-----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, Pht7E8B1MV53mVzVCy6H3stiv0XfJYdgnfITRt9mcK+Y1NrcvFP3aAv06xYydo8Y JKgnxM0Mj45KGNFtknUqBA== 0001130319-02-000489.txt : 20020521 0001130319-02-000489.hdr.sgml : 20020521 20020521160049 ACCESSION NUMBER: 0001130319-02-000489 CONFORMED SUBMISSION TYPE: 40-F PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20020521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAPE POLYMER GROUP INC CENTRAL INDEX KEY: 0000880224 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 000000000 STATE OF INCORPORATION: A8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 40-F SEC ACT: 1934 Act SEC FILE NUMBER: 001-10928 FILM NUMBER: 02658910 BUSINESS ADDRESS: STREET 1: 110E MONTEE DE LIESSE STREET 2: ST LAURENT CITY: QUEBEC H4T 1N4 CANAD STATE: A8 BUSINESS PHONE: 5147310731 MAIL ADDRESS: STREET 1: 110 E MONTEE LIESSE CITY: ST LAURENT STATE: A8 ZIP: 00000 40-F 1 m06925ore40-f.txt FORM 40-F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 40-F ANNUAL REPORT PURSUANT TO SECTION 13(a) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 2001 Commission file number: 1-10928 INTERTAPE POLYMER GROUP INC. (Exact name of Registrant as specified in its charter) Canada (Jurisdiction of incorporation or organization) 110E Montee de Liesse, St. Laurent, Quebec H4T 1N4 Canada (514) 731-0731 (Address and telephone number of Registrant's principal executive offices) Burgess H. Hildreth, 3647 Cortez Road West, Bradenton, Florida, 34219 (941) 727-5788 (Name, address and telephone number of Agent for service in the United States) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each Exchange on which registered: Common Shares, without nominal or New York Stock Exchange par value The Toronto Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: - -NONE- Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: -NONE- For annual reports, indicate by check mark the information filed with this form: [X] Annual Information Form [X] Audited Annual Financial Statements The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 2001 is: 28,506,110 Common Shares -0- Preferred Shares Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to the registrant in connection with such rule. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 2 EXHIBIT INDEX
Exhibit No. Description Page No. ----------- ----------- -------- 1 Annual Information Form dated May 21, 2002........................................ -4- 2 Consent of Independent Accountants ............................................... -33- 3 Credit Agreement dated December 20, 2001.......................................... -34- 4 Amended and Restated Note Agreement dated December 20, 2001 (US$137,000,000 Senior Secured Notes due March 31, 2008)..... -134- 5 Amended and Restated Note Agreement dated December 20, 2001 (US$25,000,000 Senior Secured Notes, Series A, Due 2005; US$112,000,000 Senior Secured Notes, Series B, Due 2009)............. -226- 6 2001 Annual Report, including: Audited Annual Consolidated Financial Statements (Pg. 19) Management's Discussion and Analysis for 2001 (Pg. 6).......................... -319-
3 EX-1 3 m06925orex1.txt ANNUAL INFORMATION FORM EXHIBIT 1 Item 1. INTERTAPE POLYMER GROUP INC. ANNUAL INFORMATION FORM For the Year ended December 31, 2001 Dated: May 21, 2002 4 INTERTAPE POLYMER GROUP INC. ANNUAL INFORMATION FORM TABLE OF CONTENTS
Page Item 1. Cover Page.............................................................................................4 Item 2. Corporate Structure....................................................................................7 2.1 Name and Incorporation..........................................................................7 2.2 Intercorporate Relationships....................................................................7 Item 3. General Development of the Business....................................................................8 3.1 History.........................................................................................8 3.2 Significant Acquisitions and Significant Dispositions..........................................11 3.3 Trends.........................................................................................12 3.4 Cautionary Statements and Risk Factors.........................................................12 Item 4. Narrative Description of the Business.................................................................16 General........................................................................................16 Products.......................................................................................16 Sales and Marketing............................................................................21 Manufacturing; Quality Control.................................................................22 Equipment and Raw Materials....................................................................22 Research and Development; New Products.........................................................23 Trademarks and Patents.........................................................................23 Competition....................................................................................24 Environmental Regulation.......................................................................24 Employees......................................................................................25 Description of Property........................................................................25 Item 5. Selected Consolidated Financial Information...........................................................26 5.1 Annual Information.............................................................................26 5.2 Dividends......................................................................................27 Item 6. Management's Discussion and Analysis..................................................................27
5
Item 7. Market For Securities.................................................................................27 Item 8. Directors and Officers................................................................................28 Item 9. Additional Information................................................................................31
6 ITEM 2. CORPORATE STRUCTURE 2.1 NAME AND INCORPORATION The business of Intertape Polymer Group Inc. ("Intertape Polymer Group" or the "Company") was established by Melbourne F. Yull, Intertape Polymer Group's Chairman of the Board and Chief Executive Officer, when Intertape Systems Inc., a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal. Intertape Polymer Group was incorporated under the Canada Business Corporations Act on December 22, 1989 under the name "171695 Canada Inc." On October 8, 1991, the Company filed a Certificate of Amendment changing its name to "Intertape Polymer Group Inc." A Certificate of Amalgamation was filed by the Company on August 31, 1993, and the Company was amalgamated with EBAC Holdings Inc. In February 1992, Intertape Polymer Group completed an initial public offering of its common shares at the offering price of $5.035 (US$4.25)(after giving effect to a 2:1 stock split on June 4, 1996). The Company completed a second public offering of its common shares in Canada and the United States in October 1995, at the offering price of $19.75 (US$14.60). The Company then completed a public offering of its common shares in Canada on a "bought deal" basis in March 1999, at the offering price of $40.25 (US$26.31) per share. In March 2002, the Company completed a public offering of 5,100,000 of its common shares in Canada on a "bought deal" basis at the offering price of $15.50 (US$9.71) per share. 2.2 INTERCORPORATE RELATIONSHIPS Intertape Polymer Group is a holding company which owns various operating companies in the United States and Canada. Intertape Polymer Inc., incorporated under the Canada Business Corporations Act ("IPI"), is the principal operating company for the Company's Canadian operations. Intertape, Inc., a Virginia corporation, formerly known as Intertape Polymer Corp. ("IPC"), is the principal operating company for the Company's United States and international operations. The table below lists for each of the subsidiaries of the Company their respective jurisdiction of incorporation and the percentage of voting securities beneficially owned or over which control or direction is exercised directly or indirectly by Intertape Polymer Group. Certain subsidiaries, each of which represents not more than ten percent of consolidated assets and not more than ten percent of consolidated sales and operating revenues of the Company, and all of which, in the aggregate, represent not more than twenty percent of total consolidated assets and total consolidated sales and operating revenues of the Company at December 31, 2001, have been omitted. 7
JURISDICTION OF PERCENTAGE OF OWNERSHIP CORPORATION INCORPORATION OR CONTROL ----------- --------------- ----------------------- Intertape Polymer Group Inc. Canada Parent Intertape Polymer Inc. Canada 100% IPG Financial Services, Inc. Delaware 100% IPG Holding Company of Nova Scotia Nova Scotia 100% IPG Finance LLC Delaware 100% Intertape Inc. Virginia 100% Central Products Company Delaware 100% Intertape Polymer Corp. Delaware 100% IPG Administrative Services Inc. Delaware 100% Intertape Woven Products Services S.A. de Mexico 100% IPG Holdings LP Delaware 100% Polymer International Corp. Virginia 100% Intertape Polymer Export Inc. Barbados 100% IPG (US) Inc. Delaware 100% IPG (US) Holdings Inc. Delaware 100% IPG Technologies Inc. Delaware 100%
ITEM 3. GENERAL DEVELOPMENT OF THE BUSINESS 3.1 HISTORY The Company has pursued a strategy of aggressive growth through both substantial capital investments and acquisitions. 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 in order to reduce material costs. 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. 8 Even as the Company was growing its customer base in pressure-sensitive tapes, it determined that it would be advantageous to adopt a progressive new product development strategy 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 $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 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. Interpack Machinery Inc. ("Interpack"), a designer of automatic carton sealing equipment, was acquired by the Company in 1993. In acquiring Interpack, 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 Co. ("American Tape") was acquired in 1997 bringing to the Company certain products including high performance masking, filament and speciality products, which mesh well with the Company's related product lines. Anchor Continental, Inc. ("Anchor") was acquired in 1998 and had been a competitor of the Company for the sale of masking tapes. Rexford Paper Company ("Rexford"), a redistributor of a variety of pressure-sensitive tapes, as well as a manufacturer of water-activated tapes, was also acquired in 1998. In 1999, the Company acquired certain assets of Spinnaker Electrical Tape Company ("SETco"), bringing a new product line, pressure-sensitive electrical tapes, to the Company. In addition, in 1999, the Company also acquired Central Products Company ("CPC"), a manufacturer of both pressure-sensitive and water-activated carton sealing tapes. The combination of these various product lines enables the Company to offer the market place a range of products to service its customers' needs. Effective as of the close of business August 31, 2000, the Company acquired the assets of Olympian Tape Sales, Inc. d/b/a United Tape Company, which distributed various packaging products into the retail market. This acquisition established the Company in the North American retail market and has accelerated the development of this important channel of distribution. Though the Company made no acquisitions during 2001, acquisitions remain an integral component of the Company's strategy to obtain new products and channels of distribution. Over the past few years, the Company has completed several strategically important acquisitions furthering its business plan to either develop or acquire new products to complete the "basket of products" approach to the Company's markets. During the last two years, the Company has transitioned from a period of rapid expansion to a period of 9 operational consolidation and debt reduction. Future acquisitions are probable, but in 2001 the Company focused on and made significant progress in implementing improvements aimed both at realizing the benefits of past acquisitions and optimizing the Company's efficiency and quality. First, the Company completed the integration of the information systems and customer service departments of its previously acquired companies. The Company also completed the implementation of its Regional Distribution Centers ("RDCs") initiative. All five centers are now open and functional thus permitting the Company to close the approximately twenty-five leased warehouse facilities it was maintaining and consolidate product shipments through the five RDCs. Lastly, during 2001 Intertape Polymer Group took various cost reduction initiatives including reducing support functions and implementing organizational changes and plant rationalizations which measures should ensure that the Company remains a low cost producer and is prepared for any further erosion in the economy. 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 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 Corp. and Augusta Bag & Supply Co.) were purchased to produce flexible intermediate bulk containers ("FIBCs") utilizing the Company's fabric as the prime raw material. Intertape Polymer Group closed its FIBC manufacturing plant in Rayne, Louisiana, in 2001, and expanded its Mexican operations. The Company's facility is located in Piedras Negras, Mexico, 150 miles southwest of San Antonio, Texas, in an industrial park with adjacent buildings that will permit future growth, if required. The Company is the second largest producer of FIBCs in North America and this move reflects the Company's commitment to increase FIBC production from lower cost sources. During 2001, the Company continued its participation in one joint venture, Fibope Portuguesa-Filmes Biorientados, S.A. ("Fibope"). Fibope produces shrink films in Portugal for the European market and has doubled its manufacturing capacity since 1995. Until 1998, the majority of the Company's growth came from the sale of internally developed products. Since then, internal capacity increases are continuing throughout the organization and in all product lines due to past acquisitions as well as internal growth. The Company's Utah manufacturing facility, a 115,000 square foot plant, became operational in June 1998, was expanded in 1999, and was expanded further in 2001. Consistent with the Company's strategy, this plant is acting not only as a producer of shrink and stretch films, but also as a distribution center for all of the Company's products with the goal to increase sales 10 in the western United States and western Canada. The integration of the acquired facilities will continue to provide further capacity for various products. In December, 2001, Intertape Polymer Group completed the refinancing of both its bank credit facilities and long-term debt. The Company and its subsidiaries entered into a Credit Agreement dated December 20, 2001, providing for revolving credit facilities in the aggregate amount of up to US$145 million secured by all of the Company's tangible and intangible assets. As of December 31, 2001, US$39.0 million of the lines of credit was utilized with an effective interest rate of approximately 7.95%. Further, the Company entered into Amended and Restated Note Agreements each dated December 20, 2001, with respect to its US$137.0 million Senior Notes and US$137.0 million Series A and B Senior Notes, increasing the interest rates and granting the noteholders a security interest in the tangible and intangible assets of the Company. Intertape Polymer Group was able to reduce its short-term debt by US$12.9 million and long-term debt by US$9.6 million during 2001. The Company is committed to further debt reductions. In March, 2002, the Company used the net proceeds of the issuance of additional common shares to further reduce its long-term debt by approximately US$47.4 million. 3.2 SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS The Company made no significant acquisitions or dispositions during 2001. While acquisitions continue to be an important part of the Company's strategy for growth, no favorable opportunities presented themselves during 2001. The following table illustrates the principal acquisitions completed by the Company during the last six years: COMPLETED ACQUISITIONS
ANNUAL COST OF YEAR ACQUISITIONS COMPANY LOCATION PRODUCTS - ---- -------------- ------- -------- -------- (US$ in millions) 1996 $ 5.3 Tape, Inc. Green Bay, Wisconsin Water-activated packaging tapes 1997 $ 42.9 American Tape Co. Marysville Michigan Pressure-sensitive tapes, masking tapes Richmond, Kentucky 1998 $113.2 Anchor Continental, Inc. Columbia, South Carolina Pressure-sensitive tapes, masking and duct tapes Rexford Paper Company Milwaukee, Wisconsin Pressure-sensitive and water-activated tapes 1999 $111.3 Central Products Company Menasha, Wisconsin Pressure-sensitive and water-activated Brighton, Colorado carton sealing tapes Spinnaker Electrical Carbondale, Illinois Pressure-sensitive Tape Company electrical tapes
11 COMPLETED ACQUISITIONS
ANNUAL COST OF YEAR ACQUISITIONS COMPANY LOCATION PRODUCTS - ---- --------------- --------- ---------- ---------- (US$ in millions) 2000 $ 32.2 Olympian Tape Sales, Inc. Cumming, Georgia Distribution of packaging products
3.3 TRENDS The Company anticipates that its gross profits and gross margins should improve during 2002 as a result of several factors. First, 2002 will be the first year that the full effect of many of the cost reduction programs implemented by the Company should be realized. Second, all five RDCs are operational and should provide enhanced capabilities for order fulfillment and shipping efficiencies. Combined with a diverse offering of packaging products and a variety of new products, the RDCs should bring about an increase in sales volume in North America. Lastly, the Company plans to continue to reduce its debt by cash generated from operations. 3.4 CAUTIONARY STATEMENTS AND RISK FACTORS This Annual Information Form, including the Management's Discussion & Analysis incorporated herein by reference, contains certain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") concerning, among other things, discussions of the business strategy of Intertape Polymer Group and expectations concerning the Company's future operations, liquidity and capital resources. When used in this Annual Information Form, the words "anticipate", "believe", "estimate", "expect" and similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements, including statements regarding intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties. All statements other than statements of historical fact made in this Annual Information Form or in any document incorporated herein by reference are forward-looking statements. In particular, the statements regarding industry prospects and the Company's future results of operations or financial position are forward-looking statements. Forward-looking statements reflect the Company's current expectations and are inherently uncertain. Actual results may differ materially from those in the forward-looking statements as a result of various factors, including those factors set forth below and other factors discussed elsewhere in this Annual Information Form and in the Management's Discussion & Analysis included in the Company's Annual Report. In addition to the other information contained in this Annual Information Form, readers should carefully consider the cautionary statements and risk factors set forth below. 12 Future acquisitions of companies may have an adverse effect on our business, financial condition and operations. An important aspect of Intertape Polymer Group's business strategy is to acquire companies that will complement our existing companies and products, expand our marketing area, improve distribution efficiencies, and enhance our technological capabilities. Financial risks to the Company in connection with future acquisitions include the use of its cash resources, incurring additional debt and liabilities, and potentially dilutive issuances of equity securities. Further, there are possible operational risks including difficulties assimilating the operations, products, technology, information systems and personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company's business. Shortages in raw material decrease sales. In the past, there have been shortages from time to time in the supply of certain resins. In the event there are shortages, the Company's sales would decrease. The Company's credit facilities and bank indebtedness contain covenants that under certain circumstances limit Management's discretion in certain business matters. The Amended and Restated Note Agreements entered into in December 2001 relating to the US$137 million Senior Notes and US$137 million Series A and B Senior Notes and the Credit Agreement entered into in December 2001 relating to the Company's revolving credit facilities contain financial and operating covenants that limit Management's discretion in certain business matters which may restrict the Company's ability to take advantage of potential business opportunities as they arise. These covenants place restrictions on, among other things, the Company's ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments (including dividends and repurchases of the Company's common shares), and to sell or otherwise dispose of assets and merge or consolidate with other entities. The revolving credit facilities also require the Company to meet certain financial ratios and tests that may require the Company to take action to reduce its debt or act in a manner contrary to its business objectives. Failure by the Company to comply with the obligations in its revolving credit facilities and Note Agreements could result in an event of default which, if not cured or waived, could permit acceleration of the Company's indebtedness under the revolving credit facilities and Note Agreements and could allow the creditors and/or noteholders thereunder to exercise their security interests, both of which could have a material adverse effect on us. 13 New products may fail to attract customers. Intertape Polymer Group's business plan involves the introduction of new products, which are both developed internally and obtained through acquisition. In the event the market does not accept these products or competitors introduce similar products, the Company's ability to expand its markets and generate organic growth would be negatively impacted and there would be an adverse affect on its financial condition and operating results. The Company may not be able to compete successfully with its larger competitors. The larger competitors of Intertape Polymer Group have greater financial resources with which to overcome what the Company believes to be significant barriers to entry into the existing packaging market, including the high cost of vertical integration, the significant number of patents already issued in respect of various processes and equipment, and the difficulties and cost of developing an adequate distribution network. 14 Compliance with Environmental Regulations Could be Costly. Intertape Polymer Group, like others in similar businesses, is subject to extensive environmental laws and regulations. The Company's policies and procedures have been designed to comply with these laws and regulations. Increasingly stringent environmental regulations could necessitate the Company to make additional expenditures. Achieving and maintaining compliance with present and future environmental laws could restrict the Company's ability to modify or expand its plants or to continue manufacturing. Compliance could also require the acquisition of additional equipment. Some of Intertape Polymer Group's plants have a history of industrial use. Soil and groundwater contamination has occurred at some of the Company's plants. Environmental laws impose liability on an owner, tenant, or operator of real property for the removal or remediation of hazardous or toxic substances, even if they were unaware of or not responsible for the contamination. Further, any company who arranges for the disposal or treatment of hazardous substances at a disposal facility may be liable for the costs of remediation of such substances at such facility whether or not the company owns or operates the facility. In accordance with environmental laws, the Company periodically investigates, remediates, and monitors soil and groundwater contamination at certain of its plants. Currently the Company is remediating contamination at its Marysville, Michigan, Columbia, South Carolina, and Carbondale, Illinois, plants, however it is not anticipated that the ultimate resolution of these matters will have a material adverse effect on the Company's business or results of operations. Intertape Polymer Group obtains Phase I or similar environmental assessments for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections without soil sampling or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on the Company. Nevertheless, the Company's assessment may not reveal all environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws. The conditions of the Company's properties could be affected in the future by the conditions of the land or operations in the vicinity of the properties. These developments and others, such as increasingly stringent environmental laws, increasingly strict enforcement of environmental laws, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of the Company's operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on us. Anti-takeover provisions in the Company's Shareholder Protection Rights Plan may prevent an acquisition. On August 24, 1993, the shareholders of Intertape Polymer Group approved a Shareholder Protection Rights Plan. Under the Plan, one common share purchase right was issued on September 1, 1993 in respect of each outstanding common share and became issuable in respect of each common share issued thereafter. Although the Plan was to have expired on September 1, 1998, on 15 May 21, 1998, the shareholders approved an amendment extending the term of the Plan to September 1, 2003. The effect of the Plan is to require anyone who seeks to acquire 20% or more of Intertape Polymer Group's voting shares to make a bid complying with specific provisions. Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price. The Company's exemptions under the Exchange Act as a foreign private issuer limits the protections and information afforded investors. Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act. As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer's equity securities within a period of less than six months). Because of these exemptions, purchasers of Intertape Polymer Group's securities are not afforded the same protections or information generally available to investors in public companies organized in the United States. Intertape Polymer Group previously filed its annual reports on Form 20-F. Commencing with the year ended December 31, 2000, the Company files its annual report on Form 40-F. Intertape Polymer Group reports on Form 6-K with the Commission and publicly releases quarterly financial reports. Because Intertape Polymer Group is a Canadian company, it may be difficult for investors to effect service of process or enforce judgments against us. Intertape Polymer Group is a Canadian corporation, certain of its officers and directors, and its auditors are residents of Canada, and a portion of our assets are located outside of the United States. Accordingly, it may be difficult for investors to effect service of process within the United States upon Intertape Polymer Group or such persons, or to enforce against them judgments obtained in the United States predicated upon the civil liability provisions of the Securities Act. 16 ITEM 4. NARRATIVE DESCRIPTION OF THE BUSINESS GENERAL Intertape Polymer Group develops, manufactures and sells a variety of specialized polyolefin plastic packaging products. These products include INTERTAPETM pressure-sensitive and water-activated tape, EXLFILM(R) shrink film ("EXLFILM(R)"), STRETCHFLEX(R) stretch wrap ("STRETCHFLEX(R)") and woven products. Most of the Company's products are derived from resins that are converted into films and adhesives. Resins also are combined with paper and converted into a variety of packaging products. Vertical integration, whereby the Company performs each step in the conversion of polyolefin resins and paper into its various products, and continuous capital expenditures to increase manufacturing efficiencies allow the Company to be among the low-cost producers of each product it manufactures. This vertical integration combined with the use of high speed production equipment provides competitive advantages to the Company in flexibility and control of the manufacturing process and in speed of delivery. Management considers all of its products to be within one operational segment because all products are made basically from similar extrusion processes and differ only in the final stages of manufacturing. The Company expanded its product offering with the 1999 acquisitions of Spinnaker Electrical Tape Company, a U.S. manufacturer of pressure-sensitive electrical tapes, and Central Products Company, a U.S. manufacturer of a natural rubber pressure-sensitive tape. Central Products Company also manufactured hot melt and acrylic pressure-sensitive tapes, and a line of water-activated carton sealing tapes, giving the Company what it now believes to be 75% of the water-activated tape market. The Company's revenues are derived primarily from sales of its products in the United States and Canada, with approximately 90% of the Company's 2001 revenues attributable to sales from manufacturing facilities in the United States. The Company's head office is located in Montreal, Quebec and the Company maintains approximately 2.7 million square feet of manufacturing facilities throughout the United States, Canada and Portugal. PRODUCTS INTERTAPETM Carton Sealing Tape: Pressure-Sensitive and Water-Activated Tapes The Company produces a variety of pressure-sensitive plastic film carton sealing tape, ranging from commodity designed standard tape to tape tailored to meet customers' unique requirements. The product range encompasses tape with film thickness from 25 microns to 50 microns and adhesives formulated for manual as well as automatic applications. Carton sealing tape lends itself to use in high speed taping machines that replace other closure methods such as staples, hot melt glues and cold glues. The tape produced by the Company includes a wide range of customized colored and printed tape, as well as tape designed for cold temperature applications and label protection. 17 The Company believes that it is one of the leading manufacturers of pressure-sensitive carton sealing tape and further believes that it is the only manufacturer in North America of all three types of adhesives; hot melt, acrylic, and natural rubber. Carton sealing tape is manufactured and sold under the INTERTAPETM name to industrial distributors and manufactured for other customers for sale under private labels. It is produced at the Company's Danville, St. Laurent, Richmond and Columbia facilities and is primarily utilized by end-users for sealing corrugated cartons. Geographic territories in which the Company markets its products are serviced by sales personnel and manufacturers' representatives coordinated by regional managers. Distributors are appointed on a basis designed to achieve market penetration of both commodity and higher grade products. 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 markets and continues to increase its sales force for these markets. The Company expects its centralized warehouse distribution system in the Tremonton, Utah facility will continue to enhance these efforts. The Company's acquisition in 1993 of the assets of Interpack, a manufacturer of equipment used to apply pressure-sensitive tapes to seal corrugated boxes, enabled the Company to further enhance the mix of products it offered to its customers. The Company introduced a line of machines designed for the high-speed application of pressure-sensitive carton sealing tape in January 1994 and has continued to enhance and improve its equipment designs. 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 1999 acquisition of Central Products Company, a producer of carton sealing tapes, should serve to provide cost reductions to the Company. In addition, the Brighton, Colorado, facility obtained in the acquisition provides the Company with the needed capacity in hot melt coating and solvent rubber products to form a basis for continued growth in these products. Further, the installation of a sixth BOPP extrusion line was commercialized at the Company's Danville, Virginia facility during 2000 and 2001. This has enabled the Company to be completely self-sufficient in the production of film for pressure sensitive tapes for both hot-melt and acrylic based adhesive tapes. The Company's principal competitor for the sale of carton sealing tape products is Minnesota Mining & Manufacturing Co. ("3M"). 18 INTERTAPETM 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 and expanded its position in this product line with the acquisition of Anchor in September 1998. Masking tapes are used for a variety of end-use applications which can be broadly described under two categories: general purpose and performance. General purpose applications include packaging and bundling, and residential and commercial paint applications. Performance applications include use in painting of aircraft, cars, buses and boats, where the properties of the tape, such as high temperature resistance and clean adhesive release, are individually designed for the customer's process. The Company's processing capabilities include solvent and synthetic rubber, hot melt and acrylic adhesive alternatives. The Company believes that its unique adhesive systems provide it with a competitive advantage in this market. The main competitors for the sale of masking tapes include 3M, Shuford Mills, Inc., Industrias Tuk, S.A. de C.V., and Tesa Tape Inc. ("Tesa"). INTERTAPETM Reinforced Filament Tape: Performance and General Purpose In addition to masking tapes, the Company's purchases of American Tape and Anchor also introduced reinforced filament tapes and flat back tapes to the Company's product line. Reinforced, general and specialty products are manufactured at the Company's facilities in Richmond, Kentucky, Marysville, Michigan and Columbia, South Carolina which were acquired in the American Tape and Anchor acquisitions. These 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 the industrial filament tape market is 3M, and for commodity filament tapes the Company's main competitor is Tara Tape. Acrylic Coating In 1995, the Company completed a $7.0 million capital expenditure program for an acrylic coater and ancillary equipment design to apply acrylic based adhesives to a wide variety of substrates at its Danville, Virginia plant. These acrylic coatings, when applied to film tapes, offer extended shelf life as well as increased performance under the extremes of low and high temperatures. In addition, certain applications, such as mirror backing, utilize woven products as the base material to which acrylic coating is applied. In 2000 and 2001, a sixth BOPP extrusion line was commercialized enabling the Company to be completely self-sufficient in the production of film for pressure sensitive tapes for acrylic based adhesive tapes. 19 INTERTAPETM Duct Tape The acquisition of Anchor provided the Company a significant capacity in the duct tape product line. Duct tapes are manufactured at the Columbia, South Carolina, facility. Approximately 75% of the duct tape volume consists of polyethylene-coated cloth. Aluminum foil type tape accounts for most of the non-polyethylene coated product sales of the Company's duct tape products. The main competitors are Tyco International, Ltd. ("Tyco") and Shurtape Technologies, Inc. EXLFILM(R) Shrink Wrap EXLFILM(R) is a specialty plastic film which shrinks under controlled heat to conform to package shape as compared to other packaging forms that require unique machinery for different product sizes and shapes. The process provides versatility because it permits the over-wrapping of a variety of products of considerably different sizes and dimensions (such as printing and paper products, packaged foods, cassettes, toys, games and sporting goods, and hardware and housewares). The Company manufactures EXLFILM(R) at its plant in Truro, Nova Scotia, and at its Tremonton, Utah facility. The Company believes that its continued investment in equipment and product development will help it expand in this market. With the development of cross-linking technology, the Company has introduced a new line of high performance shrink film, EXLFILMPLUS(TM), which can be used to satisfy additional end user applications. The Company's shrink wrap products are sold through a select group of specialty distributors primarily to manufacturers of packaged goods and printing and paper products who package their products internally. In addition, the Company holds a 50% interest in FIBOPE, a manufacturer of shrink films in Portugal. FIBOPE utilizes similar manufacturing equipment as is currently operated by the Company in its Truro and Tremonton facilities. In addition to being served by the Company, the United States and Canadian markets for polyolefin shrink wrap are currently served by two large United States manufacturers, Sealed Air and E.I. DuPont de Nemours & Co., and to a lesser extent by foreign manufacturers. STRETCHFLEX(R) Stretch Wrap STRETCHFLEX(R) is a multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallet loads of various products to ensure a solid load for shipping. During 1999, the Company invested in upgrading all of its cast lines to new five-layer technology. This technology, combined with re-engineered film allows the Company to produce polyolefin stretch wrap that has higher performance while reducing manufacturing costs. In 2000, a seventh cast line was installed in the Danville, Virginia plant, further increasing the Company's production capacity of stretch films. The Company has the capacity to produce a total of 130 million pounds of STRETCHFLEX(R) annually at its Danville, Virginia plant and its facility in Tremonton, Utah. 20 The North American market for such polyolefin stretch wrap is served by a number of manufacturers, the largest of which are AEP, Tyco, and Linear Films, Inc. Industrial Electrical Tapes As a result of the Company's 1999 acquisition of certain assets of SETco, which included its Carbondale, Illinois, facility, the Company is now a manufacturer of specialty electrical and electronic tape. The new manufacturing capability and technology at the Carbondale, Illinois, facility, coupled with the Company's high temperature resistant products manufactured at its Marysville, Michigan, facility is hoped to provide the Company access to new high margin markets. Competing manufacturers of industrial electrical tapes include 3M, Tesa, and Tyco. Finally, the Company's acquisitions have positioned the Company as a stronger supplier of industrial tape, second only, in the estimation of management, to 3M in North America, with the additional capability to provide shrink and stretch wrap, a product line 3M does not offer. The Company's status as a low-cost, high value added single source supplier to its individual distributor customer base should, subject to economic factors, lead to sales growth in the future. Woven Products The Company produces a variety of finished products utilizing coated woven polyolefin fabrics, such as bags and lumber wrap, as well as coated woven polyolefin fabrics that are sold to other manufacturers which convert these fabrics into finished products, such as packaging, protective covers, pond liners, housewrap, recreational products, and temporary structures. 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. 21 NOVA-THENE(R) 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 also manufactures other coated woven polyolefin fabrics that it supplies to converters which produce finished products for specific application, such as synthetic fiber packaging, temporary and permanent shelters, recreational products, protective covers, pond liners, and flame retardant lattice cloth. In 1999, the Company developed a new patented woven fabric that meets the fire retardant specifications required for human occupancy and maintains the UV specifications for extended outdoor use. This product is used in applications where PVC was the primary fabric previously used. Further, the Company entered the steel covering market with a patented wrap for coils. In 2000, a new printing capacity for woven products was brought on line. The expansion of the Truro, Nova Scotia, plant was completed in 2001 adding much needed capacity for production of both traditional and new woven products, such as vinyl replacement products. The Company's NOVA-THENE(R) 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. FIBCs The Company produces flexible intermediate bulk containers ("FIBCs"). To remain competitive and in furthering the Company's plan to increase its Mexican operations, Intertape Polymer Group entered into an agreement with the Professional Manufacturing Group in Piedras Negras, Mexico, an exclusive contract packager of FIBCs for the Company since February 2000. The Company believes this initiative to move FIBC production to Mexico will increase the 22 Company's FIBC production, should provide the Company with a lower cost alternative to its now closed Augusta, Georgia, facility, and its Rayne, Louisiana, manufacturing facility which closed during the second quarter of 2001, and should expand the use of the Company's woven coated fabrics in the manufacture of FIBCs, which should improve profitability. During 2001, the Company also launched two new FIBC products, PALLET-FREE(TM), which has significant cost and performance advantages compared to traditional corrugated bulk containers which compete in the same bulk product markets, and NOVA-STAT(TM), a static-dissipative FIBC. The Company believes that both of these products should provide access to new higher margin markets that require speciality high performance bags. The market for FIBCs is highly competitive and is not dominated by any single manufacturer. SALES AND MARKETING As of December 31, 2001, the Company maintained a sales force of 113 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts. The Company's overall customer base is diverse, with no single customer accounting for more than 5% of total sales. The Company has one long term contract with a customer which accounts for less than 5% of total sales. Sales for facilities located in the United States and Canada accounted for approximately 86% and 14% of total sales, respectively, in 1999, and approximately 83% and 17% in 2000, and 80% and 20% in 2001. As a result of the combined effect of a world-wide slowing economy, increasing domestic capacity in Asia, and a strong US currency in 2001, the Company decided to withdraw from commodity export markets. Management does not expect that the Company will achieve more than 10% of its sales outside North America. Export sales currently represent less than 5% of total sales and are included in United States or Canadian sales depending on the manufacturing facility from which the sale originates. The Company sales are primarily focused on distribution products and woven products. Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold into this segment include carton sealing, masking, duct and reinforced tapes, EXLFILM(R) and 23 STRETCHFLEX(R). In order to enhance sales of its pressure-sensitive carton sealing tape, the Company also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. Prior to the acquisition of Interpack, these products were manufactured by others. The Company's EXLFILM(R) and STRETCHFLEX(R) products are sold through its existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries. The Company's woven products group sells its products directly to the end-users. It offers a line of lumberwrap, valve bags, FIBCs and 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 which are extruded into film for further processing. Wide width biaxially oriented polypropylene film is extruded in the Company's facilities and this film is then coated in high-speed equipment with in-house-produced adhesive and cut to various widths and lengths for carton sealing tape. The same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company manufactures acrylic solvent based rubber and "hot melt" adhesives to respond to all demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with either polyethylene or aluminum foil type coated cloth. Intertape Polymer Group is the only North American supplier of all four technologies of carton sealing tape: hot melt, acrylic, water-activated, and natural rubber. Further, the Company is the only United States manufacturer of natural rubber carton sealing tape. This broad family of carton sealing tapes is further 24 enhanced by the Company's tape application equipment which is made in the Montreal facility. The technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, also has been utilized by the Company to expand its product line into highly technical and sophisticated films. Extrusion of up to five layers of various resins is done in four of the Company's plants. These high value added films service the shrink and stretch wrap markets, both of which have high entry barriers. The Company maintains at each manufacturing facility a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and woven products it manufactures. At the end of 2001, four of the Company's plants were certified under the ISO-9002 quality standards program, and one has been certified under the ISO-9001 quality standards program. 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 25 within the various manufacturing environments. Beginning in 1992, the Company decided to embark upon a program to develop new manufacturing processes, to enhance product performance and to develop new products throughout the Company. In 1994, the Company emphasized developing products for existing markets, and in 1996 established a corporate research and development group to undertake development of new products. Research and development expenses in 1999, 2000, and 2001 totaled US$3,901,000, US$5,109,000, and US$4,182,000, respectively. The Company currently has two active research and development programs; one primarily focused on tape products and the other supporting film, woven fabric, and FIBC development. These programs have been instrumental in the development of numerous new products including most recently, PALLET-FREE(TM) and NOVA-STAT(TM), both FIBCs. Research and development is an important factor generating internal growth for the Company. It is anticipated that in 2002 the Company will introduce significant new products into its markets. TRADEMARKS AND PATENTS The Company markets its tape products under the trademark INTERTAPETM and various private labels. The Company's valve or open mouth bags are marketed under the registered trademark NOVA-PAC(R). Its woven polyolefin fabrics are sold under the registered trademark NOVA-THENE(R). Its shrink wrap is sold under the registered trademark EXLFILM(R). Its stretch films are sold under the registered trademark STRETCHFLEX(R). FIBC's are sold under the registered trademark CAJUN(R) BAGS. The Company has approximately sixty-eight active registered trademarks, principally in the United States and Canada, including trademarks acquired from American Tape, Anchor, Rexford and CPC. The Company does not have, nor does management believe it important to the Company's business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive advantage in profitable markets, primarily in woven products and shrink wrap. The Company currently has 49 patents and approximately 10 patents pending. 26 COMPETITION The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Some of these competitors are larger companies with greater financial resources. Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market are currently publicly available. See "Products" for a discussion of the Company's main competitors. The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be: (i) the high cost of vertical integration which is necessary to operate competitively, (ii) the significant number of patents which already have been issued in respect of various processes and equipment, and (iii) the difficulties and expense of developing an adequate distribution network. ENVIRONMENTAL REGULATION The Company manufactures and sells a variety of specialized polyolefin plastic packaging products for industrial use at its manufacturing plants throughout North America and through its joint venture in Portugal. The Company is actively promoting environmental solutions, both in the development of its products and in its own manufacturing facilities. Furthermore, the Company's operations are subject to extensive regulation in each of the countries in which it maintains facilities. For example, United States Federal and state environmental laws applicable to the Company include statutes (i) intended to allocate the cost of remedying contamination among specifically identified parties as well as to prevent future contamination (the "Comprehensive Environmental Response, Compensation, and Liability Act"); (ii) imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health or welfare (the "Federal Clean Air Act"); (iii) governing the management, treatment, storage and disposal of hazardous wastes (the "Resource Conservation and Recovery Act"); and (iv) regulating the discharge of pollutants into protected waterways (the "Clean Water Act of 1972"). The Company's use in its manufacturing processes of 27 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. Intertape is currently remediating contamination at its Marysville, Michigan, Columbia, South Carolina, and Carbondale, Illinois, plants. In addition, the Marysville, Michigan, facility emits toluene and other pollutants. Approximately 95% of the toluene used is recaptured under existing solvent recovery systems or controlled by the regenerative thermal oxidizer pollution control system. The facility's emissions are within the current permitted limitations, and the Company believes that these emissions will meet the Maximum Available Control Technology requirements, which are expected to come into effect in late 2003, although additional testing or modifications at the facility may be required. The Company believes that the ultimate resolution of these matters should not have a material adverse effect on the Company's business or results of operations. EMPLOYEES As of December 31, 2001, the Company employed approximately 2900 people, 700 of whom held either sales-related, operating or administrative positions and 2200 of whom were employed in production. Approximately 65 hourly employees at the Montreal plant are unionized and are subject to a collective bargaining agreement which expires in November 2002. Approximately 85 hourly employees at the Edmundston plant became unionized in February 1997 and are subject to a collective bargaining agreement which expires on October 31, 2003. Approximately 85 hourly employees at the Green Bay plant are unionized and are subject to a collective 28 bargaining agreement which expires on February 28, 2004. Approximately 170 hourly employees at the Marysville plant are unionized and subject to a collective bargaining agreement which expires on April 29, 2007. Approximately 145 hourly employees at the Menasha plant are unionized and subject to a collective bargaining agreement which expires on July 31, 2003. Finally, approximately 40 hourly employees at the Carbondale plant are unionized and subject to a collective bargaining agreement which expires on March 4, 2003. The Company has never experienced a work stoppage and considers its employee relations to be satisfactory. DESCRIPTION OF PROPERTY The following table sets forth the principal manufacturing and distribution facilities owned or leased by the Company as at December 31, 2001:
LOCATION USE PRODUCTS AREA TITLE - -------- --- -------- ---- ----- UNITED STATES: - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Bradenton, Florida Corporate Offices N/A 20,800 Owned - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Brighton, Colorado Manufacturing Pressure-sensitive carton 211,000 Leased to 2014 sealing tapes - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Carbondale, Illinois Manufacturing Pressure-sensitive tapes 193,500 Leased for $1 per acre electrical/electronic per year until 2092 with a 99-year extension option - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Columbia, South Manufacturing Carton sealing tape, 490,000 Owned Carolina and Distribution Pressure-sensitive masking and duct tapes - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Cumming, Georgia Distribution Packaging products 172,000 Leased to 2005 w/option to renew to 2010 and option to purchase - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Danville, Virginia Manufacturing Carton sealing tape, 281,000 Owned and STRETCHFLEX(R) and acrylic Distribution coating - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Denver, Colorado Warehouse Storage for finished goods 100,000 Leased on 6-month basis - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Green Bay, Manufacturing Water-activated adhesive 156,000 Owned Wisconsin and tapes Distribution - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Marysville, Michigan Manufacturing High performance masking, 250,000 Owned filament tape, and specialty pressure-sensitive tape - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Menasha, Wisconsin Manufacturing Water-activated adhesive 195,000 Owned tapes - ------------------------- ------------------- ------------------------------- ---------- --------------------------- Ontario, California Warehouse Packaging products 45,630 Leased to 2003 w/option to renew - ------------------------- ------------------- ------------------------------- ---------- ---------------------------
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AREA LOCATION USE PRODUCTS (SQ./FT.) TITLE - -------- --- -------- ---------- ------ Rayne, Louisiana Distribution FIBCs 78,000 Leased month-to-month - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Richmond, Kentucky Manufacturing and Carton sealing, masking and 200,000 Owned Distribution reinforced tape - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Tremonton, Utah Manufacturing and EXLFILM(TM), STRETCHFLEX(R) 115,000 Owned Distribution - ------------------------- ---------------------- ---------------------------- -------- ---------------------- CANADA: - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Edmunston, New Brunswick Manufacturing FIBCs 65,000 Owned - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Lachine, Quebec Manufacturing Carton sealing equipment 15,000 Leased to 2004 - ------------------------- ---------------------- ---------------------------- -------- ---------------------- St. Laurent, Quebec Corporate Headquarters N/A 20,000 Leased to 2005 - ------------------------- ---------------------- ---------------------------- -------- ---------------------- St. Laurent Quebec Slitting, Warehouse Carton sealing tape 40,000 Leased to 2005 - ------------------------- ---------------------- ---------------------------- -------- ---------------------- St. Laurent, Quebec Manufacturing and Carton sealing tape 25,000 Owned Distribution - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Truro, Nova Scotia Manufacturing Woven products, EXLFILM(TM) 260,000 Owned - ------------------------- ---------------------- ---------------------------- -------- ---------------------- MEXICO: - ------------------------- ---------------------- ---------------------------- -------- ---------------------- Piedras Negras, Mexico Manufacturing FIBCs 161,026 Leased to 2004 - ------------------------- ---------------------- ---------------------------- -------- ----------------------
ITEM 5. SELECTED CONSOLIDATED FINANCIAL INFORMATION 5.1 ANNUAL INFORMATION The table set forth below provides a summary of the financial data for the three most recently completed financial years: THREE-YEAR DATA (IN ACCORDANCE WITH CANADIAN GAAP)
($ MILLIONS) FOR THE YEARS ENDED DECEMBER 31 2001 2000 1999 - ------------------- -------------------------- ----------------------- --------------------- US$ CDN$ US$ CDN$ US$ CDN$ -------- -------- -------- -------- ------- ------- Total Revenue $594,905 $921,448 $653,915 $971,325 569,947 846,770 Total Net (12,242) (18,962) 33,422 49,645 8,098 12,031 Income/Loss Per share (0.43) (0.67) 1.18 1.75 .29 .43 Diluted (0.43) (0.67) 1.16 1.72 .29 .43
30 THREE-YEAR DATA --------------- (IN ACCORDANCE WITH CANADIAN GAAP)
($ MILLIONS) FOR THE YEARS ENDED DECEMBER 31 2001 2000 1999 - ------------------------------- --------------------- --------------------- --------------------- Total Assets 801,989 1,279,654 845,040 1,273,560 815,006 1,183,796 Total Long-term liabilities 380,036 606,385 318,722 480,346 388,441 564,211 Cash dividends declared per share N/A N/A .106 .16 .106 .16
5.2 DIVIDENDS The Company has no written policy for the payment of dividends. So long as the payment does not result in a violation of the Company's covenants with its lenders and noteholders, currently there are no known restrictions that would prevent the Company from paying dividends. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's Discussion and Analysis is contained in the Company's 2001 Annual Report, Pages 6 to 16, and is attached to Form 40-F as Exhibit 6, to which this Annual Information Form is attached as Exhibit 1. ITEM 7. MARKET FOR SECURITIES The Company's common shares are currently traded on the New York Stock Exchange and The Toronto Stock Exchange under the symbol "ITP". The common shares were listed on The Toronto Stock Exchange on January 6, 1993. The Company's common shares were listed on the American Stock Exchange from February 21, 1992 to August 23, 1999, at which time they were listed on the New York Stock Exchange. The common shares are not traded on any other exchanges. Prior to the February 21, 1992 initial public offering of common shares, there was no public market for such shares. ITEM 8. DIRECTORS AND OFFICERS The following table sets forth the name, residence, position, principal occupations for the last five (5) years, and date first elected, of each Director of the Company as of the date hereof. Each Director serves for a term of one year and is elected at the annual shareholders' meeting. The next annual shareholders' meeting is to be held on May 22, 2002, at which time the current term of each Director will expire. 31
NAME OF FIRST YEAR AS MUNICIPALITY OF RESIDENCE POSITION AND OCCUPATION DIRECTOR ------------------------- ----------------------- ------------- Melbourne F. Yull Director, Chairman of the Board Sarasota, Florida CEO of the Company 1989 Michael L. Richards Director Westmount, Quebec Attorney, Senior Partner, Stikeman Elliott 1989 Irvine Mermelstein Director 1994-2000 Tucson, Arizona Managing Partner, Market-Tek 2001 Ben J. Davenport, Jr. Director Chatham, Virginia Chairman & CEO, Chatham Oil Company; Chairman & CEO, First Piedmont Corporation 1994 L. Robbie Shaw Director Halifax, Nova Scotia Vice President, Nova Scotia Community College 1994 Gordon R. Cunningham Director Toronto, Ontario President, Cumberland Asset Management Corp. 1998 J. Spencer Lanthier Director Toronto, Ontario Chairman & CEO, KPMG Canada from 1993 to 1999 2001
The following table sets forth the name, residence and position of each executive officer of the Company as of the date hereof:
NAME AND MUNICIPALITY OF RESIDENCE POSITION AND OCCUPATION - ---------------------------------- ----------------------- Andrew M. Archibald Chief Financial Officer, Secretary, Treasurer, and Montreal, Quebec Vice President Administration Jim Bob Carpenter Sarasota, Florida President, Woven Products since May 1, 1999 Burgess H. Hildreth Sarasota, Florida Vice President, Human Resources since October 1998 James A. Jackson Sarasota, Florida Vice President, Chief Information Officer
32
NAME AND MUNICIPALITY OF RESIDENCE POSITION AND OCCUPATION - ---------------------------------- ----------------------- H. Dale McSween Sarasota, Florida President, Distribution Products Salvatore Vitale Montreal, Quebec Vice President, Finance Melbourne F. Yull Sarasota, Florida Chief Executive Officer Duncan R. Yull Sarasota, Florida Vice President, Sales and Marketing-Distribution Products Gregory A. Yull Sarasota, Florida President-Film Products
The principal occupations of each executive officer for the last five (5) years is as follows: ANDREW M. ARCHIBALD has been Chief Financial Officer, Secretary, Treasurer and Vice President Administration since May 1995. He was Vice President Finance from May, 1995, to January 15, 1999. Prior thereto he served as Vice-President, Finance and Secretary of the Company since 1989. JIM BOB CARPENTER has been President, Woven Products, since May 1, 1999. Prior to that he was the General Manager of Polypropylene Fince Oil & Chemical Co. BURGESS H. HILDRETH has been Vice President, Human Resources, since October, 1998. Prior to that he was the Vice President Administration of Anchor Continental, Inc. since June, 1996. JAMES A. JACKSON has been Vice-President, Chief Information Officer, since September 1, 1998. Prior to that he was the Managing Partner of Spectrum Information Management Systems since 1996. H. DALE MCSWEEN has been President, Distribution Products, since December, 1999. Prior thereto he served as Executive Vice-President and Chief Operating Officer from May 1995. 33 SALVATORE VITALE has been Vice President Finance since September 1, 1998. He had been Controller of the Company since May 1997. MELBOURNE F. YULL, established the business and has been the Company's Chief Executive Officer since 1992. DUNCAN R. YULL, a son of Melbourne F. Yull, has been Vice President Sales Distribution Products, since December, 1999. Prior to that he was a Regional Sales Manager for the Company until 1997 and was the Director of Sales until December, 1999. GREGORY A. YULL, a son of Melbourne F. Yull, has been President, Film Products, since June, 1999. Prior to that he was Products Manager - Films since 1995. As of May 15, 2002, the directors and executive officers of the Company as a group owned beneficially, directly or indirectly, or exercise control or direction over, 790,321 common shares, representing approximately 2% of all common shares outstanding. In addition, the directors and executive officers as a group have 1,808,294 options to purchase common shares of the Company. The Board of Directors 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 Toronto Stock Exchange Guidelines for Corporate Governance (the "Guidelines") recommend, but do not require, that the Audit Committee be made up of outside directors only and that other board committees should be comprised generally of outside directors, a majority of whom should be unrelated directors. The Audit Committee complies with the Guidelines as it is composed of four outside directors, namely Michael L. Richards, L. Robbie Shaw, Gordon R. Cunningham and J. Spencer Lanthier. The Compensation Committee, as presently constituted, does not comply with the Guidelines, inasmuch as it has two related directors and two unrelated directors, namely Michael L. Richards, L. Robbie Shaw, Ben J. Davenport, Jr., and Melbourne F. Yull. The Board of Directors has decided not to modify its composition for the reasons outlined below. The following is a description of the Committees of the Board of Directors and their mandate: o 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 of Directors regarding the appointment of independent auditors and their remuneration and reviews any proposed change in accounting practices or policies. 34 o 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 of Directors' deliberations concerning the recommendations on his own compensation. ITEM 9. ADDITIONAL INFORMATION The Company, upon request to its Secretary, will provide to any person or entity: (1) when the securities of the Company are in the course of a distribution under a preliminary short form prospectus or a short form prospectus; (a) one copy of the Annual Information Form of the Company, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in the Annual Information Form; (b) one copy of the consolidated financial statements of the Company for its most recently completed financial year for which financial statements have been filed together with the accompanying report of the auditor and one copy of the most recent unaudited interim financial statements of the Company that have been filed, if any, for any period after the end of its most recently completed financial year; (c) one copy of the information circular of the Company in respect of its most recent annual meeting of shareholders that involved the election of directors or one copy of any annual filing prepared instead of that information circular, as appropriate; and (d) one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or the short form prospectus and are not required to be provided under clauses (a), (b) or (c); or (2) at any other time, one copy of any documents referred to in clauses (1)(a), (b) and (c) provided that the Company may require the payment of a reasonable charge if the request is made by a person or company who is not a security holder of the Company. Additional information, including directors' and officers' remuneration and indebtedness, principal holders of the Company's securities, options to purchase securities, and interests of insiders 35 in material transactions, if applicable, is contained in the Company's Notice of Annual and Special Meeting of Shareholders which was prepared for its May 22, 2002, annual and special meeting of shareholders. Additional financial information is provided in the Company's Consolidated Financial Statements for the fiscal year ended December 31, 2001. 36 UNDERTAKING. Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities. SIGNATURE. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 40-F, and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERTAPE POLYMER GROUP INC. (Registrant) /s/ Andrew M. Archibald ----------------------- (Signature) Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer, Secretary, Treasurer, and Vice President Administration Date: May 21, 2002 37 EX-2 4 m06925orex2.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation of our report dated March 8, 2002, on our audits of the consolidated financial statements of Intertape Polymer Group Inc. as at December 31, 2001 and 2000 and for each of the years in the three-year period ended December 31, 2001, which report is included in this Annual Report on Form 40-F. (s) Raymond Chabot Grant Thornton General Partnership Chartered Accountants Montreal, Canada May 21, 2002 38 EX-3 5 m06925orex3.txt CREDIT AGREEMENT EXHIBIT 3 INTERTAPE POLYMER INC. - and - INTERTAPE POLYMER CORP. - and - EACH OF THE OTHER PARTIES LISTED IN SCHEDULE "K" HERETO AS JOINT AND SEVERAL FACILITY A BORROWERS - and - IPG HOLDINGS LP, AS FACILITY B/C BORROWER -and- INTERTAPE POLYMER GROUP INC. IPG FINANCE LLC AND IPG HOLDING COMPANY OF NOVA SCOTIA AS GUARANTORS - and - THE TORONTO-DOMINION BANK, AS CANADIAN ADMINISTRATION AGENT, CANADIAN COLLATERAL AGENT, LENDER, SWING LINE LENDER AND ISSUING LENDER TORONTO DOMINION (TEXAS), INC., AS US ADMINISTRATION AGENT - and - COMERICA BANK, AS LENDER, ISSUING LENDER AND CO-ARRANGER - and - NATIONAL BANK OF CANADA, AS LENDER, CO-ARRANGER AND DOCUMENTATION AGENT - and - TD SECURITIES, AS LEAD ARRANGER AND BOOKMANAGER - -------------------------------------------------------------------------------- CREDIT AGREEMENT bearing formal date of December 20, 2001 US $145,000,000 - -------------------------------------------------------------------------------- HEENAN BLAIKIE 1250 Rene Levesque Blvd. West Suite 2500 Montreal (Quebec) H3B 4Y1 Telephone: (514) 846-1212 Telecopier: (514) 846-3427 CREDIT AGREEMENT entered into in the City of New York, State of New York dated as of December 20, 2001 BETWEEN: INTERTAPE POLYMER INC., a corporation 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 AND: INTERTAPE POLYMER CORP., a corporation constituted in accordance with the laws of the State of Delaware, having its principal place of business at 3647 Cortez Road West, Suite 102, Brandenton, Florida, 34210 AND: EACH OF THE OTHER PARTIES LISTED IN SCHEDULE "K" HERETO (hereinafter collectively called the "FACILITY A BORROWERS") PARTIES OF THE FIRST PART AND: 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, 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 (hereinafter called the "FACILITY B/C BORROWER") PARTY OF THE SECOND PART AND: INTERTAPE POLYMER GROUP INC., a corporation 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 AND: IPG FINANCE LLC, a limited liability company constituted in accordance with the laws of the State of Delaware, having its principal place of business at registered office at c/o RL&F Service Corp, One Rodney Square, Tenth floor, Tenth and King Streets, in the City of Wilmington, State of Delaware 2 AND: IPG HOLDING COMPANY OF NOVA SCOTIA, a corporation constituted in accordance with the laws of Nova Scotia, having its principal place of business at 110 Montee de Liesse, in the City of St. Laurent, Province of Quebec, (as Guarantors) PARTIES OF THE THIRD PART AND: THE TORONTO-DOMINION BANK, a banking corporation organized under the laws of Canada, having an office at 66 Wellington Street West, 38th Floor, Toronto, Ontario, M5K 1A2, acting as Canadian administration agent, Canadian Collateral Agent, Lender, Swing Line Lender and Issuing Lender (hereinafter called "TD") PARTY OF THE FOURTH PART AND: TORONTO DOMINION (TEXAS), INC., a banking corporation organized under the laws of Delaware, having an office at 909 Fannin Street, Suite 1700, in the City of Houston, State of Texas, 77010, acting as US administration agent (hereinafter called "TD TEXAS") PARTY OF THE FIFTH PART AND: COMERICA BANK, a banking corporation organized under the laws of Michigan, having an office at 500 Woodward Avenue, 23rd Floor, in the City of Detroit, Michigan, acting as Lender and Co-Arranger (hereinafter called "COMERICA") PARTY OF THE SIXTH PART AND: NATIONAL BANK OF CANADA, a banking corporation organized under the laws of Canada, having an office at 1155 Metcalfe Street, 5th Floor in the City of Montreal, Quebec, H3B 4S9, acting as Lender, Co-Arranger and Documentation Agent (hereinafter called "NBC") PARTY OF THE SEVENTH PART 3 WHEREAS the Borrowers wish to borrow certain amounts from the Lenders and the Lenders have agreed to lend such amounts to the Borrowers, subject to and in accordance with the provisions hereof; NOW THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS: 1 INTERPRETATION 1.1 DEFINITIONS In addition to the definitions contained in Schedule D, 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 "ACQUISITION" means the acquisition (whether by way of purchase, exchange, Investment or otherwise) of (i) a majority of the issued and outstanding capital stock or other ownership interests of a Person (other than a member of the Restricted Group) granting a right to vote in all circumstances, or (ii) assets of a Person (other than a member of the Restricted Group) comprising substantially all of the assets of such Person or of an independent business unit (for example, a division) operated by such Person; 1.1.2 "ADJUSTED CONSOLIDATED" shall have the same meaning as "Consolidated" except that the Unrestricted Subsidiaries are accounted for on a cost basis rather than on a Consolidated basis; 1.1.3 "ADVANCE" means any advance by any Lender under this Agreement, including direct Advances by way of Prime Rate Advances, US Base Rate Advances, US Prime Rate Advances and Libor Advances and, for Facility A only, direct Advances by way of Swing Line Advances and indirect Advances by way of BA Advances and Letters of Credit, and any renewal or conversion of an Advance; 1.1.4 "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, IPG, (ii) which beneficially owns or holds 5% or more of the Voting Stock of IPG 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 IPG 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; 1.1.5 "AGENT" means either the Canadian Agent, the US Agent or (unless the context requires otherwise) both, as the case may be, determined by reference to the provisions of Section 18.19; 4 1.1.6 "AGREEMENT", "CREDIT AGREEMENT", "THESE PRESENTS", "HEREIN", "HEREBY", "HEREUNDER" and other similar expressions refer collectively to this Credit Agreement and the Schedules hereto; 1.1.7 "ARRANGERS" means TD, Comerica and NBC; 1.1.8 "ASSIGNMENT" means an assignment of all or a portion of a Lender's rights, benefits and obligations under this Agreement in respect of any Facilities in accordance with Sections 17.2 and 17.3, and "ASSIGNEE" has the meaning ascribed to it in subsection 17.2.1; 1.1.9 "AVAILABLE CASH" means, as of any date of determination, cash and Cash Equivalents which are freely available to the Restricted Group on such date, in that there are no restrictions of any nature whatsoever on the Restricted Group's access thereto including any restrictions or potential delays 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. For purposes of the computation of Total Debt, Available Cash shall not include cash and Cash Equivalents held in Drumheath; 1.1.10 "BANKERS' ACCEPTANCE" means a non-interest bearing draft or bill of exchange in Canadian Dollars drawn and endorsed by a Canadian Borrower and accepted by a Lender in accordance with the provisions of Article 6, and includes a Discount Note where the context permits. Subject to the Lenders electing to use a clearing house as contemplated by the Depository Bills and Notes Act (S.C. 1998 c. 13) (the "Act"), "Bankers' Acceptance" shall also include a depository bill (as defined in the Act) in Canadian Dollars signed by a Canadian Borrower and accepted by a Canadian Lender. Drafts or bills of exchange that become depository bills may nevertheless be referred to herein as "drafts"; 1.1.11 "BA ADVANCE" means at any time the part of the Advances which a Canadian Borrower has chosen to borrow by Bankers' Acceptances, calculated based on the face amount of such Bankers' Acceptances; 1.1.12 "BA PROCEEDS" means, (i) for any Bankers' Acceptance issued hereunder (other than Discount Notes), an amount calculated on the applicable Acceptance Date (as defined in subsection 6.1.1) by multiplying: a) the face amount of the Bankers' Acceptance by b) the following fraction: 1 -------------------------------------------------------------- (1+ (Bankers' Acceptance Discount Rate x Designated Period (in days) (365)) , with such fraction being rounded up or down to the fifth decimal place and .00005 being rounded up; and (ii) for any Discount Notes issued hereunder, the face amount of such Discount Notes, less a discount established in the same manner as provided 5 in (i) above (with references to "Bankers' Acceptances" being replaced by references to "Discount Notes"); 1.1.13 "BA SCHEDULE I REFERENCE LENDER" means TD or such other Lender which is a Schedule I bank under the Bank Act (Canada) appointed by the Canadian Agent with the consent of the Facility A Borrowers in replacement of said Lender; 1.1.14 "BA SCHEDULE II REFERENCE LENDER" means a Lender which is a Schedule II bank under the Bank Act (Canada) appointed by the Canadian Agent with the consent of the Facility A Borrowers; 1.1.15 "BANKERS' ACCEPTANCE DISCOUNT RATE" means (i) in respect of Bankers' Acceptances to be purchased by the Canadian Lenders which are Schedule I banks under the Bank Act (Canada), the average rate for Canadian Dollar bankers' acceptances having Designated Periods of 1, 2, 3 or 6 months quoted on Reuters Service, page CDOR "Canadian Interbank Bid BA Rates" (the "CDOR RATE"), having an identical Designated Period to that of the Bankers' Acceptance to be issued on such day, and (ii) in respect of Bankers' Acceptances to be purchased by the Canadian Lenders which are Schedule II and Schedule III banks under the Bank Act (Canada) and in respect of Canadian Lenders lending by way of Discount Notes, the rate for Canadian Dollar bankers' acceptances quoted by the BA Schedule II Reference Lender, provided that such rate may not exceed the rate determined under clause (i) by more than 10 basis points (.10%) (in each of cases (i) and (ii), the "DISCOUNT RATES"). In all cases, the Discount Rates shall be quoted at approximately 10:00 a.m. (Toronto time) on the Acceptance Date calculated on the basis of a year of 365 days. In the absence of any such quote, the Bankers' Acceptance Discount Rate which would have been determined in accordance with clause (i) or clause (ii) above, respectively, shall be equal to the rate determined from time to time by the Agent as being the discount rate for bankers' acceptances of (A) in the case of clause (i), the BA Schedule I Reference Lender; and (B) in the case of clause (ii), the BA Schedule I Reference Lender plus 10 basis points (.10%), calculated on the basis of a year of 365 days, established in accordance with their normal practices at 10:00 a.m. on the Acceptance Date, for bankers' acceptances accepted by the BA Schedule I Reference Lender in amounts equal to the amount of the BA Advances to be made that day by the BA Schedule I Reference Lender, having an identical Designated Period to that of the proposed Bankers' Acceptances to be issued on such day, provided that the Bankers' Acceptance Discount Rate replacing the rate which would have been determined under clause (ii) above shall not exceed the Bankers' Acceptance Discount Rate which would have been determined in accordance with clause (i) above by more than 10 basis points (.10%); 6 1.1.16 "BORROWERS" means collectively the Facility A Borrowers and the Facility B/C Borrower, and "Borrower" means any or each of them, as the context may require. "Canadian Borrowers" means those Facility A Borrowers whose names appear from time to time in Section 1 of Schedule "K" and "U.S. Borrowers" means all Borrowers other than Canadian Borrowers; 1.1.17 "BORROWING BASE" means the aggregate, without duplication, of; 1.1.17.1 80% of the Eligible Trade Receivables; and 1.1.17.2 50% of the Eligible Inventory; and 1.1.17.3 33% of the Eligible Raw Materials, but in any event not exceeding US$10,000,000; based on the most recent inventory, accounts receivable and raw materials listing provided to the Agent in accordance with subsection 13.16.3(d). Notwithstanding the foregoing, (a) accounts receivable and inventory which would otherwise be considered Eligible Trade Receivables, Eligible Raw Materials and Eligible Inventory shall only be included if such accounts receivable, raw materials and inventory are subject to valid and enforceable Charges in favour of the Canadian Collateral Agent or the US Collateral Agent, of the nature and priority contemplated by the Inter-Creditor Agreement and the Security Documents under Facility A (but subject to the provisions of Section 10.3 hereof with regard to any Release Period); (b) there shall be deducted from the Borrowing Base amounts, whether or not due, which are secured by Charges, whether or not Permitted Charges, on the assets of the Restricted Group ranking prior to the Security under Facility A, such as deductions at source and other fiscal debts, as well as the aggregate liability of the Restricted Group referred to in Section 12.15 in respect of which a Charge has actually arisen; and (c) the amount of Eligible Inventory plus Eligible Raw Materials shall not exceed 40 % of the total Borrowing Base; 1.1.18 "BRANCH" means the office of the Agent located at, for the US Agent, 909 Fannin, Suite 1700, Houston, Texas, 77010, and, for the Canadian Agent, at 500 St.Jacques, Montreal, Quebec, H2Y 1S1, or any other offices designated by the applicable Agent from time to time by written notice to the Borrowers; 1.1.19 "BUSINESS DAY" means any day, except Saturdays, Sundays and other days which in New York, New York, London (England), Toronto, Ontario or Montreal, Quebec, are holidays or a day upon which banks in any such location are generally not open for business; 1.1.20 "CANADIAN AGENT" means TD, in its capacity as Canadian administration agent for all of the Lenders, or any successor thereof; 7 1.1.21 "CANADIAN COLLATERAL AGENT" means TD or any replacement thereof agreed upon by the Lenders; 1.1.22 "CANADIAN COLLATERAL TRUSTEE" means Computershare Trust Company of Canada or its successor duly appointed in accordance with the provisions of the Inter-Creditor Agreement; 1.1.23 "CANADIAN DOLLAR ADVANCES" means at any time, all Advances made in Cdn. Dollars, and includes all the BA Advances made, and all Letters of Credit issued, in Cdn. Dollars; 1.1.24 "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT" has the meaning ascribed thereto in subsection 11.1.22 of this Agreement; 1.1.25 "CANCO" means IPG Holding Company of Nova Scotia and its successors; 1.1.26 "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 IPG and its Subsidiaries in accordance with GAAP or (ii) for which the amount of the asset and liability thereunder if so capitalized is required to be disclosed in a note to such balance sheet in accordance with GAAP; 1.1.27 "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 then a lessee would be reflected as a liability on a consolidated balance sheet of such Person as of such date in accordance with GAAP; 1.1.28 "CASH EQUIVALENTS" means, as of the date of any determination thereof, Investments of the type described in the second, third and fourth subsections of the definition of the term "Permitted Investments" as well as all sums held in bank accounts; 1.1.29 "CDN. DOLLARS", "CANADIAN DOLLARS" or "CDN. $" means the lawful currency of Canada; 1.1.30 "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 right is based on the common law, statute or contract, and includes any security interest, hypothec, pledge, pawn, mortgage, prior claim, lien, charge, assignment for security purposes, cession, encumbrance, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, or a 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 8 purposes of this Agreement, each of the members of the Restricted Group 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; 1.1.31 "CLOSING DATE" means December 20, 2001; 1.1.32 "CODE" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, together with the regulations thereunder, in each case as in effect from time to time; 1.1.33 "COLLATERAL TRUST INDENTURE" means the Collateral Trust Indenture to be dated the Closing Date, among the Lenders, the holders of the Notes, certain members of the Restricted Group, the US Collateral Trustee and the US Collateral Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof; 1.1.34 "COMMITMENT" means the portion of the Credit for which each Lender is responsible, as set out in Schedule "A" hereof; 1.1.35 "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, all of the financial covenants contained in Section 13.11 and the other financial calculations required to be made on a Consolidated basis hereunder are calculated solely by reference to the Restricted Group, excluding any items attributable to Unrestricted Subsidiaries; 1.1.36 "CONSOLIDATED ASSETS" means, as of the date of any determination thereof, the Consolidated total assets of the Restricted Group determined as of such date in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries); 1.1.37 "CONSOLIDATED CURRENT LIABILITIES" means as of the date of any determination thereof, such liabilities of the Restricted Group on a Consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities as of such date (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries); 1.1.38 "CONSOLIDATED NET INCOME" for any period means the gross revenues of the Restricted Group for such period less all expenses and other proper charges (including taxes on income) for such period, determined on a Consolidated basis and otherwise in accordance with GAAP after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: 9 1.1.38.1 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; 1.1.38.2 the proceeds of any life insurance policy; 1.1.38.3 net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; 1.1.38.4 net earnings and losses of any Person (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner by any member of the Restricted Group, realized by such Person prior to the date of such acquisition; 1.1.38.5 net earnings and losses of any Person (other than a Restricted Subsidiary) with which any member of the Restricted Group shall have consolidated or which shall have merged into or with any member of the Restricted Group prior to the date of such consolidation or merger; 1.1.38.6 net earnings of any Person (other than a Restricted Subsidiary) in which any member of the Restricted Group has an ownership interest unless such net earnings shall have actually been received by any member of the Restricted Group in the form of cash distributions; 1.1.38.7 any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends or interest to any member of the Restricted Group; 1.1.38.8 earnings resulting from any reappraisal, revaluation or write-up of assets; 1.1.38.9 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; 1.1.38.10 any gain arising from the acquisition of any Securities of any member of the Restricted Group; and 1.1.38.11 any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been 10 made from income or revenues included in the definition of Consolidated Net Income for such period; 1.1.39 "CONSOLIDATED NET WORTH" means, as of the date of any determination thereof, the Consolidated total shareholders' equity of the Restricted Group as of such date, determined on a Consolidated basis, but in any event excluding any amount of such shareholders' equity allocable or attributable to (i) Minority Interests and (ii) all Investments (other than Permitted Investments) by any member of the Restricted Group; 1.1.40 "CONSOLIDATED TOTAL CAPITALIZATION" means, as of the date of any determination thereof, the sum of (i) the amount of Total Debt as of such date, plus (ii) the Consolidated Net Worth as of such date; 1.1.41 "CONVERSION DATE" means, as of any date of determination, the later of (i) the 364th day following the Closing Date or (ii) the last day of the most recent Renewal Period (if any); 1.1.42 "CREDIT" has the meaning ascribed thereto in Section 2.1 hereof; 1.1.43 "DEBT" of any Person means, as of the date of any determination thereof (without duplication): 1.1.43.1 all Indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of Indebtedness of such Person; 1.1.43.2 the Negative Value of Derivative Instruments of such Person; 1.1.43.3 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 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; 1.1.43.4 Capitalized Rentals of such Person; 1.1.43.5 reimbursement obligations in respect of credit enhancement instruments of such Person including letters of credit; and 11 1.1.43.6 (without duplication of any of the foregoing) Guarantees of such Person of obligations of others of the character referred to hereinabove in this definition; 1.1.44 "DEFAULT" means an event or circumstances, the occurrence or existence 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 period of time or waived in writing by the Agent, as authorized by the Lenders in accordance with the provisions hereof; 1.1.45 "DERIVATIVE INSTRUMENT" means an agreement entered into from time to time by the Facility B/C Borrower in order to control, fix or regulate currency exchange fluctuations, or the rate of interest payable, on borrowings under Facility B and/or Facility C; 1.1.46 "DERIVATIVE OBLIGATIONS" means obligations of a Borrower to one or more Lenders under Derivative Instruments; 1.1.47 "DESIGNATED PERIOD" means, with respect to a Libor Advance or BA Advance, a period designated by a Borrower in accordance with Section 4.2 or 6.1 or 6.4; 1.1.48 "DISCOUNT NOTE" means a non-interest bearing promissory note denominated in Canadian Dollars issued by a Canadian Borrower to a Canadian Lender or a participant which is not a bank or which does not stamp Bankers' Acceptances, such note to be in the form normally used by such Canadian Lender or participant; 1.1.49 "DRUMHEATH" means Drumheath Indemnity Ltd. and its successors; 1.1.50 "EBITDA" means, for any fiscal period, (i) the Consolidated Net Income of the Restricted Group for such period plus (ii) to the extent included in the calculation of such Consolidated Net Income, the Interest Expense, taxes, depreciation and amortization of the Restricted Group for such period, each calculated on a Consolidated basis and otherwise in accordance with GAAP. Notwithstanding the foregoing, "EBITDA OF THE UNRESTRICTED SUBSIDIARIES" has the same meaning as EBITDA but shall be calculated in relation to the Unrestricted Subsidiaries only; 1.1.51 "ELIGIBLE INVENTORY" means the finished goods inventory of the Restricted Group reasonably acceptable to the Lenders, valued at the lower of cost or fair market value in accordance with GAAP; 1.1.52 "ELIGIBLE RAW MATERIALS" means the resin, paper, polyethylene and any other marketable raw material of the Restricted Group reasonably acceptable to the Lenders, valued at the lower of cost or fair market value in accordance with GAAP ; 12 1.1.53 "ELIGIBLE TRADE RECEIVABLES" means, as of any date of determination, the net amount (i.e. net of set-off, deduction or reduction by any debtor of the Restricted Group who might also be a creditor thereof, net of sales and similar taxes, and, more generally, the net amount actually receivable by any member of the Restricted Group for its own account) of each of the Restricted Group's bona fide trade accounts receivables then outstanding ninety (90) days or less from the date of the related invoice or other evidence of billing, from each Person who is not an Affiliate of the Restricted Group, provided that such accounts receivable: 1.1.53.1 are considered by the Lenders, acting reasonably, to be collectable by the Restricted Group in the ordinary course of business; 1.1.53.2 are not owing by an account debtor who has failed to pay 25% or more of the aggregate amount of its accounts owing to the Restricted Group within 90 days after the date of the respective invoices or other writing evidencing such accounts; 1.1.53.3 arise either from the sale or lease of goods which, on or prior to such date, have been shipped or delivered to the account debtor under such account, or arise from services which have been performed on or prior to such date; 1.1.53.4 are evidenced by an invoice, dated not later than the date of shipment, delivery or performance, rendered to such account debtor or some other evidence of billing reasonably acceptable to the Agent; 1.1.53.5 are not evidenced by any note, trade acceptance, draft or other negotiable instrument or by any chattel paper, unless such note or other document or instrument previously has been endorsed and delivered by the relevant member of the Restricted Group to the Canadian Collateral Agent or the US Collateral Agent, as the case may be; 1.1.53.6 are not owing by an account debtor which (i) does not maintain its chief executive office in the United States of America or Canada, (ii) is not organized under the laws of the United States or Canada, or (iii) is the government of any foreign country or sovereign state (other than the United States or Canada), or of any state, province, municipality or other instrumentality thereof; 1.1.53.7 are not accounts owing by the United States of America or Canada or any state, province or political subdivision thereof, or by any department, agency, public body corporate or other instrumentality of any of the foregoing, unless all necessary steps are 13 taken to comply with the Federal Assignment of Claims Act of 1940, as amended, or with any comparable Law, if applicable, and all other necessary steps are taken to perfect the US Collateral Agent's or the Canadian Collateral Agent's (as applicable) security interest in such account; and 1.1.53.8 are not owing by an account debtor for which the Restricted Group has received a notice of (i) the death of the account debtor, (ii) the dissolution, liquidation, termination of existence, insolvency or business failure of the account debtor, (iii) the appointment of a receiver for any part of the property of the account debtor, or (iv) an assignment for the benefit of creditors, the filing of a petition in bankruptcy, or the commencement of any proceeding under any bankruptcy or insolvency Laws by or against the account debtor; Eligible Trade Receivables shall also include accounts receivable guaranteed by the trustee in bankruptcy of Owens Corning, accounts receivable owing by account debtors located outside the United States and Canada, and accounts receivable outstanding more than 90 days from the date specified in paragraph 4 above, each to the extent that (i) a letter of credit or letter of guaranty has been issued in favour of the relevant member(s) of the Restricted Group in relation thereto, (ii) such letter of credit or letter of guaranty is acceptable to the Lenders acting reasonably, and (iii) no dispute has arisen with regard to such letter of credit or letter of guaranty; 1.1.54 "ENVIRONMENTAL LAWS" means all applicable United States, Mexican and Canadian, federal, state, provincial or local, and other foreign, statutes and codes or regulations, rules or ordinances issued, promulgated or approved thereunder, as well as all other Laws and common laws under which environmental liabilities can arise, now or hereafter in effect (including those with respect to asbestos or asbestos-containing material or exposure to asbestos or asbestos-containing material), relating to pollution or protection of the environment and public health and relating to (a) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes (including without limitation, any Hazardous Substance into the environment (including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), and (b) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, petroleum, including crude oil or any fraction thereof, any petroleum product or other waste, and chemicals or substances regulated by any such statute, codes, regulations, rules or ordinances, and (c) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom, such statute, codes, regulations, rules or ordinances to include the applicable provisions of (i) the Clean Air Act (42 U.S.C.ss.7401 et seq.), (ii) the Clean Water Act (33 U.S.C.ss.1251 et seq.), (iii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C.ss. 6901 et seq.), (iv) the Toxic 14 Substances Control Act (15 U.S.C.ss.2601 et seq.), (v) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C.ss. 9601 et seq.), (vi) the Environmental Protection Act (Canada), (vii) the Environmental Protection Act (Ontario), and (viii) the Environmental Quality Act (Quebec); 1.1.55 "EQUITY INTERESTS" shall mean: (a) in the case of a corporation, capital stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock; (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and (e) any rights, warrants or options, or other Securities that are exercisable, exchangeable or convertible for or into any of the foregoing. 1.1.56 "EQUIVALENT AMOUNT", "EQUIVALENT AMOUNT" and similar expressions mean the amount obtained in converting one currency to another in accordance with the provisions of Article 16; 1.1.57 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, together with the regulations thereunder, in each case as in effect from time to time; 1.1.58 "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is, along with the Borrowers or IPG, treated as a single employer under Section 414(b) or 414(c), respectively, of the Code; 1.1.59 "EVENT OF DEFAULT" means one or more of the events described in Section 15.1; 1.1.60 "EXCESS CASH FLOW" means the Restricted Group's EBITDA on a Consolidated basis for any period, calculated as set out hereinbelow and at the times provided for in Section 9.2, plus the amount of any decrease and minus the amount of any increase in the Restricted Group's Consolidated working capital (non-cash items) for such period, less the sum of: 15 (a) the amount of taxes paid in cash during the period in question; (b) the amount of any interest or dividends paid on Debt or preferred shares in cash (not accrued) during such period; (c) the amount of any voluntary or scheduled principal repayment during such period of Debt that is permitted hereunder, including any voluntary or mandatory permanent reductions thereof; (d) the amount of capital expenditures during such period which either are not financed using Debt, or are financed using Debt incurred hereunder or Debt from a member of the Restricted Group to another member of the Restricted Group, up to a maximum of US$15,000,000 during IPG's 2002 fiscal year and US$20,000,000 during IPG's 2003 fiscal year (it being understood that if Facility B is fully repaid and cancelled during or prior to IPG's 2002 or 2003 fiscal year, then the maximum amount set forth in this clause (d) with respect to such fiscal year shall not apply); and (e) the amount of payments under Capitalized Leases during such period; in each case by the Restricted Group on a Consolidated basis; provided, however, that no amount will be deducted pursuant to subsections b) to d) inclusive, to the extent that such amount has already been deducted from the Restricted Group's EBITDA for the relevant period, nor will (i) the amount of any Mandatory Repayment resulting from the application of subsection 9.2.2 with respect to the Excess Cash Flow for a prior fiscal period or (ii) any repayment of Debt, whether voluntary or as a Mandatory Repayment, resulting from sales of assets (other than sales of inventory in the ordinary course) be deducted in calculating Excess Cash Flow. Excess Cash Flow shall be determined for each applicable fiscal quarter or fiscal year of IPG as follows: 16 ----------------------------------------------------------------- FISCAL QUARTER/YEAR BASIS ----------------------------------------------------------------- Q1/2002 Based on Excess Cash Flow ("ECF") during the quarter ----------------------------------------------------------------- Q2/2002 Based on the ECF during the first two quarters of fiscal year 2002 reduced by the ECF Mandatory Repayment made in accordance with the provisions of this Agreement and the Note Agreements with respect to the first quarter of fiscal year 2002 (the amount of any such reduction to be made under this subsection is hereinafter referred to as the "ADJUSTED AMOUNT") ----------------------------------------------------------------- Q3/2002 Based on the ECF during the first three quarters of fiscal year 2002 reduced by the ECF Mandatory Repayments made with respect to the first two quarters of fiscal year 2002 ----------------------------------------------------------------- Q4/2002 Based on the ECF for fiscal year 2002 reduced by the ECF Mandatory Repayments made with respect to the first three quarters of fiscal year 2002 and to be adjusted promptly following confirmation by IPG's auditors upon the release of the fiscal 2002 year-end financial statements ----------------------------------------------------------------- Each fiscal quarter On a trailing four quarter basis reduced during 2003 by the ECF Mandatory Repayments made with respect to the previous three quarters and to be adjusted (in the case of the four-quarter period comprising the fiscal year 2003) promptly following confirmation by IPG's auditors upon the release of the fiscal 2003 year-end financial statements ----------------------------------------------------------------- Each fiscal year On a trailing four quarter basis with commencing with the the first payment due 120 days following fiscal year in which the fiscal year end in which Facility B Facility B has been was fully repaid and cancelled and each repaid and cancelled subsequent payment due 120 days following the end of every subsequent fiscal year, in each case as confirmed by IPG's auditors upon the release of such fiscal year's year-end financial statements ----------------------------------------------------------------- Any negative Adjusted Amounts shall be carried forward into the following quarter(s) and shall not be repaid to the Borrowers. Notwithstanding anything in this subsection to the contrary, the basis of calculation set forth in the above chart opposite the caption "Q1/2002", "Q2/2002", "Q3/2002", "Q4/2002" and "each fiscal quarter during 2003" shall apply only if Facility B has not been fully repaid and cancelled prior to the date on which the Mandatory Repayment with respect to the applicable fiscal quarter is due pursuant to the first paragraph of subsection 9.2.2; 17 1.1.61 "EXISTING CREDIT FACILITIES" means all existing committed and uncommitted bank credit facilities in favour of any of the Borrowers or the Restricted Subsidiaries, including those facilities accorded by TD, Comerica, The Bank of Nova Scotia and National Bank of Canada; 1.1.62 "FACILITIES" means Facility A, Facility B and Facility C; 1.1.63 "FACILITY A" means the portion of the Advances available pursuant to subsection 2.1.1; 1.1.64 "FACILITY A BORROWERS" means, jointly and severally, Intertape Polymer Inc., IPC and each of the other Operating Restricted Subsidiaries listed as Facility A Borrowers in Schedule "K" hereto, provided that only Canadian Borrowers may borrow under Tranche A-1 and only U.S. Borrowers may borrow under Tranche A-2 (as defined in Section 2.2); 1.1.65 "FACILITY B" means the portion of the Advances available pursuant to subsection 2.1.2; 1.1.66 "FACILITY B/C BORROWER" means IPG Holdings LP; 1.1.67 "FACILITY C" means the portion of the Advances available pursuant to subsection 2.1.3; 1.1.68 "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 immediately 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 Agent from three Federal Funds brokers of recognized standing selected by the Agent; 1.1.69 "FEES" means the fees payable to the Agents, the Lenders and the Arrangers in accordance with the provisions of Section 5.14; 1.1.70 "FIRST CURRENCY" has the meaning ascribed to it in Section 16.1; 1.1.71 "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 Restricted Group, and (ii) all Interest Expense for such period on all Indebtedness (including, for this purpose, the interest component of Rentals on Capitalized Leases) of the Restricted Group; 18 1.1.72 Intentionally deleted 1.1.73 "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; 1.1.74 "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 all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or other 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 other obligation, or (ii) to maintain working capital or other balance sheet items, or otherwise to advance or make available funds, for the purchase or payment of such Indebtedness or other 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 other obligation against loss in respect thereof, or (d) otherwise to assure the owner of the Indebtedness or other 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, and a Guarantee in respect of any dividend or other obligation, shall be deemed to be Indebtedness equal to the maximum aggregate amount of such Indebtedness, dividend or other obligation; 1.1.75 "GUARANTORS" means IPG, LLC and any other Person who has guaranteed the obligations of a Borrower from time to time hereunder pursuant to the Security Documents. A list of the Guarantors under each of the Facilities as of the Closing Date is attached hereto as Schedule "L"; 1.1.76 "HAZARDOUS SUBSTANCES" shall have the meaning assigned to that term in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of 1986 (42 U.S.C.ss. 9601 et seq.) and shall include petroleum including crude oil or any fraction thereof, any petroleum product, asbestos, radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls, radioactive and toxic substances, prohibited substances and hazardous waste under the Environmental Protection Act (Canada), a "contaminant" under the Environmental Protection Act (Ontario), and a "contaminant" and a "pollutant" under the Environmental Quality Act (Quebec) as well as similar terms for such substances (including "Dangerous Substances") used in any applicable provincial or federal Canadian Laws or any other waste, chemicals or substances regulated by any Environmental Law; 19 1.1.77 "INACTIVE SUBSIDIARIES" means those Subsidiaries of IPG which are not Restricted Subsidiaries and which do not conduct any real operations or business, a list of which, at the Closing Date, is attached hereto as part of Schedule "D"; 1.1.78 "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 have 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 any other Person's obligations of the character referred to in this definition; 1.1.79 "INTER-CREDITOR AGREEMENT" means the Intercreditor Agreement, to be dated the Closing Date, among the Lenders, the holders of the Notes, the members of the Restricted Group, the Canadian Collateral Trustee, the US Collateral Trustee, the Canadian Collateral Agent and the US Collateral Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof; 1.1.80 "INTEREST EXPENSE" of any Person for any period means all interest and all amortization of debt discount and expense for such period on each item of Indebtedness of such Person 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; 1.1.81 "INVESTMENTS" means all investments, including Acquisitions, 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 Operating Assets to be used or consumed in the ordinary course of business, or Available Cash; 1.1.82 "IPC" means Intertape Polymer Corp. and its successors; 1.1.83 "IPG" means Intertape Polymer Group Inc. and its successors; 1.1.84 "ISSUING LENDER" means, for Letters of Credit to be issued in Canadian Dollars or US Dollars requested by a Canadian Borrower, TD and, for Letters of Credit to be issued in US Dollars requested by a US Borrower, Comerica; 20 1.1.85 "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; 1.1.86 "LENDER" or "LENDERS" means the Lenders listed in Schedule "A" together with any Assignee(s) or, as the context permits, any of them alone; "Canadian Lenders" means TD, NBC and Comerica Bank Canada Branch together with any Assignee(s), and "US Lenders" means the U.S. based branches of TD, NBC and Comerica together with any Assignee(s); 1.1.87 "LETTER OF CREDIT" means a stand-by letter of credit or a letter of guarantee issued by the Agent in accordance with the provisions hereof; 1.1.88 "LIBOR" means, with respect to any Designated Period of 1, 2, 3 or 6 months relating to a Libor Advance, the average rate for deposits in US$ for a period comparable to the Designated Period which is quoted on Libor 01 Page of Reuters, or, in case of the unavailability of such page, which is quoted on the British Bankers Association Libor Rates Telerate (page 3750 or other applicable page), in either case at or about 11:00 a.m., London, England time, determined two Business Days prior to a drawdown date or Rollover Date in accordance with Section 5.10; if neither of such quotes is available, then LIBOR shall be determined by the Agent as the average of the rates at which deposits in US$ for a period similar to the Designated Period and in amounts comparable to the amount of such Libor Advance are offered by the Libor Reference Lenders to prime banks in the London inter-bank market at or about 11:00 a.m. London, England time on the date of such determination; In any event, the rate determined by reference to the above-mentioned, Reuter's page, Telerate page or average inter-bank offered rate in accordance with the immediately preceding paragraph (the "QUOTED RATE") shall be adjusted for reserve requirements in accordance with the following formula to obtain the applicable LIBOR: Quoted Rate LIBOR= ------------------------------ 1.00 - Reserved Percentage where "RESERVE PERCENTAGE" means the rate (expressed as a decimal) applicable to the Agent during the relevant Designated Period under regulations, directives or guidelines issued from time to time by the Board of Governors of the Federal Reserve System (in the USA), by the Office of the Superintendent of Financial Institutions (in Canada) or by any other applicable regulatory agency, for determining the reserve requirement applicable to the Credit Facilities or to similar credit facilities of the Agent or any of the Lenders (including any basic, supplemental, emergency or marginal reserve requirement) with respect to "Eurocurrency liabilities", as that term is defined under such regulations or for the 21 purposes of complying with such directives or guidelines, in each case depending on the situs of the Advances in question (for example, if the Advances are made in the USA, the applicable Reserve Percentage shall be that of the Board of Governors of the Federal Reserve System). All adjustments to the Quoted Rate shall occur and be effective as of the effective date of any change in the Reserve Percentage, and the Agent will use reasonable efforts to advise the Borrowers of any such change as soon as practicable (provided that the Agent shall not be liable if it fails to do so). 1.1.89 "LIBOR ADVANCE" means, at any time, the part of the Advances in US$ with respect to which a Borrower has chosen to pay interest on the Libor Basis; 1.1.90 "LIBOR BASIS" means the basis of calculation of interest on the Advances or any part thereof, as set forth in Sections 5.7, 5.9 and 5.10; 1.1.91 "LIBOR REFERENCE LENDERS" means TD and Comerica or such other Lenders appointed by the Agent with the consent of the Borrowers in replacement of said Lender(s); 1.1.92 "LIKE ASSETS" means, as of the date of any determination thereof, fixed or capital assets, used or to be used by one or more members of the Restricted Group in the lines of business in which the Restricted Group is engaged as of the Closing Date or in a business reasonably related thereto; 1.1.93 "LLC" means IPG Finance LLC and its successors; 1.1.94 "LOAN" means, at any time, the aggregate of the Advances then outstanding in accordance with the provisions hereof, including the face amount of any Bankers' Acceptances and Letters of Credit issued in accordance with the provisions hereof, together with any other amount in principal, interest and accessory costs payable to the Agent or the Lenders by the Borrowers pursuant hereto; 1.1.95 "MAJORITY LENDERS" means, if there are two or three Lenders, unanimity and, if there are four or more Lenders, at least three Lenders having an aggregate of at least 662/3% of the Commitments; 1.1.96 "MANDATORY REPAYMENT" means the repayment of all or any part of the Loan and/or the Notes which the Borrowers are obliged to effect in accordance with Section 9.2 and/or the corresponding provisions of the Note Agreements; 1.1.97 "MARGIN" means, with respect to Sections 4.3, 5.1, 5.5, 5.7 and 5.14, and subject to the provisions of Section 10.3 hereof, under: 1.1.97.1 Facility A, for the period during which it constitutes Priority Debt, the margins, Stamping Fees and Standby Fees set out in the following grid: 22
Ratio of Total Standby Fee Standby Fee Prime plus; Libor plus; Debt to EBITDA (where (where US Base Rate Letter of Facility A Facility A plus; US Credit Fee; is drawn by is not so Prime Rate Stamping Fee more than drawn) plus 50%) -------------- ---------- --------- ----------- ------------- >4.50x .875% 1.225% 2.75% 3.50% ----- ------ ----- ----- >4.00x .75% 1.05% 2.25% 3.00% <4.50x - ----- ------ ----- ----- >3.50x .625% .875% 1.75% 2.50% <4.00x - ----- ------ ----- ----- >3.25x .50% .70% 1.25% 2.00% <3.50x - ----- ------ ----- ----- >3.00x .375% .525% .75% 1.50% <3.25x - ----- ------ ----- ----- >2.50x .25% .35% .25% 1.00% <3.00x - ----- ------ ----- ----- <2.50x .1875% .2625% 0% .75% - ----- ------ ----- -----
As indicated, the foregoing grid shows the amount of the Standby Fee referred to in Section 5.14.1, the fees payable in respect of Letters of Credit in accordance with the provisions of Section 4.3 and the Stamping Fee referred to in subsection 6.2.3. On the Conversion Date, each Margin other than the Standby Fee shall be automatically increased by .25% and the Standby Fee shall increase by, where Facility A is drawn by more than 50%, .0625% and, where such is not the case, by .0875%; 1.1.97.2 each of Facility B and Facility C, and Facility A in respect of any period during which the latter does not constitute Priority Debt, the margins, Stamping Fees and Standby Fees set out in the following grid: 23
Ratio of Total Standby Fee Standby Fee Prime plus; Libor plus; Debt to EBITDA (where such (where such US Base Rate Letter of Facility Facility plus; US Credit Fee; is drawn by is not so Prime Rate Stamping more than drawn) plus Fee 50%) -------------- ---------- --------- ----------- ------------- >3.50x 0.9875% 1.3825% 3.20% 3.95% ------- ------- ----- ----- >3.25x .6875% .9625% 2.00% 2.75% <3.50x - ------- ------- ----- ----- >3.00x .5625% .7875% 1.5% 2.25% <3.25x ------- ------- ----- ----- >2.50x .4375% .6125% 1.0% 1.75% <3.00x - ------- ------- ----- ----- <2.50x .375% .525% .75% 1.50% - ------- ------- ----- -----
1.1.97.3 during any Release Period (as defined in the first paragraph of Section 10.3), the Margin shall be agreed upon by the Borrowers, the Agent and the Lenders; 1.1.97.4 each Margin under Facility B shall increase by .25% per month (and the Standby Fee applicable thereto shall increase by, where such Facility is drawn by more than 50%, .0625% and, where such is not the case, by .0875%) if at any time after April 30, 2002 IPG shall have failed to enter into a "reasonable and bona fide" agreement authorizing a reputable American and/or Canadian dealer to market the issuance of equity securities or subordinated or mezzanine Debt, which Debt shall be on terms acceptable to the Lenders, in their absolute discretion, in a minimum amount equal to the outstanding amount of the Loan under Facility B, or to underwrite such securities on a firm commitment basis, in each case, on financial and other terms and conditions not materially less favourable to IPG then those generally available in the American or Canadian capital markets to issuers of securities in the packaging industry having a creditworthiness comparable to that of IPG. The Margin shall be adjusted quarterly based on the ratio of Total Debt as of the end of IPG's most recent fiscal quarter to EBITDA 24 (for the four consecutive fiscal quarters including the fiscal quarter ending on the calculation date, taken as a single accounting period), such adjustment to be effective 60 days following the end of each fiscal quarter; 1.1.98 "MATERIAL ADVERSE CHANGE" means the occurrence or the failure to occur of any event or series of events which, either singly or in the aggregate, would have a material adverse change in the business, assets, liabilities, financial position, operating results, business prospects or material agreements of the Restricted Group, or on the ability of the Borrowers, the Guarantors and IPG, taken as a whole, to perform their obligations under this Agreement or under the Security Documents; 1.1.99 "MATERIAL DEBT" means, as of any date of determination, any Debt which then has or relates to, in the aggregate, an unpaid principal amount (or a corresponding unpaid liability) of more than US $5,000,000 or an equivalent amount of money in any other currency; 1.1.100 "MINORITY INTERESTS" means any shares of stock or other ownership interests of any class of a Restricted Subsidiary (other than directors' qualifying shares or similar ownership interests as required by law) that are not owned by any member of the Restricted Group (each an "OWNERSHIP INTEREST"). Minority Interests shall be valued by valuing Ownership Interests constituting preferred stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of preferred stock; in either case, a "PREFERRED INTEREST") at the voluntary or involuntary liquidating value of such Ownership Interest, whichever is greater, and by valuing Ownership Interests constituting common stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of common stock; in either case, a "COMMON INTEREST") at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such Common Interest required by the foregoing method of valuing Minority Interests in Preferred Interests; 1.1.101 "MULTIEMPLOYER PLAN" shall have the same meaning as in section 3(37) of ERISA; 1.1.102 "NEGATIVE VALUE OF DERIVATIVE INSTRUMENTS" means the aggregate amount that would be payable to all Persons by a Borrower (net of all amounts that would be payable by each such Person to such Borrower) on the date of determination pursuant to Section 6(e)(ii)(2)(A) of each ISDA Master Agreement between such Borrower and such Persons as if all Derivative Instruments under such ISDA Master Agreements were being terminated on that day; provided that, with respect to the Derivative Instruments between each Lender and a Borrower, the Agent will determine Market Quotation (as such term is defined in the ISDA Master Agreement) using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as such term is defined in the ISDA Master Agreement); 25 1.1.103 "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 Restricted Group during such period, (b) Fixed Charges of the Restricted Group during such period, (c) all amortization expenses of the Restricted Group, and (d) all depreciation of the Restricted Group; 1.1.104 "NET INCOME TAXES" means net income taxes, net profit taxes, franchise taxes (imposed in lieu of income taxes) and taxes on capital imposed on any Lender under the laws of a jurisdiction in which such Lender is organized or located; 1.1.105 "NOTE AGREEMENTS" collectively means (i) the agreement entered into by the Facility B/C Borrower and IPG dated as of June 1, 1998, with respect to the issuance and sale of one series of senior notes in an aggregate principal amount of US$137,000,000 and (ii) the agreement entered into by the Facility B/C Borrower and IPG dated as of July 1, 1999, with respect to the issuance and sale of two series of senior notes in an aggregate principal amount of US$137,000,000, each as amended and restated on or around the Closing Date pursuant to Amended and Restated Note Agreements, and "NOTES" means the Notes issued thereunder, as so amended and restated, and in each case as such Amended and Restated Note Agreements and Notes may be amended, supplemented or otherwise modified from time to time after the Closing Date in accordance with the provisions hereof, thereof and of the Inter-Creditor Agreement; 1.1.106 "NOTICE OF BORROWING" means a notice transmitted to the Agent by a Borrower in accordance with the provisions of Sections 4.1, 4.2, 4.3 or 4.4 or of subsection 6.1.1; 1.1.107 "OPERATING ASSETS" means the accounts receivable and inventory (including raw materials, work in process and finished goods) of each of the members of the Restricted Group, wherever situated, together with any proceeds (including insurance proceeds) thereof; 1.1.108 "OPERATING RESTRICTED SUBSIDIARY" means the Restricted Subsidiaries so identified in Schedule "D"; 1.1.109 "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under section 4002 of ERISA; 1.1.110 "PERMITTED CHARGES" means, with respect to any Person as of any date: 1.1.110.1 any Charge created by law that arises in the ordinary course of business , which has not at such date been registered in accordance with applicable Laws against such Person, 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 combination with other 26 such Charges, does 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 similar decisions which such Person 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 the validity of which is then being contested in good faith by such Person before a competent tribunal or other governmental body in accordance with the provisions of Section 13.7; or any 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; 1.1.110.2 any right of a municipality, governmental body or other public authority pursuant to any lease, license, franchise, grant or permit obtained by such Person, 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; 1.1.110.3 any right granted by such Person 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 such Person or in the ordinary course of its business; 1.1.110.4 rights granted in favour of municipal authorities or public utilities on real property acquired from time to time by such Person which do not materially adversely affect the value or marketability of such Person's real property; 1.1.110.5 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 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 such Person; 1.1.110.6 Charges securing Indebtedness of a Restricted Subsidiary to IPG or to another Wholly-owned Restricted Subsidiary, or Charges on shares of stock of, or other ownership interests in, Unrestricted Subsidiaries so long as same are subordinate in all respects to the Charges in favour of the Lenders; 27 1.1.110.7 Charges incurred after the Closing Date to secure the payment of the purchase price of fixed assets useful and intended to be used in carrying on the business of any member of the Restricted Group to the extent incurred in connection with (and within twelve months of) the acquisition of such fixed assets, including Charges existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by any member of the Restricted Group 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 any member of the Restricted Group 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 IPG), and (c) all such Indebtedness shall have been incurred within the other applicable limitations of subsections 13.11.1 and 13.11.4 and Section 14.2; 1.1.110.8 security which is already encumbering assets acquired by any member of the Restricted Group prior to the date hereof and described in Schedule "I", provided that such security secures Indebtedness which complies with the other applicable limitations of subsections 13.11.1 and 13.11.4 and Section 14.2; 1.1.110.9 Charges incurred under the Security Documents; 1.1.110.10 Charges in favour of any lender under an operating line which replaces Facility A at the expiry of its Term, ranking pari passu with or subordinate to the Charges described in Section 10.2; and further provided that after giving effect to the incurrence of all Debt secured by such Charges, all such Debt shall have been incurred within the other applicable limitations of Section 13.11 and Section 14.2; provided further, however, that IPG will not, and will not permit any Restricted Subsidiary to, incur or maintain any operating lines or short-term or revolving bank facilities secured by Charges on any assets of any member of the Restricted Group, except as permitted in clause 9 or 10 of this definition; 1.1.111 "PERMITTED INVESTMENTS" means all: 28 1.1.111.1 Investments by any member of the Restricted Group in any other member of the Restricted Group, including Investments (a) directly out of the cash proceeds to IPG of the concurrent sale of shares of capital stock of IPG or (b) pursuant to a direct share exchange offer by IPG; 1.1.111.2 any Investment by any member of the Restricted Group in commercial paper maturing in 270 days or less from the date of acquisition thereof by such member of the Restricted Group, and which is accorded as of such date a rating of at least A-1 by Standard & Poor's Corporation ("STANDARD & POOR'S") or at least P-1 by Moody's Investors Service, Inc. ("MOODY'S") or their equivalent acceptable to the Lenders; 1.1.111.3 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 by any member of the Restricted Group; 1.1.111.4 Investments in certificates of deposit maturing within one year from the date of acquisition thereof by any member of the Restricted Group, issued by a bank or trust company organized under the laws of the United States of America, 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, as of such date, rated A- or better by Standard & Poor's or A3 or better by Moody's, or their equivalent acceptable to the Lenders, or Investments in Eurodollar certificates of deposit maturing within one year after the date of acquisition thereof by any member of the Restricted Group 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 1.1.111.5 loans or advances to employees of IPG and its Subsidiaries for the purchase of shares of stock of IPG by such employees) in the usual and ordinary course of business, and other loans and advances to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of any member of the Restricted Group, 29 provided that the aggregate outstanding amount of all such loans or advances shall at no time exceed US $5,000,000; 1.1.112 "PERSON" means a company, a corporation, an entity created pursuant to Law, 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; 1.1.113 "PLAN" means a "pension plan," as such term is defined in section 3(2) of ERISA and which is subject to Title IV of ERISA, established or maintained by IPG or the Borrowers or any ERISA Affiliate, or as to which IPG or the Borrowers or any ERISA Affiliate contributed or is a member or otherwise may have any liability; 1.1.114 "PRIME RATE" means, on any day, the reference rate of interest, expressed as an annual rate, publicly announced or posted from time to time by TD as being its reference rate then in effect for determining interest rates on demand commercial loans granted in Canada in Canadian Dollars to clients of TD (whether or not any such loans are actually made), rounded up, if necessary, to the first whole multiple of 1/16th of 1%; provided that in the event that the Prime Rate is, on any day, less than the average one month Bankers' Acceptance rate quoted on Reuters Service, page CDOR, as at approximately 10:00 a.m. on such day plus 1% (the "BA RATE"), the "Prime Rate" for such day shall be equal to the BA Rate; 1.1.115 "PRIME RATE ADVANCES" means, at any time, the part of the Canadian Dollar Advances with respect to which a Canadian Borrower has chosen, or, in accordance with the provisions hereof, is obliged, to pay interest on the Prime Rate Basis; 1.1.116 "PRIME RATE BASIS" means the basis of calculation of interest on the Prime Rate Advances, or any part thereof, as set forth in Sections 5.1 and 5.2; 1.1.117 "PRIORITY DEBT" has the meaning ascribed to it in subsection 14.2.1(c); 1.1.118 "PRO RATA SHARING" means the obligation of the Lenders and the holders of Notes to share the proceeds of Mandatory Repayments, as provided in subsection 9.2.4; 1.1.119 "QUALIFYING EU JURISDICTION" means any country (other than Greece) which as of the Closing Date is a member of the European Union; 1.1.120 "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 any member of the Restricted Group, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts 30 required to be paid by any member of the Restricted Group (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 or sublessee regardless of sales volume or gross revenues; 1.1.121 "REPORTABLE EVENT" means an event described in Section 4043(c) of ERISA with respect to a Plan other than those events as to which the 30-day notice period is waived under PBGC Regulation Section 4043; 1.1.122 "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of a Borrower or IPG with responsibility for the administration of the relevant portion of this Agreement; 1.1.123 "RESTRICTED GROUP" means, as of any date of determination thereof, IPG and the Restricted Subsidiaries; 1.1.124 "RESTRICTED PAYMENTS" means: 1.1.124.1 the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of any member of the Restricted Group; 1.1.124.2 the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock or other equity interests of any class, or of any warrants, rights or options to purchase or acquire shares of capital stock or other equity interests of any member of the Restricted Group; 1.1.124.3 any payment or distribution, directly or indirectly, by any member of the Restricted Group in respect of its capital stock or other equity interests; and 1.1.124.4 the prepayment of any Debt (other than Debt secured by Charges described in the subsection 7 of the definition of "Permitted Charges"), save as provided herein; provided, however, that "Restricted Payments" shall not include any such dividend, purchase, redemption, retirement, payment, distribution or prepayment by any member of the Restricted Group to IPG or to a Wholly-owned Restricted Subsidiary; 1.1.125 "RESTRICTED SUBSIDIARY" means, as of any date of determination, each of the Subsidiaries so described in Schedule "D" hereto which is then a Subsidiary and any other Subsidiary (a) which is then organized under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction of 31 any of the foregoing; (b) which then 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 then beneficially owned by IPG or any Wholly-owned Restricted Subsidiary (or any combination thereof), and (d) which has been designated by the board of directors of IPG as a Restricted Subsidiary on or prior to such date in accordance with Section 13.20; provided that such Subsidiary has provided enforceable Security to the extent contemplated by Article 10; 1.1.126 "ROLLOVER DATE" means, with respect to a Libor Advance or a BA Advance, the date of any such Advance, or the first day of any Designated Period; 1.1.127 "SECOND CURRENCY" has the meaning ascribed to it in Section 16.1; 1.1.128 "SECURITIES" has the meaning attributed to such term in Section 2(1) of the Securities Act of 1933, as amended or replaced from time to time; 1.1.129 "SECURITY" means the Guarantees and Charges created by the Security Documents; 1.1.130 "SECURITY DOCUMENTS" means all of the documents described in Article 10, as same may be amended, supplemented or otherwise modified or replaced hereunder from time to time; 1.1.131 "SELECTED AMOUNT" means: 1.1.131.1 with respect to a BA Advance, the amount of the Canadian Dollar Advances which a Canadian Borrower has asked to obtain by the issuance of Bankers' Acceptances in accordance with Section 6.1, and 1.1.131.2 with respect to a Libor Advance, the amount of the Advances in respect of which a Borrower has asked, in accordance with Section 4.2, that the interest payable thereon be calculated on the Libor Basis; 1.1.132 "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of IPG; 1.1.133 "STAMPING FEE" means the fee indicated in the applicable row of the first or second subsection of the definition of the term "Margin", as the case may be; 1.1.134 "SUBSIDIARY" means any Person in respect of which the majority of the issued and outstanding capital stock or other ownership interests granting a right to 32 vote in all circumstances is at the relevant time owned by IPG or one or more of its direct or indirect Subsidiaries, or a combination of any such Persons, and includes a limited partnership, the general partner of which is IPG or one of its Subsidiaries; 1.1.135 "SWING LINE ADVANCES" means (i) a Prime Rate Advance under Facility A by the Canadian Swing Line Lender to the Canadian Swing Line Borrower in an aggregate principal amount outstanding at any time not exceeding the Canadian Dollar equivalent amount of US$5,000,000, and (ii) a US Prime Rate Advance under Facility A by the American Swing Line Lender to the American Swing Line Borrower in an aggregate principal amount outstanding at any time not exceeding US$7,500,000. All Swing Line Advances in Canada are available only by way of Prime Rate Advances, and in the United States, only by way of US Prime Rate Advances, and may not be converted into any other form of borrowing; 1.1.136 "SWING LINE BORROWERS" means IPI (the "CANADIAN SWING LINE BORROWER") for Advances in Cdn. Dollars, and IPC (the "AMERICAN SWING LINE BORROWER") for Advances in US Dollars; 1.1.137 "SWING LINE LENDERS" means TD (the "CANADIAN SWING LINE LENDER") for Advances to a Canadian Borrower in either Cdn. Dollars or US Dollars, and Comerica (the "AMERICAN SWING LINE LENDER") for advances to a US Borrower in US Dollars, or both of them where the context so requires; 1.1.138 "SWING LINE LOAN" means, at any time, the aggregate of the Swing Line Advances outstanding at any time in accordance with the provisions hereof, together with any other amount in interest and accessory costs payable to the Swing Line Lenders by the Swing Line Borrowers pursuant hereto; 1.1.139 "TERM" means the period commencing on the Closing Date and terminating on: 1.1.139.1 with respect to Facility A, the second anniversary of the Conversion Date; 1.1.139.2 with respect to Facility B, December 31, 2003; and 1.1.139.3 with respect to Facility C, the earlier of December 31, 2005 or the date determined pursuant to Article 9; 1.1.140 "TOTAL DEBT" means, as of any date of determination, the sum of (i) the aggregate principal amount of all Debt of the Restricted Group then outstanding other than Debt owing by a member of the Restricted Group to another member thereof (and for greater certainty, includes any Debt of an Unrestricted Subsidiary Guaranteed by any member of the Restricted Group) on a Consolidated basis, plus (ii) the greater of (a) the stated value of all preferred shares, or (b) the voluntary or involuntary liquidation value of all preferred shares, as issued by a member of the 33 Restricted Group then outstanding (other than any such preferred shares held by another member of the Restricted Group), less (iii) the Available Cash as of such date; 1.1.141 "TRANSFER AGREEMENT" means the form of transfer agreement annexed hereto as Schedule "C"; 1.1.142 "UNRESTRICTED SUBSIDIARY" means any Subsidiary of IPG which is an Inactive Subsidiary or which is not otherwise a Restricted Subsidiary, a list of which, at the Closing Date, is attached hereto in Schedule "J", or as may be determined by IPG at any later date, provided the provisions of this Agreement are respected; 1.1.143 "US AGENT" means TD Texas, in its capacity as US administration agent for all of the Lenders, or any successor thereof; 1.1.144 "US BASE RATE" means, on any day, the rate of interest, expressed as an annual rate, publicly announced or posted from time to time by TD as being its reference rate then in effect for determining interest rates on demand commercial loans granted in Canada in US Dollars to its clients (whether or not any such loans are actually made); provided that if the US Base Rate is, for any period, less than the Federal Funds Effective Rate plus 1.00% per annum, the US Base Rate for such period shall be deemed to be equal to the Federal Funds Effective Rate plus 1.00% per annum. If for any reason the Canadian Agent 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 the inability of failure of the Canadian Agent to obtain sufficient bid or publications in accordance with the terms hereof, the Canadian Agent's announced US Base Rate shall apply; 1.1.145 "US BASE RATE ADVANCE" means, at any time, the part of the US Dollar Advances with respect to which a Canadian Borrower has chosen, or, in accordance with the provisions hereof, is obliged, to pay interest on the US Base Rate Basis; 1.1.146 "US BASE RATE BASIS" means the basis of calculation of interest on the US Base Rate Advances, or any part thereof, as set forth in Sections 5.3 and 5.4; 1.1.147 "US COLLATERAL AGENT" means State Street Bank and Trust Company or any replacement thereof agreed upon by the Lenders; 1.1.148 "US COLLATERAL TRUSTEE" means State Street Bank and Trust Company, in its capacity as collateral trustee, pursuant to the Collateral Trust Indenture, or its successor duly appointed pursuant to the terms of such indenture; 1.1.149 "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 34 used in the settlement of international banking obligations on the day on which any payment or any calculation must be made pursuant to this Agreement; 1.1.150 "US DOLLAR ADVANCES" means, at any time, the total of all Loans in US Dollars, including the face amount of all Letters of Credit denominated in US Dollars; 1.1.151 "US ENVIRONMENTAL INDEMNIFICATION AGREEMENT" has the meaning ascribed thereto in subsection 11.1.22 of this Agreement; 1.1.152 "US PRIME RATE" means, on any day, the rate of interest, expressed as an annual rate, publicly announced or posted by the US Agent 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 its clients, whether or not such loans are actually made; provided that in the event that the US Prime Rate is, for any period, less than the Federal Funds Effective Rate plus .50%, the US Prime Rate for such period shall be deemed to be equal to the Federal Funds Effective Rate plus .50%. If for any reason the US Agent 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 the inability of failure of such party to obtain sufficient bids or publications in accordance with the terms hereof, such party's announced US Prime Rate shall apply; 1.1.153 "US PRIME RATE ADVANCE" means, at any time, the part of the US Dollar Advances with respect to which a US Borrower has chosen, or, in accordance with the provisions hereof, is obliged, to pay interest on the US Prime Rate Basis; 1.1.154 "US PRIME RATE BASIS" means the basis of calculation of interest on the US Dollar Advances, or any part thereof, as set forth in Sections 5.5 and 5.6; 1.1.155 "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); and 1.1.156 "WHOLLY-OWNED" when used in connection with any Subsidiary means a Subsidiary of which all of the equity and voting interests (except directors' qualifying shares or similar equity interests as required by law) shall be owned by a Borrower, IPG or one or more of IPG's Wholly-owned Restricted Subsidiaries (or a combination of any such Persons). 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 (OR INCLUDING) WITHOUT LIMITATION", and (b) where any provision in this 35 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 Lenders shall otherwise expressly agree or unless otherwise expressly provided herein, all of the terms used in 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, each Lender, individually and not jointly and severally with any other Lender, agrees to make available to the Borrowers its Commitment in the Credit, which Credit consists of: 2.1.1 as of the date of determination thereof, for the Facility A Borrowers, jointly and severally, a maximum amount under Facility A equal to the least of (i) US$50,000,000, (ii) the sum obtained in subtracting from the maximum amount of Priority Debt then permitted to be outstanding pursuant to Section 14.2.1(c) hereof all then existing Priority Debt other than the Loan under Facility A, or (iii) the Borrowing Base; 2.1.2 for the Facility B/C Borrower, a maximum amount of US $35,000,000 under Facility B; and 2.1.3 for the Facility B/C Borrower, a maximum amount of US $60,000,000 under Facility C; for a total of up to US $145,000,000 (the "CREDIT"). 36 2.2 FACILITY A Facility A shall be divided into two tranches, Tranche A-1 and Tranche A-2. Tranche A-1, in a maximum amount of US$10,000,000, may be borrowed only by the Canadian Borrowers from the Canadian Lenders; Tranche A-2, in a maximum amount of US$40,000,000, may be borrowed by the U.S. Borrowers from the U.S. Lenders. Provided that no Default shall have occurred and be continuing and that no Event of Default shall have occurred which has not been waived, IPG may, once per fiscal quarter, by notice in writing sent to the Agent at least 30 days prior to the effective date thereof (the "EFFECTIVE RE-ALLOCATION DATE"), request that a different allocation, not exceeding $50,000,000 in total, be made between Tranche A-1 and Tranche A-2 of Facility A. In such event, such re-allocation will occur on the Effective Re-Allocation Date, provided that, prior to the Effective Re-Allocation Date, the U.S. Borrowers have repaid the U.S. Lenders under Tranche A-2 and the Canadian Borrowers have repaid the Canadian Lenders under Tranche A-1, to the extent necessary to permit such re-allocation to occur. All Advances borrowed under Facility A may be repaid and re-borrowed by the Facility A Borrowers at all times during the Term. 2.3 FACILITY B AND FACILITY C Subject to the permanent reductions in the ongoing availability of Facility B and Facility C resulting from the repayment of such Facilities under the provisions of either Section 9.1 or 9.2, all Advances available to the Facility B/C Borrower under Facility B and Facility C may be repaid and re-borrowed by the Facility B/C Borrower at all times during the Term. 2.4 EXTENSION OF TERM - FACILITY A The Facility A Borrowers may request, by notice in writing to the Agent given at least 60 days but not more than 90 days prior to the Conversion Date, that the Lenders extend such Conversion Date (a "RENEWAL REQUEST") by a period of 364 days from the Conversion Date otherwise in effect (the "RENEWAL PERIOD"). The Agent shall promptly notify the Lenders of any such Renewal Request, and the Lenders undertake to respond thereto no more than thirty (30) days following the Agent's receipt of the Renewal Request. If all of the Lenders agree to the Renewal Request during such period, the Conversion Date shall be extended to the last day of the Renewal Period. If any Lender fails to so respond, such Lender shall be deemed to have refused the Renewal Request. Each of the Lenders may accept or refuse the Renewal Request at its entire discretion or impose any condition it sees fit. In the event of an explicit or a deemed refusal by any of the Lenders or if the Facility A Borrowers do not accept any conditions imposed by any of the Lenders, the Term shall be extended for another 2 years, but the Facility A Borrowers shall no longer have the right to forward a Renewal Request. 37 3 PURPOSE 3.1 PURPOSE OF THE ADVANCES All Advances made by the Lenders to the Borrowers in accordance with the provisions hereof shall be used by the Borrowers (directly or indirectly) for (a) the financing of the non-hostile acquisition of assets, and (b) general corporate or business purposes, including the issuance of letters of credit and the repayment and cancellation of all Existing Credit Facilities. No proceeds of any Advance will be used (A) to acquire any equity "security", as defined in Section 2(1) of the Securities Act of 1933, as amended, 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, or (B) to finance or protect against any hostile acquisition (meaning an acquisition by or of a member of the Restricted Group in respect of which the board of directors of the target company or management of the target Person (if the target is not a corporation) has not recommended acceptance of same). 4 ADVANCES, CONVERSIONS AND OPERATION OF ACCOUNTS 4.1 NOTICE OF BORROWING Subject to the applicable provisions of this Agreement, on any Business Day during the relevant Term, each of the Borrowers 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 Prime Rate Advance, US Base Rate Advance or US Prime Rate Advance (other than a Swing Line Advance, which shall be made in accordance with the provisions of Section 4.4) is required, such Borrower shall have provided to the Agent 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, Letters of Credit, Swing Line Advances and BA Advances shall be made in accordance with the provisions of Sections 4.2, 4.3, 4.4 and 6.1 respectively. 4.2 LIBOR ADVANCES AND CONVERSIONS On any Business Day during the Term, upon an irrevocable telephone notice to the Agent 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", each of the Borrowers 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 (but subject to the other provisions of this Agreement) or that a Libor Advance or any part thereof be extended, as the case may be. The Agent 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 each 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 Designated Period of 1, 2, 3 or 6 months. However, if a Borrower requesting a LIBOR Advance has not delivered a notice to the 38 Agent in a timely manner in accordance with the provisions of this Section 4.2, the relevant Borrower shall be deemed to have chosen to have the interest on the amount of such Advance calculated in accordance with the provisions of Section 5.11. 4.3 LETTERS OF CREDIT As part of the Credit available hereunder and upon not less than three (3) Business Days' prior notice to the Agent, each of the Facility A Borrowers may cause to be issued by an Issuing Lender one or more Letters of Credit under Facility A in a maximum aggregate amount outstanding at any time not exceeding US $15,000,000, 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 relevant Facility A Borrower of the Issuing Lender's standard documentation then currently used in connection with letters of credit. Such Borrower shall pay non-refundable fees in respect of any such Letter 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 relevant Facility A Borrower shall also pay to the Issuing Lender Letter of Credit fees in respect of any such Letters of Credit equal to .12% per annum of the face amount thereof, payable (i) for Letters of Credit issued at the request of a US Borrower, in arrears at the end of each fiscal quarter of IPG, and (ii) for Letters of Credit issued at the request of a Canadian Borrower, in advance on the date of issuance, or on such other date as the Agent may determine from time to time. IPG and LLC expressly acknowledge that they will remain liable hereunder in respect of Letters of Credit irrespective of the fact that they have not executed such standard documentation together with the applicable Borrower. If a request for payment is made under any Letter of Credit, the Issuing Lender will advise the Agent and the Agent will promptly advise the relevant Facility A Borrower of any payment made thereunder. Upon any payment by the Issuing Lender under any Letter of Credit, each of the Lenders shall reimburse to the Issuing Lender a portion of such payment equal to the percentage of its respective Facility A Commitment multiplied by the amount of such payment. 4.4 SWING LINE ADVANCES 4.4.1 Swing Line Advances. Subject to the terms and conditions of this Agreement, the Swing Line Lenders agree to make Swing Line Advances to the Swing Line Borrowers on any Business Day from time to time during the Term of Facility A. Swing Line Advances may be made or drawn by way of overdrafts on the relevant Swing Line Borrower's account with the relevant Swing Line Lender or by way of irrevocable same Business Day telephone notice to the Swing Line Lender at or before 11:00 a.m. New York time followed by the delivery on the same day of a written notice of confirmation. Not later than the day following the Business Day on which it requests any Swing Line Advance, the relevant Swing Line Borrower shall advise the Agent of such Swing Line Advance by notice in writing or, where applicable, by providing to the Agent a copy of all relevant documentation. Such Borrower shall advise the Agent in a similar fashion of any repayment of a Swing Line Advance not later than the Business Day following the date of such repayment. 39 4.4.2 Use of Proceeds of Swing Line Advances. The proceeds of Swing Line Advances may be used by the Swing Line Borrowers for any purpose for which other Advances under Facility A may be used. 4.4.3 Retirement and Replacement. If any Swing Line Lender no longer wishes to act as such, it shall notify the Facility A Borrowers, the other Facility A Lenders and the Agent not less than ten (10) days prior to the date on which it proposes to cease acting as a Swing Line Lender. In such event, the Facility A Borrowers may designate a different Swing Line Lender by sending a notice to (a) the Swing Line Lender who will no longer act as such (the "RETIRING SWING LINE LENDER"), (b) the new Swing Line Lender who has agreed to act as such and (c) the Agent, not less than five (5) days prior to the date on which the replacement is to occur. On the replacement date, the new Swing Line Lender shall make a Prime Rate Advance or a US Prime Rate Advance, as the case may be, available to the Agent for the purpose of repaying the Swing Line Loans owed to the Retiring Swing Line Lender. 4.4.4 No Replacement Possible/Events of Default. If an Event of Default shall have occurred which has not been waived, other than an Event of Default under subsection 15.1.3, or if no Facility A Lender agrees to act as a replacement for the Retiring Swing Line Lender (in such case, the affected Swing Line Lender or Swing Line Lenders are herein referred to as the "FORMER SWING LINE LENDER"), the Facility A Borrowers shall be deemed to have made a request for a Prime Rate Advance or a US Prime Rate Advance, as the case may be, under Facility A, and each Facility A Lender shall make a Prime Rate Advance or a US Prime Rate Advance, as the case may be, available to the Agent, on the date referred to in the first sentence of subsection 4.4.3, for the purpose of repaying the principal amount of the Swing Line Loans owed to the Former Swing Line Lender, in the amount of such Facility A Lender's Commitment percentage multiplied by the amount of the outstanding Swing Line Loans owing to the Former Swing Line Lender (the "LENDER SWING LINE REPAYMENTS"). From and after such date, the Facility A Borrowers shall not have any further right to obtain Swing Line Advances and any outstanding Swing Line Loans will continue to form part of the Loans made under Facility A. However, if a Default under subsection 15.1.3 shall have occurred and be continuing, or if an Event of Default under subsection 15.1.3 shall have occurred and not been waived, the Facility A Lenders shall not make such Lender Swing Line Repayments and the provisions of subsection 4.4.5 shall apply. 4.4.5 Payments Following a certain Default or Event of Default. If, before the making of a Lender Swing Line Repayment under subsection 4.4.4, a Default under subsection 15.1.3 shall have occurred and be continuing or an Event of Default under subsection 15.1.3 shall have occurred which has not been waived, each Facility A Lender will, on the date such Lender Swing Line Repayment was to have been made, purchase from the Former Swing Line Lender an undivided participating interest in the Swing Line Loans to be repaid, in an amount equal to its Commitment percentage multiplied by the amount of the outstanding Swing Line Loans, and immediately transfer such amount to the Agent for the benefit of the Former Swing 40 Line Lender, in immediately available funds. From and after such date, the Facility A Borrowers shall not have any further right to obtain Swing Line Advances and the outstanding Swing Line Loans will continue to form part of the Loans made under Facility A. 4.4.6 Subsequent Payments. If at any time after any Lender Swing Line Repayment has been made, the Former Swing Line Lender receives any payment on account of the Swing Line Loans in respect of which such Lender Swing Line Repayment has been made or on account of the purchase referred to in subsection 4.4.5, the Former Swing Line Lender will distribute to the Agent for the benefit of each Facility A Lender an amount equal to its Commitment percentage multiplied by such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Facility A Lender's portion was outstanding and funded) in like funds as received; provided, however, that if such payment received by the Former Swing Line Lender is required to be returned, such Facility A Lender will return to the Agent for the benefit of the Former Swing Line Lender any portion thereof previously distributed by the Former Swing Line Lender to the Agent for the benefit of such Facility A Lender in like funds as such payment is required to be returned by such Former Swing Line Lender. 4.4.7 Unconditional Obligation to Make Lender Swing Line Repayments. Each Facility A Lender's obligation to make Lender Swing Line Repayments or to purchase a participating interest in Swing Line Loans in accordance with subsections 4.4.4 and 4.4.5 shall be absolute and unconditional and shall not be affected by any circumstance, including: (1) any set-off, compensation, counterclaim, recoupment, defence or other right which such Facility A Lender may have against a Swing Line Lender, the Facility A Borrowers or any other Person for any reason whatsoever; (2) the occurrence or continuance of any Default or Event of Default; (3) any adverse change in the condition (financial or otherwise) of the Facility A Borrowers or any other Person; (4) any breach of this Agreement by the Facility A Borrowers or any other Person; (5) any inability of the Facility A Borrowers to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which any such Lender Swing Line Repayment is to be made or participating interest is to be purchased or (6) any other circumstances, happening or event whatsoever, whether or not similar to any of the foregoing. If any Facility A Lender does not make available the amount required to be funded by it under subsection 4.4.4 or 4.4.5, as the case may be, the Former Swing Line Lender shall be entitled to recover such amount on demand from such Facility A Lender, together with interest thereon at the Prime Rate or the US Prime Rate, as the case may be, from the date of non-payment until such amount is paid in full. 4.4.8 Standby Fee not Affected. Notwithstanding the provisions of Section 5.14, and for greater certainty, the Standby Fee described in subsection 5.14.1 will be calculated daily and be payable on the entire unused portion of Facility A, irrespective of the amount of the Borrowing Base. 41 4.5 CURRENCY Subject to the provisions of Sections 2.1 and 2.2 and of Article 5 and Section 6.1, at any time during the relevant Term, each of the Facility A Borrowers may borrow, on one or more occasions, up to the maximum amount of the Credit under Facility A in Canadian or US Dollars or in any combination thereof, as such Borrowers may consider appropriate. The Facility B/C Borrower shall borrow in US Dollars only. 4.6 OPERATION OF ACCOUNTS The Agent shall maintain in its books at the Branch a record of the Loan, including the Letters of Credit issued by the Issuing Lender at the request of a Borrower, attesting as to the total of the Borrowers' indebtedness to the Lenders in accordance with the provisions hereof. Such record shall constitute, in the absence of manifest error, prima facie proof of the total amount of the indebtedness of the Borrowers to the Lenders in accordance with the provisions hereof, of the date of any Advance made to the Borrowers and of the total of all amounts paid by the Borrowers from time to time with respect to principal and interest owing on the Loan and the fees and other sums payable in accordance with the provisions hereof. 4.7 APPORTIONMENT OF ADVANCES The amount of each Advance will be apportioned among the Lenders by the Agent by reference to the Commitment of each Lender with respect to the applicable Facility, as such Commitment shall be in effect immediately prior to the making of such Advance, subject to the provisions of Section 4.4 hereof with respect to Swing Line Advances and Section 6.9 hereof with respect to BA Advances. If any amount is not in fact made available to the Agent by a Lender, the Agent shall be entitled to recover such amount (together with interest thereon at the rate reasonably determined by the Agent as being its cost of funds in the circumstances) on demand from such Lender or, if such Lender fails to reimburse the Agent for such amount on demand, from the Borrowers. 4.8 LIMITATIONS ON ADVANCES Any amount of the Credit available under Facility A, Facility B and Facility C shall cease to be available at the expiry of the applicable Term. 4.9 NETTING On the date of any Advance or on a Rollover Date, each of the Lenders shall be entitled to net amounts payable on such date by such Lender to a Borrower against amounts due and payable on such date by such Borrower to the Lender. 4.10 NOTICES IRREVOCABLE Any notice given to the Agent by a Borrower in accordance with Article 4 may not be revoked or withdrawn. 42 5 INTEREST AND FEES 5.1 INTEREST ON THE PRIME RATE BASIS The principal amount of the Loan which at any time and from time to time remains outstanding and in respect of which a Canadian Borrower has chosen or, in accordance with the provisions hereof, is obliged to pay interest on the Prime Rate Basis, shall bear interest, calculated daily, on the daily outstanding principal balance of such Loan, from the date of each applicable Advance up to and including the day preceding the date of repayment thereof in full, 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 Prime Rate at the close of business on each of such days, plus the Margin. 5.2 PAYMENT OF INTEREST ON THE PRIME RATE BASIS The interest payable in accordance with Section 5.1 and calculated in the manner described therein shall be payable to the Agent monthly in arrears, on the first Business Day of each month or on such other date as the Agent may determine and advise the Borrowers in writing from time to time, the first payment of which shall be payable on the first Business Day of the month immediately following the month in which the first Prime Rate Advance was made. 5.3 INTEREST ON THE US BASE RATE BASIS The principal amount of the Loan which at any time and from time to time remains outstanding and in respect of which a Canadian Borrower has chosen or, in accordance with the provisions hereof, is obliged to pay interest on the US Base Rate Basis, shall bear interest, calculated daily, on the daily outstanding principal balance of such Loan, from the date of each applicable Advance up to and including the day preceding the date of repayment thereof in full, 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 Base Rate at the close of business on each of such days, plus the Margin. 5.4 PAYMENT OF INTEREST ON THE US BASE RATE BASIS The interest payable in accordance with Section 5.3 and calculated in the manner hereinabove described is payable to the Agent monthly, in arrears, on the first Business Day of each month or on such other date as the Agent may determine and advise the Borrowers in writing from time to time, the first payment of which shall be payable on the first Business Day of the month immediately following the month in which the first US Base Rate Advance was made. 5.5 INTEREST ON THE US PRIME RATE BASIS The principal amount of the Loan which at any time and from time to time remains outstanding and in respect of which a US 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 outstanding principal balance of such Loan, from the date of 43 each applicable Advance up to and including the day preceding the date of repayment thereof in full 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. 5.6 PAYMENT OF INTEREST ON THE US PRIME RATE BASIS The interest payable in accordance with Section 5.5 and calculated in the manner hereinabove described is payable to the Agent monthly, in arrears, on the first Business Day of each month or on such other date as the Agent may determine and advise the Borrowers in writing from time to time, the first payment of which shall be payable on the first Business Day of the month immediately following the month in which the first US Prime Rate Advance was made. 5.7 INTEREST ON THE LIBOR BASIS The principal amount of the Loan which at any time and from time to time remains outstanding and in respect of which a Borrower has chosen, in accordance with the provisions hereof, to pay interest on a LIBOR basis, shall bear interest, calculated daily, on the daily outstanding principal balance of such Loan, from each Rollover Date up to and including the day preceding the date of repayment thereof in full, 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 applicable Selected Amount, plus the Margin, and such rate shall be effective with respect to each applicable Selected Amount as and from each applicable Rollover Date up to and including the date prior to the next such Rollover Date. 5.8 PAYMENT OF INTEREST ON THE LIBOR BASIS The interest payable in accordance with the provisions of Section 5.7 and calculated in the manner hereinabove described is payable to the Agent, in arrears, 5.8.1 on the last day of the Designated Period when the Designated Period is 1, 2 or 3 months, 5.8.2 when the Designated Period exceeds 3 months, on the last Business Day of each period of 3 months during such Designated Period and on the last day of the Designated Period, if the Designated Period is more than 3 months and is not a multiple of 3 months. 5.9 LIMITS TO THE DETERMINATION OF LIBOR Nothing herein contained shall be interpreted as authorizing a 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. 44 5.10 FIXING OF LIBOR LIBOR shall be transmitted to the relevant Borrower(s) by the Agent at approximately 11:00 A.M., New York time, two Business Days prior to: 5.10.1 the date on which the relevant Libor Advance is to be made; or 5.10.2 the relevant Rollover Date. 5.11 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 if the amount is in US Dollars and on the Prime Rate Basis if the amount is in Canadian Dollars. 5.12 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 payable on the same basis. 5.13 MAXIMUM INTEREST RATE The amount of the interest or fees payable 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. 5.14 FEES The Borrowers shall pay the following fees (the "FEES") to the Agents in the manner directed by the Agents pursuant to the provisions of Section 18.19: 5.14.1 for the Lenders and in respect of Facility A, at all times during its Term, a Standby Fee equal to the percentage set out in the definition of "Margin", in each case multiplied by an amount equal to the unused portions of Facility A (calculated based on the maximum principal amount that could then be outstanding under such Facility, irrespective of the Borrowing Base), calculated daily and payable quarterly in arrears based on a 365/366 day year on the last day of each calendar quarter or on such other date as the Agent may determine; 5.14.2 for the Lenders and in respect of each of Facility B and Facility C, at all times during the term of such Facility, a Standby Fee equal to the percentage set out in the definition of "Margin" in each case multiplied by an amount equal to the unused portions of each such Facility (calculated based on the maximum principal amount that could then be outstanding under such Facility), calculated daily and 45 payable quarterly in arrears based on a 365/366 day year on the last day of each calendar quarter or on such other date as the Agent may determine; 5.14.3 up-front Fees of US$225,000 to NBC, US$375,000 to Comerica and US$800,000 to TD, payable on the Closing Date; 5.14.4 additional Fees of US$250,000 to Comerica and US$400,000 to TD, payable on the date of the first increase in the Margin on Facility B, if any, effected pursuant to the fourth subsection of the definition of the term "Margin"; 5.14.5 structuring Fees of US$100,000 payable to the Arrangers on the Closing Date on a pro-rata basis; and 5.14.6 for the Agent, an agency fee to be determined between the Agent and the Borrowers. 5.15 INTEREST ACT 5.15.1 For the purposes of the Interest Act of Canada (to the extent applicable), 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. 5.15.2 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 BANKERS' ACCEPTANCES 6.1 ADVANCES BY BANKERS' ACCEPTANCES AND CONVERSIONS INTO BANKERS' ACCEPTANCES 6.1.1 Subject to the applicable provisions of this Agreement, on any Business Day during the relevant Term, by written Notice of Borrowing to the Agent given at least three (3) Business Days prior to the date of the Advance or a Rollover Date (for the purposes of this Article 6 called the "ACCEPTANCE DATE") and before 10:00 A.M., a Canadian Borrower may request that a BA Advance be made, that one or more Advances not borrowed as BA Advances be converted into one or more BA Advances or that a BA Advance or any part thereof be extended, as the case may be (the "BA REQUEST"). Bankers' Acceptances shall be issued on each Acceptance Date or Rollover Date, in a minimum Selected Amount, with respect to each Designated Period, of Cdn.$3,000,000 or such greater amount which is an integral multiple of Cdn.$100,000, shall have a Designated Period, as designated by the 46 relevant Canadian Borrower, of 1, 2, 3 or 6 months (or such other period as may be available and acceptable to the Agent), subject to availability, and shall, in no event, mature on a date after the expiry of the Term. 6.1.2 Prior to making any BA Request, a Canadian Borrower shall deliver: (a) to the Canadian Lenders, in the name of each Canadian Lender which is a bank that accepts bankers' acceptances (a "BA LENDER"), drafts in form and substance acceptable to the Agent and the Canadian Lenders; and (b) to the Canadian Lenders in the name of each Canadian Lender which is not a bank or does not accept bankers' acceptances (a "NON-BA LENDER"), Discount Notes; completed and executed by its authorized signatories in sufficient quantity for the Advance requested and in appropriate denominations to facilitate the sale of the Bankers' Acceptances in the financial markets. No Canadian Lender shall be responsible or liable for its failure to accept a Bankers' Acceptance hereunder if such failure is due, in whole or in part, to the failure of a Canadian Borrower to give appropriate instructions to the Agent on a timely basis, nor shall the Agent or any Canadian Lender be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except a loss or improper use arising by reason of the gross negligence or wilful misconduct of the Agent, such Canadian Lender, or their respective employees. In order to facilitate issuances of Bankers' Acceptances pursuant hereto, each Canadian Borrower hereby authorizes each Canadian Lender, and for this purpose appoints each Canadian Lender its lawful attorney, to complete and sign Bankers' Acceptances on behalf of such Borrower, in accordance with the instructions given from time to time by such Borrower, in handwritten or facsimile or mechanical signature or otherwise, and once so completed, signed and endorsed, and following acceptance of them as Bankers' Acceptances, to purchase, discount or negotiate such Bankers' Acceptances in accordance with the provisions of this Article 6, and to provide the Available Proceeds (as defined in subsection 6.2.3(d)) to the Agent in accordance with the provisions hereof. Drafts so completed, signed, endorsed and negotiated on behalf of a Canadian Borrower by any Canadian Lender shall bind such Borrower as fully and effectively as if so performed by an authorized officer of such Borrower. Each Canadian Lender shall maintain appropriate records with respect to such instruments (i) received by it hereunder, (ii) voided by it for any reason, (iii) accepted by it hereunder and (iv) cancelled, whether at their respective maturities or otherwise. Each Canadian Lender agrees to provide such records to the Canadian Borrowers promptly upon request and, at the request of a Canadian Borrower, to cancel such instruments which have been completed and executed by such Canadian Borrower pursuant to this subsection 6.1.2 and which are held by such Canadian Lender and have not yet been issued hereunder. 47 6.2 ACCEPTANCE PROCEDURE With respect to any BA Advance: 6.2.1 The Agent shall promptly notify in writing each Canadian Lender of the details of the proposed BA Advance, specifying: (a) for each BA Lender, (i) the face amount of the Bankers' Acceptances to be accepted by such Lender, and (ii) the Designated Period for such Bankers' Acceptances; and (b) for each Canadian Lender which is a Non-BA Lender, (i) the face amount of the Discount Notes to be issued to such Lender, and (ii) the Designated Period for such Discount Notes. 6.2.2 The Agent shall establish the Bankers' Acceptance Discount Rate at or about 10:00 a.m. on the Acceptance Date, and the Agent shall promptly determine the amount of the BA Proceeds. 6.2.3 Forthwith, and in any event not later than 11:30 A.M. on the Acceptance Date, the Agent shall indicate to each Canadian Lender, in the manner set out in Section 18.6: (a) the Bankers' Acceptance Discount Rate; (b) the amount of the Stamping Fee applicable to those Bankers' Acceptances to be accepted by such Lender on the Acceptance Date, which shall be calculated by multiplying the appropriate annual percentage set out in the definition of "Margin" by the face amount of each such Bankers' Acceptance and by a fraction the numerator of which is the number of days in the Designated Period and the denominator of which is 365, any such Lender being authorized by the Canadian Borrowers to collect the Stamping Fee out of the BA Proceeds of those Bankers' Acceptances; (c) the BA Proceeds of the Bankers' Acceptances to be purchased by such Lender on such Acceptance Date; and (d) the amount obtained (the "AVAILABLE PROCEEDS") by subtracting the Stamping Fee mentioned in subsection 6.2.3(b) from the BA Proceeds mentioned in subsection 6.2.3(c); 48 6.2.4 Not later than 1:00 P.M. on the Acceptance Date, each Canadian Lender shall make available to the Agent its Available Proceeds. 6.2.5 Not later than 4:00 P.M. on the Acceptance Date, the Agent shall transfer the Available Proceeds to the relevant Canadian Borrower in accordance with Section 9.10 and shall notify the relevant Canadian Borrower on such day either by telex, fax or telephone (if by telephone, to be confirmed subsequently in writing) of the details of the issue, including the information required by subsection 6.2.3. 6.3 PURCHASE OF BANKERS' ACCEPTANCES AND DISCOUNT NOTES Before giving value to the relevant Canadian Borrower, the Canadian Lenders or the participants which: 6.3.1 are BA Lenders shall, on the Acceptance Date, accept the Bankers' Acceptances by inserting the appropriate principal amount, Acceptance Date and maturity date in accordance with the BA Request relating thereto and affixing their acceptance stamps thereto, and shall purchase or sell same; and 6.3.2 are Non-BA Lenders shall, on the Acceptance Date, complete the Discount Notes by inserting the appropriate principal amount, Acceptance Date and maturity date in accordance with the BA Request relating thereto. 6.4 MATURITY DATE OF BANKERS' ACCEPTANCES Subject to the applicable notice provisions, at or prior to the maturity date of each Bankers' Acceptance, the Canadian Borrowers shall: 6.4.1 give to the Agent a notice in the form of Schedule "B" requesting that the Canadian Lenders convert all or any part of the BA Advance then outstanding by way of Bankers' Acceptances which are maturing into a Prime Rate Advance; or 6.4.2 give to the Agent a notice in the form of Schedule "B" requesting that the Canadian Lenders extend all or any part of the BA Advance outstanding by way of Bankers' Acceptances which are maturing into another BA Advance by issuing new Bankers' Acceptances, subject to compliance with the provisions of subsection 6.1.1 with respect to the minimum Selected Amount; or 6.4.3 no later than 10:00 A.M., on the third Business Day prior to the maturity date of each Bankers' Acceptance then outstanding and reaching maturity, notify the Agent that it intends to deposit in its account for the account of the Canadian Lenders on said maturity date an amount equal to the face amount of each such Bankers' Acceptance, less any portion of the related BA Advance that has been converted or extended pursuant to subsection 6.4.1 or 6.4.2 . 49 6.5 DEEMED CONVERSIONS ON THE MATURITY DATE If the Canadian Borrowers do not deliver to the Agent one or more of the notices contemplated by subsections 6.4.1 and 6.4.2 or do not give the notice and make the deposit contemplated by subsection 6.4.3, the Canadian Borrowers shall be deemed to have requested that the part of the BA Advance then outstanding by way of the Bankers' Acceptance which is maturing be converted into a Prime Rate Advance, provided that in such event the interest payable in respect of any such deemed Prime Rate Advance shall be 115% of the interest otherwise payable on the Prime Rate Basis for the three (3) day period immediately following the maturity date of the Bankers' Acceptances in question. 6.6 CONVERSION AND EXTENSION MECHANISM If under the conditions 6.6.1 of subsection 6.4.1 and of Section 6.5, a Canadian Borrower requests or is deemed to have requested, as the case may be, that the Agent convert a portion of the BA Advance which is maturing into a Prime Rate Advance, the Canadian Lenders shall pay the applicable Bankers' Acceptances which are outstanding and maturing. Such payments by the Canadian Lenders will constitute a Prime Rate Advance within the meaning of this Agreement; 6.6.2 of subsection 6.4.3, a Canadian Borrower makes a deposit in its account, without limiting in any way the generality of Section 19.5, such Canadian Borrower hereby expressly and irrevocably authorizes the Agent to make any debits necessary in its account in order to pay, to the extent contemplated by subsection 6.4.3, the Bankers' Acceptances which are outstanding and maturing. 6.7 AMOUNTS GIVEN TO THE CANADIAN LENDERS DO NOT CONSTITUTE A PREPAYMENT None of the amounts debited by the Agent from a Canadian Borrower's account from time to time in accordance with the provisions of subsection 6.6.2 shall constitute a prepayment in accordance with the provisions of Section 9.3. 6.8 PREPAYMENT OF BANKERS' ACCEPTANCES Notwithstanding any provision hereof, but subject to subsection 8.1.1, a Canadian Borrower may not prepay any Bankers' Acceptance other than on its maturity date; however, this provision shall not prevent such Borrower from acquiring, in its discretion but subject to the other provisions of this Agreement, any Bankers' Acceptance in circulation from time to time. 6.9 APPORTIONMENT AMONGST THE CANADIAN LENDERS The Agent is authorized by the Canadian Borrowers and each Canadian Lender to allocate amongst the Canadian Lenders the Bankers' Acceptances to be issued in such manner and amounts as the Agent may, in its sole discretion, but acting reasonably, consider necessary, 50 so as to ensure that no Canadian Lender is required to accept a Bankers' Acceptance for a fraction of Cdn.$100,000, and in such event, the Canadian Lenders' respective Commitment in any such Bankers' Acceptances and repayments thereof shall be altered accordingly. Further, the Agent is authorized by the Canadian Borrowers and each Canadian Lender to cause the proportionate share of one or more Lender's Advances (calculated based on its Commitment) to be exceeded by no more than Cdn.$100,000 each as a result of such allocations, provided that the principal amount of outstanding Advances, including BA Advances outstanding by way of Bankers' Acceptances, shall not thereby exceed the maximum amount of the respective Commitment of each Canadian Lender. Any resulting amount by which the requested aggregate face amount of any such Bankers' Acceptances shall have been so reduced shall be advanced, converted or continued, as the case may be, as a Prime Rate Advance, to be made contemporaneously with the BA Advance. 6.10 CASH DEPOSITS Each Canadian Lender may, in its discretion, at any time, in the absence of any demand by a Canadian Borrower to such effect, grant an Advance to a Canadian Borrower, the amount of which shall be equivalent to the face amount of all Bankers' Acceptances then in circulation which have been accepted by such Canadian Lender, which Advance shall not bear interest. The amount of the Advance shall not be taken into account in order to calculate the amount of the Credit used pursuant hereto. The Agent shall retain the amount of the Advance in a non-interest bearing cash collateral account as security, for the benefit of such Borrower, which amount may be entirely set-off against the amount of the Advance and the amount of the Bankers' Acceptances in circulation which such Canadian Lender has accepted and may be imputed, in the Lender's discretion, to the payment of such Bankers' Acceptances at their maturity. Such Borrower shall sign and remit as security with regard thereto all appropriate documents which the Lenders might judge necessary or desirable, including an assignment of the credit balance of the deposit account held as security, the whole without cost to such Borrower save (i) after the occurrence and during the continuance of a Default or after the occurrence of an Event of Default which has not been waived, or (ii) in the context of a prepayment under Section 9.3. 6.11 DAYS OF GRACE The Canadian Borrowers shall not claim from the Lenders any days of grace for the payment at maturity of any Bankers' Acceptances presented and accepted by the Lenders pursuant to the provisions of this Agreement. Further, each of the Canadian Borrowers waives any defence to payment which might otherwise exist if for any reason a Bankers' Acceptance shall be held by any Canadian Lender in its own right at the maturity thereof. 6.12 OBLIGATIONS ABSOLUTE The obligations of the Canadian Borrowers with respect to Bankers' Acceptances shall be unconditional and irrevocable and shall be paid strictly in accordance with the provisions of this Agreement under all circumstances, including the following circumstances: 51 6.12.1 any lack of validity or enforceability of any draft accepted by any Canadian Lender as a Bankers' Acceptance; o 6.12.2 the existence of any claim, set-off, defence or other right which any of the Canadian Borrowers may have at any time against the holder of a Bankers' Acceptance, the Canadian Lenders, or any other person or entity, whether in connection with this Agreement or otherwise. 6.13 DEPOSITORY BILLS AND NOTES ACT Bankers' Acceptances may be issued in the form of a depository bill and deposited with a clearing house, both terms as defined in the Depository Bills and Notes Act. The Agent and the Canadian Borrowers shall agree on the procedures to be followed, acting reasonably. The Canadian Lenders are also authorized to issue depository bills as replacements for previously issued Bankers' Acceptances, on the same terms as those replaced, and deposit them with a clearing house against cancellation of the previously issued Bankers' Acceptances. 7 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS 7.1 MARKET FOR BANKERS' ACCEPTANCES AND LIBOR ADVANCES If at any time or from time to time: (a) there no longer exists a market for Bankers' Acceptances, or (b) as a result of market conditions, it is not reasonably practicable to establish LIBOR, for a Selected Amount or a Designated Period, or (c) US Dollar deposits are not available to any Lender in the London Interbank or any comparable market in the ordinary course of business in amounts sufficient to permit it to make the requested Libor Advance for a Selected Amount or a Designated Period, such Lender shall so advise the Agent and shall not be obliged to honour any Notices of Borrowing in connection with any BA Advances or Libor Advances, and the Borrowers' option to request BA Advances or Libor Advances, as the case may be, shall thereupon be suspended upon the delivery by the Agent to the Borrowers of a notice corresponding to the notice provided by such Lender to the Agent as described above. 7.2 SUSPENSION OF BA ADVANCE AND LIBOR ADVANCE OPTION If a notice has been given by the Agent in accordance with Section 7.1, the applicable BA Advance or 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 applicable Lenders and the right of the Borrowers to choose that Advances be made or, once made, be converted or extended into BA Advances or Libor Advances, as the case may be, shall be suspended until such time as the Agent has determined that the circumstances having given rise to such suspension no longer exist, in respect of which determination the Agent shall advise the Borrowers within a reasonable delay. 52 7.3 LIMITS ON BA ADVANCES, LETTERS OF CREDIT AND LIBOR ADVANCES Nothing in this Agreement shall be interpreted as authorizing the Borrowers: 7.3.1 to issue Bankers' Acceptances or to borrow by way of Libor Advances, nor as obliging the Agent to accept Notices of Borrowing in respect of Libor Advances, in each case for a Designated Period that ends; nor 7.3.2 to cause to be issued Letters of Credit that mature; 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. 8 ILLEGALITY, INCREASED COSTS AND INDEMNIFICATION 8.1 ILLEGALITY, INCREASED COSTS If a Lender, acting reasonably, determines (which determination shall be attested to by a certificate submitted to the Borrowers by such Lender with a copy to the Agent and which shall be final and binding between the parties hereto in the absence of manifest error) that, after the date hereof, there has occurred 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, which: 8.1.1 has rendered or will render it illegal or contrary to any law, directive or guideline for such Lender to maintain or to give effect to all or part of its obligations stipulated in this Agreement, including the obligation to make or maintain all or any part of a BA Advance or a Libor Advance pursuant to the terms hereof, then the obligation of such 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 8.2 with respect to losses, costs and expenses, if the Advance affected is a BA Advance, the applicable Borrower(s) may convert the principal amount thereof into a Prime Rate Advance, and if a Libor Advance, the applicable Borrower(s) may convert the principal amount thereof into a US Prime Rate Advance or a US Base Rate Advance, and pay the interest accrued thereon, or may reimburse the particular BA Advance or 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, modification or quashing, or, if in the judgment of such Lender expressed 53 to the Agent in the certificate referred to above, an immediate conversion or reimbursement is necessary, immediately upon demand by the Agent; or 8.1.2 i) has imposed, modified or deemed applicable any loan ceiling with respect to such 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 by, or to the loans made by such Lender, or ii) changes the basis of taxation on payments made to such Lender under this Agreement (other than a change affecting Net Income Taxes), or iii) imposes upon such Lender any other monetary conditions or restrictions with respect to this Agreement, all or any part of the Loan, as the case may be, or any other document contemplated hereby, and if the result of any of the foregoing is to increase the cost to such Lender of making or maintaining its Commitment or any Advance, or to reduce any amount otherwise receivable by such Lender hereunder with respect thereto, then, in any such case, the relevant Borrower(s) shall promptly pay to such Lender, within 10 Business Days from demand by the Agent, such additional amounts as are necessary to compensate such Lender for such additional cost or reduced amount receivable as determined in good faith by such Lender. The Lenders shall use reasonable efforts to advise the Borrowers of any event described in this Section 8.1 within a reasonable delay. If a Lender becomes entitled to claim any additional amounts pursuant to this Section 8.1, it shall promptly notify the Borrowers, through the Agent, 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 a Lender as to any such additional amounts payable to it pursuant to this Section 8.1 shall be conclusive and binding in the absence of manifest error. 8.2 INDEMNITY The Borrowers shall indemnify each Lender against and hold each 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 such Lender to lenders of funds obtained by it in order to make or maintain any Advance and any loss or expense incurred in re-deploying deposits from which such funds were obtained, which such Lender may sustain or incur as a consequence of any i) default by a Borrower in the payment when due of the amount of or interest on any part of the Loan or in the payment when due of any other amount hereunder, ii) default by a Borrower in obtaining an Advance after such Borrower has given a Notice of Borrowing stating that it desires to obtain such Advance, iii) default by a Borrower in making any voluntary reduction of the outstanding amount of the Loan after such Borrower has given notice hereunder that it desires to make such reduction, and iv) the payment of any Bankers' Acceptance or Libor Advance otherwise than on the maturity date thereof (including any such payment required pursuant to Section 9.1 or upon acceleration pursuant to Section 15.2). A certificate of the Agent providing reasonable particulars of the calculation of any such loss or expense shall be conclusive and binding in the absence of manifest error. If any Lender becomes entitled to claim any amount pursuant to this Section 8.2, it shall promptly notify the Borrowers of the event by reason of which it has become so entitled and provide reasonable particulars of the related loss or expense. The Borrowers shall, within ten (10) days following receipt of a 54 notice to such effect pursuant to this Section 8.2, pay to the Agents, for the account of the applicable Lender, the amount which such Lender is then entitled to receive pursuant to this Section 8.2. 8.3 WITHHOLDING TAXES All payments to be made hereunder by the Borrowers, IPG and LLC shall be made free and clear of, and without deduction or withholding for or on account of, any present or future tax, levy, impost, duty, charge, assessment or fee (including interest, penalties and additions thereto), excluding Net Income Taxes (a "RELEVANT TAX"). If any Relevant Tax is required to be withheld from any payment due hereunder, the Borrowers, IPG and LLC shall, subject to the next paragraph, increase the amount of such payment so that the Lenders will receive a net amount (after deduction and withholding of all Relevant Taxes) equal to the amount required to be paid before giving effect to this Section 8.3. The Borrowers, IPG and LLC shall pay such Relevant Tax to the appropriate taxing authority for the account of applicable Lender and, as promptly as possible thereafter, send such Lender an original receipt showing payment thereof, together with such additional documentary evidence as such Lender may from time to time reasonably require. The Borrowers, IPG and LLC shall not be obliged to increase the amount of any payment to any non-US Lender hereunder pursuant to the preceding paragraph as a result of a US withholding of any Relevant Tax to the extent such withholding is imposed as a result of the failure of such Lender to timely deliver the appropriate form or forms (or successor form or forms) duly and properly completed establishing the Lender's basis for exemption from such withholding (an Internal Revenue Service Form W-8BEN, W-9 or other appropriate form), or the failure of such form or forms to establish a complete exemption from the withholding due to a willful error or negligent omission. If any Lender is entitled to a refund or credit in respect of any taxes on which increased amounts have been paid pursuant to this Section 8.3 and can easily calculate same, such Lender shall, if necessary, make the appropriate claim for such refund or credit, and if such Lender receives the benefit of the refund or credit, shall within 30 days after its receipt, credit the amount of such to the relevant Borrower, IPG or LLC, as appropriate. 8.4 SURVIVAL Without prejudice to the survival or termination of any other agreement of the Borrowers, IPG or LLC under this Agreement, the obligations of the Borrowers under Sections 8.2 and 8.3 shall survive the payment in full of all principal and interest on the Loan and the termination of the Credit. 55 9 PAYMENT, REPAYMENT AND PREPAYMENT 9.1 REPAYMENT OF THE LOAN The relevant Borrowers hereby agree to repay the principal amount of the Loan attributable to each Facility on the last day of the Term of such Facility. Notwithstanding the foregoing: 9.1.1 the Credit under Facility B shall be reduced by US$3,500,000 on each of September 30, 2002, December 31, 2002, March 31, 2003, June 30, 2003 and September 30, 2003; and 9.1.2 the Credit under Facility C shall be reduced by US$5,000,000 on the last day of each calendar quarter beginning on the earlier of (i) March 31, 2004 and (ii) the last day of the calendar quarter immediately following the calendar quarter in which the repayment and cancellation of Facility B occurs. In no event shall the aggregate outstanding principal amount of the Loans attributable to Facility B or Facility C exceed the Credit under such Facility as reduced pursuant to this Section 9.1. The Facility B/C Borrower shall repay all amounts necessary to ensure that such reductions do not cause the aggregate outstanding principal amount of the Loan attributable to Facility B or Facility C to exceed the Credit under such Facility at any time. 9.2 AMOUNT AND APPORTIONMENT OF MANDATORY REPAYMENTS 9.2.1 RESULTING FROM EQUITY OR DEBT: If any member of the Restricted Group: (a) issues any Equity Interests of any nature whatsoever, other than (i) those arising out of the exercise of employee stock options in the ordinary course at an exercise price up to an aggregate maximum of US$5,000,000 per fiscal year of IPG, or (ii) to another member of the Restricted Group, or (b) issues any Debt of the nature contemplated in the fourth subsection of the definition of "Margin" (other than (i) Debt owing by one member of the Restricted Group to another member thereof, and (ii) a replacement of Facility A after it has expired and otherwise in accordance with the provisions hereof), the net proceeds received by the Restricted Group from such issuance, creation or assumption shall, within 10 days following receipt thereof, be used to repay the Loan as follows, in each case subject to the provisions of Section 9.2.5 and to Pro Rata Sharing: (i) all of the net proceeds thereof shall first be applied to repay the 56 Loan, and the Credit under Facility B will be reduced by an amount equal to the amount of such repayment, and then (ii) once Facility B has been repaid and the Credit thereunder cancelled, 75% of the remaining net proceeds shall be applied to repay the Loan, and the Credit under Facility C will be reduced by an amount equal to the amount of such repayment. 9.2.2 RESULTING FROM EXCESS CASH FLOW: In addition to the other repayments required under this Section 9.2 and to the payments required pursuant to Section 9.1 hereof, but subject to the next succeeding paragraph, on the 63rd day following the end of each fiscal quarter commencing with IPG's fiscal quarter ending March 31, 2002, the Facility B/C Borrower shall make Mandatory Repayments equal to 75% of Excess Cash Flow for such fiscal quarter. Notwithstanding the foregoing and provided that each of Facility B and Facility C is fully drawn at the time payment is due, the amount of each quarterly Mandatory Repayment payable under this paragraph of this subsection and after giving effect thereto shall be limited to a maximum amount such that the principal amount of the Loan outstanding under Facility A (net of Available Cash in the Restricted Group) will not exceed US$35,000,000. Payment of the balance of such Mandatory Repayment (the "DEFERRED AMOUNT") shall be deferred to the next scheduled date for a Mandatory Repayment under this paragraph. Upon the repayment and cancellation of Facility B, and commencing with the fiscal year-end of the fiscal year in which such repayment occurs, within 120 days following the end of each fiscal year of IPG, the Facility B/C Borrower shall make (in lieu of the Mandatory Repayments required by the immediately preceding paragraph) Mandatory Repayments equal to 50% of Excess Cash Flow for such fiscal year, less, for greater certainty, Mandatory Repayments made for the same fiscal year (or any portion thereof) prior to the repayment and cancellation of Facility B under the preceding paragraph, if any. Such percentage shall be reduced to 35% for any fiscal year (a) in which IPG's Total Debt to EBITDA ratio calculated in accordance with the provisions of subsection 13.11.4 is less than 2.5:1 on the last day of such fiscal year, or (b) IPG has obtained a credit rating in respect of its long-term, senior unsecured Debt, of "BBB" or better by Standard & Poor's (or an equivalent credit rating by Moody's) and such rating is then in full force and effect, not having been withdrawn, the whole provided that, in the case of (a) or (b) above, no Default or Event of Default exists on the payment date. 9.2.3 RESULTING FROM INSURANCE PROCEEDS AND TAKINGS: The Restricted Group shall make all Mandatory Repayments required hereunder and under the Inter-Creditor Agreement with respect to insurance proceeds and "Takings" (as such term is defined in the Inter-Creditor Agreement), in the manner set forth in such agreements. 57 9.2.4 PRO RATA SHARING: Subject to the provisions of the next paragraph of this subsection 9.2.4, the proceeds representing each Mandatory Repayment shall be shared between the Lenders and the holders of the Notes. Such proceeds shall be allocated among such Lenders and the holders of the Notes based on the outstanding principal amount of the Loans under Facility B and Facility C and the outstanding principal amount of the Notes, determined in each case as of the date of such Mandatory Repayment. Such proceeds: (a) shall be allocated on a pro rata basis (i.e., based on the outstanding principal amount of the Loans under Facility B and Facility C and the outstanding principal amount of the Notes, respectively, to the sum total of such amounts); (b) to the extent payable to the Lenders, shall be paid firstly to the Facility B Lenders, secondly to the Facility C Lenders and thirdly, to the Facility A Lenders in accordance with each Lender's respective Commitment under the relevant Facility; and (c) to the extent payable to the holders of the Notes, shall be offered by IPG to all holders of Notes, on a pro rata basis (in accordance with the respective outstanding principal amounts of the Notes then held by each such holder) as a prepayment thereof, in each case, as provided in the Note Agreements. Any portion of such proceeds which is refused by a holder of Notes, or for which no response is received within the applicable delay following the offer to prepay, shall be re-offered on a pro rata basis to those holders of Notes which have accepted such offer in whole or in part, the whole in accordance with the provisions of the Note Agreement and the Inter-Creditor Agreement. To the extent that the remaining proceeds are not accepted for prepayment by such holders within the applicable delay, such proceeds shall be paid to the Lenders as provided in clause (b) above. Notwithstanding any other provision hereof, the Borrowers shall use reasonable efforts to maximize the amount of the Loans allocated to Facility B and Facility C on any date on which a Mandatory Repayment is to be made, so as to maximize the pro rata share of the Lenders with respect to any such Mandatory Repayment. Notwithstanding the foregoing, the first US$5,000,000 of Mandatory Repayments arising pursuant to subsection 9.2.2 shall be applied firstly to repay the Loan without having to share under the preceding paragraph. In addition, to the extent that the aggregate amount of the Equity Interests or Debt issued as described in subsection 9.2.1 exceeds the amount of the Loan under Facility B, such excess amount shall be paid to the Lenders alone, without Pro Rata Sharing, provided that no Default has occurred and is continuing and no Event of Default has occurred and has not been waived. 9.2.5 NO REIMBURSEMENT: In no circumstances shall any Mandatory Repayment be reimbursed to the Facility B/C Borrower. All Mandatory Repayments under Section 9.2: (i) shall be applied firstly to repay the Loan under Facility B, secondly to repay the Loan under Facility C (in each case in inverse order of the scheduled reductions under Section 9.1), and thirdly to reduce 58 the Loan under Facility A, and (ii) shall result in a corresponding permanent reduction in the amount of the Credit available under firstly, Facility B and secondly Facility C. No permanent reduction of Facility A will occur as a result of any Mandatory Repayment, including any Mandatory Repayment arising pursuant to the provisions of subsection 9.2.3 with respect to insurance proceeds received in relation to Operating Assets, saving the rights of the Lenders if a Default has occurred and is continuing or if an Event of Default has occurred and not been waived. The relevant Borrower(s) shall advise the Agent of its intention to make any Mandatory Repayment by notice in writing at least 3 Business Days before the Mandatory Repayment is due. 9.3 VOLUNTARY PREPAYMENT, REDUCTION AND CANCELLATION OF THE CREDIT On any Business Day during the Term, after having given notice to the Agent at least five (5) days prior thereto, the Borrowers may, subject to the provisions of Section 9.5, cancel any portion of the Credit under Facility A, Facility B or Facility C which is not then drawn by the Borrowers or which the Borrowers will repay prior to or contemporaneously with such cancellation. No Standby Fee shall be payable in respect of any portion of the Credit cancelled pursuant to the provisions of this Article 9 as and from the effective date of its cancellation. No Borrower shall be permitted to draw Advances in respect of any portion of the Credit so cancelled. In addition, on any Business Day during the Term, upon the same notice prior to the proposed prepayment and without penalty, a 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 any Libor Advance, no repayment may be made on a day other than the maturity date of such Advance, save as provided in Sections 8.2 and 9.4, and in respect of any BA Advance no prepayment shall be made on a date other than a maturity date of the related Bankers' Acceptances outstanding at such time, save as provided in Sections 8.2 and 9.4, with, in each case, all interest accrued and unpaid on the amounts so prepaid. Notwithstanding the foregoing, such Borrower shall provide to the Lenders, contemporaneously with its repayment and in accordance with the provisions of Section 6.10, cash deposits in an amount equal to the Bankers Acceptances in circulation. 9.4 PAYMENT OF LOSSES RESULTING FROM A PREPAYMENT If a prepayment or Mandatory Repayment in respect of any BA Advance or Libor Advance is made pursuant to the provisions of this Article 9 on a date other than the last day of the applicable Designated Period, then the relevant Borrower(s) shall pay to the Lenders the losses, costs and expenses suffered or incurred by the Lenders with respect to such prepayment or Mandatory Repayment, in each case as and to the extent required by Section 8.2 and Section 8.3, if applicable. 59 9.5 VOLUNTARY REDUCTIONS OF THE CREDIT Each partial cancellation of the Credit under Section 9.3 shall be applied first to the scheduled reductions for Facility B, second to the scheduled reductions for Facility C and then to Facility A, in inverse order of maturity for Facility B and Facility C. 9.6 CURRENCY OF MANDATORY REPAYMENTS AND PAYMENTS All payments, repayments, prepayments or Mandatory Repayments, as the case may be: 9.6.1 of principal under the Loan, or any part thereof, shall be made in the same currency as that in which such principal (or part thereof) is outstanding; 9.6.2 of interest, shall be made in the same currency as the principal amount outstanding to which they relate; 9.6.3 of Fees, shall be made in U.S. Dollars alone; and 9.6.4 of the amounts referred to in Section 8.2, shall be made in the same currency as the losses, costs and expenses suffered or incurred by the applicable Lender. 9.7 PAYMENTS BY THE BORROWERS TO THE AGENTS All payments to be made by the Borrowers in connection with this Agreement shall be made in funds having same day value to the applicable Agent (as determined pursuant to Section 18.19) at its Branch, or at any other office or account in Canada or the United States of America designated by such Agent, except that payments in respect of Swing Line Advances shall be so made to the Swing Line Lenders as directed by them. 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. 9.8 PAYMENT ON A BUSINESS DAY Each time a payment, repayment, prepayment or Mandatory Repayment is due on a day which is not a Business Day, it shall be made on the previous Business Day, except in the case of Swing Line Loans where it shall be made on the next Business Day. 9.9 PAYMENTS BY THE LENDERS TO THE AGENTS Any amounts payable to an Agent by a Lender shall be paid in funds having same day value to the Agent by such Lender on a Business Day at the applicable Branch. 9.10 PAYMENTS BY THE AGENT TO THE BORROWERS Any amounts payable to the Borrowers by an Agent shall be paid by the applicable Agent on a Business Day, in funds having same day value, to the Canadian Borrowers' or the U.S. Borrowers' account, as the case may be, located at such Agent's Branch. 60 9.11 NETTING On the date of any Advance or on a Rollover Date (a "TRANSACTION DATE"), an Agent shall be entitled to net amounts payable on such date by the Agent to a Lender against amounts payable in the same currency on such date by such Lender to the Agent, for the account of the Borrowers. Similarly, on any Transaction Date, each of the Borrowers hereby authorizes each Lender to net amounts payable in one currency on such date by such Lender to an Agent, for the account of such Borrower, against amounts payable hereunder in the same currency on such date by such Borrower to such Lender in accordance with the Agent's calculations made in accordance with the provisions of this Agreement. 9.12 APPLICATION OF PAYMENTS 9.12.1 Except as otherwise indicated herein, all payments made to an Agent by the Borrowers for the account of the Lenders shall be distributed the same day by the Agent, in accordance with its normal practice, in funds having same day value, among the Lenders to the accounts last designated in writing by each Lender to the Agent, pro rata in accordance with their respective Commitments, subject to adjustment, if necessary, as a result of any disproportion in Loans that may be owing to a Lender, whether as a result of the Swing Line Loan or otherwise, or as a result of the application of the other provisions of this Agreement (including Section 8.2), and notice thereof shall be given to the relevant Borrower(s) by the Agent within a reasonable delay. 9.12.2 Except as otherwise indicated herein or as otherwise determined by the Lenders, all payments made to the Agent on behalf of the Lenders by the Borrowers shall be applied by the Lenders as follows: (a) to the fees, costs, expenses and accessories contemplated by Article 8, Section 15.6 and Section 19.5 or by the Security Documents; (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 and Mandatory Repayments, to the imputation rules set out in Sections 9.2 and 9.5; (d) to any other amounts due pursuant to this Agreement. 9.13 NO SET-OFF OR COUNTERCLAIM BY BORROWERS All payments by the Borrowers shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 61 9.14 DEBIT AUTHORIZATION Each Agent is hereby authorized to debit each member of the Restricted Group's 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 any member of the Restricted Group for the amount of any interest or any other amounts due and owing hereunder from time to time payable by the Borrowers, in order to obtain payment thereof, provided, however, that the foregoing provision, insofar as it relates to amounts due and owing in respect of Facility B or Facility C, and Facility A during any Release Period arising pursuant to the provisions of the second paragraph of Section 10.3, is subject to the applicable provisions of the Inter-Creditor Agreement, if any. The Agent 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 Agent nor render it liable to any member of the Restricted Group. 10 SECURITY 10.1 SECURITY FOR ADVANCES UNDER FACILITY A As general and continuing security for the performance by the Facility A Borrowers of their obligations to the Facility A Lenders in connection with all Loans under Facility A in accordance with the terms hereof and the Security Documents relating to Facility A, and of their obligation to repay all amounts owing by them to such Lenders in principal, interest and accessories hereunder and of their obligations arising under any other undertaking given in connection herewith or therewith, as any of the same are, from time to time, amended, restated, amended and restated, extended or renewed, the Facility A Borrowers shall: 10.1.1 execute and cause to be executed by each Restricted Subsidiary that is not a Facility A Borrower a first-ranking security agreement and hypothec charging Operating Assets (subject only to Permitted Charges), in favour of, respectively, the US Collateral Agent and the Canadian Collateral Agent, on behalf of the Facility A Lenders, and register or publish same as promptly as practicable thereafter wherever it would be necessary or useful to do so in order to perfect or enforce same; 10.1.2 cause to be executed by IPG, LLC and each other Restricted Subsidiary that is not a Facility A Borrower an unconditional joint and several guarantee and postponement of claims, in favour of the Agent, the US Collateral Agent and the Canadian Collateral Agent, on behalf of the Facility A Lenders, of the obligations of the Facility A Borrowers under this Agreement and the Security Documents relating to Facility A; 10.1.3 [INTENTIONALLY DELETED]; 10.1.4 by way of collateral security, transfer and assign and, to the extent permitted by applicable Laws, cause to be transferred and assigned to the Canadian Collateral Agent and the US Collateral Agent on behalf of the Facility A Lenders, as their 62 interests may appear, all right, title and interest in and to all indemnities, proceeds, benefits and advantages arising under any insurance policy or contract protecting the Persons mentioned in subsection 10.1.1 and their Operating Assets, activities, business interruption and third party liability against any form of loss, or cause such agents on behalf of the Facility A Lenders to be named in such policies as a named insured as their interests may appear, and deliver to such agents certificates of insurance with respect thereto in form and substance reasonably satisfactory to the Agent; and 10.1.5 execute one or more promissory notes in favour of each Lender for the full amount of its Commitment under Facility A. 10.2 SECURITY FOR ADVANCES UNDER FACILITY B AND FACILITY C As general and continuing security for the performance by the Facility B/C Borrower of its obligations to the Facility B and Facility C Lenders in connection with all Loans under Facility B and Facility C in accordance with the terms hereof and the Security Documents in relation to Facility B and Facility C, for the performance of the Derivative Obligations, and of the Facility B/C Borrower's obligation to repay all amounts owing by the Facility B/C Borrower to the Facility B and Facility C Lenders in principal, interest and accessories hereunder, and of its obligations arising under any other undertaking given in connection herewith or therewith, as any of the same are, from time to time, amended, restated, amended and restated, extended or renewed, the Facility B/C Borrower shall: 10.2.1 execute and cause to be executed by each of the Facility A Borrowers and all other Restricted Subsidiaries, a second-ranking security agreement and hypothec charging Operating Assets (subject only to the interest of the Facility A Lenders and to Permitted Charges), in favour of, respectively, the US Collateral Trustee and the Canadian Collateral Trustee, on behalf of the Facility B and Facility C Lenders and the holders of the Notes, and register or publish same as promptly as practicable thereafter wherever it would be necessary or useful to do so in order to perfect or enforce same; 10.2.2 cause to be executed by IPG, LLC and all other Restricted Subsidiaries other than Facility B/C Borrower an unconditional joint and several guarantee and postponement of claims, in favour of the US Collateral Trustee and the Canadian Collateral Trustee, on behalf of the Facility B and Facility C Lenders, of the obligations of the Facility B/C Borrower under this Agreement and the Security Documents relating to Facility B and Facility C; 10.2.3 execute and cause to be executed by each other member of the Restricted Group in favour of respectively, the Canadian Collateral Trustee and the US Collateral Trustee, on behalf of the Facility B and Facility C Lenders and the holders of the Notes, a first-ranking (subject only to Permitted Charges and to the Charges on the Operating Assets in favour of the Canadian Collateral Agent and the US Collateral Agent on behalf of the Facility A Lenders) hypothec, General 63 Security Agreement, debentures and, where applicable, mortgages (except to the extent provided in the undertaking described in subsection 11.1.21) charging all of its property and assets, personal and real, wherever located (and/or, at the option of such trustees or the Lenders, by way of a debenture or other instrument containing the same Charges), except to the extent otherwise provided therein, and cause to be registered as promptly as practicable thereafter all appropriate financing statements and applications for registration under the Uniform Commercial Code provisions applicable in each State of the USA, under the Personal Property Security Acts of each common law province of Canada and under the Civil Code of Quebec, in each case where it would be necessary or useful to do so in order to perfect or enforce same, as well as all appropriate mortgage registrations under the applicable legislation in each of such states and provinces; 10.2.4 to the extent required by the Lenders, execute and cause to be executed by each other member of the Restricted Group a first-ranking assignment (subject only to Permitted Charges), by way of collateral security, of the contracts governing or evidencing intellectual property rights (to the extent that such assignment is not prohibited by the terms of the agreements governing such rights) in favour of, respectively, the US Collateral Trustee and the Canadian Collateral Trustee on behalf of the Facility B and Facility C Lenders and the holders of the Notes and provide notification thereunder and register same as promptly as practicable thereafter wherever it would be necessary or useful to do so in order to perfect or enforce same; 10.2.5 [INTENTIONALLY DELETED] 10.2.6 by way of collateral security, transfer and assign and, to the extent permitted by applicable Laws, cause to be transferred and assigned to the Canadian Collateral Trustee and the US Collateral Trustee on behalf of the Facility B and Facility C Lenders and the holders of the Notes, as their interests may appear, all right, title and interest in and to all indemnities, proceeds, benefits and advantages arising under any insurance policy or contract protecting the members of the Restricted Group and their property, activities, business interruption and third party liability against any form of loss, or cause such trustees on behalf of the Facility B and Facility C Lenders and the holders of the Notes to be named in such policies as a named insured as their interests may appear, and deliver to such trustees certificates of insurance with respect thereto in form and substance reasonably satisfactory to the Agent. The interest of such trustees in all proceeds of the insurance covering Operating Assets shall be subordinated to the interests of the Canadian Collateral Agent and the US Collateral Agent to the extent provided in the Inter-Creditor Agreement; 10.2.7 execute and cause to be executed by IPG and each other relevant Restricted Subsidiary a first ranking pledge of (i) the shares or other Equity Interests of each Restricted Subsidiary and (ii) all instruments evidencing Debt owing to such Person from another member of the Restricted Group (in each case subject only to 64 Permitted Charges), in favour of the Canadian Collateral Trustee and the US Collateral Trustee, as the case may be, on behalf of the Facility B and Facility C Lenders and the holders of the Notes, and register or publish same as promptly as practicable thereafter whenever it would be necessary or useful to do so in order to perfect or enforce same. In the case of a pledge by a member of the Restricted Group organized under the laws of a state of the United States of the shares or other Equity Interests of another member of the Restricted Group organized under the laws of Canada or any province thereof, such pledge shall be limited to less than 662/3% of such shares or other Equity Interests; 10.2.8 execute promissory notes in favour of each Lender for the full amount of its Commitment under Facility B and Facility C; and 10.2.9 execute and cause to be executed by all members of the Restricted Group the Inter-Creditor Agreement and (in the case of members of the Restricted Group organized under the laws of a state of the United States) the Collateral Trust Indenture. The Security described in this Section 10.2 shall rank pari passu in the manner provided in the Inter-Creditor Agreement and the other Security Documents with the security granted in favour of the holders of the Notes. All hypothecs shall be granted for an amount of Cdn.$1,000,000,000. Notwithstanding anything else to the contrary herein, the Security under Facility B and Facility C shall also secure all of the obligations of the Facility A Borrowers during any Release Period arising pursuant to the second paragraph of Section 10.3. 10.3 RELEASE PERIODS At any time when IPG's ratio of Total Debt, determined as at the end of each of the four most recently ended fiscal quarters of IPG, is less than or equal to 250% of IPG's EBITDA for the period of four consecutive fiscal quarters ended at the end of each of such four most recently ended fiscal quarters of IPG, and it has maintained a credit rating for each of its two previous fiscal quarters with respect to its long-term, senior unsecured Debt of "BBB" or better by Standard & Poor's or an equivalent credit rating by Moody's or an equivalent agency acceptable to the Lenders (for the purpose of this paragraph, the "CONDITIONS"), the Borrowers may send to the Agent a notice (the "RELEASE NOTICE") requesting that, commencing on a date that is not less than 10 Business Days after the date of the Release Notice (the "RELEASE DATE"), the Lenders direct the Canadian Collateral Agent, the US Collateral Agent, the Canadian Collateral Trustee and the US Collateral Trustee not to enforce the Security described in subsections 10.1.1, 10.1.4, 10.2.1, 10.2.3, 10.2.4, 10.2.6 and 10.2.7 during the Release Period (the "DIRECTION"). Upon receipt of all evidence that the Agent or the Lenders may reasonably require to substantiate (i) the validity of the Release Notice, and (ii) that the holders of the Notes have agreed not to enforce any of the security granted in their favor by the Restricted Group during the applicable Release Period, and provided that the provisions of Section 10.3.6 have been met to the Agent's and the Lenders' reasonable satisfaction, the Agent shall forthwith notify the Borrowers, IPG and 65 the Lenders (the "AGENT'S NOTICE") that such is the case and the Lenders shall issue the Direction. Thereafter, if either Condition is not being met, the Agent shall send to the Borrowers a notice to that effect (the date of such notice is herein referred to as the "RELEASE TERMINATION DATE") and the Direction shall be deemed to no longer apply. "RELEASE PERIOD" shall mean the period commencing on the Release Date and terminating on the Release Termination Date. In addition to the foregoing, at any time when IPG's ratio of (a) Total Debt (determined as at the end of each of the four most recently ended fiscal quarters of IPG) is less than or equal to 275% of IPG's EBITDA for the period of four consecutive fiscal quarters ended at the end of each of such four most recently ended fiscal quarters of IPG, and (b) Total Debt to Total Capitalization is less than or equal to 40% as of the end of the four most recently ended fiscal quarters, and IPG has maintained a credit rating for each of its two previous fiscal quarters with respect to its long-term, senior unsecured Debt of "BBB -" or better by Standard & Poor's or an equivalent credit rating by Moody's (for the purpose of this paragraph, the "CONDITIONS"), the Facility A Borrowers may send to the Agent a Release Notice requesting that, commencing on the Release Date, the Security described in subsections 10.1.1 and 10.1.4 shall rank pari passu with the Security granted pursuant to Section 10.2 in favor of the Lenders under Facility B and Facility C and in favor of the holders of the Notes, the whole as set forth in the Inter-Creditor Agreement. The second, third and fourth sentences of the preceding paragraph shall apply to this paragraph mutatis mutandis. For greater clarity, the Security under Facility A described in Section 10.1 may be enforced during the Release Period under this paragraph, provided that no Release Period under the preceding paragraph shall be in effect, but such enforcement shall be subject to the applicable provisions of the Inter-Creditor Agreement. Notwithstanding the preceding paragraphs, it is agreed that: 10.3.1 the registrations of the Security shall not be affected during any Release Period; 10.3.2 the Margins, Stamping Fees and Letter of Credit fees shall be negotiated between the parties as provided in the third subsection of the term "Margin" and upon the expiry of any Release Period, the original Margins, Stamping Fees and Letter of Credit fees shall once again apply; 10.3.3 the conditions of subsection 13.14 hereof shall be met at all times during any Release Period; 10.3.4 the percentage limitation on Priority Debt provided for in subsection 14.2.1(c) shall become 12.5% during the Release Period only; 10.3.5 each credit rating shall also be in full force and effect at the time a Release Notice is given, not having been withdrawn or placed on a credit watch or negative implication; and 66 10.3.6 the Lenders shall not be obliged to send the Direction if a Default or Event of Default existed on the date of the Release Note or exists on the Release Date. 11 CONDITIONS PRECEDENT 11.1 INITIAL ADVANCE UNDER THE CREDIT The obligation of the Lenders 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 11.2, to the entire satisfaction of the Lenders and their legal counsel: 11.1.1 certified copies of all of the organizational documents, by-laws and authorizing resolutions of each member of the Restricted Group shall have been provided to the Canadian Collateral Trustee and the US Collateral Trustee; 11.1.2 except as otherwise provided in the undertaking contemplated by Section 11.1.21, all Charges on the property of the Restricted Group, other than Permitted Charges, shall have been discharged; 11.1.3 each of this Credit Agreement and the Security Documents shall have been executed, delivered, issued or assigned and registered or published, as the case may be, wherever required by the Lenders; 11.1.4 all of the certificates or other instruments representing the Securities and the debt instruments to be pledged pursuant to the pledge agreements described in subsection 10.2.7 shall have been remitted to the Canadian Collateral Trustee or the US Collateral Trustee; 11.1.5 a confirmation shall have been received from IPG that, with the exception of the Unrestricted Subsidiaries, all of IPG's Subsidiaries (including Central Products Company and all the companies mentioned in the first paragraph of subsection 11.1.13 hereof) as of the date hereof are and shall remain Restricted Subsidiaries unless such Restricted Subsidiaries are sold, transferred or dissolved as permitted in accordance with the terms hereof; 11.1.6 IPG and the Restricted Subsidiaries shall have obtained all necessary governmental, regulatory and other approvals and all Laws, including Environmental Laws, shall have been complied with in all material respects; 11.1.7 each member of the Restricted Group shall hold all material permits and licences necessary to operate their businesses and all of same shall be in good standing, including all material environmental permits; 67 11.1.8 the December 31, 2000 year-end Consolidated financial statements of IPG and its 4 year financial projections, including projected financial statements and IPG's proposed capital expenditure program, shall have been delivered to the Agent, and shall be satisfactory to the Lenders; 11.1.9 the results of the due diligence conducted by the Agent concerning the Restricted Group's operations, projections, assets, legal situation and organizational structure, financial and commercial status, environmental liability and compliance and accounting systems and methods, shall be completely satisfactory to the Lenders, acting reasonably; 11.1.10 the Agent shall have received copies of all title opinions and title insurance and all environmental and search reports it may reasonably require; 11.1.11 no Law shall be in effect that would materially adversely affect the ability of any member of the Restricted Group to perform its obligations under this Agreement and the Security Documents or to provide the Security; 11.1.12 each of IPG and the Borrowers shall have delivered to the Agent a certificate in the form of Schedule "E" signed by a Responsible Officer stipulating and certifying that: (a) such officer has taken cognizance of all the terms and conditions of this Agreement, the Security Documents and of all contracts, agreements and deeds pertaining hereto; (b) (i) nothing has come to such officer's attention, after due inquiry, that would cause him/her to believe that the financial results and statements contained in the issued financial statements of IPG, as delivered, are materially inaccurate or false in any manner whatsoever, and (ii) any projected financial information provided to the Agent is (a) based on reasonable, good faith assumptions on the part of IPG and (b) has been prepared in accordance with GAAP as in effect at the date of the certificate; (c) all representations and warranties contained in this Agreement continue to be true and correct in all material respects (except where stated to be made as of one specific date alone); (d) no Default has occurred and is continuing and no Event of Default has occurred which has not been waived; and (e) each member of the Restricted Group holds the permits, licences and authorizations required in order to permit it to 68 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; 11.1.13 there shall have been delivered to the Agent a written undertaking from the Facility B/C Borrower and each of the Facility B/C Borrower's Subsidiaries, including LLC and Canco, pursuant to which each of them undertakes that for so long as any of the Borrowers or IPG has any obligations to the Agent and the Lenders hereunder: (a) it shall not carry on any business, except as provided in Section 14.3; (b) it shall not, individually or collectively, incur or have at any time any Indebtedness, except to a Wholly-owned Restricted Subsidiary, and Indebtedness constituting Guarantees in respect of the Loan, the Notes or any facility which replaces Facility A upon the expiry of its Term, in excess of an aggregate amount of US $100,000, and, in the case of the Facility B/C Borrower, any Indebtedness permitted hereunder; (c) LLC shall not assign or transfer its rights against any Restricted Subsidiary with respect to amounts owed to it by such Restricted Subsidiary to any Person other than a member of the Restricted Group, except as provided in the pledge agreements described in subsection 10.2.7 or as security for its Guarantee in respect of any facility which replaces Facility A upon expiry of its Term; 11.1.14 the Collateral Trust Indenture and the Inter-Creditor Agreement shall have been entered into, in form and substance satisfactory to the Agent, the Lenders, the holders of the Notes and the other parties thereto; 11.1.15 the Note Agreements shall have been amended and restated as contemplated by the definition thereof to ensure that the Loan under Facility A forms part of Priority Debt and in form and substance otherwise reasonably acceptable to the Lenders; 11.1.16 evidence shall have been provided to the Agent that on September 30, 2001, IPG had a ratio of Total Debt to EBITDA (for the four fiscal quarters ended September 30, 2001, treated as a single accounting period) not exceeding 5.8:1; 11.1.17 a Responsible Officer of LLC shall have certified in writing that LLC has not made any loans or advances to any Person other than to IPG (US) Inc.; 69 11.1.18 the Borrowers shall have delivered to the Agent the favourable legal opinion of the counsel to the Restricted Group, addressed to the Lenders and the Agent, in form and substance satisfactory to the Agent, covering such matters pertaining to the transactions contemplated hereunder as are required by the Agent, acting reasonably; 11.1.19 each of the Existing Credit Facilities and the existing Creditor Agreement dated as of June 10, 1999, as amended, shall have been cancelled; 11.1.20 the Borrowers and the Agent shall have executed a fee letter, satisfactory to the Agent, with respect to the agency fee described in subsection 5.14.6; 11.1.21 the Borrowers shall have delivered to the Agent an undertaking in form and in substance satisfactory to the Agent, which undertaking shall relate to, without limitation, the registration of the Security (including any registrations specific to intellectual property), environmental matters, the discharge of Charges for which no Debt is outstanding, and the delivery of certain leasehold mortgages, lease amendments, landlord consents and title commitments; and 11.1.22 the Restricted Group shall have executed a US environmental indemnification agreement (the "US ENVIRONMENTAL INDEMNIFICATION AGREEMENT") and a Canadian environmental indemnification agreement (the "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT") satisfactory to the Lenders. 11.2 CONDITIONS PRECEDENT TO ANY ADVANCE The obligation of the Lenders to make any Advance under the Credit is conditional upon each of the following conditions having been satisfied: 11.2.1 the representations and warranties contained in this Agreement shall continue to be true and correct in all material respects (except where stated to be made as at a particular date); 11.2.2 the Borrowers shall have paid all amounts due to the Agent, the Arrangers and the Lenders up to the date of such proposed Advance, whether on account of Fees, disbursements or related matters; 11.2.3 subject to the provisions of Section 4.4, the relevant Borrower(s) shall have delivered to the Agent a completed Notice of Borrowing; 11.2.4 nothing shall have occurred since December 31, 2000 which would constitute a Material Adverse Change, except as set forth in Schedule "M" hereto; and 70 11.2.5 no Default shall have occurred and be continuing and no Event of Default shall have occurred which has not been waived. Notwithstanding the provisions of paragraphs 11.2.4 and 11.2.5 hereof the Lenders accept the Material Adverse Changes and the Defaults and Events of Default that have occurred prior to the date hereof, as described in Schedule "M" hereto, and waive their right to invoke same, provided that such waiver shall have no effect on any Default or Event of Default occurring during the Term, whether or not similar in nature. 12 REPRESENTATIONS AND WARRANTIES For so long as the Loan or any other amounts payable to the Lenders and the Agent hereunder remain outstanding and unpaid, or any of the Borrowers is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied), each of IPG, LLC and the Borrowers hereby represents and warrants to the Lenders that: 12.1 INCORPORATION Each member of the Restricted Group 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 or is otherwise required to be so qualified. Each member of the Restricted Group 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. 12.2 AUTHORIZATION Each member of the Restricted Group has the power and has taken all necessary steps under the Law in order to be authorized to borrow hereunder (if such Person is a Borrower), to provide the Security to be provided by such Person under the relevant Security Documents, and to execute and deliver and perform its obligations under this Agreement and each of the Security Documents to which it is a party in accordance with the terms and conditions thereof and to complete the transactions contemplated herein and in such Security Documents. This Agreement has been duly executed and delivered by duly authorized officers of each of the Borrowers, IPG and LLC and is, and each of the Security Documents to which each member of the Restricted Group is a party is, a legal, valid and binding obligation of such member of the Restricted Group, enforceable in accordance with its terms. 12.3 COMPLIANCE OF THIS AGREEMENT Except for the consents and approvals to be obtained pursuant to the undertaking referred to in subsection 11.1.21, the execution and delivery of and performance of the obligations under this Agreement and each of the Security Documents in accordance with their respective terms and the completion of the transactions contemplated therein and herein do 71 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 any member of the Restricted Group or under any agreements, contracts or deeds to which any member of the Restricted Group 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 any member of the Restricted Group, whether presently owned or hereafter acquired, save for Permitted Charges. 12.4 BUSINESS IPG and its Subsidiaries develop, manufacture, distribute and sell, to retail, wholesale and other end-users, a variety of plastic packaging products, tape, acrylic coatings, woven products, flexible intermediate bulk containers and machines that apply tape.No member of the Restricted Group is 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 to purchase or carry any equity "security" (as defined in Section 3.1) of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or any "margin stock", as defined in Federal Reserve System Board of Governors Regulation U, or for a purpose which violates, or would be inconsistent with, Federal Reserve System Board of Governors Regulation T, U or X. Terms used in this paragraph for which meanings are provided in Federal Reserve System Board of Governors Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, have the meaning so provided. No member of the Restricted Group is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1 et seq.). The application of the proceeds of the Advances and repayment of the Loans by the Borrowers and the performance by the Restricted Group of the transactions contemplated hereunder and under the Security Documents will not violate any provision of the said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof. No member of the Restricted Group is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Interstate Commerce Act, or under any other Law which may limit its ability to incur Debt or which may otherwise render its obligations hereunder or under the Security Documents unenforceable, except that its ability to incur Debt other than the Loan may be limited by fraudulent conveyance Laws and other Laws of a similar nature. 12.5 FINANCIAL STATEMENTS The Consolidated financial statements dated December 31, 2000, March 31, 2001, June 30, 2001 and September 30, 2001 and those delivered from time to time in accordance with the provisions hereof 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 members of the Restricted Group 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. 72 12.6 CONTINGENT LIABILITIES AND INDEBTEDNESS No member of the Restricted Group has (a) any material contingent liabilities known to it which are not disclosed or referred to in the most recent financial statements delivered to the Agent in accordance with the provisions of Section 13.16 or otherwise disclosed to the Agent in writing, or (b) incurred any Indebtedness, which is not disclosed in or reflected in such financial statements, or otherwise disclosed to the Agent in writing, other than Indebtedness incurred in the ordinary course of business and Debt permitted hereunder. 12.7 TITLE TO ASSETS Each member of the Restricted Group has good, valid and marketable title to all of its owned real property and valid title to all of its other material properties and assets, free and clear of any Charges other than Permitted Charges. 12.8 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 Restricted Group, threatened, against any member of the Restricted Group or its property before any court or arbitrator or any governmental body or instituted by any governmental body which, if decided against any member of the Restricted Group, could, individually or in the aggregate, constitute a Material Adverse Change. 12.9 TAXES Each member of the Restricted Group has filed within the prescribed delays all material federal, state, provincial or other tax returns which it is required by Law to file and all material taxes, assessments and other duties levied by the various governmental authorities with respect to each member of the Restricted Group have been paid when due, except to the extent that (a) payment thereof is being contested in good faith by the Restricted Group in accordance with the appropriate procedures, for which adequate reserves have been established in the books of the Restricted Group, and (b) the outcome of such contestation, if decided against the Restricted Group, could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change. The tax identification numbers of each of the Borrowers is set forth in Schedule "N". 12.10 INSURANCE Each member of the Restricted Group has contracted for the insurance coverage described in Section 13.6. 12.11 NO ADVERSE CHANGE Except as disclosed in Schedule "M", no Material Adverse Change, considered on a Consolidated basis, has occurred since December 31, 2000. 73 12.12 REGULATORY APPROVALS No member of the Restricted Group is required to obtain any consent, approval, authorization, permit or licence from, 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 or the Security Documents, any borrowings hereunder and the granting of the Security, save with respect to the registration, publication or recording of certain of the Security Documents and the filing of financing statements and other documents in connection therewith. 12.13 COMPLIANCE WITH LAWS Each member of the Restricted Group is in material compliance with all requirements of applicable Laws (including Environmental 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. 12.14 FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the transactions contemplated hereby nor the 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, Chapter V, as amended) or any enabling legislation or executive order relating thereto. IPG and the Restricted Subsidiaries are in compliance with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, 22 U.S.C. ss. 6021 et seq. 12.15 PENSION AND EMPLOYMENT LIABILITIES, COMPLIANCE WITH ERISA 12.15.1 Except as would not result in a liability in excess of US$3,000,000, all past and current compensation obligations (including wages, salaries, commissions and vacation pay) to current and former employees of the Restricted Group have been paid or accrued in full. 12.15.2 Each Plan (other than a Multiemployer Plan) has been operated and administered 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 $3,000,000. Neither IPG nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA (other than normal funding obligations and PBGC premiums) or Chapter 43 of the Code, 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 IPG or any ERISA Affiliate, or in the imposition of any Charge on any of the rights, properties or assets of IPG or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or Chapter 43 or 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 $3,000,000. 74 12.15.3 Except as disclosed on Schedule "H" hereto, neither IPG nor any ERISA Affiliate has incurred any accumulated funding deficiency (within the meaning of Section 412 of the Code). Except as disclosed on Schedule "H" 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. Thereafter, 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 valuation report, will not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by an amount in excess of $3,000,000. 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. 12.15.4 The expected post-retirement benefit obligation (determined as of the last day of IPG'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 IPG 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 $3,000,000. 12.15.5 Assuming none of the Lenders is using the assets of any employee benefit plan subject to Title I of ERISA or any "plan" (within the meaning of Section 4975(e) of the Code), to make the Loan, 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 of the Code with respect to the employee benefit plans of IPG or any ERISA Affiliate. 12.15.6 Notwithstanding anything in this Section 12.15 to the contrary, the liabilities and other items that are subject to a $3,000,000 limit under this Section 12.15 shall not exceed $3,500,000 in the aggregate. Further, as of January 1, 2003, (a) any reference in this Section 12.15, subsection 13.17.2 and Section 14.8 to "$3,000,000" shall be deleted and replaced by a reference to "$2,500,000", and (b) the reference in this Section 12.15 to "$3,500,000" shall be deleted and replaced by a reference to "$3,000,000". 12.16 PRIORITY The Security Documents bind each member of the Restricted Group which is a party thereto, and the Charges created thereby are valid and subject to no Charge, other than Permitted Charges, and are enforceable against such member of the Restricted Group, as 75 security for the performance of its obligations secured thereby, in accordance with the respective terms of such Security Documents. The Loan under Facility A constitutes Priority Debt and the Charges created, evidenced or constituted by or under the Security Documents in relation to Facility A constitute first ranking Charges on Operating Assets of the Facility A Borrowers and the other Restricted Subsidiaries, subject to Permitted Charges. The right of the Lenders hereunder and under the Security Documents in relation to Facility B and Facility C shall rank, at all times, at least pari passu with all the senior, secured Indebtedness of the Restricted Group, save and except as permitted pursuant to Section 10.3 or subsection 14.2.1(c), subject to Permitted Charges. Notwithstanding the foregoing and with respect to Facility A only, during any applicable Release Period, the rights of the Lenders hereunder and the Guarantees shall rank, at all times, at least pari passu with all of the senior Indebtedness (including the Loans under Facility B and Facility C) of the Restricted Group, save and except as permitted pursuant to Section 10.3 or subsection 14.2.1(c), subject to Permitted Charges. As of November 30, 2001, the aggregate principal amount of Priority Debt (other than Priority Debt attributable to Facility A, Debt owing under the Existing Credit Facilities and Debt owed to the holders of the Notes) is US$2,836,200. 12.17 COMPLETE AND ACCURATE INFORMATION All of the information, reports and other documents and all data, as well as the amendments thereto, provided to the Agent by or on behalf of the Restricted Group were, at the time same were provided, and if the same were provided prior to the Closing Date, are at the Closing Date (except to the extent that such information, reports, other documents and data relate to an earlier date), complete, true and accurate in all material respects to the extent necessary to provide the Lenders with a true and accurate understanding of their effect. 12.18 EVENT OF DEFAULT No Default has occurred and is continuing, and no Event of Default has occurred which has not been waived, in each case, save as provided in the last paragraph of Section 11.2. 12.19 AGREEMENTS WITH THIRD PARTIES Each member of the Restricted Group 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. 12.20 ENVIRONMENT 12.20.1 Except as disclosed in Schedule "P" hereto, there are no existing claims, demands, damages, expenses, suits, proceedings, actions, negotiations or causes of action of any nature whatsoever, whether threatened in writing or pending, against 76 any member of the Restricted Group arising out of the presence on any property owned or controlled by the Restricted Group, either past or present, of any Hazardous Substance, or out of any past or present activity conducted on any property now owned by the Restricted Group, whether or not conducted by the Restricted Group, involving Hazardous Substances which would reasonably be expected to result in a Material Adverse Change; 12.20.2 To the best of the knowledge of the Borrowers, LLC and IPG and except as disclosed in Schedule "P" hereto, after due enquiry: (a) there is no Hazardous Substance existing on or under any property of the Restricted Group which constitutes a violation of any Environmental 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 Restricted Group is being carried on so as to be in compliance in all material ways with all Environmental Laws and all Laws applicable to health and safety matters; (c) no Hazardous Substance has been spilled or emitted in reportable quantities into the environment from any property owned or controlled by any member of the Restricted Group which could reasonably be expected to result in a Material Adverse Change; (d) there are no pending or proposed changes to the Environmental Laws which would render illegal or restrict the manufacture or sale of any products manufactured or sold or services provided by the Restricted Group which would reasonably be expected to result in a Material Adverse Change; (e) compliance by the members of the Restricted Group with all current Environmental Laws would not reasonably be expected to result in a Material Adverse Change; (f) no member of the Restricted Group is in default in filing any material report or information with any governmental authority as required pursuant to Environmental Laws; and (g) each member of the Restricted Group has maintained, in all material respects, all environmental and operating documents 77 and records substantially in the manner required by all Environmental Laws. As at the Closing Date, none of the facts described in Schedule "P" would, in the opinion of the Restricted Group, reasonably be expected to result in a Material Adverse Change. 12.21 SOLVENCY The Restricted Group is, in the aggregate, solvent and will continue to be solvent after the creation of its obligations hereunder and under the Security Documents, is able to pay its debts as they mature and has (and has reason to believe it will continue to have) sufficient capital to pay its debts as they mature and to carry on all businesses in which it shall engage. 12.22 EXISTING SUBSIDIARIES As of the Closing Date, the Restricted Subsidiaries are listed in Schedule "D" (which include all of the Subsidiaries described as such under the amended and restated credit agreement dated as of September 15, 2000 among TD and certain members of the Restricted Group, except for Drumheath, Intertape Polymer Exports Inc. and certain entities no longer in existence) and the only Unrestricted Subsidiaries are listed in Schedule "J". All manufacturing operations of the Restricted Group are conducted by Central Products Company and Intertape Inc., Intertape Polymer Inc., International Container Systems, Inc. and Cajun Bag & Supply Corp. 12.23 LOCATION OF ASSETS AND HEAD OFFICES The jurisdiction of incorporation and the location of the assets and head offices of each member of the Restricted Group is as set forth in Schedule "N" hereto. 12.24 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 Lenders by or on behalf of the Restricted Group, including under or pertaining to this Agreement, the Security Documents 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 or in such documents. All of the representations and warranties made hereunder are true and correct at the date hereof and shall be true and correct at the date of any Advance hereunder (except in each case where stated to be made solely at a particular date), shall survive the execution and delivery of this Agreement, any investigation by or on behalf of the Agent or the Lenders or the making of any Advance hereunder and none of same are nor shall be waived, except in writing. 78 13 POSITIVE COVENANTS For so long as the Loan remains outstanding and unpaid, or any Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied) and unless the Lenders, acting through the Agent, shall otherwise agree in writing, each of the Borrowers, LLC and IPG, for itself and each member of the Restricted Group and with respect to itself and each member of the Restricted Group, agrees as follows: 13.1 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, provided, however, that the foregoing shall not prevent any transaction permitted by Section 14.1. 13.2 PRESERVATION OF LICENSES It shall maintain in effect and obtain, where necessary, all such authorizations, approvals, permits, licences or consents of such governmental agencies, whether federal, state, provincial or local, which may be or become necessary or required for each member of the Restricted Group to satisfy its obligations hereunder and under the Security Documents. 13.3 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. 13.4 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 (ordinary wear and tear excepted), 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. It shall inform the Agent of any change required to Schedule "N" hereto. 13.5 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 12.4 without the prior written consent of the Agent on behalf of the Lenders. 79 13.6 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 owning and operating similar properties in accordance with good business practice and, in any event, in amounts and against risks acceptable to the Agent on behalf of the Lenders, acting reasonably. All relevant policies of insurance will name the Canadian Collateral Agent, the US Collateral Agent, the Canadian Collateral Trustee and the US Collateral Trustee as a named insured (as applicable), as their interests may appear, and contain a standard "mortgage clause" acceptable to the Agent providing that no such policy may be cancelled or modified without the insurer providing not less than 30 days' prior written notice to the Agent. The insurance policies confirming the insurance required hereunder shall not contain any co-insurance provisions except to the extent such co-insurance provisions would normally appear in policies covering other Persons engaged in similar businesses and owning similar properties as the Restricted Group, and consistent with prudent business practices. If any proceeds of such insurance policies become payable at any time, such insurance proceeds shall be disbursed in accordance with the provisions of the Inter-Creditor Agreement. Any proceeds to be paid to the Agent for the benefit of the Lenders as a Mandatory Repayment shall be applied to repay the Loan, and the Credit under Facility B will first be reduced by an amount equal to the amount of such Mandatory Repayment and then, once Facility B has been repaid and the Credit thereunder cancelled, the Credit under Facility C will be reduced by an amount equal to the remainder of such Mandatory Repayment, except, in all cases, for such proceeds arising in relation to Operating Assets, which shall be so paid as a Mandatory Repayment of Facility A. 13.7 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 any member of the Restricted Group, would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis. 13.8 ACCESS AND INSPECTION It shall allow, at its own expense, the employees and representatives of the Agent, during normal business hours, to have access to and inspect, in conjunction with IPG, the assets of the Restricted Group, to inspect and take extracts from or copies of the books and records of the Restricted Group and to discuss the business, assets, liabilities, financial position, operating results or business prospects of the Restricted Group with the principal officers of 80 the Restricted Group and, after obtaining the approval of the Borrowers which shall not be unreasonably withheld, with the auditors of the Restricted Group. 13.9 MAINTENANCE OF ACCOUNT It shall maintain an operating account at the Branch of the Agent at all times during the Term, as well as an account with each Swing Line Lender at all times during the Term of Facility A. 13.10 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 any member of the Restricted Group, would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis. Notwithstanding the foregoing contained in this Section 13.10, it shall punctually pay all amounts due or to become due under this Agreement. 13.11 MAINTENANCE OF RATIOS IPG shall maintain: 13.11.1 at all times during the Term, a ratio of Total Debt to Consolidated Total Capitalization not exceeding the following: 81
Period Ratio ------ ----- On or prior to March 30, 2002: 0.59:1 ------- From March 31, 2002 to June 29 2002: 0.585:1 ------- From June 30, 2002 to September 29, 2002: 0.58:1 ------- From September 30, 2002 to December 30, 2002: 0.575:1 ------- From December 31, 2002 to March 30, 2003: 0.57:1 ------- From March 31, 2003 to June 29 2003: 0.565:1 ------- From June 30, 2003 to September 29, 2003: 0.56:1 ------- On September 30, 2003 and thereafter during the Term: 0.55:1 -------
13.11.2 at the end of each fiscal quarter of IPG during the Term, a Consolidated ratio of Net Income Available for Fixed Charges to Fixed Charges for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) of not less than:
Period Ratio ------- ----- On or prior to September 30, 2002: 1.75:1 ------ On December 31, 2002 and March 31, 2003 1.85:1 ------ On June 30, 2003 and thereafter: 2.00:1 ------
13.11.3 at all times during the Term, a minimum Consolidated Net Worth equal to the sum total of US $275,000,000 and (i) 50% of positive Consolidated Net Income for the period commencing October 1, 2001 through the end of IPG's most 82 recently ended fiscal quarter (i.e. without any deduction for net losses) plus (ii) an amount equal to the aggregate net proceeds of any issuance of equity Securities during the Term to any Person other than a member of the Restricted Group; 13.11.4 at the end of each fiscal quarter of IPG during the Term, a ratio of Total Debt to EBITDA for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) not exceeding the lesser of: (a)
Period Ratio ------ ------ On December 31, 2001: 6.00:1 ------ On March 31, 2002: 5.75:1 ------ On June 30, 2002: 5.50:1 ------ On September 30, 2002: 5.25:1 ------ On December 31, 2002: 5.00:1 ------ On March 31, 2003: 4.75:1 ------ On June 30, 2003: 4.50:1 ------ On September 30, 2003: 4.25:1 ------ On December 31, 2003, March 31, 2004 and June 30, 2004: 4.00:1 ------ On September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005: 3.50:1 ------ On September 30, 2005 and December 31, 2005 3.25:1 ------
or (b) beginning with the March 31, 2002 results (i.e. commencing with the ratio to be applicable in respect of the period ending June 30, 2002), the actual ratio of Total Debt to EBITDA reported to the Agent in respect of the previous fiscal quarter, plus 0.25, with equal step down as per the above grid to apply to the following quarters, 83 provided that such revised ratio shall not be less than 3.25:1. For example, if the applicable ratio in respect of the period ending March 31, 2002 was 4.25:1, the applicable ratio in respect of the period ending June 30, 2002 would be 4.50:1 rather than 5.50:1; and 13.11.5 at the end of each fiscal quarter of IPG during the Term until such time as Facility B is fully repaid and cancelled, a Consolidated ratio of (i) EBITDA less capital expenditures paid in cash, to (ii) the sum total of Fixed Charges on all Indebtedness and all scheduled repayments of Debt, excluding Mandatory Repayments under Section 9.2, for the immediately preceding period of two consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period), of not less than 1.20:1. For the avoidance of doubt, scheduled repayments of Debt for the fiscal quarter ending September 30, 2001 shall not include the US$8,000,000 repayment made in the second quarter of fiscal year 2001 in respect of an agreement entered into by IPG dated as of January 1, 1996 with respect to the issuance and sale of three series of senior notes in an aggregate amount of US$33,000,000. In calculating EBITDA for the purposes of this Section 13.11 or any other provision of this Agreement, (1) the Consolidated non-recurring expenses incurred by IPG and its Restricted Subsidiaries during the last quarter of fiscal year 2000, (2) the Consolidated severance expenses and other unusual non-recurring expenses accrued or otherwise incurred by IPG and its Restricted Subsidiaries during the fiscal year 2001 prior to October 1, 2001, and (3) any charge to earnings resulting from the re-pricing of stock options as may be applicable under GAAP, shall all be added to the EBITDA for the relevant period (including on a trailing 4 quarter basis or trailing 2 quarter basis as required). For greater certainty and without limiting any provision of this Agreement, each of the Borrowers, LLC and IPG acknowledge that the failure to respect any of the foregoing financial ratios at any time during the Term constitutes a material breach of this Agreement. 13.12 MANDATORY REPAYMENTS It shall pay to the Agent when due any amounts required to be paid by it in accordance with Section 9.2 or the Inter-Creditor Agreement. 13.13 MAINTENANCE OF SECURITY It shall take all necessary steps to preserve and maintain in effect the rights of the Agent and the Lenders pursuant to the Security Documents, together with any renewals thereof or additional documents creating Charges which may be required from time to time hereunder or under the Security Documents, including those to be executed by any new Restricted Subsidiary designated by IPG pursuant to the provisions of Section 13.20, which shall be substantially in the form of the Security Documents in effect at the time of such execution (except as otherwise approved by the Lenders). 84 13.14 PRIORITY OF DEBT It shall ensure that the representations and warranties stipulated in Section 12.16 are true and correct at all times. It shall also ensure that all Debt owing by members of the Restricted Group to other members of the Restricted Group and all Charges in relation thereto are subordinated to the Loan and the Security, in form and in substance satisfactory to the Lenders. Notwithstanding the foregoing, the members of the Restricted Group may pay such Debt to the extent required in order for all scheduled repayments and Mandatory Repayments hereunder to be paid when due, and otherwise in the ordinary course provided that no Default shall have occurred and be continuing and no Event of Default shall have occurred and not been waived. The Lenders hereby acknowledge that the manner in which such Debt has been subordinated in the notes subject to the pledge agreements dated as of the Closing Date is satisfactory to them. 13.15 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 Borrowers shall pay all reasonable costs relating to the Credit, including in particular: 13.15.1 the reasonable legal fees and costs incurred by the Agent and the Lenders for the negotiation, drafting, signing, registration, publication and/or service of this Agreement and the Security Documents as well as any amendments, waivers, consents or examinations pertaining to this Agreement and the Security Documents; and 13.15.2 all reasonable fees, including reasonable legal fees and costs, incurred by the Agent and the Lenders to preserve, enforce or exercise its or their rights hereunder or under the Security Documents. All amounts due to the Agent and the Lenders pursuant hereto shall bear interest on the US Prime Rate Basis from the date of their disbursement by the Lenders or from the date of their undertaking until the Borrowers have repaid same in full, with interest on unpaid interest, as in the case of the US Prime Rate Advances. The obligations of the Borrowers under this Section 13.15 shall subsist notwithstanding the full repayment of the Loan under the provisions hereof. 13.16 FINANCIAL REPORTING For so long as the Loan or any other amounts payable to the Lenders hereunder remain outstanding and unpaid, or any Borrower is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied), and unless the Lenders shall otherwise agree in writing, each of IPG, LLC and the Borrowers agrees to provide or cause to be provided to the Agent, with sufficient copies for the Agent and each Lender, and all in form and in scope reasonably acceptable to the Lenders: 85 13.16.1 QUARTERLY STATEMENTS Within 60 days after the end of each fiscal quarter of each fiscal year of IPG (other than the last quarter of such fiscal year), the unaudited Consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for the period of four consecutive fiscal quarters ending on the last day of such quarter (taken as a single accounting period), Adjusted Consolidated balance sheets of IPG and each other member of the Restricted Group, as at the end of such quarter and the related Consolidated and, if applicable, Adjusted Consolidated, statements of earnings and changes in financial position, prepared in accordance with GAAP, for the period then ended, along with IPG's calculation of Excess Cash Flow (if required by Section 9.2 for any period ending on the last day of such quarter), 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 IPG and setting forth the information necessary to determine whether IPG has complied with the covenants contained in Section 13.11 and setting forth the ratio of Total Debt to EBITDA for all purposes required hereunder, certifying that each of IPG, LLC and the Borrowers 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 IPG signing the certificate, after due inquiry, or if a Default or Event of Default has occurred or is continuing, setting out the relevant particulars thereof, the period of existence thereof and what action IPG has taken or proposes to take with respect thereto, and as to certain other matters set forth in Schedule "Q" hereto, the whole substantially in the form set out in Schedule "Q" hereto. 13.16.2 ANNUAL STATEMENTS Within 120 days following the end of each fiscal year of IPG: (a) the audited Consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of the EBITDA for such fiscal year, Adjusted Consolidated balance sheets of IPG and each other member of the Restricted Group, as at the end of such year and the related Consolidated and, if applicable, Adjusted Consolidated, statements of earnings and changes in financial position for such fiscal year, along with IPG's calculation of Excess Cash Flow (if required by Section 9.2 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 Agent, together with comparative figures for the immediately preceding year, and any audited statements of any Restricted Subsidiary which may be prepared; and 86 (b) a certificate of a Senior Financial Officer setting forth the information necessary to determine whether IPG has complied with the covenants contained in Section 13.11, and certifying, among other matters set forth in Schedule "Q" hereto, that each of IPG, LLC and the Borrowers 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 IPG signing the certificate, after due inquiry, or if a Default has occurred and is continuing, or if an Event of Default has occurred, setting out the relevant particulars thereof, the period of existence thereof and what action IPG has taken or proposes to take with respect thereto, and as to certain other matters set forth in Schedule "Q" hereto, the whole substantially in the form set out in Schedule "Q" hereto. 13.16.3 OTHER INFORMATION (a) Financial Forecast: Within 60 days following the end of each fiscal year of IPG, the annual Consolidated pre-tax operating forecast of IPG, including balance sheet and statements of income, retained earnings and cash flow, and the Consolidated capital expenditures budget of IPG; (b) Audit Reports: Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of IPG or any other member of the Restricted Group and any management letter received from such accountants; (c) Governmental and Other Reports: Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by IPG to stockholders generally and of each regular or periodic report, registration statement or prospectus filed by IPG or any Subsidiary with any securities exchange or any governmental regulatory body including IPG's Form 20F, 10Q and 10K and unaudited quarterly reports, and copies of any orders in any proceedings to which IPG or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over IPG or any of its Subsidiaries; (d) Borrowing Base Information: Within 10 days following the end of each month or at any other time upon request by and reasonable notice from the Agent, a monthly summary listing of aged accounts receivable in respect of the previous month 87 or in respect of such other period as may be requested by the Agent, acting reasonably, including a breakdown showing Eligible Trade Receivables and inventory divided into raw materials, work in process and finished products, including a breakdown showing Eligible Inventory and Eligible Raw Materials, the whole in the form set forth in Schedule "O"; (e) Acquisitions: The Borrowers shall advise the Agent forthwith of, and in any event not less than 15 Business Days prior to, the consummation of any proposed Acquisition as to which the purchase price is (in cash, assumed Debt or otherwise) $2,500,000 or more, and shall provide to the Agent in sufficient quantities for the Lenders: (i) notice of the Acquisition, and material information with respect to the nature thereof and the proposed purchase price; (ii) such historical audited and unaudited financial statements of the target of the Acquisition (the "TARGET") as the Target has made available to the Restricted Group and any other financial statements contained in any information that has been reviewed and confirmed by a nationally recognized accounting firm or that has been submitted to and approved by IPG's board of directors; (iii) a pro forma balance sheet and income statement of the Target and the Restricted Group on a consolidated basis following the Acquisition, showing the projected impact of the Acquisition both for the current fiscal year and the immediately succeeding fiscal year; (iv) a written confirmation of a Senior Financial Officer that IPG is satisfied, based on its due diligence, that the Acquisition of the Target will not result in the assumption by any member of the Restricted Group of material liabilities which have not been fully disclosed to the Agent in the materials provided in connection with the Acquisition or otherwise in writing; (v) a certificate of a Senior Financial Officer that, on a Consolidated basis following the Acquisition, as of the date of the Acquisition after giving effect thereto, no Default shall have occurred and be continuing and no 88 Event of Default shall have occurred which has not been waived; (f) Environmental Reports: (i) Within 10 days following the end of each fiscal quarter of each fiscal year of IPG, one copy of each environmental report submitted to the board of directors of IPG during such fiscal quarter; (ii) to the Collateral Trustees (as defined in the Inter-Creditor Agreement), promptly after obtaining knowledge thereof, written notice of (A) any material governmental or regulatory actions instituted or threatened in writing under any Environmental Law affecting any of the real property subject to Charges or the matters indemnified under the U.S. Environmental Indemnification Agreement or the Canadian Environmental Indemnification Agreement, including, without limitation, any material notice of inspection, abatement or noncompliance; (B) all claims made, or material claims threatened in writing, by any third party against any member of the Restricted Group or any of the real property subject to Charges relating to damage, contribution, cost recovery, compensation, loss or injury resulting from the presence, release or discharge on or from any of the properties owned by any member of the Restricted Group of any Hazardous Substances; and (C) any member of the Restricted Group's discovery of any occurrence or condition on any of the real property subject to Charges or any real property adjoining or in the vicinity of any real property subject to Charges which is reasonably likely to subject any member of the Restricted Group to a material claim under any Environmental Law or to any restrictions on the ownership, occupancy, transferability or use of said property under any Environmental Law; and (iii) to the U.S. Collateral Trustee or the Canadian Collateral Trustee, any non-privileged documentation or records that such Collateral Trustee may request at the direction of the Majority Lenders, acting reasonably, with respect to any of the matters described in clause (ii) of this subsection 13.16.3(f); 89 (g) Other Information: From time to time and upon demand by and reasonable notice from the Agent, the data, reports, statements, documents or other additional information pertaining to the business, assets, liabilities, financial position, operating results or business prospects of IPG or any other member of the Restricted Group, as well as any documents, writings or books of account in connection therewith, as the Agent may request, acting reasonably. 13.17 NOTICE OF CERTAIN EVENTS The Borrowers, LLC or IPG shall advise the Agent forthwith upon the occurrence of any of the following events: 13.17.1 The commencement of any proceeding or investigation by or before any governmental body and any action or proceeding before any court or arbitrator against any member of the Restricted Group, or any of its property, assets or activities which, in the event that a decision is rendered which is adverse to it, could constitute a Material Adverse Change; 13.17.2 Promptly upon the occurrence thereof, written notice of (a) a Reportable Event with respect to any Plan (other than a Multiemployer Plan); (b) the institution of any steps by IPG, the Borrowers, any ERISA Affiliate, the PBGC or any other Person to terminate any Plan; (c) the institution of any steps by IPG or any ERISA Affiliate to withdraw from any Multimemployer Plan; (d) a non-exempt "prohibited transaction" within the meaning of Section 406 of the ERISA in connection with any Plan which could, either individually or in the aggregate with any other prohibited transaction(s), reasonably be expected to result in any liability to the Restricted Group in excess of $3,000,000 (subject to the decrease provided for in subsection 12.15.6); (e) any material increase in the contingent liability of IPG or any Subsidiary with respect to any post-retirement welfare liability; or (f) the taking of any action by, or 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; 13.17.3 The occurrence of any Material Adverse Change (considered on a Consolidated basis) which is known to the Borrowers, LLC or IPG, acting reasonably; 13.17.4 Any Default or Event of Default, specifying in each case the relevant details and the action contemplated in this respect. 13.18 ACCURACY OF REPORTS All information, reports, statements and other documents and data provided to the Agent or the Lenders, whether pursuant to this Article or any other provisions of this Agreement 90 shall, at the time same shall be provided, be true, complete and accurate in all material respects to the extent necessary to provide the Lenders with a true and accurate understanding of their effect. 13.19 LENDERS' OPTION TO OBTAIN IMPROVED TERMS AND CONDITIONS The Agent shall immediately be notified of the terms and conditions of any Debt of the nature described in the first paragraph of the definition of "Debt" (other than Priority Debt) to be created by any member of the Restricted Group. The Lenders shall have the option to require the Borrowers and the Guarantors to amend this Agreement to incorporate the provisions of any agreement relating to such Debt if the Lenders so wish, it being understood that the provisions which may be so incorporated shall not extend to pricing or Margins or, in the case of an operating credit which replaces Facility A after it has been repaid at the expiry of its Term, the security provided therefor. 13.20 DESIGNATION OF RESTRICTED SUBSIDIARIES IPG may designate any Subsidiary a Restricted Subsidiary by giving written notice to the Agent that the Board of Directors of IPG has made such designation, provided that (i) no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, no Default shall have occurred and be continuing, and no Event of Default shall have occurred which has not been waived, and (ii) such Subsidiary is also being designated as a "Restricted Subsidiary" under the Note Agreements. Any such designation shall be irrevocable. No Unrestricted Subsidiary may own any shares of a Restricted Subsidiary. 13.21 UNDERTAKING WITH REGARD TO OPERATING ASSETS It shall ensure that: 13.21.1 all manufacturing operations of the Restricted Group are conducted by the companies listed in Section 12.22; all U.S.-based finished goods inventory shall be shipped, delivered and maintained by IPC at all times; all Canadian-based finished goods inventory shall be shipped, delivered and maintained by IPI at all times; 13.21.2 all U.S.-based accounts receivable, other than those arising between members of the Restricted Group, shall be generated from, maintained in and collected by IPC; all Canadian-based accounts receivable, other than those arising between members of the Restricted Group, shall be generated from, maintained in and collected by IPI; and 13.21.3 each U.S.-based Restricted Subsidiary shall in no circumstance, including in connection with a default or an event of default under any agreement, (i) discontinue the shipment and delivery of all finished goods inventory to IPC, or (ii) generate any accounts receivable of its own; each Canadian-based Restricted Subsidiary shall in no circumstance, including in connection with a default or an 91 event of default under any agreement, (i) discontinue the shipment and delivery of all finished goods inventory to IPI, or (ii) generate any accounts receivable of its own, save and except that IPG shall only ensure that subsections 13.21.2 and 13.21.3 apply to Central Products Company's United Tape division starting March 31, 2002. 13.22 ADDITIONAL UNDERTAKINGS IPG shall: 13.22.1 provide, at its expense and prior to June 30, 2002, an accounts receivable and inventory audit of its Restricted Subsidiaries, which audit shall have been performed by an independent third party acceptable to the Lenders; and 13.22.2 in the event the ratio of Total Debt to EBITDA (for the period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date, taken as a single accounting period) is not less than or equal to 5.0:1 as of June 30, 2002, provide an appraisal of the Restricted Subsidiaries' equipment and inventory, such appraisal to be performed by an independent third party acceptable to the Lenders. 13.23 INTELLECTUAL PROPERTY Subject to Section 14.12, it shall ensure that all intellectual property (as described in the Security Documents) shall continue to be owned by the Person identified as the owner thereof in the Security Documents at all times during the Term; provided that, on 20 days prior notice to the Agent, the US Collateral Trustee and the Canadian Collateral Trustee, any member of the Restricted Group may sell or otherwise transfer any interest that it has in such intellectual property to IPG Technologies Inc. at any time. 14 NEGATIVE COVENANTS For so long as the Loan or any other amounts payable hereunder to the Agent or the Lenders remain outstanding and unpaid, or any of the Borrowers is entitled to borrow hereunder (whether or not the conditions precedent to such borrowing have or may be satisfied), each of the Borrowers, LLC and IPG, for itself and each member of the Restricted Group and with respect to itself and each member of the Restricted Group, agrees that it shall not do any of the following: 14.1 LIQUIDATION, AMALGAMATION, MERGER, CONSOLIDATION AND SALE OF ASSETS 14.1.1 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 14.1.4) of Consolidated Assets; notwithstanding the foregoing: 92 (a) any Restricted Subsidiary may merge or amalgamate or consolidate with or into IPG or any Wholly-owned Restricted Subsidiary so long as in any merger or consolidation involving IPG, IPG shall be the surviving or continuing corporation; (b) IPG 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 IPG, or in the case of any amalgamation, IPG's existence shall continue with the amalgamation and all of IPG's obligations hereunder and under the Security Documents 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 (iii) the Majority Lenders agree to such merger, consolidation or amalgamation, acting reasonably; (c) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to IPG or any Wholly-owned Restricted Subsidiary; the whole provided that as a result of same, the Security is not adversely affected (or, if it is, the required Mandatory Repayment has been made) and none of the Persons granting such Security changes its name without prior notice of at least 20 Business Days to the Agent. Notwithstanding the foregoing, no member of the Restricted Group shall become party to any receivables securitization program. 14.1.2 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 14.1, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock, any membership interests of any limited liability company and any similar equity interest) to any Person other than IPG 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 IPG and/or a Restricted Subsidiary whereby IPG and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. 14.1.3 Sell, transfer or otherwise dispose of any shares of stock of any class of any Restricted Subsidiary (except to IPG or a Wholly-owned Restricted Subsidiary provided that the Security is not adversely affected or for the purpose of qualifying directors), unless: 93 (a) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by IPG and by 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 Restricted Group; provided, however, that nothing in subsections 14.1.3 and 14.1.4 shall permit any disposition by IPG of any of the shares, limited partnership units or other equity interests in any of the Borrowers, the disposition by the Facility B/C Borrower of the shares of Canco, any disposition of the equity interests in LLC by Canco, or any disposition of the shares of IPG (US) Holdings Inc. or IPG (US) Inc. 14.1.4 As used in this Section 14.1, a sale, lease or other disposition of assets (including Securities) shall (unless consisting of sales of inventory made in the ordinary course of business) be deemed to be a "substantial part" of Consolidated Assets 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 Restricted Group (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, in the aggregate, 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 Restricted Group shall not be included if and to the extent the net proceeds are segregated from the general accounts of the Restricted Group, invested in Available Cash until applied in accordance with clauses (1) or (2) below, and either (1) within 6 months after such sale, lease or other disposition, are used to acquire Like Assets, or (2) within 6 months after such sale, lease or disposition, are applied to the prepayment of the Loan in accordance with the provisions of Section 8.2 of the Inter-Creditor Agreement. Any such prepayment shall be applied first to repay the Loan and the Notes, and the Credit under Facility B will be reduced by an amount equal to the amount of such repayment of the Loan and then, once Facility B has been repaid in full and the Credit the Credit under Facility C shall be reduced by an amount equal to the remainder of such repayment, in inverse order of the scheduled reductions under Section 9.1. 14.2 LIMITATIONS ON DEBT 14.2.1 Create, assume or incur or in any manner become liable in respect of any Debt, except: (a) Debt of the Restricted Group permitted by subsection 13.11.1 and 13.11.4; 94 (b) Debt of IPG or a Restricted Subsidiary owed to IPG or to a Wholly-owned Restricted Subsidiary; and (c) unsecured Debt of any Restricted Subsidiary ("SUBSIDIARY PRIORITY DEBT") and Debt of the Restricted Group secured by Permitted Charges ("SECURED PRIORITY DEBT", and, collectively with the Subsidiary Priority Debt being herein called "PRIORITY DEBT"), provided that, at the time of issuance of any such Priority Debt and after giving effect thereto and to the application of the proceeds thereof, (x) the aggregate principal amount of Priority Debt (including Facility A) shall not exceed 20%, or 12.5% during any Release Period under the first paragraph of Section 10.3, of Consolidated Net Worth and (y) all such Priority Debt shall have been incurred within the other applicable limitations of this Section 14.2, and provided further that, for the purposes of this Agreement and the Security Documents, Debt under or in respect of Facility B, Facility C and the Notes, and Debt permitted by clause (b) above, shall not constitute Priority Debt. For the purposes of this clause (c), Facility A shall be deemed to be fully utilized at all times until it is repaid and cancelled. 14.2.2 Any Person which becomes a Restricted Subsidiary after the date hereof shall, for all purposes of this Section 14.2, be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Debt of such Person existing immediately after it becomes a Restricted Subsidiary. 14.2.3 If any member of the Restricted Group incurs additional Debt, other than Debt secured by Charges described in subsection 7 of the definition of "Permitted Charges", such Debt shall be subject to terms and conditions no more restrictive than those contained herein and in the Note Agreements, excluding terms and conditions relating to pricing, collateral (in the case of Priority Debt alone) and Margins. 14.2.4 Neither LLC nor Canco shall incur or have at any time any Indebtedness in excess of an aggregate amount of US $100,000, save as provided in the undertakings contemplated in subsection 11.1.13(b). 14.3 FACILITY B/C BORROWER BUSINESS Permit any of the Facility B/C Borrower or any of its Subsidiaries, including Canco and LLC, to carry on any business, other than (i) taking such steps as may be necessary to maintain its existence or to hold Securities of Restricted Subsidiaries, (ii) provided no Default shall have occurred and be continuing and that no Event of Default shall have occurred which has not been waived, LLC may lend money to IPG (US) Inc., (iii) performing any action required hereunder or in respect hereof or under or in respect of any 95 of the Security Documents, the Note Agreements or the Notes; and (iv) the incurrence of any Indebtedness permitted by subsection 14.2.4, and, with respect to the Facility B/C Borrower, Indebtedness permitted hereunder. 14.4 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, except Permitted Charges, and only to the extent that (a) no Material Adverse Change occurs as a result and (b) the aggregate amount of Priority Debt (as defined in subsection 14.2.1 (c)) does not exceed 20% of Consolidated Net Worth, or, during any Release Period referred to in the first paragraph of Section 10.3, 12.5% of Consolidated Net Worth. 14.5 INVESTMENTS AND RESTRICTED PAYMENTS 14.5.1 Until such time as Facility B is fully repaid and cancelled, make any Restricted Payment. Until such time as Facility B is fully repaid and cancelled, make any Investment (other than a Permitted Investment), unless after giving effect to such Investment, (i) the ratio of Total Debt to EBITDA calculated on a quarterly basis as set out in subsection 13.11.4 is less than or equal to 3.25:1 for the two previous fiscal quarters and the two subsequent fiscal quarters on a pro forma basis, and (ii) the aggregate amount of all Investments (other than Permitted Investments) made by the Restricted Group up to such date would not exceed 10% of Consolidated Net Worth as of the end of the most recently ended fiscal quarter. The amount of Investments (other than Permitted Investments) as of the Closing Date is deemed to be US$11,176,870, comprised of the Investments described in Schedule "R" hereto. Once Facility B is fully repaid and cancelled, the Restricted Group shall not make: (a) any Investment (other than Permitted Investments), if, after giving effect thereto, the aggregate amount of all such Investments made by the Restricted Group up to such date would exceed 10% of Consolidated Net Worth as of the end of the most recently ended fiscal quarter; or (b) any Restricted Payments in excess of US$5,000,000 per fiscal year of IPG. 14.5.2 In addition to and not in limitation of the foregoing restrictions, IPG will not, and will not permit any Restricted Subsidiary to, make any Investment in any Unrestricted Subsidiary not engaged in a business substantially related to the business of the Restricted Group. 14.5.3 Furthermore, LLC shall not make any Investment other than Permitted Investments described in the second, third and fourth paragraphs of the definition 96 thereof and Permitted Investments in IPG (US) Inc. The latter shall not make any Investment other than Permitted Investments described in such paragraphs and Permitted Investments in any Restricted Subsidiary that has executed the required Security Documents. 14.5.4 The following restrictions shall apply in connection with any and all payments to Drumheath by any member of the Restricted Group: (a) until such time as Facility B has been repaid in full and the Credit thereunder cancelled, all payments to Drumheath must be on account of premiums payable for the insurance policies issued by Drumheath. After Facility B has been repaid and the Credit thereunder cancelled, such payments may be paid partly as premiums and partly on account of Investments, as determined by the Restricted Group. Notwithstanding the foregoing, the sum total of payments to Drumheath may not exceed US$3,000,000 in any fiscal year of IPG; (b) no Investments in or payments or Restricted Payments to Drumheath may be made while a Default has occurred or is continuing or following the occurrence of an Event of Default which has not been waived; (c) until Facility B has been repaid in full and the Credit thereunder cancelled, Drumheath may not enter into any insurance contracts in respect of any other kinds of insurance other than the types of insurance it is currently underwriting, consisting of workers' compensation; (d) all of Drumheath's liability in connection with workers' compensation policies shall be reinsured by reputable reinsurance companies, which reinsurance policies shall remain in effect at all times; (e) Drumheath may not carry on any new line of business, not currently conducted by Drumheath as of the Closing Date, during the Term other than, subject to subsection 14.5.4(c), an insurance business, as defined under applicable Law; (f) prior to the occurrence of any Event of Default which has not been waived, any monies coming from Drumheath including dividends, distributions and related proceeds (other than payment of claims under valid policies of insurance and other expenses to be paid in the ordinary course of business) must be paid directly to a member of the Restricted Group. Following the occurrence of an Event of Default which has 97 not been waived, at the request of the Agent on behalf of the Lenders, the Borrowers and the Guarantors shall cancel all insurance policies contracted with Drumheath in accordance with the terms of any such policy, other than those in respect of workers' compensation, cause Drumheath to cease carrying on business, and shall cause the net amount of all sums left in Drumheath (following the payment by Drumheath of, or reservation for, all claims (including those incurred but not reported) in respect of policies outstanding, in accordance with applicable Law) to be paid to a member of the Restricted Group to be paid to the Agent for the Lenders to reduce the Credit under Facilities B and C, in that order, subject to Pro Rata Sharing; and (g) each of the Borrowers and the Guarantors confirms that it has not guaranteed any of the liabilities of Drumheath under any of its insurance policies, nor has any of them provided any other guarantee of any liability of Drumheath of any nature whatsoever. Notwithstanding the provisions of subsection 14.5.1, the US$3,000,000 annual Restricted Payments to and/or Investments in Drumheath may be made even where the restrictions set out in clause (i) of subsection 14.5.1 have not been met. All payments to Drumheath shall be deemed "Investments" for the purposes of subsection 14.5.1. 14.5.5 In addition to the foregoing restrictions, IPG will not make any Restricted Payments or any Investment if, at the time thereof or after giving effect thereto, any Default shall have occurred and be continuing or Event of Default shall have occurred which has not been waived. 14.5.6 IPG will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. 14.5.7 For the purposes of this Section 14.5, 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 IPG) of such property at the time of the making of the Restricted Payment in question. 14.5.8 In valuing any Investments for the purpose of applying the limitations set forth in this Section 14.5, such 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. 98 14.5.9 For the purposes of this Section 14.5, at any time when a Person becomes a Restricted Subsidiary, all Investments of such Person at such time shall be deemed to have been made by such Person, as a Restricted Subsidiary, at such time. 14.6 RESTRICTIONS ON CAPITAL EXPENDITURES Until such time as Facility B is fully repaid and cancelled, make any capital expenditures exceeding US$20,000,000 in any fiscal year of IPG unless the ratio of Total Debt to EBITDA set forth in subsection 13.11.4 has been less than or equal to 3.25:1 for a period of four consecutive quarters. The foregoing restriction shall apply again if, at the end of any fiscal quarter, such ratio exceeds 3.25:1, unless Facility B has theretofore been fully repaid and cancelled. Once Facility B is fully repaid and cancelled or the ratio of Total Debt to EBITDA referred to in the preceding paragraph is met (for the purposes of this paragraph, the "CONDITIONS"), the Restricted Group shall not make capital expenditures exceeding an amount equal to 10% of Consolidated Net Worth in any fiscal year of IPG without the consent of the Lenders, acting reasonably. If either of the Conditions occurs on a date other than the last day of a fiscal year of IPG, the Restricted Group shall be permitted in such fiscal year to make the capital expenditures allowed in this paragraph rather than those permitted by the previous paragraph. Such amount shall be increased to 20% for any fiscal year in which the ratio of Total Debt to EBITDA set forth in subsection 13.11.4 has not exceeded 3.0:1 for a period of four consecutive quarters and IPG has maintained a credit rating for each of its two previous fiscal quarters with respect to its long-term, senior unsecured Debt of "BBB" or better by Standard & Poor's (or an equivalent credit rating by Moody's or an equivalent agency acceptable to the Lenders); provided that if at any time thereafter, the aforesaid (a) ratio in respect of the immediately preceding four quarters, or (b) Debt rating, no longer meets the applicable tests described above, the applicable percentage shall once again be 10% for the fiscal year in which such condition is no longer met. 14.7 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 any member of the Restricted Group's business and upon fair and reasonable terms no less favourable to such member of the Restricted Group than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 14.8 TERMINATION OF PENSION PLANS Withdraw, or permit any ERISA Affiliate to withdraw, from any Multiemployer Plan or permit any Plan (other than a Multiemployer Plan) to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle B of Title IV of ERISA) of the Restricted Group or the imposition of a Charge on any property of IPG 99 or any Subsidiary pursuant to Section 4068 of ERISA in excess of $3,000,000 (subject to reduction in accordance with the provisions of subsection 12.15.6). 14.9 OWNERSHIP OF SUBSIDIARIES Permit each of LP, LLC, Canco, IPI, IPC and all Operating Restricted Subsidiaries to be other than Wholly-owned Subsidiaries, or at any time own (either directly or through the Restricted Subsidiaries) less than 80% of the Voting Stock of its other Restricted Subsidiaries, together with such securities of such other Restricted Subsidiaries as are necessary to provide IPG with a direct or indirect economic interest of not less than 80% of each such other Restricted Subsidiary. 14.10 NO RESTRICTIONS ON DISTRIBUTIONS Restrict in any way the ability of the Restricted Subsidiaries to declare or make any payment contemplated in the first, second and third subsections of the definition of the term "Restricted Payments" to its shareholder(s) or other equity owners, except for such restrictions arising under applicable law in relation to the solvency of the Restricted Subsidiaries. 14.11 NO AMENDMENTS TO NOTE AGREEMENTS Allow any provision of the Note Agreements in relation to repayments, prepayments, pricing or financial covenants to be amended, replaced or deleted in any manner that would be adverse to the Lenders without the prior written consent of the Agent. This negative covenant is supplemental to the covenant set forth in Section 10.5 of the Inter-Creditor Agreement. 14.12 INTELLECTUAL PROPERTY Except as permitted by Section 14.1, IPG shall not, and shall not permit any member of the Restricted Group to, sell or transfer any portion of such Person's ownership interest in any intellectual property (as described in the Security Documents); provided, that any member of the Restricted Group may sell or transfer any such intellectual property to IPG Technologies Inc. at any time, subject to any notice requirements set forth in Section 13.23. 15 EVENTS OF DEFAULT AND REALIZATION 15.1 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: 15.1.1 If any of the Borrowers 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 Agent or the Lenders within two (2) Business Days after notice thereof; or 100 15.1.2 If any member of the Restricted Group fails to respect any of its other obligations and undertakings hereunder or under the Security Documents (including during any Release Period) or another undertaking of such member of the Restricted Group with respect to the Loan (including the undertakings described in Section 11.1) not otherwise contemplated by this Section 15.1 and has not remedied the Default within ten (10) days following the date on which the Agent has given written notice to the relevant Borrower(s); or 15.1.3 If (a) a court having jurisdiction shall enter a decree or order for relief in respect of any member of the Restricted Group in an involuntary case under the United States Bankruptcy Code of 1978 (11 U.S.C. et. seq.) (the "BANKRUPTCY CODE"), or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (b) an involuntary case shall be commenced against any member of the Restricted Group under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any member of the Restricted Group, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of any member of the Restricted Group for all or a substantial part of its property; or (c) any member of the Restricted Group shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law nor or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or any member of the Restricted Group shall make any assignment for the benefit of creditors; or (d) any member of the Restricted Group shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of any member of the Restricted Group (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (c) above or this clause (d) (each of the events described in clauses (a) and (b) above are hereinafter in this subsection 15.1.3 called a "PROCEEDING"); provided that, if a Proceeding is commenced against any member of the Restricted Group, the Restricted Group shall have the right to contest the Proceeding in good faith, if the Agent is absolutely satisfied, in its complete discretion, that the repayment of the Loan and the ability of each of the Borrowers and IPG to service their Debt shall not be compromised; or 15.1.4 If property of any member of the Restricted Group 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 101 commenced against any member of the Restricted Group, such member shall have the right to contest same in good faith, if the Agent is absolutely satisfied, in its complete discretion, that the repayment of the Loan and the ability of each of the Borrowers and IPG to service its Debt will not be compromised; or 15.1.5 If any statement, attestation, financial statement, report, data, representation or warranty which was given by, for the account of or in the name of any member of the Restricted Group to the Agent or the Lenders, with respect to this Agreement or the Security Documents, 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 13.16.2 insert a material qualification in their opinion; or 15.1.6 If any member of the Restricted Group is in default with respect to any Material Debt (other than amounts due to the Lenders 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 (b) such default could permit the creditor of such Material Debt 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 15.1.7 If a judgment is rendered by a competent tribunal against any member of the Restricted Group 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 Lenders) and remains undischarged for a period ending not more than five (5) Business Days before the date on which such judgment becomes enforceable; or 15.1.8 If LLC assigns or transfers any of its rights against any Restricted Subsidiary with respect to amounts owed to it by such Restricted Subsidiary, except as permitted by the provisions hereof or of the undertaking delivered pursuant to subsection 11.1.13; or 15.1.9 If any of the Notes become payable in advance following a Change in Control, as defined in the Note Agreements; or 15.1.10 If in the opinion of the Lenders, acting in good faith, a Material Adverse Change has occurred since December 31, 2000, except as set forth in Schedule "M" hereto, and the Agent has given written notice to the Borrowers to such effect; or 102 15.1.11 If PBGC has registered or recorded any Charge securing an amount greater than $1,000,000 against the property of the Restricted Group. 15.2 REMEDIES If an Event of Default occurs under subsection 15.1.3, the Loans shall immediately become due and payable, without presentation, demand, protest or other notice of any nature, to which the Borrowers hereby expressly renounce. If any other Event of Default occurs and is continuing, the Agent may, at its option, and shall if required to do so by the Lenders, declare immediately due and payable, without presentation, demand, protest or other notice of any nature, to which the Borrowers hereby expressly renounce, notwithstanding any provision to the contrary effect in this Agreement or in the Security Documents: 15.2.1 the entire amount of the Loan, including the amount corresponding to the face amount of all Letters of Credit then outstanding and the principal amount of the BA Advances then outstanding, in principal and interest, notwithstanding the fact that one or more of the holders of the Bankers' Acceptances or 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 Lenders. Neither IPG, LLC nor the Borrowers shall have the right to invoke against the Lenders any defence or right of action, indemnification or compensation of any nature or kind whatsoever that the Borrowers may at any time have or have had with respect to any holder of one or more of the Letters of Credit or Bankers' Acceptances issued in accordance with the provisions hereof. Any amounts paid to the Lenders in respect of any outstanding Letters of Credit shall be retained by the Lenders 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 relevant Borrower(s); and 15.2.2 an amount equal to the amount of losses, costs and expenses suffered or incurred by the Lenders, in each case as and to the extent required by Section 8.2 and Section 8.3, if applicable; and the Credit shall cease and as and from such time shall be annulled, and the Lenders may exercise all of their rights and recourses under the provisions of this Agreement and the Security Documents. For greater certainty, from and after the occurrence and during the continuance of any Default or from and after the occurrence of an Event of Default which has not been waived, the Lenders shall not be obliged to make any further Advances under the Credit. 15.3 BANKRUPTCY AND INSOLVENCY If any member of the Restricted Group 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 IPG 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 Lenders' rights to contest such stay of proceedings, each of 103 the Borrowers, LLC and IPG covenants and agrees to continue to pay interest on all amounts due to the Lenders. In this regard, each of the Borrowers, LLC and IPG acknowledges that permitting the Borrowers 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 Borrowers to use leased premises constitutes such valuable consideration. 15.4 APPLICATION OF PROCEEDS Subject to the provisions of the Inter-Creditor Agreement, the Agent may apply the proceeds of realization of the property contemplated by the Security Documents and of any credit or compensating balance, in reduction of the part of the Indebtedness of the Borrowers to the Lenders (in principal, interest or accessories) which is then due and payable hereunder. Notwithstanding the foregoing and except during any Release Period arising under the provisions of the second paragraph of Section 10.3 hereof, the proceeds of any such realization of the Operating Assets received by the Agent shall be applied first to Facility A, second to Facility B and then to Facility C. 15.5 NOTICE Except where otherwise expressly provided herein or in any Security Document, no notice or demand of any nature is required to be given to the Borrowers or the Guarantors by the Agent in order to put the Borrowers and the Guarantors in default, which shall occur by the simple lapse of time granted to execute an obligation or by the simple occurrence of a Default. 15.6 COSTS If an Event of Default occurs which has not been waived, and within the limits contemplated by Section 13.15, the Agent may impute to the account of the Lenders and pay to other persons reasonable sums for services rendered with respect to the realization, recovery, sale, transfer, delivery and obtention of payment with respect to the Security, and may 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 Agent in the place of such Security and, when the Agent decides it is opportune, acting reasonably, may be applied to the account of the part of the Indebtedness of the Restricted Group to the Lenders which the Agent deems preferable, without prejudice to the rights of the Lenders against the Restricted Group for any loss of profit. This Section is subject to the provisions of the Inter-Creditor Agreement. 15.7 RELATIONS WITH THE RESTRICTED GROUP The Agent may grant delays, take security or renounce thereto, accept compromises, grant acquittances and releases and otherwise negotiate with the Restricted Group as it deems advisable without in any way diminishing the liability of the Restricted Group nor prejudicing the rights of the Agent or the Lenders with respect to the Security. 104 16 JUDGMENT CURRENCY 16.1 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 Agent 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 payable or advanced or to be advanced, as the case may be. Each of the Borrowers, IPG and LLC agrees that its obligations in respect of any First Currency due from it to the Lenders 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 Agent 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 Agent 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 payable; 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 Borrowers, IPG and LLC agrees as a separate and independent obligation and notwithstanding any such payment or judgment to indemnify the Lenders against such deficiency. 16.2 DETERMINATION OF AN EQUIVALENT CURRENCY If, in their discretion, the Lenders or the Agent choose or, pursuant to the terms of this Agreement, are obliged to choose the equivalent in Canadian Dollars of any securities or amounts expressed in US Dollars or the equivalent in US Dollars of any securities or amounts expressed in Canadian Dollars, the Agent, in accordance with the conversion rules as stipulated in Section 16.1: 16.2.1 on the date indicated in the Notice of Borrowing as the date of a request for an Advance; and 16.2.2 at any other time which in the opinion of the Lenders is desirable; may, using the spot rate of the Agent 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 Agent shall inform the Borrowers and IPG of the conclusion which the Lenders have reached. 105 17 ASSIGNMENT 17.1 ASSIGNMENT BY THE BORROWERS The rights of the Borrowers under the provisions hereof are purely personal and may not be transferred or assigned, and the Borrowers may not transfer or assign any of their obligations hereunder, such assignment being null and of no effect opposite the Lenders and rendering any balance outstanding of the amounts referred to in Section l5.2 immediately due and payable at the option of the Lenders and further releasing the Lenders from any obligation to make any further Advances under the provisions hereof. 17.2 ASSIGNMENTS AND TRANSFERS BY THE LENDERS 17.2.1 Each Lender may, at its own cost, assign or transfer to a financial institution entitled to lend money in the United States of America or Canada (the "ASSIGNEE") in accordance with this Article 17 any or all of its rights, benefits and obligations under Facility A and/or Facility B and/or Facility C hereunder with the prior consent of the relevant Borrower(s), which will not be unreasonably withheld or delayed. After the occurrence and during the continuance of a Default or after the occurrence of an Event of Default and unless and until same has been waived, any Lender may transfer all or any part of its rights, benefits and obligations hereunder to any Person, without the consent of any of the Borrowers, but upon notice to the relevant Borrower(s). The prior written consent of the Issuing Lender (as defined in Section 4.3) shall be required in the case of assignment in relation to Facility A. 17.2.2 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 Commitment. 17.2.3 Notwithstanding subsection 17.2.1, each Lender shall be entitled to assign or transfer, at its own cost, in accordance with the other provisions of this Section 17 (including 17.5), its rights, benefits and obligations hereunder, in whole or in part, to a parent, a subsidiary or an affiliate of such Lender, provided that such Lender has taken all reasonable measures to avoid any resulting adverse tax consequences, including increases in respect of withholding, for any of the Borrowers. 17.3 TRANSFER AGREEMENT If a Lender wishes to assign or transfer all or any of its rights, benefits and obligations hereunder in accordance with Section 17.2, then such assignment or transfer shall be effected by the execution and delivery by such Lender to the Agent 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: 17.3.1 such Lender shall be released from further obligations to the Borrowers with respect to the portion of the obligations of such Lender assumed by the Assignee; 106 17.3.2 the Assignee shall assume the obligations of such Lender and acquire the rights of such Lender in respect of the Borrowers, LLC, IPG and the other Guarantors, without novation of the Borrowers' obligations; 17.3.3 the Agent, such 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 17.3.4 such Lender, the Agent, the Borrowers, LLC, IPG and the other Guarantors shall execute such documents and perform such acts as may be required to give effect to the transfer or assignment. 17.4 NOTICE The Agent shall promptly deliver a copy of any Transfer Agreement to each party thereto. 17.5 SUB-COMMITMENTS A 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, such Lender shall remain, insofar as the Borrowers and the Agent are concerned, as the Lender responsible hereunder, and the Borrowers 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. 17.6 GENERAL Notwithstanding anything contained in this Article: 17.6.1 the Agent 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 Borrowers shall only be obliged to give notice to or request consents from the Agent; and 17.6.2 provided no Default shall have occurred and be continuing and no Event of Default has occurred which has not been waived, the Lenders shall use reasonable efforts to ensure that the amounts payable by the Borrowers under this Agreement will 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. In this regard, Comerica shall use reasonable efforts to maintain its existing arrangements with the Borrowers on account of withholding taxes. 107 18 THE AGENT AND THE LENDERS 18.1 AUTHORIZATION OF AGENT Each Lender hereby irrevocably appoints and authorizes the Agent to act for all purposes as its agent hereunder and under the Security Documents to which it is a secured party with such powers as are expressly delegated to the Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto, and undertakes not to take any action on its own. Notwithstanding the provisions of any Law relating to contracts generally or to agency arrangements, the Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. As to any matters not expressly provided for by this Agreement, the Agent shall act hereunder or in connection herewith in accordance with the instructions of the Lenders in accordance with the provisions of this Article 18, but, in the absence of any such instructions, the Agent may (but shall not be obliged to) act as it shall deem fit in the best interests of the Lenders, and any such instructions and any action taken by the Agent in accordance herewith shall be binding upon each Lender. The Agent shall not, by reason of this Agreement, be deemed to be a trustee for the benefit of any Lender, the Borrowers or any other Person. Neither the Agent nor any of its directors, officers, employees or agents shall be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any certificate or other document referred to, or provided for in, or received by any of them under, this Agreement, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document referred to or provided for herein or any collateral provided for hereby or for any failure by the Borrowers, LLC or IPG to perform its or their obligations hereunder. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Agent nor any of its directors, officers, employees or agents shall be responsible for any action taken or omitted to be taken by it or them under or in connection herewith, except for its or their own gross negligence or wilful misconduct. 18.2 POWER OF ATTORNEY FOR QUEBEC PURPOSES For greater certainty, and without limiting the powers of the Agent hereunder or the powers of the Agent, the Canadian Collateral Agent, the Canadian Collateral Trustee, the US Collateral Agent or the US Collateral Trustee under the Security Documents, each of the Lenders hereby acknowledges that the Canadian Collateral Agent and the Canadian Collateral Trustee (collectively, the "PARTIES") shall, for the purposes of holding any security granted under the Security Documents pursuant to the laws of the Province of Quebec to secure payment of debentures (or any similar instruments), each be the holder of an irrevocable power of attorney (fonde de pouvoir) (within the meaning of Article 2692 of the Civil Code of Quebec) for all present and future Lenders and holders of such debentures, in respect of the Security described in Section 10.2, all present and future holders of the Notes and the holders of such debentures. Each of the Lenders and TD, as holder of said debentures, hereby constitutes, to the extent necessary, each of the Parties as the holder of such irrevocable power of attorney (fonde de pouvoir) in order to hold security granted under the Security Documents in the Province of Quebec to secure the debentures (or any similar instrument). Each assignee Lender shall be deemed to have confirmed and ratified the constitution of each of the Parties as the holder of such irrevocable power of attorney (fonde de pouvoir) by execution of the relevant Transfer Agreement. Notwithstanding the provisions of Section 32 of the Special Powers of Legal Persons Act (Quebec), each of the Parties may acquire and be the holder of a debenture (or any 108 similar instrument). Each member of the Restricted Group hereby acknowledges that each of the debentures executed in connection herewith constitutes a title of indebtedness, as such term is used in Article 2692 of the Civil Code of Quebec. The Canadian Collateral Agent hereby acknowledges and accepts the Quebec deeds of hypothec granted pursuant to Section 10.1 forming part of the Security Documents and agrees to be bound by the provisions thereof. Notwithstanding Section 19.8 hereof, the provisions of this Section 18.2 shall be governed by the laws of Quebec and the federal laws of Canada applicable therein. 18.3 AGENT'S RESPONSIBILITY 18.3.1 The Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, telex or telecopy) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of legal advisers, independent accountants and other experts selected by the Agent. The Agent may deem and treat each Lender as the holder of the Commitment in the Loan made by such Lender for all purposes hereof unless and until an Assignment has been completed in accordance with Section 17.2. 18.3.2 The Agent shall not be deemed to have knowledge of the occurrence of a Default or Event of Default unless the Agent has received notice from a Lender or a Borrower describing such a Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default or otherwise becomes aware that a Default or Event of Default has occurred, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Lenders in accordance with the provisions of this Article 18 provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obliged to) take such action, or refrain from taking such action, with respect to such a Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 18.3.3 The Agent shall have no responsibility, (a) to the Borrowers, LLC or IPG on account of the failure of any Lender to perform its obligations hereunder, or (b) to any Lender on account of the failure of the Borrowers, LLC or IPG to perform their obligations hereunder. 18.3.4 Each Lender severally represents and warrants to the Agent that it has made its own independent investigation of the financial condition and affairs of the Restricted Group in connection with the making and continuation of its 109 Commitment in the Loan hereunder and has not relied on any information provided to such Lender by the Agent in connection herewith, and each Lender represents and warrants to the Agent that it shall continue to make its own independent appraisal of the creditworthiness of the Restricted Group while the Loan is outstanding or the Lenders have any obligations hereunder. 18.4 RIGHTS OF AGENT AS LENDER The provisions of this Article 18 shall apply to the Agent solely in its capacity as such, except to the extent expressly stated otherwise. With respect to its Commitment in the Loan, the Agent in its capacity as a Lender shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent and the term "Lender" shall, unless the context otherwise indicates, include the Agent in its capacity as a Lender. The Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking or other business with the Restricted Group as if it were not acting as the Agent and may accept fees and other consideration from the Restricted Group for customary services in connection with this Agreement and the Loan and otherwise without having to account for the same to the Lenders. Any reference in this Agreement to the Agent means, where the Agent is also a Lender, the agency department of such Lender specifically responsible for acting as Agent under and in connection with this Agreement. In acting as Agent, the agency department will be treated as a separate entity from any other department or division of the Lender in question. Without limiting the foregoing, the Agent shall not be deemed to have notice of a document or information received by any other department or division of that Lender, nor will the Lender concerned be deemed to have notice of a document or information received by any other department or division of the Agent. 18.5 INDEMNITY Each Lender agrees to indemnify the Agent, to the extent not otherwise reimbursed by the Restricted Group, rateably in accordance with its respective Commitment in the Loan, for any and all liabilities, obligations, losses, damages, penalties, actions, judgements, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against, the Agent in any way relating to or arising out of this Agreement, the Security Documents or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless a Default or Event of Default has occurred and is continuing, normal administrative costs and expenses incidental to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the Agent's gross negligence or wilful misconduct. 18.6 NOTICE BY AGENT TO LENDERS As soon as practicable after its receipt thereof, the Agent will forward to each Lender a copy of each report, notice or other document required by this Agreement to be delivered to the Agent for such Lender. 110 18.7 PROTECTION OF AGENT 18.7.1 The Agent shall not be required to keep itself informed as to the performance or observance by the Borrowers, LLC or IPG of this Agreement or any other document referred to or provided for herein or therein or to inspect the properties or books of the Restricted Group. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the affairs or financial condition of the Restricted Group which may come to the attention of the Agent, except where provided to the Agent for the Lenders, provided that such information does not confer any advantage to the Agent, in its capacity as a Lender, over the other Lenders. Nothing in this Agreement shall oblige the Agent to disclose any information relating to the Restricted Group if such disclosure would or might, in the opinion of the Agent, constitute a breach of any Laws or duty of secrecy or confidence. 18.7.2 Unless the Agent shall have been notified in writing by any Lender prior to the date of an Advance requested hereunder that such Lender does not intend to make available to the Agent such Lender's Commitment in such Advance, the Agent may assume that such Lender has made such Lender's Commitment in such Advance available to the Agent on the date of such Advance and the Agent may, in reliance upon such assumption, make available to the relevant Borrower(s) a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender, the Agent shall be entitled to recover such amount (together with interest thereon at the rate determined by the Agent as being its cost of funds in the circumstances) on demand from such Lender or, if such Lender fails to reimburse the Agent for such amount on demand, from the Borrowers. 18.7.3 Unless the Agent shall have been notified in writing by a Borrower prior to the date on which any payment is due hereunder that a Borrower does not intend to make such payment, the Agent may assume that a Borrower has made such payment when due and the Agent may, in reliance upon such assumption, make available to each Lender on such payment date an amount equal to such Lender's pro rata share of such assumed payment. If it is established that a Borrower has not in fact made such payment to the Agent, each Lender shall forthwith on demand repay to the Agent the amount made available to such Lender (together with interest at the rate determined by the Agent as being its cost of funds in the circumstances). 18.8 NOTICE BY LENDERS TO AGENT Each Lender shall endeavour to use its best efforts to notify the Agent of the occurrence of any Default or Event of Default forthwith upon becoming aware of such event, but no Lender shall be liable if it fails to give such notice to the Agent. 111 18.9 SHARING AMONG THE LENDERS Each Lender agrees that as amongst themselves, except as otherwise provided for by the provisions of this Agreement, all amounts received by the Agent, in its capacity as agent of the Lenders pursuant to this Agreement or any other document contemplated hereby (whether received by voluntary payment, by the exercise of the right of set-off or compensation or by counterclaim, cross-claim, separate action or as proceeds of realization of any Security, other than agency fees and arrangement fees and as provided in the third paragraph of this Section 18.9), shall be shared by each Lender pro rata, in accordance with their respective Commitment and each Lender undertakes to do all such things as may be reasonably required to give full effect to this Section 18.9. If any amount which is so shared is later recovered from the Lender who originally received it, each other Lender shall restore its proportionate share of such amount to such Lender, without interest. As a necessary consequence of the foregoing, each Lender shall share, in a percentage equal to its Commitment, any losses incurred as a result of any Default or Event of Default, and shall pay to the Agent, within two (2) Business Days following a request by the Agent, any amount required to ensure that such Lender bears its pro rata share of such losses, if any, including any amounts required to be paid to any Lender in respect of any Bankers' Acceptances or Letters of Credit. Such obligation to share losses shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, compensation, counterclaim, recoupment, defence or other right which such Lender may have against the Agent, any member of the Restricted Group or any other Person for any reason whatsoever; (2) the occurrence or continuance of any Default or Event of Default; (3) any adverse change in the condition (financial or otherwise) of the Restricted Group or any other Person; (4) any breach of this Agreement by the Borrowers, IPG, LLC or any other Person; or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Lender does not make available the amount required hereunder, the Agent shall be entitled to recover such amount on demand from such Lender, together with interest thereon at the US Prime Rate from the date of non-payment until such amount is paid in full. Subject to the provisions of Section 10.3, the Lenders acknowledge and agree that the Facility A Lenders have Charges on the Operating Assets ranking prior to the Charges thereon held for the benefit of the Facility B and Facility C Lenders. The Lenders further acknowledge that any proceeds obtained by the Agent arising out of deposits made by or for the account of the Facility A Borrowers in their operating accounts may be used firstly to set off or compensate Loans under Facility A, second to set off or compensate Loans owing under Facility B and then to Loans under Facility C. Finally, the Lenders acknowledge and agree that the relative priorities of the Facility A Lenders and the Facility B and Facility C Lenders in the event of realization upon the Security will be governed by the provisions of Section 15.4. This Section shall be subject to the provisions of the Inter-Creditor Agreement. 112 18.10 DERIVATIVE OBLIGATIONS 18.10.1 The Derivative Obligations shall be secured by the Security granted under Section 10.2 provided that the related Derivative Instruments: (a) are governed by the ISDA Master Agreement (1992 Version) of the International Swaps and Derivatives Association, Inc.; (b) provide that bankruptcy or insolvency constitutes an event of default thereunder; and (c) provide that for the purposes of Section 6(e) of the ISDA Master Agreement (1992 Version) of the International Swaps and Derivatives Association, Inc., the "Market Quotation" and the "Second Method" methods of calculation apply. 18.10.2 Each Lender shall confirm to the Agent the details of each Derivative Instrument executed by it by or for the benefit of a Borrower within thirty (30) days of such execution. 18.10.3 Each Lender shall also confirm to the Agent and to the Borrowers, quarterly on or about the last day of March, June, September and December of each fiscal year, the Negative Value of the Derivative Instruments issued by it or contracted through it, calculated on a net as well as on a gross basis where several Derivative Instruments are governed by the same Master Agreement, as well as the Facility in respect of which such Derivative Instruments apply. The Agent shall then confirm to each Lender the total amount of the Negative Value of Derivative Instruments entered into with each Lender. 18.11 PROCEDURE WITH RESPECT TO ADVANCES Subject to the provisions of this Agreement, including those with respect to Swing Line Advances, upon receipt of a Notice of Borrowing from a Borrower, the Agent shall, without delay, advise each Lender of the receipt of such notice, and of its proportionate share of the amount of each Advance and of the relevant details of the Agent's account(s). Each Lender shall disburse its proportionate share of each Advance, taking into account its Commitment, and shall make it available to the Agent (no later than 10:00 a.m.) on the date of the Advance fixed by such Borrower, by depositing its proportionate share of the Advance in the Agent's account in Canadian Dollars or US Dollars, as the case may be. Once such Borrower has fulfilled the conditions stipulated in this Agreement, the Agent will make such amounts available to such Borrower on the date of the Advance, at the Branch, and, in the absence of other arrangements made in writing between the Agent and such Borrower, by transferring or causing to be transferred an equivalent amount in the case of a Loan, and the Available Proceeds (as defined in subsection 6.2.3(d)) in the case of Bankers' Acceptances, in accordance with the instructions of such Borrower which appear in the Notice of Borrowing with respect to the Advance; however, the obligation of the Agent 113 with respect hereto is limited to taking the steps judged commercially reasonable in order to follow such instructions, and once undertaken, such steps shall constitute conclusive evidence that the amounts have been disbursed in accordance with the applicable provisions. In the absence of its gross negligence or willful misconduct, the Agent shall not be liable for damages, claims or costs imputed to such Borrower and resulting from the fact that the amount of an Advance did not arrive at its agreed-upon destination. 18.12 ACCOUNTS KEPT BY EACH LENDER Each Lender shall keep in its books, in respect of its Commitment, accounts for the Libor Advances, Prime Rate Advances, US Prime Rate Advances, US Base Rate Advances, Bankers' Acceptances and other amounts payable by the Borrowers to such Lender under this Agreement. Each Lender shall make appropriate entries showing, as debits, the amount of the Debt of the Borrowers to it in respect of the Libor Advances, Prime Rate Advances, US Prime Rate Advances and US Base Rate Advances and BA Advances, as the case may be, the amount of all accrued interest and any other amount due to such Lender pursuant hereto and, as credits, each payment or repayment of principal and interest made in respect of such indebtedness as well as any other amount paid to such Lender pursuant hereto. These accounts shall constitute (in the absence of manifest error or of contradictory entries in the accounts of the Agent referred to in Section 18.11) prima facie evidence of their content against the Borrowers. The accounts which are maintained by the Agent shall constitute, except in the case of manifest error, prima facie proof of the amounts advanced and the Bankers' Acceptances accepted by each Lender, the interest and other amounts due to them and the payments of principal, interest or other amounts made to or for the account of the Lenders pursuant hereto. 18.13 BINDING DETERMINATIONS The Agent shall proceed in good faith to make any determination which is required in order to apply this Agreement and, once made, such determination shall be final and binding upon all Lenders, except in the case of manifest error. 18.14 AMENDMENT OF ARTICLE 18 The provisions of this Article 18 relating to the rights and obligations of the Lenders and the Agent inter se may be amended or added to, from time to time, by the execution by the Agent and the Lenders of an instrument in writing and such instrument in writing shall validly and effectively amend or add to any or all of the provisions of this Article 18 affecting the Lenders without requiring the execution of such instrument in writing by the Borrowers. 18.15 DECISIONS, AMENDMENTS AND WAIVERS OF THE LENDERS When the Lenders may or must consent to an action or to anything or to accomplish another act in applying this Agreement, the Agent shall request that each Lender give its consent in this regard. Subject to the provisions of Section 18.16, all decisions taken by the Lenders 114 shall be taken by the Majority Lenders. The Agent shall confirm such consent to each Lender and to the Borrowers. 18.16 AUTHORIZED WAIVERS, VARIATIONS AND OMISSIONS If so authorized in writing by the Lenders, the Agent, on behalf of the Lenders, may grant waivers, consents, vary the terms of this Agreement and, subject to the provisions of the Inter-Creditor Agreement and the Collateral Trust Indenture, the Security Documents and do or omit to do all acts and things in connection herewith or therewith. Notwithstanding the foregoing, except with the prior written agreement of each of the Lenders, nothing in Section 18.15 or this Section 18.16 shall authorize (i) any extension of the date for, or alteration in the amount, currency or mode of calculation or computation of, any payment of principal or interest or other amount, (ii) any increase in the Commitment of a Lender, (iii) any extension of any maturity date, (iv) any change in the terms of Article 18, (v) any change in the manner of making decisions among the Lenders, or in the definition of Majority Lenders, (vi) the release of any Borrower or any Guarantor, (vii) the release, in whole or in part, of any of the Security Documents, or (viii) any change in or any waiver of the conditions precedent provided for in Article 11. 18.17 PROVISIONS FOR THE BENEFIT OF LENDERS ONLY The provisions of this Article 18 relating to the rights and obligations of the Lenders and Agent inter se shall be operative as between the Lenders and Agent only, and the Borrowers shall not have any rights or obligations under or be entitled to rely for any purposes upon such provisions. However, the provisions of subsection 18.3.3 shall be applicable as between the Borrowers, IPG, LLC and the Agent and the provisions of Sections 18.2 and 18.9 shall be applicable as between the Borrowers, IPG, LLC, the Agent, the Lenders and (in the case of Section 18.2) the other Parties referred to therein. 18.18 RESIGNATION OF AGENT 18.18.1 Notwithstanding the irrevocable appointment of the Agent, the Majority Lenders may (with the consent of the Borrowers), upon giving the Agent ninety (90) days prior written notice to such effect, terminate the Agent's appointment hereunder provided that a successor Agent has been appointed at or prior to the expiry of such notice. 18.18.2 The Agent may resign its appointment hereunder at any time without giving any reason therefor by giving written notice to such effect to each of the other parties hereto. Such resignation shall not be effective until a successor Agent has been appointed. 18.18.3 In the event of any such termination or resignation, the Lenders shall appoint a successor Agent acceptable to the Borrowers and deliver copies of all accounts to such successor, and the retiring Agent shall be discharged from any further obligations hereunder but shall remain entitled to the benefit of the provisions of this Article 18 and the Agent's successor, and each of the other parties 115 hereto shall have the same rights and obligations among themselves as they would have had if such successor originally had been a party hereto as Agent. 18.19 CANADIAN AGENT AND US AGENT Notwithstanding any other provision hereof, and unless otherwise directed by the Agent, Notices of Borrowing and other matters hereunder (collectively, the "MATTERS") concerning the US Borrowers and US Lenders shall be dealt with by and addressed to the US Agent, and Matters concerning the Canadian Borrower and the Canadian Lenders shall be dealt with by and addressed to the Canadian Agent. Where such Matter relates to both Canadian and US parties (for example, the notice described in Section 2.2), such Matter shall be dealt with by and addressed to both the US Agent and the Canadian Agent. The payment of Fees and the repayment of the Loans shall be made as follows or otherwise as directed by the Agents: 18.19.1 the US Borrowers shall make such payments and repayments to the US Agent; and 18.19.2 the Canadian Borrowers shall make such payments and repayments to the Canadian Agent. 19 MISCELLANEOUS 19.1 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 courier or 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 such party may subsequently communicate to each other party hereto 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 or Canada. 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 in any other manner permitted by this Section 19 in order to ensure its prompt receipt by the other party. 19.2 AMENDMENT AND WAIVER The rights and recourses of the Agent and the Lenders under this Agreement and the Security Documents are cumulative and do not exclude any other rights and recourses which the Agent or the Lenders might have, and no omission or delay on the part of the Agent or the Lenders 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 116 Agent and the Lenders 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 members of the Restricted Group party hereto and by the Agent with the approval of the requisite Lenders. 19.3 DETERMINATIONS FINAL In the absence of any manifest error, any determinations to be made by the Agent or the Lenders in accordance with the provisions hereof, when made, are final and irrevocable for all parties. 19.4 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 requisite parties in accordance with Section 19.2. 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. 19.5 INDEMNIFICATION AND COMPENSATION In addition to the other rights now or hereafter conferred by law and those described in subsection 6.6.2 and Section 9.14, and without limiting such rights, if a Default should occur and is continuing or an Event of Default has occurred which has not been waived, each Lender and the Agent is hereby authorized by the Borrowers, LLC and IPG, at any time and from time to time, subject to the obligation to give notice to the Borrowers, LLC and IPG 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 Lenders to any member of the Restricted Group or to its or their credit or its or their account, with respect to and on account of any obligation and Debt of the Borrowers, LLC and IPG to the Lenders in accordance with the provisions hereof or the Security Documents, including, without limitation, the accounts of any nature or kind which flow from or relate to this Agreement, whether or not the Agent has made demand under the terms hereof or has declared the amounts referred to in Section 15.2 as payable 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. 19.6 BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and permitted assigns. 117 19.7 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. 19.8 APPLICABLE LAW This Agreement, its interpretation and its application shall be governed by the Laws of the State of New York. 19.9 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 unenforceable 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 unenforceable such provision in any other jurisdiction. To the extent permitted by applicable Laws, each of the Borrowers, LLC and IPG hereby waives any provision of any Laws which renders any provision hereof prohibited or unenforceable in any respect. 19.10 FURTHER ASSURANCES IPG covenants and agrees on its own behalf and on behalf of each member of the Restricted Group that, at the request of the Agent, IPG and each member of the Restricted Group 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 Agent in its reasonable discretion requires in order to evidence the indebtedness of the Restricted Group under this Agreement, under the Security Documents, or otherwise as contemplated herein, and to confirm and perfect, and maintain perfection of, the Security. 19.11 GOOD FAITH AND FAIR CONSIDERATION Each of the Borrowers, LLC and IPG acknowledges and declares that it has entered into this Agreement freely and of its own will. In particular, each of the Borrowers, LLC and IPG acknowledges that the Agreement was negotiated by it and by the Lenders in good faith, and that there was no exploitation of the Borrowers, LLC or IPG by the Lenders, nor is there any serious disproportion between the consideration provided by the Lenders and that provided by the Borrowers, LLC and IPG. 19.12 EXCESS RESULTING FROM EXCHANGE RATE CHANGE 19.12.1 Subject to Section 19.12.2, if on any Rollover Date, following one or more fluctuations in the exchange rate of the Canadian Dollar against the US Dollar, the sum of: 118 (a) the equivalent amount in US Dollars of Loans in Canadian Dollars; and (b) the Loans in US Dollars; exceeds the amount of the Credit then available, the relevant Borrower(s) shall immediately either (i) make the necessary payments or repayments to the Agent to reduce the Loans to an amount equal to or less than the available amount of the Credit or (ii) maintain or cause to be maintained with the Agent, deposits of US Dollars in an amount equal to or greater than the amount by which the Loans exceed the available amount of the Credit, such deposits to be maintained in such form and upon such terms as are acceptable to the Agent. Without in any way limiting the foregoing provisions, the Agent shall, on the date of each request for an Advance or on the date of any interest payment or on each Rollover Date, make the necessary exchange rate calculations to determine whether any such excess exists on such date and, if there is an excess, it shall so notify the relevant Borrower(s). 19.12.2 Notwithstanding subsection 19.12.1, the Agent shall be entitled, in its sole discretion, to require that the Borrowers (a) make the payments or repayments or maintain the deposits required to be made or maintained under Section 19.12.1; or (b) fully hedge, to the reasonable satisfaction of the Agent, the excess hereinafter referred to in this subsection 19.12.2 and assign the benefit of all hedging contracts to the Agent in any case where the sum of (i) the equivalent amount in US Dollars of Loans in Canadian Dollars and (ii) the Loans in US Dollars, exceeds the available amount of the Credit. 19.13 RESPONSIBILITY OF THE LENDERS Each Lender shall be solely responsible for the performance of its own obligations hereunder. Accordingly, no Lender is in any way jointly and severally or solidarily responsible for the performance of the obligations of any other Lender. 19.14 INDEMNITY In addition to the Canadian Environmental Indemnity Agreement and the US Environmental Indemnity Agreement, each of IPG, LLC and the Borrowers agrees to indemnify and defend the Agent, each Lender and their respective 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 Agent or of any of the Lenders in the transactions contemplated by this Agreement, (ii) the role of the Agent or the Lenders in any investigation, litigation or other proceeding brought or threatened relating to the Credit, and/or (iii) the compliance with or enforcement of any of their rights or obligations hereunder, including: 19.14.1 the reasonable fees and disbursements of counsel; and 119 19.14.2 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; 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. 19.15 JURISDICTION AND SERVICE IN RESPECT OF IPG, LLC AND THE BORROWERS 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, each of the Borrowers, LLC and IPG hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the Borrowers, LLC and IPG hereby irrevocably and unconditionally waives any objection, including, 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 such action or proceeding in such respective jurisdictions. Each of the Borrowers, LLC, IPG, the Agent and Lenders hereby irrevocably and unconditionally waives trial by jury. Each of the Borrowers, LLC and IPG further consents that all service of process in any such action or proceeding may be made by delivery to it at the address of the Borrowers, LLC or IPG, 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 Borrowers, LLC and IPG 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 19.15 shall affect the right of the Agent or the Lenders 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 Borrowers, LLC or IPG or to enforce a judgment obtained in the courts of any other jurisdiction. 19.16 UNDERTAKING AND REPRESENTATION OF THE LENDERS Subject to the provisions of Section 17.6, each of the Lenders shall provide the Borrowers with an IRS Form W-8ECI certifying that, and represents to the Borrowers, LLC and IPG 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. 19.17 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 120 executes, avis donnes et procedures judiciaires intentees, directement ou indirectement, relativement ou a la suite de la presente convention. 20 FORMAL DATE 20.1 FORMAL DATE For the purposes of convenience, this Credit Agreement may be referred to as bearing formal date of December 20, 2001, notwithstanding its actual date of signature. [Signature Page Follows] 121 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT ON THE DATE AND AT THE PLACE FIRST HEREIN ABOVE MENTIONED. INTERTAPE POLYMER INC. INTERTAPE POLYMER CORP. Per: /s/ Jim Bob Carpenter Per: /s/ Burgess H. Hildreth ----------------------------- --------------------------- President Vice President Address: 110E Montee de Liesse Address: 3647 Cortez Road West St. Laurent, Quebec Bradenton, FL 34210 H4T 1N4 Attention: President Attention: Chief Financial Officer Telephone: (941) 727-5788 Telephone: (514) 731-7591 Fax: (941) 727-5293 Fax: (514) 731-5477 IPG (US) HOLDINGS INC. IPG (US) INC. Per: /s/ Burgess H. Hildreth Per: /s/ Jim Bob Carpenter ----------------------------- --------------------------- Vice President President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 IPG ADMINISTRATIVE SERVICES INC. CENTRAL PRODUCTS COMPANY Per: /s/ Burgess H. Hildreth Per: /s/ Burgess H. Hildreth ----------------------------- --------------------------- Vice President Administration Vice President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293
122 INTERTAPE INC. INTERTAPE POLYMER MANAGEMENT CORP. Per: /s/ Burgess H. Hildreth Per: /s/ Burgess H. Hildreth ----------------------------- --------------------------- Vice President Manufacturing Vice President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 POLYMER INTERNATIONAL CORP. INTERNATIONAL CONTAINER SYSTEMS, INC. Per: /s/ Burgess H. Hildreth Per: /s/ Burgess H. Hildreth ----------------------------- --------------------------- President Vice President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 UTC ACQUISITION CORP. INTERTAPE INTERNATIONAL CORP. Per: /s/ Burgess H. Hildreth Per: /s/ Burgess H. Hildreth ----------------------------- --------------------------- President President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293 COIF HOLDING INC. FIBC HOLDING INC. Per: /s/ Burgess H. Hildreth Per: /s/ Jim Bob Carpenter ----------------------------- --------------------------- Secretary President Address: 3647 Cortez Road West Address: 3647 Cortez Road West Bradenton, FL 34210 Bradenton, FL 34210 Attention: President Attention: President Telephone: (941) 727-5788 Telephone: (941) 727-5788 Fax: (941) 727-5293 Fax: (941) 727-5293
123 CAJUN BAG & SUPPLY CORP. INTERPACK MACHINERY INC. Per: /s/ Jim Bob Carpenter Per: /s/ Salvatore Vitale --------------------------- --------------------------- President Vice President Finance Address: 3647 Cortez Road West Address: 110E Montee de Liesse Bradenton, FL 34210 St. Laurent, Quebec Attention: President H4T 1N4 Telephone: (941) 727-5788 Attention: President Fax: (941) 727-5293 Telephone: (514) 731-7591 Fax: (514) 731-5477 SPUNTECH FABRICS INC. IPG HOLDING COMPANY OF NOVA SCOTIA Per: /s/ Salvatore Vitale Per: /s/ Andrew M. Archibald --------------------------- --------------------------- President Vice President Finance Address: 110E Montee de Liesse Address: 110E Montee de Liesse St. Laurent, Quebec St. Laurent, Quebec H4T 1N4 H4T 1N4 Attention: President Attention: President Telephone: (514) 731-7591 Telephone: (514) 731-7591 Fax: (514) 731-5477 Fax: (514) 731-5477 IPG HOLDINGS LP, represented by its INTERTAPE POLYMER GROUP INC. General Partner, INTERTAPE POLYMER INC Per: /s/ Jim Bob Carpenter Per: /s/ Andrew M. Archibald --------------------------- --------------------------- President CFO, Vice President Administration Address: 110E Montee de Liesse Address: 110E Montee de Liesse St. Laurent, Quebec St. Laurent, Quebec H4T 1N4 H4T 1N4 Attention: General Partner Attention: Chief Financial Officer Telephone: (514) 731-7591 Telephone: (514) 731-7591 Fax: (514) 731-5477 Fax: (514) 731-5477 IPG FINANCE LLC Per: /s/ Andrew M. Archibald --------------------------- President Address: 1403 Foulk Road, Foulkstone Plaza Wilmington, DE 19899 Attention: President Telephone: (302) 478-1160
124 IPG TECHNOLOGIES INC. Per: /s/ John Tynan ----------------------------- President Address: 2000 South Beltline Blvd. Columbia, SC 29201 Attention: President Telephone: (803) 799-8800 Fax: (803) 988-7919 125 THE TORONTO-DOMINION BANK, AS CANADIAN AGENT THE TORONTO-DOMINION BANK, AS LENDER Per: /s/ Nigel Sharpley Per: /s/ Yves Bergeron ------------------------------ ------------------------------ /s/ Jean-Francois Godin ------------------------------ Address: 66 Wellington Street West Address: 500 St. Jacques Street West 38th Floor 9th Floor Toronto, Ontario Montreal, Quebec M5K 1A2 H2Y 1S1 Attention: VP Loan, Syndications, Agency Attention: Jean-Francois Godin Telephone: (416) 983-5030 Telephone: (514) 289-0102 Fax: (416) 982-5535 Fax: (416) 289-0788 THE TORONTO-DOMINION BANK, INTERNATIONAL BANKING TORONTO DOMINION (TEXAS), INC., AS US AGENT FACILITY, New York Branch, AS LENDER Per: /s/ Lynn Chasin Per: /s/ Lynn Chasin ------------------------------ ------------------------------- Manager Vice President Address: 31 West 52nd Street Address: 909 Fannin, Suite 1700 New York, New York, 10019-6101 Houston, Texas, 77010 Attention: Lynn Chasin Attention: Lynn Chasin Telephone: (713) 427-8531 Telephone: (713) 653-8289 Fax: (713) 951-9921 Fax: (713) 951-9921 COMERICA BANK, A MICHIGAN BANKING NATIONAL BANK OF CANADA, AS LENDER CORPORATION AS LENDER Per: /s/ Darlene P. Persons Per: /s/ Andre Marenger ------------------------------ ------------------------------- /s/ Daniel Arpin ------------------------------- Address: 500 Woodward Avenue, Suite 23nd Floor Address: 1155 Metcalfe Street, 5th Floor Detroit, Michigan, 48226 Montreal, Quebec, H3B 4S9 Attention: Darlene P. Persons Attention: Linda Gross Telephone: 313-222-9125 Telephone: (514) 394-8049 Fax: 313-222-3377 Fax: (514) 394-6073
126 NATIONAL BANK OF CANADA, NEW YORK BRANCH, AS LENDER COMERICA BANK CANADA BRANCH, AS LENDER Per: /s/ Auggie Marehetti Per: /s/ Robert Rosen ------------------------------- ----------------------------- /s/ Yvon LaPlante ------------------------------- Address: 125 West 55th Street, 23rd Floor Address: Suite 2210, South Tower New York, New York, 10019 Royal Bank Plaza Attention: Auggie Marchetti, Vice-President 200 Bay Street, P.O. Box 61 Telephone: (212) 632-8539 Toronto, Ontario, M5J 2J2 Fax: (212) 632-5809 Attention:Rob Rosen Telephone: (416) 367-3113 #232 Fax: (416_ 367-2460
127 TABLE OF CONTENTS 1 INTERPRETATION................................................................................................3 1.1 Definitions.............................................................................................3 1.2 Interpretation.........................................................................................34 1.3 Currency...............................................................................................35 1.4 Generally Accepted Accounting Principles...............................................................35 1.5 Division and Titles....................................................................................35 2 THE CREDIT...................................................................................................35 2.1 The Facilities.........................................................................................35 2.2 Facility A.............................................................................................36 2.3 Facility B and Facility C..............................................................................36 2.4 Extension of Term - Facility A.........................................................................36 3 PURPOSE......................................................................................................37 3.1 Purpose of the Advances................................................................................37 4 ADVANCES, CONVERSIONS AND OPERATION OF ACCOUNTS..............................................................37 4.1 Notice of Borrowing....................................................................................37 4.2 LIBOR Advances and Conversions.........................................................................37 4.3 Letters of Credit......................................................................................38 4.4 Swing Line Advances....................................................................................38 4.5 Currency...............................................................................................41 4.6 Operation of Accounts..................................................................................41 4.7 Apportionment of Advances..............................................................................41 4.8 Limitations on Advances................................................................................41 4.9 Netting................................................................................................41 4.10 Notices Irrevocable....................................................................................41 5 INTEREST AND FEES............................................................................................42 5.1 Interest on the Prime Rate Basis.......................................................................42 5.2 Payment of Interest on the Prime Rate Basis............................................................42 5.3 Interest on the US Base Rate Basis.....................................................................42 5.4 Payment of Interest on the US Base Rate Basis..........................................................42 5.5 Interest on the US Prime Rate Basis....................................................................42 5.6 Payment of Interest on the US Prime Rate Basis.........................................................43 5.7 Interest on the Libor Basis............................................................................43 5.8 Payment of Interest on the Libor Basis.................................................................43 5.9 Limits to the Determination of LIBOR...................................................................43 5.10 Fixing of LIBOR........................................................................................44 5.11 Interest on the Loan...................................................................................44 5.12 Arrears of Interest....................................................................................44 5.13 Maximum Interest Rate..................................................................................44
128 5.14 Fees 44 5.15 Interest Act...........................................................................................45 6 BANKERS' ACCEPTANCES..........................................................................................45 6.1 Advances by Bankers' Acceptances and Conversions into Bankers' Acceptances.............................45 6.2 Acceptance Procedure...................................................................................47 6.3 Purchase of Bankers' Acceptances and Discount Notes....................................................48 6.4 Maturity Date of Bankers' Acceptances..................................................................48 6.5 Deemed Conversions on the Maturity Date................................................................49 6.6 Conversion and Extension Mechanism.....................................................................49 6.7 Amounts Given to the Canadian Lenders do not Constitute a Prepayment...................................49 6.8 Prepayment of Bankers' Acceptances.....................................................................49 6.9 Apportionment Amongst the Canadian Lenders.............................................................49 6.10 Cash Deposits..........................................................................................50 6.11 Days of Grace..........................................................................................50 6.12 Obligations Absolute...................................................................................50 6.13 Depository Bills and Notes Act.........................................................................51 7 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS...............................................................51 7.1 Market for Bankers' Acceptances and Libor Advances.....................................................51 7.2 Suspension of BA Advance and Libor Advance Option......................................................51 7.3 Limits on BA Advances, Letters of Credit and Libor Advances............................................52 8 ILLEGALITY, INCREASED COSTS AND INDEMNIFICATION...............................................................52 8.1 Illegality, Increased ..Costs..........................................................................52 8.2 Indemnity..............................................................................................53 8.3 Withholding Taxes......................................................................................54 8.4 Survival...............................................................................................54 9 PAYMENT, REPAYMENT AND PREPAYMENT.............................................................................55 9.1 Repayment of the Loan..................................................................................55 9.2 Amount and Apportionment of Mandatory Repayments.......................................................55 9.3 Voluntary Prepayment, Reduction and Cancellation of the Credit.........................................58 9.4 Payment of Losses Resulting From a Prepayment..........................................................58 9.5 Voluntary Reductions of the Credit.....................................................................59 9.6 Currency of Mandatory Repayments and Payments..........................................................59 9.7 Payments by the Borrowers to the Agents................................................................59 9.8 Payment on a Business Day..............................................................................59 9.9 Payments by the Lenders to the Agents..................................................................59 9.10 Payments by the Agent to the Borrowers.................................................................59 9.11 Netting................................................................................................60 9.12 Application of Payments................................................................................60 9.13 No Set-Off or Counterclaim by Borrowers................................................................60 9.14 Debit Authorization....................................................................................61 10 SECURITY......................................................................................................61 10.1 Security for Advances under Facility A.................................................................61
129 10.2 Security for Advances Under Facility B and Facility C..................................................62 10.3 Release Periods........................................................................................64 11 CONDITIONS PRECEDENT..........................................................................................66 11.1 Initial Advance under the Credit.......................................................................66 11.2 Conditions Precedent to any Advance....................................................................69 12 REPRESENTATIONS AND WARRANTIES................................................................................70 12.1 Incorporation..........................................................................................70 12.2 Authorization..........................................................................................70 12.3 Compliance of this Agreement...........................................................................70 12.4 Business...............................................................................................71 12.5 Financial Statements...................................................................................71 12.6 Contingent Liabilities and Indebtedness................................................................72 12.7 Title to Assets........................................................................................72 12.8 Litigation.............................................................................................72 12.9 Taxes 72 12.10 Insurance..............................................................................................72 12.11 No Adverse Change......................................................................................72 12.12 Regulatory Approvals...................................................................................73 12.13 Compliance with Laws...................................................................................73 12.14 Foreign Assets Control Regulations, etc................................................................73 12.15 Pension and Employment Liabilities, Compliance with ERISA..............................................73 12.16 Priority...............................................................................................74 12.17 Complete and Accurate Information......................................................................75 12.18 Event of Default.......................................................................................75 12.19 Agreements with Third Parties..........................................................................75 12.20 Environment............................................................................................75 12.21 Solvency...............................................................................................77 12.22 Existing Subsidiaries..................................................................................77 12.23 Location of Assets and Head Offices....................................................................77 12.24 Survival of Representations and Warranties.............................................................77 13 POSITIVE COVENANTS............................................................................................78 13.1 Preservation of Juridical Personality..................................................................78 13.2 Preservation of Licenses...............................................................................78 13.3 Compliance with Applicable Laws........................................................................78 13.4 Maintenance of Assets..................................................................................78 13.5 Business...............................................................................................78 13.6 Insurance..............................................................................................79 13.7 Payment of Taxes and Duties............................................................................79 13.8 Access and Inspection..................................................................................79 13.9 Maintenance of Account.................................................................................80 13.10 Performance of Obligations.............................................................................80 13.11 Maintenance of Ratios..................................................................................80 13.12 Mandatory Repayments...................................................................................83 13.13 Maintenance of Security................................................................................83
130 13.14 Priority of Debt........................................................................................84 13.15 Payment of Legal Fees and Other Expenses................................................................84 13.16 Financial Reporting.....................................................................................84 13.17 Notice of Certain Events................................................................................89 13.18 Accuracy of Reports.....................................................................................89 13.19 Lenders' Option to Obtain Improved Terms and Conditions.................................................90 13.20 Designation of Restricted Subsidiaries..................................................................90 13.21 Undertaking with regard to Operating Assets.............................................................90 13.22 Additional Undertakings.................................................................................91 13.23 Intellectual Property...................................................................................91 14 NEGATIVE COVENANTS.............................................................................................91 14.1 Liquidation, Amalgamation, Merger, Consolidation and Sale of Assets.....................................91 14.2 Limitations on Debt.....................................................................................93 14.3 Facility B/C Borrower Business..........................................................................94 14.4 Charges.................................................................................................95 14.5 Investments and Restricted Payments.....................................................................95 14.6 Restrictions on Capital Expenditures....................................................................98 14.7 Transactions with Affiliates............................................................................98 14.8 Termination of Pension Plans............................................................................98 14.9 Ownership of Subsidiaries...............................................................................99 14.10 No Restrictions on Distributions........................................................................99 14.11 No Amendments to Note Agreements........................................................................99 14.12 Intellectual Property...................................................................................99 15 EVENTS OF DEFAULT AND REALIZATION..............................................................................99 15.1 Event of Default........................................................................................99 15.2 Remedies...............................................................................................102 15.3 Bankruptcy and Insolvency..............................................................................102 15.4 Application of Proceeds................................................................................103 15.5 Notice.................................................................................................103 15.6 Costs 103 15.7 Relations with the Restricted Group....................................................................103 16 JUDGMENT CURRENCY.............................................................................................104 16.1 Rules of Conversion....................................................................................104 16.2 Determination of an Equivalent Currency................................................................104 17 ASSIGNMENT....................................................................................................105 17.1 Assignment by the Borrowers............................................................................105 17.2 Assignments and Transfers by the Lenders...............................................................105 17.3 Transfer Agreement.....................................................................................105 17.4 Notice.................................................................................................106 17.5 Sub-Commitments........................................................................................106 17.6 General................................................................................................106 18 THE AGENT AND THE LENDERS.....................................................................................107
131 18.1 Authorization of Agent.................................................................................107 18.2 Power of Attorney for Quebec Purposes..................................................................107 18.3 Agent's Responsibility.................................................................................108 18.4 Rights of Agent as Lender..............................................................................109 18.5 Indemnity..............................................................................................109 18.6 Notice by Agent to Lenders.............................................................................109 18.7 Protection of Agent....................................................................................110 18.8 Notice by Lenders to Agent.............................................................................110 18.9 Sharing Among the Lenders..............................................................................111 18.10 Derivative Obligations.................................................................................112 18.11 Procedure with respect to Advances.....................................................................112 18.12 Accounts kept by each Lender...........................................................................113 18.13 Binding Determinations.................................................................................113 18.14 Amendment of Article 18................................................................................113 18.15 Decisions, Amendments and Waivers of the Lenders......................................................113 18.16 Authorized Waivers, Variations and Omissions...........................................................114 18.17 Provisions for the Benefit of Lenders Only.............................................................114 18.18 Resignation of Agent...................................................................................114 18.19 Canadian Agent and US Agent............................................................................115 19 MISCELLANEOUS.................................................................................................115 19.1 Notices................................................................................................115 19.2 Amendment and Waiver...................................................................................115 19.3 Determinations Final...................................................................................116 19.4 Entire Agreement.......................................................................................116 19.5 Indemnification and Compensation.......................................................................116 19.6 Benefit of Agreement...................................................................................116 19.7 Counterparts...........................................................................................117 19.8 Applicable Law.........................................................................................117 19.9 Severability...........................................................................................117 19.10 Further Assurances.....................................................................................117 19.11 Good Faith and Fair Consideration......................................................................117 19.12 Excess Resulting From Exchange Rate Change.............................................................117 19.13 Responsibility of the Lenders..........................................................................118 19.14 Indemnity..............................................................................................118 19.15 Jurisdiction and Service in respect of IPG, LLC and the Borrowers......................................119 19.16 Undertaking and Representation of the Lenders..........................................................119 19.17 Language...............................................................................................119 20 FORMAL DATE...................................................................................................120 20.1 Formal Date............................................................................................120
SCHEDULE "A" - LIST OF LENDERS AND COMMITMENTS SCHEDULE "B" - NOTICE OF BORROWING AND CERTIFICATE SCHEDULE "C" - TRANSFER AGREEMENT SCHEDULE "D" - RESTRICTED SUBSIDIARIES AND INACTIVE SUBSIDIARIES SCHEDULE "E" - OFFICER'S CERTIFICATE SCHEDULE "F" - OPINION SCHEDULE "G" - LITIGATION SCHEDULE "H" - ERISA DISCLOSURE SCHEDULE "I" - EXISTING SECURITY SCHEDULE "J" - UNRESTRICTED SUBSIDIARIES SCHEDULE "K" - LIST OF FACILITY A BORROWERS SCHEDULE "L" - LIST OF FACILITY B GUARANTORS SCHEDULE "M" - EXISTING MATERIAL ADVERSE CHANGES, DEFAULTS AND EVENTS OF DEFAULT SCHEDULE "N" - LOCATION OF ASSETS AND HEAD OFFICES AND TAX IDENTIFICATION NUMBERS SCHEDULE "O" - BORROWING BASE COMPLIANCE CERTIFICATE SCHEDULE "P" - ENVIRONMENTAL MATTERS SCHEDULE "Q" - COMPLIANCE CERTIFICATE SCHEDULE "R" - INVESTMENTS AT NOVEMBER 30, 2001 EX-4 6 m06925orex4.txt AMENDED AND RESTATED NOTE AGREEMENT Exhibit 4 ================================================================================ IPG HOLDINGS LP AMENDED AND RESTATED NOTE AGREEMENT DATED AS OF DECEMBER 20, 2001 U.S. $137,000,000 SENIOR SECURED NOTES DUE MARCH 31, 2008 GUARANTEED BY INTERTAPE POLYMER GROUP INC. INTERTAPE POLYMER INC. INTERTAPE POLYMER CORP. IPG FINANCE LLC IPG (US) INC. AND EACH OF THE OTHER RESTRICTED SUBSIDIARIES ================================================================================ TABLE OF CONTENTS
PAGE ---- 1. BACKGROUND; AMENDMENT AND RESTATEMENT...........................................................1 1.1. Background..............................................................................1 1.2. Authorization of Amendment and Restatement..............................................2 1.3. Amendment and Restatement...............................................................2 1.4. Effective Date..........................................................................2 1.5. Guaranty Agreements.....................................................................3 1.6. Collateral..............................................................................3 1.7. Waiver of Existing Defaults.............................................................4 2. INTEREST; PREPAYMENT OF NOTES...................................................................4 2.1. Interest................................................................................4 2.2. Prepayments.............................................................................5 2.3. Required Prepayments upon Equity Events.................................................5 2.4. Required Prepayments from Excess Cash Flow..............................................7 2.5. Offer to Prepay upon Change in Control..................................................8 2.6. Insurance and Condemnation Proceeds.....................................................10 2.7. Optional Prepayment with Premium........................................................10 2.8. Notice of Certain Optional Prepayments..................................................10 2.9. Application of Prepayments..............................................................10 2.10. Direct Payment..........................................................................11 3. REPRESENTATIONS.................................................................................11 3.1. Representations of the General Partner, the Issuer and the Parent.......................11 3.2. Representations of the Noteholders......................................................11 3.3. Deemed Representations of Transferees of the Notes......................................13 4. CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT................................................13 4.1. General Partner and Issuer Compliance Certificates......................................13 4.2. Parent Closing Certificates; Restricted Subsidiary Certificates.........................13 4.3. Guaranty Agreements.....................................................................14 4.4. Legal Opinions..........................................................................14 4.5. Security Documents; Collateral..........................................................15 4.6. Collateral Matters......................................................................16 4.7. Bank Documents..........................................................................17 4.8. Private Placement Numbers...............................................................18 4.9. Consent to Receive Service of Process...................................................18 4.10. Representations and Warranties..........................................................18 4.11. Total Debt to EBITDA Ratio..............................................................18 4.12. Financial Statements....................................................................18 4.13. Performance; No Default.................................................................18 4.14. Legality................................................................................18 4.15. Satisfactory Proceedings................................................................19 4.16. Payment of Special Counsel Fees and Noteholder Expenses.................................19 4.17. Payment of Certain Fees.................................................................19
i 5. PARENT, GENERAL PARTNER AND ISSUER COVENANTS.... ...............................................20 5.1. Corporate or Partnership Existence, Etc.................................................20 5.2. Insurance...............................................................................20 5.3. Taxes; Claims for Labor and Materials; Compliance with Laws.............................24 5.4. Maintenance, Etc........................................................................24 5.5. Nature of Business......................................................................25 5.6. Consolidated Net Worth..................................................................25 5.7. Coverage Ratios.........................................................................26 5.8. Leverage Ratios.........................................................................27 5.9. Additional Limitations on Debt..........................................................28 5.10. Limitation on Liens.....................................................................29 5.11. Permitted Investments and Restricted Payments...........................................31 5.12. Mergers, Consolidations and Sales of Assets.............................................33 5.13. Interest Rate Adjustment Date Fee.......................................................36 5.14. Repurchase of Notes.....................................................................36 5.15. Transactions with Affiliates............................................................36 5.16. Termination of Pension Plans............................................................36 5.17. Designation of Restricted Subsidiaries..................................................37 5.18. Reports and Rights of Inspection........................................................37 5.19. Pari Passu Debt.........................................................................42 5.20. Most Favored Lender.....................................................................43 5.21. Limitation on Business Activities.......................................................43 5.22. Ownership of Subsidiaries...............................................................43 5.23. Limitation on Issuer Debt...............................................................43 5.24. No Restrictions on Distributions........................................................44 5.25. Limitation on Capital Expenditures......................................................44 5.26. Intellectual Property...................................................................44 5.27. No Amendments to Credit Agreement.......................................................45 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..........................................................45 6.1. Events of Default.......................................................................45 6.2. Notice to Holders.......................................................................47 6.3. Acceleration of Maturities..............................................................47 6.4. Rescission of Acceleration..............................................................48 7. AMENDMENTS, WAIVERS AND CONSENTS................................................................48 7.1. Consent Required........................................................................48 7.2. Solicitation of Holders.................................................................49 7.3. Effect of Amendment or Waiver...........................................................49 8. INTERPRETATION OF AGREEMENT; DEFINITIONS........................................................49 8.1. Definitions.............................................................................49 8.2. Accounting Principles...................................................................73 8.3. Directly or Indirectly..................................................................73
ii 9. MISCELLANEOUS...................................................................................73 9.1. Registered Notes........................................................................73 9.2. Exchange of Notes.......................................................................73 9.3. Loss, Theft, Etc. of Notes..............................................................74 9.4. Expenses; Stamp Tax and Other Indemnity.................................................74 9.5. Powers and Rights Not Waived; Remedies Cumulative.......................................75 9.6. Notices.................................................................................75 9.7. Successors and Assigns..................................................................76 9.8. Survival of Covenants and Representations...............................................76 9.9. Severability............................................................................76 9.10. Governing Law...........................................................................76 9.11. Jurisdiction and Service in Respect of Issuer and Parent................................76 9.12. Payments Free and Clear of Taxes........................................................77 9.13. Currency of Payments; Judgments.........................................................77 9.14. Captions................................................................................78 9.15. Power of Attorney for Quebec Purposes...................................................78 9.16. Interest Provisions.....................................................................79 9.17. Language................................................................................80
iii Schedules and Exhibits ---------------------- Schedule I -- Information as to Noteholders Schedule II -- Existing Material Adverse Changes and Existing Defaults Schedule III -- Environmental Information Exhibit A -- Form of Senior Secured Note due March 31, 2008 Exhibit B-1 -- Representations and Warranties of the Issuer and General Partner Annex A -- Litigation Exhibit B-2 -- Representations and Warranties of the Parent Annex A -- Subsidiaries Annex B -- Debt and Long-Term Liens Annex C -- Locations of Assets and Head Offices Annex D -- Real Property Annex E -- Unrestricted and Inactive Subsidiaries Annex F -- Patents and Trademarks Annex G -- Claims, etc. regarding Hazardous Substances Annex H -- Hazardous Substances Annex I -- Litigation Exhibit 4.1(a) -- Form of Officer's Certificate of Issuer Exhibit 4.1(b)-1 -- Form of Secretary's Certificate of General Partner Exhibit 4.1(b)-2 -- Form of Secretary's Certificate of Issuer Exhibit 4.2(a) -- Form of Officer's Certificate of Parent Exhibit 4.2(b) -- Form of Secretary's Certificate of Parent Exhibit 4.3(a) -- Form of Parent Guaranty Agreement Exhibit 4.3(b) -- Form of Subsidiary Guaranty Agreement Exhibit 4.5(a) -- Form of Collateral Trust Indenture Exhibit 4.5(b) -- Form of Security Agreement Exhibit 4.5(c) -- Form of Pledge Agreement Exhibit 4.5(d) -- Form of Intercreditor Agreement Exhibit 4.6(b) -- Form of U.S. Environmental Indemnification Agreement Exhibit 4.6(c) -- Form of Canadian Environmental Indemnification Agreement iv IPG HOLDINGS LP 110E Montee de Liesse St. Laurent, Quebec H4T 1N4 Canada AMENDED AND RESTATED NOTE AGREEMENT Re: U.S. $137,000,000 Senior Secured Notes Due March 31, 2008 Guaranteed By Intertape Polymer Group Inc. Intertape Polymer Inc. Intertape Polymer Corp. IPG Finance LLC IPG (US) Inc. and other Restricted Subsidiaries Dated as of December 20, 2001 To the Noteholders named in Schedule I hereto which are signatories to this Agreement Ladies and Gentlemen: The undersigned, IPG HOLDINGS LP, a limited partnership formed under the laws of the State of Delaware (the "ISSUER"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "GENERAL PARTNER") and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "PARENT" and, together with the Issuer and the General Partner, the "OBLIGORS"), jointly and severally, agree with each of the Persons named in Schedule I hereto (collectively, the "NOTEHOLDERS") as follows: 1. BACKGROUND; AMENDMENT AND RESTATEMENT 1.1. BACKCKGROUND. The Issuer issued One Hundred Thirty-Seven Million United States Dollars (U.S. $137,000,000) in aggregate principal amount of its 6.82% Senior Guaranteed Notes, due March 31, 2008 (the "EXISTING NOTES") pursuant to those certain separate Note Agreements, each dated as of June 1, 1998 (collectively, as amended from time to time prior to the date hereof, the "EXISTING NOTE AGREEMENT"), among it, the General Partner, the Parent and each of the purchasers named in Schedule I thereto. The Existing Notes are substantially in the form of Exhibit A attached to the Existing Note Agreement. Each of the Noteholders is as of the Effective Date a holder of the aggregate principal amount of the Existing Notes indicated opposite its name in Schedule I hereto. Pursuant to the Existing Note Agreement, among other things, each of the Parent and IPG (US) Inc. entered into those separate guaranty agreements, dated as of June 1, 1998 and June 10, 1999, respectively (collectively, the "EXISTING GUARANTY AGREEMENTS"), pursuant to which the Parent and IPG (US) Inc. each unconditionally guaranteed the obligations of the Issuer under the Existing Note Agreement and the Existing Notes. The Obligors have requested the amendment and restatement, in their entirety, of the Existing Note Agreement and the Existing Notes as provided for in this Agreement, and the replacement of the Existing Guaranty Agreements as contemplated hereby. 1.2. AUTHORIZATION OF AMENDMENT AND RESTATEMENT. Each of the Obligors hereby authorizes, agrees and consents to the amendment and restatement in their entirety of the Existing Note Agreement and the Existing Notes as provided for herein. The Existing Notes, as amended and restated in the form of Exhibit A to this Agreement, shall be hereinafter referred to, individually, as a "NOTE" and, collectively, as the "NOTES." The term "NOTES" as used herein shall include each Note delivered pursuant to any provision of this Agreement, and each Note delivered in substitution or exchange for any such Note. The obligations of the Issuer under the Notes and this Agreement shall be unconditionally guaranteed by the General Partner, the Parent and each of the other Restricted Subsidiaries. The Notes shall be secured pursuant to and entitled to all of the applicable benefits of the Security Documents. 1.3. AMENDMENT AND RESTATEMENT. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 of this Agreement on or before December 27, 2001, each Noteholder, by its execution of this Agreement, hereby agrees and consents to (a) the amendment and restatement in its entirety of the Existing Note Agreement by this Agreement and, upon the satisfaction or waiver of such conditions precedent, the Existing Note Agreement is hereby so amended and restated, (b) the amendment and restatement in their entirety of the Existing Notes and (c) the replacement of the Existing Guaranty Agreements, and, upon the satisfaction or waiver of such conditions precedent, the Existing Notes are hereby amended and restated in their entirety in the form attached hereto as Exhibit A, and the Existing Guaranty Agreements are hereby terminated and of no further force or effect and replaced with the Parent Guaranty Agreement and the Subsidiary Guaranty Agreement. Upon the satisfaction or waiver of such conditions precedent, the Existing Notes shall be, without any further action required on the part of any other Person, deemed to be automatically amended and restated to conform to and have the terms provided in the form attached hereto as Exhibit A. Upon the request of any Noteholder, the Issuer shall deliver a Note, as amended and restated in the form attached hereto as Exhibit A, against surrender of the related Existing Note. 1.4. EFFECTIVE DATE. Subject to the satisfaction or waiver of the conditions set forth in Section 4 of this Agreement, the closing of the transactions contemplated by this Agreement will be held on December 27, 2001 (the "EFFECTIVE DATE") at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York. 2 1.5. GUARANTY AGREEMENTS. The payment by the Issuer of all amounts due with respect to the Notes and performance of all obligations of the Issuer under this Agreement and the Collateral Trust Indenture will be unconditionally guaranteed (a) by the Parent and the General Partner under a guaranty agreement to be dated as of the Effective Date (as the same may be amended from time to time, the "PARENT GUARANTY AGREEMENT") from the Parent and the General Partner, and (b) by each of the other Restricted Subsidiaries under a guaranty agreement to be dated as of the Effective Date (as the same may be amended from time to time, the "SUBSIDIARY GUARANTY AGREEMENT") from each of such Restricted Subsidiaries. The Parent Guaranty Agreement and the Subsidiary Guaranty Agreement are hereafter referred to collectively as the "GUARANTY AGREEMENTS" and individually as a "GUARANTY AGREEMENT". 1.6. COLLATERAL. The Notes and the Guaranty Agreements will be secured pursuant to and entitled to all of the applicable benefits of the Security Documents. In the event that at any time after the Effective Date (a) the Parent shall have maintained an Acceptable Rating at all times during each of its two previous fiscal quarters in respect of the long-term, senior unsecured Debt of the Issuer and (b) Total Debt, determined as of the end of each of the four most recently ended fiscal quarters of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for the period of four consecutive fiscal quarters of the Parent ended at the end of each of such four most recently ended fiscal quarters of the Parent, the Parent may give written notice to each holder of Notes (which notice shall include copies of the letters to the Parent from Standard & Poor's or Moody's evidencing that such Acceptable Rating is in full force and effect and has been in full force and effect at all times during each of the two previous fiscal quarters of the Parent immediately preceding the date of such notice) requesting that the holders of the Notes agree not to direct the U.S. Collateral Trustee or the Canadian Collateral Trustee to enforce any of the provisions of the Security Documents, commencing on a date specified in such notice (the "COLLATERAL SUSPENSION DATE") that is not less than ten (10) Business Days after the date of such notice. The holders of the Notes agree not to direct the U.S. Collateral Trustee or the Canadian Collateral Trustee to, and the holders of the Notes shall not, take any action to enforce or to exercise any rights or remedies under or in respect of any of the provisions of the Security Documents for the period commencing on the Collateral Suspension Date and ending on the earliest date on which the Collateral Suspension Conditions shall not continue to be satisfied (the "COLLATERAL SUSPENSION PERIOD"), provided that the holders of the Notes, the U.S. Collateral Trustee and the Canadian Collateral Trustee shall have received an officer's certificate, executed by a Senior Officer and dated the Collateral Suspension Date, specifying that each of the applicable Collateral Suspension Conditions are satisfied as of such date. If at any time after the Collateral Suspension Date any of the Collateral Suspension Conditions shall not continue to be satisfied (other than clause (d) in the definition of "Collateral Suspension Conditions"), the foregoing agreement of the holders of the Notes not to so direct the U.S. Collateral Trustee or the Canadian Collateral Trustee, and to not take any such action, shall no longer be in effect and the holders of the Notes shall be free to so direct the U.S. Collateral Trustee and the Canadian Collateral Trustee to take any and all permitted actions under any of the Security Documents and to take any actions permitted to be taken by the Noteholders thereunder. The provisions of 3 Section 5.10 shall continue to apply during the Collateral Suspension Period. At any time that there is no Debt outstanding under the Credit Agreement, and each of the Bank Term Facilities and Bank Facility A shall have been terminated, if any member of the Restricted Group enters into a successor revolving credit facility to replace Bank Facility A which is not secured by any Liens on any property of any member of the Restricted Group, and the Collateral Suspension Conditions shall continue to be satisfied at such time, the holders of the Notes shall direct the U.S. Collateral Trustee and the Canadian Collateral Trustee to fully release the Liens granted under the Security Documents. 1.7. WAIVER OF EXISTING DEFAULTS. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 of this Agreement on or before December 27, 2001, each Noteholder, by its execution of this Agreement, hereby permanently and irrevocably waives its rights arising out of Defaults and Events of Defaults described on Schedule II hereto, provided that such waiver shall have no effect on any Default or Event of Default occurring after the Effective Date arising in connection with any provisions of this Agreement, including any provisions which are similar to those giving rise to the Defaults and Events of Default set forth on Schedule II. 2. INTEREST; PREPAYMENT OF NOTES 2.1. INTEREST. Interest shall accrue on the unpaid principal balance of the Notes on the basis of a 360-day year of twelve 30-day months at a rate equal to: (a) prior to the Effective Date, 6.82% per annum; (b) from and after the Effective Date and prior to May 1, 2002, 9.07% per annum; and (c) from and after May 1, 2002, (A) for each date prior to an Interest Rate Adjustment Date, the lesser of (x) the highest interest rate allowed by applicable law on the Notes, and (y) 9.07% per annum plus the Applicable Adjustment Margin as of such date and (B) for each date on or after an Interest Rate Adjustment Date, 9.07% per annum. Interest on each Note shall be payable, in arrears, semi-annually on the last day of each March and September in each year, commencing March 31, 2002, until the full principal amount of such Note shall have been paid. Interest shall accrue on any overdue principal (including any overdue prepayment of principal and Make-Whole Amount, if any), and (to the extent permitted by applicable law) on any overdue installment of interest on the Notes both before and after demand and judgment at a rate per annum equal to the Applicable Default Rate. 4 2.2. PREPAYMENTS. (a) Required Prepayments. Subject to the provisions of Section 2.9(b), the Issuer agrees that on March 31 and September 30 in each year, commencing September 30, 2004 and ending September 30, 2007, both inclusive, the Issuer will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Notes, an amount equal to the lesser of (a) U.S. $16,500,000 and (b) the principal amount of the Notes then outstanding. The entire remaining principal amount of the Notes shall become due and payable on March 31, 2008. No premium shall be payable in connection with any required prepayment made pursuant to this Section 2.2. Except as set forth in this Section 2.2, in Section 2.3 through Section 2.5, or as contemplated by the required offers to prepay with insurance or condemnation proceeds as set forth in the Intercreditor Agreement, neither the Issuer nor any Obligor shall be required to make any offer to prepay the Notes and the Notes are not subject to prepayment or redemption prior to their expressed maturity date. (b) Tax Cap. Notwithstanding anything else contained herein or in any of the other Financing Documents, neither the Issuer nor any Obligor shall be required to prepay, or offer to prepay, more than twenty-five percent (25%) of the aggregate principal amount of any Note prior to the day following the fifth (5th) anniversary of the Original Closing Date (in aggregate for all prepayments made in respect of such Note required under Section 2.2 through Section 2.4 and prepayments made with insurance or condemnation proceeds as set forth in the Intercreditor Agreement), except in the circumstances permitted by clauses 212(1)(b)(vii)(C) to (F) inclusive of the Income Tax Act (Canada). For the avoidance of doubt, this Section 2.2(b) shall not be construed to reduce, limit or affect any other payments under this Agreement or the other Financing Documents. 2.3. REQUIRED PREPAYMENTS UPON EQUITY EVENTS. (a) Notice of Equity Event. At all times prior to the first date after which any member of the Restricted Group shall have received Equity Event Proceeds in respect of Equity Events occurring after the Effective Date in an aggregate amount equal to at least the outstanding principal amount under Bank Facility B on such date, other than Equity Events to the extent arising out of the exercise of employee stock options in the ordinary course at an exercise price up to an aggregate maximum amount of $5,000,000 per fiscal year of the Parent, the Issuer will, on the date of receipt of such Equity Event Proceeds by such member of the Restricted Group, give written notice of such Equity Event to each holder of Notes. Subject to the provisions of Section 2.2(b), such notice shall contain and constitute an offer to prepay the Notes of such holder, at par and without payment of the Make-Whole Amount, on a date specified in such notice (the "EQUITY EVENT PREPAYMENT DATE") that is not more than forty-five (45) days after the date of such notice, in a principal amount equal to the Pro Rata Share of such holder at such time, multiplied by the Equity Event Payment in respect of such Equity Event, multiplied by the Tax Percentage Limit in respect of the amount of such Equity Event Payment at such time. For the avoidance of doubt, the Equity Event Proceeds received by the members of 5 the Restricted Group in respect of any Equity Event shall be subject to the provisions of this Section 2.3 only to the extent that such Equity Event Proceeds, together with all Equity Event Proceeds theretofore received by the members of the Restricted Group after the Effective Date, do not exceed the outstanding principal amount under Bank Facility B as of the date on which the applicable Equity Event Proceeds are so received. (b) Acceptance; Rejection. At any time prior to twenty (20) days after any holder of Notes shall have received such written offer pursuant to Section 2.3(a), such holder may accept the offer to prepay made pursuant to this Section 2.3 by causing a notice of such acceptance to be delivered to the Issuer. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 2.3 with a timely notice of acceptance shall be deemed to constitute a rejection of such offer by such holder. Within three days after the end of such 20-day period, the Issuer shall offer, in writing, to each holder of Notes that shall have accepted its offer to prepay made pursuant to this Section 2.3, to prepay on such Equity Event Prepayment Date an additional portion of such holder's Notes as provided in Section 2.3(a) in a principal amount equal to its ratable share (based upon the ratio of the outstanding principal amount of Notes held by such holder at such time to the aggregate outstanding principal amount of Notes held at such time by all holders which have also accepted their respective offers to prepay made pursuant to this Section 2.3) of the portion of the Equity Event Payment as to which such offers to prepay were rejected or deemed rejected, multiplied by the Tax Percentage Limit in respect of such portion at such time (a "REMNANT EQUITY EVENT PREPAYMENT"). To accept any Remnant Equity Event Prepayment under this Section 2.3(b), a holder of Notes shall cause a written notice of such acceptance to be delivered to the Issuer not later than eight (8) days after the date of receipt by such holder of such offer of the Remnant Equity Event Prepayment (it being understood that the failure by a holder to accept such offer of the Remnant Equity Event Prepayment as provided herein prior to the end of such eight-day period shall be deemed to constitute a rejection of said Remnant Equity Event Prepayment, and that any Remnant Equity Event Prepayment so rejected shall be reoffered, in the same manner, and subject to the applicable Tax Percentage Limit, pro rata, to any other holders which have accepted their respective offers of the applicable Remnant Equity Event Prepayments). If after such Equity Event Prepayment Date any portion of a Remnant Equity Event Prepayment has not been accepted, such remaining amount shall be offered to reduce the Commitment of the Bank Term Facilities. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.3 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes, together with interest on such principal amount accrued to the Equity Event Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on the Equity Event Prepayment Date. (d) Officer's Certificate. Each offer and reoffer to prepay the Notes pursuant to this Section 2.3 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.3; 6 (ii) the Equity Event Prepayment Date; (iii) the last date upon which the offer or reoffer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.3(b); (iv) the portion of the principal amount of the applicable holder's Notes offered to be prepaid, setting forth the details of such computation; (v) the interest that would be due on the portion of such principal amount offered to be prepaid, accrued to the Equity Event Prepayment Date; and (vi) in reasonable detail, the nature and date of the applicable Equity Event. 2.4. REQUIRED PREPAYMENTS FROM EXCESS CASH FLOW. (a) Offer to Prepay from Excess Cash Flow. On each Excess Cash Flow Notice Date after March 31, 2002, the Issuer will deliver to each holder of Notes at such time a written offer to prepay the Notes of such holder, at par and without payment of the Make-Whole Amount, on the date specified in such notice, which date shall be no later than forty-five (45) days after such Excess Cash Flow Notice Date (the "EXCESS CASH FLOW PREPAYMENT DATE"), in a principal amount equal to the Pro Rata Share of such holder at such time, multiplied by the Excess Cash Flow Payment with respect to such Excess Cash Flow Prepayment Date, multiplied by the Tax Percentage Limit in respect of the amount of such Excess Cash Flow Payment at such time. (b) Acceptance; Rejection. At any time prior to twenty (20) days after any holder of Notes shall have received such written offer pursuant to Section 2.4(a), such holder may accept the offer to prepay made pursuant to this Section 2.4 by causing a notice of such acceptance to be delivered to the Issuer. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 2.4 with a timely notice of acceptance shall be deemed to constitute a rejection of such offer by such holder. Within three days after the end of such 20-day period, the Issuer shall offer, in writing, to each holder of Notes that shall have accepted its offer to prepay made pursuant to this Section 2.4, to prepay on the Excess Cash Flow Prepayment Date an additional portion of such holder's Notes as provided in Section 2.4(a) in a principal amount equal to its ratable share (based upon the ratio of the outstanding principal amount of Notes held by such holder at such time to the aggregate outstanding principal amount of Notes held at such time by all holders which have also accepted their respective offers to prepay made pursuant to this Section 2.4) of the portion of the Excess Cash Flow Payment as to which such offers to prepay were rejected or deemed rejected, multiplied by the Tax Percentage Limit in respect of such portion at such time (a "REMNANT EXCESS CASH FLOW PREPAYMENT"), multiplied by the Tax Percentage Limit in respect of such amount of such Remnant Excess Cash Flow Prepayment at such time. To accept any Remnant Excess Cash Flow Prepayment under this Section 2.4(b), a holder of Notes shall cause a written notice of such acceptance to be delivered to the Issuer not later than eight (8) days after 7 the date of receipt by such holder of such offer of the Remnant Excess Cash Flow Prepayment (it being understood that the failure by a holder to accept such offer of the Remnant Excess Cash Flow Prepayment as provided herein prior to the end of such eight-day period shall be deemed to constitute a rejection of said Remnant Excess Cash Flow Prepayment). If after the Excess Cash Flow Prepayment Date any portion of a Remnant Excess Cash Flow Prepayment has not been accepted, such remaining amount shall be offered to reduce the Commitment of the Bank Term Facilities. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.4 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes together with interest on such principal amount accrued to the Excess Cash Flow Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on such Excess Cash Flow Prepayment Date. (d) Officer's Certificate. Each offer and reoffer to prepay the Notes pursuant to this Section 2.4 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.4; (ii) the Excess Cash Flow Prepayment Date; (iii) the last date upon which the offer or reoffer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.4(b); (iv) the portion of the principal amount of the applicable holder's Notes offered to be prepaid, setting forth the details of such computation; (v) the interest that would be due on the portion of such principal amount offered to be prepaid, accrued to the Excess Cash Flow Prepayment Date; and (vi) in reasonable detail, the computation of Excess Cash Flow in respect of which the Excess Cash Flow Payment is being calculated. (e) Bank Facility B. Notwithstanding anything else contained in this Section 2.4, the Issuer will not be obligated to prepay any Notes until Five Million United States Dollars (U.S. $5,000,000) in principal amount of the outstanding loans under Bank Facility B shall have been repaid pursuant to the provisions of Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement). 2.5. OFFER TO PREPAY UPON CHANGE IN CONTROL. (a) Notice and Offer. In the event of either (i) a Change in Control, or 8 (ii) the obtaining of knowledge of a Control Event by any officer of any Obligor, then the Issuer will, within 3 Business Days of (x) such Change in Control or (y) the obtaining of knowledge of such Control Event (including via the receipt of notice of a Control Event from any holder of Notes), as the case may be, give written notice of such Change in Control or Control Event to each holder of Notes. In the event of a Change in Control, such written notice shall contain and constitute an offer to prepay all, but not less than all, of the Notes held by such holder, at par and without payment of the Make-Whole Amount, on a date specified in such notice (in respect of such Change in Control, the "CONTROL PREPAYMENT DATE") that is not less than 30 days and not more than 120 days after the date of such notice. In no event will any Obligor take any action, or permit any Subsidiary to take any action, to permit a Change in Control to occur prior to the Control Prepayment Date. Any payment made pursuant to this Section 2.5 shall not be reduced, limited or affected by the provisions of Section 2.2(b). (b) Acceptance; Rejection. A holder of Notes may accept or reject the offer to prepay made pursuant to this Section 2.5 by causing a notice of such acceptance or rejection to be delivered to the Issuer not later than 14 days after the date of receipt by such holder of the written offer of such prepayment. If so accepted, such offered prepayment shall be due and payable on the Control Prepayment Date. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 2.5 shall be deemed to constitute a rejection of such offer by such holder. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.5 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes, together with interest on such principal amount accrued to the Control Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on the Control Prepayment Date. (d) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 2.5 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.5; (ii) the Control Prepayment Date; (iii) the last date upon which the offer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.5(b); (iv) the principal amount of each Note offered to be prepaid; (v) the interest that would be due on each Note offered to be prepaid, accrued to the Control Prepayment Date; and 9 (vi) in reasonable detail, the nature and date or proposed date of the Change in Control. 2.6. INSURANCE AND CONDEMNATION PROCEEDS. Each prepayment of the principal amount of Notes with insurance or condemnation proceeds made pursuant to the provisions of the Intercreditor Agreement shall be made at 100% of the principal amount being prepaid together with interest on such principal amount accrued to the date of prepayment but without Make-Whole Amount, and shall be subject to the provisions of Section 2.2(b). 2.7. OPTIONAL PREPAYMENT WITH PREMIUM. Subject to Section 2.9, the Issuer shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes, either in whole or in part (but if in part then in a minimum principal amount of U.S. $1,000,000 in the aggregate) by payment of the principal amount of the Notes or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount, determined as of the date which is three (3) Business Days prior to the date of such prepayment pursuant to this Section 2.7. 2.8. NOTICE OF CERTAIN OPTIONAL PREPAYMENTS. The Issuer will give notice of any prepayment of the Notes pursuant to Section 2.7 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (a) such date, (b) the principal amount of the holder's Notes to be prepaid on such date, (c) that a Make-Whole Amount may be payable, (d) the date when such Make-Whole Amount will be calculated, (e) the estimated Make-Whole Amount, and (f) the accrued interest applicable to the prepayment as of the prepayment date. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the Make-Whole Amount, if any, payable with respect thereto shall become due and payable on the prepayment date specified in said notice. Not later than two (2) Business Days prior to the prepayment date specified in such notice, the Issuer shall provide each holder of a Note written notice of the Make-Whole Amount, if any, payable in connection with such prepayment and, whether or not any Make-Whole Amount is payable, a reasonably detailed computation of the Make-Whole Amount. 2.9. APPLICATION OF PREPAYMENTS. (a) In the case of each optional partial prepayment of the Notes pursuant to Section 2.7, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes then outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. Each optional partial prepayment of the Notes pursuant to Section 2.7 shall be applied in inverse order of maturity. 10 (b) Upon any partial prepayment of the Notes pursuant to Section 2.3 through Section 2.5 or repurchase of Notes pursuant to Section 5.14, or any partial prepayment with insurance or condemnation proceeds as contemplated by the Intercreditor Agreement, the principal amount of the payment required at maturity of the Notes and each required prepayment of Notes that becomes due under Section 2.2(a) on or after the date of such prepayment or repurchase shall be reduced in the same proportion as the aggregate unpaid principal amounts of the Notes are reduced as a result of such prepayment or repurchase. 2.10. DIRECT PAYMENT. Notwithstanding anything to the contrary contained in this Agreement or the Notes, in the case of any Note owned by any Noteholder or a nominee of any Noteholder or owned by any subsequent Institutional Holder which has given written notice to the Issuer requesting that the provisions of this Section 2.10 shall apply, the Issuer will punctually pay when due the principal thereof, interest thereon and Make-Whole Amount, if any, due with respect to said principal, without any presentment thereof, directly to such Noteholder, nominee or subsequent Institutional Holder at the address set forth in Schedule I hereto for such Noteholder or nominee or such other address as such Noteholder, nominee or subsequent Institutional Holder may from time to time designate in writing to the Issuer or, if a bank account with a United States bank is designated for such Noteholder or nominee on Schedule I hereto or in any written notice to the Issuer from such Noteholder, nominee or subsequent Institutional Holder, the Issuer will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account in any United States bank as such Noteholder, nominee or subsequent Institutional Holder may from time to time direct in writing. 3. REPRESENTATIONS 3.1. REPRESENTATIONS OF THE GENERAL PARTNER, THE ISSUER AND THE PARENT. (a) The General Partner and the Issuer represent and warrant that all representations and warranties set forth in Exhibit B-1 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. (b) The Parent represents and warrants that all representations and warranties set forth in Exhibit B-2 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. 3.2. REPRESENTATIONS OF THE NOTEHOLDERS. Each Noteholder represents that, by agreeing to the amendment and restatement of the Existing Note Agreement and the Existing Notes, it is specifically understood and agreed that such Noteholder holds the Notes for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of property of such Noteholder or such pension or trust funds shall at all times be within its or their control. Each Noteholder 11 understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Issuer is not required to register the Notes. Each Noteholder represents, with respect to the funds with which such Noteholder paid the purchase price of the Existing Notes purchased by it (whether upon the original issuance thereof or by transfer from a prior holder thereof), that at least one of the following statements is an accurate representation as to each source of such funds (a "SOURCE"); (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceeds ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners (the "NAIC") Annual Statement filed with such Noteholder's state of domicile; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as such Noteholder has disclosed to the obligors in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Issuer or the Parent and (ii) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuer and the Parent in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or 12 (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuer and the Parent in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 3.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 3.3. DEEMED REPRESENTATIONS OF TRANSFEREES OF THE NOTES. Any transferee of any Note, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 3.2 with respect to the Source of the funds with which such transferee paid the purchase price of such Note. 4. CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT The Existing Note Agreement and the Existing Notes shall be amended and restated in their entirety as provided in Section 1.3 upon the satisfaction or waiver by each of the Noteholders of each of the following conditions precedent: 4.1. GENERAL PARTNER AND ISSUER COMPLIANCE CERTIFICATES. (a) Officer's Certificate. Each Noteholder shall have received a certificate dated the Effective Date, signed by the President or a Vice President of the General Partner on behalf of the Issuer and as an authorized officer of the General Partner, substantially in the form set out in Exhibit 4.1(a), certifying that the conditions specified in Sections 4.10 and 4.11 have been fulfilled and that no Default or Event of Default shall have occurred and be continuing on the Effective Date. (b) Secretary's Certificate. Each Noteholder shall have received: (i) a certificate signed by the Secretary of the General Partner on behalf of the Issuer and (ii) a certificate of the Secretary of the General Partner, each dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which the General Partner and the Issuer, respectively, are parties, substantially in the forms set out in Exhibit 4.1(b)-1 and Exhibit 4.1(b)-2, respectively. 4.2. PARENT CLOSING CERTIFICATES; RESTRICTED SUBSIDIARY CERTIFICATES. (a) Officer's Certificate. Each Noteholder shall have received a certificate dated the Effective Date, signed by the President or Vice President, Finance and Administration, of the Parent, substantially in the form set out in Exhibit 4.2(a), certifying that the conditions specified in Sections 4.10 and 4.11 have been fulfilled and that no Default or Event of Default shall have occurred and be continuing on the 13 Effective Date and confirming that, with the exception of the Unrestricted Subsidiaries, all of the Parent's Subsidiaries as of the Effective Date are and shall remain Restricted Subsidiaries during the term of this Agreement unless such Restricted Subsidiaries are sold, transferred or dissolved as permitted in accordance with the terms hereof. (b) Parent Secretary's Certificate. Each Noteholder shall have received a certificate signed by the Secretary of the Parent, dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which the Parent is a party, substantially in the form set out in Exhibit 4.2(b). (c) Restricted Subsidiary Secretary's Certificate. Each Noteholder shall have received a certificate signed by the Secretary of each other Restricted Subsidiary, dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which such Restricted Subsidiary is a party, substantially in the form set out in Exhibit 4.2(c). 4.3. GUARANTY AGREEMENTS. Each Noteholder shall have received the Parent Guaranty Agreement and the Subsidiary Guaranty Agreement, each duly authorized, executed and delivered by the Parent, the General Partner and each of the Restricted Subsidiaries, as the case may be, substantially in the forms set out in Exhibit 4.3(a) and Exhibit 4.3(b), respectively, and each of the Guaranty Agreements shall be in full force and effect. 4.4. LEGAL OPINIONS. Each Noteholder shall have received opinions, dated the Effective Date, from (a) Morgan, Lewis & Bockius LLP, special U.S. counsel for the Obligors and the Restricted Subsidiaries, (b) Stikeman, Elliott, Canadian counsel for the Obligors and the Restricted Subsidiaries, (c) Bingham Dana LLP, special counsel for the Noteholders, (d) Shipman & Goodwin LLP, counsel for the U.S. Collateral Trustee, (e) Morgan, Lewis & Bockius LLP, special Florida counsel for the Restricted Subsidiaries, (f) Nelson Mullins Riley & Scarborough, LLP, special South Carolina counsel for the Restricted Subsidiaries, (g) Kaufman & Canoles, special Virginia counsel for certain Restricted Subsidiaries, 14 (h) Stikeman, Elliott, special Canadian local counsel for the Obligors and the Restricted Subsidiaries, and (i) Stewart McKelvey Stirling Scales, special Canadian local counsel for the Obligors and certain Restricted Subsidiaries, each in form and substance satisfactory to such Noteholder covering such matters pertaining to the transactions contemplated hereunder as such Noteholder may reasonably request. Each of the Obligors hereby requests and directs its counsel named in the foregoing clauses (a), (b), (e), (f), (g), (h) and (i) to deliver such opinions to each of the Noteholders. The Obligors hereby acknowledge that in acceding to the amendment and restatement of the Existing Note Agreement and the Existing Notes pursuant hereto, the Noteholders will be relying on, among other things, the opinions of such counsel for the Obligors and such Restricted Subsidiaries. 4.5. SECURITY DOCUMENTS; COLLATERAL. (a) Collateral Trust Indenture. Each of the Restricted Subsidiaries (other than those organized under the laws of Canada or any jurisdiction in Canada), the Noteholders, the Banks and State Street Bank and Trust Company shall have executed and delivered a collateral trust indenture (as amended, supplemented or otherwise modified from time to time, the "COLLATERAL TRUST INDENTURE"), substantially in the form of Exhibit 4.5(a). (b) U.S. Mortgages. Each of the Obligors and the Restricted Subsidiaries shall have executed and delivered mortgages and deeds of trust and assignments of leases and rents, as applicable (collectively, the "U.S. MORTGAGES"), with respect to all real property (other than Excluded Non-Mortgaged Properties) located in any jurisdiction in the United States and owned or leased by such Obligor or such Restricted Subsidiary, in favor of the U.S. Collateral Trustee, securing such Obligor's or such Restricted Subsidiary's obligations under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and the obligations of such Obligor or Restricted Subsidiary in respect of Bank Facility A and the Bank Term Facilities. (c) Canadian Mortgages and Security Documents. Each of the Obligors and the Restricted Subsidiaries that is organized under the laws of Canada or any jurisdiction in Canada shall have executed and delivered (i) each of the deeds of hypothec, mortgages, pledge agreements, general security agreements and other documents related thereto (collectively, the "CANADIAN MORTGAGES") with respect to all real and personal property located in any jurisdiction in Canada held by such Obligor or such Restricted Subsidiary, in favor of the Canadian Collateral Trustee, securing such Obligor's or such Restricted Subsidiary's obligations under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and Bank Facility A and the Bank Term Facilities and (ii) each of the other agreements and instruments executed or to be executed pursuant to the terms of the Canadian Mortgages and such other agreements and instruments, as are required by the Noteholders or the Canadian 15 Collateral Trustee, in form and substance reasonably acceptable to the Noteholders (collectively, together with the Canadian Mortgages, and as amended, supplemented or otherwise modified from time to time, the "CANADIAN SECURITY DOCUMENTS"). (d) Security Agreement and Pledge Agreement. Each of the Obligors and the Restricted Subsidiaries (other than any such Person that is organized under the laws of Canada or any jurisdiction in Canada) shall have executed and delivered to the U.S. Collateral Trustee a Security Agreement, substantially in the form of Exhibit 4.5(b) (as amended, supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT") and a Pledge Agreement, substantially in the form of Exhibit 4.5(c) (as amended, supplemented or otherwise modified from time to time, the "PLEDGE AGREEMENT"), each securing the indebtedness and obligations of such Obligor or Restricted Subsidiary under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and the obligations of such Obligor or Restricted Subsidiary in respect of Bank Facility A and the Bank Term Facilities with a Lien encumbering certain personal property of such Obligors and Restricted Subsidiaries and the pledge of Equity Interests in and Debt owed by Restricted Subsidiaries to such Obligor or Restricted Subsidiary, respectively. (e) Collateral. The Security Documents shall be in full force and effect. All actions necessary to perfect the Liens of the U.S. Collateral Trustee and the Canadian Collateral Trustee in the Collateral (including, without limitation, the filing of all appropriate financing statements and the recording of all appropriate documents with appropriate public officials) shall have been taken in accordance with the terms and provisions of the Security Documents, to the extent that such actions are permitted under applicable law. The Liens of the U.S. Collateral Trustee and the Canadian Collateral Trustee in the Collateral shall be valid and enforceable and the Collateral shall be subject to no other Liens, other than Permitted Liens, Liens to be discharged pursuant to the undertaking contemplated by Section 4.6(e) and any other Liens acceptable to the Noteholders. All recording, subscription and other similar fees, and all taxes and other expenses related to such filings, registrations and recordings shall have been paid, or caused to be paid, in full by the Obligors to the extent then required in accordance with the terms of the Security Documents. (f) Intercreditor Agreement. The Parent and each of the Restricted Subsidiaries, the U.S. Collateral Trustee, the Canadian Collateral Trustee, the U.S. Collateral Agent and the Canadian Collateral Agent (as each is defined in the Credit Agreement), the Noteholders and the Banks shall have executed and delivered to each Noteholder an intercreditor agreement (as amended, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT") substantially in the form of Exhibit 4.5(d). 4.6. COLLATERAL MATTERS. (a) Environmental Information. Each of the Obligors shall have delivered to each Noteholder the information set forth in Schedule III, which relates to certain environmental matters at certain of the properties which are the subject of one of the U.S. 16 Mortgages or the Canadian Mortgages relating to real property (collectively, the "MORTGAGED PROPERTIES"). (b) Environmental Indemnification. Certain of the Obligors shall have delivered to each Noteholder, the U.S. Collateral Trustee and certain other parties, one or more environmental indemnification agreements (collectively, as amended, supplemented or otherwise modified from time to time, the "U.S. ENVIRONMENTAL INDEMNIFICATION AGREEMENT"), substantially in the form of Exhibit 4.6(b). Certain of the Obligors shall have delivered to each Noteholder and the Canadian Collateral Trustee one or more environmental indemnification agreements (collectively, as amended, supplemented or otherwise modified from time to time, the "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT"), substantially in the form of Exhibit 4.6(c). (c) Casualty Insurance. The U.S. Collateral Trustee and the Canadian Collateral Trustee, as applicable, shall have received (and copies shall have been delivered to each Noteholder), with respect to each of the Mortgaged Properties, the insurance policies required by Section 5.2; each in form and substance reasonably satisfactory to the Noteholders and their special counsel. (d) Title Insurance. The U.S. Collateral Trustee shall have received (and copies shall have been delivered to each Noteholder), with respect to each of the Mortgaged Properties that is subject to one of the U.S. Mortgages, a lenders' title insurance policy issued by First American Title Insurance Company in such amounts and covering such matters as may be reasonably requested by the Noteholders, and all premiums in respect of such lenders' title insurance policies shall have been paid in full. (e) Undertaking. Each of the Obligors shall have delivered to each Noteholder an undertaking in form and in substance satisfactory to the Noteholders, which undertaking shall relate to, without limitation, the registration of the Liens granted under the Security Documents (including any registrations specific to intellectual property), environmental matters, the discharge of Liens for which no Debt is outstanding, and the delivery of certain leasehold mortgages, lease amendments, landlord consents and title commitments. 4.7. BANK DOCUMENTS. The Obligors shall have entered into the Credit Agreement in form and substance satisfactory to the Noteholders and their special counsel. The Obligors shall have delivered to each Noteholder copies of the Credit Agreement and each of the other agreements and instruments executed in connection therewith (collectively, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions of this Agreement and the Intercreditor Agreement, the "BANK DOCUMENTS"), certified as true and correct by a Responsible Officer. 17 4.8. PRIVATE PLACEMENT NUMBERS. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the NAIC) shall have been obtained for the Notes. 4.9. CONSENT TO RECEIVE SERVICE OF PROCESS. Each Noteholder shall have received, in form and substance satisfactory to such Noteholder, evidence of the consent of CT Corporation System in New York, New York to the appointment and designation provided for by Section 9.11 for the period from the Effective Date through July 1, 2009. 4.10. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the General Partner and the Issuer and the Parent set forth in Exhibit B-1 and Exhibit B-2, respectively, shall be correct when made and as of the Effective Date (except in each case where stated to be made as of an earlier date). 4.11. TOTAL DEBT TO EBITDA RATIO. The Obligors shall have provided evidence satisfactory to the Noteholders that on September 30, 2001, the Parent had a ratio of Total Debt to EBITDA for the period of four fiscal quarters of the Parent ended on such date not exceeding 5.8:1. 4.12. FINANCIAL STATEMENTS. Each Noteholder shall have received, in form and substance satisfactory to such Noteholder, the December 31, 2000 year-end consolidated financial statements of the Parent and its 4-year financial projections, including projected financial statements and the Restricted Group's proposed capital expenditure program. 4.13. PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied in all material respects with all agreements and conditions contained in the Financing Documents required to be performed or complied with by it prior to or upon the Effective Date and after giving effect to this Agreement no Default or Event of Default shall have occurred and be continuing. 4.14. LEGALITY. On the Effective Date the amendment and restatement of the Existing Note Agreement and the Existing Notes, and all other proceedings taken in connection with the transactions contemplated by this Agreement and the other Financing Documents, shall (a) be permitted by the laws and regulations of each jurisdiction to which the Noteholders are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the 18 particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject any Noteholder to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by any Noteholder, such Noteholder shall have received an officer's certificate from the Issuer certifying as to such matters of fact as such Noteholder may reasonably specify to enable such Noteholder to determine whether such proceedings are so permitted. 4.15. SATISFACTORY PROCEEDINGS. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to each of the Noteholders and the special counsel referred to in Section 4.4(c), and each such Noteholder and such special counsel shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. 4.16. PAYMENT OF SPECIAL COUNSEL FEES AND NOTEHOLDER EXPENSES. Without limiting the provisions of Section 9.4, the Obligors shall have paid on or before the Effective Date (a) the reasonable fees, charges and disbursements of the special counsel to the Noteholders referred to in Section 4.4(c) and the Canadian special counsel to the Noteholders, in each case to the extent reflected in a statement of such counsel rendered to the Obligors at least one Business Day prior to the Effective Date and (b) the out-of-pocket costs and expenses incurred by any Noteholder in connection with the transactions contemplated hereby, to the extent reflected in a statement of such Noteholder rendered to the Obligors at least one Business Day prior to the Effective Date. 4.17. PAYMENT OF CERTAIN FEES. The Obligors shall have paid to each Noteholder, as consideration for such Noteholder's consent to the amendment and restatement of the Existing Note Agreement and the Existing Notes, and the other transactions provided for in the Financing Documents, a fee in an amount equal to (a) three quarters of one percent (0.75%) of the principal amount of each Note held by such Noteholder (the "RESTRUCTURING FEE") plus (b) a Closing Catch-Up Fee in respect of each Note held by such Noteholder. The Restructuring Fee and the Closing Catch-Up Fee shall have been paid in immediately available funds to the account of each Noteholder as specified in Schedule I. As used herein, the term "Closing Catch-Up Fee" in respect of any Note means an amount equal to the product of (i) 2.25% times (ii) the principal amount of such Note on August 1, 2001, times (iii) a fraction, the numerator of which is the number of days which shall have elapsed from (and including) August 1, 2001 to (and not including) the Effective Date and the denominator of which is 360. 19 5. PARENT, GENERAL PARTNER AND ISSUER COVENANTS From and after the Effective Date and continuing so long as any amount remains unpaid on any Note: 5.1. CORPORATE OR PARTNERSHIP EXISTENCE, ETC. (a) Legal Existence. The Parent will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its legal existence and all licenses and permits necessary to the proper conduct of its business; provided, however, that the foregoing shall not prevent any transaction permitted by Section 5.12. The Issuer shall at all times be and remain a Delaware limited partnership in good standing. Intertape Polymer Inc., a Canadian corporation (or the Parent or any other Wholly-Owned Restricted Subsidiary incorporated under the laws of Canada or any Province thereof or of the United States or any State thereof) shall at all times be and remain the general partner of the Issuer. The Parent shall at all times own directly or indirectly 100% of the outstanding shares of capital stock of the General Partner, free and clear of Liens other than Liens thereon arising under or permitted by the Security Documents. (b) Collateral. The Parent will duly obtain and maintain in effect all licenses, certificates of occupancy, permits, approvals and authorizations required in connection with the Collateral and the business and other operations conducted in or on any of the Mortgaged Properties, except for licenses, certificates, permits, approvals or authorizations the failure of which to obtain or maintain could not reasonably be expected to result in a Material Adverse Change. 5.2. INSURANCE. The Parent will maintain, and will cause each Restricted Subsidiary to 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 owning and operating similar properties in accordance with good business practice and, in any event, in amounts and against risks acceptable to the holders of the Notes, acting reasonably. (a) In General. Notwithstanding anything else contained in this Section 5.2, the Parent will maintain, and will cause each Restricted Subsidiary to maintain, at its sole cost and expense, with respect to each Mortgaged Property owned or leased by such Person, the following: (i) General Liability Insurance -- Comprehensive general liability insurance (including, without limitation, excess and umbrella liability insurance) covering any and all liability of the insured with respect to or arising out of the ownership (if applicable), maintenance, use or occupancy of such Mortgaged Property and all operations incidental thereto including, but not limited to, structural alterations, new construction and demolition, and including coverage 20 for those hazards generally known in the insurance industry as explosion, collapse and underground property damage, said insurance to have limits of not less than $1,000,000 combined single limit per occurrence for bodily injury, personal injury and property damage liability; (ii) Building Insurance -- Insurance ("BUILDING INSURANCE") on all buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (inclusive of foundations, footings and similar structures below grade) against all perils generally included within the classification of "all risks," including fire and earthquake, in amounts at least equal to the full replacement cost thereof (with the exception of earthquake and without deduction for depreciation) as such replacement cost shall be determined from time to time at the request of the Canadian Collateral Trustee or the U.S. Collateral Trustee, as applicable, at the direction of the Majority Noteholders, acting reasonably, by an expert selected and paid by the Parent or such Restricted Subsidiary and approved by such Collateral Trustee at the direction of the Majority Noteholders, provided that the Parent or such Restricted Subsidiary shall not be required to select or pay for such an expert more than one time in any period of thirty-six (36) consecutive calendar months unless (A) an Event of Default has occurred and is continuing or (B) the Parent, any Restricted Subsidiary or the Majority Noteholders have a good faith belief that there has been a material change in such replacement cost. In addition, the Building Insurance shall be written in such a manner that, in the event of loss, the amount of coverage afforded to the insured shall not be reduced or diminished by reason of the application of any co-insurance or average clause. Such insurance shall, during the course of any construction or repair of any improvements on the premises, be on an All Risk Builder's Risk 100% Completed Value Form or other form approved by the Canadian Collateral Trustee or U.S. Collateral Trustee, as applicable, at the direction of the Majority Noteholders, acting reasonably; (iii) Personal Property Insurance -- Insurance on personal property against fire and any peril generally included within the classification of "extended coverage" in amounts at least equal to the actual cash value thereof as such values shall be determined from time to time at the request of the Canadian Collateral Trustee or the U.S. Collateral Trustee at the direction of the Majority Noteholders, acting reasonably; (iv) Business Interruption Insurance -- Rental value or business interruption insurance (or a combination thereof as the Canadian Collateral Trustee or the U.S. Collateral Trustee may require at the direction of the Majority Noteholders, acting reasonably) on all buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (including parking and common areas) against loss by the perils covered by the Building Insurance in amounts satisfactory to such Collateral Trustee as directed by the Majority Noteholders, acting reasonably. Such rental value or business interruption insurance shall be blanket on all such buildings, fixtures and improvements (including such parking and common areas); 21 (v) Flood Insurance -- If such Mortgaged Property or any part thereof is located in an area which has been identified by the Secretary of Housing and Urban Development as a flood hazard area and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (the "FLOOD ACT"), the Parent or such Restricted Subsidiary shall keep the buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (or part thereof) covered for so long as any Notes are outstanding by flood insurance up to the maximum limit of coverage available under the Flood Act but not in excess of 75% of the current fair market value of such Mortgaged Property (or part thereof) as determined in good faith by the board of directors of the Parent; and (vi) Other Insurance -- Such other insurance with respect to such Mortgaged Property in such amounts and against such insurable hazards as the Canadian Collateral Trustee or the U.S. Collateral Trustee from time to time may require as directed by the Majority Noteholders, acting reasonably. (b) Requirements Regarding Policies. All policies evidencing the insurance required under Section 5.2(a), including the comprehensive general liability insurance (the "POLICIES"), shall (i) provide that coverage shall not be cancelled until at least 30 days' written notice of such revision, cancellation or reduction shall have been sent to the Canadian Collateral Trustee or the U.S. Collateral Trustee, as applicable; (ii) in the case of any Mortgaged Property located in the United States, be issued by insurance companies which are qualified to do business in the state where such Mortgaged Property is located and which have a current rating of A Class XII or better in Best's Insurance Guide; and (iii) be reasonably satisfactory to the Majority Noteholders in all other respects. (c) Requirements Regarding General Liability. The comprehensive general liability insurance to be maintained by the Parent or any of the Restricted Subsidiaries pursuant to Section 5.2(a)(i) shall (i) name the U.S. Collateral Trustee, the Canadian Collateral Trustee and each holder of Notes from time to time as additional insureds, (ii) subject to the limitation of liability contained in the Policies, apply severally as to the Parent or such Restricted Subsidiary, as the case may be, and the U.S. Collateral Trustee and the Canadian Collateral Trustee, (iii) subject to the limitation of liability contained in the Policies, cover each applicable Person referred to in clause (ii) above as insureds in the same manner as if separate policies had been issued to each such Person, 22 (iv) subject to the limitation of liability contained in the Policies, contain no provisions affecting any rights which any of such Persons would have as claimants if not so named as insureds, and (v) be primary insurance with respect to or arising out of the ownership (if applicable), maintenance, use or occupancy of such Mortgaged Property with any other valid and collectible insurance available to the U.S. Collateral Trustee or the Canadian Collateral Trustee constituting excess insurance. (d) Requirements Regarding Building Insurance. The Building Insurance required under Section 5.2(a)(ii) shall name the U.S. Collateral Trustee or the Canadian Collateral Trustee, as applicable, as an additional insured. (e) Delivery of Policies. The Parent or the applicable Restricted Subsidiary will deliver to the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, original Policies or certified copies of Policies in form reasonably satisfactory to the Majority Noteholders evidencing the insurance which is required under Section 5.2(a), and the Parent or such Restricted Subsidiary shall, at the request of such Collateral Trustee at the direction of the Majority Noteholders, or any holder of Notes, promptly furnish to such Collateral Trustee or such holder of Notes copies of all renewal notices and all receipts of paid premiums received by the Parent or such Restricted Subsidiary. At least thirty (30) days prior to the expiration date of a required policy, the Parent or such Restricted Subsidiary shall deliver to the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, a binder for a renewal policy in form reasonably satisfactory to the Majority Noteholders. If the Parent or such Restricted Subsidiary has a blanket insurance policy in force providing coverage for several Mortgaged Properties, the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, will accept a certificate of such insurance together with a certified copy of such blanket insurance policy; provided that the certificate sets forth the types and amounts of insurance coverage, and such types and amounts are at least equal to the types and amounts required hereinabove, the original policy of insurance is written by a carrier or carriers reasonably acceptable to the Majority Noteholders, insures against the risks set forth hereinabove, cannot be cancelled without thirty (30) days prior written notice to such Collateral Trustee, is in amounts satisfactory to such Collateral Trustee, at the direction of the Majority Noteholders, acting reasonably, and has a replacement cost endorsement meeting the requirements of Section 5.2(a)(ii). (f) Assignment of Policy. If a Mortgaged Property is sold at a foreclosure sale or if the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, shall acquire title to a Mortgaged Property, such Collateral Trustee shall, as collateral security, have all of the right, title and interest of the Parent or the applicable Restricted Subsidiary in and to any insurance policies required under Section 5.2(a) with respect to such Mortgaged Property and the unearned premiums thereon and in and to the proceeds payable thereunder to the extent resulting from any damage to the Mortgaged Property prior to such sale or acquisition. 23 (g) Application of Insurance Proceeds. All sums paid under any insurance policy required in Section 5.2(a)(ii) through Section 5.2(a)(v) shall be paid as set forth in Section 6 of the Intercreditor Agreement and shall be subject to the provisions of Section 2.2(b) hereof. 5.3. TAXES; CLAIMS FOR LABOR AND MATERIALS; COMPLIANCE WITH LAWS. (a) Taxes, Claims for Labor and Materials. Without limiting any other obligation of the Parent hereunder including, without limitation, pursuant to Section 5.3(b), the Parent will promptly pay and discharge, and will cause each Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Parent or such Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Parent or such Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Parent or a Subsidiary; provided, however, that the Parent or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (a) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Parent or such Subsidiary or any material interference with the use thereof by the Parent or such Subsidiary, (b) any such Lien will at all times be subject to the prior and senior Lien of the U.S. Collateral Trustee or the Canadian Collateral Trustee in such property, as applicable, and (c) the Parent or such Subsidiary shall set aside on its books, reserves adequate in accordance with GAAP. (b) Compliance with Laws. The Parent will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all Environmental Laws, and the Parent will comply and will cause each Subsidiary to comply with all permits, licenses and authorizations required by Environmental Laws, except where the violation of such laws, ordinances, rules, regulations, permits, licenses and authorizations could not reasonably be expected to result in a Material Adverse Change or in any Lien other than a Permitted Lien. (c) Claims. Subject to the proviso contained in Section 5.3(a), the Parent will, and will cause each of its Restricted Subsidiaries to, jointly and severally pay and discharge all claims for which sums have become due and payable that have become a Lien other than a Permitted Lien on any Mortgaged Property (including, without limitation, mechanics' liens). 5.4. MAINTENANCE, ETC. (a) In General. The Parent will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order (subject to ordinary wear and tear) and from time to time 24 will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. (b) Mortgaged Properties. Each of the Obligors (i) shall keep, or cause to be kept, each Mortgaged Property in safe and good repair and condition, ordinary wear and tear excepted; (ii) shall, upon damage or destruction of any Mortgaged Property or any part thereof by fire or other casualty and, subject to the provisions of the Intercreditor Agreement, restore, repair, replace or rebuild, or cause to be restored, repaired, replaced or rebuilt, such Mortgaged Property that is damaged or destroyed to the condition it was in immediately prior to such damage or destruction, whether or not any insurance proceeds are available or sufficient for such purpose; provided that, if all or any substantial portion of the insurance policy proceeds in respect of any such fire or other casualty are offered for the repayment of the Notes, the Bank Term Facilities or Bank Facility A pursuant to the provisions of the Intercreditor Agreement, the Obligors shall have no obligation to restore, repair, replace or rebuild the Mortgaged Property that was so damaged or destroyed by such fire or other casualty; and (iii) shall not commit, or permit to be committed, waste or permit impairment or deterioration of any Mortgaged Property, ordinary wear and tear excepted; and (iv) shall maintain, or cause to be maintained, the roofs and structure of each Mortgaged Property in safe, sound and good repair and condition, ordinary wear and tear excepted. 5.5. NATURE OF BUSINESS. The Parent and its Restricted Subsidiaries will continue to carry on substantially the same type of business currently carried on and activities which are ancillary, incidental or necessary to the ongoing business of the Parent and its Restricted Subsidiaries as presently conducted. 5.6. CONSOLIDATED NET WORTH. The Parent will, at all times, keep and maintain Consolidated Net Worth at an amount not less than the sum of (a) US$275,000,000 plus (b) an amount equal to the greater of (i) zero (0) and (ii) 50% of Consolidated Net Income of the Parent and its Restricted Subsidiaries for the period from October 1, 2001 to the end of the Parent's then most recently ended fiscal quarter plus (c) an amount equal to the aggregate net proceeds of any issuance after the Effective Date of equity securities by any member of the Restricted Group to Persons not members of the Restricted Group. 25 5.7. COVERAGE RATIOS. (a) Fixed Charge Coverage The Parent will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Parent) of Net Income Available for Fixed Charges to Fixed Charges in each case for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than the amount set forth for the applicable quarter end in the table below: IF SUCH FISCAL QUARTER ENDS: MINIMUM RATIO ---------------------------- ------------- On or prior to September 30, 2002 1.75:1 From December 31, 2002 to March 31, 2003 1.85:1 From June 30, 2003 to March 30, 2004 2.00:1 From March 31, 2004 to March 30, 2005 2.50:1 On March 31, 2005 and thereafter 3.00:1 (b) Debt Service Coverage. The Parent will not permit, at the end of each fiscal quarter of the Parent until (but excluding) the fiscal quarter in which Bank Facility B is fully repaid and cancelled, the ratio of (i) EBITDA for the period of two consecutive fiscal quarters of the Parent ended on the calculation date (taken as a single accounting period) less capital expenditures by members of the Restricted Group paid in cash during such period, to (ii) the sum total of Fixed Charges for such period and all scheduled repayments of Debt for such period, excluding (x) a US $8,000,000 repayment of Debt made in the fiscal quarter ended June 30, 2001 in respect of an agreement entered into by the Parent dated as of January 1, 1996 with respect to the issuance and sale of three series of its senior notes in the aggregate amount of US $33,000,000, and (y) any prepayments required during such period under Section 2.3 and Section 2.4 of this Agreement and the 1999 Note Agreement and the corresponding provisions of the Credit Agreement (as in effect on the date of this Agreement), to be less than 1.20 to 1.00. For the purposes of calculations of EBITDA in this Section 5.7(b), Section 5.8(b) or any other provision of this Agreement, (A) the consolidated non-recurring expenses incurred by the Parent and its Restricted Subsidiaries during the fiscal quarter ending December 31, 2000, (B) the consolidated severance expenses and other unusual non-recurring expenses accrued or otherwise incurred by the Parent and its Restricted Subsidiaries during the period commencing on January 1, 2001 and ending on September 30, 2001 and (C) any charge to earnings resulting from the re-pricing of stock options as may be applicable under GAAP, shall all be added (to the extent deducted in the calculation of Consolidated Net Income) to the EBITDA for the relevant period (including, without limitation, on a trailing four quarter or trailing two quarter basis). 26 5.8. LEVERAGE RATIOS. (a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below: IF SUCH TIME IS: THE APPLICABLE RATIO IS: ---------------- ------------------------ On or prior to March 30, 2002 0.59:1 From March 31, 2002 to June 29, 2002 0.585:1 From June 30, 2002 to September 29, 2002 0.58:1 From September 30, 2002 to December 30, 2002 0.575:1 From December 31, 2002 to March 30, 2003 0.57:1 From March 31, 2003 to June 29, 2003 0.565:1 From June 30, 2003 to September 29, 2003 0.56:1 On September 30, 2003 and at any time thereafter 0.55:1 (b) Total Debt to EBITDA. The Parent will not permit the ratio of Total Debt as at the end of each fiscal quarter of the Parent to EBITDA for the period of the four fiscal quarters of the Parent ended on such date (taken as a single accounting period) to exceed for each such date prior to June 30, 2002, the ratio applicable to such date in the table set forth below, and if such date is on or after June 30, 2002, the lesser of (i) the Experience-Based Ratio at such date and (ii) the ratio applicable to such date in the table set forth below: IF SUCH DATE IS: THE APPLICABLE RATIO IS: ---------------- ------------------------ On December 31, 2001 6.00:1 On March 31, 2002 5.75:1 On June 30, 2002 5.50:1 On September 30, 2002 5.25:1 On December 31, 2002 5.00:1 27 IF SUCH DATE IS: THE APPLICABLE RATIO IS: ---------------- ------------------------ On March 31, 2003 4.75:1 On June 30, 2003 4.50:1 On September 30, 2003 4.25: 1 On December 31, 2003, March 31, 2004 and June 30, 2004 4.00:1 On September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005 3.50:1 On September 30, 2005 and December 31, 2005 and at any time thereafter 3.25:1 As used in this Section 5.8(b), the term "Experience-Based Ratio" means, as at the last day of any fiscal quarter of the Parent, the greater of (a) 3.25:1 and (b) the sum of (i) 0.25 plus (ii) the actual ratio of Total Debt as at the end of the fiscal quarter of the Parent ended on such date to EBITDA for the period of the four fiscal quarters of the Parent most recently ended on the last day of such fiscal quarter (taken as a single accounting period). 5.9. ADDITIONAL LIMITATIONS ON DEBT. (a) The Parent will not, and will not permit any Restricted Subsidiary to, create, assume or incur or in any manner become liable in respect of any Debt, except: (i) Debt of the Restricted Group permitted by Section 5.8; (ii) in the case of (x) unsecured Debt of any Restricted Subsidiary ("SUBSIDIARY PRIORITY DEBT") and (y) Debt of the Restricted Group secured by Liens not permitted by clauses (a) through (l) of Section 5.10 ("SECURED PRIORITY DEBT" and, collectively with the Subsidiary Priority Debt, "PRIORITY DEBT"), provided, that, at the time of issuance of any such Priority Debt and after giving effect thereto and to the application of the proceeds thereof, (A) the aggregate principal amount of Priority Debt shall not exceed 20% of Consolidated Net Worth, if a Collateral Suspension Period is not then in effect, or (B) 12.5% of Consolidated Net Worth, if a Collateral Suspension Period is then in effect; provided, further, that for the purposes of this Agreement and the Financing Documents, Debt under or in respect of the Bank Term Facilities, the Notes and the 1999 Notes, and Debt permitted by Section 5.9(a)(iii), shall not constitute Priority Debt; and (iii) Debt of the Parent or a Restricted Subsidiary owed to the Parent or to a Wholly-Owned Restricted Subsidiary; 28 (b) If any member of the Restricted Group incurs additional Debt other than Debt secured by Liens described in Section 5.10(h), such Debt shall be subject to terms and conditions no more restrictive than those contained herein and in the Credit Agreement (as in effect on the date hereof), excluding terms and conditions relating to collateral (only in the case of Priority Debt) and pricing. 5.10. LIMITATION ON LIENS. The Parent will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except for the following Liens (collectively, the "PERMITTED LIENS"), and only to the extent, after giving effect to such Lien, that (x) no Material Adverse Change occurs as a result and (y) the aggregate amount of Priority Debt does not exceed the amount permitted by Section 5.9(b): (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Parent or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including but not limited to Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Parent and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Parent and its Restricted Subsidiaries; (e) Liens securing liabilities of a Restricted Subsidiary to the Parent or to another Wholly-Owned Restricted Subsidiary so long as such Liens are subordinate and junior in all respects to the Liens securing the Notes; 29 (f) Liens on shares of stock of, or other Equity Interests in, Unrestricted Subsidiaries; (g) Liens existing as of the Effective Date and reflected in Annex B to Exhibit B-2 to this Agreement; (h) Liens incurred after the Effective Date given to secure the payment of the purchase price of fixed assets useful and intended to be used in carrying on the business of any member of the Restricted Group to the extent incurred in connection with (and within twelve months of) the acquisition of such fixed assets, including, without limitation, Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Parent or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens 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 (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all liabilities secured by Liens on such fixed assets whether or not assumed by the Parent 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 Parent), and (iii) all Debt secured by such Liens shall have been incurred within the other applicable limitations of Section 5.8 and Section 5.9; (i) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in clause (g) and (h) of this Section 5.10, provided that no additional property is encumbered and there is no increase in the aggregate principal amount of Debt secured thereby; (j) subject to the provisions of Section 1.6, Liens on the Collateral and the Canadian Collateral in favor of the U.S. Collateral Trustee and the Canadian Collateral Trustee for the benefit of the holders of the Notes and the 1999 Notes and the Banks that secure obligations under any of the Financing Documents or the Bank Documents; (k) subject to the second paragraph of Section 10.3 of the Credit Agreement (as in effect on the Effective Date), Liens on property of the members of the Restricted Group primarily constituting inventory or accounts that secure obligations arising under Bank Facility A; (l) Liens on property of the members of the Restricted Group that secure obligations arising under or in respect of a successor revolving credit facility after the termination of Bank Facility A, so long as such facility is on terms reasonably acceptable to the Majority Noteholders and the Notes are secured with Liens on such property on a senior or pari passu basis with such facility; and 30 (m) Liens, in addition to those permitted by clauses (a) through (l) of this Section 5.10, securing Debt of the Parent or any Restricted Subsidiary; provided that after giving effect to the incurrence of all Debt secured by such Liens the Parent is in compliance with the provisions of Section 5.9. Nothing in this Section 5.10 shall be deemed to permit any member of the Restricted Group to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the Collateral, whether now owned or hereafter acquired, to be further encumbered by a Lien except as expressly permitted by this Agreement and the other Financing Documents and (for so long as the applicable provisions thereof shall be in effect) the Bank Documents as in effect on the Effective Date. Notwithstanding anything else contained herein, the Parent will not, and will not permit any Restricted Subsidiary to, incur or maintain any operating lines or short-term or revolving bank facilities secured by Liens on any assets of any member of the Restricted Group (other than Bank Facility A, Bank Facility B, and Bank Facility C, or a successor revolving credit facility after the termination of Bank Facility A that complies with the provisions of clause (l) of this Section 5.10). 5.11. PERMITTED INVESTMENTS AND RESTRICTED PAYMENTS. (a) The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any Restricted Payment. The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any Investment, including any Investment in an Unrestricted Subsidiary, other than Permitted Investments, unless after giving effect to such Investment, (i) the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1 as of the end of each of the two previous fiscal quarters and each of the two subsequent fiscal quarters on a pro forma basis, and (ii) the aggregate amount of all Investments (other than Permitted Investments) made by the Restricted Group since the Effective Date would not exceed 10% of Consolidated Net Worth as of the end of the then most recently ended fiscal quarter. The amount of Investments (other than Permitted Investments) as of the Effective Date is deemed to be $11,176,870. Once Bank Facility B is fully repaid and cancelled, the Restricted Group shall not make (x) any Investment, other than Permitted Investments, if, after giving effect thereto, the aggregate amount of all such Investments of the Restricted Group at such time (valued as provided below) would exceed 10% of Consolidated Net Worth as of the end of the then most recently ended fiscal quarter, or (y) any Restricted Payments, if after giving effect thereto the aggregate amount of all Restricted Payments made in the then current fiscal year of the Parent exceeds US$5,000,000. (b) In addition to and not in limitation of the foregoing restrictions, the Parent will not, and will not permit any Restricted Subsidiary to, make any Investment in any Unrestricted Subsidiary not engaged in a business substantially related to the business of the Restricted Group. 31 (c) Furthermore, IPG Finance LLC shall not make any Investment other than Permitted Investments described in clauses (b), (c) and (d) of the definition thereof and Permitted Investments in IPG (US) Inc. and IPG (US) Inc. shall not make any Investment other than Permitted Investments described in such clauses and Permitted Investments in any Restricted Subsidiary which shall have granted Liens on its assets in the manner contemplated by the Security Documents. (d) The following restrictions shall apply in connection with any and all payments to Drumheath by any member of the Restricted Group: (i) until such time as Bank Facility B has been repaid in full and the Commitment thereunder cancelled, all payments to Drumheath must be on account of premiums payable for the insurance policies issued by Drumheath. After Bank Facility B has been repaid and the Commitment thereunder cancelled, such payments may be paid partly as premiums and partly on account of Investments, as determined by the Restricted Group. Notwithstanding the foregoing, the sum total of payments to Drumheath may not exceed US$3,000,000 in any fiscal year of the Parent; (ii) no Investments in or payments or Restricted Payments to Drumheath may be made while a Default has occurred or is continuing or following the occurrence and during the continuance of an Event of Default; (iii) until Bank Facility B has been repaid in full and the Commitment thereunder cancelled, Drumheath may not enter into any insurance contracts in respect of any other kinds of insurance other than the types of insurance it is currently underwriting, consisting of workers' compensation; (iv) all of Drumheath's liability in connection with workers' compensation policies shall be reinsured by reputable reinsurance companies, which reinsurance policies shall remain in effect at all times; (v) Drumheath may not carry on any new line of business, not currently conducted by Drumheath as of the Effective Date other than, subject to Section 5.11(d)(iii) or an insurance business, as defined under applicable Law; (vi) prior to the occurrence of any Event of Default which has not been waived, any monies coming from Drumheath including dividends, distributions and related proceeds (other than payment of claims under valid policies of insurance and other expenses to be paid in the ordinary course of business) must be paid directly to a member of the Restricted Group. Following the occurrence and during the continuance of an Event of Default, at the request of the Majority Noteholders, the members of the Restricted Group shall cancel all insurance policies contracted with Drumheath in accordance with the terms of any such policy, other than those in respect of workers' compensation, cause Drumheath to cease carrying on business, and shall cause the net amount of all sums left in Drumheath (following the payment by Drumheath of, or reservation for, all 32 claims (including those incurred but not reported) in respect of policies outstanding, in accordance with applicable Law) to be paid to a member of the Restricted Group to be paid to the holders of the Notes, subject to their Pro Rata Share; and (vii) each of the Obligors confirms that it has not guaranteed any of the liabilities of Drumheath under any of its insurance policies, nor has any of them provided any other guarantee of any liability of Drumheath of any nature whatsoever. Notwithstanding the provisions of Section 5.11(a), the US$3,000,000 annual Restricted Payments to and/or Investments in Drumheath may be made even where the restrictions set out in clause (i) of Section 5.11(a) have not been met. All payments to Drumheath shall be deemed "Investments" for the purposes of Section 5.11(a). (e) In addition to the foregoing restrictions, the Parent will not make any Restricted Payment or any Investment, other than Permitted Investments, if, at the time thereof or after giving effect thereto, any Default or Event of Default shall have occurred and be continuing. (f) The Parent will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. (g) For the purposes of this Section 5.11, 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 Parent) of such property at the time of the making of the Restricted Payment in question. (h) In valuing any Investments for the purpose of applying the limitations set forth in this Section 5.11, such 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. (i) For purposes of this Section 5.11, at any time when a Person becomes a Restricted Subsidiary, all Investments of such Person at such time shall be deemed to have been made by such Person, as a Restricted Subsidiary, at such time. 5.12. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) The Parent will not, and will not permit any Restricted Subsidiary to, (i) consolidate or amalgamate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in clause (d) of this Section 5.12) of Consolidated Assets; provided, however, that: (i) any Restricted Subsidiary may merge or amalgamate or consolidate with or into the Parent or any Wholly-Owned Restricted Subsidiary so long as (A) in any such transaction involving the Issuer, the Issuer shall be the 33 surviving or continuing limited partnership or corporation and (B) in any such transaction involving the Parent, the Parent shall be the surviving or continuing entity, provided that such successor entity shall be a solvent limited partnership, corporation or other business entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, Canada or any province thereof, and, at the time of any such amalgamation, consolidation or merger described in this Section 5.12(a), and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (ii) the Parent may consolidate or amalgamate or merge with any other corporation (which is not a Restricted Subsidiary) if, at the time of any such amalgamation, consolidation or merger described in this Section 5.12(a) and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, and (A) the surviving or continuing corporation shall be the Parent, or (B) if the successor entity is not the Parent, then such successor entity (x) shall have executed and delivered to each holder of the Notes, the U.S. Collateral Trustee and the Canadian Collateral Trustee its assumption of the due and punctual performance of each covenant and condition of this Agreement, the Parent Guaranty Agreement and each of the other Financing Documents to which the Parent is a party (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Majority Noteholders), and the successor entity shall have caused to be delivered to each holder of the Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Majority Noteholders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (y) shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or under the laws of Canada or any province thereof; and (iii) any Restricted Subsidiary (including the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to the Parent and any Restricted Subsidiary (except the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to any Wholly-Owned Restricted Subsidiary (including the Issuer); so long as in each such case all Liens in favor of the U.S. Collateral Trustee and the Canadian Collateral Trustee are not adversely affected and none of the Persons granting such Liens changes its name without at least 20 Business Days prior written notice to the U.S. Collateral Trustee and the Canadian Collateral Trustee. Notwithstanding the foregoing, no member of the Restricted Group shall become party to any receivables securitization program. 34 (b) The Parent will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 5.12, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into any Equity Interests) of such Restricted Subsidiary to any Person other than the Parent or a Wholly-Owned Restricted Subsidiary, except for the purpose of qualifying directors, or (in the case of a Restricted Subsidiary other than the Issuer) except in satisfaction of the validly preexisting preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Parent and/or a Restricted Subsidiary whereby the Parent and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Parent will not sell, transfer or otherwise dispose of any shares of stock of any class of any Restricted Subsidiary (except to the Parent or a Wholly-Owned Restricted Subsidiary, so long as the Liens granted under the Security Documents are not adversely affected, or for the purpose of qualifying directors) unless: (i) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by the Parent and by every other Restricted Subsidiary shall be sold, transferred or disposed of as an entirety; and (ii) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Parent and its Restricted Subsidiaries; provided, however, that nothing in this Section 5.12(c) or Section 5.12(d) shall permit any disposition by the Parent of any of the Equity Interests in any of the Obligors, the disposition by the Issuer of the shares of Canco, any disposition of Equity Interests in IPG Finance LLC by Canco, or any disposition of the shares of IPG (US) Holdings Inc. or IPG (US) Inc. (d) As used in this Section 5.12, a sale, lease or other disposition of assets (including Securities) (a "TRANSFER") shall (unless consisting of sales of inventory made in the ordinary course of business) be deemed to be a "substantial part" of Consolidated Assets if the book value of such assets, when added to the book value of all other assets Transferred by the Parent and its Restricted Subsidiaries (other than in the ordinary course of business) during the 365 day period ending with the date of such Transfer, exceeds, in the aggregate, 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 Transfer shall not be included if and to the extent the net proceeds thereof are segregated from the general accounts of the Parent and any Restricted Subsidiary, invested in Available Cash until applied in accordance with clause (x) or (y) below, and within six months after such Transfer are used either (x) to acquire Like Assets, or (y) offered to prepay the Secured Obligations in the manner provided in Section 8.2 35 of the Intercreditor Agreement; provided, however, that any payment to the holders of the Notes pursuant to Section 8.2 of the Intercreditor Agreement shall not be subject to the provisions of Section 2.2(b) and shall be paid to the holders of the Notes in accordance with Section 2.7. Notwithstanding anything else contained herein, except as expressly permitted in this Agreement and the other Financing Documents, none of the Collateral may be sold, transferred, conveyed or pledged. If the encumbering as contemplated by Section 5.10 or sale, transfer, conveyance or pledge of any of the Collateral shall be permitted by one Financing Document and prohibited by another Financing Document, such encumbering, sale, transfer, conveyance or pledge shall be deemed prohibited hereunder. 5.13. INTEREST RATE ADJUSTMENT DATE FEE. In the event that no Interest Rate Adjustment Date has occurred before May 1, 2002, the Issuer shall, on May 1, 2002, pay to each holder of Notes a fee in an amount equal to one-half of one percent (0.5%) of the outstanding principal amount of such holder's Notes on such date. 5.14. REPURCHASE OF NOTES. None of the Parent, the Issuer, any Subsidiary or any Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata ,from all holders of the Notes at the same time and upon the same terms. Notes repurchased by the Parent or any Subsidiary or Affiliate shall be cancelled. 5.15. TRANSACTIONS WITH AFFILIATES. The Parent will not, and will not permit any Restricted Subsidiary to, 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 Parent's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Parent or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 5.16. TERMINATION OF PENSION PLANS. (a) The Parent will not and will not permit any ERISA Affiliate to withdraw from any Multiemployer Plan or permit any Plan to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part I of Subtitle E of Title IV of ERISA) payable by any member of the Restricted Group, or the imposition of a Lien on any property of the Parent or any Subsidiary pursuant to Section 4068 of ERISA, in an amount in excess of $3,500,000. (b) The Parent will and will cause each Subsidiary to maintain each Foreign Pension Plan in accordance with the terms and provisions thereof and the requirements of applicable laws, rules and regulations except to the extent the failure to so maintain any such Foreign Pension Plan could not reasonably be expected to result in a Lien on any assets of the Parent or any of its Restricted Subsidiaries or materially adversely affect (i) the Parent, the Issuer or the Parent and its Restricted Subsidiaries taken as a whole or (ii) 36 the performance by the Parent, the Issuer or any Restricted Subsidiary of its obligations under this Agreement, the Notes or any of the other Financing Documents. 5.17. DESIGNATION OF RESTRICTED SUBSIDIARIES. The Parent may designate any Subsidiary which meets the other requirements of a Restricted Subsidiary as provided in the definition thereof as a Restricted Subsidiary by giving written notice to each holder of Notes that the Board of Directors of the Parent has made such designation, provided that no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, (a) no Default or Event of Default shall have occurred and be continuing, and (b) such Subsidiary is also being designated as a "Restricted Subsidiary" under the Credit Agreement. Such designation may not be revoked by the Board of Directors of the Parent; and no Restricted Subsidiary shall at any time be designated an Unrestricted Subsidiary and, once so designated as a Restricted Subsidiary, will at all times remain a Restricted Subsidiary. No Unrestricted Subsidiary may own any shares of a Restricted Subsidiary. 5.18. REPORTS AND RIGHTS OF INSPECTION. The Parent will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Parent or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to the holders of Notes pursuant to this Section 5.18 and concurred in by the independent public accountants referred to in Section 5.18(b) hereof), and will furnish each holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested) (and the U.S. Collateral Trustee or the Canadian Collateral Trustee, if so required by this Section 5.18): (a) Quarterly Statements. As soon as available and in any event within 60 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (i) the unaudited consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for the period of the four fiscal quarters of the Parent ending with such quarterly fiscal period, Adjusted Consolidated, balance sheets of the Parent and each other member of the Restricted Group, as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) figures for the corresponding period of the fiscal year then most recently ended, (ii) the unaudited consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for the period of the four fiscal quarters of the Parent ending with such quarterly fiscal period, Adjusted Consolidated, statements of earnings and changes in financial position of the Parent and each other member of the Restricted Group, 37 for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) figures for the corresponding periods of the preceding fiscal year, and (iii) the Parent's calculation of Excess Cash Flow for such quarterly fiscal period (if required by Section 2.4 for any period ending on the last day of such quarter), setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Parent; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Parent, copies of: (i) consolidated and consolidating and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for such fiscal year, Adjusted Consolidated, balance sheets of the Parent and its Restricted Subsidiaries as of the close of such fiscal year, and (ii) consolidated and consolidating and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for such year, Adjusted Consolidated, statements of earnings and changes in financial position of the Parent and its Restricted Subsidiaries for such fiscal year, along with the Parent's calculation of Excess Cash Flow for the last fiscal quarter in such fiscal year (if required by Section 2.4 for such fiscal year), in each case setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) and consolidating figures for the preceding fiscal year, all in reasonable detail and, with regard to the consolidated figures, certified without qualification by a reputable firm of independent chartered accountants acceptable to the Noteholders, together with any audited financial statements of any Restricted Subsidiary which may be prepared in respect of such fiscal year or any portion thereof; (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Parent or any Restricted Subsidiary; (d) Governmental And Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Parent to stockholders generally and of each regular or periodic report, registration statement or prospectus filed by the Parent or any Subsidiary with any securities exchange or any governmental regulatory body including, but without limitation, the Parent's Form 20F and unaudited quarterly reports, and copies of any orders in any proceedings to which the Parent or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over the Parent or any of its Subsidiaries; 38 (e) ERISA Reports. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan; (ii) the institution of any steps by the Parent, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (iii) the institution of any steps by the Parent or any ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Parent or any Subsidiary with respect to any post-retirement welfare liability; (vi) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; or (vii) any event or circumstance with respect to any Foreign Pension Plan which could reasonably be expected to materially adversely affect the Parent, the Issuer or the Parent and its Restricted Subsidiaries on a consolidated basis or the performance by the Parent or the Issuer hereunder or under the Notes or the Parent Guaranty Agreement; (f) Officer's Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Parent stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Parent was in compliance with the requirements of Section 5.6 through Section 5.12, Section 5.23 and Section 5.25 at the end of the period covered by the financial statements then being furnished and setting forth the ratio of Total Debt to EBITDA for purposes of Section 5.8(b) and as otherwise may be required by this Agreement, (ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default (including, without limitation, with respect to Section 5.2) and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Parent is taking and proposes to take with respect thereto and (iii) any material differences between United States generally accepted accounting principles and GAAP to the extent reasonably relevant to determining compliance with the requirements of Section 5.6 through Section 5.13 hereof; (g) Accountant's Certificates. Within the period provided in clause (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that as of the date of the fiscal year end, and for that year, with respect to which such accountants have given their report pursuant to Section 5.18(b), the Parent was in compliance with the provisions of Sections 5.6, 5.7 and 5.8 and that, in the normal course of their audit (without special or additional investigation), they have not become aware of a Default or Event of Default under the provisions of Sections 5.9, 5.10(m), 5.11 or 5.12 (but only to the extent relative to the sale of a substantial part of Consolidated Assets thereunder); (h) Annual Financial Forecasts. Within 60 days following the end of each fiscal year of the Parent, the annual consolidated pre-tax operating forecast of the Parent, including balance sheet and statements of income, retained earnings and cash flow, and 39 the consolidated capital expenditures budget of the Parent, in each case for the next fiscal year and each quarterly period in such fiscal year; (i) Pro Forma Acquisition Projections. Promptly, and in any event not less than 15 Business Days prior to, the consummation of any proposed Acquisition for consideration in the amount of at least $2,500,000: (i) notice of such Acquisition, material information with respect to the nature thereof, and the proposed purchase price with respect thereto; (ii) such historical audited and unaudited financial statements of the business to be acquired in such Acquisition (the "TARGET") as the Target has made available to any member of the Restricted Group and any financial statements contained in any other information that has been reviewed and confirmed by a nationally recognized accounting firm of the United States or Canada or that has been submitted to and approved by the Parent's board of directors; (iii) a pro forma balance sheet and income statement of the Target and the Restricted Group on a consolidated basis following such Acquisition, showing the projected impact of such Acquisition both for the current fiscal year and the immediately succeeding fiscal year; (iv) a written confirmation of a Senior Financial Officer that the Parent is satisfied, based on its due diligence, that the Acquisition of the Target will not result in the assumption by any member of the Restricted Group of material liabilities which have not been fully disclosed to the holders of the Notes in the materials provided in connection with the Acquisition or otherwise in writing; and (v) a certificate of a Senior Financial Officer that, on a consolidated basis following such Acquisition, as of the date of such Acquisition, after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (j) Environmental Reports. (i) Within 10 days following the end of each fiscal quarter of the Parent, copies of each environmental report submitted to the board of directors of the Parent during such fiscal quarter, and, (ii) to the Collateral Trustees, promptly after obtaining knowledge thereof, written notice of (A) any material governmental or regulatory actions instituted or threatened in writing under any Environmental Law affecting any of the Mortgaged Properties or the matters indemnified under the U.S. Environmental Indemnification Agreement or the Canadian Environmental Indemnification Agreement, including, without limitation, any material notice of inspection, abatement or noncompliance; (B) all claims made, or material claims threatened in writing, by any third party against any member of the Restricted Group or any of the Mortgaged Properties relating to damage, contribution, cost recovery, compensation, loss or injury resulting from the presence, release or discharge on or from any of the properties owned by any member of the Restricted Group of any 40 Hazardous Substances; and (C) any member of the Restricted Group's discovery of any occurrence or condition on any of the Mortgaged Properties or any real property adjoining or in the vicinity of any Mortgaged Property which is reasonably likely to subject any member of the Restricted Group to a material claim under any Environmental Law or to any restrictions on the ownership, occupancy, transferability or use of said property under any Environmental Law, and (iii) to the U.S. Collateral Trustee or the Canadian Collateral Trustee, any non-privileged documentation or records that such Collateral Trustee may request at the direction of the Majority Noteholders, acting reasonably, with respect to any of the matters described in clause (ii) of this Section 5.18(j); (k) Additional Undertakings. (i) Prior to June 30, 2002, at the expense of the Parent, an accounts receivable and inventory audit of its Restricted Subsidiaries, which audit shall have been performed by an independent third party acceptable to the Banks, and (ii) in the event the ratio of Total Debt as at June 30, 2002 to EBITDA for the period of four fiscal quarters of the Parent ended on such date is not less than or equal to 5.0:1, an appraisal of the Restricted Subsidiaries' equipment and inventory, such appraisal to be performed by an independent third party acceptable to the Majority Noteholders; and (l) Requested Information. With reasonable promptness, such other data and information as any holder of Notes, the U.S. Collateral Trustee or the Canadian Collateral Trustee may reasonably request. Without limiting the foregoing, the Parent will permit each holder of the then outstanding Notes (or such Persons as any such holder may designate), to visit and inspect, under the Parent's guidance, any of the properties of the Parent or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Parent authorizes said accountants to discuss with such holders the finances and affairs of the Parent and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Parent shall not be required to pay or reimburse any holder of Notes for any expenses which such holder may incur in connection with any such visitation or inspection, except that if such visitation or inspection is made during any period when a Default or an Event of Default shall have occurred and be continuing, the Parent agrees to reimburse such holder for all reasonable expenses thereof promptly upon demand. Each Noteholder agrees that it will use all reasonable efforts to keep confidential any information from time to time supplied to it by or on behalf of the Parent (including, without limitation, any such information provided pursuant to this Section 5.18) which the Parent or any Person acting on its behalf designates in writing at the time of its delivery to such Noteholder, or as promptly as practicable thereafter, is to be treated as confidential, provided, however, that the foregoing provisions of this paragraph shall not apply: (i) to any information already known to such Noteholder at the time of its receipt thereof (other than any such information which to such Noteholder's knowledge is already known to such Noteholder by virtue of any breach by any 41 third party of any confidentiality obligation owed to the Parent or any Restricted Subsidiary); (ii) to any information which is or becomes public knowledge other than (to such Noteholder's knowledge) by reason of any breach of this paragraph; (iii) to the extent that such Noteholder is required to disclose the information in question pursuant to any law, statute, rule or regulation or any order of any court or judicial process or pursuant to any direction, request or requirement (whether or not having the force of law but, if not having the force of law, being of a type with which Institutional Holders in the relevant jurisdiction are accustomed to comply) of any self-regulating organization or any governmental, fiscal, monetary or other authority; (iv) to the disclosure of any such information to any regulators or auditors including the NAIC or any successor agency; (v) to the disclosure of any such information to any other holder of a Note; (vi) to the disclosure of any information to such Noteholder's counsel or accountants or those of any other holder of a Note; (vii) to the disclosure of any information to any of such Noteholder's employees, agents or other professional advisors or those of any other holder of a Note; (viii) to the disclosure of any information to Moody's, Standard & Poor's or any other nationally recognized rating agency; (ix) to the extent that such Noteholder needs to disclose the information in question for the protection or enforcement of any of such Noteholder's rights or interests against the Issuer or the Parent, whether under this Agreement or otherwise; or (x) to the prospective transferee in connection with any contemplated transfer of any of the Notes (or of any other security of the Parent owned by such Noteholder or any Person advised by such Noteholder's investment advisor or any of its subsidiaries) by such Noteholder, provided that such prospective transferee shall agree (in writing) to be bound by the confidentiality provisions of this Section 5.18 as if it were a holder of Notes hereunder. 5.19. PARI PASSU DEBT. Except as otherwise provided in this Agreement and the Intercreditor Agreement, the Notes shall rank, at all times, at least pari passu with all of the other senior secured Indebtedness of the Restricted 42 Group, other than as permitted by Section 5.9(a)(ii) and subject to Permitted Liens. The Parent shall at all times cause any Debt owing by any member of the Restricted Group to any other member of the Restricted Group, and all Liens securing such Debt, to be subordinated to the Notes and the Liens securing the Notes, each in form and substance satisfactory to the Majority Noteholders (and the Noteholders hereby acknowledge that the manner in which such Debt has been subordinated in the notes subject to the pledge agreements dated as of the Effective Date is satisfactory to them). 5.20. MOST FAVORED LENDER. The holders of the Notes shall immediately be notified of the terms and conditions of any Debt of the nature described in clause (a) of the definition thereof to be created by any member of the Restricted Group other than Debt secured by Liens described in Section 5.10(h). The holders of the Notes shall have the option to require the Obligors and the Restricted Subsidiaries to amend this Agreement and any of the other Financing Documents to incorporate the provisions of any agreement relating to such Debt if such holders so wish, it being understood that the provisions which may be so incorporated shall not extend to the provision of collateral (other than collateral provided (a) under a replacement revolving credit facility after the termination of Bank Facility A or (b) to secure Priority Debt or Debt secured by Liens permitted by Section 5.10(h)) or to pricing. 5.21. LIMITATION ON BUSINESS ACTIVITIES. The Issuer shall not, and shall not permit IPG Finance LLC or Canco, to carry on any business, other than (i) taking such steps as may be necessary to maintain its existence, (ii) to hold Securities of Restricted Subsidiaries, (iii) taking such action as is required under or in respect of this Agreement, any of the other Financing Documents or the Bank Documents, (iv) provided no Default or Event of Default shall have occurred and be continuing, IPG Finance LLC may lend money to IPG (US) Inc. and (v) the incurrence of any other Indebtedness permitted by Section 5.23 and, with respect to the Issuer, Indebtedness permitted hereunder. 5.22. OWNERSHIP OF SUBSIDIARIES. The Parent shall not permit, at any time, IPG Finance LLC, the Issuer, Canco, Intertape Polymer Corp, IPI and (prior to the termination of Bank Facility A) all Restricted Subsidiaries who are borrowers under Bank Facility A to be other than Wholly-Owned Restricted Subsidiaries, or at any time to own (either directly or through the Restricted Subsidiaries) less than 80% of the Voting Stock of its other Restricted Subsidiaries, together with such Securities of such other Restricted Subsidiaries as are necessary to provide the Parent with a direct or indirect economic interest of not less than 80% of each such other Restricted Subsidiary. 5.23. LIMITATION ON ISSUER DEBT. The Parent will not permit either IPG Finance LLC or Canco to incur or have at any time any Indebtedness in excess of an aggregate amount of US$100,000, except for Indebtedness under or with respect to this Agreement, the 1999 Note Agreement, the Bank Documents and any facility which replaces Bank Facility A after the termination thereof, and except to a Wholly-Owned Restricted Subsidiary. 43 5.24. NO RESTRICTIONS ON DISTRIBUTIONS. The Parent shall not, and shall not permit any of its Restricted Subsidiaries to, restrict in any way the ability of any Restricted Subsidiary to declare or make any payment contemplated in clauses (a), (b) and (c) of the definition of "Restricted Payment" to its shareholder(s) or owners of its other Equity Interests, except for such restrictions arising under applicable law in relation to the solvency of the Restricted Subsidiaries. 5.25. LIMITATION ON CAPITAL EXPENDITURES. (a) The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any capital expenditures that exceed US$20,000,000 in any fiscal year of the Parent unless the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1.00; provided that the foregoing restriction shall continue to apply if, at the end of any subsequent fiscal quarter, such ratio exceeds 3.25:1.00, unless Bank Facility B has theretofore been fully repaid and cancelled. (b) Once Bank Facility B is fully repaid and cancelled, or the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1.00 (together, the "CONDITIONS"), the Restricted Group shall not make capital expenditures exceeding an amount equal to 10% of Consolidated Net Worth (as at the end of the fiscal year then most recently ended) in any fiscal year of the Parent without the consent of the Majority Noteholders, acting reasonably. If either of the Conditions occurs on a date other than the last day of a fiscal year of the Parent, the Restricted Group shall be permitted in such fiscal year to make the capital expenditures permitted under this Section 5.25(b) instead of those permitted under Section 5.25(a). Such amount shall be increased to 20% of Consolidated Net Worth for any current fiscal year in which (i) the ratio of Total Debt as at the end of the fiscal quarter of the Parent then most recently ended to EBITDA for the period of four fiscal quarters then most recently ended does not exceed 3.0:1.00, and (ii) the Parent has maintained an Acceptable Rating at all times during the then most recently ended two fiscal quarters with respect to its long-term, senior unsecured Debt; provided however, that at any time either of the tests in the preceding clauses (i) and (ii) are not met, the applicable percentage shall return to 10% for the fiscal year in which such condition is no longer met. 5.26. INTELLECTUAL PROPERTY. Subject to the next succeeding sentence, the Parent will ensure that all intellectual property, as described in the Security Documents, shall continue to be owned by the Person identified as the owner thereof in the Security Documents at all times; provided that, on 20 days prior notice to the Collateral Trustees, any member of the Restricted Group may sell or otherwise transfer any interest that such member has in such intellectual property to IPG Technologies Inc. at any time. Except as otherwise permitted by Section 5.12, the Parent will 44 not, and will not permit any Restricted Subsidiary to, sell or transfer any portion of such Person's ownership interest in any intellectual property (as described in the Security Documents); provided that any member of the Restricted Group may sell or transfer any such intellectual property to IPG Technologies Inc. at any time. 5.27. NO AMENDMENTS TO CREDIT AGREEMENT. The Parent will not, and will not permit any Restricted Subsidiary to, allow any provision of the Credit Agreement in relation to repayments, prepayments, pricing (including, without limitation, interest rate and margins), or financial covenants to be amended, replaced or deleted in any manner that the Majority Noteholders deem, in their sole discretion, to be adverse to the interests of the holders of the Notes without the prior written consent of the Majority Noteholders. This Section 5.27 is supplemental to the covenants set forth in Section 9.5 of the Intercreditor Agreement. 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR 6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute an "EVENT OF DEFAULT" as such term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five Business Days; or (b) Default shall occur in the making of any payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment, or the Issuer shall fail to make an offer to prepay as required under Section 2.5, or the failure of the Obligors to make an offer to prepay the Secured Obligations as required under Section 5.12(d); or (c) Default shall be made in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of the principal of or interest on any Material Debt (other than the Notes) of the Parent or any Restricted Subsidiary and such default shall not have been waived and shall continue beyond the period of grace, if any, allowed under the terms of such Material Debt; or (d) Default or the happening of any event shall occur under any indenture, agreement or other instrument under which any Material Debt of the Parent or any Restricted Subsidiary may be issued and such default or event shall continue for a period of time sufficient to permit the acceleration of the maturity of any Material Debt of the Parent or any Restricted Subsidiary outstanding thereunder; or (e) Default shall occur in the observance or performance of any covenant or agreement contained in Section 5.6 through Section 5.14 hereof, in Section 5.19 through Section 5.25 hereof, or of any covenant or agreement contained in any Guaranty Agreement; or 45 (f) Default shall occur in the observance or performance of any other provision of this Agreement or any provision of any of the Financing Documents which is not remedied within 30 days after the earlier of (i) the day on which any Responsible Officer first obtains knowledge of such default, or (ii) the day on which written notice thereof is given to any Obligor by the holder of any Note; or (g) Any representation or warranty made by any Obligor in this Agreement, or made by the Parent or the General Partner in the Parent Guaranty Agreement or made by any member of the Restricted Group in any other Financing Document or any statement or certificate furnished by such member of the Restricted Group in connection with the consummation of the issuance and delivery of the Notes or furnished by any member of the Restricted Group pursuant to any other Financing Document, is untrue in any material respect as of the date of the issuance or making thereof, or if the auditors certifying the financial statements in accordance with Section 5.18(b) insert a material qualification in their opinion; or (h) Final judgment or final judgments for the payment of money aggregating in excess of U.S. $2,500,000 (or the equivalent thereof in any other currency) (exclusive of judgment amounts which are covered by insurance of solvent insurers which have acknowledged such coverage) is or are outstanding against any member of the Restricted Group or against any property or assets of any such entity and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal for a period of 90 days from the date of its entry; or (i) A custodian, liquidator, trustee or receiver is appointed for any member of the Restricted Group or for the major part of the property of any one of them and is not discharged within 90 days after such appointment; or (j) Any member of the Restricted Group becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or any member of the Restricted Group applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for such member of the Restricted Group or for the major part of the property of any such entity; or (k) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against any member of the Restricted Group or any member of the Restricted Group (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (j) or this clause (k) of this Section 6.1 (each of the events referred to in clause (j) or this clause (k), a "PROCEEDING"), and, if instituted against such member of the Restricted Group, are consented to or are not dismissed within 20 Business Days after such institution; or (l) If property of any member of the Restricted Group 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 any member of the Restricted Group, such member shall have the right to contest such 46 seizure or taking in good faith, if the holders of all of the Notes are absolutely satisfied, in their complete discretion, that the repayment of the Notes, the interest and all other amounts relating thereto and the ability of the Issuer to service its Debt shall not be compromised; or (m) If IPG Finance LLC assigns or transfers any of its rights against any Restricted Subsidiary with respect to amounts owed to it by such Restricted Subsidiary, to any Person other than a member of the Restricted Group, except as permitted under this Agreement or the Security Documents; or (n) Either Guaranty Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable in any respect, or the Parent, the General Partner or any Restricted Subsidiary takes any action for the purpose of repudiating or rescinding the Guaranty Agreement to which it is a party or its obligations thereunder, or the Parent, the General Partner or any Restricted Subsidiary declares that its obligations thereunder are unenforceable; or (o) If in the opinion of the Majority Noteholders, acting in good faith, a Material Adverse Change has occurred since December 31, 2000, except for any Material Adverse Change described in Schedule II attached hereto, and the Majority Noteholders shall have given five (5) Business Days written notice to the Issuer to such effect. 6.2. NOTICE TO HOLDERS. When any Event of Default described in the foregoing Section 6.1 has occurred, or if the holder of any Note or of any other evidence of Debt of any Obligor gives any notice or takes any other action with respect to a claimed default, such Obligor agrees to give notice within three (3) Business Days of such event to all holders of the Notes then outstanding. 6.3. ACCELERATION OF MATURITIES. When any Event of Default described in clause (a) or (b) of Section 6.1 has occurred and is continuing, any holder of any Note may, by notice in writing sent in the manner provided in Section 9.6 to the Parent declare the entire principal of and all interest accrued on such Note to be, and such Note shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in clause (a), (b), (c), (d), (e), (f), (g), (h), (m), (n) or (o) of said Section 6.1 has occurred and is continuing, the holder or holders of 51% or more of the principal amount of Notes (other than Notes held by any member of the Restricted Group or any Affiliate) at the time outstanding (the "MAJORITY NOTEHOLDERS") may, by notice to the Parent, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in clause (i), (j), (k) or (l) of Section 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon any or all of the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Issuer will forthwith pay to the holders of such Notes the entire principal of and interest accrued on such 47 Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole Amount. No course of dealing on the part of the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Issuer further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all reasonable costs and expenses incurred by them in the collection of any amounts payable under the Notes in connection with any Event of Default hereunder, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. All amounts paid hereunder with respect to principal, Make-Whole Amount, if any, and interest on the Notes shall be paid ratably to all holders of Notes which have become due and payable pursuant to this Section 6.3. 6.4. RESCISSION OF ACCELERATION. The provisions of Section 6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in clause (a), (b), (c), (d), (e), (f), (g), (h), (m), (n) or (o) of Section 6.1, the holders of at least 66 2/3% in aggregate principal amount of the Notes then outstanding may rescind and annul such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to Section 7.1; and provided, further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. Such annulment and rescission shall be by written instrument filed with the Parent. 7. AMENDMENTS, WAIVERS AND CONSENTS 7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Obligors, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Obligors shall have obtained the consent in writing of the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such amendment or waiver shall be effective (a) which will change the time of payment of the principal of or the interest on any Note or change the principal amount thereof 48 or change the rate of interest thereon, or (b) which will change any of the provisions with respect to optional prepayments including, without limitation, the definition of Make-Whole Amount, or (c) which will change the percentage of holders of the Notes required to consent to any such amendment or waiver of any of the provisions of this Section 7 or Section 6. 7.2. SOLICITATION OF HOLDERS. So long as there are any Notes outstanding, no Obligor will solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by such Obligor and shall be afforded the opportunity of considering the same and shall be supplied by the Obligors with sufficient information to enable it to make an informed decision with respect thereto. No Obligor will directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently offered, on the same terms, ratably to the holders of all Notes then outstanding. 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Obligors, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 8. INTERPRETATION OF AGREEMENT; DEFINITIONS 8.1. DEFINITIONS. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "ACCEPTABLE RATING" shall mean a rating of at least BBB by Standard & Poor's or a rating of at least Baa2 by Moody's, or an equivalent credit rating by a rating agency of recognized standing acceptable to the Majority Noteholders. "ACQUISITION" shall mean the acquisition (whether by way of purchase, exchange, Investment or otherwise) of (a) a majority of the issued and outstanding Voting Stock of a Person (other than a member of the Restricted Group), or (b) assets of a Person (other than a member of the Restricted Group) comprising substantially all of the assets of such Person or of an independent business unit (for example, a division) operated by such Person. 49 "ADJUSTED CONSOLIDATED" for any period, or as of any time, shall have the same meaning as "consolidated" except that the Unrestricted Subsidiaries are accounted for on a cost basis rather than on a consolidated basis for such period or as of such time. "AFFILIATE" shall mean any Person (other than the Parent or a Restricted Subsidiary) (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, any Obligor, (b) which beneficially owns or holds (i) 5% or more of the Voting Stock of the Parent or the General Partner or (ii) 5% or more of the Equity Interests of the Issuer or (c) 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 Interests) of which is beneficially owned or held by any Obligor 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. "AGREEMENT, THIS" is defined in Section 7.3. "APPLICABLE ADJUSTMENT MARGIN" shall mean, as of any date of determination prior to an Interest Rate Adjustment Date, an amount equal to the product of (a) six hundred and three ten-thousandths percent (0.0603%) times (b) the number of complete calendar months which shall have expired since May 1, 2002 as of such date of determination. "APPLICABLE DEFAULT RATE" shall mean, for the Notes at any time, a rate per annum equal to the lesser of (a) the rate of interest in effect at such time for the Notes plus two percent (2%) and (b) the highest interest rate allowed by applicable law for the Notes. "AVAILABLE CASH" shall mean, at any time, cash and Cash Equivalents which are freely available to the Restricted Group at such time in that there are no restrictions of any nature whatsoever on the Restricted Group's access thereto at such time, including, without limitation, any restrictions or potential delays arising out of any (a) agreement, (b) incorporating, constituting or charter documents, (c) foreign exchange or currency controls, (d) Law, (e) Lien or (f) otherwise. For purposes of the computation of Total Debt, "Available Cash" shall not include cash and Cash Equivalents held in Drumheath. "BANK DOCUMENTS" is defined in Section 4.7. "BANK FACILITY A" shall mean, with respect to and pursuant to the Credit Agreement, that certain 364-day extendible revolver in the principal amount of up to U.S. $50,000,000 (or its equivalent in Canadian currency), extendible annually under the terms of the Credit Agreement. "BANK FACILITY B" shall mean, with respect to and pursuant to the Credit Agreement, that certain revolving Facility B in the principal amount of up to U.S. $35,000,000 (or its equivalent in Canadian currency). "BANK FACILITY C" shall mean, with respect to and pursuant to the Credit Agreement, that certain revolving Facility C in the principal amount of up to U.S. $60,000,000 (or its equivalent in Canadian currency). "BANKS" shall mean the "Lenders" (as such term is defined in the Credit Agreement). 50 "BANK TERM FACILITIES" shall mean Bank Facility B and Bank Facility C. "BUILDING INSURANCE" is defined in Section 5.2(a)(ii). "BUSINESS DAY" shall mean any day except a Saturday, Sunday or other day on which banks are generally not open for business in New York, New York, London, England, Toronto, Ontario, Canada or Montreal, Quebec, Canada, or any other day on which the New York Stock Exchange is generally not open for business. "CANADIAN COLLATERAL" shall mean all personal and real property located in Canada granted as security for the obligations of the Obligors and the Restricted Subsidiaries under this Agreement, the Notes, the Subsidiary Guaranty Agreement and the Parent Guaranty Agreement, pursuant to the Canadian Security Documents. "CANADIAN COLLATERAL TRUSTEE" shall mean Computershare Trust Company of Canada, in its capacity as Canadian collateral trustee for the holders of Debt under this Agreement, the other Financing Documents and the Bank Documents, together with its successors in such capacity duly appointed in accordance with the provisions of the Financing Documents. "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT" is defined in Section 4.6(b). "CANADIAN MORTGAGES" is defined in Section 3.5(c). "CANADIAN SECURITY DOCUMENTS" is defined in Section 3.5(c). "CANCO" shall mean IPG Holding Company of Nova Scotia and its successors. "CAPITALIZED LEASE" shall mean any lease (a) the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the Parent and its Subsidiaries in accordance with GAAP or (b) for which the amount of the asset and liability thereunder if so capitalized is required to be disclosed in a note to such balance sheet in accordance with GAAP. "CAPITALIZED RENTALS" of any Person shall mean, 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 then a lessee would be reflected as a liability on a consolidated balance sheet of such Person as of such date in accordance with GAAP. "CASH EQUIVALENTS" shall mean, as of the date of any determination thereof, Investments of the type described in clause (b), (c) or (d) of the definition of the term "Permitted Investments", and all sums held in bank accounts. "CDN" shall mean Canadian dollars. "CHANGE IN CONTROL" shall mean any change in ownership of the Voting Stock of the Parent after the Effective Date which results in any Person (including Affiliates or associates of such Person), other than a member of the Restricted Group, becoming the "beneficial owner" (as 51 such term is used in Rule 13d-5 under the Exchange Act) of more than 50% of the total voting power of all classes then outstanding of the Parent's Voting Stock. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder from time to time, and any successor statute thereto, together with the regulations promulgated thereunder, in each case as in effect from time to time. "COLLATERAL" shall mean the U.S. Collateral and the Canadian Collateral. "COLLATERAL SUSPENSION CONDITIONS" shall mean, at any time: (a) the Acceptable Rating contemplated by Section 1.6(a) is then in full force and effect, not having been withdrawn or placed on a credit watch with a negative implication by Moody's or Standard & Poor's (or, if applicable, such other equivalent rating agency as has been accepted by the Majority Noteholders); (b) Total Debt, determined as of the end of each of the four most recently ended fiscal quarters of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for the period of four consecutive fiscal quarters of the Parent ended at the end of each of such four most recently ended fiscal quarters of the Parent; (c) each of the Lenders pursuant to the Credit Agreement, and each of the holders of the 1999 Notes, shall have agreed not to direct the U.S. Collateral Trustee, the Canadian Collateral Trustee or any other trustees or agents holding collateral for the benefit of the Banks and the holders of the 1999 Notes to enforce any of the provisions of the Security Documents or other documents creating Liens securing Bank Facility A (or, if applicable, any replacement thereof) during the applicable Collateral Suspension Period; and (d) no Default or Event of Default has occurred and is continuing; in each case as of such time. "COLLATERAL SUSPENSION DATE" is defined in Section 1.6. "COLLATERAL SUSPENSION PERIOD" is defined in Section 1.6. "COLLATERAL TRUSTEES" shall mean the U.S. Collateral Trustee and the Canadian Collateral Trustee. "COLLATERAL TRUST INDENTURE" is defined in Section 4.5(a). "COMMITMENT" at any time, with respect to any Bank Term Facility, shall mean the amount of the "Credit" (as defined in the Credit Agreement as in effect on the date of this Agreement with respect to such Bank Term Facility), as such amount may have been reduced (but not increased) from time to time pursuant to the terms of the Credit Agreement. 52 "CONSOLIDATED" when used as a prefix to any item (unless such item is defined differently herein) shall mean the aggregate of 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, all of the financial covenants contained in Sections 5.6, 5.7 and 5.8, and the other financial calculations required to be made on a consolidated basis hereunder, are calculated solely by reference to the Restricted Group, excluding any items attributable to Unrestricted Subsidiaries. "CONSOLIDATED ASSETS" shall mean, as of the date of any determination thereof, consolidated total assets of the Restricted Group as of such date determined in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries). "CONSOLIDATED CURRENT LIABILITIES" shall mean, as of the date of any determination thereof, such liabilities of the Restricted Group on a consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities on such date (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries). "CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of the Restricted Group for such period, less all expenses and other proper charges (including taxes on income) for such period, determined on a consolidated basis and otherwise in accordance with GAAP after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding, in any event: (a) 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; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any Person (other than a Restricted Subsidiary), substantially all of the assets of which have been acquired in any manner by any member of the Restricted Group, realized by such Person prior to the date of such acquisition; (e) net earnings and losses of any Person (other than a Restricted Subsidiary) with which any member of the Restricted Group shall have consolidated or which shall have merged into or with any member of the Restricted Group prior to the date of such consolidation or merger; 53 (f) net earnings of any Person (other than a Restricted Subsidiary) in which any member of the Restricted Group has an ownership interest unless such net earnings shall have actually been received by any member of the Restricted Group in the form of cash distributions; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends or interest to any member of the Restricted Group; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) 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; (j) any gain arising from the acquisition of any Securities of any member of the Restricted Group; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been created as an expense or charge for such period. "CONSOLIDATED NET WORTH" shall mean, as of the date of any determination thereof, the total shareholders' equity of the Restricted Group as of such date, determined on a consolidated basis, but in any event excluding any amount of such shareholders' equity allocable or attributable to (a) Minority Interests and (b) all Investments (other than Permitted Investments) held by any member of the Restricted Group. "CONSOLIDATED TOTAL CAPITALIZATION" shall mean, as of the date of any determination thereof, the sum of (a) the amount of Total Debt on such date, plus (b) the Consolidated Net Worth as of such date. "CONTROL EVENT" shall mean: (a) the execution by any Obligor or any Subsidiary or Affiliate of any letter of intent with respect to any proposed transaction or event or series of transactions or events that, individually or in the aggregate, would result in a Change in Control if such transactions or events were to be consummated or to occur, or (b) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control. "CONTROL PREPAYMENT DATE" is defined in Section 2.5(a). "CREDIT AGREEMENT" shall mean that certain Credit Agreement of even date herewith, by and among the members of the Restricted Group, The Toronto-Dominion Bank, Comerica Bank, National Bank of Canada, and certain other Persons, as the same may be amended, supplemented 54 or otherwise modified from time to time in accordance with the provisions thereof, of this Agreement and of the Intercreditor Agreement. "DEBT" of any Person shall mean, as of the date of any determination thereof (without duplication): (a) all Indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of indebtedness of such Person on such date; (b) Negative Value of Derivative Instruments of such Person on such date; (c) obligations secured by any Lien on such date 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 obligations secured by Liens 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; (d) Capitalized Rentals of such Person on such date; (e) reimbursement obligations in respect of credit enhancement instruments of such Person on such date including letters of credit; and (f) (without duplication of any of the foregoing) Guaranties of such Person on such date of obligations of others of the character referred to hereinabove in this definition. "DEFAULT" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "DERIVATIVE INSTRUMENTS" shall mean an agreement entered into from time to time by the Issuer in order to control, fix or regulate currency exchange fluctuations or the rate of interest payable on borrowings under either of the Bank Term Facilities. "DESIGNATED FACILITIES" shall mean all real property owned or leased by any member of the Restricted Group in the United States of America and Canada, including land, buildings and other improvements. "DRUMHEATH" shall mean Drumheath Indemnity Ltd., a company organized under the laws of Barbados. "EBITDA" for any fiscal period shall mean (i) the Consolidated Net Income of the Restricted Group for such period plus (ii) to the extent included in the calculation of such Consolidated Net Income, the Interest Expense, taxes, depreciation and amortization of the Restricted Group for such period, each calculated on a consolidated basis and otherwise in accordance with GAAP. Notwithstanding the foregoing, "EBITDA of the Unrestricted 55 Subsidiaries" has the same meaning as EBITDA but shall be calculated in relation to the Unrestricted Subsidiaries only. "EFFECTIVE DATE" is defined in Section 1.4. "ENVIRONMENTAL LAWS" means all applicable United States, Mexican and Canadian, federal, state, county, provincial and local, and other foreign, statutes and codes or regulations, rules or ordinances issued, promulgated or approved thereunder, as well as all other Laws and common laws under which environmental liabilities can arise, now or hereafter in effect (including those with respect to asbestos or asbestos-containing material or exposure to asbestos or asbestos-containing material), relating to the clean-up, remediation, pollution, protection or regulation of the environment and public health including, without limitation: (a) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes (including, without limitation, any Hazardous Substance) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata); and (b) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, and chemicals or substances regulated by any such statutes, codes, regulations, rules or ordinances; and (c) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom. The statutes, codes, regulations, rules or ordinances referred to herein shall include the applicable provisions of (i) the Clean Air Act (42 U.S.C. ss. 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. ss. 1251 et seq.), (iii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.), (iv) the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), (v) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. ss. 9601 et seq.), (vi) the Canadian Environmental Protection Act, (vii) the Environmental Protection Act (Ontario), and (viii) the Environmental Quality Act (Quebec). "EQUITY EVENT" shall mean the issuance by any member of the Restricted Group of Equity Interests or Debt (other than (a) Debt owing by one member of the Restricted Group to another member of the Restricted Group, and (b) a replacement of Bank Facility A after the termination thereof) of the nature contemplated in the definition of "Interest Rate Adjustment Date." "EQUITY EVENT PAYMENT" shall mean, with respect to any Equity Event: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, an amount equal to 100% of the Equity Event Proceeds in respect of such Equity Event; and (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated and (iii) there is any Debt outstanding under Bank Facility C or Bank Facility C has not been terminated, an amount equal to 75% of Equity Event Proceeds in respect of such Equity Event. "EQUITY EVENT PREPAYMENT DATE" is defined in Section 2.3(a). 56 "EQUITY EVENT PROCEEDS" shall mean, at any time, with respect to any Equity Event, an amount equal to the difference of (a) the aggregate amount of the cash consideration received by the Restricted Group in connection with such Equity Event, minus (b) all reasonable out-of-pocket costs and expenses (including, without limitation, underwriting and similar fees) actually incurred by any member of the Restricted Group in connection with such Equity Event. "EQUITY INTEREST" shall mean: (a) in the case of a corporation, capital stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock; (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and (e) any rights, warrants or options or other Securities that are exercisable, exchangeable or convertible for or into any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, 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. "ERISA AFFILIATE" shall mean any corporation, trade or business that is, along with the Parent, 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. "EVENT OF DEFAULT" is defined in Section 6.1. "EXCESS CASH FLOW" shall mean, in respect of any period, the result of: (a) the Restricted Group's EBITDA for such period, as of each Excess Cash Flow Prepayment Date, plus any decrease in the Restricted Group's consolidated non-cash working capital items (or minus any increase in the Restricted Group's consolidated non-cash working capital items) during such period, minus (b) the sum for such period of: (i) all cash interest or dividends paid by the Parent and its Restricted Subsidiaries on Debt or preferred shares during such period, 57 (ii) the amount of all cash payments in respect of capital expenditures made by members of the Restricted Group during such period and not financed using the proceeds of Debt (other than Debt under the Credit Agreement or Debt from a member of the Restricted Group to another member of the Restricted Group), up to a maximum of $15,000,000 during the Parent's fiscal year 2002, and $20,000,000 during the Parent's fiscal year 2003, it being understood that from and after the first date as of which there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated, the maximum amounts set forth in this clause (ii) shall not apply, (iii) the amount of all voluntary and scheduled principal payments during such period of Debt of members of the Restricted Group held by Persons outside of the Restricted Group, including any voluntary or mandatory permanent reductions thereof but excluding (x) prepayments of loans under the Credit Agreement, the Notes and the 1999 Notes with Excess Cash Flow Payments from the application of Section 9.2.2 of the Credit Agreement and Section 2.4 of the 1999 Note Agreement (each as in effect on the date of this Agreement) and Section 2.4 hereof, in each case, for a prior fiscal period, and (y) prepayments of Debt with proceeds from the sale of assets (other than sales of inventory or services in the ordinary course of business), (iv) principal payments by members of the Restricted Group during such period on Capitalized Leases held by lessors who are not members of the Restricted Group and (v) taxes paid in cash by members of the Restricted Group in such period. Excess Cash Flow shall be determined as follows: (A) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, (1) for the fiscal quarter ended March 31, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during such quarter, (2) for the fiscal quarter ended June 30, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during the first two quarters of fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with the provisions of this Agreement, the 1999 Note Agreement, and the Credit Agreement with respect to the fiscal quarter ended March 31, 2002 (the amount of any such reduction to be made under this paragraph is hereinafter referred to as the "Adjusted Amount"), (3) for the fiscal quarter ended September 30, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during the first three quarters of fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1999 Note Agreement and the Credit Agreement with respect to the first two quarters of fiscal year 2002, 58 (4) for the fiscal quarter ended December 31, 2002, Excess Cash Flow shall be based on the Excess Cash Flow for the fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1999 Note Agreement and the Credit Agreement with respect to the first three quarters of fiscal year 2002 and to be adjusted promptly following confirmation by the Parent's auditors upon release of the fiscal year 2002 year-end financial statements; and (5) for any fiscal quarter ended on or after March 31, 2003, Excess Cash Flow shall be based on a trailing four quarter basis reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1999 Note Agreement and the Credit Agreement with respect to the previous three quarters and to be adjusted (in the case of the fiscal year 2003) promptly following confirmation by the Parent's auditors upon the release of the year-end financial statements for such fiscal year, and (B) for each fiscal year commencing with the fiscal year in which there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated, Excess Cash Flow shall be determined on a fiscal year basis. Any negative Adjusted Amounts, if any, shall be carried forward into the following quarter(s) and shall not be repaid to any member of the Restricted Group. "EXCESS CASH FLOW NOTICE DATE" shall mean: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, the date which is (i) sixty-three (63) days after the end of each fiscal quarter of the Parent or, if earlier, (ii) the date on which Bank Facility B is reduced pursuant to Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement) as a consequence of Excess Cash Flow (as calculated for the applicable period ending on the last day of such fiscal quarter); (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated and (iii) there is any Debt outstanding under Bank Facility C or Bank Facility C has not been terminated, the date which is (x) one hundred and twenty (120) days after the end of each fiscal year of the Parent or, if earlier, (y) the date on which Bank Facility C is reduced pursuant to Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement) as a consequence of the existence of Excess Cash Flow for such year; and (c) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and Excess Cash Flow Payments are required under the terms of this Agreement, the date which is one hundred and twenty (120) days after the end of each fiscal year of the Parent. 59 "EXCESS CASH FLOW PAYMENT" shall mean, in respect of any Excess Cash Flow Prepayment Date: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, an amount equal to 75% of Excess Cash Flow for the fiscal period of the Parent specified in and determined pursuant to the second sentence of the definition of "Excess Cash Flow" most recently ended as of such Excess Cash Flow Prepayment Date; (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, and (iv) the Excess Cash Flow Reduction Conditions have not been met on such Excess Cash Flow Prepayment Date, an amount equal to 50% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date; (c) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, (iv) the Excess Cash Flow Reduction Conditions have been met on such Excess Cash Flow Prepayment Date and (v) no Default or Event of Default has occurred and is continuing, an amount equal to 35% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date; (d) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and the Issuer or any member of the Restricted Group has entered into a new bank agreement with similar cash flow sweep provisions as those contained in the Credit Agreement, in form reasonably satisfactory to the Majority Noteholders, an amount equal to the greater of (i) 35% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date or (ii) the percentage of Excess Cash Flow required under the provisions of such new bank agreement; and (e) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and neither the Issuer nor any other member of the Restricted Group has entered into a new bank agreement with similar cash flow sweep provisions as those contained in the Credit Agreement, zero (0); provided, however, that, at any time, if the outstanding Debt at such time under each of the Bank Term Facilities is equal to the maximum amount permitted at such time under the Credit Agreement, the Excess Cash Flow Payment made in respect of any Excess Cash Flow Prepayment Date shall be reduced to the maximum amount (with respect to such Excess Cash Flow Prepayment Date, the "Reduced Excess Cash Flow Amount") permitted such that, after giving effect thereto, the principal amount of Debt outstanding at such time under Bank Facility A (net of Available Cash at such time) does not exceed $35,000,000; provided, further, that if the Debt outstanding under Bank Facility A is less than $35,000,000 (net of Available Cash) at any 60 time after such Excess Cash Flow Prepayment Date, the Issuer shall add to the Excess Cash Flow Payment on the next succeeding Excess Cash Flow Prepayment Date, such amount by which the Debt under Bank Facility A is less than $35,000,000 at such time. "EXCESS CASH FLOW PREPAYMENT DATE" is defined in Section 2.4(a). "EXCESS CASH FLOW REDUCTION CONDITIONS" shall mean, at any time, (a) the Parent shall have obtained an Acceptable Rating in respect of the long-term senior unsecured Debt of the Parent and such Acceptable Rating is then in full force and effect, not having been withdrawn by Moody's, Standard & Poor's or, if applicable, such other equivalent rating agency as has been accepted by the Majority Noteholders or (b) Total Debt, determined as of the end of the then most recently ended fiscal year of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for such fiscal year. "EXCLUDED NON-MORTGAGED PROPERTIES" shall mean each of the Designated Facilities that is not a Mortgaged Property. For the purposes of this Agreement, such term shall mean the following Designated Facilities only: (a) leased distribution facility in Cumming, Georgia; (b) leased warehouse facility in Ontario, California; (c) leased manufacturing and distribution facility in Rayne, Louisiana; and (d) manufacturing and distribution facility in Richmond, Kentucky which is owned by the City of Richmond, Kentucky and leased to a member of the Restricted Group. "EXISTING GUARANTY AGREEMENTS" is defined in Section 1.1. "EXISTING NOTE AGREEMENT" is defined in Section 1.1. "EXISTING NOTES" is defined in Section 1.1. "FINANCING DOCUMENTS" shall mean this Agreement, the Notes, the Guaranty Agreements, the Security Documents, the Intercreditor Agreement, the 1999 Note Agreement and the other agreements and instruments to be executed pursuant to the terms of each of such Financing Documents, as each may be amended, supplemented or otherwise modified from time to time. "FIXED CHARGES" for any period shall mean the sum, determined on a consolidated basis, of (a) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the members of the Restricted Group, and (b) all Interest Expense for such period an all Indebtedness (including, for this purpose, the interest component of Rentals on Capitalized Leases) of the Restricted Group. "FLOOD ACT" is defined in Section 5.2(a)(v). "FOREIGN PENSION PLAN" means any plan, fund (including, without limitation, any superannuation fund) or other similar program, other than social security or social insurance, established or maintained outside the United States by the Parent or any one or more of the Subsidiaries primarily for the benefit of employees of the Parent or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides for retirement 61 income for such employees or a deferral of income for such employees in contemplation of retirement and is not subject to ERISA or the Code. "GAAP" shall mean the generally accepted accounting principles acknowledged by the Canadian Institute of Chartered Accountants and published in the Canadian Institute of Chartered Accountants' Handbook. "GENERAL PARTNER" is defined in the introductory paragraph of this Agreement. "GUARANTIES" by any Person shall mean 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 all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or other 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 other obligation, or (ii) to maintain working capital or other balance sheet items, or otherwise to advance or make available funds, for the purchase or payment of such Indebtedness or other 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 other obligation against loss in respect thereof, or (d) otherwise to assure the owner of the Indebtedness or other obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money, and a Guaranty in respect of any dividend or other obligation shall be deemed to be Indebtedness equal to the maximum aggregate amount of such Indebtedness, dividend or other obligation. "GUARANTY AGREEMENTS" is defined in Section 1.5. "HAZARDOUS SUBSTANCES" shall have the meaning assigned to that term in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of 1986 (42 U.S.C. ss. 9601 et seq.) and shall also include, without limitation, petroleum including crude oil or any fraction thereof, any petroleum product, asbestos, radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls, radioactive and toxic substances, prohibited substances and hazardous waste under the Canadian Environmental Protection Act, a "contaminant" under the Environmental Protection Act (Ontario), and a "contaminant" and a "pollutant" under the Environmental Quality Act (Quebec) as well as similar terms for such substances (including "Dangerous Substances") used in any applicable United States or Canadian federal, state, county, provincial statute, code or regulation, rule or ordinance or any other waste, chemicals or substances regulated by any Environmental Law. "IMPOSITION" shall have the same meaning ascribed to such term in the U.S. Mortgages. "INACTIVE SUBSIDIARIES" shall mean those Subsidiaries of the Parent which are not Restricted Subsidiaries and which do not conduct any real operations or business, a list of which, at the Effective Date, is included as part of Annex A to Exhibit B-2. 62 "INDEBTEDNESS" of any Person shall mean and include 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 have been incurred in connection with the acquisition of property or assets, (b) obligations secured by any Lien 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 of such Person and (e) Guaranties of any other Person's obligations of the character referred to in this definition. "INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings and loan association, trust company, investment company, charitable foundation, employee benefit plan (as defined in ERISA) or other institutional investor or financial institution. "INTERCREDITOR AGREEMENT" is defined in Section 4.5(f). "INTEREST EXPENSE" of any Person for any period shall mean all interest and all amortization of debt discount and expense for such period on each item of Indebtedness of such Person 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. "INTEREST RATE ADJUSTMENT DATE" shall mean the first day on which either (a) the Parent shall have entered into a reasonable and bona fide agreement with a reputable United States and/or Canadian Securities dealer authorizing and directing such dealer to (i) market the issuance of any Equity Interests of the Parent or subordinated or mezzanine Debt of the Parent or the Issuer, which Debt shall be on terms acceptable to the Majority Noteholders (in their absolute discretion), in all such cases providing for proceeds to the Parent or the Issuer in an aggregate amount of at least the outstanding principal amount under Bank Facility B on such date, or (ii) underwrite such Securities providing for such amount of proceeds to the Parent or the Issuer on a firm commitment basis, in each case, on financial and other terms and conditions that are not materially less favorable to the Parent or the Issuer, as applicable, than those generally available in the United States and/or Canadian capital markets to issuers of Securities in the packaging industry having a creditworthiness comparable to the Parent or the Issuer, as applicable, or (b) there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated. "INVESTMENTS" shall mean all investments, including Acquisitions, 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 accounts receivable and inventory (including, without limitation, raw materials, work in process and finished goods) of such Person to be used or consumed in the ordinary course of business, or any Available Cash. "ISSUER" is defined in the introductory paragraph of this Agreement. 63 "LAW" shall mean 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. "LIEN" shall mean 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 right is based on the common law, statute or contract, and includes any security interest, hypothec, pledge, pawn, mortgage, prior claim, lien, charge, assignment for security purposes, cession, encumbrance, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, or a consignment or bailment for security purposes. The term "Lien" 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 Parent 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 Lien. "LIKE ASSETS" shall mean, as of the date of any determination thereof, fixed or capital assets used or to be used by one or more members of the Restricted Group in the lines of business in which the Restricted Group is engaged as of the Effective Date or in a business reasonably related thereto. "LONG-TERM LEASE" shall mean 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. "MAJORITY BANKS" shall have the meaning ascribed to such term in the Intercreditor Agreement. "MAJORITY NOTEHOLDERS" is defined in Section 6.3. "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 2.7 or has become or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a 64 discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "PX1" or other appropriate page of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the third Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (A) the actively traded U.S. Treasury security with the average life closest to and greater than the Remaining Average Life and (B) the actively traded U.S. Treasury security with the average life closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 2.7 or Section 6.3; and provided, further, that in calculating interest on Called Principal for purposes of determining the Remaining Scheduled Payments, it shall be assumed for such calculation that the Notes bear interest at a per annum rate equal to 6.82%. 65 "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 2.7 or has become or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "MATERIAL ADVERSE CHANGE" shall mean the occurrence or the failure to occur of any event or condition or series of events or conditions which, whether individually or in the aggregate, would result in a material adverse change in the business, assets, liabilities, financial position, operating results, business prospects or material agreements of the Restricted Group or in the ability of the members of the Restricted Group, taken as a whole, to perform their obligations under this Agreement or under the other Financing Documents. "MATERIAL DEBT" shall mean, as of any date of determination, any Debt which then has or relates to, in the aggregate, an unpaid principal amount (or a corresponding unpaid liability) of more than U.S. $5,000,000 or an equivalent amount of money in any other currency. "MINORITY INTERESTS" shall mean any shares of stock or other ownership interests of any class of a Restricted Subsidiary (other than directors' qualifying shares or similar ownership interests as required by law) that are not owned by any member of the Restricted Group (each an "OWNERSHIP INTEREST"). Minority Interests shall be valued by valuing Ownership Interests constituting preferred stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of preferred stock; in either case, a "PREFERRED INTEREST") at the voluntary or involuntary liquidating value of such Preferred Interest, whichever is greater, and by valuing Ownership Interests constituting common stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of common stock; in either case, a "COMMON INTEREST") at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such Common Interest required by the foregoing method of valuing Minority Interests in Preferred Interests. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGED PROPERTIES" is defined in Section 4.6(a). "MULTIEMPLOYER PLAN" shall have the same meaning as in section 3(37) of ERISA. "NAIC" is defined in Section 3.2(a). "NEGATIVE VALUE OF DERIVATIVE INSTRUMENTS" shall mean, as of the date of any determination thereof, the aggregate amount that would be payable to all Persons by any member of the Restricted Group (net of all amounts that would be payable by each such Person to such member of the Restricted Group) on the date of determination pursuant to Section 6(e)(ii)(2)(A) of each ISDA Master Agreement between such member and such Persons as if all Derivative Instruments under such ISDA Master Agreements were being terminated on that date. 66 "NET INCOME AVAILABLE FOR FIXED CHARGES" shall mean, for any period, the sum of Consolidated Net Income for such period plus (to the extent included in determining such Consolidated Net Income), (a) all provisions for any Federal, state, provincial or other income taxes made by the Restricted Group during such period, (b) Fixed Charges for such period, (c) all amortization expenses of the Restricted Group and (d) all depreciation of the Restricted Group. "1999 NOTE AGREEMENT" shall mean that certain Amended and Restated Note Agreement, dated as of December 20, 2001, among the Obligors and the holders of notes issued thereunder, as amended, supplemented or otherwise modified from time to time. "1999 NOTES" shall mean, collectively, those certain (a) Series A Senior Secured Notes due 2005 in the aggregate principal amount of $25,000,000, and (b) Series B Senior Secured Notes due 2009 in the aggregate principal amount of $112,000,000, each issued by the Issuer under the 1999 Note Agreement, as amended from time to time. "NOTEHOLDERS" is defined in the introductory paragraph of this Agreement. "NOTES" is defined in Section 1.2. "OBLIGORS" is defined in the introductory paragraph of this Agreement. "ORIGINAL CLOSING DATE" shall mean June 1, 1998. "PARENT" is defined in the introductory paragraph of this Agreement. "PARENT GUARANTY AGREEMENT" is defined in Section 1.5. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PERMITTED INVESTMENTS" shall mean all: (a) Investments by any member of the Restricted Group in any other member of the Restricted Group, including Investments (i) directly out of the cash proceeds to the Parent of the concurrent sale of shares of capital stock of the Parent or (ii) pursuant to a direct share exchange offer by the Parent; (b) Investments by any member of the Restricted Group in commercial paper maturing in 270 days or less from the date of acquisition thereof by such member of the Restricted Group, and which is accorded as of such date a rating of at least A-1 by Standard & Poor's or at least P-1 by Moody's, or their equivalent acceptable to the Majority Noteholders; (c) Investments in (i) 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 (ii) direct obligations of Canada or any agency or instrumentality of Canada, the payment or 67 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 by any member of the Restricted Group; (d) Investments in certificates of deposit maturing within one year from the date of acquisition thereof by any member of the Restricted Group, issued by a bank or trust company organized under the laws of the United States of America, any state thereof or Canada or any province thereof, having capital, surplus and undivided profits aggregating at least U.S. $500,000,000 (or its equivalent in Canadian currency) and whose long-term certificates of deposit are, at the time of acquisition thereof by any member of the Restricted Group, rated A- or better by Standard & Poor's or A3 or better by Moody's, or their equivalent acceptable to the holders of the Notes, or Investments in Eurodollar certificates of deposit maturing within one year after the date of acquisition thereof by any member of the Restricted Group and issued by a bank in western Europe or England having capital, surplus and undivided profits of at least U.S. $1,000,000,000 (or its equivalent in such country's local currency); and (e) loans or advances to employees of the Parent and its Subsidiaries for the purchase of shares of stock of the Parent by such employees in the usual and ordinary course of business, and other loans and advances to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of any member of the Restricted Group provided that the aggregate outstanding amount of all such loans or advances shall at no time exceed U.S. $5,000,000. "PERMITTED LIENS" is defined in Section 5.10. "PERSON" shall mean an individual, partnership, limited liability company, corporation, trust, an entity created pursuant to Law or unincorporated organization, and a government or agency or political subdivision thereof. "PLAN" means an "employee pension benefit plan" (as defined in section 3(2) of ERISA) that is subject to Title IV of ERISA (other than a Multiemployer Plan) and that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Parent or any ERISA Affiliate or with respect to which the Parent or any ERISA Affiliate may have any liability. "PLEDGE AGREEMENT" is defined in Section 4.5(e). "POLICIES" is defined in Section 5.2(b). "PRIORITY DEBT" is defined in Section 5.9(a)(ii). "PROCEEDING" is defined in Section 6.1(k). 68 "PRO RATA SHARE" shall mean, at any time, with respect to any holder of Notes, (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then outstanding principal amount of all Notes, plus the aggregate unpaid principal amount under the Bank Term Facilities at such time, plus the outstanding principal amount of 1999 Notes at such time, and (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, and (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then outstanding principal amount of the Notes, plus the aggregate unpaid principal amount under Bank Facility C at such time, plus the outstanding principal amount of 1999 Notes at such time, and (c) at any time that there is no Debt outstanding under the Bank Term Facilities, and each of the Bank Term Facilities has been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then outstanding principal amount of all Notes plus the outstanding principal amount of 1999 Notes at such time. "PTE" is defined in Section 3.2(a)(i). "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "QUALIFYING EU JURISDICTION" shall mean any country (other than Greece) which as of the Effective Date is a member of the European Union. "REMAINING TAX PREPAYMENT AMOUNT" shall mean, at any time, the greater of (a) zero (0) and (b) the result of (i) twenty-five percent (25%) of the original principal amount of the Notes issued on the Original Closing Date minus (ii) the aggregate principal amount of Notes prepaid prior to such time under Section 2.2, Section 2.3 and Section 2.4 and under the provisions of the Intercreditor Agreement requiring the offer of prepayment of the Notes with insurance proceeds and condemnation proceeds. "REMNANT EQUITY EVENT PREPAYMENT" is defined in Section 2.3(b). "REMNANT EXCESS CASH FLOW PREPAYMENT" is defined in Section 2.4(b). "RENTALS" shall mean and include, 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 any member of the Restricted Group, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of 69 any amounts required to be paid by any member of the Restricted Group (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 or sublessee regardless of sales volume or gross revenues. "REPORTABLE EVENT" shall mean a reportable event within the meaning of section 4043(c) of ERISA other than an event for which the 30-day notice period is waived under applicable Department of Labor regulations. "RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other officer of the Parent or the Issuer, as the case may be, with responsibility for the administration of the relevant portion of this Agreement or the Parent Guaranty Agreement. "RESTRICTED GROUP" shall mean, as of any date of determination thereof, the Parent and the Restricted Subsidiaries. "RESTRICTED PAYMENTS" shall mean (a) the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of any member of the Restricted Group; (b) the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock or other Equity Interests of any class, or of any warrants, rights or options to purchase or acquire any shares of capital stock or other Equity Interests of any member of the Restricted Group; (c) any payment or distribution, directly or indirectly, by any member of the Restricted Group in respect of its capital stock or other Equity Interests; and (d) the prepayment of any Debt (other than Debt secured by Liens described in Section 5.10(h)), except as contemplated herein; provided, however, that "Restricted Payments" shall not include any such dividends, purchases, redemptions, retirements, payments, distributions or prepayments by any member of the Restricted Group to the Parent or by a Restricted Subsidiary to a Wholly-Owned Restricted Subsidiary. "RESTRICTED SUBSIDIARY" shall mean, at any time, any Subsidiary (a) which is at such time organized under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction of any of the foregoing; (b) which at such time 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 at such time beneficially owned by the Parent or any Wholly-Owned Restricted Subsidiary (or any combination thereof); (d) which has been designated by the board of directors of the Parent as a Restricted Subsidiary at or prior to such time in accordance with Section 5.17 and (e) which shall have (i) guarantied the Notes pursuant to a guaranty agreement substantively in the form of the Subsidiary Guaranty Agreement and (ii) 70 granted Liens on substantially all of its assets for the benefit of the holders of the Secured Obligations pursuant to documents substantially in the form of the Security Documents. "RESTRUCTURING FEE" is defined in Section 4.17. "SECURED OBLIGATIONS" shall mean the "Secured Obligations" as such term is defined in the Collateral Trust Indenture. "SECURED PRIORITY DEBT" is defined in Section 5.9(a)(ii). "SECURITIES ACT" shall mean the United States Securities Act of 1933, as amended from time to time. "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act. "SECURITY AGREEMENT" is defined in Section 4.5(d). "SECURITY DOCUMENTS" means the Collateral Trust Indenture, the Mortgages, the Security Agreement, the Pledge Agreement, the Canadian Security Documents, the U.S. Environmental Indemnification Agreement, the Canadian Environmental Indemnification Agreement and the other agreements and instruments executed or to be executed pursuant to the terms of each of such Security Documents or which grant Liens to the U.S. Collateral Trustee or the Canadian Collateral Trustee securing the obligations of any member of the Restricted Group under any of this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, as each may be amended, supplemented or otherwise modified from time to time. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Parent or of the Issuer, as the case may be. "SENIOR OFFICER" means the chief executive officer or the chief financial officer of the Parent. "SOURCE" is defined in Section 3.2. "STANDARD & POOR'S" shall mean Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries directly or indirectly owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Parent and such "Subsidiary" shall include a limited partnership, the general partner of which is the Parent or one or more of its Subsidiaries. "SUBSIDIARY GUARANTY AGREEMENT" is defined in Section 1.5. 71 "SUBSIDIARY PRIORITY DEBT" is defined in Section 5.9(a)(ii). "TAX PERCENTAGE LIMIT" shall mean, at any time and in respect of the principal amount of any prepayment, (a) 100% if such time is after the fifth anniversary of the Original Closing Date or (b) if such time is on or before the fifth anniversary of the Original Closing Date, the lesser of (i) 100% and (ii) a fraction, expressed as a percentage, the numerator of which is the Remaining Tax Prepayment Amount at such time and the denominator of which is the principal amount of such prepayment. "TOTAL DEBT" shall mean, as of any date of determination, the sum of (a) the aggregate principal amount of all Debt of the Restricted Group then outstanding other than Debt owing by a member of the Restricted Group to another member thereof (and for greater certainty, includes any Debt of an Unrestricted Subsidiary Guarantied by any member of the Restricted Group), determined on a consolidated basis for the Restricted Group, plus (b) the greater of (i) the stated value of all preferred shares or (ii) the voluntary or involuntary liquidation value of all preferred shares, as issued by a member of the Restricted Group then outstanding (other than any such preferred shares held by another member of the Restricted Group), less (c) Available Cash as of such date. "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary of the Parent which is an Inactive Subsidiary or which is not otherwise a Restricted Subsidiary, a list of which, as of the Effective Date, is included as part of Annex E to Exhibit B-2, or as may be determined by the Parent at any later date. "U.S. COLLATERAL" shall mean the "U.S. Collateral" as such term is defined in the Collateral Trust Indenture. "U.S. COLLATERAL TRUSTEE" shall mean "Collateral Trustee", as such term is defined in the Collateral Trust Indenture. "U.S. ENVIRONMENTAL INDEMNIFICATION AGREEMENT" is defined in Section 4.6(b). "U.S. MORTGAGES" is defined in Section 4.5(b). "VOTING STOCK" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled whether through the ownership of stock, partnership interests, by contract or otherwise, to elect a majority of the board of directors (or Persons performing similar functions). "WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean any Restricted Subsidiary of which all of the issued and outstanding equity interests (except directors' qualifying shares or similar equity and voting interests as required by law) of which shall be owned directly or indirectly by the Parent or one or more of the Parent's other Wholly-Owned Restricted Subsidiaries, or any combination of the Parent and one or more other Wholly-Owned Restricted Subsidiaries. 72 8.2. ACCOUNTING PRINCIPLES. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 8.3. DIRECTLY OR INDIRECTLY. 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. 9. MISCELLANEOUS 9.1. REGISTERED NOTES. The Issuer shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "NOTE REGISTER") and the Issuer will register or transfer or cause to be registered or transferred as hereinafter provided any Note. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office, the Issuer will deliver in exchange therefor, without expense to such holder, except as set forth below, a Note for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, or Notes aggregating such unpaid principal amount in the denomination of U.S. $500,000 (or such lesser amount as shall constitute 100% of the Notes of such holder) or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Issuer may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. 73 9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Issuer, or in the event of such mutilation upon surrender and cancellation of the Note, the Issuer will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Noteholders, any subsequent Institutional Holder which is an insurance company or any other Institutional Holder which has a net worth in excess of U.S. $50,000,000 is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of such Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Issuer. 9.4. EXPENSES; STAMP TAX AND OTHER INDEMNITY. Whether or not the transactions herein contemplated shall be consummated, the Obligors, jointly and severally, agree to pay directly all of the Noteholders' out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to (a) the reasonable charges and disbursements of Bingham Dana LLP, special counsel to the Noteholders, (b) duplicating and printing costs and charges for shipping the Notes (if so required), adequately insured to the Noteholders at each Noteholder's home office or at such other place as such Noteholder may designate, (c) the fees and costs incurred in connection with the initial filing of this Agreement and all related documents and financial information, and all subsequent annual and interim filings of documents and financial information related to this Agreement, with the Securities Valuation Office of the NAIC or any successor organization acceding to the authority thereof, and (d) all such reasonable expenses (including the fees and expenses of any investment banker or financial consultant) relating to any proposed or actual amendment, waivers or consents pursuant to the provisions hereof, including, without limitation, any amendments, waivers, or consents resulting from any work-out, renegotiation or restructuring relating to the performance by any Obligor of its obligations under any Financing Document to which it is a party. The Obligors, jointly and severally, also agree that they will pay and save each Noteholder harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement, the Notes, or any other Financing Document, whether or not any Notes are then outstanding. The Obligors, jointly and severally, agree to protect and indemnify each Noteholder against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement and the other Financing Documents (other than those expressly retained by such Noteholder). The Obligors, jointly and severally, agree to indemnify each Noteholder, the U.S. Collateral Trustee and the Canadian Collateral Trustee and their respective directors, officers, agents and employees from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses of any of them for or in connection with (i) the participation of any of the Noteholders in the transactions contemplated by this Agreement and the other Financing Documents, (ii) the 74 role of any of the Noteholders in any investigation, litigation or other proceeding brought or threatened by any third party and relating to the Parent or any of its Subsidiaries, and/or (iii) the compliance with or enforcement of any of their rights or obligations hereunder, including, without limitation (A) the reasonable fees and disbursements of counsel and (B) the costs of defending, counterclaiming or claiming against third parties in respect of any action or matter and any cost, liability or damage arising out of any settlement, in each case 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. 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to, and are not exclusive of, any rights or remedies any such holder would otherwise have. 9.6. NOTICES. All communications provided for hereunder shall be in writing and, if to a Noteholder, delivered or mailed prepaid by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, in each case addressed to each Noteholder at such Noteholder's address appearing on Schedule I to this Agreement or such other address as such Noteholder or the subsequent holder of any Note initially issued to such Noteholder may designate to the Parent in writing, and if to the Parent or the Issuer, delivered or mailed by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, to the Parent or to the Issuer at 110E Montee de Liesse, St. Laurent, Quebec, Canada H4T IN4, Attention: Vice President, Finance, Fax No. 514-731-5477, with a copy to Stikeman Elliott, 1155 Rene Levesque West Blvd., Suite 3900, Montreal, Quebec, Canada H3B 3V2, Attention: Michael L. Richards, Esq., Fax No. 514-397-3222, and to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, Attn: Nancy Corbett, Esq., Fax No. 212-309-6273 or to such other address as the Parent or the Issuer may in writing designate to the Noteholders or to a subsequent holder of the Note initially issued to a Noteholder, provided that the failure to provide copies of any such notices to the parties set forth above or to provide any other copies shall not invalidate any notice provided to the Parent or the Issuer pursuant to the terms of this Section 9.6; provided, further, that a notice to a Noteholder by overnight air courier shall only be effective if delivered to such Noteholder at a street address designated for such purpose in Schedule I, and a notice to a Noteholder by facsimile communication shall only be effective if made by confirmed transmission to such Noteholder at a telephone number designated for such purpose in Schedule I and followed (on the day of transmission) by overnight air courier, or, in either case, as such Noteholder or a subsequent holder of any Note initially issued to such Noteholder may designate to the Obligors in writing. 75 9.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each party hereto and its successors and assigns and shall inure to the benefit of each party hereto and its successors and assigns, including each successive holder or holders of any Notes. 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants, representations and warranties made by any party herein and in any certificates delivered pursuant hereto, whether or not in connection with the Effective Date, shall survive the delivery of this Agreement and the Notes. 9.9. SEVERABILITY. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. 9.10. GOVERNING LAW. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with New York law, excluding choice of law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 9.11. JURISDICTION AND SERVICE IN RESPECT OF ISSUER AND PARENT. Any legal action or proceeding with respect to this Agreement, the Notes, any Guaranty 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, each of the Parent and the Issuer hereby ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER AND THE PARENT 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 ISSUER, THE PARENT AND EACH HOLDER OF A NOTE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY. 76 Each of the Issuer and the Parent further consents that all service of process may be made by delivery to it at the address of the Issuer or the Parent, as the case may be, set forth in Section 9.6 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 Issuer and the Parent 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 9.11 shall affect the right of any holder of Notes 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 Issuer or the Parent, or to enforce a judgment obtained in the courts of any other jurisdiction. 9.12. PAYMENTS FREE AND CLEAR OF TAXES. The Obligors, for the benefit of those holders of the Notes which are residents, citizens or domestic corporations of the United States of America at the time of any payment made by an Obligor hereunder (the "RELEVANT HOLDERS"), agree that in the event any such payments made by an Obligor under the Notes, this Agreement, a Guaranty Agreement or any other Financing Document 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 (or any authority therein or thereunder) from or through which payments hereunder are actually made (each a "TAXING JURISDICTION"), the Obligors will pay to the Relevant Holder such additional amounts (the "ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts paid to such Relevant Holder pursuant to the terms of this Agreement, such Notes, the Guaranty Agreements and the other Financing Documents after imposition of any such Relevant Tax (including, without limitation, any Relevant Tax on such Additional Amounts) 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 (or any authority therein or thereunder) as described above), except that no such Additional Amounts shall be payable in respect of this Agreement, any Note, a Guaranty Agreement or any other Financing Document to a Relevant Holder which is liable for such Relevant Tax in respect of this Note Agreement, such Notes, such Guaranty Agreement or such other Financing Document solely by reason of such Relevant Holder being resident or being deemed resident in such Taxing Jurisdiction or carrying on business or being deemed to carry on business in such Taxing Jurisdiction or having some other business connection with such Taxing Jurisdiction other than, in the case of Canada, the mere holding of this Agreement, such Notes, such Guaranty Agreement or such other Financing Document or the receipt of principal or interest in respect thereof. 9.13. CURRENCY OF PAYMENTS; JUDGMENTS. Any payment made by any member of the Restricted Group to any holder of the Notes or for the account of any such holder in respect of any amount payable by such member of the Restricted Group (including any payments under the Guaranty Agreements or any other Financing Document) shall be made in U.S. Dollars. Any payment made by such member of the 77 Restricted Group to any holder of Notes or for the account of any such holder in respect of any amount payable by such member of the Restricted Group in lawful currency of the United States of America, which payment is made in Canadian dollars or other foreign currency, whether pursuant to any judgment or order of any court or tribunal or otherwise, shall constitute a discharge of the obligations of such member of the Restricted Group only to the extent of the amount of lawful currency of the United States of America which may be purchased with such Canadian dollars or other foreign currency on the date of payment (or if it is not practicable to make the purchase on such date, on the first day on which it is practicable to do so); provided that any such conversion of a foreign currency into lawful currency of the United States shall be calculated as of the date such payment is received by such holder. If the amount of U.S. Dollars so purchased is less than the amount of U.S. Dollars expressed to be due hereunder or under the Notes or under such other Financing Document, the Obligors shall indemnify such holder against any loss sustained by such holder as a result hereunder or under the Notes or such other Financing Document; and in any event, the Obligors shall indemnify such holder against the reasonable cost of making any such purchase. These indemnities shall constitute a separate and independent obligation from the other obligations herein, in the Notes, the Guaranty Agreements and the other Financing Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any such holder, shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any such sum due hereunder, under any Note, under any Guaranty Agreement, or under any other Financing Document and shall survive the payment of the Notes and the termination of this Agreement and the other Financing Documents. 9.14. CAPTIONS. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.15. POWER OF ATTORNEY FOR QUEBEC PURPOSES. For greater certainty, and without limiting the powers of the U.S. Collateral Trustee or the Canadian Collateral Trustee under the Security Documents, each of the Noteholders hereby acknowledges that the Canadian Collateral Trustee shall, for the purposes of holding any security granted under the Security Documents pursuant to the laws of the Province of Quebec to secure payment of debentures (or any similar instruments), be the holder of an irrevocable power of attorney (fonde de pouvoir) (within the meaning of Article 2692 of the Civil Code of Quebec) for all present and future holders of the Notes and holders of debentures. Each of the Noteholders hereby constitutes, to the extent necessary, the Canadian Collateral Trustee as the holder of such irrevocable power of attorney (fonde de pouvoir) in order to hold security granted under the Security Documents in the Province of Quebec to secure the debentures (or any similar instrument). Each assignee of the Notes shall be deemed to have confirmed and ratified the constitution of the Canadian Collateral Trustee as the holder of such irrevocable power of attorney (fonde de pouvoir). Notwithstanding the provisions of Section 32 of the Special Powers of Legal Persons Act (Quebec), the Canadian Collateral Trustee may acquire and be the holder of a debenture (or any similar instrument). Each of the Obligors hereby acknowledges that a debenture executed by it constitutes a title of indebtedness, as such term is used in Article 2692 78 of the Civil Code of Quebec. Notwithstanding the provisions of Section 9.10, the provisions of this Section 9.15 shall be governed by the laws of the Province of Quebec and the federal laws of Canada applicable therein. 9.16. INTEREST PROVISIONS. (a) Interest Act (Canada). Solely for purposes of the Interest Act (Canada) and in respect of all or any portion of a calendar year, the annual rate of interest to which any interest rate herein is equal is such rate multiplied by a fraction, the numerator of which is the total number of days in such year and the denominator of which is 360. (b) Criminal Code (Canada). If any provision of this Agreement or any other Financing Document would obligate any member of the Restricted Group to make any payment of interest or other amount payable to the holders of the Notes in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the holders of the Notes of interest at a criminal rate (as construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or result in a receipt by the holders of the Notes of interest at a criminal rate, the adjustment to be effected, to the extent necessary, as follows: (i) firstly, by reducing the amount or rate of interest required to be paid to the holders of the Notes, and (ii) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the holders of the Notes which would constitute interest for purposes of Section 347 of the Criminal Code (Canada). Any amount or rate of interest shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the Notes remain outstanding on the assumption that any charges, fees or expenses that fall within the meaning of interest (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be prorated over such period of time and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Majority Noteholders, shall be conclusive for the purposes of such determination, absent manifest error. (c) Bankruptcy and Insolvency. If any member of the Restricted Group files a notice of intention to file a proposal, or files a proposal under the Canadian Bankruptcy and Insolvency Act, or files a petition under the US Bankruptcy Code, or if the Parent 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 rights of the holders of the Notes to contest such stay of proceedings, the Issuer covenants and agrees to continue to pay interest on all amounts due to the holders of the Notes. In this regard, the Issuer acknowledges that permitting the Issuer to continue to use the proceeds of the Notes constitutes valuable consideration provided after the filing of any such proceeding in the same way that permitting the Issuer to use leased premises constitutes such valuable consideration. 79 9.17. LANGUAGE. The parties hereby confirm their express intent that this Agreement, the Guaranty Agreements, the Notes, the other Financing Documents and all documents and agreements directly and indirectly related thereto be written in English. Les parties reconnaissent leur volonte expresse que la presente convention, les billets ainsi que les documents et convention qui s'y rattachent directement ou indirectement soient rediges en anglais. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS SIGNATURE PAGE.] 80 The execution hereof by the Noteholders shall constitute a contract between the Noteholders, the Parent, the Issuer and the General Partner for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/ Salvatore Vitale ----------------------------------------- Name: Salvatore Vitale Title: Vice President Finance IPG HOLDINGS LP BY: INTERTAPE POLYMER INC., ITS GENERAL PARTNER By: /s/ Jim Bob Carpenter ----------------------------------------- Name: Jim Bob Carpenter Title: President INTERTAPE POLYMER INC. By: /s/ Salvatore Vitale ----------------------------------------- Name: Salvatore Vitale Title: Assistant Secretary ACCEPTED AND AGREED: NEW YORK LIFE INSURANCE COMPANY By: /s/ A. Post Howland ------------------------------ Name: A. Post Howland Title: Investment Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION BY: NEW YORK LIFE INVESTMENT MANAGEMENT LLC, ITS INVESTMENT MANAGER By: /s/ A. Post Howland ------------------------------ Name: A. Post Howland Title: Vice President [Signature Page to Amended and Restated 1998 Note Agreement] NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT BY: NEW YORK LIFE INVESTMENT MANAGEMENT LLC, ITS INVESTMENT MANAGER By: /s/ A. Post Howland ---------------------------- Name: A. Post Howland Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Kevin Kraska ---------------------------- Name: Kevin Kraska Title: Vice President U.S. PRIVATE PLACEMENT FUND BY: PRUDENTIAL PRIVATE PLACEMENT INVESTORS, L.P., INVESTMENT ADVISOR BY: PRUDENTIAL PRIVATE PLACEMENT INVESTORS, INC., ITS GENERAL PARTNER By: /s/ Kevin Kraska ---------------------------- Name: Kevin Kraska Title: Vice President THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, A WISCONSIN CORPORATION By: /s/ David A. Barras.... ---------------------------- Name: David A. Barras Title: Its Authorized Representative MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY BY: DAVID L. BABSON & COMPANY INC. AS INVESTMENT ADVISER By: /s/ Richard C. Morrison ---------------------------- Name: Richard C. Morrison Title: Managing Director [Signature Page to Amended and Restated 1998 Note Agreement] CONNECTICUT GENERAL LIFE INSURANCE COMPANY BY: CIGNA INVESTMENTS, INC. (AUTHORIZED AGENT) By: /s/ Debra J. Height -------------------------------- Name: Debra J. Height Title: Managing Director LIFE INSURANCE COMPANY OF NORTH AMERICA BY: CIGNA INVESTMENTS, INC. (AUTHORIZED AGENT) By: /s/ Debra J. Height -------------------------------- Name: Debra J. Height Title: Managing Director PRINCIPAL LIFE INSURANCE COMPANY BY: PRINCIPAL CAPITAL MANAGEMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ITS AUTHORIZED SIGNATORY By: /s/ Clint Woods -------------------------------- Name: Clint Woods Title: Counsel By: /s/ Christopher J. Henderson -------------------------------- Name: Christopher J. Henderson Title: Counsel PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS BY: PRINCIPAL CAPITAL MANAGEMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ITS AUTHORIZED SIGNATORY By: /s/ Clint Woods --------------------------------- Name: Clint Woods Title: Counsel By: /s/ Christopher J. Henderson --------------------------------- Name: Christopher J. Henderson Title: Counsel [Signature Page to Amended and Restated 1998 Note Agreement] CGU LIFE INSURANCE COMPANY OF AMERICA, A DELAWARE CORPORATION (FORMERLY KNOWN AS COMMERCIAL UNION LIFE INSURANCE COMPANY OF AMERICA) BY: PRINCIPAL CAPITAL MANAGEMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ITS ATTORNEY IN FACT By: /s/ Clint Woods ---------------------------------- Name: Clint Woods Title: Counsel By: /s/ Christopher J. Henderson ---------------------------------- Name: Christopher J. Henderson Title: Counsel JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/ Robert E. Whalen, II ----------------------------------- Name: Robert E. Whalen, II Title: Vice President JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, SUCCESSOR BY MERGER TO AH (MICHIGAN) LIFE INSURANCE COMPANY By: /s/ Robert E. Whalen, II ----------------------------------- Name: Robert E. Whalen, II Title: Vice President NORTHERN LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich ------------------------------------ Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich ------------------------------------ Name: James V. Wittich Title: Senior Vice President [Signature Page to Amended and Restated 1998 Note Agreement] RELIASTAR LIFE INSURANCE COMPANY, AS SUCCESSOR BY MERGER TO RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich ------------------------------------- Name: James V. Wittich Title: Senior Vice President MODERN WOODMEN OF AMERICA By: /s/ Nick S. Coin ------------------------------------- Name: Nick S. Coin Title: Manager Securities Division CLARICA LIFE INSURANCE COMPANY - U.S. By: /s/ Constance L. Keller ------------------------------------- Name: Constance L. Keller Title: Executive Director Private Placements [Signature Page to Amended and Restated 1998 Note Agreement] EXHIBIT A [FORM OF SENIOR SECURED NOTE DUE MARCH 31, 2008] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. IPG HOLDINGS LP AMENDED AND RESTATED SENIOR SECURED NOTE DUE MARCH 31, 2008 No. R-[__] [Date] $[_______] PPN: 44981# AD 9 IPG HOLDINGS LP, a Delaware limited partnership (the "ISSUER"), for value received, hereby promises to pay to [_________________], or its registered assigns, on the 31st day of March 31, 2008, the principal amount of [__________________] U.S. DOLLARS ($[_________]) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon, computed in the manner provided in Section 2.1 of the Note Agreement (defined below), payable semiannually on the last day of each March and September in each year (commencing on March 31, 2002) and at maturity. The Issuer agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and Make-Whole Amount, if any, and (to the extent legally enforceable) on any overdue installment of interest, both before and after demand and judgment, at a rate equal to the Applicable Default Rate (as defined in the Note Agreement). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Citibank, N.A., in New York, New York or at such other place in the State of New York as the Issuer shall have designated by written notice to the holder of this Note as provided in the Note Agreement referred to below. This Note is one of the Amended and Restated Senior Secured Notes due March 31, 2008 (collectively, as may be amended from time to time, the "NOTES") of the Issuer in an aggregate principal amount of U.S. $137,000,000, pursuant to the terms and provisions of that certain Amended and Restated Note Agreement, dated as of December 20, 2001 (as may be amended from time to time, the "NOTE AGREEMENT"), entered into by the Issuer, Intertape Polymer, Inc., a Canadian corporation and general partner of the Issuer and Intertape Polymer Group Inc., a Canadian corporation, and the purchasers named therein. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreement to all the benefits provided by the Note Agreement. Reference is hereby made to the Note Agreement for a statement of such rights and benefits. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Exhibit 4.6(c)-1 ss.5.18 of the Note Agreement and (ii) to have made the representation set forth in ss.3.2 of the Note Agreement. This Note and the other Notes outstanding under the Note Agreement may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreement. The Notes are not subject to prepayment or redemption at the option of the Issuer prior to its expressed maturity date except on the terms and conditions and in the amounts and with the Make-Whole Amount, if any, set forth in the Note Agreement. The payment of all principal of, premium, if any, and interest in this Note and the other Notes outstanding under the Note Agreement has been unconditionally guaranteed, and has the benefit of security, in each case as contemplated by the Note Agreement. Reference is hereby made thereto for a statement of the rights and benefits accorded thereby. This Note is registered on the books of the Issuer and is transferable only by surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, Make-Whole Amount, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note shall be governed by and construed in accordance with the laws of the State of New York. IPG HOLDINGS LP BY: INTERTAPE POLYMER INC., ITS GENERAL PARTNER By: __________________________ Name: Title: Exhibit 4.6(c)-2 EX-5 7 m06925orex5.txt AMENDED AND RESTATED NOTE AGREEMENT Exhibit 5 ================================================================================ IPG HOLDINGS LP AMENDED AND RESTATED NOTE AGREEMENT DATED AS OF DECEMBER 20, 2001 U.S. $25,000,000 SENIOR SECURED NOTES, SERIES A, DUE 2005 U.S. $112,000,000 SENIOR SECURED NOTES, SERIES B, DUE 2009 GUARANTEED BY INTERTAPE POLYMER GROUP INC. INTERTAPE POLYMER INC. INTERTAPE POLYMER CORP. IPG FINANCE LLC IPG (US) INC. AND EACH OF THE OTHER RESTRICTED SUBSIDIARIES ================================================================================ TABLE OF CONTENTS
PAGE 1. BACKGROUND; AMENDMENT AND RESTATEMENT............................................................1 1.1. Background..............................................................................1 1.2. Authorization of Amendment and Restatement..............................................2 1.3. Amendment and Restatement...............................................................2 1.4. Effective Date..........................................................................3 1.5. Guaranty Agreements.....................................................................3 1.6. Collateral..............................................................................3 1.7. Waiver of Existing Defaults.............................................................4 2. INTEREST; PREPAYMENT OF NOTES....................................................................4 2.1. Interest................................................................................4 2.2. Prepayments.............................................................................5 2.3. Required Prepayments upon Equity Events.................................................6 2.4. Required Prepayments from Excess Cash Flow..............................................7 2.5. Offer to Prepay upon Change in Control..................................................9 2.6. Insurance and Condemnation Proceeds.....................................................10 2.7. Optional Prepayment with Premium........................................................10 2.8. Notice of Certain Optional Prepayments..................................................11 2.9. Application of Prepayments..............................................................11 2.10. Direct Payment..........................................................................11 3. REPRESENTATIONS..................................................................................12 3.1. Representations of the General Partner, the Issuer and the Parent.......................12 3.2. Representations of the Noteholders......................................................12 3.3. Deemed Representations of Transferees of the Notes......................................13 4. CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT.................................................14 4.1. General Partner and Issuer Compliance Certificates......................................14 4.2. Parent Closing Certificates; Restricted Subsidiary Certificates.........................14 4.3. Guaranty Agreements.....................................................................15 4.4. Legal Opinions..........................................................................15 4.5. Security Documents; Collateral..........................................................16 4.6. Collateral Matters......................................................................17 4.7. Bank Documents..........................................................................18 4.8. Private Placement Numbers...............................................................18 4.9. Consent to Receive Service of Process...................................................18 4.10. Representations and Warranties..........................................................19 4.11. Total Debt to EBITDA Ratio..............................................................19 4.12. Financial Statements....................................................................19 4.13. Performance; No Default.................................................................19 4.14. Legality................................................................................19 4.15. Satisfactory Proceedings................................................................19 4.16. Payment of Special Counsel Fees and Noteholder Expenses.................................20 4.17. Payment of Certain Fees.................................................................20
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PAGE 5. PARENT, GENERAL PARTNER AND ISSUER COVENANTS.....................................................20 5.1. Corporate or Partnership Existence, Etc.................................................20 5.2. Insurance...............................................................................21 5.3. Taxes; Claims for Labor and Materials; Compliance with Laws.............................24 5.4. Maintenance, Etc........................................................................25 5.5. Nature of Business......................................................................26 5.6. Consolidated Net Worth..................................................................26 5.7. Coverage Ratios.........................................................................26 5.8. Leverage Ratios.........................................................................27 5.9. Additional Limitations on Debt..........................................................29 5.10. Limitation on Liens.....................................................................29 5.11. Permitted Investments and Restricted Payments...........................................31 5.12. Mergers, Consolidations and Sales of Assets.............................................34 5.13. Interest Rate Adjustment Date Fee.......................................................36 5.14. Repurchase of Notes.....................................................................36 5.15. Transactions with Affiliates............................................................37 5.16. Termination of Pension Plans............................................................37 5.17. Designation of Restricted Subsidiaries..................................................37 5.18. Reports and Rights of Inspection........................................................37 5.19. Pari Passu Debt.........................................................................43 5.20. Most Favored Lender.....................................................................43 5.21. Limitation on Business Activities.......................................................44 5.22. Ownership of Subsidiaries...............................................................44 5.23. Limitation on Issuer Debt...............................................................44 5.24. No Restrictions on Distributions........................................................44 5.25. Limitation on Capital Expenditures......................................................44 5.26. Intellectual Property...................................................................45 5.27. No Amendments to Credit Agreement.......................................................45 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..........................................................46 6.1. Events of Default.......................................................................46 6.2. Notice to Holders.......................................................................48 6.3. Acceleration of Maturities..............................................................48 6.4. Rescission of Acceleration..............................................................49 7. AMENDMENTS, WAIVERS AND CONSENTS.................................................................49 7.1. Consent Required........................................................................49 7.2. Solicitation of Holders.................................................................49 7.3. Effect of Amendment or Waiver...........................................................50 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.........................................................50 8.1. Definitions.............................................................................50 8.2. Accounting Principles...................................................................73 8.3. Directly or Indirectly..................................................................73
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PAGE 9. MISCELLANEOUS....................................................................................74 9.1. Registered Notes........................................................................74 9.2. Exchange of Notes.......................................................................74 9.3. Loss, Theft, Etc. of Notes..............................................................74 9.4. Expenses; Stamp Tax and Other Indemnity.................................................75 9.5. Powers and Rights Not Waived; Remedies Cumulative.......................................76 9.6. Notices.................................................................................76 9.7. Successors and Assigns..................................................................76 9.8. Survival of Covenants and Representations...............................................76 9.9. Severability............................................................................77 9.10. Governing Law...........................................................................77 9.11. Jurisdiction and Service in Respect of Issuer and Parent................................77 9.12. Payments Free and Clear of Taxes........................................................77 9.13. Currency of Payments; Judgments.........................................................78 9.14. Captions................................................................................79 9.15. Power of Attorney for Quebec Purposes...................................................79 9.16. Interest Provisions.....................................................................79 9.17. Language................................................................................80
iii Schedules and Exhibits
Schedule I - Information as to Noteholders Schedule II - Existing Material Adverse Changes and Existing Defaults Schedule III - Environmental Information Exhibit A-1 - Form of Senior Secured Note, Series A, due 2005 Exhibit A-2 - Form of Senior Secured Note, Series B, due 2009 Exhibit B-1 - Representations and Warranties of the Issuer and General Partner Annex A - Litigation Exhibit B-2 - Representations and Warranties of the Parent Annex A - Subsidiaries Annex B - Debt and Long-Term Liens Annex C - Locations of Assets and Head Offices Annex D - Real Property Annex E - Unrestricted and Inactive Subsidiaries Annex F - Patents and Trademarks Annex G - Claims, etc. regarding Hazardous Substances Annex H - Hazardous Substances Annex I - Litigation Exhibit 4.1(a) - Form of Officer's Certificate of Issuer Exhibit 4.1(b)-1 - Form of Secretary's Certificate of General Partner Exhibit 4.1(b)-2 - Form of Secretary's Certificate of Issuer Exhibit 4.2(a) - Form of Officer's Certificate of Parent Exhibit 4.2(b) - Form of Secretary's Certificate of Parent Exhibit 4.3(a) - Form of Parent Guaranty Agreement Exhibit 4.3(b) - Form of Subsidiary Guaranty Agreement Exhibit 4.5(a) - Form of Collateral Trust Indenture Exhibit 4.5(b) - Form of Security Agreement Exhibit 4.5(c) - Form of Pledge Agreement Exhibit 4.5(d) - Form of Intercreditor Agreement Exhibit 4.6(b) - Form of U.S. Environmental Indemnification Agreement Exhibit 4.6(c) - Form of Canadian Environmental Indemnification Agreement
iv IPG HOLDINGS LP 110E Montee de Liesse St. Laurent, Quebec H4T 1N4 Canada AMENDED AND RESTATED NOTE AGREEMENT Re: U.S. $25,000,000 Senior Secured Notes, Series A Due 2005 U.S. $112,000,000 Senior Secured Notes, Series B Due 2009 Guaranteed By Intertape Polymer Group Inc. Intertape Polymer Inc. Intertape Polymer Corp. IPG Finance LLC IPG (US) Inc. and other Restricted Subsidiaries Dated as of December 20, 2001 To the Noteholders named in Schedule I hereto which are signatories to this Agreement Ladies and Gentlemen: The undersigned, IPG HOLDINGS LP, a limited partnership formed under the laws of the State of Delaware (the "ISSUER"), INTERTAPE POLYMER INC., a Canadian corporation and general partner of the Issuer (the "GENERAL PARTNER") and INTERTAPE POLYMER GROUP INC., a Canadian corporation (the "PARENT" and, together with the Issuer and the General Partner, the "OBLIGORS"), jointly and severally, agree with each of the Persons named in Schedule I hereto (collectively, the "NOTEHOLDERS") as follows: 1. BACKGROUND; AMENDMENT AND RESTATEMENT 1.1. BACKGROUND. The Issuer issued (a) Twenty-Five Million United States Dollars (U.S. $25,000,000) in aggregate principal amount of its 7.66% Senior Guaranteed Notes, Series A, due May 31, 2005 (the "EXISTING SERIES A NOTES") and (b) One Hundred Twelve Million United States Dollars (U.S. $112,000,000) in aggregate principal amount of its 7.81% Senior Guaranteed Notes, Series B, due May 31, 2009 (the "EXISTING SERIES B NOTES" and, together with the Existing Series A Notes, the "EXISTING NOTES"), pursuant to those certain separate Note Agreements, each dated as of July 1, 1999 (collectively, as amended from time to time prior to the date hereof, the "EXISTING NOTE AGREEMENT"), among it, the General Partner, the Parent and each of the purchasers named in Schedule I thereto. The Existing Notes are substantially in the form of Exhibit A-1 and Exhibit A-2, as the case may be, attached to the Existing Note Agreement. Each of the Noteholders is as of the Effective Date a holder of the aggregate principal amount of the Existing Notes indicated opposite its name in Schedule I hereto. Pursuant to the Existing Note Agreement, among other things, each of the Parent and IPG (US) Inc. entered into those separate guaranty agreements, each dated as of July 1, 1999 (collectively, the "EXISTING GUARANTY AGREEMENTS"), pursuant to which the Parent and IPG (US) Inc. each unconditionally guaranteed the obligations of the Issuer under the Existing Note Agreement and the Existing Notes. The Obligors have requested the amendment and restatement, in their entirety, of the Existing Note Agreement and the Existing Notes as provided for in this Agreement, and the replacement of the Existing Guaranty Agreements as contemplated hereby. 1.2. AUTHORIZATION OF AMENDMENT AND RESTATEMENT. Each of the Obligors hereby authorizes, agrees and consents to the amendment and restatement in their entirety of the Existing Note Agreement and the Existing Notes as provided for herein. The Existing Series A Notes, as amended and restated in the form of Exhibit A-1 to this Agreement, shall be hereinafter referred to, individually, as a "SERIES A NOTE" and, collectively, as the "SERIES A NOTES." The Existing Series B Notes, as amended and restated in the form of Exhibit A-2 to this Agreement, shall be hereinafter referred to, individually, as a "SERIES B NOTE" and, collectively, as the "SERIES B NOTES." The Series A Notes and the Series B Notes are herein sometimes collectively referred to as the "NOTES" and individually referred to as a "NOTE". The term "Notes" as used herein shall include each Note delivered pursuant to any provision of this Agreement, and each Note delivered in substitution or exchange for any such Note. The obligations of the Issuer under the Notes and this Agreement shall be unconditionally guaranteed by the General Partner, the Parent and each of the other Restricted Subsidiaries. The Notes shall be secured pursuant to and entitled to all of the applicable benefits of the Security Documents. 1.3. AMENDMENT AND RESTATEMENT. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 of this Agreement on or before December 27, 2001, each Noteholder, by its execution of this Agreement, hereby agrees and consents to (a) the amendment and restatement in its entirety of the Existing Note Agreement by this Agreement and, upon the satisfaction or waiver of such conditions precedent, the Existing Note Agreement is hereby so amended and restated, (b) the amendment and restatement in their entirety of the Existing Notes and (c) the replacement of the Existing Guaranty Agreements, and, upon the satisfaction or waiver of such conditions precedent, the Existing Notes are hereby amended and restated in their entirety in the forms attached hereto as Exhibit A-1 and Exhibit A-2, as the case may be, and the Existing Guaranty Agreements are hereby terminated and of no further force or effect and replaced with the Parent Guaranty Agreement and the Subsidiary Guaranty Agreement. Upon the satisfaction or waiver of such conditions precedent, the Existing Notes shall be, without any further action required on the part of any other Person, deemed to be automatically amended and restated to conform to and have the terms provided in the forms attached hereto as Exhibit A-1 and Exhibit A-2, as the case may be. Upon the request of any Noteholder, the Issuer shall deliver a Note, as amended and restated in the form attached hereto as Exhibit A-1 or Exhibit A-2, as the case may be, against surrender of the related Existing Note. 2 1.4. EFFECTIVE DATE. Subject to the satisfaction or waiver of the conditions set forth in Section 4 of this Agreement, the closing of the transactions contemplated by this Agreement will be held on December 27, 2001 (the "EFFECTIVE DATE") at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York. 1.5. GUARANTY AGREEMENTS. The payment by the Issuer of all amounts due with respect to the Notes and performance of all obligations of the Issuer under this Agreement and the Collateral Trust Indenture will be unconditionally guaranteed (a) by the Parent and the General Partner under a guaranty agreement to be dated as of the Effective Date (as the same may be amended from time to time, the "PARENT GUARANTY AGREEMENT") from the Parent and the General Partner, and (b) by each of the other Restricted Subsidiaries under a guaranty agreement to be dated as of the Effective Date (as the same may be amended from time to time, the "SUBSIDIARY GUARANTY AGREEMENT") from each of such Restricted Subsidiaries. The Parent Guaranty Agreement and the Subsidiary Guaranty Agreement are hereafter referred to collectively as the "GUARANTY AGREEMENTS" and individually as a "GUARANTY AGREEMENT". 1.6. COLLATERAL. The Notes and the Guaranty Agreements will be secured pursuant to and entitled to all of the applicable benefits of the Security Documents. In the event that at any time after the Effective Date (a) the Parent shall have maintained an Acceptable Rating at all times during each of its two previous fiscal quarters in respect of the long-term, senior unsecured Debt of the Issuer and (b) Total Debt, determined as of the end of each of the four most recently ended fiscal quarters of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for the period of four consecutive fiscal quarters of the Parent ended at the end of each of such four most recently ended fiscal quarters of the Parent, the Parent may give written notice to each holder of Notes (which notice shall include copies of the letters to the Parent from Standard & Poor's or Moody's evidencing that such Acceptable Rating is in full force and effect and has been in full force and effect at all times during each of the two previous fiscal quarters of the Parent immediately preceding the date of such notice) requesting that the holders of the Notes agree not to direct the U.S. Collateral Trustee or the Canadian Collateral Trustee to enforce any of the provisions of the Security Documents, commencing on a date specified in such notice (the "COLLATERAL SUSPENSION DATE") that is not less than ten (10) Business Days after the date of such notice. The holders of the Notes agree not to direct the U.S. Collateral Trustee or the Canadian Collateral Trustee to, and the holders of the Notes shall not, take any action to enforce or to exercise any rights or remedies under or in respect of any of the provisions of the Security Documents for the period commencing on the Collateral Suspension Date and ending on the earliest date on which the Collateral Suspension Conditions shall not continue to be satisfied (the "COLLATERAL SUSPENSION PERIOD"), provided that the holders of the Notes, the U.S. Collateral Trustee and the Canadian Collateral Trustee shall have received an officer's certificate, executed by a Senior Officer and dated the Collateral Suspension Date, specifying that each of the applicable Collateral Suspension Conditions are satisfied as of such date. If at any time after the Collateral Suspension Date any of the Collateral Suspension Conditions shall not continue to be 3 satisfied (other than clause (d) in the definition of "Collateral Suspension Conditions"), the foregoing agreement of the holders of the Notes not to so direct the U.S. Collateral Trustee or the Canadian Collateral Trustee, and to not take any such action, shall no longer be in effect and the holders of the Notes shall be free to so direct the U.S. Collateral Trustee and the Canadian Collateral Trustee to take any and all permitted actions under any of the Security Documents and to take any actions permitted to be taken by the Noteholders thereunder. The provisions of Section 5.10 shall continue to apply during the Collateral Suspension Period. At any time that there is no Debt outstanding under the Credit Agreement, and each of the Bank Term Facilities and Bank Facility A shall have been terminated, if any member of the Restricted Group enters into a successor revolving credit facility to replace Bank Facility A which is not secured by any Liens on any property of any member of the Restricted Group, and the Collateral Suspension Conditions shall continue to be satisfied at such time, the holders of the Notes shall direct the U.S. Collateral Trustee and the Canadian Collateral Trustee to fully release the Liens granted under the Security Documents. 1.7. WAIVER OF EXISTING DEFAULTS. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 of this Agreement on or before December 27, 2001, each Noteholder, by its execution of this Agreement, hereby permanently and irrevocably waives its rights arising out of Defaults and Events of Defaults described on Schedule II hereto, provided that such waiver shall have no effect on any Default or Event of Default occurring after the Effective Date arising in connection with any provisions of this Agreement, including any provisions which are similar to those giving rise to the Defaults and Events of Default set forth on Schedule II. 2. INTEREST; PREPAYMENT OF NOTES 2.1. INTEREST. Interest shall accrue on the unpaid principal balance of the Notes on the basis of a 360-day year of twelve 30-day months as follows: (a) Series A Notes. Each Series A Note will bear interest on the unpaid principal balance thereof at a rate equal to: (i) prior to the Effective Date, 7.66% per annum; (ii) from and after the Effective Date and prior to May 1, 2002, 9.91% per annum; and (iii) from and after May 1, 2002, (A) for each date prior to an Interest Rate Adjustment Date, the lesser of (x) the highest interest rate allowed by applicable law on the Series A Notes, and (y) 9.91% per annum plus the Applicable Adjustment Margin as of such date and (B) for each date on or after an Interest Rate Adjustment Date, 9.91% per annum. (b) Series B Notes. Each Series B Note will bear interest on the unpaid principal balance thereof at a rate equal to: 4 (i) prior to the Effective Date, 7.81% per annum; (ii) from and after the Effective Date and prior to May 1, 2002, 10.06% per annum; and (iii) from and after May 1, 2002, (A) for each date prior to an Interest Rate Adjustment Date, the lesser of (x) the highest interest rate allowed by applicable law on the Series B Notes, and (y) 10.06% per annum plus the Applicable Adjustment Margin as of such date and (B) for each date on or after an Interest Rate Adjustment Date, 10.06% per annum. Interest on each Series A Note and Series B Note shall be payable, in arrears, semi-annually on the last day of each May and November in each year, commencing May 31, 2002, until the full principal amount of such Note shall have been paid. Interest shall accrue on any overdue principal (including any overdue prepayment of principal and Make-Whole Amount, if any), and (to the extent permitted by applicable law) on any overdue installment of interest on the Notes both before and after demand and judgment at a rate per annum equal to the Applicable Default Rate. 2.2. PREPAYMENTS. (a) Series A Notes. Except as set forth in Section 2.3 through Section 2.5, or as contemplated by the required offers to prepay with insurance or condemnation proceeds as set forth in the Intercreditor Agreement, neither the Issuer nor any Obligor shall be required to make an offer to prepay the Series A Notes and the Series A Notes are not subject to prepayment or redemption prior to their expressed maturity date. (b) Series B Notes. Subject to the provisions of Section 2.9(b), the Issuer agrees that on May 31 and November 30 in each year, commencing November 30, 2005 and ending November 30, 2008, both inclusive, the Issuer will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Series B Notes, an amount equal to the lesser of (i) U.S. $13,440,000 and (ii) the principal amount of the Series B Notes then outstanding. The entire remaining principal amount of the Series B Notes shall become due and payable on May 31, 2009. No premium shall be payable in connection with any required prepayment made pursuant to this Section 2.2. Except as set forth in this Section 2.2, in Section 2.3 through Section 2.5, or as contemplated by the required offers to prepay with insurance or condemnation proceeds as set forth in the Intercreditor Agreement, neither the Issuer nor any Obligor shall be required to make any offer to prepay the Series B Notes and the Series B Notes are not subject to prepayment or redemption prior to their expressed maturity date. (c) Tax Cap. Notwithstanding anything else contained herein or in any of the other Financing Documents, neither the Issuer nor any Obligor shall be required to prepay, or offer to prepay, more than twenty-five percent (25%) of the aggregate principal amount of any Note of any Series prior to the day following the fifth (5th) anniversary of the Original Closing Date (in aggregate for all prepayments made in respect of such Note required under Section 2.2 through Section 2.4 and prepayments 5 made with insurance or condemnation proceeds as set forth in the Intercreditor Agreement), except in the circumstances permitted by clauses 212(1)(b)(vii)(C) to (F) inclusive of the Income Tax Act (Canada). For the avoidance of doubt, this Section 2.2(c) shall not be construed to reduce, limit or affect any other payments under this Agreement or the other Financing Documents. 2.3. REQUIRED PREPAYMENTS UPON EQUITY EVENTS. (a) Notice of Equity Event. At all times prior to the first date after which any member of the Restricted Group shall have received Equity Event Proceeds in respect of Equity Events occurring after the Effective Date in an aggregate amount equal to at least the outstanding principal amount under Bank Facility B on such date, other than Equity Events to the extent arising out of the exercise of employee stock options in the ordinary course at an exercise price up to an aggregate maximum amount of $5,000,000 per fiscal year of the Parent, the Issuer will, on the date of receipt of such Equity Event Proceeds by such member of the Restricted Group, give written notice of such Equity Event to each holder of Notes. Subject to the provisions of Section 2.2(c), such notice shall contain and constitute an offer to prepay the Notes of such holder, at par and without payment of the Make-Whole Amount, on a date specified in such notice (the "EQUITY EVENT PREPAYMENT DATE") that is not more than forty-five (45) days after the date of such notice, in a principal amount equal to the Pro Rata Share of such holder at such time, multiplied by the Equity Event Payment in respect of such Equity Event, multiplied by the Tax Percentage Limit in respect of the amount of such Equity Event Payment at such time. For the avoidance of doubt, the Equity Event Proceeds received by the members of the Restricted Group in respect of any Equity Event shall be subject to the provisions of this Section 2.3 only to the extent that such Equity Event Proceeds, together with all Equity Event Proceeds theretofore received by the members of the Restricted Group after the Effective Date, do not exceed the outstanding principal amount under Bank Facility B as of the date on which the applicable Equity Event Proceeds are so received. (b) Acceptance; Rejection. At any time prior to twenty (20) days after any holder of Notes shall have received such written offer pursuant to Section 2.3(a), such holder may accept the offer to prepay made pursuant to this Section 2.3 by causing a notice of such acceptance to be delivered to the Issuer. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 2.3 with a timely notice of acceptance shall be deemed to constitute a rejection of such offer by such holder. Within three days after the end of such 20-day period, the Issuer shall offer, in writing, to each holder of Notes that shall have accepted its offer to prepay made pursuant to this Section 2.3, to prepay on such Equity Event Prepayment Date an additional portion of such holder's Notes as provided in Section 2.3(a) in a principal amount equal to its ratable share (based upon the ratio of the outstanding principal amount of Notes held by such holder at such time to the aggregate outstanding principal amount of Notes held at such time by all holders which have also accepted their respective offers to prepay made pursuant to this Section 2.3) of the portion of the Equity Event Payment as to which such offers to prepay were rejected or deemed rejected, multiplied by the Tax Percentage Limit in respect of such portion at such time (a "REMNANT EQUITY EVENT PREPAYMENT"). To accept any Remnant Equity Event Prepayment under this Section 2.3(b), a holder of 6 Notes shall cause a written notice of such acceptance to be delivered to the Issuer not later than eight (8) days after the date of receipt by such holder of such offer of the Remnant Equity Event Prepayment (it being understood that the failure by a holder to accept such offer of the Remnant Equity Event Prepayment as provided herein prior to the end of such eight-day period shall be deemed to constitute a rejection of said Remnant Equity Event Prepayment, and that any Remnant Equity Event Prepayment so rejected shall be reoffered, in the same manner, and subject to the applicable Tax Percentage Limit, pro rata, to any other holders which have accepted their respective offers of the applicable Remnant Equity Event Prepayments). If after such Equity Event Prepayment Date any portion of a Remnant Equity Event Prepayment has not been accepted, such remaining amount shall be offered to reduce the Commitment of the Bank Term Facilities. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.3 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes, together with interest on such principal amount accrued to the Equity Event Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on the Equity Event Prepayment Date. (d) Officer's Certificate. Each offer and reoffer to prepay the Notes pursuant to this Section 2.3 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.3; (ii) the Equity Event Prepayment Date; (iii) the last date upon which the offer or reoffer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.3(b); (iv) the portion of the principal amount of the applicable holder's Notes offered to be prepaid, setting forth the details of such computation; (v) the interest that would be due on the portion of such principal amount offered to be prepaid, accrued to the Equity Event Prepayment Date; and (vi) in reasonable detail, the nature and date of the applicable Equity Event. 2.4. REQUIRED PREPAYMENTS FROM EXCESS CASH FLOW. (a) Offer to Prepay from Excess Cash Flow. On each Excess Cash Flow Notice Date after March 31, 2002, the Issuer will deliver to each holder of Notes at such time a written offer to prepay the Notes of such holder, at par and without payment of the Make-Whole Amount, on the date specified in such notice, which date shall be no later than forty-five (45) days after such Excess Cash Flow Notice Date (the "EXCESS CASH FLOW PREPAYMENT DATE"), in a principal amount equal to the Pro Rata Share of such 7 holder at such time, multiplied by the Excess Cash Flow Payment with respect to such Excess Cash Flow Prepayment Date, multiplied by the Tax Percentage Limit in respect of the amount of such Excess Cash Flow Payment at such time. (b) Acceptance; Rejection. At any time prior to twenty (20) days after any holder of Notes shall have received such written offer pursuant to Section 2.4(a), such holder may accept the offer to prepay made pursuant to this Section 2.4 by causing a notice of such acceptance to be delivered to the Issuer. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 2.4 with a timely notice of acceptance shall be deemed to constitute a rejection of such offer by such holder. Within three days after the end of such 20-day period, the Issuer shall offer, in writing, to each holder of Notes that shall have accepted its offer to prepay made pursuant to this Section 2.4, to prepay on the Excess Cash Flow Prepayment Date an additional portion of such holder's Notes as provided in Section 2.4(a) in a principal amount equal to its ratable share (based upon the ratio of the outstanding principal amount of Notes held by such holder at such time to the aggregate outstanding principal amount of Notes held at such time by all holders which have also accepted their respective offers to prepay made pursuant to this Section 2.4) of the portion of the Excess Cash Flow Payment as to which such offers to prepay were rejected or deemed rejected, multiplied by the Tax Percentage Limit in respect of such portion at such time (a "REMNANT EXCESS CASH FLOW PREPAYMENT"), multiplied by the Tax Percentage Limit in respect of such amount of such Remnant Excess Cash Flow Prepayment at such time. To accept any Remnant Excess Cash Flow Prepayment under this Section 2.4(b), a holder of Notes shall cause a written notice of such acceptance to be delivered to the Issuer not later than eight (8) days after the date of receipt by such holder of such offer of the Remnant Excess Cash Flow Prepayment (it being understood that the failure by a holder to accept such offer of the Remnant Excess Cash Flow Prepayment as provided herein prior to the end of such eight-day period shall be deemed to constitute a rejection of said Remnant Excess Cash Flow Prepayment). If after the Excess Cash Flow Prepayment Date any portion of a Remnant Excess Cash Flow Prepayment has not been accepted, such remaining amount shall be offered to reduce the Commitment of the Bank Term Facilities. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.4 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes together with interest on such principal amount accrued to the Excess Cash Flow Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on such Excess Cash Flow Prepayment Date. (d) Officer's Certificate. Each offer and reoffer to prepay the Notes pursuant to this Section 2.4 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.4; (ii) the Excess Cash Flow Prepayment Date; 8 (iii) the last date upon which the offer or reoffer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.4(b); (iv) the portion of the principal amount of the applicable holder's Notes offered to be prepaid, setting forth the details of such computation; (v) the interest that would be due on the portion of such principal amount offered to be prepaid, accrued to the Excess Cash Flow Prepayment Date; and (vi) in reasonable detail, the computation of Excess Cash Flow in respect of which the Excess Cash Flow Payment is being calculated. (e) Bank Facility B. Notwithstanding anything else contained in this Section 2.4, the Issuer will not be obligated to prepay any Notes until Five Million United States Dollars (U.S. $5,000,000) in principal amount of the outstanding loans under Bank Facility B shall have been repaid pursuant to the provisions of Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement). 2.5. OFFER TO PREPAY UPON CHANGE IN CONTROL. (a) Notice and Offer. In the event of either (i) a Change in Control, or (ii) the obtaining of knowledge of a Control Event by any officer of any Obligor, then the Issuer will, within 3 Business Days of (x) such Change in Control or (y) the obtaining of knowledge of such Control Event (including via the receipt of notice of a Control Event from any holder of Notes), as the case may be, give written notice of such Change in Control or Control Event to each holder of Notes. In the event of a Change in Control, such written notice shall contain and constitute an offer to prepay all, but not less than all, of the Notes of each Series held by such holder, at par and without payment of the Make-Whole Amount, on a date specified in such notice (in respect of such Change in Control, the "CONTROL PREPAYMENT DATE") that is not less than 30 days and not more than 120 days after the date of such notice. In no event will any Obligor take any action, or permit any Subsidiary to take any action, to permit a Change in Control to occur prior to the Control Prepayment Date. Any payment made pursuant to this Section 2.5 shall not be reduced, limited or affected by the provisions of Section 2.2(c). (b) Acceptance; Rejection. A holder of Notes may accept or reject the offer to prepay made pursuant to this Section 2.5 by causing a notice of such acceptance or rejection to be delivered to the Issuer not later than 14 days after the date of receipt by such holder of the written offer of such prepayment. If so accepted, such offered prepayment shall be due and payable on the Control Prepayment Date. A failure by a 9 holder of Notes to respond to an offer to prepay made pursuant to this Section 2.5 shall be deemed to constitute a rejection of such offer by such holder. (c) Prepayment. Each prepayment of Notes pursuant to this Section 2.5 shall be at a price equal to 100% of the principal amount being prepaid with respect to such Notes, together with interest on such principal amount accrued to the Control Prepayment Date, but without any Make-Whole Amount. The prepayment shall be made on the Control Prepayment Date. (d) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 2.5 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) that such offer is made pursuant to this Section 2.5; (ii) the Control Prepayment Date; (iii) the last date upon which the offer can be accepted or rejected, and setting forth the consequences of failing to provide an acceptance or rejection, as provided in Section 2.5(b); (iv) the principal amount of each Note offered to be prepaid; (v) the interest that would be due on each Note offered to be prepaid, accrued to the Control Prepayment Date; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control. 2.6. INSURANCE AND CONDEMNATION PROCEEDS. Each prepayment of the principal amount of Notes with insurance or condemnation proceeds made pursuant to the provisions of the Intercreditor Agreement shall be made at 100% of the principal amount being prepaid together with interest on such principal amount accrued to the date of prepayment but without Make-Whole Amount, and shall be subject to the provisions of Section 2.2(c). 2.7. OPTIONAL PREPAYMENT WITH PREMIUM. Subject to Section 2.9, the Issuer shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes of both Series, either in whole or in part (but if in part then in a minimum principal amount of U.S. $1,000,000 in the aggregate) by payment of the principal amount of the Notes or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount, determined as of the date which is three (3) Business Days prior to the date of such prepayment pursuant to this Section 2.7. 10 2.8. NOTICE OF CERTAIN OPTIONAL PREPAYMENTS. The Issuer will give notice of any prepayment of the Notes of both Series pursuant to Section 2.7 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (a) such date, (b) the principal amount of the holder's Notes to be prepaid on such date, (c) that a Make-Whole Amount may be payable, (d) the date when such Make-Whole Amount will be calculated, (e) the estimated Make-Whole Amount, and (f) the accrued interest applicable to the prepayment as of the prepayment date. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the Make-Whole Amount, if any, payable with respect thereto shall become due and payable on the prepayment date specified in said notice. Not later than two (2) Business Days prior to the prepayment date specified in such notice, the Issuer shall provide each holder of a Note written notice of the Make-Whole Amount, if any, payable in connection with such prepayment and, whether or not any Make-Whole Amount is payable, a reasonably detailed computation of the Make-Whole Amount. 2.9. APPLICATION OF PREPAYMENTS. (a) In the case of each optional partial prepayment of the Notes pursuant to Section 2.7, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes of both Series then outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. Each optional partial prepayment of the Series B Notes pursuant to Section 2.7 shall be applied in inverse order of maturity. (b) Upon any partial prepayment of the Series B Notes pursuant to Section 2.3 through Section 2.5 or repurchase of Series B Notes pursuant to Section 5.14, or any partial prepayment with insurance or condemnation proceeds as contemplated by the Intercreditor Agreement, the principal amount of the payment required at maturity of the Series B Notes and each required prepayment of Series B Notes that becomes due under Section 2.2(b) on or after the date of such prepayment or repurchase shall be reduced in the same proportion as the aggregate unpaid principal amounts of the Series B Notes are reduced as a result of such prepayment or repurchase. 2.10. DIRECT PAYMENT. Notwithstanding anything to the contrary contained in this Agreement or the Notes, in the case of any Note owned by any Noteholder or a nominee of any Noteholder or owned by any subsequent Institutional Holder which has given written notice to the Issuer requesting that the provisions of this Section 2.10 shall apply, the Issuer will punctually pay when due the principal thereof, interest thereon and Make-Whole Amount, if any, due with respect to said principal, without any presentment thereof, directly to such Noteholder, nominee or subsequent Institutional Holder at the address set forth in Schedule I hereto for such Noteholder or nominee or such other address as such Noteholder, nominee or subsequent Institutional Holder may from time to time designate in writing to the Issuer or, if a bank account with a United States bank is designated for such Noteholder or nominee on Schedule I hereto or in any written notice to the 11 Issuer from such Noteholder, nominee or subsequent Institutional Holder, the Issuer will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account in any United States bank as such Noteholder, nominee or subsequent Institutional Holder may from time to time direct in writing. 3. REPRESENTATIONS 3.1. REPRESENTATIONS OF THE GENERAL PARTNER, THE ISSUER AND THE PARENT. (a) The General Partner and the Issuer represent and warrant that all representations and warranties set forth in Exhibit B-1 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. (b) The Parent represents and warrants that all representations and warranties set forth in Exhibit B-2 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. 3.2. REPRESENTATIONS OF THE NOTEHOLDERS. Each Noteholder represents that, by agreeing to the amendment and restatement of the Existing Note Agreement and the Existing Notes, it is specifically understood and agreed that such Noteholder holds the Notes for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of property of such Noteholder or such pension or trust funds shall at all times be within its or their control. Each Noteholder understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Issuer is not required to register the Notes. Each Noteholder represents, with respect to the funds with which such Noteholder paid the purchase price of the Existing Notes purchased by it (whether upon the original issuance thereof or by transfer from a prior holder thereof), that at least one of the following statements is an accurate representation as to each source of such funds (a "SOURCE"); (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceeds ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners (the "NAIC") Annual Statement filed with such Noteholder's state of domicile; or 12 (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as such Noteholder has disclosed to the obligors in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Issuer or the Parent and (ii) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuer and the Parent in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuer and the Parent in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 3.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 3.3. DEEMED REPRESENTATIONS OF TRANSFEREES OF THE NOTES. Any transferee of any Note, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 3.2 with respect to the Source of the funds with which such transferee paid the purchase price of such Note. 13 4. CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT The Existing Note Agreement and the Existing Notes shall be amended and restated in their entirety as provided in Section 1.3 upon the satisfaction or waiver by each of the Noteholders of each of the following conditions precedent: 4.1. GENERAL PARTNER AND ISSUER COMPLIANCE CERTIFICATES. (a) Officer's Certificate. Each Noteholder shall have received a certificate dated the Effective Date, signed by the President or a Vice President of the General Partner on behalf of the Issuer and as an authorized officer of the General Partner, substantially in the form set out in Exhibit 4.1(a), certifying that the conditions specified in Sections 4.10 and 4.11 have been fulfilled and that no Default or Event of Default shall have occurred and be continuing on the Effective Date. (b) Secretary's Certificate. Each Noteholder shall have received: (i) a certificate signed by the Secretary of the General Partner on behalf of the Issuer and (ii) a certificate of the Secretary of the General Partner, each dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which the General Partner and the Issuer, respectively, are parties, substantially in the forms set out in Exhibit 4.1(b)-1 and Exhibit 4.1(b)-2, respectively. 4.2. PARENT CLOSING CERTIFICATES; RESTRICTED SUBSIDIARY CERTIFICATES. (a) Officer's Certificate. Each Noteholder shall have received a certificate dated the Effective Date, signed by the President or Vice President, Finance and Administration, of the Parent, substantially in the form set out in Exhibit 4.2(a), certifying that the conditions specified in Sections 4.10 and 4.11 have been fulfilled and that no Default or Event of Default shall have occurred and be continuing on the Effective Date and confirming that, with the exception of the Unrestricted Subsidiaries, all of the Parent's Subsidiaries as of the Effective Date are and shall remain Restricted Subsidiaries during the term of this Agreement unless such Restricted Subsidiaries are sold, transferred or dissolved as permitted in accordance with the terms hereof. (b) Parent Secretary's Certificate. Each Noteholder shall have received a certificate signed by the Secretary of the Parent, dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which the Parent is a party, substantially in the form set out in Exhibit 4.2(b). (c) Restricted Subsidiary Secretary's Certificate. Each Noteholder shall have received a certificate signed by the Secretary of each other Restricted Subsidiary, dated the Effective Date, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Financing Documents to which such Restricted Subsidiary is a party, substantially in the form set out in Exhibit 4.2(c). 14 4.3. GUARANTY AGREEMENTS. Each Noteholder shall have received the Parent Guaranty Agreement and the Subsidiary Guaranty Agreement, each duly authorized, executed and delivered by the Parent, the General Partner and each of the Restricted Subsidiaries, as the case may be, substantially in the forms set out in Exhibit 4.3(a) and Exhibit 4.3(b), respectively, and each of the Guaranty Agreements shall be in full force and effect. 4.4. LEGAL OPINIONS. Each Noteholder shall have received opinions, dated the Effective Date, from (a) Morgan, Lewis & Bockius LLP, special U.S. counsel for the Obligors and the Restricted Subsidiaries, (b) Stikeman, Elliott, Canadian counsel for the Obligors and the Restricted Subsidiaries, (c) Bingham Dana LLP, special counsel for the Noteholders, (d) Shipman & Goodwin LLP, counsel for the U.S. Collateral Trustee, (e) Morgan, Lewis & Bockius LLP, special Florida counsel for the Restricted Subsidiaries, (f) Nelson Mullins Riley & Scarborough, LLP, special South Carolina counsel for the Restricted Subsidiaries, (g) Kaufman & Canoles, special Virginia counsel for certain Restricted Subsidiaries, (h) Stikeman, Elliott, special Canadian local counsel for the Obligors and the Restricted Subsidiaries, and (i) Stewart McKelvey Stirling Scales, special Canadian local counsel for the Obligors and certain Restricted Subsidiaries, each in form and substance satisfactory to such Noteholder covering such matters pertaining to the transactions contemplated hereunder as such Noteholder may reasonably request. Each of the Obligors hereby requests and directs its counsel named in the foregoing clauses (a), (b), (e), (f), (g), (h) and (i) to deliver such opinions to each of the Noteholders. The Obligors hereby acknowledge that in acceding to the amendment and restatement of the Existing Note Agreement and the Existing Notes pursuant hereto, the Noteholders will be relying on, among other things, the opinions of such counsel for the Obligors and such Restricted Subsidiaries. 15 4.5. SECURITY DOCUMENTS; COLLATERAL. (a) Collateral Trust Indenture. Each of the Restricted Subsidiaries (other than those organized under the laws of Canada or any jurisdiction in Canada), the Noteholders, the Banks and State Street Bank and Trust Company shall have executed and delivered a collateral trust indenture (as amended, supplemented or otherwise modified from time to time, the "COLLATERAL TRUST INDENTURE"), substantially in the form of Exhibit 4.5(a). (b) U.S. Mortgages. Each of the Obligors and the Restricted Subsidiaries shall have executed and delivered mortgages and deeds of trust and assignments of leases and rents, as applicable (collectively, the "U.S. MORTGAGES"), with respect to all real property (other than Excluded Non-Mortgaged Properties) located in any jurisdiction in the United States and owned or leased by such Obligor or such Restricted Subsidiary, in favor of the U.S. Collateral Trustee, securing such Obligor's or such Restricted Subsidiary's obligations under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and the obligations of such Obligor or Restricted Subsidiary in respect of Bank Facility A and the Bank Term Facilities. (c) Canadian Mortgages and Security Documents. Each of the Obligors and the Restricted Subsidiaries that is organized under the laws of Canada or any jurisdiction in Canada shall have executed and delivered (i) each of the deeds of hypothec, mortgages, pledge agreements, general security agreements and other documents related thereto (collectively, the "CANADIAN MORTGAGES") with respect to all real and personal property located in any jurisdiction in Canada held by such Obligor or such Restricted Subsidiary, in favor of the Canadian Collateral Trustee, securing such Obligor's or such Restricted Subsidiary's obligations under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and Bank Facility A and the Bank Term Facilities and (ii) each of the other agreements and instruments executed or to be executed pursuant to the terms of the Canadian Mortgages and such other agreements and instruments, as are required by the Noteholders or the Canadian Collateral Trustee, in form and substance reasonably acceptable to the Noteholders (collectively, together with the Canadian Mortgages, and as amended, supplemented or otherwise modified from time to time, the "CANADIAN SECURITY DOCUMENTS"). (d) Security Agreement and Pledge Agreement. Each of the Obligors and the Restricted Subsidiaries (other than any such Person that is organized under the laws of Canada or any jurisdiction in Canada) shall have executed and delivered to the U.S. Collateral Trustee a Security Agreement, substantially in the form of Exhibit 4.5(b) (as amended, supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT") and a Pledge Agreement, substantially in the form of Exhibit 4.5(c) (as amended, supplemented or otherwise modified from time to time, the "PLEDGE AGREEMENT"), each securing the indebtedness and obligations of such 16 Obligor or Restricted Subsidiary under this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, and the obligations of such Obligor or Restricted Subsidiary in respect of Bank Facility A and the Bank Term Facilities with a Lien encumbering certain personal property of such Obligors and Restricted Subsidiaries and the pledge of Equity Interests in and Debt owed by Restricted Subsidiaries to such Obligor or Restricted Subsidiary, respectively. (e) Collateral. The Security Documents shall be in full force and effect. All actions necessary to perfect the Liens of the U.S. Collateral Trustee and the Canadian Collateral Trustee in the Collateral (including, without limitation, the filing of all appropriate financing statements and the recording of all appropriate documents with appropriate public officials) shall have been taken in accordance with the terms and provisions of the Security Documents, to the extent that such actions are permitted under applicable law. The Liens of the U.S. Collateral Trustee and the Canadian Collateral Trustee in the Collateral shall be valid and enforceable and the Collateral shall be subject to no other Liens, other than Permitted Liens, Liens to be discharged pursuant to the undertaking contemplated by Section 4.6(e) and any other Liens acceptable to the Noteholders. All recording, subscription and other similar fees, and all taxes and other expenses related to such filings, registrations and recordings shall have been paid, or caused to be paid, in full by the Obligors to the extent then required in accordance with the terms of the Security Documents. (f) Intercreditor Agreement. The Parent and each of the Restricted Subsidiaries, the U.S. Collateral Trustee, the Canadian Collateral Trustee, the U.S. Collateral Agent and the Canadian Collateral Agent (as each is defined in the Credit Agreement), the Noteholders and the Banks shall have executed and delivered to each Noteholder an intercreditor agreement (as amended, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT") substantially in the form of Exhibit 4.5(d). 4.6. COLLATERAL MATTERS. (a) Environmental Information. Each of the Obligors shall have delivered to each Noteholder the information set forth in Schedule III, which relates to certain environmental matters at certain of the properties which are the subject of one of the U.S. Mortgages or the Canadian Mortgages relating to real property (collectively, the "MORTGAGED PROPERTIES"). (b) Environmental Indemnification. Certain of the Obligors shall have delivered to each Noteholder, the U.S. Collateral Trustee and certain other parties, one or more environmental indemnification agreements (collectively, as amended, supplemented or otherwise modified from time to time, the "U.S. ENVIRONMENTAL INDEMNIFICATION AGREEMENT"), substantially in the form of Exhibit 4.6(b). Certain of the Obligors shall have delivered to each Noteholder and the Canadian Collateral Trustee one or more environmental indemnification agreements (collectively, as amended, supplemented or otherwise modified from time to time, the "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT"), substantially in the form of Exhibit 4.6(c). 17 (c) Casualty Insurance. The U.S. Collateral Trustee and the Canadian Collateral Trustee, as applicable, shall have received (and copies shall have been delivered to each Noteholder), with respect to each of the Mortgaged Properties, the insurance policies required by Section 5.2; each in form and substance reasonably satisfactory to the Noteholders and their special counsel. (d) Title Insurance. The U.S. Collateral Trustee shall have received (and copies shall have been delivered to each Noteholder), with respect to each of the Mortgaged Properties that is subject to one of the U.S. Mortgages, a lenders' title insurance policy issued by First American Title Insurance Company in such amounts and covering such matters as may be reasonably requested by the Noteholders, and all premiums in respect of such lenders' title insurance policies shall have been paid in full. (e) Undertaking. Each of the Obligors shall have delivered to each Noteholder an undertaking in form and in substance satisfactory to the Noteholders, which undertaking shall relate to, without limitation, the registration of the Liens granted under the Security Documents (including any registrations specific to intellectual property), environmental matters, the discharge of Liens for which no Debt is outstanding, and the delivery of certain leasehold mortgages, lease amendments, landlord consents and title commitments. 4.7. BANK DOCUMENTS. The Obligors shall have entered into the Credit Agreement in form and substance satisfactory to the Noteholders and their special counsel. The Obligors shall have delivered to each Noteholder copies of the Credit Agreement and each of the other agreements and instruments executed in connection therewith (collectively, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions of this Agreement and the Intercreditor Agreement, the "BANK DOCUMENTS"), certified as true and correct by a Responsible Officer. 4.8. PRIVATE PLACEMENT NUMBERS. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the NAIC) shall have been obtained for each Series of Notes. 4.9. CONSENT TO RECEIVE SERVICE OF PROCESS. Each Noteholder shall have received, in form and substance satisfactory to such Noteholder, evidence of the consent of CT Corporation System in New York, New York to the appointment and designation provided for by Section 9.11 for the period from the Effective Date through July 1, 2009. 18 4.10. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the General Partner and the Issuer and the Parent set forth in Exhibit B-1 and Exhibit B-2, respectively, shall be correct when made and as of the Effective Date (except in each case where stated to be made as of an earlier date). 4.11. TOTAL DEBT TO EBITDA RATIO. The Obligors shall have provided evidence satisfactory to the Noteholders that on September 30, 2001, the Parent had a ratio of Total Debt to EBITDA for the period of four fiscal quarters of the Parent ended on such date not exceeding 5.8:1. 4.12. FINANCIAL STATEMENTS. Each Noteholder shall have received, in form and substance satisfactory to such Noteholder, the December 31, 2000 year-end consolidated financial statements of the Parent and its 4-year financial projections, including projected financial statements and the Restricted Group's proposed capital expenditure program. 4.13. PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied in all material respects with all agreements and conditions contained in the Financing Documents required to be performed or complied with by it prior to or upon the Effective Date and after giving effect to this Agreement no Default or Event of Default shall have occurred and be continuing. 4.14. LEGALITY. On the Effective Date the amendment and restatement of the Existing Note Agreement and the Existing Notes, and all other proceedings taken in connection with the transactions contemplated by this Agreement and the other Financing Documents, shall (a) be permitted by the laws and regulations of each jurisdiction to which the Noteholders are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject any Noteholder to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by any Noteholder, such Noteholder shall have received an officer's certificate from the Issuer certifying as to such matters of fact as such Noteholder may reasonably specify to enable such Noteholder to determine whether such proceedings are so permitted. 4.15. SATISFACTORY PROCEEDINGS. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to each of the Noteholders and the special counsel referred to in Section 19 4.4(c), and each such Noteholder and such special counsel shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. 4.16. PAYMENT OF SPECIAL COUNSEL FEES AND NOTEHOLDER EXPENSES. Without limiting the provisions of Section 9.4, the Obligors shall have paid on or before the Effective Date (a) the reasonable fees, charges and disbursements of the special counsel to the Noteholders referred to in Section 4.4(c) and the Canadian special counsel to the Noteholders, in each case to the extent reflected in a statement of such counsel rendered to the Obligors at least one Business Day prior to the Effective Date and (b) the out-of-pocket costs and expenses incurred by any Noteholder in connection with the transactions contemplated hereby, to the extent reflected in a statement of such Noteholder rendered to the Obligors at least one Business Day prior to the Effective Date. 4.17. PAYMENT OF CERTAIN FEES. The Obligors shall have paid to each Noteholder, as consideration for such Noteholder's consent to the amendment and restatement of the Existing Note Agreement and the Existing Notes, and the other transactions provided for in the Financing Documents, a fee in an amount equal to (a) three quarters of one percent (0.75%) of the principal amount of each Note held by such Noteholder (the "RESTRUCTURING FEE") plus (b) a Closing Catch-Up Fee in respect of each Note held by such Noteholder. The Restructuring Fee and the Closing Catch-Up Fee shall have been paid in immediately available funds to the account of each Noteholder as specified in Schedule I. As used herein, the term "Closing Catch-Up Fee" in respect of any Note means an amount equal to the product of (i) 2.25% times (ii) the principal amount of such Note on August 1, 2001, times (iii) a fraction, the numerator of which is the number of days which shall have elapsed from (and including) August 1, 2001 to (and not including) the Effective Date and the denominator of which is 360. 5. PARENT, GENERAL PARTNER AND ISSUER COVENANTS From and after the Effective Date and continuing so long as any amount remains unpaid on any Note: 5.1. CORPORATE OR PARTNERSHIP EXISTENCE, ETC. (a) Legal Existence. The Parent will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its legal existence and all licenses and permits necessary to the proper conduct of its business; provided, however, that the foregoing shall not prevent any transaction permitted by Section 5.12. The Issuer shall at all times be and remain a Delaware limited partnership in good standing. Intertape Polymer Inc., a Canadian corporation (or the Parent or any other Wholly-Owned Restricted Subsidiary incorporated under the laws of Canada or any Province thereof or of the United States or any State thereof) shall at all times be and remain the general partner of the Issuer. The Parent shall at all times own directly or indirectly 100% of the outstanding shares of capital stock of the General 20 Partner, free and clear of Liens other than Liens thereon arising under or permitted by the Security Documents. (b) Collateral. The Parent will duly obtain and maintain in effect all licenses, certificates of occupancy, permits, approvals and authorizations required in connection with the Collateral and the business and other operations conducted in or on any of the Mortgaged Properties, except for licenses, certificates, permits, approvals or authorizations the failure of which to obtain or maintain could not reasonably be expected to result in a Material Adverse Change. 5.2. INSURANCE. The Parent will maintain, and will cause each Restricted Subsidiary to 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 owning and operating similar properties in accordance with good business practice and, in any event, in amounts and against risks acceptable to the holders of the Notes, acting reasonably. (a) In General. Notwithstanding anything else contained in this Section 5.2, the Parent will maintain, and will cause each Restricted Subsidiary to maintain, at its sole cost and expense, with respect to each Mortgaged Property owned or leased by such Person, the following: (i) General Liability Insurance - Comprehensive general liability insurance (including, without limitation, excess and umbrella liability insurance) covering any and all liability of the insured with respect to or arising out of the ownership (if applicable), maintenance, use or occupancy of such Mortgaged Property and all operations incidental thereto including, but not limited to, structural alterations, new construction and demolition, and including coverage for those hazards generally known in the insurance industry as explosion, collapse and underground property damage, said insurance to have limits of not less than $1,000,000 combined single limit per occurrence for bodily injury, personal injury and property damage liability; (ii) Building Insurance - Insurance ("BUILDING INSURANCE") on all buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (inclusive of foundations, footings and similar structures below grade) against all perils generally included within the classification of "all risks," including fire and earthquake, in amounts at least equal to the full replacement cost thereof (with the exception of earthquake and without deduction for depreciation) as such replacement cost shall be determined from time to time at the request of the Canadian Collateral Trustee or the U.S. Collateral Trustee, as applicable, at the direction of the Majority Noteholders, acting reasonably, by an expert selected and paid by the Parent or such Restricted Subsidiary and approved by such Collateral Trustee at the direction of the Majority Noteholders, provided that the Parent or such Restricted Subsidiary shall not be required to select or pay 21 for such an expert more than one time in any period of thirty-six (36) consecutive calendar months unless (A) an Event of Default has occurred and is continuing or (B) the Parent, any Restricted Subsidiary or the Majority Noteholders have a good faith belief that there has been a material change in such replacement cost. In addition, the Building Insurance shall be written in such a manner that, in the event of loss, the amount of coverage afforded to the insured shall not be reduced or diminished by reason of the application of any co-insurance or average clause. Such insurance shall, during the course of any construction or repair of any improvements on the premises, be on an All Risk Builder's Risk 100% Completed Value Form or other form approved by the Canadian Collateral Trustee or U.S. Collateral Trustee, as applicable, at the direction of the Majority Noteholders, acting reasonably; (iii) Personal Property Insurance - Insurance on personal property against fire and any peril generally included within the classification of "extended coverage" in amounts at least equal to the actual cash value thereof as such values shall be determined from time to time at the request of the Canadian Collateral Trustee or the U.S. Collateral Trustee at the direction of the Majority Noteholders, acting reasonably; (iv) Business Interruption Insurance - Rental value or business interruption insurance (or a combination thereof as the Canadian Collateral Trustee or the U.S. Collateral Trustee may require at the direction of the Majority Noteholders, acting reasonably) on all buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (including parking and common areas) against loss by the perils covered by the Building Insurance in amounts satisfactory to such Collateral Trustee as directed by the Majority Noteholders, acting reasonably. Such rental value or business interruption insurance shall be blanket on all such buildings, fixtures and improvements (including such parking and common areas); (v) Flood Insurance - If such Mortgaged Property or any part thereof is located in an area which has been identified by the Secretary of Housing and Urban Development as a flood hazard area and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (the "FLOOD ACT"), the Parent or such Restricted Subsidiary shall keep the buildings, fixtures and improvements located on and forming a part of such Mortgaged Property (or part thereof) covered for so long as any Notes are outstanding by flood insurance up to the maximum limit of coverage available under the Flood Act but not in excess of 75% of the current fair market value of such Mortgaged Property (or part thereof) as determined in good faith by the board of directors of the Parent; and (vi) Other Insurance - Such other insurance with respect to such Mortgaged Property in such amounts and against such insurable hazards as the Canadian Collateral Trustee or the U.S. Collateral Trustee from time to time may require as directed by the Majority Noteholders, acting reasonably. 22 (b) Requirements Regarding Policies. All policies evidencing the insurance required under Section 5.2(a), including the comprehensive general liability insurance (the "POLICIES"), shall (i) provide that coverage shall not be cancelled until at least 30 days' written notice of such revision, cancellation or reduction shall have been sent to the Canadian Collateral Trustee or the U.S. Collateral Trustee, as applicable; (ii) in the case of any Mortgaged Property located in the United States, be issued by insurance companies which are qualified to do business in the state where such Mortgaged Property is located and which have a current rating of A Class XII or better in Best's Insurance Guide; and (iii) be reasonably satisfactory to the Majority Noteholders in all other respects. (c) Requirements Regarding General Liability. The comprehensive general liability insurance to be maintained by the Parent or any of the Restricted Subsidiaries pursuant to Section 5.2(a)(i) shall (i) name the U.S. Collateral Trustee, the Canadian Collateral Trustee and each holder of Notes from time to time as additional insureds, (ii) subject to the limitation of liability contained in the Policies, apply severally as to the Parent or such Restricted Subsidiary, as the case may be, and the U.S. Collateral Trustee and the Canadian Collateral Trustee, (iii) subject to the limitation of liability contained in the Policies, cover each applicable Person referred to in clause (ii) above as insureds in the same manner as if separate policies had been issued to each such Person, (iv) subject to the limitation of liability contained in the Policies, contain no provisions affecting any rights which any of such Persons would have as claimants if not so named as insureds, and (v) be primary insurance with respect to or arising out of the ownership (if applicable), maintenance, use or occupancy of such Mortgaged Property with any other valid and collectible insurance available to the U.S. Collateral Trustee or the Canadian Collateral Trustee constituting excess insurance. (d) Requirements Regarding Building Insurance. The Building Insurance required under Section 5.2(a)(ii) shall name the U.S. Collateral Trustee or the Canadian Collateral Trustee, as applicable, as an additional insured. (e) Delivery of Policies. The Parent or the applicable Restricted Subsidiary will deliver to the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, original Policies or certified copies of Policies in form reasonably satisfactory to the 23 Majority Noteholders evidencing the insurance which is required under Section 5.2(a), and the Parent or such Restricted Subsidiary shall, at the request of such Collateral Trustee at the direction of the Majority Noteholders, or any holder of Notes, promptly furnish to such Collateral Trustee or such holder of Notes copies of all renewal notices and all receipts of paid premiums received by the Parent or such Restricted Subsidiary. At least thirty (30) days prior to the expiration date of a required policy, the Parent or such Restricted Subsidiary shall deliver to the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, a binder for a renewal policy in form reasonably satisfactory to the Majority Noteholders. If the Parent or such Restricted Subsidiary has a blanket insurance policy in force providing coverage for several Mortgaged Properties, the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, will accept a certificate of such insurance together with a certified copy of such blanket insurance policy; provided that the certificate sets forth the types and amounts of insurance coverage, and such types and amounts are at least equal to the types and amounts required hereinabove, the original policy of insurance is written by a carrier or carriers reasonably acceptable to the Majority Noteholders, insures against the risks set forth hereinabove, cannot be cancelled without thirty (30) days prior written notice to such Collateral Trustee, is in amounts satisfactory to such Collateral Trustee, at the direction of the Majority Noteholders, acting reasonably, and has a replacement cost endorsement meeting the requirements of Section 5.2(a)(ii). (f) Assignment of Policy. If a Mortgaged Property is sold at a foreclosure sale or if the U.S. Collateral Trustee or Canadian Collateral Trustee, as applicable, shall acquire title to a Mortgaged Property, such Collateral Trustee shall, as collateral security, have all of the right, title and interest of the Parent or the applicable Restricted Subsidiary in and to any insurance policies required under Section 5.2(a) with respect to such Mortgaged Property and the unearned premiums thereon and in and to the proceeds payable thereunder to the extent resulting from any damage to the Mortgaged Property prior to such sale or acquisition. (g) Application of Insurance Proceeds. All sums paid under any insurance policy required in Section 5.2(a)(ii) through Section 5.2(a)(v) shall be paid as set forth in Section 6 of the Intercreditor Agreement and shall be subject to the provisions of Section 2.2(c) hereof. 5.3. TAXES; CLAIMS FOR LABOR AND MATERIALS; COMPLIANCE WITH LAWS. (a) Taxes, Claims for Labor and Materials. Without limiting any other obligation of the Parent hereunder including, without limitation, pursuant to Section 5.3(b), the Parent will promptly pay and discharge, and will cause each Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Parent or such Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Parent or such Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Parent or a Subsidiary; provided, however, that the Parent or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (a) 24 the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Parent or such Subsidiary or any material interference with the use thereof by the Parent or such Subsidiary, (b) any such Lien will at all times be subject to the prior and senior Lien of the U.S. Collateral Trustee or the Canadian Collateral Trustee in such property, as applicable, and (c) the Parent or such Subsidiary shall set aside on its books, reserves adequate in accordance with GAAP. (b) Compliance with Laws. The Parent will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all Environmental Laws, and the Parent will comply and will cause each Subsidiary to comply with all permits, licenses and authorizations required by Environmental Laws, except where the violation of such laws, ordinances, rules, regulations, permits, licenses and authorizations could not reasonably be expected to result in a Material Adverse Change or in any Lien other than a Permitted Lien. (c) Claims. Subject to the proviso contained in Section 5.3(a), the Parent will, and will cause each of its Restricted Subsidiaries to, jointly and severally pay and discharge all claims for which sums have become due and payable that have become a Lien other than a Permitted Lien on any Mortgaged Property (including, without limitation, mechanics' liens). 5.4. MAINTENANCE, ETC. (a) In General. The Parent will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order (subject to ordinary wear and tear) and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. (b) Mortgaged Properties. Each of the Obligors (i) shall keep, or cause to be kept, each Mortgaged Property in safe and good repair and condition, ordinary wear and tear excepted; (ii) shall, upon damage or destruction of any Mortgaged Property or any part thereof by fire or other casualty and, subject to the provisions of the Intercreditor Agreement, restore, repair, replace or rebuild, or cause to be restored, repaired, replaced or rebuilt, such Mortgaged Property that is damaged or destroyed to the condition it was in immediately prior to such damage or destruction, whether or not any insurance proceeds are available or sufficient for such purpose; provided that, if all or any substantial portion of the insurance policy proceeds in respect of any such fire or other casualty are offered for the repayment of the Notes, the Bank Term Facilities or Bank Facility A pursuant to 25 the provisions of the Intercreditor Agreement, the Obligors shall have no obligation to restore, repair, replace or rebuild the Mortgaged Property that was so damaged or destroyed by such fire or other casualty; and (iii) shall not commit, or permit to be committed, waste or permit impairment or deterioration of any Mortgaged Property, ordinary wear and tear excepted; and (iv) shall maintain, or cause to be maintained, the roofs and structure of each Mortgaged Property in safe, sound and good repair and condition, ordinary wear and tear excepted. 5.5. NATURE OF BUSINESS. The Parent and its Restricted Subsidiaries will continue to carry on substantially the same type of business currently carried on and activities which are ancillary, incidental or necessary to the ongoing business of the Parent and its Restricted Subsidiaries as presently conducted. 5.6. CONSOLIDATED NET WORTH. The Parent will, at all times, keep and maintain Consolidated Net Worth at an amount not less than the sum of (a) US$275,000,000 plus (b) an amount equal to the greater of (i) zero (0) and (ii) 50% of Consolidated Net Income of the Parent and its Restricted Subsidiaries for the period from October 1, 2001 to the end of the Parent's then most recently ended fiscal quarter plus (c) an amount equal to the aggregate net proceeds of any issuance after the Effective Date of equity securities by any member of the Restricted Group to Persons not members of the Restricted Group. 5.7. COVERAGE RATIOS. (a) Fixed Charge Coverage The Parent will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Parent) of Net Income Available for Fixed Charges to Fixed Charges in each case for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than the amount set forth for the applicable quarter end in the table below:
============================================================================================= IF SUCH FISCAL QUARTER ENDS: MINIMUM RATIO ============================================================================================= On or prior to September 30, 2002 1.75:1 --------------------------------------------------------------------------------------------- From December 31, 2002 to March 31, 2003 1.85:1 --------------------------------------------------------------------------------------------- From June 30, 2003 to March 30, 2004 2.00:1 --------------------------------------------------------------------------------------------- From March 31, 2004 to March 30, 2005 2.50:1 ---------------------------------------------------------------------------------------------
26
============================================================================================= IF SUCH FISCAL QUARTER ENDS: MINIMUM RATIO ============================================================================================= On March 31, 2005 and thereafter 3.00:1 =============================================================================================
(b) Debt Service Coverage. The Parent will not permit, at the end of each fiscal quarter of the Parent until (but excluding) the fiscal quarter in which Bank Facility B is fully repaid and cancelled, the ratio of (i) EBITDA for the period of two consecutive fiscal quarters of the Parent ended on the calculation date (taken as a single accounting period) less capital expenditures by members of the Restricted Group paid in cash during such period, to (ii) the sum total of Fixed Charges for such period and all scheduled repayments of Debt for such period, excluding (x) a US $8,000,000 repayment of Debt made in the fiscal quarter ended June 30, 2001 in respect of an agreement entered into by the Parent dated as of January 1, 1996 with respect to the issuance and sale of three series of its senior notes in the aggregate amount of US $33,000,000, and (y) any prepayments required during such period under Section 2.3 and Section 2.4 of this Agreement and the 1998 Note Agreement and the corresponding provisions of the Credit Agreement (as in effect on the date of this Agreement), to be less than 1.20 to 1.00. For the purposes of calculations of EBITDA in this Section 5.7(b), Section 5.8(b) or any other provision of this Agreement, (A) the consolidated non-recurring expenses incurred by the Parent and its Restricted Subsidiaries during the fiscal quarter ending December 31, 2000, (B) the consolidated severance expenses and other unusual non-recurring expenses accrued or otherwise incurred by the Parent and its Restricted Subsidiaries during the period commencing on January 1, 2001 and ending on September 30, 2001 and (C) any charge to earnings resulting from the re-pricing of stock options as may be applicable under GAAP, shall all be added (to the extent deducted in the calculation of Consolidated Net Income) to the EBITDA for the relevant period (including, without limitation, on a trailing four quarter or trailing two quarter basis). 5.8. LEVERAGE RATIOS. (a) Total Debt to Consolidated Total Capitalization. The Parent will not at any time permit the ratio of Total Debt to Consolidated Total Capitalization to exceed the ratio applicable to such time in the table set forth below:
=============================================================================================== IF SUCH TIME IS: THE APPLICABLE RATIO IS: =============================================================================================== On or prior to March 30, 2002 0.59:1 ----------------------------------------------------------------------------------------------- From March 31, 2002 to June 29, 2002 0.585:1 ----------------------------------------------------------------------------------------------- From June 30, 2002 to September 29, 2002 0.58:1 ----------------------------------------------------------------------------------------------- From September 30, 2002 to December 30, 2002 0.575:1 ----------------------------------------------------------------------------------------------- From December 31, 2002 to March 30, 2003 0.57:1 -----------------------------------------------------------------------------------------------
27
=============================================================================================== IF SUCH TIME IS: THE APPLICABLE RATIO IS: =============================================================================================== From March 31, 2003 to June 29, 2003 0.565:1 ----------------------------------------------------------------------------------------------- From June 30, 2003 to September 29, 2003 0.56:1 ----------------------------------------------------------------------------------------------- On September 30, 2003 and at any time thereafter 0.55:1 ===============================================================================================
(b) Total Debt to EBITDA. The Parent will not permit the ratio of Total Debt as at the end of each fiscal quarter of the Parent to EBITDA for the period of the four fiscal quarters of the Parent ended on such date (taken as a single accounting period) to exceed for each such date prior to June 30, 2002, the ratio applicable to such date in the table set forth below, and if such date is on or after June 30, 2002, the lesser of (i) the Experience-Based Ratio at such date and (ii) the ratio applicable to such date in the table set forth below:
============================================================================================== IF SUCH DATE IS: THE APPLICABLE RATIO IS: ============================================================================================== On December 31, 2001 6.00:1 ---------------------------------------------------------------------------------------------- On March 31, 2002 5.75:1 ---------------------------------------------------------------------------------------------- On June 30, 2002 5.50:1 ---------------------------------------------------------------------------------------------- On September 30, 2002 5.25:1 ---------------------------------------------------------------------------------------------- On December 31, 2002 5.00:1 ---------------------------------------------------------------------------------------------- On March 31, 2003 4.75:1 ---------------------------------------------------------------------------------------------- On June 30, 2003 4.50:1 ---------------------------------------------------------------------------------------------- On September 30, 2003 4.25:1 ---------------------------------------------------------------------------------------------- On December 31, 2003, March 31, 2004 and 4.00:1 June 30, 2004 ---------------------------------------------------------------------------------------------- On September 30, 2004, December 31, 2004, 3.50:1 March 31, 2005 and June 30, 2005 ---------------------------------------------------------------------------------------------- On September 30, 2005 and December 31, 2005 and at any time 3.25:1 thereafter ==============================================================================================
28 As used in this Section 5.8(b), the term "Experience-Based Ratio" means, as at the last day of any fiscal quarter of the Parent, the greater of (a) 3.25:1 and (b) the sum of (i) 0.25 plus (ii) the actual ratio of Total Debt as at the end of the fiscal quarter of the Parent ended on such date to EBITDA for the period of the four fiscal quarters of the Parent most recently ended on the last day of such fiscal quarter (taken as a single accounting period). 5.9. ADDITIONAL LIMITATIONS ON DEBT. (a) The Parent will not, and will not permit any Restricted Subsidiary to, create, assume or incur or in any manner become liable in respect of any Debt, except: (i) Debt of the Restricted Group permitted by Section 5.8; (ii) in the case of (x) unsecured Debt of any Restricted Subsidiary ("SUBSIDIARY PRIORITY DEBT") and (y) Debt of the Restricted Group secured by Liens not permitted by clauses (a) through (l) of Section 5.10 ("SECURED PRIORITY DEBT" and, collectively with the Subsidiary Priority Debt, "PRIORITY DEBT"), provided, that, at the time of issuance of any such Priority Debt and after giving effect thereto and to the application of the proceeds thereof, (A) the aggregate principal amount of Priority Debt shall not exceed 20% of Consolidated Net Worth, if a Collateral Suspension Period is not then in effect, or (B) 12.5% of Consolidated Net Worth, if a Collateral Suspension Period is then in effect; provided, further, that for the purposes of this Agreement and the Financing Documents, Debt under or in respect of the Bank Term Facilities, the Notes and the 1998 Notes, and Debt permitted by Section 5.9(a)(iii), shall not constitute Priority Debt; and (iii) Debt of the Parent or a Restricted Subsidiary owed to the Parent or to a Wholly-Owned Restricted Subsidiary; (b) If any member of the Restricted Group incurs additional Debt other than Debt secured by Liens described in Section 5.10(h), such Debt shall be subject to terms and conditions no more restrictive than those contained herein and in the Credit Agreement (as in effect on the date hereof), excluding terms and conditions relating to collateral (only in the case of Priority Debt) and pricing. 5.10. LIMITATION ON LIENS. The Parent will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except for the following Liens (collectively, the "PERMITTED LIENS"), and only to the extent, after giving effect to such Lien, that (x) no Material Adverse Change occurs as a result and (y) the aggregate amount of Priority Debt does not exceed the amount permitted by Section 5.9(b): (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 5.3; 29 (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Parent or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including but not limited to Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Parent and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Parent and its Restricted Subsidiaries; (e) Liens securing liabilities of a Restricted Subsidiary to the Parent or to another Wholly-Owned Restricted Subsidiary so long as such Liens are subordinate and junior in all respects to the Liens securing the Notes; (f) Liens on shares of stock of, or other Equity Interests in, Unrestricted Subsidiaries; (g) Liens existing as of the Effective Date and reflected in Annex B to Exhibit B-2 to this Agreement; (h) Liens incurred after the Effective Date given to secure the payment of the purchase price of fixed assets useful and intended to be used in carrying on the business of any member of the Restricted Group to the extent incurred in connection with (and within twelve months of) the acquisition of such fixed assets, including, without limitation, Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Parent or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens 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 (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all liabilities secured by Liens on such fixed assets whether or not assumed by the Parent 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 30 determined in good faith by the Board of Directors of the Parent), and (iii) all Debt secured by such Liens shall have been incurred within the other applicable limitations of Section 5.8 and Section 5.9; (i) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in clause (g) and (h) of this Section 5.10, provided that no additional property is encumbered and there is no increase in the aggregate principal amount of Debt secured thereby; (j) subject to the provisions of Section 1.6, Liens on the Collateral and the Canadian Collateral in favor of the U.S. Collateral Trustee and the Canadian Collateral Trustee for the benefit of the holders of the Notes and the 1998 Notes and the Banks that secure obligations under any of the Financing Documents or the Bank Documents; (k) subject to the second paragraph of Section 10.3 of the Credit Agreement (as in effect on the Effective Date), Liens on property of the members of the Restricted Group primarily constituting inventory or accounts that secure obligations arising under Bank Facility A; (l) Liens on property of the members of the Restricted Group that secure obligations arising under or in respect of a successor revolving credit facility after the termination of Bank Facility A, so long as such facility is on terms reasonably acceptable to the Majority Noteholders and the Notes are secured with Liens on such property on a senior or pari passu basis with such facility; and (m) Liens, in addition to those permitted by clauses (a) through (l) of this Section 5.10, securing Debt of the Parent or any Restricted Subsidiary; provided that after giving effect to the incurrence of all Debt secured by such Liens the Parent is in compliance with the provisions of Section 5.9. Nothing in this Section 5.10 shall be deemed to permit any member of the Restricted Group to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the Collateral, whether now owned or hereafter acquired, to be further encumbered by a Lien except as expressly permitted by this Agreement and the other Financing Documents and (for so long as the applicable provisions thereof shall be in effect) the Bank Documents as in effect on the Effective Date. Notwithstanding anything else contained herein, the Parent will not, and will not permit any Restricted Subsidiary to, incur or maintain any operating lines or short-term or revolving bank facilities secured by Liens on any assets of any member of the Restricted Group (other than Bank Facility A, Bank Facility B, and Bank Facility C, or a successor revolving credit facility after the termination of Bank Facility A that complies with the provisions of clause (l) of this Section 5.10). 5.11. PERMITTED INVESTMENTS AND RESTRICTED PAYMENTS. (a) The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any Restricted Payment. The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any Investment, including any 31 Investment in an Unrestricted Subsidiary, other than Permitted Investments, unless after giving effect to such Investment, (i) the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1 as of the end of each of the two previous fiscal quarters and each of the two subsequent fiscal quarters on a pro forma basis, and (ii) the aggregate amount of all Investments (other than Permitted Investments) made by the Restricted Group since the Effective Date would not exceed 10% of Consolidated Net Worth as of the end of the then most recently ended fiscal quarter. The amount of Investments (other than Permitted Investments) as of the Effective Date is deemed to be $11,176,870. Once Bank Facility B is fully repaid and cancelled, the Restricted Group shall not make (x) any Investment, other than Permitted Investments, if, after giving effect thereto, the aggregate amount of all such Investments of the Restricted Group at such time (valued as provided below) would exceed 10% of Consolidated Net Worth as of the end of the then most recently ended fiscal quarter, or (y) any Restricted Payments, if after giving effect thereto the aggregate amount of all Restricted Payments made in the then current fiscal year of the Parent exceeds US$5,000,000. (b) In addition to and not in limitation of the foregoing restrictions, the Parent will not, and will not permit any Restricted Subsidiary to, make any Investment in any Unrestricted Subsidiary not engaged in a business substantially related to the business of the Restricted Group. (c) Furthermore, IPG Finance LLC shall not make any Investment other than Permitted Investments described in clauses (b), (c) and (d) of the definition thereof and Permitted Investments in IPG (US) Inc. and IPG (US) Inc. shall not make any Investment other than Permitted Investments described in such clauses and Permitted Investments in any Restricted Subsidiary which shall have granted Liens on its assets in the manner contemplated by the Security Documents. (d) The following restrictions shall apply in connection with any and all payments to Drumheath by any member of the Restricted Group: (i) until such time as Bank Facility B has been repaid in full and the Commitment thereunder cancelled, all payments to Drumheath must be on account of premiums payable for the insurance policies issued by Drumheath. After Bank Facility B has been repaid and the Commitment thereunder cancelled, such payments may be paid partly as premiums and partly on account of Investments, as determined by the Restricted Group. Notwithstanding the foregoing, the sum total of payments to Drumheath may not exceed US$3,000,000 in any fiscal year of the Parent; (ii) no Investments in or payments or Restricted Payments to Drumheath may be made while a Default has occurred or is continuing or following the occurrence and during the continuance of an Event of Default; 32 (iii) until Bank Facility B has been repaid in full and the Commitment thereunder cancelled, Drumheath may not enter into any insurance contracts in respect of any other kinds of insurance other than the types of insurance it is currently underwriting, consisting of workers' compensation; (iv) all of Drumheath's liability in connection with workers' compensation policies shall be reinsured by reputable reinsurance companies, which reinsurance policies shall remain in effect at all times; (v) Drumheath may not carry on any new line of business, not currently conducted by Drumheath as of the Effective Date other than, subject to Section 5.11(d)(iii) or an insurance business, as defined under applicable Law; (vi) prior to the occurrence of any Event of Default which has not been waived, any monies coming from Drumheath including dividends, distributions and related proceeds (other than payment of claims under valid policies of insurance and other expenses to be paid in the ordinary course of business) must be paid directly to a member of the Restricted Group. Following the occurrence and during the continuance of an Event of Default, at the request of the Majority Noteholders, the members of the Restricted Group shall cancel all insurance policies contracted with Drumheath in accordance with the terms of any such policy, other than those in respect of workers' compensation, cause Drumheath to cease carrying on business, and shall cause the net amount of all sums left in Drumheath (following the payment by Drumheath of, or reservation for, all claims (including those incurred but not reported) in respect of policies outstanding, in accordance with applicable Law) to be paid to a member of the Restricted Group to be paid to the holders of the Notes, subject to their Pro Rata Share; and (vii) each of the Obligors confirms that it has not guaranteed any of the liabilities of Drumheath under any of its insurance policies, nor has any of them provided any other guarantee of any liability of Drumheath of any nature whatsoever. Notwithstanding the provisions of Section 5.11(a), the US$3,000,000 annual Restricted Payments to and/or Investments in Drumheath may be made even where the restrictions set out in clause (i) of Section 5.11(a) have not been met. All payments to Drumheath shall be deemed "Investments" for the purposes of Section 5.11(a). (e) In addition to the foregoing restrictions, the Parent will not make any Restricted Payment or any Investment, other than Permitted Investments, if, at the time thereof or after giving effect thereto, any Default or Event of Default shall have occurred and be continuing. (f) The Parent will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. 33 (g) For the purposes of this Section 5.11, 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 Parent) of such property at the time of the making of the Restricted Payment in question. (h) In valuing any Investments for the purpose of applying the limitations set forth in this Section 5.11, such 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. (i) For purposes of this Section 5.11, at any time when a Person becomes a Restricted Subsidiary, all Investments of such Person at such time shall be deemed to have been made by such Person, as a Restricted Subsidiary, at such time. 5.12. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) The Parent will not, and will not permit any Restricted Subsidiary to, (i) consolidate or amalgamate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in clause (d) of this Section 5.12) of Consolidated Assets; provided, however, that: (i) any Restricted Subsidiary may merge or amalgamate or consolidate with or into the Parent or any Wholly-Owned Restricted Subsidiary so long as (A) in any such transaction involving the Issuer, the Issuer shall be the surviving or continuing limited partnership or corporation and (B) in any such transaction involving the Parent, the Parent shall be the surviving or continuing entity, provided that such successor entity shall be a solvent limited partnership, corporation or other business entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, Canada or any province thereof, and, at the time of any such amalgamation, consolidation or merger described in this Section 5.12(a), and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (ii) the Parent may consolidate or amalgamate or merge with any other corporation (which is not a Restricted Subsidiary) if, at the time of any such amalgamation, consolidation or merger described in this Section 5.12(a) and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, and (A) the surviving or continuing corporation shall be the Parent, or (B) if the successor entity is not the Parent, then such successor entity (x) shall have executed and delivered to each holder of the Notes, the U.S. Collateral Trustee and the Canadian Collateral Trustee its assumption of the due and punctual performance of each covenant and condition of this Agreement, the Parent Guaranty Agreement and each of 34 the other Financing Documents to which the Parent is a party (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Majority Noteholders), and the successor entity shall have caused to be delivered to each holder of the Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Majority Noteholders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (y) shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or under the laws of Canada or any province thereof; and (iii) any Restricted Subsidiary (including the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to the Parent and any Restricted Subsidiary (except the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to any Wholly-Owned Restricted Subsidiary (including the Issuer); so long as in each such case all Liens in favor of the U.S. Collateral Trustee and the Canadian Collateral Trustee are not adversely affected and none of the Persons granting such Liens changes its name without at least 20 Business Days prior written notice to the U.S. Collateral Trustee and the Canadian Collateral Trustee. Notwithstanding the foregoing, no member of the Restricted Group shall become party to any receivables securitization program. (b) The Parent will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 5.12, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into any Equity Interests) of such Restricted Subsidiary to any Person other than the Parent or a Wholly-Owned Restricted Subsidiary, except for the purpose of qualifying directors, or (in the case of a Restricted Subsidiary other than the Issuer) except in satisfaction of the validly preexisting preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Parent and/or a Restricted Subsidiary whereby the Parent and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Parent will not sell, transfer or otherwise dispose of any shares of stock of any class of any Restricted Subsidiary (except to the Parent or a Wholly-Owned Restricted Subsidiary, so long as the Liens granted under the Security Documents are not adversely affected, or for the purpose of qualifying directors) unless: (i) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by the Parent and by every other Restricted Subsidiary shall be sold, transferred or disposed of as an entirety; and 35 (ii) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Parent and its Restricted Subsidiaries; provided, however, that nothing in this Section 5.12(c) or Section 5.12(d) shall permit any disposition by the Parent of any of the Equity Interests in any of the Obligors, the disposition by the Issuer of the shares of Canco, any disposition of Equity Interests in IPG Finance LLC by Canco, or any disposition of the shares of IPG (US) Holdings Inc. or IPG (US) Inc. (d) As used in this Section 5.12, a sale, lease or other disposition of assets (including Securities) (a "TRANSFER") shall (unless consisting of sales of inventory made in the ordinary course of business) be deemed to be a "substantial part" of Consolidated Assets if the book value of such assets, when added to the book value of all other assets Transferred by the Parent and its Restricted Subsidiaries (other than in the ordinary course of business) during the 365 day period ending with the date of such Transfer, exceeds, in the aggregate, 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 Transfer shall not be included if and to the extent the net proceeds thereof are segregated from the general accounts of the Parent and any Restricted Subsidiary, invested in Available Cash until applied in accordance with clause (x) or (y) below, and within six months after such Transfer are used either (x) to acquire Like Assets, or (y) offered to prepay the Secured Obligations in the manner provided in Section 8.2 of the Intercreditor Agreement; provided, however, that any payment to the holders of the Notes pursuant to Section 8.2 of the Intercreditor Agreement shall not be subject to the provisions of Section 2.2(c) and shall be paid to the holders of the Notes in accordance with Section 2.7. Notwithstanding anything else contained herein, except as expressly permitted in this Agreement and the other Financing Documents, none of the Collateral may be sold, transferred, conveyed or pledged. If the encumbering as contemplated by Section 5.10 or sale, transfer, conveyance or pledge of any of the Collateral shall be permitted by one Financing Document and prohibited by another Financing Document, such encumbering, sale, transfer, conveyance or pledge shall be deemed prohibited hereunder. 5.13. INTEREST RATE ADJUSTMENT DATE FEE. In the event that no Interest Rate Adjustment Date has occurred before May 1, 2002, the Issuer shall, on May 1, 2002, pay to each holder of Notes a fee in an amount equal to one-half of one percent (0.5%) of the outstanding principal amount of such holder's Notes on such date. 5.14. REPURCHASE OF NOTES. None of the Parent, the Issuer, any Subsidiary or any Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata ,from all holders of the Notes at the same time and upon the same terms. Notes repurchased by the Parent or any Subsidiary or Affiliate shall be cancelled. 36 5.15. TRANSACTIONS WITH AFFILIATES. The Parent will not, and will not permit any Restricted Subsidiary to, 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 Parent's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Parent or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 5.16. TERMINATION OF PENSION PLANS. (a) The Parent will not and will not permit any ERISA Affiliate to withdraw from any Multiemployer Plan or permit any Plan to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part I of Subtitle E of Title IV of ERISA) payable by any member of the Restricted Group, or the imposition of a Lien on any property of the Parent or any Subsidiary pursuant to Section 4068 of ERISA, in an amount in excess of $3,500,000. (b) The Parent will and will cause each Subsidiary to maintain each Foreign Pension Plan in accordance with the terms and provisions thereof and the requirements of applicable laws, rules and regulations except to the extent the failure to so maintain any such Foreign Pension Plan could not reasonably be expected to result in a Lien on any assets of the Parent or any of its Restricted Subsidiaries or materially adversely affect (i) the Parent, the Issuer or the Parent and its Restricted Subsidiaries taken as a whole or (ii) the performance by the Parent, the Issuer or any Restricted Subsidiary of its obligations under this Agreement, the Notes or any of the other Financing Documents. 5.17. DESIGNATION OF RESTRICTED SUBSIDIARIES. The Parent may designate any Subsidiary which meets the other requirements of a Restricted Subsidiary as provided in the definition thereof as a Restricted Subsidiary by giving written notice to each holder of Notes that the Board of Directors of the Parent has made such designation, provided that no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, (a) no Default or Event of Default shall have occurred and be continuing, and (b) such Subsidiary is also being designated as a "Restricted Subsidiary" under the Credit Agreement. Such designation may not be revoked by the Board of Directors of the Parent; and no Restricted Subsidiary shall at any time be designated an Unrestricted Subsidiary and, once so designated as a Restricted Subsidiary, will at all times remain a Restricted Subsidiary. No Unrestricted Subsidiary may own any shares of a Restricted Subsidiary. 5.18. REPORTS AND RIGHTS OF INSPECTION. The Parent will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Parent or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial 37 statements furnished to the holders of Notes pursuant to this Section 5.18 and concurred in by the independent public accountants referred to in Section 5.18(b) hereof), and will furnish each holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested) (and the U.S. Collateral Trustee or the Canadian Collateral Trustee, if so required by this Section 5.18): (a) Quarterly Statements. As soon as available and in any event within 60 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (i) the unaudited consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for the period of the four fiscal quarters of the Parent ending with such quarterly fiscal period, Adjusted Consolidated, balance sheets of the Parent and each other member of the Restricted Group, as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) figures for the corresponding period of the fiscal year then most recently ended, (ii) the unaudited consolidated and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for the period of the four fiscal quarters of the Parent ending with such quarterly fiscal period, Adjusted Consolidated, statements of earnings and changes in financial position of the Parent and each other member of the Restricted Group, for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) figures for the corresponding periods of the preceding fiscal year, and (iii) the Parent's calculation of Excess Cash Flow for such quarterly fiscal period (if required by Section 2.4 for any period ending on the last day of such quarter), setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Parent; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Parent, copies of: (i) consolidated and consolidating and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for such fiscal year, Adjusted Consolidated, balance sheets of the Parent and its Restricted Subsidiaries as of the close of such fiscal year, and (ii) consolidated and consolidating and, in the event that the total EBITDA of the Unrestricted Subsidiaries is in the aggregate greater than 5% of EBITDA for such year, Adjusted Consolidated, statements of earnings and changes in financial position of the Parent and its Restricted Subsidiaries for such 38 fiscal year, along with the Parent's calculation of Excess Cash Flow for the last fiscal quarter in such fiscal year (if required by Section 2.4 for such fiscal year), in each case setting forth in comparative form the consolidated (or Adjusted Consolidated, if applicable) and consolidating figures for the preceding fiscal year, all in reasonable detail and, with regard to the consolidated figures, certified without qualification by a reputable firm of independent chartered accountants acceptable to the Noteholders, together with any audited financial statements of any Restricted Subsidiary which may be prepared in respect of such fiscal year or any portion thereof; (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Parent or any Restricted Subsidiary; (d) Governmental And Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Parent to stockholders generally and of each regular or periodic report, registration statement or prospectus filed by the Parent or any Subsidiary with any securities exchange or any governmental regulatory body including, but without limitation, the Parent's Form 20F and unaudited quarterly reports, and copies of any orders in any proceedings to which the Parent or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over the Parent or any of its Subsidiaries; (e) ERISA Reports. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan; (ii) the institution of any steps by the Parent, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (iii) the institution of any steps by the Parent or any ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Parent or any Subsidiary with respect to any post-retirement welfare liability; (vi) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; or (vii) any event or circumstance with respect to any Foreign Pension Plan which could reasonably be expected to materially adversely affect the Parent, the Issuer or the Parent and its Restricted Subsidiaries on a consolidated basis or the performance by the Parent or the Issuer hereunder or under the Notes or the Parent Guaranty Agreement; (f) Officer's Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Parent stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Parent was in compliance with the requirements of Section 5.6 through Section 5.12, Section 5.23 and Section 5.25 at the end of the period covered by the financial statements then being furnished and setting forth the ratio of Total Debt to EBITDA for purposes of Section 5.8(b) and as otherwise may be required by this Agreement, (ii) whether there existed as of the date of such financial statements and whether, to the best of such 39 officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default (including, without limitation, with respect to Section 5.2) and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Parent is taking and proposes to take with respect thereto and (iii) any material differences between United States generally accepted accounting principles and GAAP to the extent reasonably relevant to determining compliance with the requirements of Section 5.6 through Section 5.13 hereof; (g) Accountant's Certificates. Within the period provided in clause (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that as of the date of the fiscal year end, and for that year, with respect to which such accountants have given their report pursuant to Section 5.18(b), the Parent was in compliance with the provisions of Sections 5.6, 5.7 and 5.8 and that, in the normal course of their audit (without special or additional investigation), they have not become aware of a Default or Event of Default under the provisions of Sections 5.9, 5.10(m), 5.11 or 5.12 (but only to the extent relative to the sale of a substantial part of Consolidated Assets thereunder); (h) Annual Financial Forecasts. Within 60 days following the end of each fiscal year of the Parent, the annual consolidated pre-tax operating forecast of the Parent, including balance sheet and statements of income, retained earnings and cash flow, and the consolidated capital expenditures budget of the Parent, in each case for the next fiscal year and each quarterly period in such fiscal year; (i) Pro Forma Acquisition Projections. Promptly, and in any event not less than 15 Business Days prior to, the consummation of any proposed Acquisition for consideration in the amount of at least $2,500,000: (i) notice of such Acquisition, material information with respect to the nature thereof, and the proposed purchase price with respect thereto; (ii) such historical audited and unaudited financial statements of the business to be acquired in such Acquisition (the "TARGET") as the Target has made available to any member of the Restricted Group and any financial statements contained in any other information that has been reviewed and confirmed by a nationally recognized accounting firm of the United States or Canada or that has been submitted to and approved by the Parent's board of directors; (iii) a pro forma balance sheet and income statement of the Target and the Restricted Group on a consolidated basis following such Acquisition, showing the projected impact of such Acquisition both for the current fiscal year and the immediately succeeding fiscal year; 40 (iv) a written confirmation of a Senior Financial Officer that the Parent is satisfied, based on its due diligence, that the Acquisition of the Target will not result in the assumption by any member of the Restricted Group of material liabilities which have not been fully disclosed to the holders of the Notes in the materials provided in connection with the Acquisition or otherwise in writing; and (v) a certificate of a Senior Financial Officer that, on a consolidated basis following such Acquisition, as of the date of such Acquisition, after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (j) Environmental Reports. (i) Within 10 days following the end of each fiscal quarter of the Parent, copies of each environmental report submitted to the board of directors of the Parent during such fiscal quarter, and, (ii) to the Collateral Trustees, promptly after obtaining knowledge thereof, written notice of (A) any material governmental or regulatory actions instituted or threatened in writing under any Environmental Law affecting any of the Mortgaged Properties or the matters indemnified under the U.S. Environmental Indemnification Agreement or the Canadian Environmental Indemnification Agreement, including, without limitation, any material notice of inspection, abatement or noncompliance; (B) all claims made, or material claims threatened in writing, by any third party against any member of the Restricted Group or any of the Mortgaged Properties relating to damage, contribution, cost recovery, compensation, loss or injury resulting from the presence, release or discharge on or from any of the properties owned by any member of the Restricted Group of any Hazardous Substances; and (C) any member of the Restricted Group's discovery of any occurrence or condition on any of the Mortgaged Properties or any real property adjoining or in the vicinity of any Mortgaged Property which is reasonably likely to subject any member of the Restricted Group to a material claim under any Environmental Law or to any restrictions on the ownership, occupancy, transferability or use of said property under any Environmental Law, and (iii) to the U.S. Collateral Trustee or the Canadian Collateral Trustee, any non-privileged documentation or records that such Collateral Trustee may request at the direction of the Majority Noteholders, acting reasonably, with respect to any of the matters described in clause (ii) of this Section 5.18(j); (k) Additional Undertakings. (i) Prior to June 30, 2002, at the expense of the Parent, an accounts receivable and inventory audit of its Restricted Subsidiaries, which audit shall have been performed by an independent third party acceptable to the Banks, and (ii) in the event the ratio of Total Debt as at June 30, 2002 to EBITDA for the period of four fiscal quarters of the Parent ended on such date is not less than or equal to 5.0:1, an appraisal of the Restricted Subsidiaries' equipment and inventory, such appraisal to be performed by an independent third party acceptable to the Majority Noteholders; and (l) Requested Information. With reasonable promptness, such other data and information as any holder of Notes, the U.S. Collateral Trustee or the Canadian Collateral Trustee may reasonably request. 41 Without limiting the foregoing, the Parent will permit each holder of the then outstanding Notes (or such Persons as any such holder may designate), to visit and inspect, under the Parent's guidance, any of the properties of the Parent or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Parent authorizes said accountants to discuss with such holders the finances and affairs of the Parent and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Parent shall not be required to pay or reimburse any holder of Notes for any expenses which such holder may incur in connection with any such visitation or inspection, except that if such visitation or inspection is made during any period when a Default or an Event of Default shall have occurred and be continuing, the Parent agrees to reimburse such holder for all reasonable expenses thereof promptly upon demand. Each Noteholder agrees that it will use all reasonable efforts to keep confidential any information from time to time supplied to it by or on behalf of the Parent (including, without limitation, any such information provided pursuant to this Section 5.18) which the Parent or any Person acting on its behalf designates in writing at the time of its delivery to such Noteholder, or as promptly as practicable thereafter, is to be treated as confidential, provided, however, that the foregoing provisions of this paragraph shall not apply: (i) to any information already known to such Noteholder at the time of its receipt thereof (other than any such information which to such Noteholder's knowledge is already known to such Noteholder by virtue of any breach by any third party of any confidentiality obligation owed to the Parent or any Restricted Subsidiary); (ii) to any information which is or becomes public knowledge other than (to such Noteholder's knowledge) by reason of any breach of this paragraph; (iii) to the extent that such Noteholder is required to disclose the information in question pursuant to any law, statute, rule or regulation or any order of any court or judicial process or pursuant to any direction, request or requirement (whether or not having the force of law but, if not having the force of law, being of a type with which Institutional Holders in the relevant jurisdiction are accustomed to comply) of any self-regulating organization or any governmental, fiscal, monetary or other authority; (iv) to the disclosure of any such information to any regulators or auditors including the NAIC or any successor agency; (v) to the disclosure of any such information to any other holder of a Note; (vi) to the disclosure of any information to such Noteholder's counsel or accountants or those of any other holder of a Note; 42 (vii) to the disclosure of any information to any of such Noteholder's employees, agents or other professional advisors or those of any other holder of a Note; (viii) to the disclosure of any information to Moody's, Standard & Poor's or any other nationally recognized rating agency; (ix) to the extent that such Noteholder needs to disclose the information in question for the protection or enforcement of any of such Noteholder's rights or interests against the Issuer or the Parent, whether under this Agreement or otherwise; or (x) to the prospective transferee in connection with any contemplated transfer of any of the Notes (or of any other security of the Parent owned by such Noteholder or any Person advised by such Noteholder's investment advisor or any of its subsidiaries) by such Noteholder, provided that such prospective transferee shall agree (in writing) to be bound by the confidentiality provisions of this Section 5.18 as if it were a holder of Notes hereunder. 5.19. PARI PASSU DEBT. Except as otherwise provided in this Agreement and the Intercreditor Agreement, the Notes shall rank, at all times, at least pari passu with all of the other senior secured Indebtedness of the Restricted Group, other than as permitted by Section 5.9(a)(ii) and subject to Permitted Liens. The Parent shall at all times cause any Debt owing by any member of the Restricted Group to any other member of the Restricted Group, and all Liens securing such Debt, to be subordinated to the Notes and the Liens securing the Notes, each in form and substance satisfactory to the Majority Noteholders (and the Noteholders hereby acknowledge that the manner in which such Debt has been subordinated in the notes subject to the pledge agreements dated as of the Effective Date is satisfactory to them). 5.20. MOST FAVORED LENDER. The holders of the Notes shall immediately be notified of the terms and conditions of any Debt of the nature described in clause (a) of the definition thereof to be created by any member of the Restricted Group other than Debt secured by Liens described in Section 5.10(h). The holders of the Notes shall have the option to require the Obligors and the Restricted Subsidiaries to amend this Agreement and any of the other Financing Documents to incorporate the provisions of any agreement relating to such Debt if such holders so wish, it being understood that the provisions which may be so incorporated shall not extend to the provision of collateral (other than collateral provided (a) under a replacement revolving credit facility after the termination of Bank Facility A or (b) to secure Priority Debt or Debt secured by Liens permitted by Section 5.10(h)) or to pricing. 43 5.21. LIMITATION ON BUSINESS ACTIVITIES. The Issuer shall not, and shall not permit IPG Finance LLC or Canco, to carry on any business, other than (i) taking such steps as may be necessary to maintain its existence, (ii) to hold Securities of Restricted Subsidiaries, (iii) taking such action as is required under or in respect of this Agreement, any of the other Financing Documents or the Bank Documents, (iv) provided no Default or Event of Default shall have occurred and be continuing, IPG Finance LLC may lend money to IPG (US) Inc. and (v) the incurrence of any other Indebtedness permitted by Section 5.23 and, with respect to the Issuer, Indebtedness permitted hereunder. 5.22. OWNERSHIP OF SUBSIDIARIES. The Parent shall not permit, at any time, IPG Finance LLC, the Issuer, Canco, Intertape Polymer Corp, IPI and (prior to the termination of Bank Facility A) all Restricted Subsidiaries who are borrowers under Bank Facility A to be other than Wholly-Owned Restricted Subsidiaries, or at any time to own (either directly or through the Restricted Subsidiaries) less than 80% of the Voting Stock of its other Restricted Subsidiaries, together with such Securities of such other Restricted Subsidiaries as are necessary to provide the Parent with a direct or indirect economic interest of not less than 80% of each such other Restricted Subsidiary. 5.23. LIMITATION ON ISSUER DEBT. The Parent will not permit either IPG Finance LLC or Canco to incur or have at any time any Indebtedness in excess of an aggregate amount of US$100,000, except for Indebtedness under or with respect to this Agreement, the 1998 Note Agreement, the Bank Documents and any facility which replaces Bank Facility A after the termination thereof, and except to a Wholly-Owned Restricted Subsidiary. 5.24. NO RESTRICTIONS ON DISTRIBUTIONS. The Parent shall not, and shall not permit any of its Restricted Subsidiaries to, restrict in any way the ability of any Restricted Subsidiary to declare or make any payment contemplated in clauses (a), (b) and (c) of the definition of "Restricted Payment" to its shareholder(s) or owners of its other Equity Interests, except for such restrictions arising under applicable law in relation to the solvency of the Restricted Subsidiaries. 5.25. LIMITATION ON CAPITAL EXPENDITURES. (a) The Parent will not, and will not permit any Restricted Subsidiary to, until such time as Bank Facility B is fully repaid and cancelled, make any capital expenditures that exceed US$20,000,000 in any fiscal year of the Parent unless the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1.00; provided that the foregoing restriction shall continue to apply if, at the end of any subsequent fiscal quarter, such ratio exceeds 3.25:1.00, unless Bank Facility B has theretofore been fully repaid and cancelled. 44 (b) Once Bank Facility B is fully repaid and cancelled, or the ratio of Total Debt to EBITDA (calculated on a quarterly basis for the immediately preceding period of four fiscal quarters including the fiscal quarter most recently ended) is less than or equal to 3.25:1.00 (together, the "CONDITIONS"), the Restricted Group shall not make capital expenditures exceeding an amount equal to 10% of Consolidated Net Worth (as at the end of the fiscal year then most recently ended) in any fiscal year of the Parent without the consent of the Majority Noteholders, acting reasonably. If either of the Conditions occurs on a date other than the last day of a fiscal year of the Parent, the Restricted Group shall be permitted in such fiscal year to make the capital expenditures permitted under this Section 5.25(b) instead of those permitted under Section 5.25(a). Such amount shall be increased to 20% of Consolidated Net Worth for any current fiscal year in which (i) the ratio of Total Debt as at the end of the fiscal quarter of the Parent then most recently ended to EBITDA for the period of four fiscal quarters then most recently ended does not exceed 3.0:1.00, and (ii) the Parent has maintained an Acceptable Rating at all times during the then most recently ended two fiscal quarters with respect to its long-term, senior unsecured Debt; provided however, that at any time either of the tests in the preceding clauses (i) and (ii) are not met, the applicable percentage shall return to 10% for the fiscal year in which such condition is no longer met. 5.26. INTELLECTUAL PROPERTY. Subject to the next succeeding sentence, the Parent will ensure that all intellectual property, as described in the Security Documents, shall continue to be owned by the Person identified as the owner thereof in the Security Documents at all times; provided that, on 20 days prior notice to the Collateral Trustees, any member of the Restricted Group may sell or otherwise transfer any interest that such member has in such intellectual property to IPG Technologies Inc. at any time. Except as otherwise permitted by Section 5.12, the Parent will not, and will not permit any Restricted Subsidiary to, sell or transfer any portion of such Person's ownership interest in any intellectual property (as described in the Security Documents); provided that any member of the Restricted Group may sell or transfer any such intellectual property to IPG Technologies Inc. at any time. 5.27. NO AMENDMENTS TO CREDIT AGREEMENT. The Parent will not, and will not permit any Restricted Subsidiary to, allow any provision of the Credit Agreement in relation to repayments, prepayments, pricing (including, without limitation, interest rate and margins), or financial covenants to be amended, replaced or deleted in any manner that the Majority Noteholders deem, in their sole discretion, to be adverse to the interests of the holders of the Notes without the prior written consent of the Majority Noteholders. This Section 5.27 is supplemental to the covenants set forth in Section 9.5 of the Intercreditor Agreement. 45 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR 6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute an "EVENT OF DEFAULT" as such term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five Business Days; or (b) Default shall occur in the making of any payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment, or the Issuer shall fail to make an offer to prepay as required under Section 2.5, or the failure of the Obligors to make an offer to prepay the Secured Obligations as required under Section 5.12(d); or (c) Default shall be made in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of the principal of or interest on any Material Debt (other than the Notes) of the Parent or any Restricted Subsidiary and such default shall not have been waived and shall continue beyond the period of grace, if any, allowed under the terms of such Material Debt; or (d) Default or the happening of any event shall occur under any indenture, agreement or other instrument under which any Material Debt of the Parent or any Restricted Subsidiary may be issued and such default or event shall continue for a period of time sufficient to permit the acceleration of the maturity of any Material Debt of the Parent or any Restricted Subsidiary outstanding thereunder; or (e) Default shall occur in the observance or performance of any covenant or agreement contained in Section 5.6 through Section 5.14 hereof, in Section 5.19 through Section 5.25 hereof, or of any covenant or agreement contained in any Guaranty Agreement; or (f) Default shall occur in the observance or performance of any other provision of this Agreement or any provision of any of the Financing Documents which is not remedied within 30 days after the earlier of (i) the day on which any Responsible Officer first obtains knowledge of such default, or (ii) the day on which written notice thereof is given to any Obligor by the holder of any Note; or (g) Any representation or warranty made by any Obligor in this Agreement, or made by the Parent or the General Partner in the Parent Guaranty Agreement or made by any member of the Restricted Group in any other Financing Document or any statement or certificate furnished by such member of the Restricted Group in connection with the consummation of the issuance and delivery of the Notes or furnished by any member of the Restricted Group pursuant to any other Financing Document, is untrue in any material respect as of the date of the issuance or making thereof, or if the auditors certifying the 46 financial statements in accordance with Section 5.18(b) insert a material qualification in their opinion; or (h) Final judgment or final judgments for the payment of money aggregating in excess of U.S. $2,500,000 (or the equivalent thereof in any other currency) (exclusive of judgment amounts which are covered by insurance of solvent insurers which have acknowledged such coverage) is or are outstanding against any member of the Restricted Group or against any property or assets of any such entity and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal for a period of 90 days from the date of its entry; or (i) A custodian, liquidator, trustee or receiver is appointed for any member of the Restricted Group or for the major part of the property of any one of them and is not discharged within 90 days after such appointment; or (j) Any member of the Restricted Group becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or any member of the Restricted Group applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for such member of the Restricted Group or for the major part of the property of any such entity; or (k) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against any member of the Restricted Group or any member of the Restricted Group (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (j) or this clause (k) of this Section 6.1 (each of the events referred to in clause (j) or this clause (k), a "PROCEEDING"), and, if instituted against such member of the Restricted Group, are consented to or are not dismissed within 20 Business Days after such institution; or (l) If property of any member of the Restricted Group 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 any member of the Restricted Group, such member shall have the right to contest such seizure or taking in good faith, if the holders of all of the Notes are absolutely satisfied, in their complete discretion, that the repayment of the Notes, the interest and all other amounts relating thereto and the ability of the Issuer to service its Debt shall not be compromised; or (m) If IPG Finance LLC assigns or transfers any of its rights against any Restricted Subsidiary with respect to amounts owed to it by such Restricted Subsidiary, to any Person other than a member of the Restricted Group, except as permitted under this Agreement or the Security Documents; or (n) Either Guaranty Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable in any respect, or the Parent, the General Partner or any Restricted Subsidiary takes any action for the purpose of repudiating or 47 rescinding the Guaranty Agreement to which it is a party or its obligations thereunder, or the Parent, the General Partner or any Restricted Subsidiary declares that its obligations thereunder are unenforceable; or (o) If in the opinion of the Majority Noteholders, acting in good faith, a Material Adverse Change has occurred since December 31, 2000, except for any Material Adverse Change described in Schedule II attached hereto, and the Majority Noteholders shall have given five (5) Business Days written notice to the Issuer to such effect. 6.2. NOTICE TO HOLDERS. When any Event of Default described in the foregoing Section 6.1 has occurred, or if the holder of any Note or of any other evidence of Debt of any Obligor gives any notice or takes any other action with respect to a claimed default, such Obligor agrees to give notice within three (3) Business Days of such event to all holders of the Notes then outstanding. 6.3. ACCELERATION OF MATURITIES. When any Event of Default described in clause (a) or (b) of Section 6.1 has occurred and is continuing, any holder of any Note may, by notice in writing sent in the manner provided in Section 9.6 to the Parent declare the entire principal of and all interest accrued on such Note to be, and such Note shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in clause (a), (b), (c), (d), (e), (f), (g), (h), (m), (n) or (o) of said Section 6.1 has occurred and is continuing, the holder or holders of 51% or more of the principal amount of Notes (other than Notes held by any member of the Restricted Group or any Affiliate) of all Series, taken as a single class, at the time outstanding (the "MAJORITY NOTEHOLDERS") may, by notice to the Parent, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in clause (i), (j), (k) or (l) of Section 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon any or all of the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Issuer will forthwith pay to the holders of such Notes the entire principal of and interest accrued on such Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole Amount. No course of dealing on the part of the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Issuer further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all reasonable costs and expenses incurred by them in the collection of any amounts payable under the Notes in connection with any Event of Default hereunder, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. All amounts paid hereunder with respect to principal, Make-Whole Amount, if any, and interest on the Notes shall be paid ratably to all holders of Notes which have become due and payable pursuant to this Section 6.3. 48 6.4. RESCISSION OF ACCELERATION. The provisions of Section 6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in clause (a), (b), (c), (d), (e), (f), (g), (h), (m), (n) or (o) of Section 6.1, the holders of at least 66 2/3% in aggregate principal amount of the Notes of all Series, taken as a single class, then outstanding may rescind and annul such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to Section 7.1; and provided, further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. Such annulment and rescission shall be by written instrument filed with the Parent. 7. AMENDMENTS, WAIVERS AND CONSENTS 7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Obligors, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Obligors shall have obtained the consent in writing of the holders of at least 66 2/3% in aggregate principal amount of the outstanding Notes of all Series, taken as a single class; provided that without the written consent of the holders of all of the Notes then outstanding, no such amendment or waiver shall be effective (a) which will change the time of payment of the principal of or the interest on any Note or change the principal amount thereof or change the rate of interest thereon, or (b) which will change any of the provisions with respect to optional prepayments including, without limitation, the definition of Make-Whole Amount, or (c) which will change the percentage of holders of the Notes required to consent to any such amendment or waiver of any of the provisions of this Section 7 or Section 6. 7.2. SOLICITATION OF HOLDERS. So long as there are any Notes outstanding, no Obligor will solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by such Obligor and shall be afforded the opportunity of 49 considering the same and shall be supplied by the Obligors with sufficient information to enable it to make an informed decision with respect thereto. No Obligor will directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently offered, on the same terms, ratably to the holders of all Notes then outstanding. 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Obligors, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 8. INTERPRETATION OF AGREEMENT; DEFINITIONS 8.1. DEFINITIONS. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "ACCEPTABLE RATING" shall mean a rating of at least BBB by Standard & Poor's or a rating of at least Baa2 by Moody's, or an equivalent credit rating by a rating agency of recognized standing acceptable to the Majority Noteholders. "ACQUISITION" shall mean the acquisition (whether by way of purchase, exchange, Investment or otherwise) of (a) a majority of the issued and outstanding Voting Stock of a Person (other than a member of the Restricted Group), or (b) assets of a Person (other than a member of the Restricted Group) comprising substantially all of the assets of such Person or of an independent business unit (for example, a division) operated by such Person. "ADJUSTED CONSOLIDATED" for any period, or as of any time, shall have the same meaning as "consolidated" except that the Unrestricted Subsidiaries are accounted for on a cost basis rather than on a consolidated basis for such period or as of such time. "AFFILIATE" shall mean any Person (other than the Parent or a Restricted Subsidiary) (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, any Obligor, (b) which beneficially owns or holds (i) 5% or more of the Voting Stock of the Parent or the General Partner or (ii) 5% or more of the Equity Interests of the Issuer or (c) 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 Interests) of which is beneficially owned or held by any Obligor or a Subsidiary. The term "control" means the possession, directly or indirectly, of the 50 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. "AGREEMENT, THIS" is defined in Section 7.3. "APPLICABLE ADJUSTMENT MARGIN" shall mean, as of any date of determination prior to an Interest Rate Adjustment Date, an amount equal to the product of (a) six hundred and three ten-thousandths percent (0.0603%) times (b) the number of complete calendar months which shall have expired since May 1, 2002 as of such date of determination. "APPLICABLE DEFAULT RATE" shall mean, for any Series of Notes at any time, a rate per annum equal to the lesser of (a) the rate of interest in effect at such time for such Series of Notes plus two percent (2%) and (b) the highest interest rate allowed by applicable law for Notes of such Series of Notes. "AVAILABLE CASH" shall mean, at any time, cash and Cash Equivalents which are freely available to the Restricted Group at such time in that there are no restrictions of any nature whatsoever on the Restricted Group's access thereto at such time, including, without limitation, any restrictions or potential delays arising out of any (a) agreement, (b) incorporating, constituting or charter documents, (c) foreign exchange or currency controls, (d) Law, (e) Lien or (f) otherwise. For purposes of the computation of Total Debt, "Available Cash" shall not include cash and Cash Equivalents held in Drumheath. "BANK DOCUMENTS" is defined in Section 4.7. "BANK FACILITY A" shall mean, with respect to and pursuant to the Credit Agreement, that certain 364-day extendible revolver in the principal amount of up to U.S. $50,000,000 (or its equivalent in Canadian currency), extendible annually under the terms of the Credit Agreement. "BANK FACILITY B" shall mean, with respect to and pursuant to the Credit Agreement, that certain revolving Facility B in the principal amount of up to U.S. $35,000,000 (or its equivalent in Canadian currency). "BANK FACILITY C" shall mean, with respect to and pursuant to the Credit Agreement, that certain revolving Facility C in the principal amount of up to U.S. $60,000,000 (or its equivalent in Canadian currency). "BANKS" shall mean the "Lenders" (as such term is defined in the Credit Agreement). "BANK TERM FACILITIES" shall mean Bank Facility B and Bank Facility C. "BUILDING INSURANCE" is defined in Section 5.2(a)(ii). "BUSINESS DAY" shall mean any day except a Saturday, Sunday or other day on which banks are generally not open for business in New York, New York, London, England, Toronto, Ontario, Canada or Montreal, Quebec, Canada, or any other day on which the New York Stock Exchange is generally not open for business. 51 "CANADIAN COLLATERAL" shall mean all personal and real property located in Canada granted as security for the obligations of the Obligors and the Restricted Subsidiaries under this Agreement, the Notes, the Subsidiary Guaranty Agreement and the Parent Guaranty Agreement, pursuant to the Canadian Security Documents. "CANADIAN COLLATERAL TRUSTEE" shall mean Computershare Trust Company of Canada, in its capacity as Canadian collateral trustee for the holders of Debt under this Agreement, the other Financing Documents and the Bank Documents, together with its successors in such capacity duly appointed in accordance with the provisions of the Financing Documents. "CANADIAN ENVIRONMENTAL INDEMNIFICATION AGREEMENT" is defined in Section 4.6(b). "CANADIAN MORTGAGES" is defined in Section 3.5(c). "CANADIAN SECURITY DOCUMENTS" is defined in Section 3.5(c). "CANCO" shall mean IPG Holding Company of Nova Scotia and its successors. "CAPITALIZED LEASE" shall mean any lease (a) the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the Parent and its Subsidiaries in accordance with GAAP or (b) for which the amount of the asset and liability thereunder if so capitalized is required to be disclosed in a note to such balance sheet in accordance with GAAP. "CAPITALIZED RENTALS" of any Person shall mean, 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 then a lessee would be reflected as a liability on a consolidated balance sheet of such Person as of such date in accordance with GAAP. "CASH EQUIVALENTS" shall mean, as of the date of any determination thereof, Investments of the type described in clause (b), (c) or (d) of the definition of the term "Permitted Investments", and all sums held in bank accounts. "CDN" shall mean Canadian dollars. "CHANGE IN CONTROL" shall mean any change in ownership of the Voting Stock of the Parent after the Effective Date which results in any Person (including Affiliates or associates of such Person), other than a member of the Restricted Group, becoming the "beneficial owner" (as such term is used in Rule 13d-5 under the Exchange Act) of more than 50% of the total voting power of all classes then outstanding of the Parent's Voting Stock. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder from time to time, and any successor statute thereto, together with the regulations promulgated thereunder, in each case as in effect from time to time. "COLLATERAL" shall mean the U.S. Collateral and the Canadian Collateral. 52 "COLLATERAL SUSPENSION CONDITIONS" shall mean, at any time: (a) the Acceptable Rating contemplated by Section 1.6(a) is then in full force and effect, not having been withdrawn or placed on a credit watch with a negative implication by Moody's or Standard & Poor's (or, if applicable, such other equivalent rating agency as has been accepted by the Majority Noteholders); (b) Total Debt, determined as of the end of each of the four most recently ended fiscal quarters of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for the period of four consecutive fiscal quarters of the Parent ended at the end of each of such four most recently ended fiscal quarters of the Parent; (c) each of the Lenders pursuant to the Credit Agreement, and each of the holders of the 1998 Notes, shall have agreed not to direct the U.S. Collateral Trustee, the Canadian Collateral Trustee or any other trustees or agents holding collateral for the benefit of the Banks and the holders of the 1998 Notes to enforce any of the provisions of the Security Documents or other documents creating Liens securing Bank Facility A (or, if applicable, any replacement thereof) during the applicable Collateral Suspension Period; and (d) no Default or Event of Default has occurred and is continuing; in each case as of such time. "COLLATERAL SUSPENSION DATE" is defined in Section 1.6. "COLLATERAL SUSPENSION PERIOD" is defined in Section 1.6. "COLLATERAL TRUSTEES" shall mean the U.S. Collateral Trustee and the Canadian Collateral Trustee. "COLLATERAL TRUST INDENTURE" is defined in Section 4.5(a). "COMMITMENT" at any time, with respect to any Bank Term Facility, shall mean the amount of the "Credit" (as defined in the Credit Agreement as in effect on the date of this Agreement with respect to such Bank Term Facility), as such amount may have been reduced (but not increased) from time to time pursuant to the terms of the Credit Agreement. "CONSOLIDATED" when used as a prefix to any item (unless such item is defined differently herein) shall mean the aggregate of 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, all of the financial covenants contained in Sections 5.6, 5.7 and 5.8, and the other financial calculations 53 required to be made on a consolidated basis hereunder, are calculated solely by reference to the Restricted Group, excluding any items attributable to Unrestricted Subsidiaries. "CONSOLIDATED ASSETS" shall mean, as of the date of any determination thereof, consolidated total assets of the Restricted Group as of such date determined in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries). "CONSOLIDATED CURRENT LIABILITIES" shall mean, as of the date of any determination thereof, such liabilities of the Restricted Group on a consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities on such date (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries). "CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of the Restricted Group for such period, less all expenses and other proper charges (including taxes on income) for such period, determined on a consolidated basis and otherwise in accordance with GAAP after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding, in any event: (a) 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; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any Person (other than a Restricted Subsidiary), substantially all of the assets of which have been acquired in any manner by any member of the Restricted Group, realized by such Person prior to the date of such acquisition; (e) net earnings and losses of any Person (other than a Restricted Subsidiary) with which any member of the Restricted Group shall have consolidated or which shall have merged into or with any member of the Restricted Group prior to the date of such consolidation or merger; (f) net earnings of any Person (other than a Restricted Subsidiary) in which any member of the Restricted Group has an ownership interest unless such net earnings shall have actually been received by any member of the Restricted Group in the form of cash distributions; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends or interest to any member of the Restricted Group; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; 54 (i) 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; (j) any gain arising from the acquisition of any Securities of any member of the Restricted Group; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been created as an expense or charge for such period. "CONSOLIDATED NET WORTH" shall mean, as of the date of any determination thereof, the total shareholders' equity of the Restricted Group as of such date, determined on a consolidated basis, but in any event excluding any amount of such shareholders' equity allocable or attributable to (a) Minority Interests and (b) all Investments (other than Permitted Investments) held by any member of the Restricted Group. "CONSOLIDATED TOTAL CAPITALIZATION" shall mean, as of the date of any determination thereof, the sum of (a) the amount of Total Debt on such date, plus (b) the Consolidated Net Worth as of such date. "CONTROL EVENT" shall mean: (a) the execution by any Obligor or any Subsidiary or Affiliate of any letter of intent with respect to any proposed transaction or event or series of transactions or events that, individually or in the aggregate, would result in a Change in Control if such transactions or events were to be consummated or to occur, or (b) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control. "CONTROL PREPAYMENT DATE" is defined in Section 2.5(a). "CREDIT AGREEMENT" shall mean that certain Credit Agreement of even date herewith, by and among the members of the Restricted Group, The Toronto-Dominion Bank, Comerica Bank, National Bank of Canada, and certain other Persons, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof, of this Agreement and of the Intercreditor Agreement. "DEBT" of any Person shall mean, as of the date of any determination thereof (without duplication): (a) all Indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of indebtedness of such Person on such date; (b) Negative Value of Derivative Instruments of such Person on such date; 55 (c) obligations secured by any Lien on such date 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 obligations secured by Liens 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; (d) Capitalized Rentals of such Person on such date; (e) reimbursement obligations in respect of credit enhancement instruments of such Person on such date including letters of credit; and (f) (without duplication of any of the foregoing) Guaranties of such Person on such date of obligations of others of the character referred to hereinabove in this definition. "DEFAULT" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "DERIVATIVE INSTRUMENTS" shall mean an agreement entered into from time to time by the Issuer in order to control, fix or regulate currency exchange fluctuations or the rate of interest payable on borrowings under either of the Bank Term Facilities. "DESIGNATED FACILITIES" shall mean all real property owned or leased by any member of the Restricted Group in the United States of America and Canada, including land, buildings and other improvements. "DRUMHEATH" shall mean Drumheath Indemnity Ltd., a company organized under the laws of Barbados. "EBITDA" for any fiscal period shall mean (i) the Consolidated Net Income of the Restricted Group for such period plus (ii) to the extent included in the calculation of such Consolidated Net Income, the Interest Expense, taxes, depreciation and amortization of the Restricted Group for such period, each calculated on a consolidated basis and otherwise in accordance with GAAP. Notwithstanding the foregoing, "EBITDA of the Unrestricted Subsidiaries" has the same meaning as EBITDA but shall be calculated in relation to the Unrestricted Subsidiaries only. "EFFECTIVE DATE" is defined in Section 1.4. "ENVIRONMENTAL LAWS" means all applicable United States, Mexican and Canadian, federal, state, county, provincial and local, and other foreign, statutes and codes or regulations, rules or ordinances issued, promulgated or approved thereunder, as well as all other Laws and common laws under which environmental liabilities can arise, now or hereafter in effect (including those with respect to asbestos or asbestos-containing material or exposure to asbestos or asbestos-containing material), relating to the clean-up, remediation, pollution, protection or 56 regulation of the environment and public health including, without limitation: (a) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes (including, without limitation, any Hazardous Substance) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata); and (b) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, and chemicals or substances regulated by any such statutes, codes, regulations, rules or ordinances; and (c) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom. The statutes, codes, regulations, rules or ordinances referred to herein shall include the applicable provisions of (i) the Clean Air Act (42 U.S.C. ss. 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. ss. 1251 et seq.), (iii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.), (iv) the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), (v) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. ss. 9601 et seq.), (vi) the Canadian Environmental Protection Act, (vii) the Environmental Protection Act (Ontario), and (viii) the Environmental Quality Act (Quebec). "EQUITY EVENT" shall mean the issuance by any member of the Restricted Group of Equity Interests or Debt (other than (a) Debt owing by one member of the Restricted Group to another member of the Restricted Group, and (b) a replacement of Bank Facility A after the termination thereof) of the nature contemplated in the definition of "Interest Rate Adjustment Date." "EQUITY EVENT PAYMENT" shall mean, with respect to any Equity Event: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, an amount equal to 100% of the Equity Event Proceeds in respect of such Equity Event; and (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated and (iii) there is any Debt outstanding under Bank Facility C or Bank Facility C has not been terminated, an amount equal to 75% of Equity Event Proceeds in respect of such Equity Event. "EQUITY EVENT PREPAYMENT DATE" is defined in Section 2.3(a). "EQUITY EVENT PROCEEDS" shall mean, at any time, with respect to any Equity Event, an amount equal to the difference of (a) the aggregate amount of the cash consideration received by the Restricted Group in connection with such Equity Event, minus (b) all reasonable out-of-pocket costs and expenses (including, without limitation, underwriting and similar fees) actually incurred by any member of the Restricted Group in connection with such Equity Event. "EQUITY INTEREST" shall mean: (a) in the case of a corporation, capital stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock; 57 (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and (e) any rights, warrants or options or other Securities that are exercisable, exchangeable or convertible for or into any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, 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. "ERISA AFFILIATE" shall mean any corporation, trade or business that is, along with the Parent, 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. "EVENT OF DEFAULT" is defined in Section 6.1. "EXCESS CASH FLOW" shall mean, in respect of any period, the result of: (a) the Restricted Group's EBITDA for such period, as of each Excess Cash Flow Prepayment Date, plus any decrease in the Restricted Group's consolidated non-cash working capital items (or minus any increase in the Restricted Group's consolidated non-cash working capital items) during such period, minus (b) the sum for such period of: (i) all cash interest or dividends paid by the Parent and its Restricted Subsidiaries on Debt or preferred shares during such period, (ii) the amount of all cash payments in respect of capital expenditures made by members of the Restricted Group during such period and not financed using the proceeds of Debt (other than Debt under the Credit Agreement or Debt from a member of the Restricted Group to another member of the Restricted Group), up to a maximum of $15,000,000 during the Parent's fiscal year 2002, and $20,000,000 during the Parent's fiscal year 2003, it being understood that from and after the first date as of which there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated, the maximum amounts set forth in this clause (ii) shall not apply, (iii) the amount of all voluntary and scheduled principal payments during such period of Debt of members of the Restricted Group held by Persons outside of the Restricted Group, including any voluntary or mandatory permanent reductions thereof but excluding (x) prepayments of loans under the Credit 58 Agreement, the Notes and the 1998 Notes with Excess Cash Flow Payments from the application of Section 9.2.2 of the Credit Agreement and Section 2.4 of the 1998 Note Agreement (each as in effect on the date of this Agreement) and Section 2.4 hereof, in each case, for a prior fiscal period, and (y) prepayments of Debt with proceeds from the sale of assets (other than sales of inventory or services in the ordinary course of business), (iv) principal payments by members of the Restricted Group during such period on Capitalized Leases held by lessors who are not members of the Restricted Group and (v) taxes paid in cash by members of the Restricted Group in such period. Excess Cash Flow shall be determined as follows: (A) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, (1) for the fiscal quarter ended March 31, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during such quarter, (2) for the fiscal quarter ended June 30, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during the first two quarters of fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with the provisions of this Agreement, the 1998 Note Agreement, and the Credit Agreement with respect to the fiscal quarter ended March 31, 2002 (the amount of any such reduction to be made under this paragraph is hereinafter referred to as the "Adjusted Amount"), (3) for the fiscal quarter ended September 30, 2002, Excess Cash Flow shall be based on the Excess Cash Flow during the first three quarters of fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1998 Note Agreement and the Credit Agreement with respect to the first two quarters of fiscal year 2002, (4) for the fiscal quarter ended December 31, 2002, Excess Cash Flow shall be based on the Excess Cash Flow for the fiscal year 2002 reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1998 Note Agreement and the Credit Agreement with respect to the first three quarters of fiscal year 2002 and to be adjusted promptly following confirmation by the Parent's auditors upon release of the fiscal year 2002 year-end financial statements; and (5) for any fiscal quarter ended on or after March 31, 2003, Excess Cash Flow shall be based on a trailing four quarter basis reduced by the Excess Cash Flow paid in accordance with this Agreement, the 1998 Note Agreement and the Credit Agreement with respect to the previous three quarters and to be adjusted (in the case of the fiscal year 2003) promptly following confirmation by 59 the Parent's auditors upon the release of the year-end financial statements for such fiscal year, and (B) for each fiscal year commencing with the fiscal year in which there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated, Excess Cash Flow shall be determined on a fiscal year basis. Any negative Adjusted Amounts, if any, shall be carried forward into the following quarter(s) and shall not be repaid to any member of the Restricted Group. "EXCESS CASH FLOW NOTICE DATE" shall mean: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, the date which is (i) sixty-three (63) days after the end of each fiscal quarter of the Parent or, if earlier, (ii) the date on which Bank Facility B is reduced pursuant to Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement) as a consequence of Excess Cash Flow (as calculated for the applicable period ending on the last day of such fiscal quarter); (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated and (iii) there is any Debt outstanding under Bank Facility C or Bank Facility C has not been terminated, the date which is (x) one hundred and twenty (120) days after the end of each fiscal year of the Parent or, if earlier, (y) the date on which Bank Facility C is reduced pursuant to Section 9.2.2 of the Credit Agreement (as in effect on the date of this Agreement) as a consequence of the existence of Excess Cash Flow for such year; and (c) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and Excess Cash Flow Payments are required under the terms of this Agreement, the date which is one hundred and twenty (120) days after the end of each fiscal year of the Parent. "EXCESS CASH FLOW PAYMENT" shall mean, in respect of any Excess Cash Flow Prepayment Date: (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, an amount equal to 75% of Excess Cash Flow for the fiscal period of the Parent specified in and determined pursuant to the second sentence of the definition of "Excess Cash Flow" most recently ended as of such Excess Cash Flow Prepayment Date; (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, and (iv) the Excess Cash Flow Reduction Conditions have not been met on such Excess Cash Flow Prepayment Date, an amount equal to 50% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date; 60 (c) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, (iv) the Excess Cash Flow Reduction Conditions have been met on such Excess Cash Flow Prepayment Date and (v) no Default or Event of Default has occurred and is continuing, an amount equal to 35% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date; (d) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and the Issuer or any member of the Restricted Group has entered into a new bank agreement with similar cash flow sweep provisions as those contained in the Credit Agreement, in form reasonably satisfactory to the Majority Noteholders, an amount equal to the greater of (i) 35% of Excess Cash Flow for the fiscal year of the Parent most recently ended as of such Excess Cash Flow Prepayment Date or (ii) the percentage of Excess Cash Flow required under the provisions of such new bank agreement; and (e) at any time that there is no Debt outstanding under the Bank Term Facilities, the Bank Term Facilities have been terminated and neither the Issuer nor any other member of the Restricted Group has entered into a new bank agreement with similar cash flow sweep provisions as those contained in the Credit Agreement, zero (0); provided, however, that, at any time, if the outstanding Debt at such time under each of the Bank Term Facilities is equal to the maximum amount permitted at such time under the Credit Agreement, the Excess Cash Flow Payment made in respect of any Excess Cash Flow Prepayment Date shall be reduced to the maximum amount (with respect to such Excess Cash Flow Prepayment Date, the "Reduced Excess Cash Flow Amount") permitted such that, after giving effect thereto, the principal amount of Debt outstanding at such time under Bank Facility A (net of Available Cash at such time) does not exceed $35,000,000; provided, further, that if the Debt outstanding under Bank Facility A is less than $35,000,000 (net of Available Cash) at any time after such Excess Cash Flow Prepayment Date, the Issuer shall add to the Excess Cash Flow Payment on the next succeeding Excess Cash Flow Prepayment Date, such amount by which the Debt under Bank Facility A is less than $35,000,000 at such time. "EXCESS CASH FLOW PREPAYMENT DATE" is defined in Section 2.4(a). "EXCESS CASH FLOW REDUCTION CONDITIONS" shall mean, at any time, (a) the Parent shall have obtained an Acceptable Rating in respect of the long-term senior unsecured Debt of the Parent and such Acceptable Rating is then in full force and effect, not having been withdrawn by Moody's, Standard & Poor's or, if applicable, such other equivalent rating agency as has been accepted by the Majority Noteholders or (b) Total Debt, determined as of the end of the then most recently ended fiscal year of the Parent, does not exceed two hundred fifty percent (250%) of EBITDA for such fiscal year. "EXCLUDED NON-MORTGAGED PROPERTIES" shall mean each of the Designated Facilities that is not a Mortgaged Property. For the purposes of this Agreement, such term shall mean the following Designated Facilities only: (a) leased distribution facility in Cumming, Georgia; (b) 61 leased warehouse facility in Ontario, California; (c) leased manufacturing and distribution facility in Rayne, Louisiana; and (d) manufacturing and distribution facility in Richmond, Kentucky which is owned by the City of Richmond, Kentucky and leased to a member of the Restricted Group. "EXISTING GUARANTY AGREEMENTS" is defined in Section 1.1. "EXISTING NOTE AGREEMENT" is defined in Section 1.1. "EXISTING NOTES" is defined in Section 1.1. "EXISTING SERIES A NOTES" is defined in Section 1.1. "EXISTING SERIES B NOTES" is defined in Section 1.1. "FINANCING DOCUMENTS" shall mean this Agreement, the Notes, the Guaranty Agreements, the Security Documents, the Intercreditor Agreement, the 1998 Note Agreement and the other agreements and instruments to be executed pursuant to the terms of each of such Financing Documents, as each may be amended, supplemented or otherwise modified from time to time. "FIXED CHARGES" for any period shall mean the sum, determined on a consolidated basis, of (a) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the members of the Restricted Group, and (b) all Interest Expense for such period an all Indebtedness (including, for this purpose, the interest component of Rentals on Capitalized Leases) of the Restricted Group. "FLOOD ACT" is defined in Section 5.2(a)(v). "FOREIGN PENSION PLAN" means any plan, fund (including, without limitation, any superannuation fund) or other similar program, other than social security or social insurance, established or maintained outside the United States by the Parent or any one or more of the Subsidiaries primarily for the benefit of employees of the Parent or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides for retirement income for such employees or a deferral of income for such employees in contemplation of retirement and is not subject to ERISA or the Code. "GAAP" shall mean the generally accepted accounting principles acknowledged by the Canadian Institute of Chartered Accountants and published in the Canadian Institute of Chartered Accountants' Handbook. "GENERAL PARTNER" is defined in the introductory paragraph of this Agreement. "GUARANTIES" by any Person shall mean 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 all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to 62 purchase such Indebtedness or other 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 other obligation, or (ii) to maintain working capital or other balance sheet items, or otherwise to advance or make available funds, for the purchase or payment of such Indebtedness or other 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 other obligation against loss in respect thereof, or (d) otherwise to assure the owner of the Indebtedness or other obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money, and a Guaranty in respect of any dividend or other obligation shall be deemed to be Indebtedness equal to the maximum aggregate amount of such Indebtedness, dividend or other obligation. "GUARANTY AGREEMENTS" is defined in Section 1.5. "HAZARDOUS SUBSTANCES" shall have the meaning assigned to that term in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of 1986 (42 U.S.C. ss. 9601 et seq.) and shall also include, without limitation, petroleum including crude oil or any fraction thereof, any petroleum product, asbestos, radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls, radioactive and toxic substances, prohibited substances and hazardous waste under the Canadian Environmental Protection Act, a "contaminant" under the Environmental Protection Act (Ontario), and a "contaminant" and a "pollutant" under the Environmental Quality Act (Quebec) as well as similar terms for such substances (including "Dangerous Substances") used in any applicable United States or Canadian federal, state, county, provincial statute, code or regulation, rule or ordinance or any other waste, chemicals or substances regulated by any Environmental Law. "IMPOSITION" shall have the same meaning ascribed to such term in the U.S. Mortgages. "INACTIVE SUBSIDIARIES" shall mean those Subsidiaries of the Parent which are not Restricted Subsidiaries and which do not conduct any real operations or business, a list of which, at the Effective Date, is included as part of Annex A to Exhibit B-2. "INDEBTEDNESS" of any Person shall mean and include 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 have been incurred in connection with the acquisition of property or assets, (b) obligations secured by any Lien 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 of such Person and (e) Guaranties of any other Person's obligations of the character referred to in this definition. 63 "INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings and loan association, trust company, investment company, charitable foundation, employee benefit plan (as defined in ERISA) or other institutional investor or financial institution. "INTERCREDITOR AGREEMENT" is defined in Section 4.5(f). "INTEREST EXPENSE" of any Person for any period shall mean all interest and all amortization of debt discount and expense for such period on each item of Indebtedness of such Person 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. "INTEREST RATE ADJUSTMENT DATE" shall mean the first day on which either (a) the Parent shall have entered into a reasonable and bona fide agreement with a reputable United States and/or Canadian Securities dealer authorizing and directing such dealer to (i) market the issuance of any Equity Interests of the Parent or subordinated or mezzanine Debt of the Parent or the Issuer, which Debt shall be on terms acceptable to the Majority Noteholders (in their absolute discretion), in all such cases providing for proceeds to the Parent or the Issuer in an aggregate amount of at least the outstanding principal amount under Bank Facility B on such date, or (ii) underwrite such Securities providing for such amount of proceeds to the Parent or the Issuer on a firm commitment basis, in each case, on financial and other terms and conditions that are not materially less favorable to the Parent or the Issuer, as applicable, than those generally available in the United States and/or Canadian capital markets to issuers of Securities in the packaging industry having a creditworthiness comparable to the Parent or the Issuer, as applicable, or (b) there is no Debt outstanding under Bank Facility B and Bank Facility B has been terminated. "INVESTMENTS" shall mean all investments, including Acquisitions, 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 accounts receivable and inventory (including, without limitation, raw materials, work in process and finished goods) of such Person to be used or consumed in the ordinary course of business, or any Available Cash. "ISSUER" is defined in the introductory paragraph of this Agreement. "LAW" shall mean 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. "LIEN" shall mean 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 right is based on the common law, statute or contract, and includes any security interest, hypothec, pledge, pawn, mortgage, prior claim, lien, charge, assignment for security purposes, cession, encumbrance, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, or a consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, 64 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 Parent 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 Lien. "LIKE ASSETS" shall mean, as of the date of any determination thereof, fixed or capital assets used or to be used by one or more members of the Restricted Group in the lines of business in which the Restricted Group is engaged as of the Effective Date or in a business reasonably related thereto. "LONG-TERM LEASE" shall mean 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. "MAJORITY BANKS" shall have the meaning ascribed to such term in the Intercreditor Agreement. "MAJORITY NOTEHOLDERS" is defined in Section 6.3. "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 2.7 or has become or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "PX1" or other appropriate page of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury 65 Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the third Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (A) the actively traded U.S. Treasury security with the average life closest to and greater than the Remaining Average Life and (B) the actively traded U.S. Treasury security with the average life closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 2.7 or Section 6.3; and provided, further, that in calculating interest on Called Principal for purposes of determining the Remaining Scheduled Payments, it shall be assumed for such calculation that the Series A Notes bear interest at a per annum rate equal to 7.66% and that the Series B Notes bear interest at a per annum rate equal to 7.81%. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 2.7 or has become or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "MATERIAL ADVERSE CHANGE" shall mean the occurrence or the failure to occur of any event or condition or series of events or conditions which, whether individually or in the aggregate, would result in a material adverse change in the business, assets, liabilities, financial position, operating results, business prospects or material agreements of the Restricted Group or in the ability of the members of the Restricted Group, taken as a whole, to perform their obligations under this Agreement or under the other Financing Documents. 66 "MATERIAL DEBT" shall mean, as of any date of determination, any Debt which then has or relates to, in the aggregate, an unpaid principal amount (or a corresponding unpaid liability) of more than U.S. $5,000,000 or an equivalent amount of money in any other currency. "MINORITY INTERESTS" shall mean any shares of stock or other ownership interests of any class of a Restricted Subsidiary (other than directors' qualifying shares or similar ownership interests as required by law) that are not owned by any member of the Restricted Group (each an "OWNERSHIP INTEREST"). Minority Interests shall be valued by valuing Ownership Interests constituting preferred stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of preferred stock; in either case, a "PREFERRED INTEREST") at the voluntary or involuntary liquidating value of such Preferred Interest, whichever is greater, and by valuing Ownership Interests constituting common stock (or if such Ownership Interest is not in a corporation, then any such Ownership Interest that has the characteristics of common stock; in either case, a "COMMON INTEREST") at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such Common Interest required by the foregoing method of valuing Minority Interests in Preferred Interests. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGED PROPERTIES" is defined in Section 4.6(a). "MULTIEMPLOYER PLAN" shall have the same meaning as in section 3(37) of ERISA. "NAIC" is defined in Section 3.2(a). "NEGATIVE VALUE OF DERIVATIVE INSTRUMENTS" shall mean, as of the date of any determination thereof, the aggregate amount that would be payable to all Persons by any member of the Restricted Group (net of all amounts that would be payable by each such Person to such member of the Restricted Group) on the date of determination pursuant to Section 6(e)(ii)(2)(A) of each ISDA Master Agreement between such member and such Persons as if all Derivative Instruments under such ISDA Master Agreements were being terminated on that date. "NET INCOME AVAILABLE FOR FIXED CHARGES" shall mean, for any period, the sum of Consolidated Net Income for such period plus (to the extent included in determining such Consolidated Net Income), (a) all provisions for any Federal, state, provincial or other income taxes made by the Restricted Group during such period, (b) Fixed Charges for such period, (c) all amortization expenses of the Restricted Group and (d) all depreciation of the Restricted Group. "1998 NOTE AGREEMENT" shall mean that certain Amended and Restated Note Agreement, dated as of December 20, 2001, among the Obligors and the holders of notes issued thereunder, as amended, supplemented or otherwise modified from time to time. "1998 NOTES" shall mean those certain Senior Secured Notes due 2008 in the aggregate principal amount of $137,000,000, issued by the Issuer under the 1998 Note Agreement, as amended from time to time. "NOTEHOLDERS" is defined in the introductory paragraph of this Agreement. 67 "NOTES" is defined in Section 1.2. "OBLIGORS" is defined in the introductory paragraph of this Agreement. "ORIGINAL CLOSING DATE" shall mean July 1, 1999. "PARENT" is defined in the introductory paragraph of this Agreement. "PARENT GUARANTY AGREEMENT" is defined in Section 1.5. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PERMITTED INVESTMENTS" shall mean all: (a) Investments by any member of the Restricted Group in any other member of the Restricted Group, including Investments (i) directly out of the cash proceeds to the Parent of the concurrent sale of shares of capital stock of the Parent or (ii) pursuant to a direct share exchange offer by the Parent; (b) Investments by any member of the Restricted Group in commercial paper maturing in 270 days or less from the date of acquisition thereof by such member of the Restricted Group, and which is accorded as of such date a rating of at least A-1 by Standard & Poor's or at least P-1 by Moody's, or their equivalent acceptable to the Majority Noteholders; (c) Investments in (i) 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 (ii) 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 by any member of the Restricted Group; (d) Investments in certificates of deposit maturing within one year from the date of acquisition thereof by any member of the Restricted Group, issued by a bank or trust company organized under the laws of the United States of America, any state thereof or Canada or any province thereof, having capital, surplus and undivided profits aggregating at least U.S. $500,000,000 (or its equivalent in Canadian currency) and whose long-term certificates of deposit are, at the time of acquisition thereof by any member of the Restricted Group, rated A- or better by Standard & Poor's or A3 or better by Moody's, or their equivalent acceptable to the holders of the Notes, or Investments in Eurodollar certificates of deposit maturing within one year after the date of acquisition thereof by any member of the Restricted Group and issued by a bank in western Europe or England having capital, surplus and undivided profits of at least U.S. $1,000,000,000 (or its equivalent in such country's local currency); and 68 (e) loans or advances to employees of the Parent and its Subsidiaries for the purchase of shares of stock of the Parent by such employees in the usual and ordinary course of business, and other loans and advances to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of any member of the Restricted Group provided that the aggregate outstanding amount of all such loans or advances shall at no time exceed U.S. $5,000,000. "PERMITTED LIENS" is defined in Section 5.10. "PERSON" shall mean an individual, partnership, limited liability company, corporation, trust, an entity created pursuant to Law or unincorporated organization, and a government or agency or political subdivision thereof. "PLAN" means an "employee pension benefit plan" (as defined in section 3(2) of ERISA) that is subject to Title IV of ERISA (other than a Multiemployer Plan) and that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Parent or any ERISA Affiliate or with respect to which the Parent or any ERISA Affiliate may have any liability. "PLEDGE AGREEMENT" is defined in Section 4.5(e). "POLICIES" is defined in Section 5.2(b). "PRIORITY DEBT" is defined in Section 5.9(a)(ii). "PROCEEDING" is defined in Section 6.1(k). "PRO RATA SHARE" shall mean, at any time, with respect to any holder of Notes, (a) at any time that there is any Debt outstanding under Bank Facility B or Bank Facility B has not been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then outstanding principal amount of all Notes, plus the aggregate unpaid principal amount under the Bank Term Facilities at such time, plus the outstanding principal amount of 1998 Notes at such time, and (b) at any time that (i) there is no Debt outstanding under Bank Facility B, (ii) Bank Facility B has been terminated, and (iii) there is any Debt outstanding under Bank Facility C, or Bank Facility C has not been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then outstanding principal amount of the Notes, plus the aggregate unpaid principal amount under Bank Facility C at such time, plus the outstanding principal amount of 1998 Notes at such time, and (c) at any time that there is no Debt outstanding under the Bank Term Facilities, and each of the Bank Term Facilities has been terminated, a fraction the numerator of which shall be the outstanding principal amount of the Notes held by such holder at such time and the denominator of which shall be the sum of the then 69 outstanding principal amount of all Notes plus the outstanding principal amount of 1998 Notes at such time. "PTE" is defined in Section 3.2(a)(i). "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "QUALIFYING EU JURISDICTION" shall mean any country (other than Greece) which as of the Effective Date is a member of the European Union. "REMAINING TAX PREPAYMENT AMOUNT" shall mean, at any time, the greater of (a) zero (0) and (b) the result of (i) twenty-five percent (25%) of the original principal amount of the Notes issued on the Original Closing Date minus (ii) the aggregate principal amount of Notes prepaid prior to such time under Section 2.2, Section 2.3 and Section 2.4 and under the provisions of the Intercreditor Agreement requiring the offer of prepayment of the Notes with insurance proceeds and condemnation proceeds. "REMNANT EQUITY EVENT PREPAYMENT" is defined in Section 2.3(b). "REMNANT EXCESS CASH FLOW PREPAYMENT" is defined in Section 2.4(b). "RENTALS" shall mean and include, 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 any member of the Restricted Group, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by any member of the Restricted Group (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 or sublessee regardless of sales volume or gross revenues. "REPORTABLE EVENT" shall mean a reportable event within the meaning of section 4043(c) of ERISA other than an event for which the 30-day notice period is waived under applicable Department of Labor regulations. "RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other officer of the Parent or the Issuer, as the case may be, with responsibility for the administration of the relevant portion of this Agreement or the Parent Guaranty Agreement. "RESTRICTED GROUP" shall mean, as of any date of determination thereof, the Parent and the Restricted Subsidiaries. "RESTRICTED PAYMENTS" shall mean (a) the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of any member of the Restricted Group; 70 (b) the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock or other Equity Interests of any class, or of any warrants, rights or options to purchase or acquire any shares of capital stock or other Equity Interests of any member of the Restricted Group; (c) any payment or distribution, directly or indirectly, by any member of the Restricted Group in respect of its capital stock or other Equity Interests; and (d) the prepayment of any Debt (other than Debt secured by Liens described in Section 5.10(h)), except as contemplated herein; provided, however, that "Restricted Payments" shall not include any such dividends, purchases, redemptions, retirements, payments, distributions or prepayments by any member of the Restricted Group to the Parent or by a Restricted Subsidiary to a Wholly-Owned Restricted Subsidiary. "RESTRICTED SUBSIDIARY" shall mean, at any time, any Subsidiary (a) which is at such time organized under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction of any of the foregoing; (b) which at such time 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 at such time beneficially owned by the Parent or any Wholly-Owned Restricted Subsidiary (or any combination thereof); (d) which has been designated by the board of directors of the Parent as a Restricted Subsidiary at or prior to such time in accordance with Section 5.17 and (e) which shall have (i) guarantied the Notes pursuant to a guaranty agreement substantively in the form of the Subsidiary Guaranty Agreement and (ii) granted Liens on substantially all of its assets for the benefit of the holders of the Secured Obligations pursuant to documents substantially in the form of the Security Documents. "RESTRUCTURING FEE" is defined in Section 4.17. "SECURED OBLIGATIONS" shall mean the "Secured Obligations" as such term is defined in the Collateral Trust Indenture. "SECURED PRIORITY DEBT" is defined in Section 5.9(a)(ii). "SECURITIES ACT" shall mean the United States Securities Act of 1933, as amended from time to time. "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act. "SECURITY AGREEMENT" is defined in Section 4.5(d). "SECURITY DOCUMENTS" means the Collateral Trust Indenture, the Mortgages, the Security Agreement, the Pledge Agreement, the Canadian Security Documents, the U.S. Environmental Indemnification Agreement, the Canadian Environmental Indemnification Agreement and the other agreements and instruments executed or to be executed pursuant to the terms of each of such Security Documents or which grant Liens to the U.S. Collateral Trustee or the Canadian 71 Collateral Trustee securing the obligations of any member of the Restricted Group under any of this Agreement, the Notes, the Parent Guaranty Agreement or the Subsidiary Guaranty Agreement, as the case may be, as each may be amended, supplemented or otherwise modified from time to time. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Parent or of the Issuer, as the case may be. "SENIOR OFFICER" means the chief executive officer or the chief financial officer of the Parent. "SERIES" shall mean any one or both of the Series A Notes, taken together, and the Series B Notes, taken together. "SERIES A NOTES" is defined in Section 1.2. "SERIES B NOTES" is defined in Section 1.2. "SOURCE" is defined in Section 3.2. "STANDARD & POOR'S" shall mean Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries directly or indirectly owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Parent and such "Subsidiary" shall include a limited partnership, the general partner of which is the Parent or one or more of its Subsidiaries. "SUBSIDIARY GUARANTY AGREEMENT" is defined in Section 1.5. "SUBSIDIARY PRIORITY DEBT" is defined in Section 5.9(a)(ii). "TAX PERCENTAGE LIMIT" shall mean, at any time and in respect of the principal amount of any prepayment, (a) 100% if such time is after the fifth anniversary of the Original Closing Date or (b) if such time is on or before the fifth anniversary of the Original Closing Date, the lesser of (i) 100% and (ii) a fraction, expressed as a percentage, the numerator of which is the Remaining Tax Prepayment Amount at such time and the denominator of which is the principal amount of such prepayment. "TOTAL DEBT" shall mean, as of any date of determination, the sum of (a) the aggregate principal amount of all Debt of the Restricted Group then outstanding other than Debt owing by a member of the Restricted Group to another member thereof (and for greater certainty, includes any Debt of an Unrestricted Subsidiary Guarantied by any member of the Restricted Group), determined on a consolidated basis for the Restricted Group, plus (b) the greater of (i) the stated 72 value of all preferred shares or (ii) the voluntary or involuntary liquidation value of all preferred shares, as issued by a member of the Restricted Group then outstanding (other than any such preferred shares held by another member of the Restricted Group), less (c) Available Cash as of such date. "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary of the Parent which is an Inactive Subsidiary or which is not otherwise a Restricted Subsidiary, a list of which, as of the Effective Date, is included as part of Annex E to Exhibit B-2, or as may be determined by the Parent at any later date. "U.S. COLLATERAL" shall mean the "U.S. Collateral" as such term is defined in the Collateral Trust Indenture. "U.S. COLLATERAL TRUSTEE" shall mean "Collateral Trustee", as such term is defined in the Collateral Trust Indenture. "U.S. ENVIRONMENTAL INDEMNIFICATION AGREEMENT" is defined in Section 4.6(b). "U.S. MORTGAGES" is defined in Section 4.5(b). "VOTING STOCK" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled whether through the ownership of stock, partnership interests, by contract or otherwise, to elect a majority of the board of directors (or Persons performing similar functions). "WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean any Restricted Subsidiary of which all of the issued and outstanding equity interests (except directors' qualifying shares or similar equity and voting interests as required by law) of which shall be owned directly or indirectly by the Parent or one or more of the Parent's other Wholly-Owned Restricted Subsidiaries, or any combination of the Parent and one or more other Wholly-Owned Restricted Subsidiaries. 8.2. ACCOUNTING PRINCIPLES. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 8.3. DIRECTLY OR INDIRECTLY. 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. 73 9. MISCELLANEOUS 9.1. REGISTERED NOTES. The Issuer shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "NOTE REGISTER") and the Issuer will register or transfer or cause to be registered or transferred as hereinafter provided any Note. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office, the Issuer will deliver in exchange therefor, without expense to such holder, except as set forth below, a Note of the same Series for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, or Notes of the same Series aggregating such unpaid principal amount in the denomination of U.S. $500,000 (or such lesser amount as shall constitute 100% of the Notes of such holder) or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form, series and tenor as the Notes so surrendered for exchange. The Issuer may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. 9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Issuer, or in the event of such mutilation upon surrender and cancellation of the Note, the Issuer will make and deliver without expense to the holder thereof, a new Note, of like tenor and series, in lieu of such lost, stolen, destroyed or mutilated Note. If the Noteholders, any subsequent Institutional Holder which is an insurance company or any other Institutional Holder which has a net worth in excess of U.S. $50,000,000 is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of such Note at the time of such loss, theft or destruction shall be accepted 74 as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Issuer. 9.4. EXPENSES; STAMP TAX AND OTHER INDEMNITY. Whether or not the transactions herein contemplated shall be consummated, the Obligors, jointly and severally, agree to pay directly all of the Noteholders' out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to (a) the reasonable charges and disbursements of Bingham Dana LLP, special counsel to the Noteholders, (b) duplicating and printing costs and charges for shipping the Notes (if so required), adequately insured to the Noteholders at each Noteholder's home office or at such other place as such Noteholder may designate, (c) the fees and costs incurred in connection with the initial filing of this Agreement and all related documents and financial information, and all subsequent annual and interim filings of documents and financial information related to this Agreement, with the Securities Valuation Office of the NAIC or any successor organization acceding to the authority thereof, and (d) all such reasonable expenses (including the fees and expenses of any investment banker or financial consultant) relating to any proposed or actual amendment, waivers or consents pursuant to the provisions hereof, including, without limitation, any amendments, waivers, or consents resulting from any work-out, renegotiation or restructuring relating to the performance by any Obligor of its obligations under any Financing Document to which it is a party. The Obligors, jointly and severally, also agree that they will pay and save each Noteholder harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement, the Notes, or any other Financing Document, whether or not any Notes are then outstanding. The Obligors, jointly and severally, agree to protect and indemnify each Noteholder against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement and the other Financing Documents (other than those expressly retained by such Noteholder). The Obligors, jointly and severally, agree to indemnify each Noteholder, the U.S. Collateral Trustee and the Canadian Collateral Trustee and their respective directors, officers, agents and employees from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses of any of them for or in connection with (i) the participation of any of the Noteholders in the transactions contemplated by this Agreement and the other Financing Documents, (ii) the role of any of the Noteholders in any investigation, litigation or other proceeding brought or threatened by any third party and relating to the Parent or any of its Subsidiaries, and/or (iii) the compliance with or enforcement of any of their rights or obligations hereunder, including, without limitation (A) the reasonable fees and disbursements of counsel and (B) the costs of defending, counterclaiming or claiming against third parties in respect of any action or matter and any cost, liability or damage arising out of any settlement, in each case 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. 75 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to, and are not exclusive of, any rights or remedies any such holder would otherwise have. 9.6. NOTICES. All communications provided for hereunder shall be in writing and, if to a Noteholder, delivered or mailed prepaid by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, in each case addressed to each Noteholder at such Noteholder's address appearing on Schedule I to this Agreement or such other address as such Noteholder or the subsequent holder of any Note initially issued to such Noteholder may designate to the Parent in writing, and if to the Parent or the Issuer, delivered or mailed by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, to the Parent or to the Issuer at 110E Montee de Liesse, St. Laurent, Quebec, Canada H4T IN4, Attention: Vice President, Finance, Fax No. 514-731-5477, with a copy to Stikeman Elliott, 1155 Rene Levesque West Blvd., Suite 3900, Montreal, Quebec, Canada H3B 3V2, Attention: Michael L. Richards, Esq., Fax No. 514-397-3222, and to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, Attn: Nancy Corbett, Esq., Fax No. 212-309-6273 or to such other address as the Parent or the Issuer may in writing designate to the Noteholders or to a subsequent holder of the Note initially issued to a Noteholder, provided that the failure to provide copies of any such notices to the parties set forth above or to provide any other copies shall not invalidate any notice provided to the Parent or the Issuer pursuant to the terms of this Section 9.6; provided, further, that a notice to a Noteholder by overnight air courier shall only be effective if delivered to such Noteholder at a street address designated for such purpose in Schedule I, and a notice to a Noteholder by facsimile communication shall only be effective if made by confirmed transmission to such Noteholder at a telephone number designated for such purpose in Schedule I and followed (on the day of transmission) by overnight air courier, or, in either case, as such Noteholder or a subsequent holder of any Note initially issued to such Noteholder may designate to the Obligors in writing. 9.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each party hereto and its successors and assigns and shall inure to the benefit of each party hereto and its successors and assigns, including each successive holder or holders of any Notes. 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants, representations and warranties made by any party herein and in any certificates delivered pursuant hereto, whether or not in connection with the Effective Date, shall survive the delivery of this Agreement and the Notes. 76 9.9. SEVERABILITY. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. 9.10. GOVERNING LAW. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with New York law, excluding choice of law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 9.11. JURISDICTION AND SERVICE IN RESPECT OF ISSUER AND PARENT. Any legal action or proceeding with respect to this Agreement, the Notes, any Guaranty 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, each of the Parent and the Issuer hereby ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER AND THE PARENT 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 ISSUER, THE PARENT AND EACH HOLDER OF A NOTE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY. Each of the Issuer and the Parent further consents that all service of process may be made by delivery to it at the address of the Issuer or the Parent, as the case may be, set forth in Section 9.6 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 Issuer and the Parent 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 9.11 shall affect the right of any holder of Notes 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 Issuer or the Parent, or to enforce a judgment obtained in the courts of any other jurisdiction. 9.12. PAYMENTS FREE AND CLEAR OF TAXES. The Obligors, for the benefit of those holders of the Notes which are residents, citizens or domestic corporations of the United States of America at the time of any payment made by an Obligor hereunder (the "RELEVANT HOLDERS"), agree that in the event any such payments made 77 by an Obligor under the Notes, this Agreement, a Guaranty Agreement or any other Financing Document 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 (or any authority therein or thereunder) from or through which payments hereunder are actually made (each a "TAXING JURISDICTION"), the Obligors will pay to the Relevant Holder such additional amounts (the "ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts paid to such Relevant Holder pursuant to the terms of this Agreement, such Notes, the Guaranty Agreements and the other Financing Documents after imposition of any such Relevant Tax (including, without limitation, any Relevant Tax on such Additional Amounts) 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 (or any authority therein or thereunder) as described above), except that no such Additional Amounts shall be payable in respect of this Agreement, any Note, a Guaranty Agreement or any other Financing Document to a Relevant Holder which is liable for such Relevant Tax in respect of this Note Agreement, such Notes, such Guaranty Agreement or such other Financing Document solely by reason of such Relevant Holder being resident or being deemed resident in such Taxing Jurisdiction or carrying on business or being deemed to carry on business in such Taxing Jurisdiction or having some other business connection with such Taxing Jurisdiction other than, in the case of Canada, the mere holding of this Agreement, such Notes, such Guaranty Agreement or such other Financing Document or the receipt of principal or interest in respect thereof. 9.13. CURRENCY OF PAYMENTS; JUDGMENTS. Any payment made by any member of the Restricted Group to any holder of the Notes or for the account of any such holder in respect of any amount payable by such member of the Restricted Group (including any payments under the Guaranty Agreements or any other Financing Document) shall be made in U.S. Dollars. Any payment made by such member of the Restricted Group to any holder of Notes or for the account of any such holder in respect of any amount payable by such member of the Restricted Group in lawful currency of the United States of America, which payment is made in Canadian dollars or other foreign currency, whether pursuant to any judgment or order of any court or tribunal or otherwise, shall constitute a discharge of the obligations of such member of the Restricted Group only to the extent of the amount of lawful currency of the United States of America which may be purchased with such Canadian dollars or other foreign currency on the date of payment (or if it is not practicable to make the purchase on such date, on the first day on which it is practicable to do so); provided that any such conversion of a foreign currency into lawful currency of the United States shall be calculated as of the date such payment is received by such holder. If the amount of U.S. Dollars so purchased is less than the amount of U.S. Dollars expressed to be due hereunder or under the Notes or under such other Financing Document, the Obligors shall indemnify such holder against any loss sustained by such holder as a result hereunder or under the Notes or such other Financing Document; and in any event, the Obligors shall indemnify such holder against the reasonable cost of making any such purchase. These indemnities shall constitute a separate and independent obligation from the other obligations herein, in the Notes, the Guaranty Agreements and the other Financing Documents, shall give rise to a separate and independent cause of action, 78 shall apply irrespective of any indulgence granted by any such holder, shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any such sum due hereunder, under any Note, under any Guaranty Agreement, or under any other Financing Document and shall survive the payment of the Notes and the termination of this Agreement and the other Financing Documents. 9.14. CAPTIONS. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.15. POWER OF ATTORNEY FOR QUEBEC PURPOSES. For greater certainty, and without limiting the powers of the U.S. Collateral Trustee or the Canadian Collateral Trustee under the Security Documents, each of the Noteholders hereby acknowledges that the Canadian Collateral Trustee shall, for the purposes of holding any security granted under the Security Documents pursuant to the laws of the Province of Quebec to secure payment of debentures (or any similar instruments), be the holder of an irrevocable power of attorney (fonde de pouvoir) (within the meaning of Article 2692 of the Civil Code of Quebec) for all present and future holders of the Notes and holders of debentures. Each of the Noteholders hereby constitutes, to the extent necessary, the Canadian Collateral Trustee as the holder of such irrevocable power of attorney (fonde de pouvoir) in order to hold security granted under the Security Documents in the Province of Quebec to secure the debentures (or any similar instrument). Each assignee of the Notes shall be deemed to have confirmed and ratified the constitution of the Canadian Collateral Trustee as the holder of such irrevocable power of attorney (fonde de pouvoir). Notwithstanding the provisions of Section 32 of the Special Powers of Legal Persons Act (Quebec), the Canadian Collateral Trustee may acquire and be the holder of a debenture (or any similar instrument). Each of the Obligors hereby acknowledges that a debenture executed by it constitutes a title of indebtedness, as such term is used in Article 2692 of the Civil Code of Quebec. Notwithstanding the provisions of Section 9.10, the provisions of this Section 9.15 shall be governed by the laws of the Province of Quebec and the federal laws of Canada applicable therein. 9.16. INTEREST PROVISIONS. (a) Interest Act (Canada). Solely for purposes of the Interest Act (Canada) and in respect of all or any portion of a calendar year, the annual rate of interest to which any interest rate herein is equal is such rate multiplied by a fraction, the numerator of which is the total number of days in such year and the denominator of which is 360. (b) Criminal Code (Canada). If any provision of this Agreement or any other Financing Document would obligate any member of the Restricted Group to make any payment of interest or other amount payable to the holders of the Notes in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the holders of the Notes of interest at a criminal rate (as construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to 79 have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or result in a receipt by the holders of the Notes of interest at a criminal rate, the adjustment to be effected, to the extent necessary, as follows: (i) firstly, by reducing the amount or rate of interest required to be paid to the holders of the Notes, and (ii) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the holders of the Notes which would constitute interest for purposes of Section 347 of the Criminal Code (Canada). Any amount or rate of interest shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the Notes remain outstanding on the assumption that any charges, fees or expenses that fall within the meaning of interest (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be prorated over such period of time and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Majority Noteholders, shall be conclusive for the purposes of such determination, absent manifest error. (c) Bankruptcy and Insolvency. If any member of the Restricted Group files a notice of intention to file a proposal, or files a proposal under the Canadian Bankruptcy and Insolvency Act, or files a petition under the US Bankruptcy Code, or if the Parent 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 rights of the holders of the Notes to contest such stay of proceedings, the Issuer covenants and agrees to continue to pay interest on all amounts due to the holders of the Notes. In this regard, the Issuer acknowledges that permitting the Issuer to continue to use the proceeds of the Notes constitutes valuable consideration provided after the filing of any such proceeding in the same way that permitting the Issuer to use leased premises constitutes such valuable consideration. 9.17. LANGUAGE. The parties hereby confirm their express intent that this Agreement, the Guaranty Agreements, the Notes, the other Financing Documents and all documents and agreements directly and indirectly related thereto be written in English. Les parties reconnaissent leur volonte expresse que la presente convention, les billets ainsi que les documents et convention qui sly rattachent directement ou indirectement soient rediges en anglais. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS SIGNATURE PAGE.] 80 The execution hereof by the Noteholders shall constitute a contract between the Noteholders, the Parent, the Issuer and the General Partner for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.
INTERTAPE POLYMER GROUP INC. LE GROUPE INTERTAPE POLYMER INC. By: /s/ Salvatore Vitale ------------------------------- Name: Salvatore Vitale Title: Vice President Finance IPG HOLDINGS LP BY: INTERTAPE POLYMER INC., ITS GENERAL PARTNER By: /s/ Jim Bob Carpenter ------------------------------------ Name: Jim Bob Carpenter Title: President INTERTAPE POLYMER INC. By: /s/ Salvatore Vitale ------------------------------- Name: Salvatore Vitale Title: Assistant Secretary
ACCEPTED AND AGREED: PRINCIPAL LIFE INSURANCE COMPANY BY: PRINCIPAL CAPITAL MANAGEMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ITS AUTHORIZED SIGNATORY By: /s/ Karen A. Pearson ------------------------------- Name: Karen A. Pearson Title: Counsel By: /s/ Christopher J. Henderson ------------------------------- Name: Christopher J. Henderson Title: Counsel [Signature Page to Amended and Restated 1999 Note Agreement] PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS BY: PRINCIPAL CAPITAL MANAGEMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ITS AUTHORIZED SIGNATORY By: /s/ Karen A. Pearson ------------------------------- Name: Karen A. Pearson Title: Counsel By: /s/ Christopher J. Henderson ------------------------------- Name: Christopher J. Henderson Title: Counsel THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, A WISCONSIN CORPORATION By: /s/ David A. Barras.... ---------------------------------------- Name: David A. Barras Title: Its Authorized Representative NEW YORK LIFE INSURANCE COMPANY By: /s/ A. Post Howland.... ---------------------------------------- Name: A. Post Howland Title: Investment Vice President J. ROMEO & CO. By: /s/ Peter Coccia....... ------------------------------------------------- Name: Peter Coccia Title: Partner HARE & CO. By: /s/ Suzanne E. Walton.. ---------------------------------------- Name: Suzanne E. Walton Title: Authorized IM Representative [Signature Page to Amended and Restated 1999 Note Agreement] JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/ Robert E. Whalen, II ------------------------------------------------- Name: Robert E. Whalen, II Title: Vice President C.M. LIFE INSURANCE COMPANY BY: DAVID L. BABSON & COMPANY INC. AS INVESTMENT SUB-ADVISER By: /s/ Richard C. Morrison ------------------------------------------------- Name: Richard C. Morrison Title: Managing Director MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY BY: DAVID L. BABSON & COMPANY INC. AS INVESTMENT ADVISER By: /s/ Richard C. Morrison ------------------------------------------------- Name: Richard C. Morrison Title: Managing Director CONNECTICUT GENERAL LIFE INSURANCE COMPANY BY: CIGNA INVESTMENTS, INC. (AUTHORIZED AGENT) By: /s/ Debra J. Height ------------------------------- Name: Debra J. Height Title: Managing Director NORTHERN LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich... ---------------------------------------- Name: James V. Wittich Title: Senior Vice President RELIASTAR LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich... ---------------------------------------- Name: James V. Wittich Title: Senior Vice President [Signature Page to Amended and Restated 1999 Note Agreement] RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich... ---------------------------------------- Name: James V. Wittich Title: Senior Vice President SECURITY-CONNECTICUT LIFE INSURANCE COMPANY BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT By: /s/ James V. Wittich... ---------------------------------------- Name: James V. Wittich Title: Senior Vice President [Signature Page to Amended and Restated 1999 Note Agreement] EXHIBIT A-1 [FORM OF SENIOR SECURED NOTE, SERIES A, DUE 2005] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. IPG HOLDINGS LP AMENDED AND RESTATED SENIOR SECURED NOTE, SERIES A, DUE MAY 31, 2005 No. R-[__] [Date] $[_______] PPN: 44981# AE 7 IPG HOLDINGS LP, a Delaware limited partnership (the "ISSUER"), for value received, hereby promises to pay to [_________________], or its registered assigns, on the 31st day of May, 2005, the principal amount of [__________________] U.S. DOLLARS ($[_________]) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon, computed in the manner provided in Section 2.1 of the Note Agreement (defined below), payable semiannually on the last day of each May and November in each year (commencing on May 31, 2002) and at maturity. The Issuer agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and Make-Whole Amount, if any, and (to the extent legally enforceable) on any overdue installment of interest, both before and after demand and judgment, at a rate equal to the Applicable Default Rate (as defined in the Note Agreement). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Citibank, N.A., in New York, New York or at such other place in the State of New York as the Issuer shall have designated by written notice to the holder of this Note as provided in the Note Agreement referred to below. This Note is one of an issue of Notes of the Issuer issued in an aggregate principal amount of U.S. $137,000,000, consisting of $25,000,000 in aggregate principal amount of the Issuer's Amended and Restated Senior Secured Notes, Series A, due May 31, 2005 and $112,000,000 in aggregate principal amount of the Issuer's Amended and Restated Senior Secured Notes, Series B, due May 31, 2009 (collectively, as may be amended from time to time, the "NOTES"), pursuant to the terms and provisions of that certain Amended and Restated Note Agreement, dated as of December 20, 2001 (as may be amended from time to time, the "NOTE AGREEMENT"), entered into by the Issuer, Intertape Polymer, Inc., a Canadian corporation and general partner of the Issuer and Intertape Polymer Group Inc., a Canadian corporation, and the purchasers named therein. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreement to all the benefits provided by the Note Agreement. Reference is hereby made to the Note Agreement for a statement of Exhibit A-1-1 such rights and benefits. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in ss.5.18 of the Note Agreement and (ii) to have made the representation set forth in ss.3.2 of the Note Agreement. This Note and the other Notes outstanding under the Note Agreement may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreement. The Notes are not subject to prepayment or redemption at the option of the Issuer prior to its expressed maturity date except on the terms and conditions and in the amounts and with the Make-Whole Amount, if any, set forth in the Note Agreement. The payment of all principal of, premium, if any, and interest in this Note and the other Notes outstanding under the Note Agreement has been unconditionally guaranteed, and has the benefit of security, in each case as contemplated by the Note Agreement. Reference is hereby made thereto for a statement of the rights and benefits accorded thereby. This Note is registered on the books of the Issuer and is transferable only by surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, Make-Whole Amount, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note shall be governed by and construed in accordance with the laws of the State of New York. IPG HOLDINGS LP BY: INTERTAPE POLYMER INC., ITS GENERAL PARTNER By: __________________________ Name: Title: Exhibit A-1-2 EXHIBIT A-2 [FORM OF SENIOR SECURED NOTE, SERIES B, DUE 2009] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. IPG HOLDINGS LP AMENDED AND RESTATED SENIOR SECURED NOTE, SERIES B, DUE MAY 31, 2009 No. R-[__] [Date] $[_______] PPN: 44981# AF 4 IPG HOLDINGS LP, a Delaware limited partnership (the "ISSUER"), for value received, hereby promises to pay to [_________________], or its registered assigns, on the 31st day of May, 2009, the principal amount of [__________________] U.S. DOLLARS ($[_________]) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon, computed in the manner provided in Section 2.1 of the Note Agreement (defined below), payable semiannually on the last day of each May and November in each year (commencing on May 31, 2002) and at maturity. The Issuer agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and Make-Whole Amount, if any, and (to the extent legally enforceable) on any overdue installment of interest, both before and after demand and judgment, at a rate equal to the Applicable Default Rate (as defined in the Note Agreement). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Citibank, N.A., in New York, New York or at such other place in the State of New York as the Issuer shall have designated by written notice to the holder of this Note as provided in the Note Agreement referred to below. This Note is one of an issue of Notes of the Issuer issued in an aggregate principal amount of U.S. $137,000,000, consisting of $25,000,000 in aggregate principal amount of the Issuer's Amended and Restated Senior Secured Notes, Series A, due May 31, 2005 and $112,000,000 in aggregate principal amount of the Issuer's Amended and Restated Senior Secured Notes, Series B, due May 31, 2009 (collectively, as may be amended from time to time, the "NOTES"), pursuant to the terms and provisions of that certain Amended and Restated Note Agreement, dated as of December 20, 2001 (as may be amended from time to time, the "NOTE AGREEMENT"), entered into by the Issuer, Intertape Polymer, Inc., a Canadian corporation and general partner of the Issuer and Intertape Polymer Group Inc., a Canadian corporation, and the purchasers named therein. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreement to all the benefits provided by the Note Agreement. Reference is hereby made to the Note Agreement for a statement of Exhibit 4.6(c)-1 such rights and benefits. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in ss.5.18 of the Note Agreement and (ii) to have made the representation set forth in ss.3.2 of the Note Agreement. This Note and the other Notes outstanding under the Note Agreement may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreement. The Notes are not subject to prepayment or redemption at the option of the Issuer prior to its expressed maturity date except on the terms and conditions and in the amounts and with the Make-Whole Amount, if any, set forth in the Note Agreement. The payment of all principal of, premium, if any, and interest in this Note and the other Notes outstanding under the Note Agreement has been unconditionally guaranteed, and has the benefit of security, in each case as contemplated by the Note Agreement. Reference is hereby made thereto for a statement of the rights and benefits accorded thereby. This Note is registered on the books of the Issuer and is transferable only by surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, Make-Whole Amount, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note shall be governed by and construed in accordance with the laws of the State of New York. IPG HOLDINGS LP BY: INTERTAPE POLYMER INC., ITS GENERAL PARTNER By: __________________________ Name: Title: Exhibit 4.6(c)-2 EX-6 8 m06925orex6.txt 2001 ANNUAL REPORT Exhibit 6 COVER 2001 Annual Report LOGO INSIDE IPG Corporate Profile Intertape Polymer Group Inc. (IPG) is a recognized leader in the development and manufacture of specialized polyolefin plastic & paper packaging products and complementary packaging systems. Headquartered in Montreal, Quebec, and Sarasota, Florida, the company has grown strategically to support operations in 23 locations including 17 manufacturing facilities, with approximately 2,900 employees. IPG's advanced manufacturing technologies offer the flexibility to produce a wide range of products that reflect the needs of our customers. Products sold through IPG distributors include Intertape(TM) brand hot-melt, acrylic and natural rubber pressure-sensitive carton sealing tapes, water-activated carton sealing tape, masking tape, cloth duct tape, HVAC tape, electrical/electronic tape, automotive high performance and a variety of specialty tapes. Other products include Exlfilm(R) brand shrink film, StretchFlex(R) brand stretch wrap, Interpack(TM) brand packaging equipment, carton sealers, case erectors, shrink packaging, ink jet printers and labeling systems. Examples of products directly to end users include a wide range of Nova(TM) brand woven polyolefin fabrics and Intertape(TM) brand flexible intermediate bulk containers (FIBC). Since its inception in 1981, IPG has become a major presence in North America by focusing on large niche markets, continuing its momentum of successful rapid growth and remaining a low cost producer. With this strategy, IPG's competitively priced products are sold to both a broad range of industrial/specialty distributors, retail stores, and large end-users in diverse industries. These industries include the aeronautical, agricultural, automotive, beverage, chemical, construction, food, forest, geotextile, mining, pharmaceutical, paper, recreational, retail, sports and transportation industries. Intertape Polymer Group Inc. is a publicly traded company with its common shares listed on the New York Stock Exchange and The Toronto Stock Exchange under the Stock Symbol "ITP." Table of Contents Financial Highlights ...................................................... 2 Message to Shareholders ................................................... 4 Consolidated Quarterly Statements of Earnings ............................. 5 Management's Discussion and Analysis ...................................... 6 Management's Responsibility for Financial Statements ...................... 17 Auditors' Report .......................................................... 18 Financial Statements Consolidated Earnings .................................................... 19 Consolidated Retained Earnings ........................................... 19 Consolidated Cash Flows .................................................. 20 Consolidated Balance Sheets .............................................. 21 Notes to Consolidated Financial Statements ......................................................... 22 to 38 Intertape Polymer Group - Locations ...................................... 39 Other Information ........................................................ 40 Notes .................................................................... 41 Corporate Headquarters 110 E Montee de Liesse Montreal, Quebec Canada, H4T 1N4 Investor Relations Tel: 866-202-4713 Fax: 514-731-5477 Web: www.intertapepolymer.com E-mail: itp$info@intertapeipg.com Safe Harbor Statement Certain statements and information set forth in this Annual Report, as well as other written or oral statements made from time to time by the Company or by its authorized executive officers on its behalf, constitute "forward-looking statements" within the meaning of the the Federal Securities laws including statements regarding the Company's expectations, beliefs, intentions, or strategies for the future. The Company intends for its forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The reader should note that the Company's forward-looking statements speak only as of the date hereof or when made and the Company undertakes no duty or obligation to update or revise its forward-looking statements. Although management believes that the expectations, plans, intentions and projections reflected in its forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that the Company's stockholders and prospective investors should consider include, but are not limited to, the following: risks associated with pricing, volume and continued strength of markets where the Company's products are sold; delays and disruptions associated with terrorist attacks and reprisals, political instability, heightened security and war in countries of the world that affect the Company's business; the effect of competition on the Company's ability to maintain margins on existing or acquired operations; the continued acceptance of the Company's existing and new products by its major customers; increases in costs; and other risk factors listed from time to time in the Company's reports (including its Annual Report on Form 40-F) filed with the U.S. Securities and Exchange Commission, especially those discussed under the heading "Risk Factors." 1 Financial Highlights
2001 2000 1999 -------- -------- -------- OPERATIONS Consolidated sales $594,905 $653,915 $569,947 Net earnings (Loss) Cdn Gaap (12,242) 33,422 8,098 Net earnings (Loss) US Gaap (12,242) 33,422 8,098 Cash from operations before funding of changes in non-cash working capital items 13,874 57,932 36,130 -------- -------- -------- PER COMMON SHARE Net earnings (Loss) Cdn Gaap (0.43) 1.18 0.29 Net earnings (Loss) US Gaap (0.43) 1.18 0.29 Cash from operations before funding of changes in non-cash working capital items 0.49 2.05 1.31 Book value Cdn Gaap 10.32 10.98 9.97 Book value US Gaap 10.32 10.98 9.97 -------- -------- -------- FINANCIAL POSITION Working capital 68,075 8,718 68,937 Total assets Cdn Gaap 801,989 845,040 815,006 Total assets US Gaap 801,989 845,040 815,006 Total debt 362,973 286,216 338,094 Shareholders equity Cdn Gaap 294,090 309,642 282,003 Shareholders equity US Gaap 294,090 309,642 282,003 -------- -------- -------- SELECTED RATIOS Working capital 1.53 1.04 1.48 Debt/Capital Employed Cdn Gaap 0.55 0.48 0.55 Debt/Capital Employed US Gaap 0.55 0.48 0.55 Return on equity Cdn Gaap -4.2% 10.8% 2.9% Return on equity US Gaap -4.2% 10.8% 2.9% -------- -------- --------
2
2001 2000 1999 ------ ------ ------ STOCK INFORMATION Weighted average shares o/s (Cdn Gaap)+ 28,266 28,328 27,679 Weighted average shares o/s (US Gaap)+ 28,266 28,328 27,679 TORONTO STOCK EXCHANGE (CDN $) Market price at year end 13.25 11.00 40.80 High : 52 weeks 24.00 41.00 46.30 Low : 52 weeks 10.50 10.90 35.50 Volume : 52 weeks+ 20,490 14,053 10,611 NEW YORK STOCK EXCHANGE Market price at year end 8.30 7.31 28.19 High : 52 weeks 15.60 28.19 30.94 Low : 52 weeks 7.00 7.19 24.06 Volume : 52 weeks+ 13,695 4,929 1,264 ====== ===== =====
TORONTO STOCK EXCHANGE (CDN $)
High Low Close ADV* ----- ----- ----- ------- Q1 18.50 10.70 14.50 150,300 Q2 24.00 14.10 18.80 49,200 Q3 20.00 10.50 12.04 72,533 Q4 16.55 11.85 13.25 50,433 ----- ----- ----- -------
NEW YORK STOCK EXCHANGE
High Low Close ADV* ----- ----- ----- ------- Q1** 12.03 7.25 9.02 81,100 Q2** 15.60 9.04 13.59 35,767 Q3** 13.57 7.00 7.60 47,167 Q4** 10.44 7.55 8.30 54,800 ===== ==== ==== ======
This data should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto and Management's Disscussion and Analysis of Financial Condition and Results of Operations. (In thousands of U.S. dollars except per share data, selected ratios and trading volume information.) * Average daily volume. ** Prior to August 16, 1999 stock was traded on the American Stock Exchange (AMEX). + In thousands 3 Message to Shareholders Dear Shareholders, The year 2001 started well for the Company. Our first quarter was in line with our projections. However, the deterioration in the overall economy caught up with us and 2001 became a year of contrasts. In spite of the negative results, it was a year of key achievements for Intertape. We effected a variety of initiatives, all of which should have a direct and positive effect on IPG's future growth and profitability. Last year, Intertape: o Opened five regional distribution centers o Attained key information technology (I.T.) objectives o Closed or reduced unprofitable operations o Completed a refinancing of our credit facilities and senior notes o Developed several new products o Reorganized our marketing and sales structure into focused markets From an operational standpoint, we made improvements aimed at realizing the benefits from all of our recent acquisitions and optimizing our efficiency and quality. While these programs are ongoing, a quantum leap was achieved during the year, which should manifest itself in 2002. Raw material prices were generally at an all-time low, which was reflected by considerably lower selling prices in most products. We did, however, retain our historic value-added as a percentage of sales and expect to maintain it as prices of raw material increase with an improved economy. Historically, our gross margin dollars have increased substantially as raw material prices rise and we believe this relationship will continue. The performance of our I.T. Division met expectations. The instantaneous information that is available to our managers has provided the tools to react to an ever-changing economy and markets. In addition, we can supply our customers with cost effective transactions and inventory controls. Measurement-to-performance criteria has been enhanced for every aspect of the Company to ensure that we remain a low cost provider of products and services to a diverse customer base. The breadth of our product line and our supply chain strategy will provide our customers with a value added beyond their standard margins by reducing their overall inventory levels. During the latter part of the year, our sales and marketing staffs were realigned and trained to leverage this unique position. Research & Development continued to provide new products for new applications and markets. Five new films were commercialized during the year. All are designed to provide superior performance. New tape products designed for specific industries such as automotive, aerospace, etc., were also developed. The R&D focus of the company is in these performance products which provide higher gross margins. Our Woven and FIBC fabrics division introduced improved shelter fabrics during the year and entered the steel market with a patented wrap for coils. There are a number of exciting new products in our pipeline for all markets we are in. We refinanced our borrowing facilities and our long-term debt during the year. This was followed by an issue of 5.1 million shares early in 2002 that generated approximately $47 million, which was used to lower our borrowings. I anticipate a further $25-30 million reduction in borrowings during 2002 by cash generated from operations. Capital expenditures are budgeted to be 50% of the 2001 level as the Company now has the ability to produce over $800 million of products. As 2002 begins, I am very excited about our prospects. Our cost base is at an all-time low and should continue to decline as we optimize our operations and realize the full benefits of our distribution centers. Our supply chain strategy is designed to give us a competitive advantage and enable us to grow existing product lines. New products in all sectors of our business will provide potential for accelerated growth as the year progresses. New business development efforts should offer future opportunities. I want to thank our employees, customers, and shareholders for their unwavering support and dedication. I am optimistic that their devoted efforts will be rewarded as we close 2002. /s/ Melbourne F. Yull - ------------------------------- Melbourne F. Yull Chairman & Chief Executive Officer March 8, 2002 4 Consolidated Quarterly Statements of Earnings (In thousands of US dollars, except per share amounts)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 2001 2000 2001 2000 2001 2000 2001 2000 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- SALES $ 158,863 $ 169,358 $ 141,265 $ 167,231 $ 148,602 $ 166,356 $ 146,175 $ 150,970 Cost of sales 120,089 131,117 114,549 126,513 122,544 121,612 118,906 121,305 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- GROSS PROFIT 38,774 38,241 26,716 40,718 26,058 44,744 27,269 29,665 Selling, general and administrative expenses 21,858 20,032 20,090 17,891 27,837 21,306 21,558 23,863 Amortization of goodwill 1,743 1,550 1,797 1,522 1,757 1,663 1,717 1,805 Research and development 1,168 1,325 1,198 1,409 884 1,073 932 1,302 Financial expenses 8,436 5,995 7,736 6,652 13,212 7,345 9,527 7,213 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 33,205 28,902 30,821 27,474 43,690 31,387 33,734 34,183 Gain on sale of interest in joint venture 0 (5,500) 0 0 0 0 0 0 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 33,205 23,402 30,821 27,474 43,690 31,387 33,734 34,183 Earnings (losses) before income taxes 5,568 14,839 (4,105) 13,244 (17,632) 13,357 (6,465) (4,518) Income taxes (recovery) 1,392 4,155 (1,392) 3,707 (4,937) 3,741 (5,455) (8,103) Net earnings (losses) 4,176 10,684 (2,713) 9,537 (12,695) 9,616 (1,010) 3,585 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS (LOSS) PER SHARE Cdn GAAP - Basic - US $ 0.15 0.38 (0.10) 0.34 (0.45) 0.34 (0.03) 0.13 Cdn GAAP - Diluted - US $ 0.15 0.37 (0.10) 0.33 (0.45) 0.33 (0.03) 0.13 US GAAP - Basic - US $ 0.15 0.38 (0.10) 0.34 (0.45) 0.34 (0.03) 0.13 US GAAP - Diluted - US $ 0.15 0.37 (0.10) 0.33 (0.45) 0.33 (0.03) 0.13 --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- AVERAGE NUMBER OF SHARES OUTSTANDING Cdn GAAP - Basic - US $27,983,417 28,300,781 28,199,535 28,297,621 28,346,102 28,342,803 28,496,884 28,380,530 Cdn GAAP - Diluted - US $28,675,701 28,879,770 27,304,725 28,716,590 28,346,102 28,763,582 28,496,884 28,565,564 US GAAP - Basic - US $27,983,417 28,300,781 28,199,535 28,297,621 28,346,102 28,342,803 28,496,884 28,380,530 US GAAP - Diluted - US $28,675,701 28,879,770 27,304,725 28,716,590 28,346,102 28,763,582 28,496,884 28,565,564 =========== ========== ========== ========== ========== ========== ========== ==========
Note: In the 4th quarter of 2000, Canadian GAAP adopted the US GAAP definition of the diluted earnings per share retroactively. 5 Review of Operations SALES Intertape Polymer Group's consolidated sales decreased by 9.0% to $594.9 million for the year 2001. In the year 2000 sales had increased by 14.7% to $653.9 million and increased by 50.8% to $569.9 million for the year 1999. All sales are derived from packaging products made from various combinations of resins and papers which are then converted into high quality, value-added products. Products are made from somewhat the same extrusion processes and differ to some degree only in the final stages of manufacturing. Furthermore, most of the Company's products, while brought into the market through varying sales methods and channels, bear the same economic characteristics in all respects. The two basic methods of bringing products to market are either through selective distribution or by selling directly to end-users. In both cases, the Company's highly trained sales force works closely with either the distributors sales force or with the end-users. Examples of products sold through distributors are Intertape(TM) brand pressure-sensitive carton sealing tapes which include hot-melt (introduced in 1981) acrylic (1995) and natural rubber adhesives (1998); water-activated carton sealing tape (1996); paper tapes (1997); duct tapes (1998); Exlfilm(R) brand shrink wrap (1992) and StretchFlex(R) brand stretch wrap (1996). Examples of products sold directly to end-users include a wide range of Nova-Thene(R) brand woven polyolefin products (1989); Intertape(TM) brand flexible intermediate bulk containers (FIBC) (1994), and electrical specialty tapes (1997). [GRAPH: SALES] The following are the highlights of factors that contributed to changes in sales volume during 2001. o In a majority of the Company's product lines, selling prices declined during the year. These changes in unit selling prices are mostly in relation to steadily declining raw material prices. Overall, selling prices declined by 2.2% or approximately $14.4 million from the 2000 selling price levels. o The North American economy started to slow down during the last half of 2000 and continued to do so up to September 11, 2001. After the events of September, the economy slowed even more. While some of the strategically important product lines showed unit growth in spite of the economy, overall, unit growth declined by 6.8% or $44.6 million as compared to the year 2000. Significant contributions to the unit decline were: o The combined effect of a world-wide slowing economy, increasing domestic capacity in Asia and a strong US currency led the Company to the decision to withdraw from commodity export markets. This decision lowered sales by approximately $12.0 million. o The Company acquired the operating assets of Olympian Tape Sales, Inc. d/b/a United Tape Company (UTC) during the third quarter of 2000. As a result of this acquisition, the Company lost a major private label supply contract with a customer that had been a major competitor of UTC in the retail market. This resulted in a decline in sales of approximately $20.0 million. o During 2001, the strong US currency provided an opportunity for importers of flexible intermediate bulk containers (FIBC) to increase their share of the North American market. Sales from this product line decreased $7.8 million during 2001. o Sales volumes were impacted by substantial declines in the consumption of packaging materials used in certain industries including the textiles, furniture and appliance, electronics and computer, aviation and electrical industries. The Company expects modest revenue growth during 2002 driven by new products and the implementation of our supply chain cost reduction programs. It is expected that increased economic activity in general will contribute to further growth during the balance of 2002. 6 GROSS PROFIT AND GROSS MARGIN The Company's gross profit excluding non-recurring amounts decreased 22.3% during 2001 to $126.5 million. In the year 2000, the Company's gross profit excluding non-recurring amounts had increased 13.0% to $162.9 million in 2000; and in 1999, it had increased 35.8% from its 1998 level to $144.1 million. As a percentage of sales, gross margins excluding non-recurring amounts decreased to 21.3% in 2001 from 24.9% for 2000 and from 25.3% for 1999. Throughout this three-year period, the Company was able to maintain value-added percentages within less than 0.75%. Value-added is the difference between material costs and selling prices expressed as a percent of sales. Traditionally, the Company has been able to maintain an extremely narrow value-added window despite changes in raw material costs. This is one of the strengths of the Company. For the year 2001, the following are highlights of key factors contributing to the decline in margins as compared to 2000: o Value-added as a percent of sales did not materially change from 2000 to 2001. However, the decline in sales of $59.0 million brought about a decline in value-added dollars with a direct impact on gross profit of approximately $30.0 million between these years. o Had the fiscal 2000 cost structures related to labour and manufacturing overhead remained at the same level for fiscal 2001, there would have been a further decline in gross profits of approximately $18.0 million. However, during the year Management took various actions to bring about cost reductions which resulted in cost savings being realized in the amount of approximately $18.7 million. o Several non-recurring charges were incurred during 2001, including $3.2 million of finished goods inventory write downs, $2.3 million related to the cost of setting up the various regional distribution centers (RDC's), $1.2 million for severance payments and $1.0 million related to the write down of certain assets. These amounts totaling $7.7 million are included in cost of sales and reduced gross profit. Even though the Company was able to maintain value-added as a percent of sales and was able to reduce its manufacturing costs, the effect of lower sales and the non-recurring costs of $7.7 million brought about a decline in gross margins excluding non-recurring amounts from 24.9% in 2000 to 21.3% in 2001. For the year 2000, the following are highlights of contributing factors which lead to lower gross margins in that year: o Lower selling prices particularly in stretch wrap and carton sealing tapes adversely affected gross margin. o Gross profits were negatively impacted by further charges of a net amount of $9.5 million which were recorded during the fourth quarter of 2000. These charges consisted of additional account receivable and inventory reserves of $15.0 million less the impact of the reversal against earnings of $5.5 million of provisions which had been established in prior years related to environmental, [GRAPH: GROSS PROFIT] [GRAPH: GROSS MARGIN] 7 [GRAPH: SELLING, GENERAL & ADMINISTRATIVE] [GRAPH: SELLING GENERAL & ADMINISTRATIVE] transfer pricing and employee-related benefits. During the year ended December 2000, the Company completed its review of these provisions and decided to reduce them to more appropriate levels based on third party studies. As the Company has made a series of acquisitions over the past few years, Management contracted with a third party consultant to have an extensive review conducted of its major manufacturing equipment. The consultant's report supported the decision to standardize the useful lives of major equipment to twenty (20) years. Based on information available at the current time, Management anticipates that both gross profits and gross margins should increase during 2002 due to the realization of new product sales. Management's expectations in this regard are based on the following assumptions being realized: o Available economic data regarding raw material prices indicates that the cost of many of the Company's raw material components should increase sometime during 2002. Historically, the Company has been able to maintain value-added as a percent of sales which should put pressure on the packaging industry to increase unit selling prices as raw material costs increase. This should bring about an expansion in the Company's gross margins and profits. o During 2001, the Company completed the implementation of its RDC strategy. The Company anticipates the RDC's will result in lower freight costs and will increase efficiencies through complete and on-time delivery of products to its customers. o Based on current volume, the Company has more than 30% capacity available as a result of various programs completed during 2001 which expanded plant outputs. The incremental cost of additional volume beyond that of 2001 is mostly in raw materials, freight, and energy cost. Should sales volume increase, this will also contribute to improvements in both gross profits and margins. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES During 2001, the Company recorded $10.8 million of non-recurring charges in Selling, General and Administrative (SG&A) expenses. These charges are comprised of $7.0 million of additional reserves for bad debts related primarily to insufficient reserves related to the systems conversion of Central Products Company (CPC), $3.0 million worth of expense for severance payments was taken and a further amount of $0.8 million was related to the required reductions in the value of certain assets. During 1999, there were several unusual non-recurring charges included as SG&A expenses. These charges were comprised of $8.5 million as a result of the MIS difficulties which contributed to increases in the allowance for doubtful accounts and a further $3.1 million related to several abandoned acquisitions as well as the final costs of relocating more than twenty-five key managers to the Company's new corporate office in Sarasota, Florida. For purposes of the graphs above and the following detailed explanations, these non-recurring expenses have been excluded. 8 SG&A expenses decreased by $2.6 million to an adjusted amount of $80.5 million for 2001; increased $9.4 million to $83.1 million for 2000 from $73.7 million excluding non-recurring items for 1999. As a percentage of sales, these expenses were 13.5%, 12.7% and 12.9% for the years 2001 to 1999 respectively. The year 2000 results: SG&A costs increased as a result of the acquisitions of UTC during 2000 and CPC during 1999. In both cases, the Company did not obtain the anticipated synergies due to the decision to not integrate these operations' systems until the Company's MIS systems were stabilized. CPC was integrated during April 2001 and UTC is not scheduled for integration before the second quarter of 2002. RESEARCH AND DEVELOPMENT Research and Development (R&D) remains an important function within the Company. Taken as a percentage of sales, R&D was 0.7%, 0.8% and 0.7% for the years 2001 to 1999 respectively. R&D continues to be focused on new products, new technology developments, new product processes and formulations. Fiscal 2002 will see a steady rollout of significant new products into the Company's markets. OPERATING PROFIT For purposes of this discussion, Operating Profit is defined as Gross Profit less SG&A expenses. When adjusted for all of the above highlighted effects on sales, cost of sales and SG&A expenses incurred as a result of the MIS and plant integration difficulties for the years from 2001 to 1999, adjusted operating profits are $46.0 million (7.7%), $79.8 million (12.2%) and $70.4 million (12.4%) for the years 2001 to 1999 respectively. The decline in operating profits is as a result of several factors. [GRAPH: RESEARCH AND DEVELOPMENT] [GRAPH: OPERATING PROFIT] [GRAPH: OPERATING MARGIN] 9 [GRAPH: EFFECTIVE INCOME TAX RATES] For the year 2001: The majority of the decline in operating profits was as a result of the effect of the decrease in value-added dollars although the decline was lessened by certain cost reduction programs both in manufacturing costs and SG&A expenses. However, overall, the Company was not able to sustain this decline in value-added dollars as the majority of its manufacturing costs and SG&A expenses are somewhat fixed. For the years 2000 and 1999: Acquisitions consummated in 1999 and 2000 have brought products into the Company which currently have gross margins below the Company's historic levels. Furthermore, Stretch-Flex(R) stretch wrap margins were and continue to be under intense pressure as a result of market conditions. MIS difficulties made certain synergistic cost reductions unattainable during both 1999 and 2000. Ongoing plant integration difficulties depressed both gross margins and operating profits even further. FINANCIAL EXPENSES Included in financial expenses for 2001 is a non-recurring $6.7 million charge consisting of the write-off of certain deferred costs related to the previous financing arrangements that were refinanced at the end of 2001, together with to the fees paid to both the Noteholders and the Banks in relation to the refinancing. INCOME TAX The Company's statutory income tax rate was approximately 43.0% for the period from 1999 to 2001. The impact of certain items for tax purposes discussed below and the amortization of that part of the goodwill which is non-deductible for income tax purposes will result in the Company's effective income tax rate exceeding its statutory tax rate. The Company's effective tax rate was impacted by two material events during recent years. First, the Company's foreign based income is taxed at rates which are significantly lower than the rates that would have applied on the income had it been earned in Canada. Secondly, the Company entered into a series of transactions that resulted in permanent differences greater than prior years. As such, pre-tax accounting income is less than $50.0 million, this will have the effect of reducing the effective tax rate lower than the expected percent. At December 31, 2001, the Company had accumulated $31.3 million of Canadian operating loss carry-forwards expiring in 2007 and 2008 and $102.3 million of U.S. federal and state operating losses expiring in 2017 through 2020. In assessing the valuation of future income tax assets, Management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets, net of the valuation allowance at December 31, 2001, to be realized as a result of the reversal of existing taxable temporary differences. As part of the above analysis, a $15.5 million valuation allowance was established during the year ended December 31, 2001. 10 NET EARNINGS - CANADIAN AND U.S. GAAP For the purposes of the ten year graphical presentation, 1997 net earnings are based on the earnings that would have been recorded if a restructuring charge had not taken place in that year; 1999 net earnings are being presented before the above highlighted negative effects on sales, gross profit and SG&A as a result of the MIS and plant integration difficulties; 2000 net earnings are being presented before the final effect on gross profit; and 2001 net earnings have been presented before the effect of the non-recurring costs discussed in the above text. The Company's net earnings adjusted as per the above for the years 2001, 2000, and 1999 would have been $13.0 million, $42.9 million, and $39.2 million respectively. Canadian GAAP net earnings conform in all material respects to amounts that would have to be reported if the financial statements would have been prepared under U.S. GAAP. EARNINGS PER SHARE - CANADIAN AND U.S. GAAP Basic EPS adjusted for non-recurring costs decreased to $0.46 for the year 2001 as compared to $1.48 for 2000 and $1.39 in 1999. The weighted-average number of common shares outstanding for the purpose of the basic EPS calculation was 28.3 million shares for 2001, 28.3 million shares for 2000, and 27.7 million shares for 1999. Liquidity and Capital Resources CASH FLOW Cash flow from operations before changes in non-cash working capital items decreased $44.0 million to $13.9 million for 2001, increased by $21.8 million to $57.9 million for 2000, and decreased $21.8 million to $36.1 million in 1999. The decrease for the year 2001 is directly related to the decline in sales which negatively impacted earnings. In spite of the shortfall in sales, the Company's management certain balance sheet items generated $34.2 million of additional cash flow from working capital during 2001, during the year 2000, working capital consumed $17.9 million of cash. This turnaround of $52.1 million in working capital contribution to cash flow is a direct result of the Company placing less emphasis on its acquisition strategy and more emphasis on the completion of integrating its acquired business processes. [GRAPH: NT EARNINGS - CDN GAAP] [GRAPH: EPS - BASIC CDN GAAP] 11 [GRAPH: CASH FLOW BEFORE FUNDING WORKING CAPITAL] [GRAPH: CASH FLOW AFTER FUNDING WORKING CAPITAL] Cash flow from investing activities was also significantly different in 2001 than in recent years. For 2001, the Company acquired net capital assets of $17.9 million and increased other assets by $8.6 million, for a total use of cash of $26.5 million. During 2000, $54.5 million of cash was used to acquire $43.9 million of net capital assets and in order to complete a small acquisition in the amount of $28.2 million; less funds provided by a reduction of $17.6 million in other assets. In 1999, cash flow was consumed in order to sustain investing activities. $175.9 million was used to complete acquisitions of $108.1 million, to increase capital assets in the amount of $57.2 million and to fund an increase in other assets of $10.5 million. Cash flow from financing activities was also significantly different than that in previous years. 2001 was the first fiscal period since the Company embarked on its acquisition strategy in 1995 in which cash flow from operations was used to reduce debt. Short-term bank indebtedness was reduced by $12.9 million and $86.4 million was transferred to long-term debt as a result of the refinancing completed late in 2001. Long-term debt was reduced by $9.6 million. The Company issued $3.4 million of common shares related to the exercise of employees' stock options and the funding of the U.S. employee stock ownership and retirement savings plan. It also used $0.9 million to purchase and cancel common shares. There were no dividends paid during 2001. For the year 2000, the Company increased short-term bank indebtedness by $26.5 million, repaid $2.2 million in long-term debt and used $7.2 million to purchase common shares for cancellation and to pay dividends. For the year 1999, the Company increased long-term debt by $187.0 million in order to fund its investing activities, issued $78.6 million of common shares, used $60.8 million to reduce other long-term debt, used $5.5 million to purchase common shares for cancellation and to pay dividends and reduced bank indebtedness by $68.8 million. Management is committed to further debt reductions. This will be accomplished by a combination of the 2002 common share issue which should generate approximately $47.4 million of net proceeds and will be used to reduce long-term debt; maintain a policy of limited investing in capital assets; and further reductions in working capital requirements. 12 CREDIT FACILITIES The Company had various credit facilities that had expired during 2000 and that, throughout 2001, were renewed on a short-term basis subject to being refinanced. On December 20, 2001, the new financing was completed. The effect was a new short-term line of credit committed for three years in the amount of $50.0 million. $39.0 million of which was utilized as at the year-end. A first charge against trade receivables and inventories was granted to the banks to secure this new facility. Even though 2001 was a year of challenges, the Company was able to generate positive cash flows both before and after funding of working capital needs. The effect of the issuance of common shares in 2002, the planned reduction in 2002 capital expenditures and cash from operations and management of financial items will further enhance the ability of the Company to reduce debt while meeting all its short and long term funding commitments. LONG-TERM DEBT As part of the new financing, the balance of the then short-term debt was cancelled and new facilities with two year and four year terms in the aggregate amount of $95.0 million were entered into. $86.4 million was drawn against these facilities as at December 31, 2001. A fixed charge against all assets and a second lien against receivables and inventory was granted to both the long-term bank debt and the Senior Noteholders. Interest rates applicable to the Senior Noteholders was increased by 225 basis points for the duration of their Notes. [GRAPH: BANK DEBT] [GRAPH: LONG-TERM DEBT] [GRAPH: LONG-TERM DEBT -- PROFORMA FOR NEW FINANCING] 13 [GRAPH: CAPITAL STOCK] [GRAPH: CAPITAL STOCK - PROFORMA OF MARCH 1, 2002 OFFERING] [GRAPH: CAPITAL EXPENDITURES] CAPITAL STOCK From time to time in 2001, 2000, and 1999, various employees exercised stock options which contributed $1.1 million, $0.2 million, and $1.7 million during 2001, 2000, and 1999 respectively. Further, for the first time in 2001, $2.3 million worth of shares were issued in relation to funding the Company's U.S. employee stock ownership retirement savings plan. As part of the financing of the purchase of certain assets of UTC during the third quarter of 2000, $4.0 million worth of shares were issued at a per share price of $15.9625. During the first quarter of 1999, the Company issued 3,000,000 additional common shares at a price of CDN $40.25 per share (US $25.63 per share after issue costs) for a total cash infusion of US $76.9 million after issue costs. Proceeds were used to repay short-term and long-term debts. During 1999, the Company announced that it had registered a Normal Course Issuer Bid (NCIB) in Canada. The NCIB was extended for one-year terms during 2000 and again during 2001. 128,100, 353,200 and 100,000 shares were purchased for cancellation during 2001, 2000 and 1999 respectively. This resulted in a reduction in the stated value of the Company's issued common shares in the amounts of $0.8 million, $2.4 million and $0.7 million for the years 2001, 2000 and 1999 respectively. As part of the purchase price for the acquisition of CPC, the Company issued 300,000 share purchase warrants. These warrants expire on August 9, 2004, and permit the holder to purchase common shares of the Company at a price of $29.50 per share. On March 1, 2002, the Company issued 5.1 million shares at a price of CDN $15.50 (US $9.71) per share under a "Bought Deal" as allowed under Canadian security laws for a cash infusion of $. Proceeds have been used primarily to reduce long-term debt. 14 CAPITAL EXPENDITURES Total net capital expenditures were $17.9 million, $43.9 million, and $57.2 million for the years 2001 to 1999 respectively. There were a number of major projects either ongoing or completed during this period as described below: o The expansion of our Truro, Nova Scotia, plant began in 1999 and was completed in 2001. This expansion added much needed capacity for production of both traditional and new woven products such as vinyl replacement products. As well, new printing capacity for woven products was brought on line in 2000. o The installation of a 6th BOPP extrusion line was commercialized at the Company's Danville, Virginia, facility during 2000 and 2001. This enabled the Company to be completely self-sufficient in the production of film for pressure sensitive tapes for both hot-melt and acrylic based adhesives tapes. o A 7th cast line for the production of Stretch Films was installed in the Danville, Virginia, location during 2000 to bring the Company's capacity in this product line to more than 100 million pounds. o Other expenditures were made in order to lower manufacturing costs and improve output of tape production facilities in Columbia, South Carolina, Marysville, Michigan, and Richmond, Kentucky, primarily in the areas of finishing and packaging. o Expenditures in the MIS area continued in 2001 as the Company completed the migration of most of its systems onto a new enterprise platform, which is essential to the "Basket-of-Products" programs. As well, the Company continued with the roll-out of Warehouse Management Systems (WMS). All of the Company's major manufacturing locations and RDC's will have a WMS by the end of 2002. During 2000, the Company also started to bring the entire payroll function in house. This was completed in the latter part of 2001. Management is projecting that capital expenditures for the year 2002 should not exceed $16.0 million and will be funded from available cash generated by operations. BUSINESS ACQUISITIONS 2001 There were no acquisitions in the year 2001. While acquisitions remain an important component of the strategy to provide the Company with new products and channels of distribution, there were no attractive opportunities presented to the Company during the year which met Management's criteria. 2000 On September 1, 2000, the Company completed the acquisition of UTC, a manufacturer and distributor of certain packaging products into the retail market. With this acquisition, the Company established a presence in the North American retail market. Prior to the acquisition, the Company was involved to a lesser degree in this channel of distribution. The UTC acquisition has accelerated the development of this important channel of distribution. The purchase price was paid for with cash in the amount of $28.2 million and $4.0 million worth of common shares of Intertape stock. The purchase price allocation includes $20.4 million allocated to goodwill. 1999 On July 30 and August 9, 1999, respectively, the Company acquired from Spinnaker Industries, Inc. (Amex: SKK) substantially all the assets of SETco and all of the outstanding shares of Central Products Company, manufacturers of pressure-sensitive, water-activated and electrical tapes. The total cash consideration and transactions costs for these acquisitions was $108.1 million. In addition, the Company issued 300,000 share purchase warrants valued at $3.2 million to the seller of these companies. The purchase price allocations reflect $48.5 million allocated to goodwill. 15 [GRAPH: BOOK VALUE PER SHARE] BOOK VALUE PER SHARE The unadjusted book value per share for the years ended 2001, 2000, and 1999 are $10.32, $10.98, and $9.97 respectively. DIVIDEND ON COMMON SHARES There were no dividends declared during 2001. On May 15, 2000, the Company declared an annual dividend of $0.106 per share (CDN $0.16) to shareholders of record as of May 30, 2000. The dividend was paid on June 8, 2000, and amounted to approximately $3.0 million. On March 9, 1999, the Company declared an annual dividend of $0.106 per share (CDN $0.16) to shareholders of record as of March 19, 1999. The dividend was paid on April 5, 1999, and amounted to approximately $3.0 million. NEW ACCOUNTING REPORTING STANDARDS Over the past several months, the Financial Accounting Standards Board approved the issuance of SFAS No. 141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". The new standards require that all business acquisitions initiated after June 30, 2001, must be accounted for under the purchase method. In addition, all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented, or exchanged shall be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives will no longer be subject to amortization, but will be subject to at least an annual assessment for impairment by applying a fair value based test. The Company continued to amortize goodwill under its current method until January 1, 2002. The Company will begin applying SFAS 142 beginning in the first quarter of 2002. Application of the non-amortization provisions of SFAS 142 is expected to result in an increase in net income of approximately $7.1 million in 2002. The Company will test for goodwill impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company expects to perform the first test of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002, in the first quarter of 2002. Any impairment charge resulting from these transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the first quarter of 2002. The Company has been able to determine the effect of these tests; and does not anticipate that there will be any material effect on the earnings and financial position of the Company for 2002. 16 To the Shareholders of Intertape Polymer Group Inc. MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The consolidated financial statements of Intertape Polymer Group Inc. and the other financial information included in this annual report are the responsibility of the Company's Management and have been examined and approved by its Board of Directors. These consolidated financial statements have been prepared by Management in accordance with Canadian generally accepted accounting principles and include some amounts that are based on Management's best estimates and judgements. The selection of accounting principles and methods is Management's responsibility. The Company maintains internal control systems designed to ensure that the financial information produced is relevant and reliable. Management recognizes its responsibility for conducting the Company's affairs in a manner to comply with the requirements of applicable laws and established financial standards and principles, and for maintaining proper standards of conduct in its activities. The Board of Directors assigns its responsibility for the financial statements and other financial information to the audit committee, the majority of whom are non-management directors. The audit committee's role is to examine the financial statements and annual report and recommend that the Board of Directors approve them, to examine the internal control and information protection systems and all other matters relating to the Company's accounting and finances. In order to do so, the audit committee meets periodically with external auditors, to review their audit plans and discuss the results of their examination. This committee is responsible for recommending the appointment of the external auditors or the renewal of their engagement. The Company's external auditors, Raymond Chabot Grant Thornton, appointed by the shareholders at the Annual and Special Meeting, have audited the Company's financial statements and their report indicating the scope of their audit and their opinion on the financial statements follows. Sarasota, Florida and Montreal, Canada March 8, 2002 /s/ Melbourne F. Yull - ------------------------------- Melbourne F. Yull Chairman and Chief Executive Officer /s/ Andrew M. Archibald - ------------------------------- Andrew M. Archibald Chief Financial Officer, Secretary, Treasurer Vice President, Administration 17 AUDITOR'S REPORT We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 2001 and 2000, and the consolidated statements of earnings, retained earnings and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in accordance with Canadian generally accepted accounting principles. /s/ Raymond Chabot Grant Thornton - -------------------------------------------- General Partnership Chartered Accountants Montreal March 8, 2002 18 Consolidated Earnings (In thousands of US dollars, except per share amounts)
YEARS ENDED DECEMBER 31, 2001 2000 1999 - ------------------------ --------- --------- --------- Sales $ 594,905 $ 653,915 $ 569,947 Cost of sales (Note 4) 476,089 500,547 445,322 --------- --------- --------- GROSS PROFIT 118,816 153,368 124,625 Selling, general and administrative expenses (Note 4) 91,343 83,092 85,330 Amortization of goodwill 7,014 6,540 5,451 Research and development 4,182 5,109 3,901 Financial expenses (Note 5) 38,911 27,205 22,149 Gain on sale of interest in joint venture (Note 4) (5,500) --------- --------- --------- 141,450 116,446 116,831 --------- --------- --------- Earnings (loss) before income taxes (22,634) 36,922 7,794 Income taxes (Note 6) (10,392) 3,500 (304) --------- --------- --------- Net earnings (loss) $ (12,242) $ 33,422 $ 8,098 --------- --------- --------- EARNINGS (LOSS) PER SHARE (NOTE 7) Basic $ (0.43) $ 1.18 $ 0.29 --------- --------- --------- Diluted $ (0.43) $ 1.16 $ 0.29 ========= ========= =========
Consolidated Retained Earnings (In thousands of US dollars)
Years Ended December 31, 2001 2000 1999 --------- --------- --------- Balance, beginning of year $ 116,966 $ 88,422 $ 85,184 Net earnings (loss) (12,242) 33,422 8,098 --------- --------- --------- 104,724 121,844 93,282 Dividends 3,006 2,993 Premium on purchase for cancellation of common shares 157 1,872 1,867 --------- --------- --------- 157 4,878 4,860 Balance, end of year $ 104,567 $ 116,966 $ 88,422 ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 19 Consolidated Cash Flows (In thousands of US dollars)
YEARS ENDED DECEMBER 31, 2001 2000 1999 --------- --------- --------- OPERATING ACTIVITIES Net earnings (loss) $ (12,242) $ 33,422 $ 8,098 Non-cash items Depreciation and amortization 33,831 27,934 31,229 Future income taxes (9,165) 482 (3,197) Write-off of debt issue expenses 2,165 Write-off of capital assets 1,594 Other non-cash items (Note 15) (715) (5,500) Cash from operations before changes in non-cash working capital items $ 13,874 $ 57,932 $ 36,130 --------- --------- --------- Changes in non-cash working capital items Trade receivables 10,337 (6,897) 2,274 Other receivables (1,287) 3,003 (5,595) Inventories 17,690 3,318 (4,393) Parts and supplies (1,626) 175 (1,692) Prepaid expenses (3,341) (1,809) (2,123) Accounts payable and accrued liabilities 12,431 (15,697) 21,903 --------- --------- --------- 34,204 (17,907) 10,374 Cash flows from operating activities $ 48,078 $ 40,025 $ 46,504 --------- --------- --------- INVESTING ACTIVITIES Acquisitions of businesses (Note 8) (28,195) (108,172) Capital assets, net of investment tax credits (25,942) (48,142) (57,154) Proceeds on sale of capital assets 8,000 4,239 Other assets (8,592) 17,637 (10,577) Cash flows from investing activities $ (26,534) $ (54,461) $(175,903) --------- --------- --------- FINANCING ACTIVITIES Net change in bank indebtedness (99,261) 26,468 (68,835) Issue of long-term debt 86,400 187,000 Repayment of long-term debt (9,634) (2,249) (60,767) Issue of common shares 3,379 176 78,583 Common shares purchased for cancellation (922) (4,194) (2,542) Dividends paid (3,006) (2,993) Cash flows from financing activities $ (20,038) $ 17,195 $ 130,446 --------- --------- --------- NET INCREASE IN CASH POSITION 1,506 2,759 1,047 Effect of foreign currency translation adjustments (1,506) (2,759) (1,047) Cash position, beginning and end of year $ -- $ -- $ -- --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Interest paid $ 32,791 $ 29,319 $ 22,065 Income taxes paid $ 1,234 $ 3,118 $ 3,153 ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 20 Consolidated Balance Sheets (In thousands of US dollars)
DECEMBER 31, 2001 2000 -------- -------- ASSETS Current assets Trade receivables (net of allowance for doubtful accounts of $6,670; $10,300 in 2000) $ 86,529 $ 97,478 Other receivables (Note 9) 13,654 11,659 Inventories (Note 10) 70,688 89,264 Parts and supplies 11,592 10,069 Prepaid expenses 9,450 6,114 Future income tax assets (Note 6) 4,025 10,810 -------- -------- 195,938 225,394 Capital assets (Note 11) 366,567 374,753 Other assets (Note 12) 11,680 10,636 Goodwill, at amortized cost 227,804 234,257 -------- -------- 801,989 845,040 ======== ======== LIABILITIES Current liabilities Bank indebtedness (Note 13) 28,046 127,333 Accounts payable and accrued liabilities 91,507 79,811 Instalments on long-term debt 8,310 9,532 -------- -------- 127,863 216,676 Future income taxes (Note 6) 21,588 37,538 Long-term debt (Note 14) 354,663 276,684 Other liabilities (Note 15) 3,785 4,500 -------- -------- 507,899 535,398 SHAREHOLDERS' EQUITY Capital stock and share purchase warrants (Note 16) 189,496 186,908 Retained earnings 104,567 116,966 Accumulated foreign currency translation adjustments 27 5,768 -------- -------- 294,090 309,642 $801,989 $845,040 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. On behalf of the Board, /s/ Ben J. Davenport, Jr. /s/ Gordon R. Cunningham ---------------------------- ---------------------------- Ben J. Davenport, Jr., Gordon R. Cunningham, (signed) Director (signed) Director 21 Notes to Consolidated Financial Statements December 31, (In US dollars; tabular amounts in thousands, except per share amounts) 1 - GOVERNING STATUTES The Company, incorporated under the Canada Business Corporations Act, is based in Montreal, Canada and Sarasota, Florida. The common shares of the Company are listed on the New York Stock Exchange in the United States of America ("United States") and on The Toronto Stock Exchange in Canada. 2 - ACCOUNTING POLICIES The consolidated financial statements are expressed in US dollars and were prepared in accordance with Canadian generally accepted accounting principles, which, in certain respects, differ from the accounting principles generally accepted in the United States, as shown in Note 21. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires Management to make estimates and assumptions that affect the recorded amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated. Investments in joint ventures have been proportionately consolidated based on the Company's ownership interest. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of trade receivables, other receivables, bank indebtedness as well as accounts payable and accrued liabilities is equivalent to carrying amounts, given the short maturity period of such financial instruments. The fair value of receivables from joint ventures approximates the carrying amounts reported in the consolidated balance sheets. The fair value of long-term debt was established as described in Note 14. FOREIGN CURRENCY TRANSLATION Reporting currency The accounts of the Company's operations having a functional currency other than the US dollar have been translated into the reporting currency using the current rate method as follows: assets and liabilities have been translated at the exchange rate in effect at year-end and revenues and expenses have been translated at the average rate during the year. All translation gains or losses of the Company's net equity investments in these operations have been included in the accumulated foreign currency translation adjustments account in shareholders' equity. Changes in this account for all periods presented result solely from the application of this translation method. Foreign currency translation Transactions denominated in currencies other than the functional currency have been translated into the functional currency as follows: monetary assets and liabilities have been translated at the exchange rate in effect at the end of each year and revenue and expenses have been translated at the average exchange rate for each year, except for depreciation and amortization which are translated at the historical rate; non-monetary assets and liabilities have been translated at the rates prevailing at the transaction dates. Exchange gains and losses arising from such transactions are included in earnings. CASH AND CASH EQUIVALENTS The Company's policy is to present cash and temporary investments having a term of three months or less with cash and cash equivalents. INVENTORIES AND PARTS AND SUPPLIES VALUATION Raw materials are valued at the lower of cost and replacement cost. Work in process and finished goods are valued at the lower of cost and net realizable value. Cost is principally determined by the first in, first out method. The cost of work in process and finished goods includes the cost of raw materials, direct labour and manufacturing overhead. Parts and supplies are valued at the lower of cost and replacement cost. 22 2 - ACCOUNTING POLICIES (CONTINUED) CAPITAL ASSETS Capital assets are stated at cost less applicable investment tax credits and government grants earned and are depreciated over their estimated useful lives principally as follows:
Rates and Methods periods ------------- -------------- Buildings Diminishing balance 5% or straight-line 15 to 40 years Buildings under capital leases Straight-line 20 years Manufacturing equipment Straight-line 20 years(i) Furniture, office and computer equipment, software and other Diminishing balance 20% or straight-line 7 years ------------- --------------
(i) In 2000, as a result of an extensive review of the useful lives of the Company's principal manufacturing equipment, Management decided to extend to 20 years the estimated useful lives of all manufacturing equipment. Prior to such revision, these assets were depreciated over periods of 12 to 20 years. This change in estimated useful life was applied prospectively commencing January 1, 2000 and has resulted in a decrease in depreciation expense and a corresponding increase in earnings before income taxes, net earnings, basic earnings per share and diluted earnings per share of approximately $11.6 million, $7.3 million, $0.26 and $0.25 respectively for the year ended December 31, 2000. The Company follows the policy of capitalizing interest during the construction and preproduction periods as part of the cost of significant capital assets. Normal repairs and maintenance are expensed as incurred. Expenditures which materially increase values, change capacities or extend useful lives are capitalized. Depreciation is not charged on new capital assets until they become operative. DEFERRED CHARGES Debt issue expenses are deferred and amortized on a straight-line basis over the term of the related obligation. Other deferred charges are amortized on a straight-line basis over a five-year period. GOODWILL Goodwill represents the excess of the purchase price and related costs over the value assigned to the net tangible assets of investments in subsidiaries and joint ventures at the dates of acquisition. Goodwill is being amortized on a straight-line basis over periods ranging from 20 to 40 years, the estimated life of the underlying benefit. The value of goodwill is regularly evaluated by reviewing the returns of the related business, taking into account the risk associated with the investment. Any permanent impairment in the amortized value of goodwill would be written off against earnings. ENVIRONMENTAL COSTS The Company expenses, on a current basis, recurring costs associated with managing hazardous substances and pollution in ongoing operations. The Company also accrues for costs associated with the remediation of environmental pollution when it becomes probable that a liability has been incurred and its share of the amount can be reasonably estimated. PENSION PLANS AND OTHER RETIREMENT BENEFITS The Company has defined benefit and defined contribution pension plans and other retirement benefit plans for its Canadian and American employees. In the year ended December 31, 2000, the Company adopted, without restating prior period financial statements, the new recommendations of the Canadian Institute of Chartered Accountants (CICA) with respect to accounting for the cost of pension benefits and other employee future benefits. The new recommendations require that the discount rate used to value pension obligations and current costs be changed from an estimated long-term rate to a market interest rate. The adoption of these new recommendations has not resulted in a significant impact to the current or prior year's financial statements. The following policies are used with respect to the accounting for the defined benefit and other retirement benefit plans: - -- The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and is charged to earnings as services are provided by the employees. The calculations take into account Management's best estimate of expected plan investment performance, salary escalation, retirement ages of employees, participants' mortality rates and expected health care costs; 23 2 - ACCOUNTING POLICIES (CONTINUED) - -- For the purpose of calculating the expected return on plan assets, those assets are valued at the market-related value for certain plans and, for other plans, at fair value; - -- Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service period of employees active at the date of amendment; - -- The excess of the net actuarial gains (losses) over 10% of the greater of the benefit obligation and the market-related value or the fair value of plan assets is amortized over the average remaining service period of active employees. INCOME TAXES The Company provides for income taxes using the liability method of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the financial statement values and tax values of assets and liabilities, using substantially enacted income tax rates expected to be in effect for the year in which the differences are expected to reverse. STOCK OPTIONS The Company has granted stock options as described in Note 16. No compensation expense is recognized when stock options are granted. Any consideration paid by employees on exercise of stock options is credited to capital stock. REVENUE RECOGNITION Revenue is recorded when products are shipped to customers. EARNINGS PER SHARE In the year ended December 31, 2000, the Company adopted, on a retroactive basis, the new recommendations of the CICA with respect to Section 3500, Earnings Per Share. Under the new recommendations, the treasury stock method is used, instead of the current imputed earnings approach, for determining the dilutive effect of warrants and options. Previously reported diluted earnings per share amounts have been recalculated in accordance with the new requirements. This change in accounting policy has not resulted in differences in previously reported diluted earnings per share and has not impacted the establishment of the current year's diluted earnings per share. Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. NEW ACCOUNTING PRONOUNCEMENTS In December 2001, the CICA issued Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, effective for fiscal years beginning on or after January 1, 2002. This standard establishes, among other things, financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value method of accounting for employee stock options and encourages entities to adopt that method of accounting for its stock-based compensation plans. Under this method, compensation cost would be measured at the grant date based on the fair value of the award and would be recognized over the related service period. An entity that does not adopt the fair value method of accounting will be required to include in its financial statements pro forma disclosures of net earnings and earnings per share as if the fair value method of accounting had been applied. In adopting this new standard in 2002, the Company plans to adopt the latter alternative treatment. It does not expect adoption of the standard to have a material effect on the Company's financial position or results of operations. Under US GAAP, the Company already follows a similar method and presents similar pro forma disclosures. In 2001, the CICA approved new standards modifying the method of accounting for business combinations entered into after June 30, 2001 and dealing with the accounting for goodwill and other intangible assets. The new standard on goodwill and other intangible assets should be applied for fiscal years beginning on or after January 1, 2002. When these recommendations are adopted, the Company will no longer amortize its goodwill but will however evaluate goodwill for impairment annually. The Company will also be required to perform a transitional goodwill impairment test as at January 1, 2002. The transitional goodwill impairment test has to be completed by the end of the current fiscal year. Any impairment loss recognized as a result of the transitional goodwill impairment test would be recognized as the effect of a change in accounting policy and charged to opening retained earnings for the fiscal year ending December 31, 2002. The effect of implementation will be a reduction of amortization of goodwill of approximately $7.1 million during fiscal year 2002. Management does not anticipate any adjustments for impairment of goodwill as a result of the change in accounting policy. These standards are equivalent to the US standards. 24 3 - JOINT VENTURES The Company's pro rata share of its joint ventures' operations included in the consolidated financial statements is summarized as follows:
2001 2000 1999 -------- -------- -------- Earnings Sales $ 3,572 $ 2,671 $ 4,467 Gross profit 664 383 1,010 Financial expenses (income) (7) (320) 882 Net earnings (loss) 110 136 (767) Cash flows From operating activities 1,342 643 (1,331) From investing activities 86 (2,232) 2,343 From financing activities (956) 512 2,566 Balance sheets Assets Current assets 1,307 1,483 3,091 Long-term assets 6,122 7,119 11,243 Liabilities Current liabilities 2,925 2,885 10,817 Long-term debt 667 1,862 3,187 ======== ======== ========
During the year ended December 31, 2001, the Company had no sales to its joint ventures ($2,790,000 in 2000 and $7,716,000 in 1999). Also, the Company had no interest income from a joint venture for the year ended December 31, 2001 ($58,000 in 2000 and $1,494,000 in 1999). 4 - INTEGRATION AND TRANSITION, ASSET WRITE-DOWNS AND OTHER NON-RECURRING ITEMS For the year ended December 31, 2001, the Company recorded asset write-downs and non-recurring costs as a result of recent integrations, the startup of its Regional Distribution Centers, workforce reductions and debt refinancing. Cost of sales includes $7.7 million, selling, general and administrative expenses include $10.8 million and financial expenses include $6.7 million of such costs. During the year ended December 31, 2000, the Company realized a gain of $5.5 million on the sale of its interest in a joint venture. For the year ended December 31, 1999, the Company incurred substantial integration and transition, asset write-downs and other non-recurring costs as a result of recent business acquisitions and the implementation of a major enterprise-wide Management Information System. Cost of sales includes $19.5 million and selling, general and administrative expenses include $11.6 million of such costs. 5 - INFORMATION INCLUDED IN THE CONSOLIDATED STATEMENTS OF EARNINGS
2001 2000 1999 ------- ------- -------- Depreciation of capital assets $24,977 $20,334 $25,077 ------- ------- ------- Amortization of debt issue expenses and other deferred charges 1,840 1,060 701 ======= ======= ======= Financial expenses Interest on long-term debt 22,029 20,812 17,924 Interest on credit facilities 11,064 8,747 6,519 Refinancing costs 6,700 Interest income, exchange gain and other 18 (1,116) (1,154) Interest capitalized to capital assets (900) (1,238) (1,140) ------- ------- ------- 38,911 27,205 22,149 ======= ======= =======
25 6 - INCOME TAXES The provision for income taxes consists of the following:
2001 2000 1999 -------- -------- -------- Current $ (1,227) $ 3,018 $ 2,893 Future (9,165) 482 (3,197) -------- -------- -------- (10,392) 3,500 (304) ======== ======== ========
The reconciliation of the combined federal and provincial statutory income tax rate to the Company's effective tax rate is detailed as follows:
2001 2000 1999 ------ ------ ------ Combined federal and provincial income tax rate 42.7% 43.1% 42.7% Manufacturing and processing (8.6) 2.2 14.0 Foreign losses recovered (foreign income taxed) at lower rates (6.4) (5.1) 0.3 Impact of other differences 86.7 (30.7) (60.9) Change in valuation allowance (68.5) ------ ------ ------ Effective income tax rate 45.9 9.5 (3.9) ====== ====== ======
The net future income tax liabilities are detailed as follows:
2001 2000 -------- -------- Future income tax assets Accounts payable and accrued liabilities $ 2,257 $ 4,131 Tax credits and loss carry-forwards 55,397 17,843 Trade and other receivables 2,318 5,561 Inventories 296 1,761 Valuation allowance (15,498) -------- -------- 44,770 29,296 ======== ======== Future income tax liabilities Capital assets 62,333 54,613 Other -- 1,411 -------- -------- 62,333 56,024 -------- -------- Net future income tax liabilities 17,563 26,728 Net current future income tax assets 4,025 10,810 -------- -------- Net long-term future income tax liabilities 21,588 37,538 ======== ========
At December 31, 2001, the Company has $31.3 million of Canadian operating loss carry-forwards expiring in 2007 and 2008 and $102.3 million of US federal and state operating losses expiring 2017 through 2020. In assessing the realizability of future income tax assets, Management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the future income tax assets, net of the valuation allowance, at December 31, 2001 to be realized as a result of the reversal of existing taxable temporary differences. As part of the above analysis, a $15.5 million valuation allowance was established during the year ended December 31, 2001. 26 7 - EARNINGS (LOSS) PER SHARE The following table provides a reconciliation between basic and diluted earnings (loss) per share:
2001 2000 1999 ------------ ------------ ------------ Net earnings (loss) $ (12,242) $ 33,422 $ 8,098 Weighted average number of common shares outstanding 28,265,708 28,328,114 27,679,385 Effect of dilutive stock options and warrants(i) 387,738 915,423 ---------- ---------- ---------- Weighted average number of diluted common shares outstanding 28,265,708 28,715,852 28,594,808 ---------- ---------- ---------- Basic earnings (loss) per share (0.43) 1.18 0.29 Diluted earnings (loss) per share (0.43) 1.16 0.29 ========== ========== ==========
(i) Diluted earnings (loss) per share is calculated by adjusting outstanding shares, assuming any dilutive effects of stock options and warrants. For the year ended December 31, 2001, the effect of the stock options and warrants numbering 269,707 were not included as the effect would be anti-dilutive. 8 - ACQUISITIONS OF BUSINESSES Business acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets and liabilities based on their estimated fair value as of the acquisition date. The operating results of the acquired businesses have been included in the consolidated financial statements from the effective dates of acquisition. A) YEAR ENDED DECEMBER 31, 2000 Effective as of September 1, 2000, the Company acquired certain assets of Olympian Tape Sales, Inc. d/b/a United Tape Company ("UTC"). UTC was a manufacturer and distributor of certain packaging products into the retail market. UTC was a long-term customer of one particular product line of IPG. The purchase price was paid for in both cash in the amount of $28.2 million and $4.0 million worth of common shares of Intertape stock from treasury. B) YEAR ENDED DECEMBER 31, 1999 On July 30, 1999 and August 9, 1999 respectively, the Company purchased certain assets of Spinnaker Electrical Tape Company (SETco) and 100% of the outstanding shares of Central Products Company (CPC), manufacturers of pressure-sensitive, water-activated and electrical tapes. The total cash consideration and estimated transaction costs for the acquisitions were approximately $108.1 million. In addition, the Company issued share purchase warrants valued at $3.2 million to the former owners.
2000 1999 --------- --------- Current assets $ 14,383 $ 26,523 Capital assets 1,316 66,541 Goodwill and other assets 20,963 49,763 --------- --------- 36,662 142,827 Current liabilities assumed (4,467) (23,250) Net future income tax liabilities (8,255) --------- --------- Net assets purchased 32,195 111,322 ========= ========= Consideration Cash 28,195 108,172 Issue of common shares 4,000 Issue of share purchase warrants 3,150 --------- --------- 32,195 111,322 ========= =========
27 9 - OTHER RECEIVABLES
2001 2000 ------- ------- Rebates receivable $ 3,088 $ 5,734 Income and other taxes 4,903 1,046 Sales taxes 745 1,051 Other 4,918 3,828 ------- ------- 13,654 11,659 ======= =======
10 - INVENTORIES
2001 2000 ------- ------- Raw materials $15,520 $23,198 Work in process 11,815 14,483 Finished goods 43,353 51,583 ------- ------- 70,688 89,264 ======= =======
11 - CAPITAL ASSETS
2001 ----------------------------------- Accumulated Cost amortization Net -------- ------------- -------- Land $ 3,317 $ $ 3,317 Buildings and related capital leases 59,425 15,241 44,184 Manufacturing equipment 370,195 101,609 268,586 Furniture, office and computer equipment, software and other 30,969 15,279 15,690 Manufacturing equipment under construction and software projects under development 34,790 34,790 -------- -------- -------- 498,696 132,129 366,567 ======== ======== ========
2000 ----------------------------------- Accumulated Cost amortization Net -------- ------------- -------- Land $ 3,329 $ $ 3,329 Buildings and related capital leases 57,024 10,573 46,451 Manufacturing equipment 359,883 88,540 271,343 Furniture, office and computer equipment, software and other 33,629 7,351 26,278 Manufacturing equipment under construction and software projects under development 27,352 27,352 -------- -------- -------- 481,217 106,464 374,753 ======== ======== ========
12 - OTHER ASSETS
2001 2000 ------- ------- Debt issue expenses and other deferred charges, at amortized cost $ 8,879 $ 5,773 Loans to officers and directors, including loans regarding the exercise of stock options, without interest, various repayment terms 1,059 1,675 Receivables from joint ventures 648 Other receivables 430 65 Other, at cost 1,312 2,475 ------- ------- 11,680 10,636 ======= =======
28 13 - BANK INDEBTEDNESS AND CREDIT FACILITIES In December 2001, the Company completed a refinancing agreement which provides revolving credit facilities of up to US$145.0 million (short-term US$50.0 million, long-term US$35.0 million and US$60.0 million - see Note 14). The credit facilities are secured by certain assets of the Company and contain certain financial covenants, including limitations on debt as a percentage of tangible net worth, maintenance of tangible net worth above predefined levels and fixed charge coverage ratios. The bank indebtedness consists of the utilized portion of the short-term revolving bank credit facilities and cheques issued which have not been drawn from the facilities and is reduced by any cash and cash equivalent balances. As at December 31, 2001, the Company had: - -- Bank loans under a US$50.0 million revolving credit facility (Facility A), extendible annually at the option of the lenders, converting to a two-year term loan if not extended by the lenders. The loan is secured by a first ranking charge on the Company's accounts receivable and inventories. The loan bears interest at various interest rates including US prime rate plus a premium varying between 0 and 275 basis points and LIBOR plus a premium varying between 75 and 350 basis points. As at December 31, 2001, the effective rate was approximately 7.95% and US$39.0 million was utilized. An amount of $5.5 million of this credit facility is used for letters of credit. As at December 31, 2000, the Company had: - -- A senior unsecured bank loan under a US$80.0 million revolving credit facility which matured June 30, 2001. This loan bears interest at US prime rate plus a premium bearing between 0 and 125 basis points or at LIBOR plus a premium varying between 40 and 225 basis points. As at December 31, 2000, the effective rate was approximately 7.4% and the facility was fully utilized; - -- A senior unsecured bank loan under a US$50.0 million revolving credit facility which matured June 30, 2001. This loan bears interest at US prime rate or at LIBOR plus a premium varying between 125 and 150 basis points. As at December 31, 2000, the effective interest rate was approximately 8.7% and US$40.0 million was utilized; - -- A senior unsecured bank loan under a US$15.0 million revolving credit facility which matured June 30, 2001. This loans bears interest at US prime rate. As at December 31, 2000, the effective rate was approximately 9.5% and US$14.8 million was utilized; - -- A senior unsecured US$10.0 million demand bank loan, bearing interest at US prime rate. As at December 31, 2000, the effective interest rate was approximately 9.5% and US$7.7 million was utilized; - -- A senior unsecured CAN$5.0 million demand bank loan, bearing interest at Canadian prime rate. As at December 31, 2000, the effective rate was approximately 7.5% and CAN$2.6 million was utilized. 14 - LONG-TERM DEBT Long-term debt consists of the following:
2001 2000 -------- -------- a) US$137,000,000 Series A and B Senior Notes $137,000(i) $137,000 b) US$137,000,000 Senior Notes 137,000(i) 137,000 c) US$8,000,000 Series 3 Notes 8,000 d) Bank loans under revolving credit facilities 86,400 e) Other debt 2,573 4,216 -------- -------- 362,973 286,216 Less Current portion of long-term debt 8,310 9,532 -------- -------- 354,663 276,684 ======== ========
(i) In December 2001, the senior note agreements for the US$137.0 million Series A and B Senior Notes and the US$137.0 million Senior Notes were amended resulting in the notes being secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on the accounts receivable and inventories and an increase in the interest rates. The Senior Notes contain the same financial covenants as the credit facilities. 29 14 - LONG-TERM DEBT (CONTINUED) A) SERIES A AND B SENIOR NOTES Senior Notes bearing interest at an average rate of 10.03% (7.8% in 2000) payable semi-annually.The Series A US$25.0 million Notes mature on May 31, 2005. The Series B US$112.0 million Notes are repayable in semi-annual instalments of $13,440,000 starting in November 2005 and mature on May 31, 2009. B) SENIOR NOTES Senior Notes bearing interest at 9.07% (6.82% in 2000) payable semi-annually, repayable in semi-annual instalments of $16,500,000 starting in September 2004 and maturing on March 31, 2008. C) SERIES 3 NOTES Senior unsecured Notes, bearing interest at a rate of 8.08%, payable semi-annually. These notes matured on June 1, 2001. D) BANK LOANS UNDER REVOLVING CREDIT FACILITIES Revolving reducing facility (Facility B) in the amount of up to US$35.0 million, reducing by US$3.5 million on the last day of each quarter beginning September 30, 2002, maturing on December 31, 2003, secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on the accounts receivable and inventories. This loan bears interest at various rates including US prime rate plus a premium varying between 75 and 320 basis points and LIBOR plus a premium varying between 150 and 395 basis points. As at December 31, 2001, the effective interest rate was approximately 7.95% and US$26.4 million was utilized. Revolving reducing term loan (Facility C) in the amount of up to US$60.0 million, reducing by US$5.0 million on the last day of each quarter beginning the earlier of March 31, 2004 or the last day of the quarter following the repayment of Facility B, maturing on December 31, 2005, secured by a first ranking charge on all of the tangible and intangible assets of the Company and a second ranking charge on all the accounts receivable and inventories. This loan bears interest at US prime rate plus a premium varying between 75 and 320 basis points or LIBOR plus a premium varying between 150 and 395 basis points. As at December 31, 2001, the effective interest rate was approximately 7.95% and US$60.0 million was utilized. E) OTHER DEBT Other debt consisting of government loans, mortgage loans in a joint venture, obligations related to capitalized leases and other loans at fixed and variable interest rates ranging from interest-free to 8.25% and requiring periodic principal repayments through 2008. The Company has complied with the maintenance of financial ratios and with other conditions that are stipulated in the covenants pertaining to the various loan agreements. Long-term debt repayments are due as follows: 2002 $ 8,310 2003 20,012 2004 36,922 2005 111,440 2006 60,259 Thereafter 126,030 -------- Total 362,973 ========
FAIR VALUE For all debts with fixed interest rates, the fair value has been determined based on the discounted value of cash flows under the existing contracts using rates representing those which the Company could currently obtain for loans with similar terms, conditions and maturity dates. For the debts with floating interest rates, the fair value is closely equivalent to their carrying amounts. The carrying amounts and fair values of the Company's long-term debt as at December 31, 2001 and 2000 are as follows:
2001 2000 ------------------------- ------------------------ Carrying Carrying Fair value amount Fair value amount ---------- -------- ---------- --------- Long-term debt $334,054 $362,973 $ 264,680 $ 286,216 ======== ======== ========= =========
30 15 - OTHER LIABILITIES
2001 2000 ------ ------ Provision for future site rehabilitation costs $ 785 $1,500 Other 3,000 3,000 ------ ------ 3,785 4,500 ====== ======
During the years ended December 31, 2001 and 2000, the Company reviewed certain provisions, which it had previously established in accounting for prior years' business acquisitions. This process included the obtaining from third parties environmental, transfer pricing and employee related benefit studies. Furthermore, the Company holds letters of guarantee provided by the vendors against certain future related claims. As a result of the above, the Company reversed against earnings $715,000 of provisions in 2001 and $5,500,000 in 2000, which had been recorded in prior years. 16 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS A) CAPITAL STOCK -- AUTHORIZED Unlimited number of shares without par value Common shares, voting and participating Class "A" preferred shares, issuable in series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution. The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series B) CAPITAL STOCK - ISSUED AND FULLY PAID Subsequent to year-end, on February 19, 2002, the Company filed a final prospectus in Canada for the registration and sale of 5,100,000 common shares at CAN$15.50 (US$9.71) per share. The closing of the transaction is expected to take place on or before March 1, 2002. The net proceeds of approximately CAN$75,700,000 (US$47,441,000) will be used to partially repay indebtedness to the Company's banking syndicate and indebtedness to holders of its Senior Notes. The changes in the number of outstanding common shares and their aggregate stated value from January 1, 1999 to December 31, 2001 were as follows:
2001 2000 1999 ------------------------- ------------------------- ------------------------- Number Stated Number Stated Number Stated of shares value of shares value of shares value ---------- ----------- ---------- ----------- ---------- ----------- Balance, beginning of year 28,211,179 $ 183,758 28,296,392 $ 181,941 25,194,333 $ 104,033 Shares issued for cash in public offering 3,000,000 76,887 Shares issued for business acquisitions 250,587 4,000 Shares issued to the USA Employees' Stock Ownership and Retirement Savings Plan 248,906 2,240 Shares purchased for cancellation (128,100) (765) (353,200) (2,359) (100,000) (675) Shares issued for cash upon exercise of stock options 174,125 1,113 17,400 176 202,059 1,696 ---------- ----------- ---------- ----------- ---------- ----------- Balance, end of year 28,506,110 186,346 28,211,179 183,758 28,296,392 181,941 ========== =========== ========== =========== ========== ===========
31 16 - CAPITAL STOCK AND SHARE PURCHASE WARRANTS (CONTINUED) C) SHARE PURCHASE WARRANTS
2001 2000 ------- ------ 300,000 share purchase warrants $ 3,150 $3,150 ======= ======
The warrants, which expire on August 9, 2004, permit holders to purchase common shares of the Company at a price of $29.50 per share. D) SHAREHOLDERS' PROTECTION RIGHTS PLAN On May 21, 1998, the shareholders approved the extension to September 2003 of a shareholders' protection rights plan originally established in 1993. The effect of the rights plan is to require anyone who seeks to acquire 20% or more of the Company's voting shares to make a bid complying with specific provisions. E) STOCK OPTIONS Under the Company's amended executive stock option plan, options may be granted to the Company's executives and directors. Options expire no later than 10 years after the date of granting. The plan provides that such options will vest and may be exercisable 25% per year over four years. All options were granted at a price equal to the average closing market values on the day immediately preceding the date the options were granted. The changes in number of options outstanding were as follows:
2001 2000 1999 --------- --------- --------- Weighted Weighted Weighted Average average average exercise Number of exercise Number of exercise Number of price options price options price options -------- --------- -------- --------- -------- --------- Balance, beginning of year $ 12.89 2,797,036 $15.76 2,217,224 $14.30 2,406,067 Granted 9.79 386,000 10.37 1,183,000 27.88 14,000 Exercised 6.39 (174,125) 8.23 (17,400) 8.18 (202,059) Cancelled 16.56 (601,661) 16.84 (585,788) 19.30 (784) --------- --------- --------- Balance, end of year 10.06 2,407,250 12.89 2,797,036 15.76 2,217,224 ======== ========= ======== ========= ======== ========= Options exercisable at the end of the year 1,022,214 1,267,019 1,286,790 ========= ========= =========
The following table summarizes information about options outstanding and exercisable at December 31, 2001:
Options outstanding Options exercisable ------------------------- ------------------------ Weighted Average Weighted Weighted Contractual average average Life exercise exercise Number (in years) price Number price --------- ------------ -------- --------- -------- Range of exercise prices $4.25 to $8.14 672,900 6.2 7.48 365,400 6.93 $8.31 to $19.09 1,707,350 7.4 10.74 648,064 10.41 $22.13 to $27.88 27,000 6.8 25.10 8,750 25.41 --------- --------- 2,407,250 1,022,214 ========= =========
On January 10, 2001, the Company repriced 474,163 of unexercised stock options held by employees, other than directors and executive officers. The repriced options had exercise prices ranging from US$16.30 to US$23.26 (CAN$26.01 to CAN$37.11) and expire in 2003 and 2006. The revised exercise price was set at US$8.28 (CAN$13.21), being the average of the closing price on The Toronto Stock Exchange and the New York Stock Exchange on January 9, 2001. All other terms and conditions of the respective options, including the percentage vesting and the vesting and expiry dates, remain unchanged. 32 17 - COMMITMENTS AND CONTINGENCIES A) COMMITMENTS As at December 31, 2001, the Company had commitments aggregating approximately $35,506,000 up to 2010 for the rental of offices, warehouse space, manufacturing equipment, automobiles and other. Minimum payments for the next five years are $10,752,000 in 2002, $10,212,000 in 2003, $4,688,000 in 2004, $2,352,000 in 2005 and $1,646,000 in 2006. B) CONTINGENCIES The Company is party to various claims and lawsuits which are being contested. In the opinion of Management, the outcome of such claims and lawsuits will not have a material adverse effect on the Company. 18 - PENSION AND POST-RETIREMENT BENEFIT PLANS The Company has several defined contribution plans and defined benefit plans for substantially all its employees in both Canada and the United States. These plans are generally contributory in Canada and non-contributory in the United States. DEFINED CONTRIBUTIONS PLANS In the United States, the Company maintains a savings retirement plan (401[k] Plan) for the benefit of certain employees who have been employed for at least 90 days. Contribution to these plans is at the discretion of the Company. The Company contributes as well to a multi-employer plan for employees covered by collective bargaining agreements. In Canada, the Company maintains a defined contribution plan for its salaried employees. The Company contributes to the plan amounts equal to 4% of each participant's eligible salary. The Company has expensed $2,295,000 for these plans for the year ended December 31, 2001 ($2,013,000 and $1,896,000 for 2000 and 1999 respectively). DEFINED BENEFIT PLANS The Company has, in the United States, two defined benefit plans (hourly and salaried). Benefits for employees are based on compensation and years of service for salaried employees and fixed benefits per month for each year of service for hourly employees. The funding policy is consistent with the funding requirements of federal laws and regulations. Plan assets consist primarily of equity securities and fixed income investments. In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit of $10.65 ($9.95 and $10.33 in 2000 and 1999 respectively) per month for each year of service. In the United States, the Company provides group health care and life insurance benefits to certain retirees. 33 18 - PENSION AND POST-RETIREMENT BENEFIT PLANS (CONTINUED) Information relating to the various plans is as follows:
Pension plans Other plans ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Accrued benefit obligations Balance, beginning of year $ 18,866 $ 16,690 $ 785 $ 712 Current service cost 398 393 10 9 Interest cost 1,363 1,309 56 53 Benefits paid (754) (686) (73) (54) Plan amendments 340 Actuarial losses 420 1,203 4 65 Foreign exchange rate adjustment (61) (43) ------- ------- ------- ------- Balance, end of year 20,572 18,866 782 785 ------- ------- ------- ------- Plan assets Balance, beginning of year 16,931 16,706 Actual return on plan assets (1,742) (1,260) Employer contributions 1,075 2,206 Benefits paid (754) (686) Foreign exchange rate adjustment (60) (35) ------- ------- ------- ------- Balance, end of year 15,450 16,931 -- -- ------- ------- ------- ------- Funded status - deficit 5,122 1,935 782 785 Unamortized past service costs (912) (633) Unamortized net actuarial gain (loss) (5,573) (1,772) 118 128 Unamortized transition assets (obligation) 90 100 (41) (45) ------- ------- ------- ------- Accrued benefit liability (prepaid benefit) (1,273) (370) 859 868 ======= ======= ======= =======
34 18 - PENSION AND POST-RETIREMENT BENEFIT PLANS (CONTINUED) ACCRUED BENEFIT EXPENSE
Pension plans Other plans ---------------------------- ---------------------------- 2001 2000 1999 2001 2000 1999 ------- ------- ------- ------- ------- ------- Current service cost $ 398 $ 393 $ 420 $ 10 $ 9 $ 21 Interest cost 1,363 1,309 804 56 53 58 Expected return on plan assets (1,652) (1,459) (846) Amortization of past service costs 52 53 52 Amortization of transition obligation (asset) (4) (4) (4) 4 4 32 Amortization of unrecognized loss (gain) 18 (21) 7 (6) (14) (2) ------- ------- ------- ------- ------- ------- Pension expense for the year 175 271 433 64 52 109 ======= ======= ======= ======= ======= =======
The significant assumptions which Management considers to be the most likely and which were used to measure its accrued benefit obligations are as follows (weighted average assumptions as at December 31) :
Pension plans Other plans --------------------------- ------------------------------ 2001 2000 1999 2001 2000 1999 ------ ------ ------ ------ ------ ------ Canadian plans Discount rate 7.25% 7.50% 6.50% -- -- -- Expected rate of return on plan assets 9.25% 9.00% 9.00% -- -- -- US plans Discount rate 7.25% 7.50% 7.50% 7.25% 7.50% 8.25% Expected rate of return on plan assets 9.25% 8.60% 8.60% -- -- -- Rate of compensation increase (only for one plan) -- -- 4.00% -- -- -- ===== ===== ===== ===== ===== =====
For measurement purposes, a 5.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001 (5% in 2000 and 8% in 1999) and deemed to remain constant through 2005. 35 19 - SEGMENT DISCLOSURES The Company manufactures and sells an extensive range of specialized polyolefin plastic packaging products primarily in Canada and in the United States. All products have to be considered part of one reportable segment as they are made from similar extrusion processes and differ only in the final stages of manufacturing. A vast majority of the Company's products, while brought to market through various distribution channels, generally have similar economic characteristics. The following table presents sales by country based on the location of the manufacturing facilities:
2001 2000 1999 --------- --------- --------- Canada $ 127,878 $ 117,799 $ 107,072 United States 500,028 581,723 487,640 Other 3,563 2,443 3,333 Transfers between geographic areas (36,564) (48,050) (28,098) --------- --------- --------- Total sales 594,905 653,915 569,947 ========= ========= =========
The following table presents capital assets and goodwill by country based on the locations of assets:
2001 2000 1999 -------- -------- -------- Capital assets, net Canada $ 48,693 $ 51,388 $ 48,016 United States 312,501 316,900 296,326 Other 5,373 6,465 7,380 -------- -------- -------- Total capital assets 366,567 374,753 351,722 ======== ======== ======== Goodwill, net Canada $ 16,202 17,955 19,053 United States 211,602 216,302 198,833 -------- -------- -------- Total goodwill 227,804 234,257 217,886 ======== ======== ========
No customer accounted for 10% or more of revenues in 2001, 2000 and 1999. 20 - COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the presentation adopted in the current year. 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA A) NET EARNINGS AND EARNINGS PER SHARE Net earnings of the Company and earnings per share established under Canadian GAAP conform in all material respects to the amounts that would be reported if the financial statements would have been prepared under US GAAP. B) CONSOLIDATED BALANCE SHEETS Under Canadian GAAP, the financial statements are prepared using the proportionate consolidation method of accounting for joint ventures. Under US GAAP, these investments would be accounted for using the equity method. Note 3 to the consolidated financial statements provides details of the impact of proportionate consolidation on the Company's consolidated financial statements for 2001, 2000 and 1999, including the impact on the consolidated balance sheets. The other differences in presentation that would be required under US GAAP to the consolidated balance sheets are not viewed as significant enough to require further disclosure. C) CONSOLIDATED CASH FLOWS Canadian GAAP permits the disclosure of a subtotal of the amount of funds provided by operations before changes in non-cash working capital items to be included in the consolidated statements of cash flows. US GAAP does not permit this subtotal to be presented. 36 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (CONTINUED) D) ACCOUNTING FOR COMPENSATION PROGRAMS The Company has chosen to continue to measure compensation costs related to awards of stock options using the intrinsic value based method of accounting. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44 (FIN 44), which became effective on July 1, 2000, requiring that the cancellation of outstanding stock options by the Company and the granting of new options with a lower exercise price (the replacement options) be considered as an indirect reduction of the exercise price of the stock options. Under FIN 44, the replacement options and any repriced options are subject to variable accounting from the cancellation date or date of grant, depending on which stock options were identified as the replacement options. Using variable accounting, the Company is required to recognize, at each reporting date, compensation expense for the excess of the quoted market price of the stock over the exercise prices of the replacement or repriced options until such time as the replacement options are exercised, forfeited or expire. The impact on the Company's financial results will depend on the fluctuations in the Company's stock price and the dates of the exercises, forfeitures or cancellations of the stock options. Depending on these factors, the Company could be required to record significant compensation expense during the life of the options which expire in 2006. In November 2000, 300,000 and 50,000 replacement options were issued at exercise prices of US$10.13 (CAN$15.50) and US$14.71 (CAN$21.94) respectively, and in May and August 2001, 40,000 and 54,000 replacement options were issued for US$9.00 (CAN$13.80) and US$11.92 (CAN$18.80) respectively. In addition, in January 2001, 474,163 options were repriced at US$8.28 (CAN$12.40) (see note 16). As at December 31, 2001, the Company's quoted market stock price was US$8.30 (CAN$13.25) per share. For the options subject to variable accounting, the compensation expense would not materially impact net earnings (loss) reported in the consolidated statement of earnings for 2001 under US GAAP. Under US GAAP, the Company is required to make pro forma disclosures of net earnings, basic earnings per share and diluted earnings per share as if the fair value based method of accounting had been applied. The fair value of options granted in 2001, 2000 and 1999 was estimated using the Black-Scholes option-pricing model, taking into account an expected life of five years, expected volatility of 50% (45% in 2000 and 25% in 1999), risk-free interest rates of 4.76% (5.96% in 2000 and 5.39% in 1999) and expected dividends ranging from $0.00 to $0.18 per share ($0.11 in 2000 and 1999). A compensation charge is amortized over the vesting periods. Accordingly, the Company's net loss, basic loss per share and diluted loss per share for the year ended December 31, 2001, would have been increased, on a pro forma basis, by $4,212,000, $0.15 and $0.15 respectively, the net earnings, earnings per share and diluted earnings per share for the year ended December 31, 2000, on a pro forma basis, would have been decreased by $3,362,000, $0.12 and $0.12 respectively, and for the year ended December 31, 1999, by $2,499,000, $0.09 and $0.09 respectively. The weighted average fair value of options granted in 2001 was $4.74 ($4.42 in 2000 and $8.79 in 1999). The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's amended executive stock option plan has characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in Management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. E) ACCUMULATED PENSION BENEFIT OBLIGATION Under US GAAP, if the accumulated pension benefit obligation exceeds the fair value of benefit plan assets, a liability must be recognized in the balance sheet that is at least equal to the unfunded accumulated benefit obligation. To the extent that the additional minimum liability is created by a plan improvement, an intangible asset can be established. Any additional minimum liability not covered by an intangible asset will cause a net of tax reduction in accumulated other comprehensive income. 37 21 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (CONTINUED) The following sets out the adjustments required to the Company's consolidated balance sheets to conform with US GAAP:
2001 2000 1999 ------- ------ ------ Future income tax assets would increase by $ 2,029 $ -- $ -- Other assets would increase by 912 -- -- Accounts payable and accrued liabilities would increase by 6,396 -- -- Shareholders' equity would decrease by (3,455) -- -- ======== ======== ========
F) CONSOLIDATED COMPREHENSIVE INCOME As required under US GAAP, the Company would have reported the following consolidated comprehensive income:
2001 2000 1999 -------- -------- ------- Net earnings (loss) in accordance with US GAAP $(12,242) $ 33,422 $ 8,098 Foreign currency translation adjustments (5,741) (2,722) 3,458 Minimum pension liability adjustment, net of tax (Note 21 e)) (3,455) -------- -------- -------- Consolidated comprehensive income (loss) (21,438) 30,700 11,556 ======== ======== ========
22 - SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP NEW ACCOUNTING PRONOUNCEMENTS In 2001, the Financial Accounting Standards Board (FASB) approved the issuance of SFAS No. 141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". The new standards are equivalent to the Canadian standards as disclosed in Accounting Policies - New accounting pronouncements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective for fiscal years beginning after December 15, 2001. The Company does not expect any significant impact upon adoption. 38 Intertape Polymer Group - Locations CORPORATE OFFICES
MONTREAL, QUEBEC, CANADA SARASOTA, FLORIDA, U.S.A. - ------------------------------------------------- --------------------------------------------- Atlanta, Georgia, U.S.A. o Marysville, Michigan, U.S.A. + # * Brighton, Colorado, U.S.A. # * Menasha, Wisconsin, U.S.A. # * Carbondale, Illinois, U.S.A. # * Ontario, California, U.S.A. # * Chicago, Illinois, U.S.A. o Piedras Negras, Mexico * Columbia, South Carolina, U.S.A. # * Porto, Portugal # * Cumming, Georgia, U.S.A. # * Rayne, Louisiana, U.S.A. # Danville, Virginia, U.S.A. o + # * Richmond, Kentucky, U.S.A. # * Edmundston, New Brunswick, Canada + # * St. Laurent, Quebec, Canada o + # * Green Bay, Wisconsin, U.S.A. # * Tremonton, Utah, U.S.A. # * Lachine, Quebec, Canada * Truro, Nova Scotia, Canada + # * Los Angeles, California, U.S.A. o - ------------------------------------------------- ---------------------------------------------
O REGIONAL DIST. CTR. + ISO CERTIFIED # DISTRIBUTION * MANUFACTURING LOCATION 39 Other Information
BOARD OF DIRECTORS HONORARY DIRECTOR - ------------------------------------- -------------------------------------- ------------------------------------- Melbourne F. Yul Ben J. Davenport, Jr. James A. Motley, Sr. Chairman and Chief Executive Officer Chairman, First Piedmont Corporation Director, American National Bank and Chairman and CEO, Chatham Oil Company Trust Company American National Bancshares, inc. L. Robbie Shaw (1) Gordon R. Cunningham (1) Vice President President, Cumberland Asset Management Nova Scotia Community College Michael Richards (1) Irvine Mermelstein Senior Partner, Stikeman Elliott Managing Partner, Market-Tek J. Spencer Lanthier (1) Currently Serves as a Member of the Board of Several Publicly Traded Companies
(1) Member of Audit Committee
EXECUTIVE OFFICERS - ------------------------------------- -------------------------------------- ------------------------------------- Melbourne F. Yull Burgess H. Hildreth. Salvatore Vitale, C.A. Chairman and Chief Executive Officer Vice President, Human Resources Vice President, Finance Andrew M. Archibald, C.A. James A. Jackson Duncan R. Yull Chief Financial Officer, Secretary, Vice President, Chief Information Vice President Treasurer, Vice President, Administration Officer Sales, Distribution Products Jim Bob Carpenter H. Dale McSween Gregory A. Yull President, Woven Products, Procurement President, Distribution Products President, Film Products
TRANSFER AGENT AND REGISTRAR - ------------------------------------- -------------------------------------------- CANADA: CIBC Mellon Trust Company U.S.A.: Mellon Investor Services L.L.C. 2110 University Street, 16th floor 85 Challenger Road, 2nd Floor Montreal, Quebec, Canada H3A 4L8 Ridgefield Park, New Jersey, U.S.A. 07660
AUDITORS - ------------------------------------- -------------------------------------------- CANADA: Raymond Chabot Grant Thornton U.S.A.: Grant Thornton International 600 de la Gauchetiere West, 130 E. Randolph Street Suite 1900 Chicago, Illinois, U.S.A. 60601-6203 Montreal, Quebec, Canada H3B 4L8
INVESTOR INFORMATION STOCK AND SHARE LISTING Common shares are listed on the New York Stock Exchange and the Toronto Stock Exchange, trading under the symbol ITP. SHAREHOLDER AND INVESTOR RELATIONS Shareholders and investors having inquiries or wishing to obtain copies of the Company's Annual Report or other U.S. Securities Exchange Commission filings should contact: MR. ANDREW M. ARCHIBALD, C.A. Chief Financial Officer Intertape Polymer Group Inc. 110 E Montee de Liesse St. Laurent, Quebec, Canada H4T 1N4 (866) 202-4713 E-mail: itp$info@intertapeipg.com ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS The Annual and Special Meeting of Shareholders will be held on Wednesday, May 22, 2002, at 4:00 p.m. at The Hilton Montreal Bonaventure Hotel, 1 Place Bonaventure, Montreal, Quebec, Canada. 40 Notes 41 2001 Annual Report -----END PRIVACY-ENHANCED MESSAGE-----