<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
FOR THE TRANSITION PERIOD ENDED DECEMBER 31, 1998
OF
GOSS GRAPHIC SYSTEMS, INC.
a Delaware Corporation
IRS Employer Identification No. 25-1200273
SEC File Number 333-08421
700 OAKMONT LANE
WESTMONT, ILLINOIS 60559-5546
(630) 850-5600
Goss (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 and (2) has been subject to such filing requirements for the
past 90 days.
Goss had 100 shares of Common Stock outstanding at February 12, 1999,
all of which were held by an affiliate.
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<TABLE>
<CAPTION>
GOSS GRAPHIC SYSTEMS, INC.
INDEX
Part I - Financial Information: Page No.
- ------------------------------ --------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet - December 31, 1998 and
September 30, 1998 2
Consolidated Statement of Operations - Three months ended
December 31, 1998 and 1997 3
Consolidated Statement of Cash Flows - Three months ended
December 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information:
- ----------------------------
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
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</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $57.1 $30.1
Accounts receivable, net 125.3 212.1
Inventories, net 277.1 234.7
Other current assets 19.4 22.5
---- ----
Total current assets 478.9 499.4
Property and equipment, net 186.2 176.2
Goodwill, net 308.0 312.4
Other assets 27.7 28.1
---- ----
Total assets $1,000.8 $1,016.1
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $170.9 $185.0
Revolving credit facilities 178.9 151.0
Current portion of long-term debt 5.2 4.7
Advance payments from customers 178.6 126.9
Other current liabilities 194.7 206.2
----- -----
Total current liabilities 728.3 673.8
Long-term debt, less current portion 275.5 273.7
Other liabilities 59.5 60.0
---- ----
Total liabilities 1,063.3 1,007.5
Minority interest 8.8 8.8
Common stock, 100 shares authorized and
outstanding, $0.01 par value 0.0 0.0
Additional paid in capital 162.2 162.2
Retained earnings (228.9) (156.6)
Minimum pension obligation (5.3) (5.3)
Cumulative translation adjustment 0.7 (0.5)
--- -----
Total shareholders' equity (71.3) (0.2)
----- -----
Total liabilities and shareholders' equity $1,000.8 $1,016.1
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
3
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GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED DECEMBER 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $107.2 $106.0
Cost of sales 130.1 88.8
----- ----
Gross profit (22.9) 17.2
Operating expenses 27.0 22.3
Workforce reduction charge 7.1 0.0
Goodwill amortization 2.1 2.3
--- ---
Operating profit (59.1) (7.4)
Other (expense) income (1.4) 0.9
Interest expense (12.3) (10.9)
------ ------
Loss before income taxes (72.8) (17.4)
Provision (benefit) for income taxes (0.4) (6.8)
----- -----
Net loss $(72.4) $(10.6)
======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
4
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GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED DECEMBER 31,
------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(72.4) $(10.6)
Depreciation 5.1 5.1
Amortization of goodwill 2.1 2.3
Changes in assets and liabilities:
Accounts receivable 86.7 19.3
Inventory (42.4) (45.4)
Accounts payable (14.2) (18.3)
Customer advances 51.7 35.9
Other current liabilities (11.4) (23.7)
Other assets 1.6 (15.6)
Other liabilities 3.6 1.9
--- ---
Net cash provided by (used for) operating activities 10.4 (49.1)
---- ------
INVESTING ACTIVITIES:
Capital expenditures (9.6) (4.2)
Investment in affiliate 0.0 (5.1)
--- -----
Net cash used for investing activities (9.6) (9.3)
----- -----
FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 27.9 46.2
Repayment of term loan 0.0 (9.1)
Repayment of mortgage notes (0.7) (2.3)
Repayment of other obligations (1.0) 0.0
----- ---
Net cash provided by financing activities 26.2 34.8
---- ----
Net increase (decrease) in cash 27.0 (23.6)
Cash at the beginning of the period 30.1 49.6
---- ----
Cash at the end of the period $57.1 $26.0
===== =====
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
5
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GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Goss Graphic Systems, Inc. ("Goss" or the "Company"), the
unaudited financial statements contain all adjustments, consisting solely of
adjustments of a recurring nature, necessary to present fairly the financial
position, results of operations, and cash flows for the periods presented. These
statements should be read in conjunction with Goss's Form 10-K for the year
ended September 30, 1998. The results of operations for the three months ended
December 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
In June 1998, the Board of Directors approved a change in Goss's fiscal year-end
from September 30 to December 31, effective for the calendar year beginning
January 1, 1999. The three month fiscal transition period from October 1, 1998
to December 31, 1998, which is covered by this report, will precede the start of
the new calendar cycle.
Certain reclassifications have been made to the 1997 financial statements to
conform to the classifications used in 1998.
2. INVENTORIES
Net inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
Materials $111.8 $104.8
Work in process 94.6 58.6
Finished goods 41.9 42.5
Parts 28.8 28.8
---- ----
Total inventories, net $277.1 $234.7
====== ======
</TABLE>
3. WORKFORCE REDUCTION CHARGE
During the quarter ended December 31, 1998, Goss initiated a five percent
reduction in its worldwide workforce. This reduction, which affected both
salaried and hourly jobs, resulted in a charge for severance costs of $7.1
million. Approximately 185 employees are being terminated in this action.
Substantially all of the severance costs will be paid by the end of 1999. As of
December 31, 1998, approximately $0.8 million in severance costs had been paid.
6
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GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. DEBT
The debt obligations of Goss are as follows (in millions):
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
---- ----
<S> <C> <C>
Revolving credit facilities $178.9 $151.0
Mortgage loans 52.3 49.2
Senior subordinated notes 225.0 225.0
Other debt obligations 3.4 4.2
--- ---
Total debt 459.6 429.4
Less current portion 184.1 155.7
----- -----
Long-term debt $275.5 $273.7
====== ======
</TABLE>
Goss's $200 million revolving credit facility contains covenants which must be
satisfied at the end of each fiscal quarter and generally cover Goss's
performance during the preceding four fiscal quarters. On August 31, 1998, Goss
entered into the First Amendment to the credit facility which contained revised
covenants for the quarters ended September 30, 1998, and thereafter. These
covenants were predicated upon Goss's business plan at that time, and
subsequently it became apparent that Goss would not be able to fulfill those
covenants. As result, Goss and its lenders amended these covenants in the Second
Amendment to the credit facility dated as of January 12, 1999, and, as so
amended, Goss's management believes that it will be able to comply with the
covenant structure contained therein. See Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations for additional detail.
5. CONTINGENCIES
LEGAL CONTINGENCIES
In the normal course of its business, the Company is subject to various claims
and lawsuits. Typically, these matters consist of product liability claims
brought by the individuals who operate the equipment that the Company sold,
disputes with customers over the performance and completion of installation of
equipment, and workers' compensation claims by the Company's own employees.
It is not presently possible to determine the outcome of the claims and lawsuits
against the Company. However, the Company maintains as an accrued liability a
reserve that is its present estimate of the total cost to resolve all of these
matters. Management does not believe that the ultimate disposition of any of
these matters will have a material adverse effect on the
7
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GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company's financial position or liquidity, although it is possible that the
resolution of these matters could be material to the results of operations in
a given period.
ENVIRONMENTAL CONTINGENCIES
The Company has received either notices of potential liability or third-party
claims under the Federal Comprehensive Environmental Response, Compensation, and
Liability Act at six off-site disposal facilities or so-called "Superfund
Sites". The Company's share of the responsibility for these Superfund Sites
generally is minor, and, although current law imposes joint and several
liability on any party deemed to be responsible at a Superfund Site, management
believes that the ultimate resolution of these matters will not be material to
the Company.
The Company's Reading, Pennsylvania, facility has been operating a groundwater
remediation system under a 1981 Consent Order with the Commonwealth of
Pennsylvania as a result of its and its predecessor's historical waste disposal
practices. The Company has completed remediation at the site pursuant to a
remediation proposal approved by the Commonwealth and has submitted a monitoring
proposal to the Commonwealth for approval.
Rockwell has agreed to indemnify the Company for expenses attendant to existing
environmental matters to the extent of one-half of those expenses in excess of
$1.0 million. The Company maintains as an accrued liability a reserve that is
its present estimate of the total cost to resolve all of these matters.
6. NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which will be effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires disclosure of certain
information about operating segments, products and services, geographic areas
and major customers.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" which is also effective for fiscal
years beginning after December 15, 1997. SFAS No. 132 requires additional
information on changes in the benefit obligations and fair values of plan
assets.
SFAS Nos. 131 and 132 will be implemented in Goss's new full fiscal year
beginning January 1, 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which is effective for 2000. SFAS No.133
will require that all derivatives
8
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GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
be recorded on the balance sheet at fair value. For derivatives that are
hedges, changes in the fair value of derivatives will be offset by the
changes in the fair value of the hedged assets, liabilities or firm
commitments.
Goss's management believes that the adoption of these new accounting standards
will not have a material effect on its financial statements.
7. COMPREHENSIVE INCOME
As of October 1, 1998 Goss adopted SFAS No. 130 "Reporting Comprehensive Income"
which requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, in a
financial statement for the period in which they are recognized. Goss has chosen
to disclose comprehensive income, which encompasses net income and foreign
currency translation adjustments, in the notes to the consolidated financial
statements.
Total comprehensive income is as follows (in millions):
<TABLE>
<CAPTION>
For the Quarter
Ended December 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Net loss $(72.4) $(10.6)
Other comprehensive income:
Foreign currency translation adjustment 1.2 0.0
--- ---
Total comprehensive loss $(71.2) $(10.6)
======= =======
</TABLE>
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Readers are urged to consider carefully the financial statements and related
notes contained elsewhere in this report and in Goss's Form 10-K for its fiscal
year ended September 30, 1998 as they read the discussion below.
RESULTS OF OPERATIONS
Net Sales
Goss's net sales for the transition quarter ended December 31, 1998 increased
by 1.2% or $1.3 million to $107.2 million compared to the quarter ended
December 31, 1997. Sales in the Americas increased by $15.0 million to $58.5
million as a result of increased shipments to large newspaper customers in
1998. Sales in Europe decreased by $13.2 million to $32.5 million as
reductions in shipments to large newspaper customers more than offset an
increase in shipments to small newspaper customers. The quarter ended
December 31, 1997 contained a major large newspaper equipment sale of $15.5
million to one European customer. Sales in the Asia Pacific region remained
level at approximately $16.0 million.
Gross Profit
Gross profit decreased by $40.1 million in 1998 to a loss of $22.9 million
due primarily to performance in the Americas. As a result of its recent
operating results, Goss took certain actions subsequent to September 30, 1998
which were intended to increase its profitability and liquidity, including
senior management changes, a revised business plan and strategy and workforce
reductions. New Goss senior management has made substantial progress in its
ongoing evaluation of the Americas business unit. Charges of $29.9 million
were recorded as a result of decisions made to resolve certain customer
disputes and to accelerate the disposition of used equipment inventory,
resulting in higher costs or greater losses than originally estimated.
Gross profit was also negatively affected by manufacturing performance and by
certain Americas contracts that shipped during the quarter for which loss
reserves had previously been established and which, therefore, contributed no
gross profit.
Operating Expenses
Operating expenses -- I.E., engineering, selling, general and administrative
expenses -- increased 20.6% to $27.0 million. The increase is due to higher
engineering and administrative expenses. Engineering expenses increased due
to costs associated with new engineering information systems, including
depreciation thereof, and the timing of the capitalization of
contract-related engineering costs into inventory. During the quarter ended
December 31, 1997, a greater amount of engineering costs were capitalized
into inventory due to substantial engineering efforts associated with a major
contract. Administrative expenses increased as a result of depreciation
expense on a new financial information system and expenses associated with
recruiting new employees.
10
<PAGE>
Workforce Reduction Charge
During the quarter ended December 31, 1998, Goss initiated a five percent
reduction in its worldwide workforce. This reduction, which affected both
salaried and hourly jobs, resulted in a charge for severance costs of $7.1
million. Approximately 185 employees are being terminated in this action.
Substantially all of the severance costs will be paid by the end of 1999. As of
December 31, 1998, approximately $0.8 million in severance costs had been paid.
Other (Expense) Income
Other expenses increased by $2.3 million. On November 30, 1998, Goss sold
approximately $35.6 million in accounts receivable to BT Commercial Corporation.
A loss of $1.7 million was recorded in connection with the sale.
Interest Expense
Interest expense increased by $1.4 million due to increased borrowings under
Goss's revolving credit facility during the quarter ended December 31, 1998.
FINANCIAL CONDITION AND LIQUIDITY
In the transition period ended December 31, 1998, operating activities
provided $10.4 million of cash compared to 1997 when operating activities
used $49.1 million of cash. The positive cash flow from operations in 1998 is
due to the collection of accounts receivable, the sale of $35.6 million in
accounts receivable to BT Commercial Corporation and the receipt of customer
advances, partially offset by a build up of inventory.
Other than cash flow from operations, Goss's primary source of liquidity is its
revolving credit facility which permits borrowings up to $200 million, including
up to $175 million in letters of credit. As of December 31, 1998, borrowings and
letters of credit under this facility, excluding $2.2 million of revolving
credit relating to Goss's joint venture in China, totaled $198.2 million, an
increase of $26.5 million from the end of the prior fiscal quarter.
Goss's revolving credit facility contains certain financial covenants,
including, but not limited to, a minimum fixed charge coverage test, a minimum
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) test, a
minimum net worth test, a maximum leverage test and a minimum asset coverage
test. These covenants are described more fully in Section 7.6 of the January 29,
1998 credit facility agreement, a copy of which was filed with the Securities
and Exchange Commission as Exhibit 4.2 to Goss's Form 8-K dated February 12,
1998, as amended by a First Amendment to Credit Agreement dated as of August 31,
1998 and a Second Amendment to Credit Agreement dated as of January 12, 1999,
filed with the Securities and Exchange Commission as Exhibit 4.2 to Goss's Form
10-K for its fiscal year ended September 30, 1998 and is incorporated herein by
reference.
As a consequence of its earnings levels and cash flows, Goss was not in
compliance with these
11
<PAGE>
financial covenants as of the quarter ended March 31, 1998. Goss's lenders
waived this non-compliance (as well as non-compliance as of the end of the
quarter ended June 30, 1998), and on August 31, 1998, Goss entered into the
First Amendment which contained revised covenants for the quarter ended
September 30, 1998 and thereafter. These covenants were predicated upon
Goss's business plan at that time, and subsequently it became apparent that
Goss would not be able to fulfill these covenants. As a result, Goss and its
lenders amended those covenants in the Second Amendment and, as so amended,
Goss's management believes that it will be able to comply with the covenant
structure contained in its revolving credit facility. As part of the Second
Amendment, the revolving credit facility also was amended to include various
limitations on Goss's operation and borrowing, including a limitation on the
amount that can be borrowed by Goss based upon its accounts receivable,
inventory, equipment, real property and intellectual property. In general,
this limitation is similar to the limitation contained in the revolving
credit facility prior to January 29, 1998. Also as part of the Second
Amendment, Stonington Financing Inc., ("Stonington") was required to make a
capital contribution to Goss, which took the form of the purchase by
Stonington and the contribution to Goss of the accounts receivable previously
sold to BT Commercial Corporation (see below). Stonington made this
contribution on January 28, 1999. The Second Amendment provides Goss with
financial covenants consistent with anticipated financial performance, but in
exchange therefor Goss has less flexibility in other areas.
On November 30, 1998, Goss sold approximately $35.6 million in accounts
receivable to BT Commercial Corporation. This sale was permitted by Goss's
revolving credit facility and was intended to provide Goss with additional
liquidity beyond what was then available under the revolving credit facility.
Generally, the receivables that were sold were expected to mature between
February and May, 1999. The sale was without recourse to Goss although the
collectibility of the receivables was guaranteed by an affiliate of Stonington,
a related party.
In addition to the revolving credit facility, Goss also is party to an indenture
under which it issued $225 million in subordinated notes and mortgage loans on
certain of its facilities. Copies of these agreements are included as Exhibits
4.1, 4.4 and 4.5 to Goss's Form 10-K for its fiscal year ended September 30,
1997 and are incorporated herein by reference. The indenture contains covenants
similar to those in the revolving credit facility and includes cross-default
provisions under which an event of default under the revolving credit facility
would also be considered an event of default under the indenture.
Goss, because of the acquisition, is a highly leveraged business. As a
consequence, it is dependent upon its bank credit facility to provide
essential liquidity, and borrowings under that facility are dependent upon
Goss's fulfillment of the financial covenants that it contains. Violations of
the financial covenants contained in the bank credit facility can be waived,
and certain covenants have been waived or not enforced as a result of Goss's
financial performance as its credit needs expanded. Should Goss at some
future time not be able to satisfy those financial covenants it would
significantly, and negatively, affect Goss's business by, among other things,
restricting growth in sales or necessitating Goss's obtaining a replacement
credit facility. Goss's ability to obtain a replacement facility would be
dependent on the financial markets and its financial condition at that time.
12
<PAGE>
Goss's operating losses for the fiscal year 1998 and the transition quarter
ended December 31, 1998 have caused it to access a substantial portion of its
available liquidity. As a result, Goss has taken certain actions intended to
increase its profitability and the availability of liquidity, including senior
management changes, a revised business plan, workforce reductions, a sale of
$35.6 million in accounts receivable, a renegotiation of its Revolving Credit
Facility, and a capital contribution by Stonington of $35.6 million. While
Goss's management believes that these actions will result in improved
profitability and the ability to obtain necessary liquidity, there can be no
assurances that they will be successful.
YEAR 2000
Goss uses software and related technologies throughout its business and in
certain of its products that will be affected by the Year 2000 issue which
involves the inability of date sensitive computer applications to process dates
beyond the year 1999. A comprehensive inventory and assessment of business
systems and processes that may be affected by Year 2000 issues have been
completed in each country in which Goss operates.
Goss has also completed an investigation of Year 2000 issues related to the
functionality of its press systems which included a comprehensive review of Goss
press models sold over a period of more than thirty years and has found no
date-related issues that would render presses inoperable on the arrival of the
year 2000. Certain date functionality issues were identified with some older
press systems and software upgrades have been developed to solve these issues.
Where necessary, customers have been notified of these issues and many presses
have already been upgraded.
Goss's U.S. manufacturing facilities are in the process of implementing new Year
2000 compliant manufacturing and financial applications which include general
ledger, accounts receivable, accounts payable, inventory, purchasing,
engineering and order entry. These implementations are expected to be completed
by May 1, 1999 in Cedar Rapids and by June 1, 1999 in Reading. Goss's
headquarters and parts facility in Westmont, Illinois have already implemented
new manufacturing and financial systems which are Year 2000 compliant.
The majority of systems in Europe are already Year 2000 compliant with the
exception of Nantes, France where most systems will either have codes changed on
existing software or will be upgraded to Year 2000 compliant versions. These
modifications are expected to be completed by June 1999 except for the
purchasing system will be replaced by a fully integrated module of the general
ledger package and should be operational by September 1999. In Japan system
modification began in October 1998 and is currently in the final planning stage.
Individual modules will be implemented beginning in January 1999 and will be
completed by June 1999. Financial systems may not be completed until November
1999.
Certain non-IT systems, such as telephone and voice mail systems, time and labor
collection systems and other desktop computer systems, have been assessed and
all necessary upgrades will be scheduled for completion by the fourth quarter of
1999.
13
<PAGE>
The expected cost to convert all business systems to be Year 2000 compliant is
approximately $17.3 million, the majority of which are capital expenditures.
About 70% of these costs have been incurred as of December 31, 1998. These costs
do not include certain costs incurred in the U.K. over the last two years to
upgrade systems as part of an overall systems upgrade strategy as these costs
were not tracked separately.
As part of Goss's Year 2000 assessment, the Company's vendors and suppliers are
being contacted about Year 2000 issues affecting their business and products. In
addition to requesting information about their plans, Goss may require
significant vendors to document Year 2000 compliance through a separate
self-audit questionnaire.
Although Goss's management believes that it will be successful in avoiding any
disruption in its business, given the complexity and number of potential risks,
there can be no guarantee that the Company's efforts will be successful. If
Goss's efforts to achieve Year 2000 compliance are unsuccessful, the result
could have a material adverse effect on Goss's results of operations and
financial condition. The potential adverse effects include the inability to
order materials, manufacture and distribute products and process daily business
transactions. In the event certain systems are not operational in time to avoid
a Year 2000 issue, Goss has planned to manually accumulate and process data
necessary to continue operations. At such time as these systems become Year 2000
compliant, the manually accumulated data will be loaded and processed into the
new systems.
FORWARD LOOKING STATEMENTS
Certain of the statements contained in this Report are forward-looking. While
Goss believes that these statements are accurate, Goss's business is dependent
upon general economic conditions, various conditions specific to its industry,
and future trends and these factors could cause actual results to differ
materially from the forward-looking statements that have been made.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<S> <C>
(a) Exhibit 4.2 Second Amendment to Credit Agreement
(b) Exhibit 27.1 Financial Data Schedule
</TABLE>
15
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOSS GRAPHIC SYSTEMS, INC.
Date: February 16, 1999 By: /s/ Joseph P. Gaynor, III
--------------------------------------------------
Joseph P. Gaynor, III, Executive Vice President
and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
16
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
AND
LIMITED WAIVER
This SECOND AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER
(this "AMENDMENT") is dated as of January 12, 1999 and entered into by and
among GOSS GRAPHIC SYSTEMS, INC., a corporation organized under the laws of
the State of Delaware ("COMPANY") and whose registered office is at 700
Oakmont Lane, Westmont, Illinois 60559, GOSS GRAPHIC SYSTEMS LIMITED (Company
Number 3212468), a company organized under the laws of England ("GOSS UK")
and whose registered office is at Greenbank Street, Preston, Lancashire PR1
7LA, GOSS SYSTEMES GRAPHIQUES NANTES, S.A., a SOCIETE ANONYME organized under
the laws of the Republic of France ("GOSS FRANCE") and whose registered
office is at 20, rue de Koufra, 44300 Nantes, GOSS GRAPHIC SYSTEMS JAPAN
CORPORATION, a corporation organized under the laws of Japan ("GOSS JAPAN";
and together with Company, Goss UK and Goss France, the "BORROWERS") and
whose registered office is at Mitsuya Toranomon Building, 22-14 Toranomon
1-Chome, Minato-Ku, Tokyo 105, THE FINANCIAL INSTITUTIONS ACTING AS LENDERS
AND LISTED ON THE SIGNATURE PAGES HEREOF, THE FINANCIAL INSTITUTIONS ACTING
AS INDEMNIFYING LENDERS AND LISTED ON THE SIGNATURE PAGES HEREOF, BANKERS
TRUST COMPANY, as administrative agent for the Lenders (in such capacity,
"ADMINISTRATIVE AGENT") and whose registered office is at One Bankers Trust
Plaza, 130 Liberty Street, New York, New York 10006, and CREDIT SUISSE FIRST
BOSTON ("CSFB"), as syndication agent for Lenders (in such capacity,
"SYNDICATION AGENT") and whose offices are at 11 Madison Avenue, New York,
New York 10010, and, for purposes of Section 5 hereof, the Credit Support
Parties (as defined in Section 5 hereof) listed on the signature pages
hereof, and is made with reference to that certain Amended and Restated
Multicurrency Credit Agreement dated as of January 29, 1998, by and among
Borrowers, Lenders, Indemnifying Lenders, Administrative Agent, Syndication
Agent and certain other parties, as amended by that certain First Amendment
dated as of August 31, 1998 (as so amended, the "CREDIT AGREEMENT").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Borrower and Lenders desire to amend the Credit
Agreement to include a borrowing base with respect to Revolving Loans; and
WHEREAS, Borrowers and Lenders also desire to amend the Credit
Agreement to (i) amend certain of the defined terms contained therein, (ii)
amend certain of the financial covenants contained therein, and (iii) make
certain other amendments, all as more specifically set forth herein:
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO RECITALS.
The Recitals to the Credit Agreement are hereby amended by
deleting the reference to "$175,000,000" contained in the second recital and
substituting "up to $175,000,000" therefor.
1.2 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED TERMS.
A. AMENDMENTS TO EXISTING DEFINITIONS. Subsection 1.1 of
the Credit Agreement is hereby amended as follows: the definitions
"Applicable Base Rate Margin", "Applicable Offshore Rate Margin", "Commitment
Fee Percentage", "Consolidated Leverage Ratio", "Eligible Accounts Receivable
Value", "Eligible Inventory Value", "Inventory" and "Maximum Revolving Loan
Commitments" are each hereby amended by deleting each definition in its
entirety and substituting the following therefor:
"'APPLICABLE BASE RATE MARGIN' means, as of any date of
determination, a percentage per annum as set forth below opposite the
applicable Consolidated Leverage Ratio:
<TABLE>
<CAPTION>
<S> <C>
CONSOLIDATED LEVERAGE RATIO APPLICABLE BASE RATE MARGIN
greater than or equal to 4.00:1.00 2.25%
less than 4.00:1.00 2.00%
but greater than or equal to 3.50:1.00
less than 3.50:1.00 1.75%
but greater than or equal to 3.00:1.00
less than 3.00:1.00 1.50%
</TABLE>
; PROVIDED that until adjusted in accordance with the provisions of
subsection 2.2A, the Applicable Base Rate Margin shall be 2.25% per annum
effective on the Second Amendment Effective Date.
'APPLICABLE OFFSHORE RATE MARGIN' means, as of any date of
determination, a percentage per annum as set forth below opposite the
applicable Consolidated Leverage Ratio:
<TABLE>
<CAPTION>
<S> <C>
CONSOLIDATED LEVERAGE RATIO APPLICABLE OFFSHORE RATE MARGIN
greater than or equal to 4.00:1.00 3.25%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
less than 4.00:1.00 3.00%
but greater than or equal to 3.50:1.00
less than 3.50:1.00 2.75%
but greater than or equal to 3.00:1.00
less than 3.00:1.00 2.50%
</TABLE>
; PROVIDED that until adjusted in accordance with the provisions of
subsection 2.2A, the Applicable Offshore Rate Margin shall be 3.25% per
annum effective on the Second Amendment Effective Date.
'COMMITMENT FEE PERCENTAGE' means, as of any date of
determination, 0.500% per annum.
'CONSOLIDATED LEVERAGE RATIO' means, as at any date of
determination, the ratio of (x) Consolidated Total Debt, as of the last
day of the Fiscal Quarter for which such determination is being made, to
(y) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period
ending as of the last day of the Fiscal Quarter for which such
determination is being made.
'ELIGIBLE ACCOUNTS RECEIVABLE' means the aggregate amount of all
Accounts of all Borrowers deemed by Administrative Agent in the exercise
of its Permitted Discretion to be eligible for inclusion in the
calculation of the Borrowing Base. In determining the amount to be so
included, the face amount of such Accounts shall be reduced by the amount
of all returns, discounts, deductions, claims, credits, charges, or other
allowances. Unless otherwise approved in writing by Administrative
Agent, an Account shall not be an Eligible Account Receivable if:
(a) it arises out of a sale made by a Borrower to an
Affiliate; or
(b) the goods giving rise to such Account have been
shipped, delivered and invoiced, and title has passed, to the
account debtor and such Account is classified by a Borrower in
accordance with its past practices and procedures as an "account
receivable not yet due" (collectively, the "EXTENDED PAYMENT
ACCOUNTS"), but only to the extent (1) the aggregate amount of all
such Extended Payment Accounts of all Borrowers exceeds 20% of all
Accounts of all Borrowers or (2) final payment on such an Extended
Payment Account shall not be received by such Borrower within 270
days after shipment and delivery of the goods giving rise to such
Extended Payment Account; or
(c) it is unpaid more than 90 days after the original
payment due date; or
(d) it is from the same account debtor or its Affiliate
and fifty percent (50%) or more of all Accounts from that account
debtor (and its Affiliates) are ineligible under (c) above; or
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<PAGE>
(e) when aggregated with all other Accounts of an
account debtor, such Account exceeds 25% in face value of all
Accounts of all Borrowers then outstanding, but only to the extent
of such excess, unless such excess is supported by an irrevocable
letter of credit satisfactory to Administrative Agent (as to form,
substance and issuer) and assigned to Administrative Agent; or
(f) the account debtor for such Account is a creditor of
any Borrower, has or has asserted a right of setoff against such
Borrower, or has disputed its liability or otherwise has made any
claim with respect to such Account or any other Account which has
not been resolved, in each case to the extent of the amount owed
by such Borrower to such account debtor, the amount of such actual
or asserted right of setoff, or the amount of such dispute or
claim, as the case may be; or
(g) the account debtor is (or its assets are) the
subject of any of the events described in subsection 8.6 or 8.7;
or
(h) (1) such Account is not payable in Dollars, an
Offshore Currency or any other freely convertible or exchangeable
currency or (2) the account debtor for such Account is located
outside the United States, the EU or Japan, except to the extent
(x) the aggregate amount of such Accounts of all Borrowers which
do not comply with sub-clause (2) above does not exceed 20% of the
aggregate amount of all Accounts of all Borrowers, or (y) such
Account is supported by an irrevocable letter of credit, a
guaranty or any other financing arrangement, in each case
satisfactory to Administrative Agent (as to form, substance and
issuer) and assigned to Administrative Agent; or
(i) the sale to the account debtor is on a bill-and-
hold, guarantied sale, sale-and-return, sale on approval or
consignment basis or made pursuant to any other written agreement
providing for repurchase or return; or
(j) Administrative Agent determines by its own credit
analysis that collection of such Account is uncertain or that such
Account may not be paid; or
(k) the account debtor is any federal, state, local,
provincial, or other comparable or similar governmental authority,
agency or instrumentality; PROVIDED that if the account debtor is
the United States of America, the UK, France or Japan, or any
department, agency or instrumentality thereof, such Account shall
not be ineligible solely as a result of this clause (k) if the
applicable Loan Party duly assigns its rights to payment of such
Account to Administrative Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sections 3727 et seq.)
or the comparable law, code or regulation in the UK, France or
Japan, as the case may be; or
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<PAGE>
(l) such Account does not comply with all requirements
of all applicable laws, rules, regulations and orders of any
governmental authority, including without limitation the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act,
Regulation Z of the Board of Governors of the Federal Reserve
System and all Environmental Laws; or
(m) such Account arises as a result of any progress
billing or such Account is subject to any adverse security
deposit, progress payment or other similar advance made by or for
the benefit of the applicable account debtor; or
(n) the goods giving rise to such Account are subject to
any Secured Customer Financing Arrangement or Customer Financing
Note Guaranty; or
(o) it is not subject to a valid and perfected First
Priority Lien in favor of Administrative Agent or does not
otherwise conform to the representations and warranties contained
in the Loan Documents; PROVIDED that no Account which is otherwise
an Eligible Account Receivable shall be excluded under this clause
(o) solely as a result of (i) in the case of Goss UK and Goss
France, the account debtor for such Account is located in a
jurisdiction other than that of the UK or France so long as such
account debtor is in the EU; and (ii) in the case of Goss Japan,
such Account is not subject to a perfected Lien in favor of
Administrative Agent solely because (x) no notification of
Administrative Agent's security interest in such Account has been
provided to the account debtor or (y) Administrative Agent has not
taken possession of any drafts or checks related to such Account;
or
(p) it is an Account with a customer credit balance that
is unpaid more than 90 days after the original payment date for
which a debit balance exists; or
(q) it is not owned solely by a Borrower or such
Borrower does not have good, valid and marketable title thereto;
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in this definition.
'ELIGIBLE INVENTORY' means the aggregate amount of Inventory of
all Borrowers deemed by Administrative Agent in the exercise of its
Permitted Discretion to be eligible for inclusion in the calculation of
the Borrowing Base. In determining the amount to be so included, such
Inventory shall be valued at the lower of cost or market, on a basis
consistent with Borrowers' current and historical accounting practice.
Unless otherwise approved in writing by Administrative Agent, an item of
Inventory shall not be included in Eligible Inventory if:
(a) it is not owned solely by a Borrower or such
Borrower does not have good, valid and marketable title thereto;
or
5
<PAGE>
(b) it is not located in the United States, the UK,
France or Japan; or
(c) other than finished goods constituting Inventory
subject to a Secured Customer Financing Arrangement which are in
the process of being installed by a Borrower for a period which
does not exceed six months ("SPECIFIED FINISHED GOODS"), it
consists of goods or Inventory (including consigned goods or
Inventory) not located on property owned or leased by any Borrower
or in a contract warehouse; PROVIDED that such goods or Inventory
(other than consigned goods or Inventory) shall not be excluded
under this clause (c) if such goods are located on property owned
or leased by any Borrower or in a contract warehouse, in each case
that is subject to a Collateral Access Agreement executed by any
applicable mortgagee, lessor or contract warehouseman, as the case
may be, and such goods are segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
or
(d) it is not subject to a valid and perfected First
Priority Lien in favor of Administrative Agent except, with
respect to Inventory stored at sites described in clause (c)
above, for Liens for unpaid rent or normal and customary
warehousing charges; PROVIDED that no Inventory which is otherwise
Eligible Inventory shall be excluded under this clause (d) solely
as a result of, in the case of Goss UK and Goss France, Specified
Finished Goods are being installed in a jurisdiction other than
that of the UK or France so long as they are being installed in
the EU; or
(e) it consists of goods returned or rejected by any
Borrower's customers, or goods (other than Specified Finished
Goods) in transit to third parties (other than to warehouse sites
covered by a Collateral Access Agreement); or
(f) it consists of raw materials constituting Inventory
which are sub-assemblies or works in process or other partially
manufactured goods constituting Inventory; or
(g) it is not first-quality goods, is obsolete or slow
moving, or is not accountable due to loss or shrinkage or
valuation capitalization, or does not otherwise conform to the
representations and warranties contained in the Loan Documents; or
(h) it consists of Inventory to be included in finished
goods and such Inventory has been assigned to specific contracts
with customers who have made advance payments with respect to such
Inventory on such contracts;
6
<PAGE>
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in this definition.
'INVENTORY' means, with respect to a Person, all goods,
merchandise and other personal property which are held by such Person for
sale or lease, including those held for display or demonstration or out
on lease or consignment or to be furnished under a contract of service,
including without limitation (but without duplication) raw materials,
components, works in process, finished goods (including without
limitation all completed offset newspaper press systems, insert web
offset press systems and commercial web offset printing presses, or
accessories thereto, and other related goods and merchandise, in each
case constituting finished goods which are held for sale or lease by such
Person, including those held for display or demonstration), spare parts
(including without limitation all components, goods, merchandise or spare
parts relating to press equipment held for sale or lease by such Person
in connection with the servicing, maintenance or repair of finished goods
sold or leased by such Person), or other materials used or consumed, or
to be used or consumed, in the business of such Person; PROVIDED that
'Inventory' shall not include any materials or other items that would
otherwise constitute 'Equipment'.
'MAXIMUM REVOLVING LOAN COMMITMENTS' means, as of any date of
determination, (x) for any Borrower, the Dollar Equivalent of the
Revolving Loan Commitments available to such Borrower as set forth in the
most recent Notice of Allocation delivered by Borrowers to Administrative
Agent pursuant to subsection 2.1A(i)(b), and (y) for all Borrowers, (1)
for the period from and including the Effective Date to but excluding
January 1, 2001, the Dollar Equivalent of $200,000,000 LESS the aggregate
amount of all reductions made to all Revolving Loan Commitments pursuant
to subsections 2.4A(ii) and 2.4.A(iii), (2) for the period from and
including January 1, 2001 to but excluding January 1, 2002, the Dollar
Equivalent of $175,000,000 LESS the aggregate amount of all reductions
made to all Revolving Loan Commitments pursuant to subsections 2.4A(ii)
and 2.4.A(iii), and (3) for the period from and including January 1, 2002
through and including the Commitment Termination Date, the Dollar
Equivalent of $150,000,000 LESS the aggregate amount of all reductions
made to all Revolving Loan Commitments pursuant to subsections 2.4A(ii)
and 2.4.A(iii)."
B. AMENDMENTS TO EXISTING DEFINITIONS. Subsection 1.1 of the
Credit Agreement is hereby further amended by deleting the reference to
"$175,000,000" contained in the definition of "Letters of Credit Suballocation"
and substituting "the Maximum Letter of Credit Amount" therefor.
C. ADDITION OF NEW DEFINITIONS. Subsection 1.1 of the Credit
Agreement is hereby further amended by adding thereto the following definitions
which shall be inserted in proper alphabetical order:
"'BORROWING BASE' means, as at any date of determination, an
aggregate amount equal to:
7
<PAGE>
(i) eighty-five percent (85%) of Eligible Accounts Receivable
of all Borrowers, PLUS
(ii) sixty-five percent (65%) of Eligible Inventory of all
Borrowers, PLUS
(iii) fifty percent (50%) of Eligible Equipment of all Borrowers,
PLUS
(iv) fifty percent (50%) of Eligible Real Property of all
Borrowers, PLUS
(v) fifty percent (50%) of Eligible Intellectual Property of
all Borrowers, MINUS
(vi) the aggregate amount of reserves, if any, established by
Administrative Agent in the exercise of its Permitted Discretion against
Eligible Accounts Receivable, Eligible Inventory, Eligible Equipment,
Eligible Real Property and Eligible Intellectual Property of Borrowers;
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may (a) increase or decrease reserves against Eligible
Accounts Receivable, Eligible Inventory, Eligible Equipment, Eligible
Real Property and Eligible Intellectual Property of Borrowers and (b)
reduce the advance rates provided in this definition, or restore such
advance rates to any level equal to or below the advance rates in effect
as of the Second Amendment Effective Date.
'BORROWING BASE CERTIFICATE' means a certificate substantially in
the form of EXHIBIT XXVI annexed hereto delivered by Borrowers pursuant
to subsection 6.1(xx). Borrowers shall complete such Borrowing Base
Certificate based on the respective Dollar, Sterling, Franc, Mark or Yen
amounts reflected for Accounts, Inventory, Equipment, Real Property
Assets or Intellectual Property on Borrowers' financial books and records
and shall, in addition, provide the Dollar Equivalent of such Sterling,
Franc, Mark or Yen amounts as of the date of such Borrowing Base
Certificate. For purposes of determining compliance with the provisions
of this Agreement, Administrative Agent shall utilize the Dollar
Equivalent of such Sterling, Franc, Mark or Yen amounts.
'BTCC RECEIVABLES PURCHASE AGREEMENTS' means that certain
receivables purchase agreement, dated as of November 27, 1998, entered
into by and between BT Commercial Corporation and Company, and any and
all related agreements, including without limitation any related put
agreements, executed and delivered in connection with such receivables
purchase agreement.
'CONTRIBUTED ACCOUNTS' means the Accounts, as set forth on
SCHEDULE 1.1(b) annexed hereto, purchased by BT Commercial Corporation
from Company and which Contributed Accounts, with a face value of not
less than $35,000,000, shall be purchased by Stonington Equity Sub from
BT Commercial Corporation and contributed by Stonington Equity Sub to
Company as the Stonington 1999 Equity Contribution, in each case pursuant
to the BTCC Receivables Purchase Agreements.
8
<PAGE>
'ELIGIBLE EQUIPMENT' means the aggregate amount of all Equipment
of all Borrowers deemed by Administrative Agent in the exercise of its
Permitted Discretion to be eligible for inclusion in the calculation of
the Borrowing Base. In determining the amount to be so included, such
Equipment shall be valued at the liquidation value of such Equipment.
Unless otherwise approved in writing by Administrative Agent, an item of
Equipment shall not be included in Eligible Equipment if:
(a) it is not owned solely by a Borrower or such
Borrower does not have good, valid and marketable title thereto;
or
(b) it is not located in the United States, the UK,
France or Japan; or
(c) it is not subject to a valid and perfected First
Priority Lien in favor of Administrative Agent; or
(d) it is not first-quality goods, is obsolete or slow
moving, or does not otherwise conform to the representations and
warranties contained in the Loan Documents;
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in this definition.
'ELIGIBLE INTELLECTUAL PROPERTY' means the aggregate amount of all
Intellectual Property of all Borrowers deemed by Administrative Agent in
the exercise of its Permitted Discretion to be eligible for inclusion in
the calculation of the Borrowing Base. In determining the amount to be
so included, such Intellectual Property shall be valued at fair market
value. Unless otherwise approved in writing by Administrative Agent, an
item of Intellectual Property shall not be included in Eligible
Intellectual Property if:
(a) it is not owned solely by a Borrower or such
Borrower does not have good, valid and marketable title thereto;
or
(b) it is not subject to a valid and perfected First
Priority Lien in favor of Administrative Agent, or does not
otherwise conform to the representations and warranties contained
in the Loan Documents;
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in this definition.
'ELIGIBLE REAL PROPERTY' means the aggregate amount of all Real
Property Assets of all Borrowers deemed by Administrative Agent in the
exercise of its Permitted Discretion to be eligible for inclusion in the
calculation of the Borrowing Base. In determining the amount to be so
included, such Real Property Assets shall be valued at fair market value.
Unless otherwise approved in writing by
9
<PAGE>
Administrative Agent, an item of Real Property Assets shall not be
included in Eligible Real Property Assets if:
(a) it is not owned solely by a Borrower or such
Borrower does not have good, valid and marketable title thereto;
or
(b) it is not located in the United States, the UK,
France or Japan; or
(c) it is not subject to a valid and perfected First
Priority Lien in favor of Administrative Agent, or does not
otherwise conform to the representations and warranties contained
in the Loan Documents;
PROVIDED that Administrative Agent, in the exercise of its Permitted
Discretion, may impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in this definition.
'EQUIPMENT' means, with respect to a Person, all equipment in all
of its forms, all parts thereof and all accessions thereto owned or held
by such Person, including without limitation all equipment, parts and
accessions relating to the manufacture, production, servicing,
maintenance or repair of press systems, printing presses and related
finished goods and spare parts; PROVIDED that 'Equipment' shall not
include any materials or other items that would otherwise constitute
'Inventory'.
'EU' means the European Union.
'INTELLECTUAL PROPERTY' means, with respect to a Person, any
trademarks, servicemarks, tradenames, tradesecrets, business names,
logos, patents, licenses and copyrights, any applications thereof, any
registration and franchise rights and interest relating thereto, and any
other intellectual property of any type, and any goodwill associated with
any of the foregoing, owned or held by such Person.
'INVESTMENT AGREEMENT' means that certain Investment Agreement
dated as of January 12, 1999 entered into by and between Stonington
Equity Sub and Holdings.
'MAXIMUM LETTER OF CREDIT AMOUNT' means, as of any date of
determination, for all Borrowers, (1) for the period from and including
the Effective Date to but excluding January 1, 2001, the Dollar
Equivalent of $175,000,000 LESS the aggregate amount of all reductions
made to all Revolving Loan Commitments pursuant to subsections 2.4A(ii)
and 2.4.A(iii), (2) for the period from and including January 1, 2001 to
but excluding January 1, 2002, the Dollar Equivalent of $150,000,000 LESS
the aggregate amount of all reductions made to all Revolving Loan
Commitments pursuant to subsections 2.4A(ii) and 2.4.A(iii), and (3) for
the period from and including January 1, 2002 through and including the
Commitment Termination Date, the Dollar Equivalent of $125,000,000 LESS
the aggregate amount of all reductions made to all Revolving Loan
Commitments pursuant to subsections 2.4A(ii) and 2.4.A(iii).
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<PAGE>
'PERMITTED DISCRETION' means Administrative Agent's good faith
judgment based upon any factor which it believes in good faith: (i) will
or could adversely affect the value of any Collateral, the enforceability
or priority of Administrative Agent's Liens thereon or the amount which
Administrative Agent and Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral; (ii) suggests that any collateral report
or financial information delivered to Administrative Agent by any Person
on behalf of any Loan Party is incomplete, inaccurate or misleading in
any material respect; (iii) materially increases the likelihood of a
bankruptcy, reorganization or other insolvency proceeding involving any
Borrower or any of its Subsidiaries or any of the Collateral; or (iv)
creates or reasonably could be expected to create a Potential Event of
Default or Event of Default. In exercising such judgment, Administrative
Agent may consider such factors already included in or tested by the
definition of Eligible Accounts Receivable, Eligible Inventory, Eligible
Equipment, Eligible Real Property and Eligible Intellectual Property, as
well as any of the following: (i) the financial and business climate of
any Borrower's industry and general macroeconomic conditions, (ii)
changes in collection history and dilution with respect to any such
Borrower's Accounts, (iii) changes in demand for, and pricing of, any
such Borrower's Inventory, (iv) changes in any concentration of risk with
respect to such Accounts, Inventory, Equipment, Real Property Assets or
Intellectual Property, and (v) any other factors that change the credit
risk of lending to any Borrower on the security of such Accounts,
Inventory, Equipment, Real Property Assets or Intellectual Property,
including without limitation any foreign exchange risks or uncertainties.
The burden of establishing lack of good faith shall be on Borrowers.
'SECOND AMENDMENT EFFECTIVE DATE' means the date on which that
certain Second Amendment to Credit Agreement dated as of January 12, 1999
by and among Borrowers, Lenders, Indemnifying Lenders, Administrative
Agent and Syndication Agent becomes effective in accordance with its
terms, which date shall be no later than January 13, 1999.
'STONINGTON 1999 EQUITY CONTRIBUTION' means the equity
contribution by Stonington Equity Sub to Company through Holdings of the
Contributed Accounts.
'STONINGTON EQUITY SUB' means Stonington Financing Inc., a
Delaware corporation and an Affiliate of Stonington."
1.3 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.
A. ALLOCATION OF REVOLVING LOAN COMMITMENTS; NOTICES OF
ALLOCATION. Subsection 2.1A(i)(b) of the Credit Agreement is hereby amended by
deleting the reference to "$175,000,000" contained therein and substituting "the
Maximum Letter of Credit Amount" therefor.
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<PAGE>
B. LIMITATION ON REVOLVING LOANS. Subsection 2.1A(i)(c) of
the Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"(c) LIMITATION ON REVOLVING LOANS. Anything contained in this
Agreement to the contrary notwithstanding, the Revolving Loans and the
Revolving Loan Commitments shall be subject to the limitations that:
(1) in no event shall the Total Utilization of
Commitments for all Borrowers then in effect exceed the Maximum
Revolving Loan Commitments for all Borrowers then in effect;
(2) in no event shall the Total Utilization of
Commitments for any Borrower then in effect exceed the Maximum
Revolving Loan Commitments for such Borrower then in effect;
(3) in no event shall the Total Utilization of
Commitments for all Borrowers then in effect exceed the Borrowing
Base for all Borrowers then in effect; and
(4) with respect to any Borrower, in no event shall the
Dollar Equivalent of the sum of (x) the aggregate principal amount
of all outstanding Revolving Loans made to such Borrower (other
than Revolving Loans made for the purpose of repaying any Refunded
Swing Line Loans in the case of Company, or reimbursing the
applicable Issuing Lender for any amount drawn under any Letter of
Credit but not yet so applied in the case of all Borrowers) PLUS
(y) in the case of Company, the aggregate principal amount of all
outstanding Swing Line Loans made to Company, exceed the Revolving
Loan Suballocation for such Borrower then in effect."
C. SWING LINE LOANS. Subsection 2.1A(ii) of the Credit
Agreement is hereby amended by deleting the second paragraph contained therein
in its entirety and substituting the following therefor:
"Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment
shall be subject to the limitations that:
(1) in no event shall the Total Utilization of
Commitments for all Borrowers then in effect exceed the Maximum
Revolving Loan Commitments for all Borrowers then in effect;
(2) in no event shall the Total Utilization of
Commitments for Company then in effect exceed the Maximum
Revolving Loan Commitments for Company then in effect;
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<PAGE>
(3) in no event shall the Total Utilization of
Commitments for all Borrowers then in effect exceed the Borrowing
Base for all Borrowers then in effect; and
(4) in no event shall the Dollar Equivalent of the sum
of (x) the aggregate principal amount of all outstanding Revolving
Loans made to Company (other than Revolving Loans made for the
purpose of repaying any Refunded Swing Line Loans, or reimbursing
the applicable Issuing Lender for any amount drawn under any
Letter of Credit but not yet so applied) PLUS (y) the aggregate
principal amount of all outstanding Swing Line Loans made to
Company, exceed the Revolving Loan Suballocation for Company then
in effect."
D. RATE OF INTEREST. Subsection 2.2A of the Credit Agreement
is hereby amended by deleting the last paragraph contained therein in its
entirety and substituting the following therefor:
"Upon delivery of the Margin Determination Certificate by Company
to Administrative Agent pursuant to subsection 6.1(xvii), each of the
Applicable Base Rate Margin and the Applicable Offshore Rate Margin shall
automatically be adjusted in accordance with such Margin Determination
Certificate, such adjustment to become effective on the first day of the
Fiscal Quarter immediately succeeding the Fiscal Quarter in which
Administrative Agent receives such Margin Determination Certificate;
PROVIDED that if a Margin Determination Certificate is not delivered at
the time required pursuant to subsection 6.1(xvii), the highest
"Applicable Base Rate Margin" and "Applicable Offshore Rate Margin", as
the case may be, shall be applicable from such time until delivery of the
succeeding Margin Determination Certificate; PROVIDED FURTHER that if a
Margin Determination Certificate erroneously indicates an applicable
margin more favorable to Borrowers than should be afforded by the actual
calculation of the Consolidated Leverage Ratio, each Borrower shall
promptly pay additional interest, letter of credit fees and all other
applicable fees, as the case may be, to correct for such error."
E. PREPAYMENTS AND REDUCTIONS FROM NET ASSET SALE PROCEEDS.
Subsection 2.4A(iii)(a) of the Credit Agreement is hereby amended by deleting
the proviso contained therein in its entirety and substituting the following
therefor:
"PROVIDED, HOWEVER, that up to $10,000,000 of Net Asset Sale
Proceeds received by Borrowers and their respective Subsidiaries from
Asset Sales permitted under subsection 7.7(iv) shall be used to prepay
Loans, but shall not be required to be used to permanently reduce
Revolving Loan Commitments pursuant to this subsection 2.4A(iii)(a), so
long as such proceeds are reinvested by Borrowers or their Subsidiaries
within 180 days after receipt of such proceeds in similar assets of
similar fair market value."
13
<PAGE>
F. PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF EQUITY
SECURITIES. Subsection 2.4A(iii)(d) of the Credit Agreement is hereby amended
by deleting the "." at the end of the first sentence contained therein and
substituting the following therefor:
"; PROVIDED, HOWEVER, that the Net Equity Proceeds from the equity
contribution made to Company by Stonington Equity Sub pursuant to
subsection 6.12(i) shall be excluded from the provisions of this
subsection 2.4A(iii)(d)."
G. PREPAYMENTS DUE TO RESTRICTIONS OF REVOLVING LOAN
COMMITMENTS OR CURRENCY FLUCTUATIONS. Subsection 2.4A(iii)(g) of the Credit
Agreement is hereby amended by deleting it in its entirety and substituting the
following therefor:
"(g) PREPAYMENTS DUE TO RESTRICTIONS OF REVOLVING LOAN
COMMITMENTS OR CURRENCY FLUCTUATIONS. If (I) on any Computation Date
Administrative Agent shall have determined that the Total Utilization of
Commitments exceeds the Maximum Revolving Loan Commitments (whether for a
particular Borrower or all Borrowers) because of a change in applicable
rates of exchange between Dollars and Offshore Currencies, (II) at any
time the Total Utilization of Commitments for all Borrowers exceeds the
Maximum Revolving Loan Commitments for all Borrowers then in effect,
(III) the Total Utilization of Commitments for any Borrower exceeds the
Maximum Revolving Loan Commitments for such Borrower then in effect, or
(IV) the Total Utilization of Commitments for all Borrowers exceeds the
Borrowing Base for all Borrowers then in effect, then Administrative
Agent shall give notice to the applicable Borrower(s) that a prepayment
is required under this subsection 2.4A(iii)(g), and (1) in the case of
Company, Company shall promptly (x) prepay FIRST its Swing Line Loans and
SECOND its Revolving Loans and/or (y) cash collateralize its outstanding
Letters of Credit, and (2) in the case of a Borrower other than Company,
such Borrower shall promptly (x) prepay its Revolving Loans and/or (y)
cash collateralize its outstanding Letters of Credit, in each case to the
extent necessary so that the Total Utilization of Commitments shall not
exceed the Maximum Revolving Loan Commitments (whether for such Borrower
or all Borrowers) then in effect or the Borrowing Base for all Borrowers
then in effect, as the case may be."
1.4 AMENDMENTS TO SECTION 3: LETTERS OF CREDIT.
A. Subsection 3.1A(i) of the Credit Agreement is hereby
amended by deleting it in its entirety and substituting the following therefor:
"(i) any Letter of Credit if, after giving effect to such
issuance, (I) the Total Utilization of Commitments for all Borrowers
would exceed (x) the Maximum Revolving Loan Commitments for all Borrowers
then in effect or (y) the Borrowing Base for all Borrowers then in
effect, or (II) the Total Utilization of Commitments for any Borrower
would exceed the Maximum Revolving Loan Commitments for such Borrower
then in effect;"
14
<PAGE>
B. Subsection 3.1A(ii) of the Credit Agreement is hereby
amended by deleting the reference to "$175,000,000" contained therein and
substituting "the Maximum Letter of Credit Amount" therefor.
1.5 AMENDMENTS TO SECTION 6: BORROWERS' AFFIRMATIVE COVENANTS.
A. MONTHLY FINANCIALS. Subsection 6.1(i) of the Credit
Agreement is hereby amended by (1) deleting the reference to "45 days" contained
therein and substituting "30 days" therefor, (2) deleting the reference to "and"
immediately after clause (a) contained in such subsection 6.1(i), and (3)
deleting the ";" at the end of clause (b) contained therein and substituting the
following:
", and (c) a report comparing the achievements of Company with
respect to contract margin improvement, collection of Accounts and
disposition of stale Inventory against the corresponding figures from the
Financial Plan for the current Fiscal Year;"
B. QUARTERLY FINANCIALS. Subsection 6.1(ii) of the Credit
Agreement is hereby amended by:
(1) deleting the reference to "within 45 days after the
end of each Fiscal Quarter" contained therein and substituting the following
therefor:
"within (x) 45 days after the end of each Fiscal Quarter (other
than the Fiscal Quarter ended on September 30, 1999) and (y) 31 days
after the end of the Fiscal Quarter ended on September 30, 1999"; and
(2) adding at the end of such subsection 6.1(ii) the
following as a new proviso:
"PROVIDED, HOWEVER, that Company will deliver to Administrative
Agent and Lenders, as soon as available and in any event within 30 days
after August 31, 1999, the consolidated and consolidating (by Region and
by product line) balance sheets of each Borrower and its Subsidiaries as
at the end of the eight-consecutive month period ended on August 31, 1999
and the related consolidated and consolidating (by Region and by product
line) statements of income, stockholders' equity and cash flows of such
Borrower and its Subsidiaries for the eight-consecutive month period
ended on August 31, 1999, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of such Borrower and its
Subsidiaries as at August 31, 1999 and the results of their operations
and their cash flows for the eight-consecutive month period ended
August 31, 1999, subject to changes resulting from audit and normal
year-end adjustments."
C. BORROWING BASE CERTIFICATES. Subsection 6.1 of the Credit
Agreement is hereby amended by (1) renumbering the existing subsection 6.1(xx)
as subsection 6.1(xxii) and (2) adding a new subsection 6.1(xx) and a new
subsection 6.1(xxi) as follows:
15
<PAGE>
"(xx) BORROWING BASE CERTIFICATE: (a) as soon as available and
in any event within thirty (30) days after the last Business Day of each
month ending after the Second Amendment Effective Date or (b) as soon as
available and in any event within three (3) Business Days after a written
request from Administrative Agent, a Borrowing Base Certificate dated as
of the last Business Day of such month or such date of request, as
applicable, together with any additional schedules and other information
as Administrative Agent may reasonably request, and such Borrowing Base
Certificate shall, with respect to Equipment, Real Property Assets and
Intellectual Property, use the most recently available appraised values
for Equipment, Real Property Assets and Intellectual Property;
(xxi) PAYMENTS RELATING TO THE SENIOR SUBORDINATED NOTES: five
(5) days prior to Company, directly or indirectly, declaring, ordering,
paying, making or setting apart any sum for any Restricted Junior Payment
in respect of the Senior Subordinated Notes a written notice from Company
specifying its intent to declare, order, pay, make or set apart such sum
for such Restricted Junior Payment, the amount of such Restricted Junior
Payment and the date such payment is to be made; and"
D. INSPECTION; AUDITS; APPRAISALS; LENDER MEETING. Subsection
6.5 of the Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"6.5 INSPECTION; AUDITS; APPRAISALS; LENDER MEETING.
A. INSPECTION RIGHTS. Each Borrower shall, and shall cause
each of its Subsidiaries to, permit any authorized representatives
designated by Administrative Agent (which may include representatives of
any Lender at such Lender's expense) to visit and inspect any of the
properties of such Borrower or any of its Subsidiaries, including its and
their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that such Borrower may, if it so chooses, be present at or
participate in any such discussion).
B. AUDITS AND APPRAISALS. Upon the request of Administrative
Agent, each Borrower shall, and shall cause each of its Subsidiaries to,
permit any authorized representatives designated by Administrative Agent
to conduct one or more audits of all Accounts and Inventory of Loan
Parties and one or more appraisals of all Equipment, Real Property Assets
and Intellectual Property of Loan Parties, in each case during each
twelve-month period after the Second Amendment Effective Date (exclusive
of any audits or appraisals required under subsection 6.12(ii) (the "BASE
AUDITS AND APPRAISALS")), or upon the occurrence and during the
continuation of an Event of Default, such additional audits of Accounts
and Inventory and appraisals of Equipment, Real Property Assets and
Intellectual Property as Administrative Agent may require, each such
audit and/or appraisal to be substantially similar in scope and substance
to the Base Audits and Appraisals, all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be
reasonably requested.
16
<PAGE>
C. LENDER MEETING. Without in any way limiting the foregoing,
each Borrower will participate in a meeting of Administrative Agent and
Lenders at least once during each Fiscal Year to be held at such
Borrower's corporate offices (or such other location as may be agreed to
by such Borrower and Administrative Agent) at such time as may be agreed
to by such Borrower and Administrative Agent."
E. MATTERS RELATING TO SECOND AMENDMENT. Section 6 of the
Credit Agreement is hereby amended by adding at the end of said Section 6 a new
subsection 6.12 as follows:
"6.12 MATTERS RELATING TO SECOND AMENDMENT.
(i) EQUITY CONTRIBUTION; INVESTMENT AGREEMENT. No later than
January 29, 1999, Stonington Equity Sub shall have contributed the
Stonington 1999 Equity Contribution to Company through Holdings.
Stonington Equity Sub and Holdings shall have executed and delivered the
Investment Agreement and none of the parties thereto shall enter into any
agreement which purports to materially amend, supplement or otherwise
modify such Investment Agreement without the written consent of Requisite
Lenders, as contemplated under the Investment Agreement. In the event
that Company has not collected the full amount of the Contributed
Accounts on or before July 28, 1999, Holdings shall deliver the Notice
of Investment Date and Amount (as defined in the Investment Agreement) to
Stonington Equity Sub within the times specified in the Investment
Agreement and Stonington Equity Sub shall invest in Holdings an amount in
Cash of up to $5,000,000 (the "INVESTMENT AMOUNT") within the times
specified in the Investment Agreement, but in any event no later than
September 15, 1999, in each case pursuant to the Investment Agreement;
PROVIDED, HOWEVER, that in the event that Company, through Holdings,
exchanges uncollected or deficient Contributed Accounts for such
Investment Amount, the face value of such uncollected or deficient
Contributed Accounts so exchanged shall not exceed the Investment Amount.
Upon receipt of the Investment Amount, Holdings shall immediately
contribute, as common equity, the Investment Amount to Company.
(ii) AUDITS AND APPRAISALS OF CERTAIN ASSETS OF BORROWERS.
Administrative Agent shall have received (x) no later than 30 days after
the Second Amendment Effective Date, completed audits of Accounts and
Inventory of Borrowers located in North America from
PricewaterhouseCoopers LLP or such other independent auditors
satisfactory to Administrative Agent, (y) no later than 60 days after the
Second Amendment Effective Date, completed audits of Accounts and
Inventory of Borrowers located outside of North American from one or more
independent auditors satisfactory to Administrative Agent, and (z) no
later than 120 days after the Second Amendment Effective Date, completed
appraisals from one or more independent appraisers satisfactory to
Administrative Agent with respect to (1) all Equipment of Borrowers and
(2) such other assets of Borrowers deemed by Administrative Agent to
require appraisals, in each case such audits or appraisals shall be in
form, scope and substance satisfactory to Administrative Agent and, with
respect to the appraisals, satisfying the requirements of, and to the
extent required under, any applicable laws and regulations.
Notwithstanding any other provision contained herein to the
17
<PAGE>
contrary, Borrowers shall pay all costs and expenses of
PricewaterhouseCoopers LLP and any other independent auditors or
appraisers relating to the audits and appraisals referenced in this
subsection 6.12(ii)."
F. CASH MAINTENANCE. Section 6 of the Credit Agreement is
hereby further amended by adding at the end of said Section 6 a new subsection
6.13 as follows:
"6.13 CASH MAINTENANCE.
Each Borrower shall, and shall cause each of its
Subsidiaries to, (x) deposit, transfer and otherwise maintain all Cash in
Deposit Accounts established and maintained with Lenders and (y) maintain
all Cash Equivalents with Lenders. Any Cash of a Borrower not on deposit
or otherwise maintained in a Deposit Account established and maintained
with a Lender and any Cash Equivalents not maintained with a Lender, in
each case as of the Second Amendment Effective Date, shall be transferred
by such Borrower to a Deposit Account established and maintained with a
Lender or to a Lender, as the case may be, no later than thirty (30) days
after the Second Amendment Effective Date. In the event that a Lender is
replaced pursuant to subsection 2.8 or a financial institution is no
longer a Lender under this Agreement, then all Cash and Cash Equivalents
maintained with such former Lender shall be transferred to a Lender no
later than thirty (30) days after such former Lender is replaced or is no
longer a Lender, as the case may be."
1.6 AMENDMENTS TO SECTION 7: BORROWERS' NEGATIVE COVENANTS.
A. INDEBTEDNESS. Subsection 7.1(ix) of the Credit Agreement
is hereby amended by deleting the reference to "$25,000,000" contained therein
and substituting "$7,500,000" therefor.
B. INVESTMENTS; JOINT VENTURES. Subsection 7.3(vii) of the
Credit Agreement is hereby amended by deleting the reference to "7.7(v)"
contained therein and substituting "7.7(iv)" therefor.
C. RESTRICTED JUNIOR PAYMENTS. Subsection 7.5 of the Credit
Agreement is hereby amended by deleting in its entirety clause (i) set forth in
the proviso contained in such subsection 7.5 and substituting the following
therefor:
"(i) Company may make payments of regularly scheduled interest in
respect of the Senior Subordinated Notes, in accordance with the terms of
and to the extent required by, and subject to the subordination
provisions contained in, the Senior Subordinated Note Indenture (PROVIDED
that Company may make such regularly scheduled interest payments only on
the scheduled interest payment dates specified in the Senior Subordinated
Notes and Senior Subordinated Note Indenture and Company may not prepay
or otherwise pay in advance any amounts payable under the Senior
Subordinated Notes or the Senior Subordinated Note Indenture on a date
other than
18
<PAGE>
the applicable scheduled payment date specified in the Senior
Subordinated Notes or Senior Subordinated Note Indenture, as the case may
be);"
D. MINIMUM FIXED CHARGE RATIO. Subsection 7.6A of the Credit
Agreement is hereby amended by deleting it in its entirety and substituting the
following therefor:
"A. MINIMUM FIXED CHARGE RATIO. Company shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed
Charges for any four-Fiscal Quarter period ending on any of the dates set
forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
<S> <C>
PERIOD MINIMUM FIXED CHARGE RATIO
December 31, 1999 0.75:1.00
March 31, 2000 0.90:1.00
June 30, 2000 0.95:1.00
September 30, 2000 1.05:1.00
December 31, 2000 1.15:1.00
March 31, 2001 1.20:1.00
June 30, 2001 1.25:1.00
September 30, 2001 1.30:1.00
December 31, 2001 1.40:1.00
March 31, 2002 1.50:1.00
June 30, 2002 1.50:1.00
September 30, 2002 1.50:1.00
December 31, 2002 1.50:1.00
and thereafter
</TABLE>
; PROVIDED that Company shall not be subject to a minimum ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed Charges for
the four-Fiscal Quarter periods ending on March 31, 1999, June 30, 1999
and September 30, 1999 only."
E. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Subsection 7.6B of
the Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not
permit its Consolidated Leverage Ratio for any four-fiscal Quarter period
ending on any of the dates set forth below to exceed the correlative
ratio indicated:
<TABLE>
<CAPTION>
<S> <C>
MAXIMUM CONSOLIDATED
PERIOD LEVERAGE RATIO
March 31, 2000 10.00:1.00
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<C> <C>
June 30, 2000 9.00:1.00
September 30, 2000 8.00:1.00
December 31, 2000 6.75:1.00
March 31, 2001 6.75:1.00
June 30, 2001 6.50:1.00
September 30, 2001 6.00:1.00
December 31, 2001 5.50:1.00
March 31, 2002 5.50:1.00
June 30, 2002 5.50:1.00
September 30, 2002 5.00:1.00
December 31, 2002 4.75:1.00
and thereafter
</TABLE>
; PROVIDED that Company shall not be subject to a maximum Consolidated
Leverage Ratio for the four-Fiscal Quarter periods ending on March 31,
1999, June 30, 1999, September 30, 1999 and December 31, 1999 only;
PROVIDED, HOWEVER, that Company shall not permit its Consolidated Total
Debt as of the last day of any Fiscal Quarter ending on any dates set
forth below to exceed the correlative amount indicated:
<TABLE>
<CAPTION>
<S> <C>
MAXIMUM CONSOLIDATED
PERIOD TOTAL DEBT
March 31, 1999 $475,000,000
June 30, 1999 $475,000,000
September 30, 1999 $475,000,000
December 31, 1999 $450,000,000"
</TABLE>
F. MINIMUM CONSOLIDATED ADJUSTED EBITDA. Subsection 7.6C of
the Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"C. MINIMUM CONSOLIDATED ADJUSTED EBITDA.
(i) Company shall not permit Consolidated Adjusted EBITDA
for any four-Fiscal Quarter period ending as of the last day of any
Fiscal Quarter ending on any of the dates set forth below to be less
than the correlative amount indicated:
<TABLE>
<CAPTION>
<S> <C>
MINIMUM CONSOLIDATED
PERIOD ADJUSTED EBITDA
March 31, 1999 $(5,000,000)
June 30, 1999 $ 7,000,000
September 30, 1999 $20,000,000
December 31, 1999 $38,000,000
March 31, 2000 $45,000,000
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
June 30, 2000 $50,000,000
September 30, 2000 $55,000,000
December 31, 2000 $63,000,000
March 31, 2001 $64,000,000
June 30, 2001 $66,000,000
September 30, 2001 $69,000,000
December 31, 2001 $73,000,000
March 31, 2002 $74,000,000
June 30, 2002 $75,000,000
September 30, 2002 $76,000,000
December 31, 2002 $78,000,000
and thereafter
</TABLE>
; PROVIDED that, for purposes of this subsection 7.6C only, (i) with
respect to the Fiscal Quarter ended on March 31, 1999, Consolidated
Adjusted EBITDA shall be for the immediately preceding one Fiscal Quarter
period; (ii) with respect to the Fiscal Quarter ended on June 30, 1999,
Consolidated Adjusted EBITDA shall be for the immediately preceding two-
consecutive Fiscal Quarter period; (iii) with respect to the Fiscal
Quarter ended on September 30, 1999, Consolidated Adjusted EBITDA shall
be for the immediately preceding three-consecutive Fiscal Quarter period;
and (iv) for each subsequent Fiscal Quarter after the Fiscal Quarter
ended on September 30, 1999, Consolidated Adjusted EBITDA shall be for
the immediately preceding four-consecutive Fiscal Quarter period ending
as of the last day of any Fiscal Quarter ending on any of the dates set
forth above.
(ii) Company shall not permit Consolidated Adjusted
EBITDA for the eight-consecutive month period ended on August 31, 1999 to
be less than $13,500,000; PROVIDED that if (a) Company fails to comply
with this subsection 7.6C(ii) and Administrative Agent, on behalf of
Lenders, delivers to the trustee under the Senior Subordinated Note
Indenture (the "TRUSTEE") a Blockage Notice (as defined in the Senior
Subordinated Note Indenture), such notice to be delivered in accordance
with the terms of the Senior Subordinated Note Indenture, (b)
Administrative Agent and Lenders receive from Company on or before
October 31, 1999 the financial statements required to be delivered under
subsection 6.1(ii) for the Fiscal Quarter ended on September 30, 1999,
(c) such financial statements demonstrate that Company is in compliance
with the provisions of subsection 7.6 for the period ended on September
30, 1999, and (d) no other Event of Default or Potential Event of Default
shall have occurred and be continuing, then Administrative Agent, on
behalf of Lenders, shall send to the Trustee no later than November 10,
1999 a notice terminating the Payment Blockage Period (as defined in the
Senior Subordinated Note Indenture) resulting from the Blockage Notice
delivered pursuant to the immediately preceding proviso."
G. MINIMUM CONSOLIDATED NET WORTH. Subsection 7.6D of the
Credit Agreement is hereby amended by deleting it in its entirety.
21
<PAGE>
H. MINIMUM ASSET COVERAGE. Subsection 7.6E is hereby amended
by deleting subsection 7.6E in its entirety.
I. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND
ACQUISITIONS. Subsection 7.7 of the Credit Agreement is hereby amended by (1)
deleting in its entirety the reference to "all or any part of its business,
property or fixed assets" in the introductory paragraph of such subsection 7.7
and substituting "all or any part of its business, property or fixed assets
(including without limitation any Accounts or other accounts receivables)"; (2)
deleting clause (iii) of such subsection 7.7 in its entirety; and (3)
renumbering clauses (iv) and (v) as clauses (iii) and (iv) respectively.
J. CONSOLIDATED CAPITAL EXPENDITURES. Subsection 7.8 of the
Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"7.8 CONSOLIDATED CAPITAL EXPENDITURES.
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to make or incur Consolidated Capital Expenditures, in any
Fiscal Year indicated below, in an aggregate amount in excess of the
corresponding amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
<S> <C>
MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
Fiscal Year 1999 $15,000,000
Fiscal Year 2000 and each
Fiscal Year thereafter $20,000,000"
</TABLE>
K. DISPOSAL OF SUBSIDIARY STOCK. Subsection 7.11 of the
Credit Agreement is hereby amended by deleting the reference to "7.7(i) and (v)"
contained therein and substituting "7.7(i) and (iv)" therefor.
1.7 AMENDMENTS TO SECTION 8: EVENTS OF DEFAULT.
A. BREACH OF CERTAIN COVENANTS. Subsection 8.3 of the Credit
Agreement is hereby deleted in its entirety and substituting the following
therefor:
"8.3 BREACH OF CERTAIN COVENANTS.
Failure of any Borrower to perform or comply with any term
or condition contained in subsection 2.5 or 6.2 or Section 7 of this
Agreement; or failure of Company to deliver at the times specified in
subsection 6.1(ii) the financial statements required under the proviso
set forth in subsection 6.1(ii) or the financial statements for the
Fiscal Quarter ended on September 30, 1999 required under subsection
6.1(ii); or"
22
<PAGE>
B. FAILURE TO MAKE STONINGTON 1999 EQUITY CONTRIBUTION;
FAILURE TO PERFORM UNDER INVESTMENT AGREEMENT. Section 8 of the Credit
Agreement is hereby amended by (i) deleting the ":" at the end of subsection
8.16 contained therein and substituting "; or" therefor, and (ii) adding
immediately after subsection 8.16 the following as a new subsection 8.17 and new
subsection 8.18:
"8.17 FAILURE TO MAKE STONINGTON 1999 EQUITY CONTRIBUTION.
Stonington Equity Sub shall have failed to contribute to
Company the Stonington 1999 Equity Contribution on or before January 29,
1999; or
8.18 FAILURE TO PERFORM UNDER INVESTMENT AGREEMENT.
Holdings shall have failed to deliver the Notice of
Investment Date and Amount (as defined in the Investment Agreement) to
Stonington Equity Sub within the times specified in the Investment
Agreement or Holdings shall have failed to perform its other obligations
under the Investment Agreement, or Stonington Equity Sub shall have
failed to invest in Holdings, within the times specified in the
Investment Agreement, the full amount of the Investment Amount (as
defined in subsection 6.12(i)) in Cash:"
1.8 AMENDMENTS TO EXHIBITS.
A. COMPLIANCE CERTIFICATE. ATTACHMENT I to EXHIBIT VI to the
Credit Agreement is hereby amended by deleting it in its entirety and
substituting therefor a new ATTACHMENT I substantially in form of ANNEX A
annexed hereto.
B. BORROWING BASE CERTIFICATE. The Exhibits to the Credit
Agreement are hereby amended by adding a new EXHIBIT XXVI (Form of Borrowing
Base Certificate) thereto substantially in the form of ANNEX B annexed hereto.
1.9 AMENDMENTS TO SCHEDULES.
The Schedules to the Credit Agreement are hereby amended by adding
a new SCHEDULE 1.1(b) (Contributed Accounts) thereto substantially in the form
of ANNEX C annexed hereto.
23
<PAGE>
1.10 AMENDMENTS TO SECURITY AGREEMENT EXECUTED BY HOLDINGS.
The Security Agreement executed and delivered by Holdings on the
Effective Date (the "HOLDINGS SECURITY AGREEMENT") is hereby amended by deleting
SCHEDULE I annexed thereto in its entirety and substituting therefor a new
SCHEDULE I substantially in the form of ANNEX D annexed hereto.
1.11 AMENDMENTS TO SECURITY AGREEMENT EXECUTED BY COMPANY.
The Security Agreement executed and delivered by Company on the
Effective Date (the "COMPANY SECURITY AGREEMENT") is hereby amended as follows:
(i) by deleting the reference to "Secured Party"
contained in Section 1(e) of such Company Security Agreement and
substituting "Secured Party or any Lender" therefor; and
(ii) by deleting SCHEDULE I annexed thereto in its
entirety and substituting therefor a new SCHEDULE I substantially in the
form of ANNEX E annexed hereto.
SECTION 2. LIMITED WAIVER.
A. LIMITED WAIVER. Subject to the terms and conditions set
forth herein and in reliance on the representations and warranties of Borrowers
herein contained, Lenders hereby waive compliance with the provisions of
subsections 7.6 and 7.8 of the Credit Agreement to the extent, and only to the
extent, necessary to permit:
(i) the ratio of Consolidated Adjusted EBITDA to Consolidated
Fixed Charges for the four-Fiscal Quarter period ending on September 30,
1998 and the four-Fiscal Quarter period ending on December 31, 1998 to be
less than the correlative ratios set forth in the table contained in
subsection 7.6A;
(ii) the Consolidated Leverage Ratio for the four-Fiscal Quarter
period ending on September 30, 1998 and the four-Fiscal Quarter period
ending on December 31, 1998 to be higher than the correlative ratios set
forth in the table contained in subsection 7.6B;
(iii) the Consolidated Adjusted EBITDA for the four-Fiscal
Quarter period ending on September 30, 1998 and the four-Fiscal Quarter
period ending on December 31, 1998 to be lower than the correlative
amounts set forth in the table contained in subsection 7.6C;
(iv) the Consolidated Net Worth for the period ending on
September 30, 1998 and the period ending on December 31, 1998 to be lower
than the correlative amounts set forth in the table contained in
subsection 7.6D; and
24
<PAGE>
(v) the Consolidated Capital Expenditures for Fiscal Year 1998
to be higher than the correlative amount set forth in the proviso
contained in subsection 7.8.
B. LIMITATION OF WAIVER. Without limiting the generality of
the provisions of subsection 10.6 of the Credit Agreement, the waiver set forth
above shall be limited precisely as written and relates solely to the
noncompliance by Company with the provisions of subsections 7.6 and 7.8 of the
Credit Agreement in the manner and to the extent described above, and nothing in
this Amendment shall be deemed to:
(a) constitute a waiver of compliance by Borrowers with respect
to (i) subsections 7.6 and 7.8 of the Credit Agreement in any other
instance or (ii) any other term, provision or condition of the Credit
Agreement or any other instrument or agreement referred to therein
(whether in connection with the noncompliance of Borrowers of the
financial covenants described above or otherwise); or
(b) prejudice any right or remedy that Administrative Agent or
any Lender may now have (except to the extent such right or remedy was
based upon existing defaults that will not exist after giving effect to
this Amendment) or may have in the future under or in connection with the
Credit Agreement or any other instrument or agreement referred to
therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Sections 1 and 2 of this Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SECOND
AMENDMENT EFFECTIVE DATE"):
A. BORROWER DOCUMENTS. On or before the Second Amendment
Effective Date, each Borrower shall deliver to Lenders (or to Administrative
Agent for Lenders) the following, each, unless otherwise noted, dated the Second
Amendment Effective Date:
1. Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Amendment,
certified as of the Second Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment;
2. Signature and incumbency certificates of their respective
officers executing this Amendment; and
3. Six executed copies of this Amendment.
25
<PAGE>
B. EXECUTION OF AMENDMENT BY REQUISITE LENDERS. On or before
the Second Amendment Effective Date, Requisite Lenders shall have executed and
delivered copies of this Amendment to Administrative Agent.
C. INVESTMENT AGREEMENT. On or before the Second Amendment
Effective Date, Company shall have delivered to Administrative Agent a fully
executed or conformed copy of the Investment Agreement.
D. BORROWING BASE. On or before the Second Amendment
Effective Date, Borrowers shall have delivered to Administrative Agent a
Borrowing Base Certificate, substantially in the form of ANNEX B annexed hereto,
prepared as of a recent date prior to the Second Amendment Effective Date. For
purposes of calculating the Eligible Equipment, Eligible Real Property and
Eligible Intellectual Property for such Borrowing Base Certificate delivered
pursuant to this Section 3D, Borrowers may use the appraised values for
Equipment, Real Property Assets and Intellectual Property as determined in
August 1996, which values are set forth on SCHEDULE I annexed hereto.
E. FEES. On or before the Second Amendment Effective Date,
Company shall pay (x) an amendment fee, for each Lender which executes this
Amendment on or before the Second Amendment Effective Date, equal to each such
Lender's Pro Rata Share of 0.500% of the Revolving Loan Commitments, all such
amendment fees to be paid to Administrative Agent for distribution to the
applicable Lenders, and (y) such other fees payable on or before the Second
Amendment Effective Date.
F. OTHER PROCEEDINGS. On or before the Second Amendment
Effective Date, all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents
incidental thereto not previously found acceptable by Administrative Agent,
acting on behalf of Lenders, and its counsel shall be satisfactory in form and
substance to Administrative Agent and such counsel, and Administrative Agent and
such counsel shall have received all such counterpart originals or certified
copies of such documents as Administrative Agent may reasonably request.
SECTION 4. BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, each Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Borrower has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of each Borrower.
26
<PAGE>
C. NO CONFLICT. The execution and delivery by each Borrower
of this Amendment and the performance by each Borrower of the Amended Agreement
do not and will not (i) violate any provision of any law or any governmental
rule or regulation applicable to such Borrower or any of its Subsidiaries, the
Certificate or Articles of Incorporation or Bylaws of such Borrower or any of
its Subsidiaries or any order, judgment or decree of any court or other agency
of government binding on such Borrower or any of its Subsidiaries, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of such Borrower or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of such Borrower or any of its Subsidiaries
(other than Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of such Borrower or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
Borrower of this Amendment and the performance by such Borrower of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by each Borrower and are the
legally valid and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. Other than the Events of Default
waived pursuant to Section 2 hereof, no event has occurred and is continuing,
and no event will result from the consummation of the transactions contemplated
by this Amendment, in each case that would constitute an Event of Default or a
Potential Event of Default. Neither Holdings nor Company nor any of their
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
of its Contractual Obligations, and no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if any,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
27
<PAGE>
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to certain Guaranties and each Borrower is a
party to certain Collateral Account Agreements, Security Agreements, Pledge
Agreements, Trademark Security Agreements, Patent Security Agreements and
Mortgages pursuant to which such Borrower has created Liens in favor of
Administrative Agent on certain Collateral to secure the Obligations.
Holdings is a party to a Guaranty and certain Security Agreements and Pledge
Agreements pursuant to which Holdings has (i) guarantied the Obligations and
(ii) created Liens in favor of Administrative Agent on certain Collateral to
secure its obligations under the Guaranty. Goss Realty, L.L.C., a Delaware
limited liability company ("GOSS REALTY") is a party to a Subsidiary Guaranty
pursuant to which Goss Realty has guarantied the Obligations. Each Borrower,
Holdings and Goss Realty are collectively referred to herein as the "CREDIT
SUPPORT PARTIES", and all such Guaranties and Collateral Documents referred
to above are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to
this Amendment. Each Credit Support Party hereby confirms that each Credit
Support Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guarantee or secure, as the case may be,
to the fullest extent possible the payment and performance of all
"Obligations," "Guarantied Obligations" and "Secured Obligations," as the
case may be (in each case as such terms are defined in the applicable Credit
Support Document), including without limitation the payment and performance
of all such "Obligations," "Guarantied Obligations" or "Secured Obligations,"
as the case may be, in respect of the Obligations of the Borrowers now or
hereafter existing under or in respect of the Amended Agreement.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in
the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material respects on
and as of the Second Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Credit Support Party (other than the Borrowers)
acknowledges and agrees that (i) notwithstanding the conditions to
effectiveness set forth in this Amendment, such Credit Support Party is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any
other Loan Document shall be deemed to require the consent of such Credit
Support Party to any future amendments to the Credit Agreement.
28
<PAGE>
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy of
any Agent or any Lender under, the Credit Agreement or any of the other
Loan Documents.
B. FEES AND EXPENSES. Each Borrower acknowledges that all
costs, fees and expenses as described in subsection 10.2 of the Credit
Agreement incurred by Administrative Agent and its counsel with respect to
this Amendment and the documents and transactions contemplated hereby shall
be for the account of the Borrowers.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
[Remainder of page intentionally left blank]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
GOSS GRAPHIC SYSTEMS, INC.,
as a Borrower
By: ______________________
Title: ___________________
GOSS GRAPHIC SYSTEMS LIMITED,
as a Borrower
By: ______________________
Title: ___________________
GOSS SYSTEMES GRAPHIQUES NANTES S.A.,
as a Borrower
By: ______________________
Title: ___________________
GOSS GRAPHIC SYSTEMS JAPAN
CORPORATION,
as a Borrower
By: ______________________
Title: ___________________
30
<PAGE>
GGS HOLDINGS, INC.,
as a Credit Support Party
By: ______________________
Title: ___________________
GOSS REALTY, L.L.C.,
as a Credit Support Party
By: ______________________
Title: ___________________
31
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
as Administrative Agent and as a Lender
By: ______________________
Title: ___________________
32
<PAGE>
CREDIT SUISSE FIRST BOSTON,
as Syndication Agent and as a Lender
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
33
<PAGE>
THE BANK OF NOVA SCOTIA,
as a Lender
By: ______________________
Title: ___________________
34
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, as a Lender
By: ______________________
Title: ___________________
35
<PAGE>
THE BANK OF NEW YORK,
as a Lender
By: ______________________
Title: ___________________
36
<PAGE>
NATIONSBANK, N.A.,
as a Lender
By: ______________________
Title: ___________________
37
<PAGE>
CREDIT AGRICOLE INDOSUEZ,
as a Lender
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
38
<PAGE>
DEUTSCHE FINANCIAL SERVICES
CORPORATION, as a Lender and
as an Indemnifying Lender
By: ______________________
Title: ___________________
39
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
By: ______________________
Title: ___________________
40
<PAGE>
THE FUJI BANK, LIMITED,
as a Lender
By: ______________________
Title: ___________________
41
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
as a Lender
By: ______________________
Title: ___________________
42
<PAGE>
THE INDUSTRIAL BANK OF JAPAN TRUST
COMPANY, as a Lender and as an
Indemnifying Lender
By: ______________________
Title: ___________________
43
<PAGE>
LaSALLE NATIONAL BANK,
as a Lender
By: ______________________
Title: ___________________
44
<PAGE>
NATIONAL BANK OF CANADA, A CANADIAN
CHARTERED BANK, as a Lender
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
45
<PAGE>
THE SANWA BANK, LIMITED, CHICAGO BRANCH,
as a Lender
By: ______________________
Title: ___________________
46
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By: ______________________
Title: ___________________
47
<PAGE>
NATIONAL WESTMINSTER BANK PLC, as a
Lender
By: ______________________
Title: Manager
48
<PAGE>
BARCLAYS BANK PLC,
as a Lender
By: ______________________
Title: ___________________
49
<PAGE>
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as a Lender
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
50
<PAGE>
CIBC INC., as a Lender and
as an Indemnifying Lender
By: ______________________
Title: ___________________
51
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GOSS GRAPHIC SYSTEMS, INC. FOR THE TRANSITION PERIOD
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 43
<SECURITIES> 14
<RECEIVABLES> 155
<ALLOWANCES> 30
<INVENTORY> 358
<CURRENT-ASSETS> 478
<PP&E> 238
<DEPRECIATION> 51
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 728
<BONDS> 459
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 107
<TOTAL-REVENUES> 107
<CGS> 129
<TOTAL-COSTS> 129
<OTHER-EXPENSES> 29
<LOSS-PROVISION> 8
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> (72)
<INCOME-TAX> 0
<INCOME-CONTINUING> (72)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (72)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
