEREST ON THE LOAN Where no specific provision with respect to interest on an outstanding portion of the Loan is contained in this Agreement, the interest on such portion of the Loan shall be calculated and payable on the US Prime Rate Basis. 5.8 ARREARS OF INTEREST Any arrears of interest or principal shall bear interest at a rate that is two percent (2%) per annum higher than the rate of interest payable in respect of the relevant principal amount of the Loan and shall be calculated and exigible on the same basis. 5.9 MAXIMUM INTEREST RATE The amount of the interest or fees exigible in applying this agreement shall not exceed the maximum rate permitted by Law. Where the amount of such interest or such fees is greater than the maximum rate, the amount shall be reduced to the highest rate which may be recovered in accordance with the applicable provisions of Law. 5.10 FEES The Borrower shall pay the following fees (the "FEES") to the Lender: 5.10.1 a Standby Fee equal to the percentage set out in the definition of "Margin", multiplied by an amount equal to the unused portions of Facility A of the Credit, calculated daily and payable monthly in arrears based on a 365/366 day year on the last day of each calendar month or on such other date as the Lender may determine, commencing in respect of the month ending on December 31, 1997; 25 5.10.2 an arrangement fee: (a) in respect of Facility A, equal to .35% of the Credit available under Facility A, being an amount of US $175,000, payable to the Lender upon the signature hereof, and (b) in respect of Facility B, equal to .35% of the Credit available under Facility B, being an amount of US $175,000, payable to the Lender upon the signature hereof; and 5.10.3 in the event of any syndication, assignment or granting of participations in accordance with the provisions of Section 15.2, an annual agency fee in an amount to be negotiated at the time. However, notwithstanding the provisions of subsection 5.10.2 hereof, if by March 31, 1998 the Guarantor and the Restricted Subsidiaries have not completed a private placement and remitted the proceeds thereof to the Lender in full payment of the Loans under Facility B, the Borrower and the Guarantor shall pay to the Lender an additional fee equal to .35% of the Credit under Facility B. 5.11 INTEREST ACT 5.11.1 For the purposes of the Interest Act of Canada, any amount of interest or fees calculated herein using 360, 365 or 366 days per year and expressed as an annual rate is equal to the said rate of interest or fees multiplied by the actual number of days comprised within the calendar year, divided by 360, 365 or 366, as the case may be. 5.11.2 The parties agree that all interest in this Agreement will be calculated using the nominal rate method and not the effective rate method, and that the deemed re-investment principle shall not apply to such calculations. In addition, the parties acknowledge that there is a material distinction between the nominal and effective rates of interest and that they are capable of making the calculations necessary to compare such rates. 6 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS 6.1 MARKET FOR LIBOR ADVANCES If at any time or from time to time: (a) as a result of market conditions, there exists no appropriate or reasonable method to establish LIBOR, for a Selected Amount or a Designated Period, or (c) US Dollar deposits are not available to the Lender in such market in the ordinary course of business in amounts sufficient to permit it to make the Libor Advance, for a Selected Amount or a Designated Period, the Lender shall so advise the Borrower and the Lender shall not be obliged to honour any notices of borrowing in connection with any Libor Advances, and 26 the Libor Advance option shall thereupon be suspended upon such notice by the Lender to the Borrower. 6.2 SUSPENSION OF LIBOR ADVANCE OPTION If a notice has been given by the Lender in accordance with Section 6.1, the Libor Advance, or any part thereof, as the case may be, shall not be made (whether as an Advance, a conversion or an extension) by the Lender and the right of the Borrower to choose that Advances be made or, once made, be converted or extended into the Libor Advance shall be suspended until such time as the Lender has determined that the circumstances having given rise to such suspension no longer exist, in respect of which determination the Lender shall advise the Borrower within a reasonable delay, and the Borrower shall within ten (10) days following receipt of a demand to such effect, pay to the Lender the amounts referred to in Section 7.2. 6.3 LIMITS ON THE LETTERS OF CREDIT AND LIBOR ADVANCES Nothing in this Agreement shall be interpreted as authorizing the Borrower: 6.3.1 to borrow by way of Libor Advances, nor as obliging the Lender to accept such Notices of Borrowing in respect of Libor Advances, for a Designated Period; nor 6.3.2 to cause to be issued Letters of Credit; maturing on a date which results in a situation where the Credit cannot be reduced as required by this Agreement, or on a date which is after the expiry of the Term. 7 CHANGES IN CIRCUMSTANCES, INCREASED FEES AND INDEMNIFICATION 7.1 ILLEGALITY, INCREASED COSTS If the Lender, acting reasonably, determines (which determination shall be attested to by a certificate submitted to the Borrower and which shall be final and binding between the parties hereto in the absence of manifest error) that i) the adoption by a governmental or international authority (including the Bank for International Settlements (the "BIS")) of a law, directive, requirement or guideline, whether or not having the force of law, ii) any modification to a law, directive or guideline, whether or not having the force of law, or to the interpretation or application of same by a tribunal or governmental or international authority (including the BIS) or other body charged with such interpretation or application, or iii) any quashing by a tribunal or other governmental or international authority or body (including the BIS) of an interpretation of any law, directive, requirement or guideline, whether or not having the force of law: 27 7.1.1 has rendered or will render it illegal or contrary to any law, directive or guideline for the Lender to maintain or to give effect to all or part of the obligations stipulated in this Agreement, including the obligation to make or maintain all or any part of a Libor Advance pursuant to the terms hereof, then the obligation of the Lender to maintain or to give effect to such part of its obligations, will become null and, subject to the provisions of the particular law, directive or guideline and of Section 7.2 with respect to losses, costs and expenses, if the Loan affected is a Libor Advance, the Borrower may convert the principal amount thereof into a US Prime Rate Advance, and pay the interest accrued thereon, or may reimburse the particular Libor Advance in whole with interest accrued thereon. Such conversion or reimbursement shall be made at the expiry of the relevant Designated Period which is the last to expire prior to the effective date of such adoption, change or quashing, or, if in the judgment of the Lender, an immediate conversion or reimbursement is necessary, immediately upon demand by the Lender; or 7.1.2 i) has imposed, modified or deemed applicable any loan ceiling with respect to the Lender, or imposed, modified or deemed applicable any special tax, reserve, deposit, capital adequacy or similar requirement with respect to the assets held by, deposited at or used for the purchase of funds, or to the loans made by the Lender, or ii) changes the basis of taxation on payments made to the Lender under this Agreement (other than a change affecting the taxes based on net profits or capital of the Lender), or iii) imposes upon the Lender any other monetary conditions or restrictions with respect to this Agreement, all or any part of a Loan, as the case may be, or any other document, effect or operation contemplated hereby, and if the result of any of the foregoing is to increase the cost to the Lender of making or maintaining any Loan, or any part thereof, as the case may be, or to reduce any amount otherwise receivable by the Lender hereunder with respect thereto, then, in any such case, the Borrower shall promptly pay to the Lender, within 10 Business Days from demand, such additional amounts necessary to compensate the Lender for such additional cost or reduced amount receivable as is determined in good faith by the Lender. The Lender shall use reasonable efforts to advise the Borrower of any event described in this Section 7.1 within a reasonable delay. If the Lender becomes entitled to claim any additional amounts pursuant to this Section 7.1, it shall promptly notify the Borrower of the event by reason of which it has become so entitled and provide reasonable particulars of the calculation of such amount. A certificate of the Lender as to any such additional amounts payable to it shall be conclusive and binding in the absence of manifest error. 28 7.2 INDEMNITY The Borrower shall indemnify the Lender against and hold the Lender as well as its directors, officers or employees harmless from any loss or expense, including without limitation any loss or expense arising from interest or fees payable by the Lender to lenders of funds obtained by it in order to make or maintain any Advance and any loss or expense incurred in liquidating or re-employing deposits from which such funds were obtained, which the Lender may sustain or incur as a consequence of any i) default by the Borrower in the payment when due of the amount of or interest on any Loan or in the payment when due of any other amount hereunder, ii) default by the Borrower in obtaining an Advance after the Borrower has given notice hereunder that it desires to obtain such Advance, iii) default by the Borrower in making any voluntary reduction of the outstanding amount of any Loan after the Borrower has given notice hereunder that it desires to make such reduction, and iv) the payment of any Libor Advance otherwise than on the maturity date thereof (including without limitation any such payment required pursuant to Section 8.1 or upon acceleration pursuant to Section 13.2). A certificate of the Lender providing reasonable particulars of the calculation of any such loss or expense shall be conclusive and binding in the absence of manifest error. If the Lender becomes entitled to claim any amount pursuant to this Section 7.2, it shall promptly notify the Borrower of the event by reason of which it has become so entitled and reasonable particulars of the related loss or expense. 7.3 WITHHOLDING TAXES The Borrower and the Guarantor, for the benefit of the Lender and any Assignees which are residents, citizens or domestic corporations of the United States of America at the time of any payment made by the Borrower or the Guarantor hereunder (the "RELEVANT HOLDERS"), agree that in the event any such payments made by the Borrower or the Guarantor under this Agreement are subject to any present or future tax, duty, assessment, impost, levy or other similar charge (a "RELEVANT TAX") imposed, levied, collected, assessed, deducted or withheld by the government of Canada (or any authority therein or thereof) or by the government of any other country or jurisdiction (or any authority therein or thereof) other than the United States from or through which payments hereunder are actually made (each a "TAXING JURISDICTION"), the Borrower or the Guarantor will pay to the Relevant Holder such additional amounts as may be necessary in order that the net amounts paid to such Relevant Holder pursuant to the terms of this Agreement after imposition of any such Relevant Tax (including, without limitation, any Relevant Tax on such additional amount) shall be not less than the amounts specified in this Agreement to be then due and payable (after giving effect to the exclusion for Relevant Taxes imposed by the government of the United States as described above). 7.4 SURVIVAL Without prejudice to the survival or termination of any other agreement of the Borrower or the Guarantor under this Agreement, the obligations of the Borrower under Sections 7.2 and 7.3 29 shall survive the payment of principal and interest on all Loans and the termination of the Credit. 8 PAYMENT, REPAYMENT AND PREPAYMENT 8.1 REPAYMENT OF THE LOAN The Borrower hereby agrees to repay the Loan on the last day of the Term. However, if the Guarantor or the Restricted Subsidiaries complete a private placement as contemplated, the proceeds thereof shall promptly be used to prepay the Loans under Facility B, subject to the provisions of Section 8.2 with respect to such prepayment. 8.2 PREPAYMENT, REDUCTION AND CANCELLATION OF THE CREDIT On any Business Day during the Term, after having given notice to the Lender at least five (5) days prior to the proposed prepayment, the Borrower may repay or prepay in minimum amounts of US $1,000,000, or in whole multiples of such amount, all or part of the principal amount of the Loan, provided that in respect of the Libor Advance, no repayment may be made on a day other than a Rollover Date, save as provided in Sections 7.2 and 8.3, with, in each case, all interest accrued and unpaid on the amounts so prepaid. However, the Borrower may not, in respect of Facility B at any time during the Term, again borrow all or part of the Loan repaid, whether such payment was a prepayment or otherwise. In addition, the Borrower may, upon the same notice, cancel any portion of the Credit under Facility A which has not been drawn by the Borrower. No Standby Fee (described in Section 5.10) shall be payable in respect of any portion of the Credit so cancelled as and from the effective date of its cancellation. The Borrower shall not be permitted to draw Advances in respect of any portion of the Credit so cancelled. If necessary in connection with such cancellation or reduction, the Borrower shall repay all or any part of the Loan, provided that in respect of a Libor Advance, no repayment may be made on a day other than a Rollover Date, save as provided in Section 7.2 and in Section 8.3, with all interest accrued and unpaid on the amounts so prepaid. 8.3 PAYMENT OF LOSSES RESULTING FROM A PREPAYMENT If a prepayment in respect of the Libor Advance is made on a date other than a Rollover Date, simultaneously with such prepayment, the Borrower shall pay to the Lender the losses, costs and expenses suffered or incurred by the Lender with respect to such prepayment, which are referred to in Section 7.2. 30 8.4 IMPUTATION OF PREPAYMENTS Any prepayment made in accordance with Section 8.2 shall be imputed firstly to Facility B, and secondly to Facility A. 8.5 CURRENCY OF PAYMENTS All payments, repayments or prepayments, made hereunder shall be made in US Dollars. 8.6 PAYMENTS BY THE BORROWER TO THE LENDER All payments to be made by the Borrower in connection with this Agreement shall be made in funds having same day value to the Lender at the Branch, or at any other office or account in Canada or the United States of America designated by the Lender. Any such payment shall be made on the date upon which such payment is due, in accordance with the terms hereof, no later than 11:00 A.M., NEW YORK time. 8.7 PAYMENT ON A BUSINESS DAY Each time a payment, repayment or prepayment is due on a day which is not a Business Day, it shall be made on the previous Business Day. 8.8 PAYMENTS BY LENDER TO THE BORROWER Any amounts payable to the Borrower shall be paid by the Lender on a Business Day, in funds having same day value, to the Borrower's account located at Toronto Dominion Bank, 31 West 52nd Street, 19th floor, New York, New York. 8.9 APPLICATION OF PAYMENTS Except as otherwise indicated herein or as otherwise determined by the Lender, all payments made to the Lender by the Borrower shall be applied by the Lender as follows: a) to the fees, costs, expenses and accessories contemplated by Article 7, Section 13.6 and Section 16.5; b) to all amounts due under Article 5 hereunder; c) to the repayment of the principal amount of the Loan subject, in the case of prepayments, to the imputation rules set out in Section 8.4; d) to any other amounts due pursuant to this Agreement. 31 8.10 NO SET-OFF OR COUNTERCLAIM BY BORROWER All payments by the Borrower shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 8.11 DEBIT AUTHORIZATION The Lender is hereby authorized to debit the Borrower's, the Guarantor's and the Restricted Subsidiaries' account or accounts maintained from time to time at the Branch or elsewhere, and to set off and compensate against any and all accounts, credits and balances maintained at any time by the Borrower, the Guarantor or the Restricted Subsidiaries for the amount of any interest or any other amounts due and owing hereunder from time to time payable by the Borrower to the Lender, in order to obtain payment thereof. The Lender agrees to give notice of any such debit, set off or compensation within a reasonable delay thereafter, provided that the failure to give such notice shall not invalidate any action taken by the Lender nor render it liable to the Borrower, the Guarantor or the other Restricted Subsidiaries. 9 CONDITIONS PRECEDENT 9.1 INITIAL ADVANCE UNDER THE CREDIT The obligation of the Lender to make an initial Advance under the Credit is conditional upon each of the following conditions having been satisfied, together with the conditions set out in Section 9.2: 9.1.1 all Charges on the property of the Guarantor and the Restricted Subsidiaries, other than Permitted Charges, shall have been discharged; provided that the Charges in favour of Comerica Bank may continue to charge the property of ATC if the Lender is in possession of an authorized, valid undertaking from Comerica Bank to discharge such Charges within a delay not exceeding 30 days from the Closing Date (the "CB/ATC TEMPORARY CHARGES"); 9.1.2 each of this Agreement and the IPG Guarantee shall have been executed and delivered; 9.1.3 a Guarantee by IPG Finance LLC of the obligations of the Borrower to the Lender, substantially in the form of the IPG Guarantee, together with an assignment of all amounts owing to IPG Finance LLC from IPG (US) Acquisition Corporation and ATC (collectively the "LLC DOCUMENTS"), shall have been executed and delivered; 9.1.4 the Guarantor and the Restricted Subsidiaries shall have obtained all necessary governmental, regulatory and other approvals (including Federal Trade 32 Commission approval) and all Laws, including environmental Laws, shall have been complied with; 9.1.5 the Lender shall have received evidence satisfactory to it that: a) ATC's Funded Debt will remain as Funded Debt and not be accelerated or otherwise become payable as a result of the contemplated acquisition of ATC; and b) ATC's Debt will rank PARI PASSU with the Loans hereunder, subject to the provisions of subsection 12.2.1 (c); 9.1.6 the opening balance sheet of each of the Borrower and its Subsidiaries and IPG (US) Acquisition Corporation and its Subsidiaries shall have been delivered to the Lender, and shall be satisfactory to it; 9.1.7 the results of the due diligence conducted by the Lender concerning ATC's operations, including site visits, accounts receivable audit, environmental due diligence, base-case PRO FORMA statements and the assumptions contained therein, shall be completely satisfactory to the Lender, acting reasonably; 9.1.8 each of the Guarantor and the Borrower shall have delivered to the Lender a certificate in the form of Schedule "F" signed by a Responsible Officer stipulating and certifying that: a) such officer has taken cognizance of all the terms and conditions of this Agreement and of all contracts, agreements and deeds pertaining hereto; and b) no Default or Event of Default has occurred nor exist hereunder; and c) each of the Guarantor and its Restricted Subsidiaries holds the permits, licences and authorizations required in order to permit it to possess its property and its real estate and to carry on its business in the manner in which it is being carried on at present; 9.1.9 there shall have been delivered to the Lender a written undertaking from each of the Borrower's Subsidiaries, IPG Finance LLC and Canco, as well as from IPG (US) Acquisition Corporation, IPG (US) Holdings Inc. and IPG (US) Inc., pursuant to which each of them undertakes that for so long as the Borrower or the Guarantor has any obligations to the Lender hereunder: 33 a) it shall not carry on any business, except for the purposes of the acquisition of ATC; b) it shall not, individually or collectively, incur or have at any time any Indebtedness in excess of an aggregate amount of US $100,000; c) IPG Finance LLC shall not assign or transfer, other than to the Lender and to Comerica Bank (with respect to the Borrower's operating facility with Comerica Bank), its rights against ATC or IPG (US) Acquisition Corporation with respect to amounts owed to it from either or both of them; 9.1.10 the Borrower shall have delivered to the Lender the favourable legal opinion of the counsel to the Borrower and the Guarantor, addressed to the Lender and its counsel, substantially in the form set forth in Schedule "G" and covering as well such other ancillary matters as pertain to the transactions contemplated hereunder and the acquisition of ATC, as required by the Lender, acting reasonably. 9.2 CONDITIONS PRECEDENT TO ANY ADVANCE The obligation of the Lender to make any Advance under the Credit is conditional upon each of the following conditions having been satisfied: 9.2.1 the representations and warranties contained in this Agreement shall continue to be true and correct (except where stated to be made as at a particular date); and 9.2.2 the Borrower shall have paid all amounts due to the Lender up to the date of any proposed Advance, whether on account of Fees, disbursements or related matters; 9.2.3 nothing shall have occurred since December 31, 1996 which would constitute a Material Adverse Change; 9.2.4 no Default shall have occurred and be continuing and no Event of Default shall have occurred. 10 REPRESENTATIONS AND WARRANTIES For so long as the Loan or any other amounts payable to the Lender hereunder remain outstanding and unpaid, or the Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied) each of the Guarantor and the Borrower hereby represents and warrants to the Lender that: 34 10.1 INCORPORATION The Guarantor and each of the Restricted Subsidiaries is a corporation duly incorporated or a limited partnership or limited liability company duly constituted, and is organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or constitution and of all jurisdictions in which it carries on business. The Guarantor and each of the Restricted Subsidiaries has the capacity and power, whether corporate or otherwise, to hold its assets and carry on the business presently carried on by it or which it proposes to carry on hereafter in each jurisdiction where such business is carried on. 10.2 AUTHORIZATION The Borrower has the power and has taken all necessary steps under the Law in order to be authorized to borrow hereunder and to execute and deliver and perform its obligations under this Agreement in accordance with the terms and conditions thereof and to complete the transactions contemplated herein. This Agreement has been duly executed and delivered by duly authorized officers of the Borrower and is a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. The Guarantor has the power and has taken all necessary steps under the Law in order to be authorized to provide the IPG Guarantee and to execute and deliver and perform its obligations under this Agreement and the IPG Guarantee in accordance with the terms and conditions thereof and to complete the transactions contemplated in the IPG Guarantee and herein. Each of this Agreement and the IPG Guarantee has been duly executed and delivered by duly authorized officers of the Guarantor, and is a legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms. IPG Finance LLC has the power and has taken all necessary steps under the Law in order to be authorized to provide the LLC Documents and to execute and deliver and perform its obligations under the LLC Documents in accordance with the terms and conditions thereof and to complete the transactions contemplated in the LLC Documents. Each of the LLC Documents has been duly executed and delivered by duly authorized officers of IPG Finance LLC, and is a legal, valid and binding obligation of IPG Finance LLC, enforceable in accordance with its terms. 10.3 COMPLIANCE OF THIS AGREEMENT The execution and delivery of and performance of the obligations under this Agreement and the IPG Guarantee in accordance with their respective terms and the completion of the transactions contemplated therein and herein do not require any consents or approvals which have not been obtained, do not violate any Laws, do not conflict with, violate or constitute a breach under the documents of incorporation or by-laws of the Guarantor or the Restricted 35 Subsidiaries or under any agreements, contracts or deeds to which the Guarantor or any of the Restricted Subsidiaries is a party or binding upon it or its assets and do not result in or require the creation or imposition of any Charge whatsoever on the assets of the Guarantor or any of the Restricted Subsidiaries, whether presently owned or hereafter acquired, save for the Permitted Charges. 10.4 BUSINESS The Guarantor currently operates as a holding company. ATC currently operates the business of manufacturing and distributing masking tape. Each of the Borrower and its Subsidiaries and IPG (US) Acquisition Corporation and its Subsidiaries was created for the purpose of facilitating the acquisition of ATC and none of them, other than ATC, carries on any business. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Advances will be used for a purpose which violates, or would be inconsistent with, Federal Reserve System Board of Governors Regulation G, U or X. Terms used in this Section or in Section 3.1 of this Agreement for which meanings are provided in Federal Reserve System Board of Governors Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, have the meaning so provided. 10.5 FINANCIAL STATEMENTS The Consolidated financial statements dated December 31, 1996 have been prepared in accordance with GAAP applied on a consistent basis throughout the periods specified (except as noted thereon) and are an accurate representation of the financial position of the Guarantor and the Restricted Subsidiaries to which they relate as of the respective dates specified and the results of their operations and changes in financial position for the respective periods specified. 10.6 TITLE TO ASSETS The Guarantor and each of the Restricted Subsidiaries has good, valid and marketable title to all of its real property and valid title to all of its other material properties and assets, free and clear of any Charges other than Permitted Charges. 10.7 LITIGATION Except as set out in Schedule "H" annexed hereto, on the date hereof, there are no actions, suits or legal proceedings instituted or pending nor, to the knowledge of the Guarantor and each of the Restricted Subsidiaries, threatened, against any of them or their property before any court or arbitrator or any governmental body or instituted by any governmental body which, if decided against the Guarantor or any of the Restricted Subsidiaries, could, individually or in the aggregate, constitute a Material Adverse Change. 36 10.8 TAXES The Guarantor and each of the Restricted Subsidiaries has filed within the prescribed delays all federal, provincial or other tax returns which it is required by Law to file and all taxes, assessments and other duties levied by the various governmental authorities with respect to the Guarantor and each of the Restricted Subsidiaries have been paid when due, except to the extent that (a) payment thereof is being contested in good faith by the Guarantor or any of the Restricted Subsidiaries in accordance with the appropriate procedures, for which adequate reserves have been established in the books of the Guarantor or the Restricted Subsidiaries, as the case may be, and (b) the outcome of such contestation, if decided against the Guarantor or such Restricted Subsidiaries, could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change. 10.9 INSURANCE The Guarantor and each of the Restricted Subsidiaries have contracted for the insurance coverage described in Section 11.6. 10.10 NO ADVERSE CHANGE No Material Adverse Change, considered on a Consolidated basis, has occurred from December 31, 1996 to the Closing Date. 10.11 REGULATORY APPROVALS Neither the Guarantor nor any of the Restricted Subsidiaries is required to obtain any consent, approval, authorization, permit or licence, nor to effect any filing or registration with any federal, provincial or other regulatory authority in connection with the execution, delivery or performance, in accordance with their respective terms, of this Agreement, any borrowings hereunder and the granting of the IPG Guarantee or any other Guarantee. 10.12 COMPLIANCE WITH LAWS Each of the Guarantor and the Restricted Subsidiaries is in material compliance with all requirements of applicable Laws and with all of the material conditions attaching to its permits, authorizations, licenses, certificates and approvals, including without limitation its articles of incorporation and by-laws. 10.13 FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the transactions contemplated hereby nor its use of the proceeds of any Advances hereunder will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, 37 Chapter V, as amended) or any enabling legislation or executive order relating thereto. The Guarantor and the Restricted Subsidiaries are in compliance with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, 22 U.S.C. Sections 6021 ET SEQ. 10.14 PENSION AND EMPLOYMENT LIABILITIES, COMPLIANCE WITH ERISA 10.14.1 Except as disclosed in subsection 10.14.3, neither the Guarantor nor any of the Restricted Subsidiaries has any unfunded pension liabilities, whether valued on a going concern or a wind-up basis, and all compensation obligations (including wages, salaries, commissions and vacation pay) to current employees and to former employees of the Guarantor and the Restricted Subsidiaries have been paid or accrued in full. 10.14.2 Each of the Guarantor, the Borrower and each ERISA Affiliate has operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a liability in excess of US $2,500,000. Neither the Guarantor nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Guarantor or any ERISA Affiliate, or in the imposition of any Charge on any of the rights, properties or assets of the Guarantor or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Charges as would not, individually or in the aggregate, be expected to result in a liability in excess of US $2,500,000. 10.14.3 Except as disclosed on Schedule "I-1" hereto, the present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of ERISA. 10.14.4 The Guarantor, the Borrower and the ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate would be expected to result in a liability in excess of US $2,500,000. 38 10.14.5 The expected post-retirement benefit obligation (determined as of the last day of the Guarantor's and its Subsidiaries most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Guarantor and its Subsidiaries has been disclosed in the appropriate financial statements and, in any event, would not be expected to result in a liability in excess of US $2,500,000. 10.14.6 The execution and delivery of this Agreement and the borrowings hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code with respect to the employee benefit plans of the Guarantor or any ERISA Affiliate. 10.14.7 Schedule "I" sets forth all ERISA Affiliates and all "employee benefit plans" maintained by the Guarantor (or any "affiliate" thereof) or in respect of which the Notes could constitute an "employer security" ("EMPLOYEE BENEFIT PLAN" has the meaning specified in section 3 of ERISA, "AFFILIATE" has the meaning specified in section 407(d) of ERISA and section V of the Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "EMPLOYER SECURITY" has the meaning specified in section 407(d) of ERISA). 10.15 PRIORITY The rights of the Lender hereunder, under the IPG Guarantee and under the LLC Documents rank, and shall continue to rank, at all times during the Term, at least PARI PASSU with all of the Indebtedness of the Guarantor and each of the Restricted Subsidiaries, save and except as permitted pursuant to subsection 12.2.1 (c). 10.16 COMPLETE AND ACCURATE INFORMATION All of the information, reports and other documents and all data, as well as the amendments thereto, provided to the Lender by or on behalf of the Guarantor and the Restricted Subsidiaries were, at the time same were provided, and are at the date hereof, complete, true and accurate in all material respects. 10.17 EVENT OF DEFAULT There exists no Default or Event of Default hereunder. 39 10.18 AGREEMENTS WITH THIRD PARTIES Each of the Guarantor and the Restricted Subsidiaries is in compliance in all material respects with each and every one of its obligations under agreements with third parties to which it is a party or by which it is bound, the breach of which could reasonably be expected to result in a Material Adverse Change. 10.19 ENVIRONMENT 10.19.1 There are no existing claims, demands, damages, expenses, suits, proceedings, actions, negotiations or causes of action of any nature whatsoever, whether threatened or pending, arising out of the presence on any property owned or controlled by the Guarantor or the Restricted Subsidiaries, either past or present, of any hazardous substance or hazardous waste, or out of any past or present activity conducted on any property now owned by the Guarantor or the Restricted Subsidiaries, whether or not conducted by the Guarantor or the Restricted Subsidiaries, involving hazardous substances or hazardous waste which would reasonably be expected to result in a Material Adverse Change; 10.19.2 To the best of the knowledge of the Borrower and the Guarantor, after due enquiry: (a) there is no hazardous substance or hazardous waste existing on or under any property of the Guarantor or any of the Restricted Subsidiaries which constitutes a violation of any ordinance, statute or law for which an owner or person in control of a property may be held liable and which could reasonably be expected to result in a Material Adverse Change; (b) the business of the Guarantor and each of the Restricted Subsidiaries is being carried on so as to respect in all material ways the rules and regulations applicable to environmental and health and safety matters; and (c) no contaminant, pollutant, toxic substance or material or dangerous waste has been spilled or emitted in reportable quantities into the environment from any property owned or controlled by the Guarantor or any of the Restricted Subsidiaries which could reasonably be expected to result in a Material Adverse Change. 40 10.20 SURVIVAL OF REPRESENTATIONS AND WARRANTIES All of the statements contained in any certificate, attestation, financial statements, reports, statements, data or other documents delivered to the Lender by or on behalf of the Borrower, including under or pertaining to this agreement or any other document contemplated hereby, and any amendments thereto, or pertaining to any transactions contemplated therein or hereby, constitute representations and warranties made hereunder, subject to the limits and restrictions stipulated herein. All of the representations and warranties made hereunder are true and correct at the date hereof, shall be true and correct at the date of any Advance hereunder, shall survive the execution and delivery of this agreement, any investigation by or on behalf of the Lender or the making of any Advance hereunder, and none of same are nor shall be waived, except in writing. 11 POSITIVE COVENANTS For so long as the Loan remains outstanding and unpaid, or the Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied) and unless the Lender shall otherwise agree in writing, each of the Borrower and the Guarantor, for itself and each of the other Restricted Subsidiaries and with respect to itself and each of the other Restricted Subsidiaries, agrees as follows: 11.1 PRESERVATION OF JURIDICAL PERSONALITY It shall do or cause to be done all things necessary to preserve and maintain its existence in full force and effect. 11.2 PRESERVATION OF LICENSES It shall maintain in effect and obtain, where necessary, all such authorizations, approvals, licences or consents of such governmental agencies, whether federal, state, provincial or local, which may be or become necessary or required for the Guarantor and the Restricted Subsidiaries to satisfy their obligations hereunder and under the IPG Guarantee. 11.3 COMPLIANCE WITH APPLICABLE LAWS It shall conduct its business in a proper and efficient manner and shall keep or cause to be kept appropriate books and records of account, in compliance with the Law, and shall record or cause to be recorded faithfully and accurately all transactions with respect to its business in accordance with GAAP applied on a consistent basis, and shall comply with all material requirements of Law and with all the conditions attaching to its permits, authorizations, licences, certificates and approvals including the Occupational Safety and Health Act of 1970, as amended and ERISA. 41 11.4 MAINTENANCE OF ASSETS It shall maintain or cause to be maintained in good operating condition all of its assets used or useful in the conduct of its business, as would a prudent owner of similar property, whether same are held under lease or under any agreement providing for the retention of ownership, and shall from time to time make or cause to be made thereto all necessary and appropriate repairs, renewals, replacements, additions, improvements and other works. 11.5 BUSINESS It will continue to carry on substantially the same type of business currently carried on and activities which are ancillary, incidental or necessary to its ongoing business as presently conducted, and will not change the nature of its business activities as described in Section 10.4 without the prior written consent of the Lender. 11.6 INSURANCE It will maintain insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owing and operating similar properties in accordance with good business practice and, in any event, in amounts and against risks acceptable to the Lender, acting reasonably. 11.7 PAYMENT OF TAXES AND DUTIES It shall pay all taxes, assessments and other governmental duties which are imposed on it or on its income or profits or its assets, when due and payable, provided that no such tax, assessment or duty need be paid if (a) it is being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and (b) such reserves or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor, and (c) the outcome of such contestation, if decided adversely to the Guarantor or the Restricted Subsidiaries, would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis. 11.8 ACCESS AND INSPECTION It shall allow the employees and representatives of the Lender, during normal business hours, to have access to and inspect, in conjunction with the Guarantor, the assets of the Guarantor and the Restricted Subsidiaries, to inspect and take extracts from or copies of the books and records of the Guarantor and the Restricted Subsidiaries and to discuss the business, assets, liabilities, financial position, operating results or business prospects of the Guarantor and the Restricted Subsidiaries with the principal officers of the Guarantor and the Restricted 42 Subsidiaries and, after obtaining the approval of the Borrower which shall not be unreasonably withheld, with the auditors of the Borrower. 11.9 MAINTENANCE OF ACCOUNT It shall maintain an operating account at each Branch at all times during the Term. 11.10 PERFORMANCE OF OBLIGATIONS It shall perform all obligations in accordance with usual and customary business terms, except to the extent that the non-fulfilment of same would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis, and except where the same are being contested in good faith, if the outcome of such contestation, if decided adversely to the Guarantor or the Restricted Subsidiaries, would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis. Notwithstanding the foregoing contained in this Section 11.10, it shall punctually pay all amounts due or to become due under this Agreement. 11.11 MAINTENANCE OF RATIOS The Guarantor shall maintain: 11.11.1 at all times during the Term, a ratio of Consolidated Funded Debt to Consolidated Total Capitalization not exceeding 50%; 11.11.2 a Consolidated ratio (determined as of the end of each fiscal quarter of the Guarantor) 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) at not less than 2.0 to 1.0; and 11.11.3 at all times during the Term, a minimum Consolidated Net Worth of Cdn. $200,000,000; For greater certainty and without limiting any provision of this Agreement, each of the Borrower and the Guarantor acknowledges that the failure to respect any of the foregoing financial ratios at any time during the Term constitutes a material breach of this Agreement. 11.12 PAYMENT OF LEGAL FEES AND OTHER EXPENSES Whether the transactions contemplated by this Agreement are concluded or not and whether or not any part of the Credit is actually advanced, in whole or in part, the Borrower shall pay all reasonable costs relating to the Credit, including in particular: 43 11.12.1 the reasonable legal fees and costs incurred by the Lender (including those incurred by Comerica Bank) for the negotiation, drafting, signing, registration, publication and/or service of this Agreement and the IPG Guarantee as well as any amendments, renunciations, consents or examinations pertaining to this Agreement and the IPG Guarantee; and 11.12.2 all reasonable fees, including reasonable legal fees and costs, incurred by the Lender to preserve, enforce or exercise its rights hereunder or under the IPG Guarantee following an action, a Default or an omission of the Guarantor or of a Restricted Subsidiary. All amounts due to the Lender pursuant hereto shall bear interest on the US Prime Rate Basis from the date of their disbursement by the Lender or from the date of their undertaking until the Borrower has repaid same in full, with interest on unpaid interest, as in the case of the US Prime Rate Advances, taking into account such modifications as may be necessary. The obligations of the Borrower under this Section 11.12 shall subsist notwithstanding the full repayment of the Loan under the provisions hereof. 11.13 FINANCIAL REPORTING For so long as the Loan or any other amounts payable to the Lender hereunder remain outstanding and unpaid, or the Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied) and unless the Lender shall otherwise agree in writing, each of the Guarantor and the Borrower agrees to provide or cause to be provided to the Lender and so undertakes: 11.13.1 QUARTERLY STATEMENTS Within 60 days after the end of each fiscal quarter of each fiscal year of the Guarantor (other than the last quarter), the unaudited Consolidated and unConsolidated balance sheet of the Guarantor and each of the Restricted Subsidiaries which carries on business as at the end of such quarter and the related Consolidated statements of earnings and changes in financial position, prepared in accordance with GAAP, for the period then ended, in each case with comparative figures for the same period for the immediately preceding fiscal year, accompanied by a certificate of the Senior Financial Officer of the Guarantor and setting forth the information necessary to determine whether the Guarantor has complied with the covenants contained in Section 11.11, certifying that each of the Guarantor and the Borrower is in compliance with all of its covenants hereunder and that no Default or Event of Default has come to the attention of such Senior Financial Officer of the Guarantor signing the certificate, after due inquiry, or if a Default or Event of Default has 44 occurred, setting out the relevant particulars thereof, the period of existence thereof and what action the Guarantor has taken or proposes to take with respect thereto. 11.13.2 ANNUAL STATEMENTS Within 120 days following the end of each fiscal year of the Guarantor: (a) the audited Consolidated balance sheet of the Guarantor as at the end of such year and the related Consolidated statements of earnings and changes in financial position for such fiscal year, together with comparative figures for the immediately preceding year, the whole as certified without qualification by a reputable firm of independent chartered accountants acceptable to the Lender, together with the unaudited unConsolidated balance sheet of the Guarantor and each Restricted Subsidiary as at the end of such year and the related unConsolidated statements of earnings and changes in financial position for such fiscal year, together with comparative figures for the immediately preceding year, and any audited statements of any Restricted Subsidiary which may be prepared; and (b) a certificate of a Senior Financial Officer setting forth the information necessary to determine whether the Guarantor has complied with the covenants contained in Section 11.11, and certifying that each of the Guarantor and the Borrower is in compliance with all of its covenants hereunder and that no Default or Event of Default has come to the attention of the Senior Financial Officer of the Guarantor signing the certificate, after due inquiry, or if a Default or Event of Default has occurred, setting out the relevant particulars thereof, the period of existence thereof and what action the Guarantor has taken or proposes to take with respect thereto. 11.13.3 OTHER INFORMATION a) BUDGET: Within 60 days following the end of each fiscal year of the Guarantor, the annual Consolidated pre-tax operating forecast and the Consolidated Capital Expenditures budget of the Guarantor; b) AUDIT REPORTS: Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Guarantor or any Restricted Subsidiary and any management letter received from such accountants; 45 c) GOVERNMENTAL AND OTHER REPORTS: Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Guarantor to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Guarantor or any Subsidiary with any securities exchange or any governmental regulatory body including, but without limitation, the Guarantor's Form 20F and unaudited quarterly reports, and copies of any orders in any proceedings to which the Guarantor or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over the Guarantor or any of its Subsidiaries; d) UNRESTRICTED SUBSIDIARIES: Within the respective periods provided in subsections 11.13.1 and 11.13.2, financial statements of the character and for the dates and periods as in said subsections 11.13.1 and 11.13.2 above, covering each Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis); e) OTHER INFORMATION: From time to time and upon demand by and reasonable notice from the Lender, the data, reports, statements, documents or other additional information pertaining to the business, assets, liabilities, financial position, operating results or business prospects of the Guarantor or any of the Restricted Subsidiaries, as well as any documents, writings or books of account in connection therewith, as the Lender may request, acting reasonably. 11.14 NOTICE OF CERTAIN EVENTS The Borrower and the Guarantor shall advise the Lender forthwith upon the occurrence of any of the following events: 11.14.1 The commencement of any proceeding or investigation by or before any governmental body and any action or proceeding before any court or arbitrator against the Guarantor, the Restricted Subsidiaries, or any of their property, assets or activities which, in the event that a decision is rendered which is adverse to them, could constitute a Material Adverse Change; 11.14.2 Promptly upon the occurrence thereof, written notice of (a) a Reportable Event with respect to any Plan; (b) the institution of any steps by the Guarantor, the Borrower, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (c) the institution of any steps by the Guarantor or any ERISA Affiliate to withdraw from any Plan; (d) a non-exempt "prohibited transaction" within the meaning of Section 406 of the ERISA in connection with any Plan; (e) any material increase in the contingent liability of the Guarantor or any Subsidiary with respect to any post-retirement welfare liability; or (f) the taking of any action by, or 46 the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labour or the PBGC with respect to any of the foregoing; 11.14.3 The occurrence of any Material Adverse Change (considered on a Consolidated basis) which is known to the Borrower or the Guarantor, acting reasonably; 11.14.4 Any Default or Event of Default, specifying in each case the relevant details and the action contemplated in this respect. 11.15 ACCURACY OF REPORTS All information, reports, statements and other documents and data provided to the Lender, whether pursuant to this Article or any other provisions of this Agreement shall, at the time same shall be provided, be true, complete and accurate in all material respects to the extent necessary to provide the Lender with a true and accurate understanding of their effect. 11.16 LENDER'S OPTION TO OBTAIN IMPROVED TERMS AND CONDITIONS The Lender shall immediately be notified of the terms and conditions of any Debt to be created by the Borrower or the Guarantor. The Lender shall have the option to require the Borrower and the Guarantor to amend this Agreement to incorporate the provisions of any such agreement relating to Debt if the Lender so wishes, it being understood that the provisions which may be so incorporated shall not extend to pricing, Margins and, with respect to any demand facilities, the maturity date of such facilities. 11.17 DESIGNATION OF RESTRICTED SUBSIDIARIES The Guarantor may designate any Subsidiary a Restricted Subsidiary by giving written notice to the Lender that the Board of Directors of the Guarantor has made such designation, provided, however, no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, no Default or Event of Default shall exist. Any such designation shall be irrevocable. 12 NEGATIVE COVENANTS For so long as the Loan or any other amounts payable hereunder to the Lender remain outstanding and unpaid, or the Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied), each of the Borrower and the Guarantor, for itself and each of the other Restricted Subsidiaries and with respect to itself and each of the other Restricted Subsidiaries, agrees that it shall not do any of the following: 47 12.1 LIQUIDATION, AMALGAMATION, MERGERS, CONSOLIDATIONS AND SALE OF ASSETS 12.1.1 Consolidate or amalgamate with or be a party to a merger with any other corporation, or sell, lease or otherwise dispose of all or any substantial part (as defined in subsection 12.1.4) of Consolidated Assets; provided, however, that: (a) any Restricted Subsidiary may merge or amalgamate or consolidate with or into the Guarantor or any Wholly-owned Restricted Subsidiary so long as in any merger or consolidation involving the Guarantor, the Guarantor shall be the surviving or continuing corporation; (b) the Guarantor may consolidate or amalgamate or merge with any other corporation if (i) in the case of any consolidation or merger, the purchasing, surviving or continuing corporation shall be the Guarantor, or in the case of any amalgamation, the Guarantor's existence shall continue with the amalgamation and all obligations hereunder and under the IPG Guarantee shall constitute obligations of the amalgamated entity and (ii) at the time of such amalgamation, consolidation or merger after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; and (c) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Guarantor or any Wholly-owned Restricted Subsidiary. 12.1.2 Permit any Restricted Subsidiary to issue or sell any shares of stock of any class of such Restricted Subsidiary (including as "stock" for the purposes of this Section 12.1, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) to any Person other than the Guarantor or a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Guarantor and/or a Restricted Subsidiary whereby the Guarantor and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. 12.1.3 Sell, transfer or otherwise dispose of any shares of stock of any Restricted Subsidiary (except to qualify directors) and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Guarantor or a Wholly-owned Restricted Subsidiary) any shares of stock of any other Restricted Subsidiary, unless: (a) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by the Guarantor and by 48 every other Restricted Subsidiary shall be sold, transferred or disposed of as an entirety; and (b) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Guarantor and its Restricted Subsidiaries; provided, however, that nothing in subsections 12.1.3 and 12.1.4 shall permit any disposition by the Guarantor of any of the limited partnership units or other interest in the Borrower, the disposition by the Borrower of the shares of Canco, any disposition of the shares of IPG Finance LLC by Canco, or any disposition of the shares of IPG (US) Holdings Inc. or IPG (US) Inc.. 12.1.4 As used in this Section 12.1, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Guarantor and its Restricted Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Guarantor and its Restricted Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such sale, lease or other disposition, exceeds 10% of Consolidated Assets, determined as of the end of the immediately preceding fiscal quarter. For the purpose of making any determination of "substantial part", any sale, lease or other dispositions of assets of the Guarantor and its Restricted Subsidiaries shall not be included if and to the extent the net proceeds are segregated from the general accounts of the Guarantor and any Restricted Subsidiary, invested in Cash Equivalents until applied in accordance with clauses (1) or (2) below, and either (1) within one year after such sale, lease or other disposition, are used to acquire Like Assets, or (2) within one year after such sale, lease or disposition, are applied to the optional prepayment of Indebtedness for borrowed money on a PARI PASSU basis with all other lenders owed any such Indebtedness for borrowed money. 12.2 LIMITATIONS ON DEBT 12.2.1 Create, assume or incur or in any manner become liable in respect of any Debt, except: (a) Funded Debt of the Guarantor and its Restricted Subsidiaries permitted by subsection 11.11.1; (b) Current Debt of the Guarantor or any Restricted Subsidiary, provided that during the twelve-month period immediately preceding the date of any determination hereunder, there shall have been a period of 30 consecutive days 49 during which Current Debt of the Guarantor and its Restricted Subsidiaries shall be an amount no greater than the amount of additional Funded Debt that could have been issued on each such day of said 30-day period within the limitations of subsection 12.2.1(a); (c) in addition to the limitations with respect to Debt pursuant to the foregoing paragraphs (a) and (b), in the case of (i) unsecured Debt of any Restricted Subsidiary ("UNSECURED PRIORITY DEBT") and (ii) Debt of the Guarantor and its Restricted Subsidiaries secured by Permitted Charges ("SECURED PRIORITY DEBT", and, collectively with the Unsecured Priority Debt being herein referred to as "PRIORITY DEBT"), at the time of issuance of any such Priority Debt and after giving effect thereto and the application of the proceeds thereof, (x) the aggregate principal amount of Priority Debt shall not exceed an amount equal to Cdn. $60,000,000, (y) the aggregate amount of Secured Priority Debt shall not exceed 20% of Consolidated Net Worth and (z) all such Priority Debt shall have been incurred within the other applicable limitations of this Section 12.2; and (d) Debt of a Restricted Subsidiary to the Guarantor or to a Wholly-owned Restricted Subsidiary. 12.2.2 Any corporation which becomes a Restricted Subsidiary after the date hereof shall, for all purposes of this Section 12.2, be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. 12.2.3 If the Guarantor or any Restricted Subsidiary incurs additional Debt in excess of Cdn. $50,000,000 in connection with an acquisition which is permitted as a Restricted Investment, such Debt shall be Funded Debt and shall be subject to terms and conditions no more restrictive than those contained in the Note Agreement. 12.2.4 The Borrower shall not, individually or collectively with its Subsidiaries, IPG Finance LLC and Canco, as well as with IPG (US) Acquisition Corporation, IPG (US) Holdings Inc. and IPG (US) Inc., incur or have at any time any Indebtedness in excess of an aggregate amount of US $100,000, save with respect to the liability of the Borrower in respect of the Loan. 12.3 BORROWER'S BUSINESS Permit any of the Borrower, Canco or IPG Finance LLC to carry on any business, other than taking such steps as may be necessary to maintain its existence or to hold securities of Restricted Subsidiaries. 50 12.4 CHARGES Create, incur, assume, enter into or permit to subsist, directly or indirectly, any Charge on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except Permitted Charges, and only to the extent that the aggregate amount secured by Permitted Charges does not exceed 20% of Consolidated Net Worth, and, together with the aggregate Unsecured Priority Debt (as defined in subsection 12.2.1 (c)), does not exceed Cdn. $60,000,000. 12.5 RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS Make any Restricted Investment or Restricted Payment, if, after giving effect thereto, the sum of: 12.5.1 the aggregate amount of Restricted Payments made during the period from and after January 1, 1996 to and including the date of the making of the Restricted Payment in question, plus 12.5.2 the aggregate amount of all Restricted Investments made by the Guarantor or any Restricted Subsidiary during said period would exceed the sum of (a) Cdn. $85,000,000 plus (b) 75% of Consolidated Net Income for such period, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure for any fiscal period within such period, then minus 100% of such deficit) plus (c) an amount equal to the aggregate net cash proceeds received by the Guarantor from the issuance or sale after the Closing Date (other than to the Guarantor or any Subsidiary) of shares of common stock of the Guarantor (such sum described in clauses (a), (b) and (c) being referred to as the "AVAILABLE POOL"). In addition to and not in limitation of the foregoing restrictions, the Guarantor will not, and will not permit any Restricted Subsidiary to make any Investment in or make any Restricted Payment to, any Unrestricted Subsidiary: 12.5.3 not engaged in a business substantially related to the business of the Guarantor and its Restricted Subsidiaries if, after giving effect thereto, the sum of (a) all Investments in such Unrestricted Subsidiaries made by the Guarantor and its Restricted Subsidiaries during the period from and after January 1, 1996 plus (b) the aggregate amount of Restricted Payments made by the Guarantor and its Restricted Subsidiaries to such Unrestricted Subsidiaries during the period from and after 51 January 1, 1996, would exceed an amount equal to the Available Pool minus Cdn. $70,000,000; or 12.5.4 if, after giving effect thereto, the sum of (a) all Investments in such Unrestricted Subsidiaries made by the Guarantor and its Restricted Subsidiaries during the period from and after January 1, 1996 plus (b) the aggregate amount of Restricted Payments made by the Guarantor and its Restricted Subsidiaries to such Unrestricted Subsidiaries during the period from and after the Closing Date, would exceed US $20,000,000. In addition to the foregoing restrictions, the Guarantor will not make any Restricted Payments or any Restricted Investment if, at the time thereof or after giving effect thereto, any Default or Event of Default shall exist. The Guarantor will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. For the purposes of this section 12.5, the amount of any Restricted Payment declared, paid or distributed in property shall be deemed to be the greater of the book value or fair market value (as determined in good faith by the Board of Directors of the Guarantor) of such property at the time of the making of the Restricted Payment in question. In valuing any Restricted Investments for the purpose of applying the limitations set forth in this Section 12.5, such Restricted Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For the purposes of this Section 12.5, at any time when a corporation becomes a Restricted Subsidiary, all Restricted Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. 12.6 TRANSACTIONS WITH AFFILIATES Enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Guarantor's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favourable to the Guarantor and such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 52 12.7 TERMINATION OF PENSION PLANS Withdraw, or permit any Subsidiary to withdraw, from any Multiemployer Plan or permit any employee benefit plan maintained by it to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Charge on any property of the Guarantor or any Subsidiary pursuant to section 4068 of ERISA. 12.8 OWNERSHIP OF SUBSIDIARIES Permit each of Intertape Polymer Inc. and Intertape Polymer Corporation to be other than Wholly-owned Subsidiaries, or at any time own less than 80% of the Voting Stock of its Restricted Subsidiaries, together with such Securities of the Restricted Subsidiaries as are necessary to provide the Guarantor with an economic interest of not less than 80% of each Restricted Subsidiary. 13 EVENTS OF DEFAULT AND REALIZATION 13.1 EVENT OF DEFAULT The occurrence of any of the following events during the Term shall constitute an Event of Default unless remedied within the prescribed delays or renounced to in writing: 13.1.1 If the Borrower fails to make any payment of interest or principal with respect to the Loan when due, or fails to pay any other amount due to the Lender within two (2) Business Days after notice thereof; or 13.1.2 If the Guarantor or any one or more of the Restricted Subsidiaries fails to respect any of its other obligations and undertakings hereunder or under the IPG Guarantee or another undertaking of the Guarantor or any of the Restricted Subsidiaries with respect to the Loan not otherwise contemplated by this Section 13.1 and has not remedied the Default within ten (10) days following the date on which the Lender has given written notice to the Borrower; or 13.1.3 If the Guarantor or any of the Restricted Subsidiaries (a) is generally not paying, or admits in writing its inability to pay, its debts as they become due; or (b) commits another act of bankruptcy within the meaning of the Bankruptcy and Insolvency Act (Canada); or (c) makes an assignment in favour of its creditors; or (d) files or consents to the filing of a petition for a receiving order or a proposal within the meaning of the Bankruptcy and Insolvency Act (Canada); or (e) is insolvent or bankrupt, or makes a motion to a tribunal to name a trustee, receiver, liquidator or sequestrator with respect to its property; or (f) files or consents in any way to the 53 filing of a petition for relief or reorganization or arrangement, or otherwise commences a proceeding with respect to itself or its property under the provisions of any law contemplating reorganizations, proposals, rectification, compromise or liquidation, in any jurisdiction whatsoever (hereinafter in this subsection 13.1.3 called a "PROCEEDING"); or (g) is the object of a Proceeding which is not settled or withdrawn within a delay of five (5) Business Days; or (h) if a trustee, receiver, liquidator or sequestrator with respect to the Guarantor, any of the Restricted Subsidiaries or any of their property is named; or (i) if the Guarantor or any of the Restricted Subsidiaries consent, approve or accept any Proceeding or the nomination of any trustee, receiver, liquidator or sequestrator with respect to it or its property; provided that, if a Proceeding is commenced against the Guarantor or a Restricted Subsidiary, the Borrower or the Restricted Subsidiaries shall have the right to contest in good faith, if the Lender is absolutely satisfied, in its complete discretion, that the repayment of the Loan, the interest and the accessories relating thereto and the ability of the Borrower and the Guarantor to service their Debt shall not be compromised; or 13.1.4 If property of the Guarantor or any of the Restricted Subsidiaries having a total value of more than US $2,500,000 is the object of a seizure or of a taking of possession or other Proceeding by a creditor, provided that if such legal proceedings are commenced against the Guarantor or a Restricted Subsidiary, the Guarantor or the Restricted Subsidiary shall have the right to contest in good faith, if the Lender is absolutely satisfied, in its complete discretion, that the repayment of the Loan, the interest and the accessories relating thereto and the ability of the Borrower and the Guarantor to service its Debt will not be compromised; or 13.1.5 If any statement, attestation, financial statement, report, data, representation or warranty which was given by, for the account of or in the name of the Guarantor or any of the Restricted Subsidiaries to the Lender, with respect to this Agreement or the IPG Guarantee, is revealed to be false, misleading or incomplete in any material respect at any time, or if the auditors certifying the financial statements in accordance with subsection 11.13.2 insert a material qualification in their opinion; or 13.1.6 If the Guarantor or any of the Restricted Subsidiaries is in default with respect to any Material Debt (other than amounts due to the Lender hereunder), if: (a) such default was caused by the failure to make any payment of an amount in excess of US $5,000,000 when due, and such default is not remedied within ten (10) days of its occurrence; or 54 (b) such default could permit the creditor of such obligations to cause an amount in excess of US $5,000,000 to become due and payable prior to its stated maturity or scheduled payment date; or 13.1.7 If a judgment is rendered by a competent tribunal against the Guarantor or any of the Restricted Subsidiaries in an aggregate amount in excess of US $2,500,000 (net of applicable insurance coverage pursuant to which liability is acknowledged in writing by the insurer to the Agent on behalf of the Lender) and remains undischarged for a period ending not more than five (5) Business Days before the date on which such judgment becomes executory; 13.1.8 If IPG Finance LLC assigns or transfers any of its rights against ATC or IPG (US) Acquisition Corporation with respect to amounts owed to it from either or both of them, other than to the Lender; 13.1.9 If the Notes become payable in advance following a Change in Control, as defined in the Note Agreement; 13.1.10 If in the opinion of the Lender, acting in good faith, there is a Material Adverse Change, on a Consolidated basis. 13.2 REMEDIES If an Event of Default occurs under subsection 13.1.3, the Loans shall immediately become due and exigible, without presentation, demand, protest or other notice of any nature, to which the Borrower hereby expressly renounces. If any other Event of Default occurs and is continuing, the Lender may declare immediately due and exigible, without presentation, demand, protest or other notice of any nature, to which the Borrower hereby expressly renounces, notwithstanding any provision to the contrary effect in this Agreement or in the IPG Guarantee: 13.2.1 the entire amount of the Loan, including the amount corresponding to the face amount of all Letters of Credit then outstanding, in principal and interest, notwithstanding the fact that one or more of the holders of the Letters of Credit issued pursuant to the provisions hereof have not demanded payment in whole or in part or have demanded only partial payment from the Lender. Neither the Guarantor nor the Borrower shall have the right to invoke against the Lender any defence or right of action, indemnification or compensation of any nature or kind whatsoever that the Borrower may at any time have or have had with respect to any holder of one or more of the Letters of Credit issued in accordance with the provisions hereof. Any amounts paid to the Lender in respect of any outstanding Letters of Credit shall be retained by the Lender to be applied against such Letters of Credit when payment thereon is requested, with any balance, after payment of all Loans, to be returned to the Borrower; and 55 13.2.2 an amount equal to the amount of losses, costs and expenses assumed by the Lender and referred to in Section 7.2; and the Credit shall cease and as and from such time shall be annulled, and the Lender may exercise all of its rights and recourses under the provisions of this Agreement and the Guarantee. For greater certainty, from and after the occurrence of any Default or Event of Default, the Lender shall not be obliged to make any further Advances under the Credit. 13.3 BANKRUPTCY AND INSOLVENCY If the Guarantor or any of the Restricted Subsidiaries files a notice of intention to file a proposal, or files a proposal under the Bankruptcy and Insolvency Act, or files a petition under the US Bankruptcy Code, or if the Guarantor or any of the Restricted Subsidiaries obtains the permission of a Canadian court to file a Plan of Arrangement under the Companies' Creditors Arrangements Act, and if a stay of proceedings is obtained or ordered under the provisions of any such statute, without prejudice to the Lender's rights to contest such stay of proceedings, each of the Borrower and the Guarantor covenants and agrees to continue to pay interest on all amounts due to the Lender. In this regard, each of the Borrower and the Guarantor acknowledges that permitting the Borrower to continue to use the proceeds of the Loan constitutes valuable consideration provided after the filing of any such proceeding in the same way that permitting the Borrower to use leased premises constitutes such valuable consideration. 13.4 APPLICATION OF PROCEEDS The Lender may apply the proceeds of realization of the property of the Borrower and the Guarantor, and of any credit or compensating balance, in reduction of the part of the Indebtedness of the Borrower to the Lender (in principal, interest or accessories) which the Lender judges appropriate. 13.5 NOTICE Except where otherwise expressly provided herein, no notice or demand of any nature is required to be given to the Borrower or the Guarantor by the Lender in order to put the Borrower and the Guarantor in default, which shall occur by the simple lapse of time granted to execute an obligation or by the simple occurrence of a Default. 13.6 COSTS If an Event of Default occurs, and within the limits contemplated by Section 11.12, the Lender may impute to its account and pay to other persons reasonable sums for services rendered with respect to the realization, recovery, sale, transfer, delivery and obtention of payment, and may 56 deduct the amount of such costs and payments from the proceeds which it receives therefrom. The balance of such proceeds may be held by the Lender and, when the Lender decides it is opportune, acting reasonably, may be applied to the account of the part of the Indebtedness of the Borrower and the Guarantor to the Lender which the Lender deems preferable, without prejudice to the rights of the Lender against the Borrower and the Guarantor for any loss of profit. 13.7 RELATIONS WITH THE BORROWER The Lender may grant delays, take security or renounce thereto, accept compromises, grant acquittances and releases and otherwise negotiate with the Borrower and the Guarantor as it deems advisable without in any way diminishing the liability of the Borrower or the Guarantor. 14 JUDGMENT CURRENCY 14.1 RULES OF CONVERSION If for the purpose of obtaining judgment in any court or for any other purpose hereunder, it is necessary to convert an amount due, advanced or to be advanced hereunder from the currency in which it is due (the "FIRST CURRENCY") into another currency (the "SECOND CURRENCY") the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Lender could purchase, in the Canadian money market or the Canadian exchange market, as the case may be, the First Currency with the Second Currency on the date on which the judgment is rendered, the sum is exigible or advanced or to be advanced, as the case may be. Each of the Borrower and the Guarantor agrees that its obligations in respect of any First Currency due from it to the Lender in accordance with the provisions hereof shall, notwithstanding any judgment rendered or payment made in the Second Currency, be discharged by a payment made to the Lender on account thereof in the Second Currency only to the extent that, on the Business Day following receipt of such payment in the Second Currency, the Lender may, in accordance with normal banking procedures, purchase on the Canadian money market or the Canadian foreign exchange market, as the case may be, the First Currency with the amount of the Second Currency so paid or which a judgment rendered exigible; and if the amount of the First Currency which may be so purchased is less than the amount originally due in the First Currency, each of the Borrower and the Guarantor agrees as a separate and independent obligation and notwithstanding any such payment or judgment to indemnify the Lender against such deficiency. 14.2 DETERMINATION OF AN EQUIVALENT CURRENCY If, in its discretion, the Lender chooses or, pursuant to the terms of this Agreement, is obliged to choose the equivalent in Canadian Dollars of any securities or amounts expressed in US 57 Dollars or the equivalent in US Dollars of any securities or amounts expressed in Canadian Dollars, the Lender, in accordance with the conversion rules as stipulated in Section 14.1: 14.2.1 on the date indicated in the Notice of Borrowing as the date of a request for an Advance; and 14.2.2 at any other time which in the opinion of the Lender is desirable; may, using the spot rate of the Lender on such date, determine the equivalent in Canadian Dollars or in US Dollars, as the case may be, of any Security or amount expressed in the other currency pursuant to the terms hereof. Immediately following such determination, the Lender shall inform the Borrower and the Guarantor of the conclusion which the Lender has reached. 15 ASSIGNMENT 15.1 ASSIGNMENT BY THE BORROWER The rights of the Borrower under the provisions hereof are purely personal and may not be transferred or assigned, and the Borrower may not transfer or assign any of its obligations, such assignment being null and of no effect opposite the Lender and rendering any balance outstanding of the amounts referred to in Section l3.2 immediately due and exigible at the option of the Lender and further releasing the Lender from any obligation to make any further Advances under the provisions hereof. 15.2 ASSIGNMENTS AND TRANSFERS BY THE LENDER 15.2.1 The Lender may transfer 50% of its Participation under Facility B to Comerica Bank at any time. If by March 31, 1998, the Guarantor and the Restricted Subsidiaries have not completed a private placement and remitted the proceeds thereof to the Lender in full payment of the Loans under Facility B, the Lender may, at its own cost, assign or transfer to a financial institution entitled to lend money in Canada (the "ASSIGNEE") in accordance with this Article 15 any or all of its rights, benefits and obligations under Facility A and/or Facility B hereunder with the prior consent of the Borrower, which will not be unreasonably withheld or delayed. After the occurrence of a Default, the Lender may transfer all or any part of its rights, benefits and obligations hereunder to any Person, without the consent of the Borrower, but upon notice to the Borrower. 15.2.2 Any such assignment or transfer shall be for a minimum amount of US $5,000,000 and in multiples of US $1,000,000 thereafter, of any of Facilities A or B. 58 15.2.3 Notwithstanding subsection 15.2.1, the Lender shall be entitled to assign or transfer, at its own cost, in accordance with the other provisions of this Section 15 (including 15.5), its rights, benefits and obligations hereunder, in whole or in part, to a parent, a Subsidiary or an Affiliate of the Lender, provided that there are no resulting adverse tax consequences for the Borrower. 15.3 TRANSFER AGREEMENT If the Lender wishes to assign or transfer all or any of its rights, benefits and obligations hereunder in accordance with Section 15.2, then such assignment or transfer shall be effected by the delivery by the Lender to the Borrower of a duly completed and executed Transfer Agreement whereupon, to the extent that in such Transfer Agreement the Lender seeks to assign or transfer its rights and obligations hereunder: 15.3.1 the Lender shall be released from further obligations to the Borrower with respect to the portion of the obligations of the Lender assumed by the Assignee; 15.3.2 the Assignee shall assume the obligations of the Lender and acquire the rights of the Lender in respect of the Borrower and the Guarantor, without novation of the Borrower's obligations; 15.3.3 the Lender and the Assignee shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the Assignee been an original party hereto with the obligations assumed and the rights acquired by it as a result of such assignment or transfer; and 15.3.4 the Borrower and the Guarantor shall execute such documents and perform such acts as may be required to give effect to the transfer or assignment. 15.4 NOTICE The Lender shall promptly deliver a copy of any Transfer Agreement to the Borrower and the Guarantor. 15.5 SUB-PARTICIPATIONS The Lender may, at its own cost, grant one or more sub-participations in its rights, benefits and obligations hereunder, provided that, notwithstanding any such sub-participation, the Lender shall remain, insofar as the Borrower is concerned, as the Lender responsible hereunder, and the Borrower shall not be obliged to recognize any such sub-participant as having the rights against it which it would have if it had been a party hereto. 59 15.6 GENERAL Notwithstanding anything contained in this Article: 15.6.1 the Lender shall act as agent (the "AGENT") for each Assignee and, in this connection, with respect to all decisions, notices and other matters relating to anything referred to in this Agreement, the Borrower shall only be obliged to give notice to or request consents from the Lender; 15.6.2 subject to the provisions of the interlender agreement referred to in subsection 15.6.5, all decisions to be taken by the Lender with respect to any matter referred to in this Agreement must be taken by the Lender and the Assignee(s) and must first be approved by a majority of the Lender and the Assignee(s), acting together, holding at least 66 2/3% of the Credit; 15.6.3 following any assignment, the term "Lender" shall mean, as the context allows, the Lender in its role as Agent or the Lender and the Assignees collectively; 15.6.4 the Borrower and the Guarantor shall pay an agency fee to be negotiated between them and the Lender; 15.6.5 the Lender and the Assignee(s) shall enter into an interlender agreement on terms and conditions to be negotiated among them; and 15.6.6 the amounts payable by the Borrower under this Agreement shall not increase, whether in respect of withholding on account of taxes or otherwise, as a result of any such assignment or transfer to an Assignee which is organized under the laws of a jurisdiction outside of the United States of America, unless such Assignee provides the Borrower with an IRS Form 4224 certifying that the interest paid to such Assignee is in connection with a U.S. trade or business conducted by the Assignee and therefore exempt from U.S. withholding taxes. 16 RELATIONSHIP WITH AND BETWEEN THE LENDERS In the event that Comerica Bank (herein ("CB") takes a 50% Participation under Facility B, the following provisions shall apply: 16.1 ALLOCATION AS BETWEEN THE LENDERS All Advances made under Facility A shall be made solely by TD. All Advances made under Facility B shall be allocated between TD and CB in accordance with their respective Participations, and any prepayments will be allocated accordingly. The Borrower shall request 60 its initial Advance equally from both Lenders under Facility B, and will ensure that all renewals and conversions of such Advances are effected with the Lender which made such initial Advance. 16.2 ACCOUNT OPERATIONS The Borrower will maintain accounts at a branch of each of the Lenders and will deal with each Lender separately with respect to the administration of Advances and Loans, including Advances by way of Letter of Credit. The Fees payable in respect of Facility B pursuant to subsection 5.10.2 shall be paid to the Lenders in accordance with their respective Participations. 16.3 SHARING OF INFORMATION The Borrower and the Guarantor hereby authorize the Lenders to provide each other with any and all documentation and information which they have at any time concerning the financial position of any of the Guarantor and its Subsidiaries. 16.4 LIABILITY OF THE LENDERS No Lender shall have any responsibility, (a) to the Borrower or the Guarantor on account of the failure of any other Lender to perform its obligations hereunder, or (b) to any other Lender on account of the failure of the Borrower to perform its obligations hereunder. Each Lender severally represents and warrants to the other that it has made its own independent investigation of the financial condition and affairs of the Borrower and the Guarantor in connection with the making and continuation of its Participation in the Loan hereunder and has not relied on any information provided to such Lender by another Lender in connection herewith, and each Lender represents and warrants to the other that it shall continue to make its own independent appraisal of the creditworthiness of the Borrower and the Guarantor while the Loan is outstanding or the Lenders have any obligations hereunder. 16.5 INTERLENDER AGREEMENT The Lenders shall enter into an interlender agreement substantially in the form of Schedule "K" in order to govern their relationship hereunder. 61 17 MISCELLANEOUS 17.1 NOTICES Except where otherwise specified herein, all notices, requests, demands or other communications between the parties hereto shall be in writing and shall be deemed to have been duly given or made to the party to whom such notice, request, demand or other communication is given or permitted to be given or made hereunder, when delivered to the party (by certified or registered mail, postage prepaid, or by telegraph, telex, facsimile or by physical delivery) to the address of such party and to the attention indicated under the signature of such party or to any other address which the parties hereto may subsequently communicate to each other in writing. Any notice given by mail is deemed to have been received on the second Business Day following the day on which the envelope containing the notice has been deposited in a post office or in a mail box in the United States of America. If normal postal or telegraph service is interrupted by strike, work slow-down, fortuitous event or other cause, the party sending the notice shall use such services which have not been interrupted or shall deliver such notice by messenger in order to ensure its prompt receipt by the other party. 17.2 AMENDMENT AND WAIVER The rights and recourses of the Lender under this Agreement and the IPG Guarantee are cumulative and do not exclude any other rights and recourses which the Lender might have, and no omission or delay on the part of the Lender in the exercise of any right shall have the effect of operating as a waiver of such right, and the partial or sole exercise of a right or power will not prevent the Lender from exercising thereafter any other right or power. The provisions of this Agreement may only be amended or waived by an instrument in writing (and not orally) in each case signed by the requisite majority of Lenders, as will be determined in accordance with the provisions of the interlender agreement to be entered into between them. 17.3 DETERMINATIONS FINAL In the absence of any manifest error, any determinations to be made by the Lender in accordance with the provisions hereof, when made, are final and irrevocable for all parties. 17.4 ENTIRE AGREEMENT The entire agreement between the parties is expressed herein, and no variation or modification of its terms shall be valid unless expressed in writing and signed by the parties. All previous agreements, promises, proposals, representations, understandings and negotiations between the parties hereto which relate in any way to the subject matter of this Agreement are hereby deemed to be null. 62 17.5 INDEMNIFICATION AND COMPENSATION In addition to the other rights now or hereafter conferred by law and those described in Section 8.11, and without limiting such rights, if a Default or Event of Default should occur, the Lender is hereby authorized by the Borrower and the Guarantor, at any time and from time to time, subject to the obligation to give notice to the Borrower and the Guarantor subsequently and within a reasonable delay, to indemnify, compensate, use and allocate any deposit (general or special, term or demand, including, without limitation, any debt evidenced by certificates of deposit, whether or not matured) and any other debt at any time held or due by the Lender to the Guarantor or the Restricted Subsidiaries or to its or their credit or its or their account, with respect to and on account of any obligation and indebtedness of the Borrower and the Guarantor to the Lender in accordance with the provisions hereof or the IPG Guarantee, including, without limitation, the accounts of any nature or kind which flow from or relate to this Agreement, whether or not the Lender has made demand under the terms hereof or have declared the amounts referred to in Section 13.2 as exigible in accordance with the provisions of that Section and even if such obligation and Debt or either of them is a future or unmatured Debt. 17.6 BENEFIT OF AGREEMENT This Agreement shall be binding upon and ensure to the benefit of each party hereto and its successors and permitted assigns. 17.7 COUNTERPARTS This Agreement may be signed in any number of counterparts, each of which shall be deemed to constitute an original, but all of the separate counterparts shall constitute one single document. 17.8 APPLICABLE LAW This Agreement, its interpretation and its application shall be governed by the Laws of the State of New York. 17.9 SEVERABILITY Each provision of this Agreement is separate and distinct from the others, such that any decision of a court or tribunal to the effect that any provision of this Agreement is null or unenforceable shall in no way affect the validity of the other provisions of this Agreement or the enforceability thereof. Any provision of this agreement which is prohibited or un-enforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render 63 unenforceable such provision in any other jurisdiction. To the extent permitted by applicable Laws, the Guarantor and the Restricted Subsidiaries hereby waive any provision of any Laws which renders any provision hereof prohibited or unenforceable in any respect. 17.10 FURTHER ASSURANCES The Guarantor covenants and agrees on its own behalf and on behalf of each of the Restricted Subsidiaries that, at the request of the Lender, the Guarantor and each of the Restricted Subsidiaries will at any time and from time to time execute and deliver such further and other documents and instruments and do all acts and things as the Lender in its reasonable discretion requires in order to evidence the indebtedness of the Borrower and the Guarantor under this Agreement, under the IPG Guarantee, or otherwise. 17.11 GOOD FAITH AND FAIR CONSIDERATION Each of the Borrower and the Guarantor acknowledges and declares that it has entered into this Agreement freely and of its own will. In particular, each of the Borrower and the Guarantor acknowledges that the Agreement was negotiated by it and by the Lender in good faith, and that there was no exploitation of the Borrower or the Guarantor by the Lender, nor is there any serious disproportion between the consideration provided by the Lender and that provided by the Borrower and the Guarantor. 17.12 INDEMNITY Each of the Guarantor and the Borrower agrees to indemnify and defend the Lender and its directors, officers, agents and employees from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses of any kind which at any time or from time to time may be asserted against or incurred or paid by any of them for or in connection with: (i) the participation of the Lender in the transactions contemplated by this Agreement, (ii) the role of the Lender in any investigation, litigation or other proceeding brought or threatened relating to the Credit, (iii) any liability arising directly or indirectly from or relating to the presence on or under or the release or migration from any property or into the environment of any hazardous material, and/or (iv) the compliance with or enforcement of any of their rights or obligations hereunder, including without limitation: 17.12.1 the fees and disbursements of counsel; and 17.12.2 the costs of defending, counterclaiming or claiming over against third parties in respect of any action or matter and any cost, liability or damage arising out of any settlement; 64 other than losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the indemnified party, as determined by a final judgment of a court of competent jurisdiction. 17.13 JURISDICTION AND SERVICE IN RESPECT OF THE GUARANTOR AND THE BORROWER Any legal action or proceeding with respect to this Agreement or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower and the Guarantor hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the Borrower and the Guarantor hereby irrevocably and unconditionally waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such respective jurisdictions. Each of the Borrower, the Guarantor and Lender hereby irrevocably and unconditionally waives trial by jury. Each of the Borrower and the Guarantor further consents that all service of process may be made by delivery to it at the address of the Borrower or the Guarantor, as the case may be, set forth on the signature page hereof or to its agent referred to below at such agent's address set forth below and that service so made shall be deemed to be completed upon actual receipt. Each of the Borrower and the Guarantor for itself hereby irrevocably appoints CT Corporation System with an office on the date hereof at 1633 Broadway, New York, New York, 10019, as its agent for the purpose of receiving service of any process within the State of New York. Nothing contained in this Section 16.13 shall affect the right of the Lender to serve legal process in any other manner permitted by Law or to bring any action or proceeding in the courts of any jurisdiction against the Borrower or the Guarantor or to enforce a judgment obtained in the courts of any other jurisdiction. 17.14 UNDERTAKING AND REPRESENTATION OF THE TORONTO-DOMINION BANK The Toronto-Dominion Bank shall provide the Borrower with an IRS Form 4224 certifying that, and represents to the Borrower and the Guarantor that, the interest paid to it hereunder is in connection with a U.S. trade or business conducted by it and therefore exempt from U.S. withholding taxes. 17.15 LANGUAGE 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, 65 avis donnes et procedures judiciaires intentees, directement ou indirectement, relativement ou a la suite de la presente convention. 18 FORMAL DATE 18.1 FORMAL DATE For the purposes of convenience, this Agreement may be referred to as bearing Formal Date of December 15, 1997 notwithstanding its actual date of signature. IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT ON THE DATE AND AT THE PLACE FIRST HEREINABOVE MENTIONED. IPG HOLDINGS LP, represented by its INTERTAPE POLYMER GROUP INC. General Partner, INTERTAPE POLYMER INC. Per:_____________________________ Per:_____________________________ Per:_____________________________ Per:_____________________________ Address:- Address: 110 E Montee de Liesse - - St. Laurent, Quebec - - H4T 1N4 Attention: Chief Financial Officer Attention: Chief Financial Officer Telephone: ( )_____-________ Telephone: ( )_____-________ Fax: ( )_____-________ Fax: ( )_____-________ 66 THE TORONTO-DOMINION BANK Per:_____________________________ Address: 909 Fannin, Suite 1700 Houston, Texas, 77010 ATTENTION: MANAGER, CREDIT ADMINISTRATION Tel: (713) 653-8250 Fax: (713) 951-9921 67 SCHEDULE "A" - LIST OF LENDERS AND PARTICIPATIONS FACILITY A
MAXIMUM LENDER PARTICIPATION (%) PARTICIPATION ($) - ------ ---------------- ----------------- THE TORONTO-DOMINION BANK 100% US $50,000,000
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ FACILITY B
MAXIMUM LENDER PARTICIPATION (%) PARTICIPATION ($) - ------ ---------------- ----------------- THE TORONTO-DOMINION BANK 100% US $25,000,000
SCHEDULE "B" - NOTICE OF BORROWING AND CERTIFICATE TO: [LENDER] Attention: FROM: IPG HOLDINGS LP DATE: 1) This Notice of Borrowing and Certificate is delivered to you pursuant to the credit agreement (the "CREDIT AGREEMENT") dated as of December 15, 1997. All defined terms set forth in this Notice of Borrowing and Certificate shall have the respective meanings set forth in the Credit Agreement. 2) We hereby request an Advance under Facility___ (INDICATE A OR B) pursuant to Sections_________ of the Credit Agreement as follows: (a) Date of Advance: ___________________________________________________ (b) Amount of Advance: _________________________________________________ (c) Type of Advance: ___________________________________________________ (d) Designated Period(s) (if any): _____________________________________ (e) Maturity Date(s) (if applicable): __________________________________ (f) Payment Instruction (if any): ______________________________________ 3) We have understood the provisions of the Credit Agreement which are relevant to the furnishing of this Notice of Borrowing and Certificate. To the extent that this Notice of Borrowing and Certificate evidences, attests or confirms compliance with any covenants or conditions precedent provided for in the Credit Agreement, we have made such examination or investigation as was, in our opinion, necessary to enable us to express an informed opinion as to whether such covenants or conditions have been complied with. 4) WE HEREBY CERTIFY THAT, in our opinion, as of the date hereof: (a) All of the representations and warranties of the Borrower contained in Article 10 of the Credit Agreement are true and correct on and as of the date hereof, except for those, if any, that expressly relate to an earlier date, as though made on and as of the date hereof. (b) All of the covenants of the Borrower contained in Articles 11 and 12 of the Credit Agreement together with all of the conditions precedent to an Advance and all other terms and conditions contained in the Credit Agreement have been fully complied with. (c) No Event of Default has occurred and no Default has occurred and is continuing. Yours truly, IPG HOLDINGS LP, represented by its General Partner, INTERTAPE POLYMER INC. Per:_____________________________ Title: __________________________ SCHEDULE "C" - IPG GUARANTEE GUARANTEE entered into in the City of Montreal, Province of Quebec, as of December 15, 1997, BY: INTERTAPE POLYMER GROUP INC., a company constituted in accordance with the laws of Canada, having its principal place of business at 110E Montee de Liesse, in the City of St. Laurent, Province of Quebec (hereinafter called the "GUARANTOR") IN FAVOUR OF: THE TORONTO-DOMINION BANK, a banking corporation organized under the laws of Canada, acting by and through its Houston Agency, having an office at 909 Fannin Street, Suite 1700, in the City of Houston, State of Texas, 77010 (hereinafter called the "LENDER") WHEREAS pursuant to the Credit Agreement entered into among the Borrower, the Guarantor and the Lender dated as of December 15, 1997 (the "CREDIT AGREEMENT"), the Guarantor has agreed to provide the Lender with a guarantee of the obligations of IPG Holdings LP (the "BORROWER") to the Lender; NOW THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS: 1 GUARANTEE 1.1 GUARANTEE For valuable consideration, the undersigned (herein referred to as the "GUARANTOR") hereby solidarily (jointly and severally) guarantees to the Lender (at the address set out in the Credit Agreement or such other address as the Lender may advise the Guarantor in writing), forthwith after demand therefor (at the Guarantor's address specified in the Credit Agreement or such other address as the Guarantor may advise the Lender in writing), payment of all present and future debts and liabilities, and the performance of all obligations of every nature, absolute or contingent, direct, indirect or otherwise, in any currency, now or at any time and from time to time hereafter due or owing by the Borrower to the Lender, whether arising under the Credit Agreement, from dealings between the Lender and the Borrower, or from any other dealings by which the Borrower may become in any manner whatever liable to the Lender (the "OBLIGATIONS"). The Guarantor expressly renounces to the benefits of division and discussion. 1.2 GUARANTEE ABSOLUTE: The liability of the Guarantor hereunder shall be absolute and unconditional and shall not be affected by: (a) any lack of validity or enforceability of any agreements between the Borrower and the Lender; any change in the time, manner or place of payment of or in any other term of such agreements or the failure on the part of the Borrower to carry out any of its obligations under such agreements; (b) any impossibility, impracticability, frustration of purpose, illegality, FORCE MAJEURE or act of government; (c) the bankruptcy, winding-up, liquidation, dissolution or insolvency of the Borrower, the Lender or any other Person; (d) any lack or limitation of power, incapacity or disability on the part of the Borrower or of the directors, partners or agents thereof or any other irregularity, defect or informality on the part of the Borrower in its obligations to the Lender; (e) any change or changes in the name, corporate existence or structure of the Borrower or the Guarantor; (e) any other law, regulation or other circumstance which might otherwise constitute a defence available to, or a discharge of, the Borrower in respect of any or all of the Obligations. 1.3 RECOVERY AS PRINCIPAL DEBTOR Any amount which may not be recoverable from the Guarantor by the Lender on the basis of a guarantee shall be recoverable by the Lender from the Guarantor as principal debtor in respect thereof and shall be paid to the Lender forthwith after demand therefor. 2 DEALINGS WITH BORROWER AND OTHERS 2.1 NO RELEASE The liability of the Guarantor hereunder shall not be released, discharged, limited or in any way affected by anything done, suffered or permitted by the Lender in connection with any duties or liabilities of the Borrower to the Lender or any security therefor including any loss of or in respect of any security received by the Lender from the Borrower or others. Without limiting the 2 generality of the foregoing and without releasing, discharging, limiting or otherwise affecting in whole or in part the Guarantor's liability hereunder, without obtaining the consent of or giving notice to the Guarantor, the Lender may discontinue, reduce, increase or otherwise vary the credit of the Borrower in any manner whatsoever and may: (a) grant time, renewals, extensions, indulgences, releases and discharges to the Borrower; (b) take or abstain from taking or enforcing securities or collateral from the Borrower or from perfecting securities or collateral of the Borrower; (c) accept compromises from the Borrower; (d) apply all money at any time from the Borrower or from securities upon such part of the Obligations as the Lender may see fit or change any such application in whole or in part from time to time as the Lender may see fit; for greater certainty, the Lender may at any time and from time to time, to the fullest extent permitted by law, set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender to or for the credit of the Guarantor against any and all of the liabilities of the Borrower, whether or not the Lender shall have made any demand under this guarantee. The Lender shall promptly notify the Guarantor after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this paragraph are in addition to other rights and remedies (including without limitation, other rights of set-off) which the Lender may have; and (f) otherwise deal with the Borrower and all other persons and securities as the Lender may see fit, acting reasonably. 2.2 NO EXHAUSTION OF REMEDIES The Lender shall not be bound or obligated to exhaust its recourse against the Borrower or other persons or any securities or collateral it may hold or take any other action before being entitled to demand payment from the Guarantor hereunder. 2.3 ACCOUNTS BINDING UPON THE GUARANTOR Any account settled or stated in writing by or between the Lender and the Borrower shall be accepted by the Guarantor as conclusive evidence, absent manifest error, that the balance or 3 amount thereby appearing due by the Borrower to the Lender is so due. 2.4 NO SET-OFF In any claim by the Lender against the Guarantor, the Guarantor may not assert any set-off or counterclaim that the Guarantor or the Borrower may have against the Lender. In particular, any loss of or in respect of any securities received by the Lender from the Borrower or any other person, and the failure to perfect any mortgage, hypothec, prior claim or security interest of any nature whatsoever, whether occasioned through the fault or negligence of the Lender or otherwise, shall not discharge, limit or lessen the liability of the Guarantor under this guarantee. 3 CONTINUING GUARANTEE This Guarantee shall be a continuing guarantee of the Obligations and shall apply to and secure any ultimate balance due or remaining due to the Lender under or as contemplated by the Credit Agreement or otherwise and shall not be considered as wholly or partially satisfied by the payment or liquidation at any time of any sum of money for the time being due or remaining unpaid to the Lender. This Guarantee shall continue to be effective even if at any time any payment of any of the Obligations is rendered unenforceable or is rescinded or must otherwise be returned by the Lender upon the occurrence of any action or event including the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. The Guarantor expressly waives the provisions of Articles 2353, 2362 and 2366 of the Civil Code of Quebec (the "CCQ"). 4 RIGHT TO PAYMENTS Should the Lender receive from the Guarantor one or more payments on account of the liability under this guarantee, the Guarantor shall not be entitled to claim repayment against the Borrower or the Borrower's estate until the Lender's claims against the Borrower have been paid in full. In the event of the liquidation, winding-up or bankruptcy of the Borrower (whether voluntary or compulsory); or if the Borrower shall make a sale of an enterprise within the meaning of articles 1767 et seq. CCQ or a bulk sale of any of the Borrower's assets within the meaning of any applicable legislation of any other province of Canada or under the Uniform Commercial Code of the USA; or should the Borrower make any proposal, composition or scheme of arrangement with its creditors; then, in any of such events the Lender shall have the right to rank for its full claim and receive all dividends or other payments in respect thereof until its claim has been paid in full and the Guarantor shall remain liable up to the amount guaranteed, less any payments made by the Guarantor, for any balance which may be owing to the Lender by the Borrower; and in the event of the valuation by the Lender of any security held in respect of the Borrower's debts, or of the retention by the Lender of such security, such valuation and/or retention shall not, as between the Lender and the Guarantor, be considered as a purchase of such security, or as 4 payment or satisfaction or reduction of the Borrower's liabilities to the Lender, or any part thereof. 5 TAXES All payments to be made hereunder by the Guarantor shall be made free and clear of deduction for any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority ("TAXES"). If any Taxes are imposed and required to be withheld from any payment hereunder, the Guarantor shall (a) increase the amount of such payment so that the Lender will receive a net amount (after deduction of all taxes, including any Taxes on the amount of any such increase) equal to the amount due hereunder, (b) pay such Taxes to the appropriate taxing authority for the account of the Lender and (c) as promptly as possible thereafter, send the Lender an original receipt showing payment thereof, together with such additional documentary evidence as the Lender may from time to time reasonably require. If the Guarantor fails to perform its obligations under parts (b) or (c) of the preceding sentence, the Guarantor shall indemnify the Lender for any incremental taxes, interest or penalties that may become payable by the Lender as a consequence of such failure. 6 SUBROGATION To the fullest extent permitted by law, the Guarantor hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of the Guarantor's obligations under this Guarantee including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy against the Borrower or any collateral securing any obligation of the Borrower, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right. If any amount shall be paid to the Guarantor in violation of the preceding sentence at any time prior to the indefeasible cash payment in full of the Obligations and all other amounts payable under this Guarantee, such amount shall be held in trust for the benefit of the Lender and shall forthwith be paid to the Lender to be credited and applied to the Obligations and all other amounts payable under this Guarantee. 5 7 GENERAL 7.1 REPRESENTATIONS AND WARRANTIES The Guarantor reiterates the representations and warranties to the Lender it made in the Credit Agreement (which representations and warranties will be deemed to be repeated by the Guarantor on the date of any advance made by the Lender to the Borrower). 7.2 PAYMENT OF FEES AND COSTS The Guarantor agrees to pay on demand all out-of-pocket expenses (including the reasonable fees and expenses of the Lender's counsel) in any way relating to the enforcement or protection of the rights of the Lender hereunder. 7.3 CURRENCY (a) Each payment to be made under this guarantee will be made in US Dollars (the "SPECIFIED CURRENCY"). To the fullest extent permitted by applicable law, any obligation of the Guarantor to make payments under this guarantee in the Specified Currency will not be discharged or satisfied by any tender in any currency other than the Specified Currency. (b) To the fullest extent permitted by applicable law, if any judgment or order expressed in a currency other than the Specified Currency is rendered (i) for any payment of any amount owing in respect of this Guarantee or (ii) in respect of a judgment or order of another court for the payment of any amount described in (i) above, the Lender, after recovery in full of the aggregate amount to which they are entitled pursuant to the judgment or order, will be entitled to receive immediately from the Guarantor the amount of any shortfall of the Specified Currency received by the Lender as a consequence of sums paid in such other currency and will refund promptly to the Guarantor any excess of the Specified Currency received by the Lender as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Specified Currency are converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which the Lender is able, acting in a reasonable manner and in good faith, in converting the currency received into the Specified Currency, to purchase the Specified Currency with the amount of the currency of the judgment or order actually received by the Lender. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange 6 payable in connection with the purchase of or conversion into the Specified Currency. (c) To the fullest extent permitted by applicable law, the indemnities in this Section 7.3 constitute separate and independent obligations of the Guarantor from the other obligations in this Guarantee, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the Lender and will not be affected by judgment being obtained or claim or proof being made for any other sums due in respect of this guarantee. (d) For the purposes of this Section 7.3, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 7.4 DISCHARGE The Guarantor will not be discharged from any of its obligations hereunder except by a release or discharge signed in writing by the Lender. 7.5 ENTIRE AGREEMENT This Guarantee, together with the Credit Agreement, constitutes the entire agreement between the Guarantor and the Lender with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between such parties with respect thereto. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express, implied or statutory, between the parties except as expressly set forth herein. The Lender shall not be bound by any representations or promises made by the Borrower to the Guarantor and possession of this Guarantee by the Lender shall be conclusive evidence against the Guarantor that the Guarantee was not delivered in escrow or pursuant to any agreement that it should not be effective until any condition precedent or subsequent has been complied with and this Guarantee shall be operative and binding notwithstanding the non-execution thereof by any proposed signatory. 7.6 AMENDMENTS AND WAIVERS No amendment to this Guarantee will be valid or binding unless set forth in writing and duly executed by the Guarantor and the Lender. No waiver of any breach of any provision of this Guarantee will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, will be limited to the specific breach waived. 7 7.7 SEVERABILITY If any provision of this Guarantee is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability will attach only to such provision or part thereof and the remaining part of such provision and all other provisions hereof will continue in full force and effect. 7.8 INTERPRETATION If more than one guarantor executes this instrument the provisions hereof shall be read with all grammatical changes thereby rendered necessary and each reference to the Guarantor shall include the undersigned and each and every one of them severally and this guarantee and all covenants and agreements herein contained shall be deemed to be solidary. 7.9 ADDITIONAL RIGHTS This agreement is in addition and supplemental to all other guarantees and/or postponement agreements (whether or not in the same form as this instrument) held or which may hereafter be held by the Lender. 7.10 COLLATERAL AGREEMENTS There are no representations, collateral agreements or conditions with respect to this instrument or affecting the Guarantor's liability hereunder other than as contained herein or in the Credit Agreement. 7.11 GOVERNING LAW This agreement shall be governed by and construed in accordance with the laws of the Province of Quebec. 7.12 BENEFIT OF THE GUARANTEE This agreement shall extend to and enure to the benefit of the successors and assigns of the Lender and shall be binding upon the Guarantor and the successors of the Guarantor. 7.13 LANGUAGE The Guarantor acknowledges that it has 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. Le soussigne reconnait avoir exige 8 la redaction en anglais de la presente convention ainsi que de tous documents executes, avis donnes et poursuites judiciaires intentees, directement ou indirectement, relativement ou a la suite de la presente convention. 7.14 EXECUTED COPY The Guarantor acknowledges receipt of a fully executed copy of this Guarantee. IN WITNESS WHEREOF the Guarantor has executed this Guarantee on the date and at the place first hereinabove mentioned. INTERTAPE POLYMER GROUP INC. Per: __________________________________ Per: __________________________________ ACCEPTED AND AGREED as of December 15, 1997: THE TORONTO-DOMINION BANK, acting by and through its Houston Agency Per: __________________________________ Per: __________________________________ 9 SCHEDULE "D" - TRANSFER AGREEMENT TO: ____________________ (the "AGENT"), ____________________ (the "BORROWER") and ____________________ (the "GUARANTOR") WHEREAS the Borrower entered into a Credit Agreement dated as of December 15, 1997 (the "CREDIT AGREEMENT") with the Agent, as [Agent and] Lender, whereby the Agent agreed to provide the Borrower with certain credit facilities; and WHEREAS pursuant to and in accordance with Article 15 of the Credit Agreement the Lender may, without the prior consent of the Borrower, assign or transfer all or any part of its rights, benefits and obligations under the Credit Agreement by duly completing, executing and delivering to the Agent and to the Borrower this Transfer Agreement; and WHEREAS ____________________ (the "TRANSFEROR") wishes to assign or transfer to ____________________ (the "ASSIGNEE") the rights, benefits and obligations of the Transferor under the Credit Agreement specified herein; WHEREAS the Borrower has consented in writing to such assignment or transfer pursuant to the provisions of the Credit Agreement; and has reiterated its consent hereby; NOW THEREFORE in consideration of the foregoing and of one dollar ($l.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, the signatories hereto agree as follows: 1. All capitalized terms defined in the Credit Agreement and not otherwise defined herein have the same meaning as in the Credit Agreement. 2. The Transferor assigns and transfers to the Assignee the following rights, benefits and obligations (the "TRANSFER"): (description of the transferred rights, benefits and obligations, indicating retained interest or fees, if applicable, extent of the Assignee's interest and any applicable arrangements if any Libor Advances or Letters of Credit are outstanding at the time of the Assignment) (the "TRANSFERRED RIGHTS" and the "TRANSFERRED OBLIGATIONS", as applicable). 3. The Assignee accepts the Transfer and assumes the Transferred Obligations without novation (the "ASSUMPTION"). The Borrower and the Guarantor each release the Transferor from all obligations and liabilities associated with the Transferred Rights and acknowledge the assumption by the Assignee of the Transferred Obligations. 4. The Transfer and the Assumption are governed by and subject to Article 15 of the Credit Agreement. 5. The Assignee acknowledges and confirms that it has not relied upon and that neither the Transferor nor the Agent has made any representation or warranty whatsoever as to the due execution, legality, effectiveness, validity or enforceability of the Credit Agreement or any other documentation or information delivered by the Transferor or the Agent to the Assignee in connection therewith or for the performance thereof by any party thereto or for the performance of any obligation by any Restricted Subsidiary or for the financial condition of the Guarantor or of any Restricted Subsidiary. All representations, warranties and conditions expressed or implied by law or otherwise are hereby excluded. 6. The Assignee represents and warrants that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigation into the financial condition, creditworthiness, affairs, status and nature of the Guarantor and the Restricted Subsidiaries and has not relied and will not hereafter rely on the Transferor and/or the Agent to appraise or keep under review on its behalf the financial condition, creditworthiness, affairs, status or nature of the Guarantor or the Restricted Subsidiaries. The Assignee acknowledges and agrees that it has no right to obtain any non-public information directly from the Guarantor and the Restricted Subsidiaries and that it will request any information it requires solely from the Agent. 7. Each of the Transferor and the Assignee represents and warrants to the other and to the Agent and the other Lender(s), if any, and the Guarantor and the Borrower, that it has the right, capacity and power to enter into the Transfer and the Assumption in accordance with the terms hereof and to perform its obligations arising therefrom, and all action required to authorize the execution and delivery hereof and the performance of such obligations has been duly taken. 8. This Transfer Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA. DATED this day of , 19 . [BORROWER] (TRANSFEROR) per: ___________________ per: ___________________ per: ___________________ [LENDER/AGENT] (ASSIGNEE) per: ___________________ per: ___________________ SCHEDULE "E" - RESTRICTED SUBSIDIARIES Intertape Polymer Inc. ("IPI") IPG Holdings LP ("LP") IPG Holdings Company of Nova Scotia ("NS ULC") IPG Finance LLC ("LLC") IPG (US) Holdings Inc. IPG (US) Inc. Intertape Polymer Corp. ("IPC") IPG (US) Acquisition Corporation STC Tape Inc. ("STC") American Tape ("ATC") Tape ACQ Tape Inc. TAPE FSC Inc. Polymer International Corp. ("PIC") IFCO MFG (USA) ICS Inc. (USA) Cajun Bag Corp. (Augusta, USA) SCHEDULE "F" - OFFICER'S CERTIFICATE [SAME FOR BORROWER] I, the undersigned, ____________________, the ____________________ of Intertape Polymer Group Inc. (the "GUARANTOR"), do hereby certify as follows: a) I have taken cognizance of all the terms and conditions of the Credit Agreement (the "CREDIT AGREEMENT") dated as of December 15, 1997 entered into among the Borrower, the Guarantor and The Toronto-Dominion Bank, as well as of the Guarantee (as defined in the Credit Agreement) and all other contracts, agreements and deeds pertaining thereto; and b) no Default or Event of Default has occurred nor exists thereunder; and c) each of the Borrower and the Restricted Subsidiaries holds the permits, licences and authorizations required in order to permit it to possess its property and its real estate and to carry on its business in the manner in which it is being carried on at present. Executed at the City of ____________________, ____________________ this _th day of December, 1997. ____________________ [Name of Officer] SCHEDULE "G" - OPINION ____________________, 199_ THE TORONTO-DOMINION BANK ____________________ ____________________ _____________ - - and - HEENAN BLAIKIE Suite 2500 1250 Rene Levesque Blvd. W. Montreal, Quebec H3B 4Y1 Dear Sirs: RE: IPG HOLDINGS LP AND INTERTAPE POLYMER GROUP INC. We have acted as counsel to IPG Holdings LP (the "BORROWER") and Intertape Polymer Group Inc. (the "GUARANTOR") as well as to the Restricted Subsidiaries in connection with a Credit Agreement bearing formal date of December 15, 1997 (the "CREDIT AGREEMENT") entered into among the Borrower, the Guarantor and The Toronto-Dominion Bank (the "LENDER"), providing for a Credit made available to the Borrower in an aggregate amount of up to US $100,000,000. The terms used herein which are defined in the Credit Agreement have the respective meanings set forth in the Credit Agreement and this opinion is delivered to you in accordance with the provisions of subsection 9.1.8 of the Credit Agreement. In this connection, we have examined such certificates of public officials, such certificates of officers of the Borrower and the Guarantor and originals or copies certified to our satisfaction of all such corporate documents and records of the Guarantor and the Restricted Subsidiaries, and all of such other documents, records and papers, as we have deemed relevant and necessary as a basis for our opinions hereinafter set forth. We have also made such other investigations as we have deemed relevant and necessary in order to enable us to render our opinions herein set forth. Without restricting the generality of the foregoing, we have examined the following documents: a) The Credit Agreement; b) The IPG Guarantee; c) The Guarantee and assignment by IPG Finance LLC ("LLC") in favour of the Lender (the "LLC DOCUMENTS"); d) Documents pertaining to the acquisition by one of the Guarantor's Restricted Subsidiaries of all of the issued shares of the capital stock of ATC; In making our examination of the foregoing documents, we have assumed the genuineness of all signatures not known to us, the authenticity of all documents tendered to us as originals, the conformity to the originals of all documents submitted to us as certified or photostatic copies and the legal competency of any individual executing such documents. Based on the foregoing, we are of the opinion that: 1. Each of the Guarantor, the Borrower and the other Restricted Subsidiaries is a corporation or limited partnership duly incorporated or constituted and organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or constitution and of all jurisdictions in which it carries on business. The Guarantor and each of the Restricted Subsidiaries has the capacity and power, whether corporate or otherwise, to hold its assets and carry on the business presently carried on by it or which it proposes to carry on hereafter in each jurisdiction where such business is carried on. 2. The Borrower has the power, capacity and authority to borrow all amounts contemplated under the Credit Agreement, as well as to execute and deliver and perform its obligations under the Credit Agreement, and has taken all necessary steps under the Law in order to be authorized to borrow thereunder and to execute and deliver and perform its obligations thereunder in accordance with the terms and conditions thereof and to complete the transactions contemplated therein. The Credit Agreement has been duly executed and delivered by duly authorized officers of the Borrower and is a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. 3. The Credit Agreement has been duly executed and delivered by duly authorized officers of the Borrower and the Guarantor and is a legal, valid and binding obligation of the Borrower and the Guarantor, enforceable in accordance with its terms. 4. The Guarantor has the power, capacity and authority to, and has taken all necessary steps under the Law in order to be authorized to, provide the IPG Guarantee and to execute and deliver and perform its obligations under the Credit Agreement and the IPG Guarantee in accordance with the terms and conditions thereof and to complete the transactions contemplated in the IPG Guarantee and in the Credit Agreement. 5. Each of the Credit Agreement and the IPG Guarantee has been duly executed and delivered by duly authorized officers of the Guarantor, and is a legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms. 6. LLC has the power, capacity and authority to, and has taken all necessary steps under the Law in order to be authorized to, provide the LLC Documents and to execute and deliver and perform its obligations under the LLC Documents in accordance with the terms and conditions thereof and to complete the transactions contemplated in the LLC Documents. 7. Each of the LLC Documents has been duly executed and delivered by duly authorized officers of LLC, and is a legal, valid and binding obligation of LLC, enforceable in accordance with its terms. 8. The execution and delivery by the Borrower, the Guarantor and the other Restricted Subsidiaries of the Credit Agreement, the IPG Guarantee and the LLC Documents and all other agreements and instruments referred to therein do not conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, or result in any violation of any of the terms or provisions of, the constating documents or by-laws of the Borrower, the Guarantor or any of the other Restricted Subsidiaries or, to the best of our knowledge after due enquiry, under any agreements, contracts or deeds to which the Borrower, the Guarantor or any of the other Restricted Subsidiaries is a party or binding upon it or its assets and do not result in or require the creation or imposition of any Charge whatsoever on the assets of the Borrower, the Guarantor or any of the other Restricted Subsidiaries, whether presently owned or hereafter acquired, save for the Permitted Charges. 9. The acquisition of ATC was effected in accordance with all applicable Laws. All of the issued shares of ATC are owned by one or more Restricted Subsidiaries of the Guarantor. 10. The structure established in order to acquire ATC, including the constitution of the Borrower and its Subsidiaries and _________ and its Subsidiaries was established solely for the purpose of such acquisition and to our knowledge, none of the Persons referred to carry on any business other than in connection with the aforesaid acquisition. 11. Neither the Borrower, the Guarantor nor any of the other Restricted Subsidiaries is required to obtain any consent, approval, authorization, permit or license, nor to effect any filing or registration with any federal, provincial or other regulatory authority in connection with the execution, delivery or performance, in accordance with their respective terms, of the Credit Agreement, the IPG Guarantee or the LLC Documents, or any borrowings under the Credit Agreement. 12. Based on search reports concerning _________________, _________________, _________________ and _________________, all Debt of the Guarantor, considered on a Consolidated basis, is subject to no Charge, other than the Permitted Charges. 13. [PARI PASSU NATURE OF DEBT?] 14. To the best of our knowledge, after making reasonable enquiries, there is no litigation threatened or pending against the Borrower, the Guarantor or the other Restricted Subsidiaries other than the litigation described in Schedule "H" to the Credit Agreement. In connection with the foregoing opinions: a) As to the enforceability of the obligations of the Borrower, the Guarantor or LLC in specific documents, we are not opining upon the question of whether or not the remedy of specific performance or injunctive or other equitable relief would be available, inasmuch as the availability of such remedies is subject to the discretion of the court before which any proceedings for such remedy may be brought; b) we have assumed that the Credit Agreement, the IPG Guarantee and the LLC Documents have been duly authorized, executed and delivered by the parties thereto other than the Borrower, the Guarantor and LLC. The foregoing opinions extend only to the laws of the State of New York and the laws of the United States of America applicable therein. Finally, the enforceability of the Credit Agreement, the IPG Guarantee and the LLC Documents is subject to such limitations and prohibitions of enforceability as may exist or may be enacted in laws relating to bankruptcy, insolvency, liquidation, reorganization, moratorium or other laws of general application affecting the enforceability of creditors' rights and may only be relied upon by the parties to whom they are addressed for the purposes of the transactions herein contemplated. Yours truly, SCHEDULE "H" - LITIGATION None SCHEDULE "I" - ERISA AFFILIATES AND PLANS - - Intertape Polymer Inc. employer funded defined contribution pension plan. - - Intertape Polymer Group USA Retirement Plan (401K). - - Tape Inc. retirement plan (401K). SCHEDULE "I-1" - ERISA DISCLOSURE RE: AMERICAN TAPE COMPANY HOURLY EMPLOYEES PENSION PLAN Based on asset and liability information provided in the January 1, 1997 valuation report, the plan on an ongoing (funding) basis is underfunded by approximately $615,000. This is based on an actuarial value of assets of $3,739,424 and an actuarial liability of $4,354,147. On a termination basis, the plan would be underfunded by approximately $1,714,000. This is based on a market value of assets of $4,286,019. An estimated liability of $6,000,000. SCHEDULE "J" - EXISTING SECURITY SCHEDULE "K" - INTERLENDER AGREEMENT INTERLENDER AGREEMENT entered into in the City of New York, State of New York, as of ______________________, 1997. BETWEEN: THE TORONTO-DOMINION BANK, a banking corporation organized under the laws of Canada, acting by and through its Houston Agency, having an office at 909 Fannin Street, Suite 1700, in the City of Houston, State of Texas, 77010 (hereinafter called "TD") AND: COMERICA BANK, a Michigan banking corporation, having a branch at ______, __th floor, in the City of ___________, State of ________ (hereinafter called "CB") (CB and TD are herein collectively called the "LENDERS") WHEREAS TD entered into a Credit Agreement as of December 15, 1997 with IPG HOLDINGS LP (hereinafter called the "BORROWER") and INTERTAPE POLYMER GROUP INC. (hereinafter called the "GUARANTOR") (hereinafter called the "CREDIT AGREEMENT"); and WHEREAS CB has become an Assignee under the Credit Agreement, and the Lenders desire to establish certain rights and obligations as between themselves; NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1 INTERPRETATION Capitalized terms not otherwise defined herein have the meaning ascribed to them in the Credit Agreement. 2 PARTICIPATIONS OF TD AND CB 2.1 Each of the Lenders agrees to make its Participation available to the Borrower. The Lenders agree, as between themselves, that each of them will make the Advances (including by way of Letters of Credit) provided for in the Credit Agreement, as requested by the Borrower, to the extent of their respective Participations. 2.2 Each of the Lenders will maintain its own accounts and administer its own Advances. 2.3 The Lenders acknowledge that the allocation of the Advances under Facility B as between the Lenders may not always be PRO RATA to the Participations of the Lenders, the whole as contemplated by Section 16.1 of the Credit Agreement. Notwithstanding that at any time the allocation of the Loans as between the Lenders may not be in proportion to their respective Participations, the Lenders will share the risks and suffer any losses on a PARI PASSU basis in any distribution of any amounts paid by, or arising out of the proceeds of realization of the property of, the Borrower and the Guarantor. Each of the Lenders acknowledges that based on the respective Participations of TD and CB in Facility B of the Credit as at the Closing Date, any such proceeds would be shared on the basis of 50% for TD and 50% for CB. 3 AMENDMENTS TO THE CREDIT AGREEMENT WITH RESPECT TO FACILITY B If the Borrower from time to time submits a written request to the Lenders: a) that the amount of the Credit available under Facility B be increased and such request is accompanied by a proposed allocation of the requested increase as between the Lenders by way of increased Participations; or b) that any of the terms of the Credit Agreement affecting Facility B be changed; each of the Lenders will, within 30 days following the receipt of such notice, advise the other in writing whether or not it agrees to the proposed increase or change, and the following provisions will apply: 3.1 if each Lender agrees to the proposed increase or change within the said (30) day delay, they will advise the Borrower thereof and will negotiate and will enter into the appropriate amendment to the Credit Agreement and the Lenders will amend this Interlender agreement accordingly; 3.2 if each Lender refuses the proposed increase or change, they will advise the Borrower thereof; 3.3 if only one of the Lenders agrees to the proposed increase or change to the Credit Agreement in connection with Facility B, the Lender who so agrees (the "AGREEING LENDER") will be entitled to negotiate arrangements with the Borrower to take over the position of the other Lender (the "REFUSING LENDER") with respect to Facility B and if an agreement is reached between the Agreeing Lender and the Borrower within 60 days following the receipt by the Lenders of the request, and the Refusing Lender is advised thereof by the Agreeing Lender within that delay, the Refusing Lender will cease to participate in the Credit available under Facility B. Once all amounts owing to the Refusing Lender have been paid in full and the Refusing Lender has received the appropriate indemnifications with respect to any of its then outstanding Letters of Credit under Facility B, the Refusing Lender will enter into an Assignment in favour of the Agreeing Lender. If no agreement is reached between the Agreeing Lender and 2 Borrower within the said 60 day period, the Lenders will advise the Borrower that the request has been refused. 4 SHARING OF INFORMATION Each Lender will, if requested by the other(s) provide such information as it has received from the Borrower as the other may request and each of the Lenders shall promptly give notice to the other of any Default of which it becomes aware under the Credit Agreement and of any information it receives which might reasonably be considered to be materially adverse to the Borrower. It is agreed that failure to provide notice of such Default or such materially adverse information will not result in any liability on the part of the Lender which fails to give such notice or information to the other Lender. 5 DEFAULTS 5.1 If a Lender discovers or believes that a Default or an Event of Default has occurred, it will forthwith so advise the other in writing. 5.2 If a Default exists which requires the giving of a notice in order to give rise to an Event of Default, either of the Lenders desiring that the notice be given will notify the other thereof in writing. If the holders of Participations representing 66 2/3% of the Credit under Facility B (the "MAJORITY LENDERS") agree, the Lenders may give the required notice. Notwithstanding the foregoing, the decision to waive the Default or Event of Default in respect of any of the following matters, and the decision to amend the Credit Agreement in respect of any of the following matters, shall require the unanimous consent of the Lenders: (i) any extension of the date for, or alteration in the amount, currency or mode of calculation or computation or any payment of principal or interest or other amount, (ii) any increase in the Participation of a Lender, (iii) any extension of any maturity date, (iv) any change in the terms of this Section, (v) any change in the manner of making decisions among the Lenders, (vi) the release of the Borrower or the Guarantor, in whole or in part, (vii) any change in or any waiver of the conditions precedent provided for in Article 9 of the Credit Agreement, or (viii) any amendment to this Section 5.2. 5.3 None of the Lenders will make any Advances to the Borrower (including by the issuance of any Letter of Credit) at a time when a Default or an Event of Default should be invoked, unless it is determined by a decision of the Majority Lenders to withdraw the notice invoking the Event of Default or the Default or, in the case of a Default, the Default has been remedied. 3 5.4 Should there occur an Event of Default and a Lender has so notified the other in writing, the Lenders will consult with each other as to what steps, if any, should be taken. If the Majority Lenders desire that a demand should be made under the Credit Agreement, the Lenders will make a joint demand or give the appropriate notice of enforcement within 5 Business Days of the receipt of such a notice. However, no demand will be made if the other Lender (the "SUPPORTING LENDER") desires not to so proceed and the Supporting Lender agrees to pay the other Lender (the "RETIRING LENDER") the entire amount of the Loan due to it under the Credit Agreement and undertakes to indemnify and hold the Retiring Lender harmless from any liability under any outstanding Letter of Credit. The Supporting Lender will make payment to the Retiring Lender and will provide the appropriate indemnification documentation by the time demand was otherwise to have been made hereunder, and the Retiring Lender will enter into an Assignment in favour of the Supporting Lender. 5.5 Neither of the Lenders will make any demand for payment under the Credit Agreement except as provided for in the immediately preceding paragraph. 5.6 Within 5 Business Days following the making of any demand for payment under the Credit Agreement, the Lenders will make adjustments between themselves so that their Loans to the Borrower will be PRO RATA to their respective Participations in the Credit. They will make further such adjustments between themselves as and when any Letters of Credit mature. 5.7 Any amounts received by any of the Lenders from or for the account of any of the Borrower or the Guarantor after the making of a demand for payment will be distributed as follows: 5.7.1 Firstly, in payment of all costs and expenses incurred in the making of the demand for payment and enforcement of the Credit Agreement; 5.7.2 Secondly, in payment to the Lenders, PRO RATA, of the Loans of the Borrower to each of them under the Credit Agreement, as at the date of the making of a demand for payment (as adjusted pursuant to section 5.6 and otherwise in due course between the Lenders), taking account of all Advances, interest, and Fees, but excluding any amounts referred to in subsection 5.7.4 hereof; 5.7.3 Thirdly, in payment to the Lenders, PRO RATA, of any interest accrued after the date of the making of demand for payment on the amounts referred to in subsection 5.7.2; 4 5.7.4 Fourthly, in payment of the Lenders, PRO RATA, of any indebtedness of the Borrower to each of them in respect of Advances made at a time when a Default or Event of Default has occurred and has been invoked and notice invoking such Default has not been withdrawn or the Default has not been remedied; and 5.7.5 Fifthly, in payment to the Lenders, PRO RATA, of any Indebtedness of the Borrower or the Guarantor to them in respect of loans, advances and credit facilities other than under the Credit Agreement. 6 NO RIGHTS IN FAVOUR OF THE BORROWER OR THE GUARANTOR Nothing herein contained will be deemed to restrict, lessen or prejudicially affect the rights of the Lenders as against the Borrower or the Guarantor, and without limiting the generality of the foregoing, nothing herein contained will be interpreted as constituting a stipulation for the benefit of any of the Borrower or the Guarantor. 7 GENERAL 7.1 This agreement will continue in full force and effect until terminated by the mutual consent of the Lenders or until such time as the Credit Agreement has terminated and there remains nothing further owing (including contingently) to each of the Lenders thereunder. 7.2 Any notices required or permitted to be given hereunder shall be in writing and may be given in accordance with the provisions of the Credit Agreement. 7.3 This Agreement will enure to the benefit of and be binding upon the Lenders and their respective successors and assigns. 7.4 The preamble hereof shall form part of these presents as if recited at length herein. 7.5 This agreement is made pursuant to the laws of the State of New York and will be construed, interpreted, performed and enforced in accordance therewith. 7.6 The parties acknowledge that they have required that this agreement and all related documents be drawn up in English. Les parties reconnaissent avoir exige que la presente convention et tous les documents connexes soient rediges en anglais. 5 EXECUTED AT THE CITY OF ___________________, as of _________________, 1997. THE TORONTO-DOMINION BANK COMERICA BANK Per: _______________________ Per: _______________________ Per: _______________________ Per: _______________________ 6 -----END PRIVACY-ENHANCED MESSAGE-----