<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL FIBERSTOK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2677 23-2574778
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or Classification Code Number)
organization)
</TABLE>
--------------------------
(314) 344-8000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
ROBERT B. WEBSTER
CHIEF FINANCIAL OFFICER
NATIONAL FIBERSTOK CORPORATION
5775 PEACHTREE DUNWOODY ROAD
SUITE C150
ATLANTA, GEORGIA 30342
(404) 256-1123, EXT. 309
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Mr. David E. King Frank L. Schiff, Esq.
McCown De Leeuw & Co. White & Case
101 East 52nd Street 1155 Avenue of the Americas
31st Floor New York, New York 10036-2787
New York, New York 10022 (212) 819-8752
(212) 355-5500
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH OFFERING AGGREGATE AMOUNT OF
NOTE OF SECURITIES AMOUNT TO BE PRICE OFFERING PRICE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE (1) (1) FEE
<S> <C> <C> <C> <C>
11 5/8% Series B Senior Notes due
2002................................... $100,000,000 100% $100,000,000 $34,482.76
Guarantees of each of the
Guarantors(2).......................... (3) (3) (3) None (3)
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of July 26, 1996, of the
outstanding 11 5/8 Senior Notes due 2002 of National Fiberstok Corporation
to be cancelled in the exchange transaction hereunder.
(2) The 11 5/8 Senior Notes due 2002 of National Fiberstok Corporation being
registered will be guaranteed by each of National Fiberstok Corporation's
subsidiaries: Label Art, Inc., InfoSeal International, Inc., Government
Forms and Systems, Inc., Putnam Graphic Innovations, Inc., Short Run Labels,
Inc., Boharb Corporation and A/L Systems, Inc.
(3) No additional consideration will be paid by the recipients of the 11 5/8
Senior Notes due 2002 for the Guarantees. Pursuant to Rule 437(n) under the
Securities Act of 1933, no separate fee is payable for the Guarantees.
------------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
OTHER REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD ADDRESS, INCLUDING ZIP
JURISDICTION INDUSTRIAL IRS EMPLOYER CODE AND TELEPHONE NUMBER
OF CLASSIFICATION IDENTIFICATION INCLUDING AREA CODE, OF
NAME OF CORPORATION INCORPORATION CODE NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
- -------------------------------------- -------------- ----------------- ------------ --------------------------
<S> <C> <C> <C> <C>
1 Riverside Way
Wilton, NH 03086
Label Art, Inc........................ Delaware 2799 02-0263991 (603) 654-6131
1825 Blue Hills Circle,
N.E.
Roanoke, VA 24012
InfoSeal International, Inc........... Delaware 2761 54-1737450 (540) 853-8000
1825 Blue Hills Circle,
N.E.
Roanoke, VA 24012
Government Forms and Systems, Inc..... Delaware 2761 13-2912960 (540) 853-8000
1825 Blue Hills Circle,
N.E.
Roanoke, VA 24012
Putnam Graphic Innovations, Inc....... Delaware 2761 13-3323623 (540) 853-8000
1681 Industrial Way
San Carlos, CA 94070
Short Run Labels, Inc................. Delaware 2799 94-3185354 (415) 592-7683
1 Riverside Way
Wilton, N.H. 03086
Boharb Corporation.................... Delaware 2799 02-0371660 (603) 654-6131
1 Riverside Way
Wilton, N.H. 03086
A/L Systems, Inc...................... Delaware 2799 02-0371688 (603) 654-6131
</TABLE>
<PAGE>
NATIONAL FIBERSTOK CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF
ITEMS OF FORM S-4
<TABLE>
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover Page; Cross Reference
Outside Front Cover Page of Prospectus..... Sheet; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back Cover
of Prospectus.............................. Page
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Risk Factors; Unaudited
Charges and Other Information.............. Pro Forma Financial Data; Selected
Historical Financial Data (National
Fiberstok Corporation); Selected
Historical Consolidated Financial Data
(Transkrit Corporation)
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer;
Certain United States Federal Income Tax
Consequences; Description of the Notes
5. Pro Forma Financial Information............ Prospectus Summary; The Transaction;
Unaudited Pro Forma Consolidated Financial
Data
6. Material Contacts with the Company Being Not Applicable
Acquired...................................
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties Deemed to
be Underwriters............................
8. Interests of Named Experts and Counsel..... Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities................................
B. INFORMATION ABOUT THE REGISTRANTS
10. Information with Respect to S-3 Not Applicable
Registrants................................
11. Incorporation of Certain Information by Not Applicable
Reference..................................
12. Information with Respect to S-2 or S-3 Not Applicable
Registrants................................
13. Incorporation of Certain Information by Not Applicable
Reference..................................
14. Information with Respect to Registrants Prospectus Summary; The Transaction;
Other Than S-2 or S-3 Registrants.......... Capitalization; Selected Historical
Financial Data (National Fiberstok
Corporation); Selected Historical
Consolidated Financial Data (Transkrit
Corporation); Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Related Transactions;
Description of the Notes; Description of
New Credit Facility; Financial State-
ments
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Not Applicable
Companies..................................
16. Information with Respect to S-2 or S-3 Not Applicable
Companies..................................
17. Information with Respect to Companies Other Not Applicable
Than S-2 or S-3 Companies..................
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited.........
19. Information if Proxies, Consents or Management; Certain Related Transactions
Authorizations are not to be Solicited or
in an Exchange Offer.......................
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 26, 1996
PROSPECTUS
NATIONAL FIBERSTOK CORPORATION
OFFER TO EXCHANGE
11 5/8% SENIOR NOTES DUE 2002, SERIES B
FOR ALL OUTSTANDING 11 5/8% SENIOR NOTES DUE 2002, SERIES A
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED
---------------------
National Fiberstok Corporation, a Delaware corporation (the "Company" or
"NFC"), a wholly-owned subsidiary of DEC International, Inc., a Delaware
corporation ("DEC"), hereby offers, upon the terms and subject to conditions set
forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"; together with the Prospectus, the
"Exchange Offer"), to exchange up to an aggregate principal amount of
$100,000,000 of its 11 5/8% Senior Notes Due 2002, Series B (the "New Notes")
for up to an aggregate principal amount of $100,000,000 of its outstanding
11 5/8% Senior Notes Due 2002, Series A (the "Old Notes"). The terms of the New
Notes are identical in all material respects to those of the Old Notes, except
for certain transfer restrictions and registration rights relating to the Old
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the Indenture (as defined) governing the Old Notes. The New Notes and the
Old Notes are sometimes referred to collectively as the "Notes."
Interest on the New Notes will accrue from the date of issuance thereof (the
"Issue Date") at the rate of 11 5/8% PER ANNUM and will be payable semi-annually
in arrears on each June 15 and December 15, commencing on December 15, 1996. The
New Notes will be redeemable, at NFC's option, in whole at any time or in part
from time to time, on or after June 15, 1999 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, thereon to the date of
redemption. In addition, at any time or from time to time, on or prior to June
15, 1999, NFC may, at its option, use the net cash proceeds of one or more
Public Equity Offerings (as defined herein) to redeem up to $35.0 million
aggregate principal amount of New Notes at the redemption price set forth
herein, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided that at least 65% of the principal amount of New Notes
originally issued remains outstanding immediately after giving effect to any
such redemption.
The New Notes will be senior obligations of NFC ranking PARI PASSU in right
of payment with all other senior indebtedness of NFC. The New Notes will be
guaranteed by each of NFC's subsidiaries (the "Guarantors"). Each Guarantee (as
defined herein) will be a senior obligation of the applicable Guarantor, ranking
PARI PASSU in right of payment with all other senior indebtedness of such
Guarantor. The New Notes and the Guarantees will be effectively subordinated in
right of payment to all existing and future secured indebtedness of NFC and the
Guarantors. As of June 30, 1996, after giving pro forma effect to the
Transactions (as defined herein), NFC and the Guarantors would have had
approximately $2.6 million of secured indebtedness outstanding.
The New Notes will be secured by a first priority lien on and security
interest in all of the outstanding capital stock of each of the Guarantors.
Upon the occurrence of a Change of Control (as defined herein), each holder
of the New Notes will have the right to require NFC to purchase all or a portion
of such holder's New Notes at a price equal to 101% thereof, plus accrued and
unpaid interest, if any, thereon to the date of purchase. In addition, NFC will
be obligated to offer to purchase New Notes at 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
purchase in the event of certain asset sales. See "Description of the Notes."
(CONTINUED ON NEXT PAGE)
------------------------
SEE "RISK FACTORS", WHICH BEGINS AT PAGE 10, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
(CONTINUED FROM COVER)
The Old Notes were originally issued and sold on June 28, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144 A and
Regulation D under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available.
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1996, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than , 1996. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
June 28, 1996 (the "Registration Rights Agreement") by and among the Company,
the Guarantors and BT Securities Corporation and Donaldson, Lufkin and Jenrette
Securities Corporation, as the initial purchasers (the "Initial Purchasers"),
with respect to the initial sale of the Old Notes. Based on interpretations by
the staff of the Securities and Exchange Commission (the "Commission"), the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by respective holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act),
provided that the New Notes are acquired in the ordinary course of such holder's
business and such holder has no arrangement with any person to participate in
the distribution of such New Notes and is not engaged in and does not intend to
engage in a distribution of the New Notes. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of the New Notes received in exchange for Old Notes
if such New Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. To the extent
that an active market for the New Notes does develop, the market value of the
New Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition,
and other factors. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Absence of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
i
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
------------------------
Until , 1996 (90 days after commencement of this offering), all
dealers effecting transactions in the New Notes, whether or not participating in
this offering, may be required to deliver a Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act, with respect to the New Notes. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Items of information omitted from
this Prospectus but contained in the Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following regional offices of the Commission: Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed that, so long as any Notes remain outstanding, it
will file with the Commission and distribute to holders of the Old Notes or the
New Notes, as applicable, copies of the financial information that would have
been contained in such annual reports and quarterly reports, including
management's discussion and analysis of financial condition and results of
operations, that would have been required to be filed with the Commission
pursuant to the Exchange Act. See "Description of the Notes -- Certain Covenants
- -- Reports to Holders."
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE STATED IN THIS PROSPECTUS, REFERENCES TO (A) "NFC"
SHALL MEAN NATIONAL FIBERSTOK CORPORATION, A DELAWARE CORPORATION, (B)
"TRANSKRIT" SHALL MEAN THE FORMER TRANSKRIT CORPORATION, AND ITS SUBSIDIARIES
AND (C) THE "COMPANY" SHALL MEAN NFC AND TRANSKRIT AFTER GIVING EFFECT TO THE
TRANSACTIONS (AS DEFINED HEREIN). SEE "PROSPECTUS SUMMARY -- THE TRANSACTIONS."
THE COMPANY
The Company is a leading designer and manufacturer of custom paper-based
products for the mailer, direct mail, pressure sensitive label and custom
envelope markets. The Company has pursued a strategy of focusing on the rapidly
growing markets for non-impact self-mailers, direct mail products and services
and custom pressure sensitive labels, while maintaining leading positions in
more mature markets such as impact mailers and custom envelopes. The Company's
products are grouped into four principal business areas that accounted for the
following percentages of pro forma 1995 net sales: impact and non-impact mailer
products (31%), direct mail products and services (13%), custom pressure
sensitive labels (24%) and custom envelopes (32%). For the latest twelve month
period ended March 31, 1996 ("LTM"), the Company had pro forma net sales of
$169.3 million and pro forma EBITDA (as defined) of $23.8 million. See
"Unaudited Pro Forma Financial Data."
MAILER PRODUCTS. The Company believes it is the largest U.S. manufacturer
of spot carbon impact mailers and has the largest installed base of laser and
other non-impact printer compatible mailer systems. Impact mailers are
ready-to-mail, multi-part forms, which are widely used to print correspondence
such as account statements, invoices, tax notices and utility and medical bills
without opening or sealing the envelope. Non-impact mailers are laser printer
compatible self-mailer forms which are printed, folded, sealed and mailed as
payroll checks, direct deposit statements and vendor remittances. Sales of the
Company's non-impact mailers are experiencing rapid growth due to the
proliferation of laser and ink-jet printers and the cost effectiveness of
mailers versus traditional fold and insert mailing methods. Since 1968, when the
Company began manufacturing impact mailers, the Company has been a leader in the
development of mailer technology. In 1987, the Company introduced the patented
InfoSeal-Registered Trademark- self-mailer system, which led the industry in the
development of laser printer compatible mailers. InfoSeal-Registered Trademark-
is an integrated, turn-key mailer system utilizing a patented form which is
printed and then processed by dedicated equipment that moistens an adhesive and
folds the form into a one-piece mailer. The InfoSeal-Registered Trademark-
system has the largest installed base of dedicated self-mailer office equipment.
With 1995 net sales of $9.5 million, InfoSeal-Registered Trademark- forms have
achieved compound annual net sales growth of 56% over the past five years.
DIRECT MAIL PRODUCTS AND SERVICES. The Company offers a selection of
products sold exclusively to the direct mail industry, which includes catalog
bind-in order forms, advertising inserts and coupons. The Company also provides
customers with direct mail fulfillment, which includes personalization,
addressing and mailing services. To complement these products and services, the
Company's mailers, envelopes and labels are customized and sold for use in
direct mail applications. The Company's array of products and services
distinguish it as a one-stop supplier to the direct mail industry, which has
grown at a compound annual rate of 6% over the past five years.
CUSTOM PRESSURE SENSITIVE LABELS. The Company is the largest U.S.
manufacturer of custom pressure sensitive labels sold through independent
distributors. The Company differentiates itself from its competitors by offering
a variety of customized value-added label products aimed at short and medium-run
customers. Management believes that the Company is recognized for high quality
products, excellent customer service and its ability to respond quickly to
time-sensitive customer orders. The Tag and Label Manufacturers Institute
estimates that the pressure sensitive label market is growing at a compound
annual rate of approximately 10%, and the Company's custom pressure sensitive
label products have achieved compound annual net sales growth of 15%, on a pro
forma basis, over the past two years.
1
<PAGE>
CUSTOM ENVELOPES. The Company designs and manufacturers custom envelopes in
the growing Southeastern U.S. regional market. The Company has focused on the
high value-added specialty segments of the envelope market, placing particular
emphasis on the direct mail, photo-finishing and banking industries, where it
has established leadership positions. Almost all of the Company's envelope
products are specially printed or manufactured to end-user specifications and
generally have higher margins than plain commodity envelopes. The Company also
produces custom expanding envelopes, pockets, wallets and other products for the
professional office. Net sales of the Company's custom envelopes have increased
at a compound annual rate of 7% over the past two years.
2
<PAGE>
COMPETITIVE STRENGTHS
The Company's products and market presence distinguish it as one of the
leading designers and manufacturers of mailer products, direct mail products and
services, custom pressure sensitive labels and custom envelopes. The Company's
leading position in these product segments and continued opportunities for
growth and operating profitability are attributable to the following competitive
strengths:
-MARKET LEADER. The Company is a market leader in most of its core product
lines, including mailer products, custom pressure sensitive labels and
custom envelopes. In the mailer products and custom pressure sensitive
label markets, the Company believes that it is the largest supplier of
products sold through independent distributors with market shares
significantly in excess of those of its competitors. The Company is a
leading supplier of custom envelopes sold directly to end-use customers in
the Southeastern region of the U.S.
-FOCUS ON HIGH VALUE-ADDED PRODUCTS. Almost all of the Company's products
have a high value-added component which differentiates them from lower
margin, commodity paper-based products. Substantially all of the Company's
pressure sensitive label and envelope products are customized to end-user
specifications. Most mailer products and direct mail products and services
are also customized to specific customer design or printing requirements.
The Company's patented InfoSeal-Registered Trademark- self-mailer system,
which generally uses customized forms, provides a value-added, innovative
and cost effective system for a wide variety of mail applications.
-COMPREHENSIVE DIRECT MAIL PRODUCT LINE. The Company produces a broad range
of products which target direct mail customers, including impact and
non-impact mailers, catalog bind-in order forms, custom pressure sensitive
labels and custom envelopes. Combined with the Company's direct mail
fulfillment services, these products offer an integrated solution to the
direct mail industry which has grown at a compound annual rate of 6% over
the past five years.
-PRODUCT DEVELOPMENT EXPERTISE. The Company has a record of successful new
product introductions and service enhancements which distinguishes it as a
provider of high value-added solution-oriented technologies. Recent
examples of this product development expertise include the new, patented
InfoSeal-Registered Trademark- desktop folder/sealer which the Company
expects will significantly expand the market for the
InfoSeal-Registered Trademark- system by targeting small businesses and
satellite offices of large companies. The Company believes that it is the
first manufacturer to develop a self-mailer system targeting this market.
The Company has also recently introduced the Label Launch-TM- service, an
on-line software package enabling pressure sensitive label customers to
electronically process orders and transfer artwork directly to the
Company's pre-press and design facilities.
-DIVERSE DISTRIBUTION CHANNELS. The Company sells its products through
distribution channels which optimize access to respective end-use markets.
In its mailer and pressure sensitive label businesses, the Company believes
that it is the largest manufacturer selling through independent
distributors who provide superior coverage of the Company's small to
medium-sized customer base. The Company's catalog bind-in order forms and
custom envelopes are sold directly to end-users who, due to exacting
specifications and high volume requirements, prefer direct relationships
with the manufacturer. The Company's strategic partnership with Xerox
Corporation, which recently selected InfoSeal-Registered Trademark- as the
non-impact mailer system to be marketed by the Xerox Supplies Group sales
force, is expected to enhance distribution to large companies.
3
<PAGE>
BUSINESS STRATEGY
The Company seeks to strengthen its leadership position by focusing on the
following core business strategies:
-EXPAND MARKET FOR THE INFOSEAL-REGISTERED TRADEMARK- SYSTEM. Management
believes that the proliferation of laser and other non-impact printing
technologies has created a significant new marketing opportunity for the
Company's InfoSeal-Registered Trademark- mailer system.
InfoSeal-Registered Trademark-, which is compatible with laser and other
non-impact printers, allows customers to address a variety of mailing
requirements more cost effectively than traditional fold and insert
methods. To further broaden InfoSeal-Registered Trademark-'s potential
markets, the Company has recently developed a new desktop folder/sealer
which it expects will address the needs of a broad range of potential
customers.
-CONTINUED INVESTMENT IN GROWING MARKETS. The Company has invested
significant capital resources to develop products serving high growth niche
markets, including an estimated $8.0 million in the development of the
InfoSeal-Registered Trademark- system and an estimated $4.4 million in
state-of-the art equipment to enhance production capabilities for custom
pressure sensitive label products. Sales of these two product lines, which
accounted for 30% of the Company's pro forma 1995 net sales, achieved
compound annual net sales growth of 13% over the past two years.
-EXPAND AND DEVELOP PRESENCE IN DIRECT MAIL INDUSTRY. The Acquisition will
broaden the Company's product and service offerings to the growing direct
mail industry. The Company intends to further develop its presence in this
market and has made significant capital investments designed to enhance its
product offerings for direct mail customers. The Company has recently
invested an estimated $5.9 million in state-of-the-art equipment to upgrade
and increase production capacity of catalog bind-in order forms and direct
mail personalization capabilities. These investments will improve the
Company's product and service offerings to its direct mail customers.
-CROSS-SELL PRODUCTS AND SERVICES. The Company has a dedicated direct sales
force through which it sells custom envelopes and direct mail products and
services and has strong relationships with its independent distributors
through which it sells mailer products and custom pressure sensitive
labels. As a result of the Acquisition, the Company will be able to
cross-sell a broader range of products through both of these well
established distribution channels.
-CONTINUED COST REDUCTIONS. The Company intends to continue to improve its
financial results through the rationalization of operations. The Company's
current management team has a successful track record of achieving cost
reductions through facility consolidation, improved management information
systems and the elimination of redundant corporate and administrative
expenses. In connection with the Acquisition, the Company expects to
realize approximately $2.3 million of annualized cost savings through raw
material purchasing efficiencies and reductions in headcount and operating
expenses.
-PURSUE COMPLEMENTARY PRODUCT LINE ACQUISITIONS. The Company plans to
pursue acquisitions which complement its existing product lines.
Specifically, the Company intends to acquire related direct mail product
and fulfillment businesses in order to expand the array of products and
services sold to its direct mail customers. To strengthen its leading
positions in other key markets, the Company plans to continue to pursue
acquisitions of small impact mailer and custom pressure sensitive label
manufacturers.
4
<PAGE>
THE INVESTORS
The controlling stockholder of NFC's parent, DEC, is McCown De Leeuw & Co.
("McCown De Leeuw"), a private investment firm specializing in buying and
building middle market businesses such as the Company. McCown De Leeuw has made
28 separate investments since 1983 and has made a number of investments in
businesses and markets related to those of the Company. Related industry
investments have included: DIMAC Corporation, a full service provider of direct
marketing products and services (now a division of Heritage Media Corporation);
Eastman Corporation, a contract office products distributor (now a division of
Office Depot, Inc.); Graphics Art Center Inc., a specialty printer of marketing
communications products and direct mail catalogs (now a division of Mail-Well
Inc.); and Specialty Paperboard, Inc., a manufacturer of specialty paper
products.
THE TRANSACTIONS
Pursuant to a Stock Purchase Agreement, dated June 19, 1996 (the "Stock
Purchase Agreement"), NFC purchased all of the outstanding capital stock of
Transkrit from its stockholders on June 28, 1996. The purchase price paid for
the capital stock of Transkrit was $86.4 million, and is subject to post-closing
adjustment for certain changes in Transkrit's working capital, other net assets,
and capital expenditures from the amounts estimated at the closing of the
acquisition (the "Acquisition"). (See "The Transactions"). At the closing of the
Acquisition, Transkrit was merged with and into NFC.
Concurrently with the consummation of the Acquisition, (i) the Company
issued the Old Notes in an aggregate principal amount of $100,000,000 (the
"Initial Offering"); (ii) DEC issued $10.0 million in aggregate liquidation
preference of preferred stock and used a portion of the proceeds therefrom to
make a capital contribution to the Company of approximately $7.4 million (the
"Parent Capital Contribution"), (iii) NFC repaid approximately $23.4 million of
existing long-term debt ("Prior Debt") and terminated its existing credit
agreement (together, the "Refinancing") and (iv) the Company executed a new
senior secured revolving credit facility (the "New Bank Credit Facility"), which
provides borrowing availability of up to $20.0 million. The Offering, the
Acquisition, the Parent Capital Contribution, the Refinancing and the execution
of the New Bank Credit Facility are referred to herein as the "Transactions."
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The New Notes....................... The forms and terms of the New Notes are identical in
all material respects to the terms of the Old Notes
for which they may be exchanged pursuant to the
Exchange Offer, except for certain transfer
restrictions and registration rights relating to the
Old Notes and except for certain penalty interest
provisions relating to the Old Notes described below
under "-- Terms of the Notes."
The Exchange Offer.................. The Company is offering to exchange up to
$100,000,000 aggregate principal amount of the New
Notes for up to $100,000,000 aggregate principal
amount of the Old Notes. Old Notes may be exchanged
only in integral multiples of $1,000.
Expiration Date; Withdrawal of The Exchange Offer will expire at 5:00 p.m., New York
Tender............................. City time, on , 1996, or such later date
and time to which it is extended by the Company (the
"Expiration Date"). The tender of Old Notes pursuant
to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. The Expiration Date
will not in any event be extended to a date later
than , 1996. Any Old Notes not accepted
for
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
exchange for any reason will be returned without
expense to the tendering holder thereof as promptly
as practicable after the expiration or termination of
the Exchange Offer.
Certain Conditions to the Note
Exchange Offer..................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer."
Procedures for Tendering Old Each holder of Old Notes wishing to accept the
Notes.............................. Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Old Notes and any other required documentation to the
Exchange Agent (as defined) at the address set forth
herein. By executing the Letter of Transmittal, each
holder will represent to the Company that, among
other things, (i) any New Notes to be received by it
will be acquired in the ordinary course of its
business, (ii) it has no arrangement with any person
to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in
Rule 405 of the Securities Act, of the Company or, if
it is an affiliate, it will comply with the
registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
Interest on the New Notes........... Interest on the New Notes will accrue from the date
of issuance (the "Issue Date") at the rate of 11 5/8%
per annum, and will be payable semi-annually in
arrears on each June 15 and December 15, commencing
December 15, 1996. Holders of the New Notes will also
on December 15, 1996 receive an amount equal to the
accrued interest on the Old Notes. Interest on the
Old Notes accepted for exchange will cease to accrue
upon issuance of the New Notes.
Special Procedures for Beneficial
Owners............................. Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender such Old Notes in the Exchange Offer should
contact such registered holder promptly instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date.
Guaranteed Delivery Procedure....... Holders of Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or
who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent, prior to
the Expiration Date, must tender
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
their Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Registration Requirements........... The Company has agreed to use its best efforts to
consummate by November 22, 1996, the registered
Exchange Offer pursuant to which holders of the Old
Notes will be offered an opportunity to exchange
their Old Notes for the New Notes which will be
issued without legends restricting the transfer
thereof. In the event that applicable interpretations
of the staff of the Commission do not permit the
Company to effect the Exchange Offer or in certain
other circumstances, the Company has agreed to file a
Shelf Registration Statement covering resales of the
Old Notes and to use its best efforts to cause such
Shelf Registration Statement to be declared effective
under the Securities Act and, subject to certain
exceptions, keep such Shelf Registration Statement
effective until three years after the original
issuance of the Old Notes.
Certain Federal Income Tax
Considerations..................... For a discussion of certain federal income tax
considerations relating to the exchange of the New
Notes for the Old Notes, see "Certain Federal Income
Tax Considerations."
Use of Proceeds..................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent...................... Wilmington Trust Company is the Exchange Agent. The
address and telephone number of the Exchange Agent
are set forth in "The Exchange Offer -- Exchange
Agent."
</TABLE>
TERMS OF THE NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that the New Notes are registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. See
"Description of the Notes."
RISK FACTORS
See "Risk Factors," which begins at page 10, for a discussion of certain
factors that should be considered by participants in the Exchange Offer.
7
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
THE COMPANY
The following summary unaudited pro forma financial data gives pro forma
effect in the manner described under "Unaudited Pro Forma Financial Data" and
the notes thereto to the Transactions (including $2.3 million of annualized cost
savings related to the integration of NFC and Transkrit), as if such
transactions had occurred on January 1, 1995 in the case of Income Statement
Data and Other Data, and, in the case of Balance Sheet Data, as if the
Transactions had occurred on March 31, 1996. The Income Statement Data and Other
Data do not purport to represent what the Company's results of operations
actually would have been if the Transactions had occurred as of such date or
what such results will be for any future periods. The final allocation of
purchase price and the resulting amortization expenses in the Income Statement
Data will differ from the preliminary estimates for the reasons described in
more detail in "Unaudited Pro Forma Financial Data." The information contained
in this table should be read in conjunction with "Selected Historical Financial
Data -- National Fiberstok Corporation," "Selected Historical Consolidated
Financial Data -- Transkrit Corporation," "Unaudited Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" the Financial Statements of NFC and accompanying notes thereto and
the Consolidated Financial Statements of Transkrit and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA THREE MONTHS PRO FORMA
PRO FORMA LATEST TWELVE
YEAR ENDED ENDED MARCH 31, MONTHS ENDED
DECEMBER 31, ---------------------- MARCH 31,
1995 1995 1996 1996
------------ ---------- ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................ $ 168,760 $ 40,950 $ 41,501 169,311
Cost of products sold.................................... 116,540 28,700 28,916 116,756
------------ ---------- ---------- --------------
Gross profit............................................. 52,220 12,250 12,585 52,555
Selling, general and administrative expenses............. 38,647 10,215 9,867 38,299
------------ ---------- ---------- --------------
Operating income......................................... 13,573 2,035 2,718 14,256
Interest expense, net.................................... 12,681 3,186 3,200 12,695
Other (income) expense................................... (482) (555) 35 108
------------ ---------- ---------- --------------
Income (loss) before income taxes........................ 1,374 (596) (517) 1,453
Income tax provision (benefit)........................... (1,460) (111) (198) (1,547)
------------ ---------- ---------- --------------
Net income (loss)........................................ $ 2,834 $ (485) $ (319) $ 3,000
------------ ---------- ---------- --------------
------------ ---------- ---------- --------------
OTHER DATA:
EBITDA (a)............................................... $ 22,966 $ 4,382 $ 5,257 $ 23,841
Long-term debt to EBITDA................................. 4.27x
EBITDA to interest expense............................... 1.88x
Ratio of Earnings to Fixed Charges(b) 1.11x .82x .84x 1.11x
Depreciation and amortization............................ 10,651 2,526 2,596 10,721
Capital expenditures..................................... 6,480 1,547 3,002 7,935
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................................................... $ 22,496
Total assets....................................................................... 134,798
Long-term debt, less current maturities............................................ 101,851
</TABLE>
- ------------------------------
(a) EBITDA is defined as operating income, plus depreciation and amortization
and reflects (a) with respect to NFC, the provision for plant shutdown cost
in 1993 related to the shutdown of NFC's Philadelphia, Pennsylvania
facility and the non-cash charges related to pension, deferred financing
and change in vacation policy, and (b) with respect to Transkrit (i) the
conversion of Transkrit's inventory valuation method from LIFO to FIFO,
(ii) the disposal of the Pegboard Accounting System and Tax Forms product
lines on December 2, 1994 and April 19, 1995, respectively, (iii) the
elimination of the relocation and duplicate costs incurred in connection
with the relocation of Transkrit's headquarters to Roanoke, Virginia from
Brewster, New York, (iv) deferred compensation and pension expenses and (v)
incremental management fees and rental expenses paid to Transkrit's parent.
EBITDA is provided because it is a measure of an issuer's ability to
service its indebtedness commonly used by certain investors. EBITDA is not
a measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity.
(b) The ratio of earnings to fixed charges is computed by adding fixed charges
(interest and amortization of deferred financing costs and discounts) to
income before provision for income taxes and dividing that sum by the sum
of fixed charges. Pro Forma earnings were insufficient to cover fixed
charges by $596 and $517 for the three months ended March 31, 1995 and
1996, respectively.
8
<PAGE>
THE FOLLOWING FINANCIAL DATA HAS NOT BEEN PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH
ARTICLE 11 OF REGULATION S-X UNDER THE SECURITIES ACT
SUPPLEMENTAL COMBINED ADJUSTED HISTORICAL DATA
(UNAUDITED)
The following supplemental combined adjusted historical statement data
reflect the combined results of operations of the Company for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1995 and
1996, adjusted for (i) the purchase accounting adjustments resulting from the
Acquisition (consisting of adjustments to reflect changes in fixed asset
depreciation, amortization of patents and goodwill, to reflect Transkrit's
inventory at FIFO and to reflect the elimination of fees and expenses paid to
Transkrit's parent), but excluding the adjustments to reflect the cost savings
resulting from the integration of Transkrit (ii) the sale of the Pegboard
Accounting System and Tax Forms business units of Transkrit and (iii) the
relocation and duplicate costs incurred to move operations from Brewster, New
York to Roanoke, Virginia, as if each had occurred on January 1, 1993. The
supplemental combined adjusted historical data have not been prepared in
accordance with generally accepted accounting principles or Article 11 of
Regulation S-X under the Securities Act and are included for the purpose of
providing supplemental information in order to assist investors in comparing the
historical financial performance of NFC and Transkrit as combined companies. The
following supplemental combined adjusted historical data should not be construed
to be indicative of the results that actually would have occurred if such
transactions and adjustments described above had occurred on the date assumed
and do not project the Company's results of operations at any future date. See
"Selected Historical Financial Data -- National Fiberstok Corporation" and the
financial statements of NFC and related notes thereto for the actual historical
results of operations for NFC and "Selected Historical Consolidated Financial
Data -- Transkrit Corporation" and the consolidated financial statements of
Transkrit and notes thereto for the actual historical results of operations for
Transkrit.
INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FOLLOWING
SUPPLEMENTAL COMBINED ADJUSTED HISTORICAL DATA.
<TABLE>
<CAPTION>
COMBINED HISTORICAL DATA
--------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales (a)........................................ $ 152,946 $ 157,559 $ 168,760 $ 40,950 $ 41,501
Cost of products sold................................ 109,165 110,408 116,940 28,800 29,016
---------- ---------- ---------- --------- ---------
Gross profit....................................... 43,781 47,151 51,820 12,150 12,485
Selling, general and administrative expenses......... 41,464 40,090 40,497 10,678 10,330
---------- ---------- ---------- --------- ---------
Operating income..................................... $ 2,317 $ 7,061 $ 11,323 $ 1,472 $ 2,155
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
OTHER DATA:
EBITDA (b)........................................... $ 13,805 $ 16,353 $ 20,716 $ 3,819 $ 4,694
</TABLE>
- ------------------------------
(a) Reflects the elimination of the Pegboard Accounting System and Tax Forms
product lines due to the sale of these product lines on December 2, 1994
and April 15, 1995, respectively. The table below represents the net sales
for the following periods for these two product lines.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------- ----------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales..................................................... $ 7,602 $ 6,563 $ 178 $ 178 $ --
</TABLE>
(b) EBITDA is defined as operating income, plus depreciation and amortization
and reflects (a) with respect to NFC, the provision for plant shutdown cost
in 1993 related to the shutdown of NFC's Philadelphia, Pennsylvania
facility and the non-cash charges related to pension, deferred financing
and change in vacation policy, and (b) with respect to Transkrit (i) the
conversion of Transkrit's inventory valuation method from LIFO to FIFO,
(ii) the disposal of the Pegboard Accounting System and Tax Forms product
lines on December 2, 1994 and April 19, 1995, respectively, (iii) the
elimination of the relocation and duplicate costs incurred in connection
with the relocation of Transkrit's headquarters to Roanoke, Virginia from
Brewster, New York, (iv) deferred compensation and pension expenses and (v)
incremental management fees and rental expenses paid to Transkrit's parent.
EBITDA is provided because it is a measure of an issuer's ability to
service its indebtedness commonly used by certain investors. EBITDA is not
a measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity.
9
<PAGE>
RISK FACTORS
Prospective participants should carefully consider the following factors in
addition to the other information set forth in this Prospectus before
participating in the Exchange Offer.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE AND REFINANCE DEBT
In connection with the Transactions, the Company incurred a significant
amount of indebtedness. As of March 31, 1996, after giving pro forma effect to
the Transactions, the Company's indebtedness would have been approximately
$102.2 million and its stockholder's equity would have been $13.1 million. In
addition, subject to the restrictions in the New Bank Credit Facility and the
Indenture, the Company may incur additional indebtedness from time to time to
finance acquisitions or capital expenditures or for other purposes.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's cash
flow from operations must be dedicated to debt service and will not be available
for other purposes; (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures or
acquisitions may be limited; and (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the industry and economic
conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow, together with borrowings under the New Bank Credit
Facility, will be sufficient to meet its operating expenses and to service its
interest requirements as they become due. The Company anticipates that it will
be required to refinance the Notes at maturity. No assurance can be given that
the Company will be able to refinance the Notes on terms acceptable to it, if at
all. If the Company is unable to service its indebtedness, it will be forced to
adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments to the Company, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the New Bank Credit Facility contains other and more restrictive covenants. See
"Description of the Notes -- Certain Covenants" and "Description of New Bank
Credit Facility." A breach of any of these covenants could result in a default
under the New Bank Credit Facility and/or the Indenture. Upon the occurrence of
an event of default under the New Bank Credit Facility, the lenders thereunder
could elect to declare all amounts outstanding under the New Bank Credit
Facility, together with accrued interest, to be immediately due and payable. If
the Company were unable to repay those amounts, such lenders could proceed
against the collateral granted to them to secure that indebtedness. If the
lenders under the New Bank Credit Facility accelerate the payment of such
indebtedness, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Notes. All of the Company's inventory, accounts
receivable, patents, trademarks and other intangibles and the proceeds thereof
have been pledged as security under the New Bank Credit Facility. See
"Description of New Bank Credit Facility."
EXPOSURE TO FLUCTUATIONS IN PAPER COSTS AND SUPPLY
The Company's principal raw material is paper, which is cyclical in both
price and supply. The cyclical nature of paper pricing presents a potential risk
to the Company's gross profit margins to the extent that the
10
<PAGE>
Company is unable to pass along price increases to its customers on a timely
basis. The Company is also subject to the risk that it will be unable to
purchase sufficient quantities of paper to meet its production requirements
during times of tight supply.
COMPETITION AND CHANGING MARKETS
The envelope, mailer, label and custom office supply industries, within
which the Company competes are fragmented and highly competitive. The Company
competes with other national and local manufacturers in many product segments.
Certain of the Company's principal competitors are less highly-leveraged than
the Company and may have greater financing and operating flexibility. There can
be no assurance that the Company will not encounter increased competition in the
future, which could have a material adverse effect on the Company's business.
See "Business -- Competition."
LIMITATION ON SECURITY FOR THE NOTES
The Notes are secured by a first priority lien on and security interest in
all of the issued and outstanding capital stock of each of the Guarantors. See
"Description of the Notes -- Security." There is no existing public market for
the capital stock of the Guarantors, and even if such capital stock could be
sold, there can be no assurance that the proceeds from the sale of such capital
stock would be sufficient to satisfy the amounts due on the Notes in the event
of a default. Absent an acceleration of the Notes, the Company will be able to
vote, as it sees fit in its sole discretion, the stock of the Guarantors. In the
event of a bankruptcy or liquidation of the Company, the security interest in
the capital stock of the Guarantors may be of no value to holders of Notes
because holders of such capital stock would be entitled only to the assets which
remained after all indebtedness of the Guarantors had been paid in full. The
lien on capital stock of a Guarantor in favor the Noteholders is subject to
release under certain circumstances. See "Description of the Notes -- Security."
The right of the Trustee to dispose of the pledged capital stock of the
Guarantors upon the occurrence of an event of default under the Indenture is
likely to be significantly impaired by applicable bankruptcy laws if a
bankruptcy proceeding were to be commenced by or against NFC or a Guarantor
prior to such disposition. Under Federal bankruptcy laws, secured creditors,
such as the Trustee and the Noteholders, are prohibited from foreclosing upon
collateral held by a debtor in a bankruptcy case, or from disposing of
collateral repossessed from such a debtor, without bankruptcy court approval.
Moreover, applicable Federal bankruptcy laws generally permit a debtor to
continue to retain and to use collateral, including capital stock, even if the
debtor is in default under the applicable debt instruments, provided that the
secured creditor is given "adequate protection." The interpretation of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in collateral.
Because the term "adequate protection" is subject to varying interpretation and
because of the broad discretionary powers of a bankruptcy court, it is
impossible to predict (i) if payments under the Notes or the Guarantees would be
made following commencement of and during a bankruptcy case, (ii) whether or
when the Trustee could foreclose upon or sell any collateral securing the Notes,
or (iii) whether or to what extent Noteholders would be compensated for any
delay in payment or loss of value of collateral securing the Notes under the
doctrine of "adequate protection." Furthermore, in the event a bankruptcy court
were to determine that the value of the collateral securing the Notes was not
sufficient to repay all amounts due on the Notes, the Noteholders would become
holders of "undersecured claims." Applicable Federal bankruptcy laws do not
permit the payment and/or accrual of interest, costs and attorneys' fees for
"undersecured claims" during a debtor's bankruptcy case.
EFFECTIVE SUBORDINATION OF NOTES TO SECURED INDEBTEDNESS
The Notes and the Guarantees will be effectively subordinated to secured
indebtedness of NFC and the Guarantors, including indebtedness under the New
Bank Credit Facility, to the extent of the collateral securing such
indebtedness. See "Description of the Notes" and "Description of New Bank Credit
Facility."
Subject to restrictions under the New Bank Credit Facility and the
Indenture, NFC and the Guarantors may in the future incur additional secured
indebtedness to which the Notes will be effectively subordinated to the extent
of the collateral securing such indebtedness. See "Description of the Notes" and
"Description of New Bank Credit Facility."
11
<PAGE>
IMPACT OF ENVIRONMENTAL REGULATION; GOVERNMENTAL REGULATION
Like similar companies, the Company's operations and properties are subject
to a wide variety of federal, state and local laws and regulations, including
those governing the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees. As such, the nature of the Company's operations exposes it to the
risk of claims with respect to environmental protection and health and safety
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims. Pursuant to these laws and
regulations, there are currently pending investigations at certain of the
Company's plants and sites at which they may have disposed of hazardous
substances. In addition, the Company has been designated as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("Superfund") with respect to off-site
disposal of hazardous substances at two sites. Based upon its experience to
date, management of NFC believes that the future cost of compliance with
existing environmental protection and health and safety laws and regulations,
and liability for known claims of this type, will not have a material adverse
effect on the Company's business or financial position. However, future events,
such as changes in existing laws and regulations or their interpretation, and
more vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material to the Company's
business or financial position. See "Business -- Environmental, Health and
Safety Matters."
DEPENDENCE ON KEY MANAGEMENT
The Company's success will continue to depend to a significant extent on its
executives and other key management personnel. There can be no assurance that
the Company will be able to retain its executive officers and key personnel or
attract additional qualified management in the future. In addition, the success
of certain of the Company's acquisitions may depend, in part, on the Company's
ability to retain management personnel of the acquired companies.
CONTROLLING STOCKHOLDER
Certain affiliates of McCown De Leeuw & Co. (the "MDC Entities") own
substantially all of the outstanding voting stock of DEC. By virtue of such
stock ownership, the MDC Entities have the power to control all matters
submitted to stockholders of NFC and to elect all directors of NFC and its
subsidiaries. The interests of the MDC Entities as equityholders may differ from
the interests of holders of Notes. See "Security Ownership."
FRAUDULENT TRANSFER STATUTES
Under applicable provisions of Federal bankruptcy law and comparable
provisions of state fraudulent transfer laws, if it were found that any
Guarantor (i) had incurred indebtedness represented by its Guarantee or granted
liens on its assets with an intent to hinder, delay or defraud creditors or had
received less than a reasonably equivalent value or fair consideration for such
indebtedness or pledges and (ii)(A) was insolvent, (B) was rendered insolvent by
reason of such incurrence, (C) was engaged or about to engage in a business or
transaction for which its remaining assets constituted unreasonably small
capital to carry on its business, or (D) intended to incur or believed that it
would incur debts beyond its ability to pay as such debts matured, the
obligations of such Guarantor under its Guarantee and liens on collateral
granted by such Guarantor could be avoided or claims in respect of such
Guarantee and collateral could be subordinated to all other debts of such
Guarantor. A legal challenge of a Guarantee or a lien on fraudulent conveyance
grounds could, among other things, focus on the benefits, if any, realized by a
Guarantor as a result of the issuance by NFC of the Notes. To the extent that a
Guarantee or a lien were held to be unenforceable as a fraudulent conveyance for
any reason, the holders of the Notes would cease to have any direct claim in
respect of a Guarantor and would be solely creditors of NFC, and would lose the
benefits, of the collateral pledged by such Guarantor. In the event a Guarantee
and related liens were held to be subordinated, the claims of the holders of the
Notes would be subordinated to claims of other creditors of such Guarantor and
other creditors secured by the applicable collateral with respect thereto.
The measures of insolvency for purposes of the foregoing considerations will
vary depending on the law applied in any proceeding with respect to the
foregoing. Generally, however, an issuer would be considered
12
<PAGE>
insolvent if the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of its assets at a fair valuation or if the
present fair saleable value of its assets were less than the amount that would
be required to pay its probable liabilities on its existing debts, including
contingent liabilities, as they become absolute and mature. There can be no
assurance, however, as to what standard a court would apply in making such
determination.
The Company believes that the Guarantors received equivalent value at the
time the indebtedness was incurred under the Guarantees. In addition, the
Company believes that none of the Guarantors (i) is or will be insolvent, (ii)
is or will be engaged in a business or transaction for which its remaining
assets constitute unreasonable small capital, or (iii) intends or will intend to
incur debt beyond its ability to repay such debts as they mature. Since each of
the components of the question of whether a Guarantee is a fraudulent conveyance
is inherently fact based and fact specific, there can be no assurance that a
court passing on such questions would agree with the Company. Neither counsel
for the Company nor counsel for the Initial Purchasers will express any opinion
as to Federal or state laws relating to fraudulent transfers.
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes. There can
be no assurance as to the liquidity of any markets that may develop for the New
Notes, the ability of holders to sell the New Notes, or the price at which
holders would be able to sell the New Notes. Future trading prices of the New
Notes will depend on many factors, including among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. Historically, the market for securities similar to the New Notes,
including non-investment grade debt, has been subject to disruptions that have
caused substantial volatility in the prices of such securities. There can be no
assurance that any market for the New Notes, if such market develops, will not
be subject to similar disruptions.
13
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
Pursuant to the Stock Purchase Agreement, NFC purchased the issued and
outstanding capital stock of Transkrit from Rogers Communications, Inc., Frank
Neubauer (Chairman and Chief Executive Officer of Transkrit) and Jack Resnick
(Chief Operating Officer of Transkrit). The purchase price paid for Transkrit at
the closing of the Acquisition was $86.4 million in cash. The purchase price is
subject to post-closing adjustment for certain changes in Transkrit's working
capital, other net assets and capital expenditures from the amounts estimated at
the closing of the Acquisition. At the closing of the Acquisition, Transkrit was
merged with and into NFC.
Concurrently with the consummation of the Acquisition, (i) the Company made
the Initial Offering, (ii) DEC issued $10.0 million in aggregate liquidation
preference of preferred stock and used a portion of the proceeds therefrom to
make the Parent Capital Contribution of $7.4 million to NFC, (iii) NFC repaid
the Prior Debt and terminated its existing credit agreements and (iv) the
Company executed the New Bank Credit Facility, which provides borrowing
availablilty of up to $20.0 million.
USE OF PROCEEDS FROM THE INITIAL OFFERING
The gross proceeds of $100.0 million from the Initial Offering were used,
together with the proceeds from the Parent Capital Contribution and cash on
hand, to pay the purchase price of the Acquisition, refinance Prior Debt, pay
fees and expenses relating to the Transactions and pay certain accrued
management fees.
USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby. In consideration
for issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange Offer --
Terms of the Exchange Offer." The Old Notes surrendered in exchange for the New
Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
14
<PAGE>
PRO FORMA CAPITALIZATION
(UNAUDITED)
The following table sets forth the capitalization of the Company on a pro
forma basis giving effect to the Transactions as if they had occurred on March
31, 1996. This table should be read in conjunction with the "Selected Historical
Financial Data -- National Fiberstock Corporation," "Selected Historical
Consolidated Financial Data -- Transkrit Corporation" and "Unaudited Pro Forma
Financial Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 1996
--------------------
(DOLLARS IN
MILLIONS)
<S> <C>
New Bank Credit Facility............................................... $ 0.0
Initial Offering...................................................... 100.0
Capitalized Lease obligations (a)..................................... 2.2
-------
Total Debt.......................................................... $ 102.2
-------
-------
Stockholder's Equity (b).............................................. 13.1
-------
Total Capitalization................................................ $ 115.3
-------
-------
</TABLE>
- ------------------------------
(a) Represents capital lease financing obtained through The CIT Group ("CIT")
for production equipment. The related lease provides for the purchase of
the production equipment at the end of the lease term at the Company's
option for 20% of original cost. Under the CIT lease agreement, CIT has a
first priority security interest in the related production equipment.
(b) Represents the following (in millions):
<TABLE>
<S> <C>
Stockholder's equity in NFC prior to the Transactions..................................... $ 6.5
Parent Capital Contribution............................................................... 7.4
After-tax effect of the payment of debt prepayment penalty and the elimination of debt
discount and deferred finance costs related to the Prior Debt being retired.............. (0.8)
---------
$ 13.1
---------
---------
</TABLE>
15
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Company, the
Guarantors and the Initial Purchasers, the Company has agreed (i) to file a
registration statement with respect to an offer to exchange the Old Notes for
senior debt securities of the Company with terms substantially identical to the
Old Notes (except that the New Notes will not contain terms with respect to
transfer restrictions) within 30 days after the date of original issuance of the
Old Notes and (ii) to use best efforts to cause such registration statement to
become effective under the Securities Act within 120 days after such issue date.
In the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Notes notify the Company that they are not permitted to
participate in, or would not receive freely tradeable New Notes pursuant to, the
Exchange Offer, the Company will use its best efforts to cause to become
effective the Shelf Registration Statement with respect to the resale of the Old
Notes and to keep the Shelf Registration Statement effective until three years
after the original issuance of the Old Notes. The interest rate on the Old Notes
is subject to increase under certain circumstances if the Company is not in
compliance with its obligations under the Registration Rights Agreement. See
"Old Notes Registration Rights."
Each holder of the Old Notes who wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or, if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. See "Old
Notes Registration Rights."
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes surrendered pursuant to the Exchange Offer. Old Notes may be tendered
only in integral multiples of $1,000.
16
<PAGE>
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $100 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Notes. There will be
no fixed record date for determining registered holders of Old Notes entitled to
participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Old Notes which are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the Indenture and the Registration Rights
Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 2 of
the Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the New Notes from the Company.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions specified below under "--
Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. "See -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under "The
Exchange Offer -- Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders of Old
Notes. If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such amendment
by means of a prospectus supplement that will be distributed to the registered
holders, and the Company will extend the Exchange Offer, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such period.
17
<PAGE>
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 11 5/8% per annum, payable
semi-annually, on each June 15 and December 15, commencing December 15, 1996.
Holders of New Notes will receive interest on December 15, 1996 from the date of
initial issuance of the New Notes, plus an amount equal to the accrued interest
on the Old Notes. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a)
any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange
Offer which, in the Company's sole judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b)
any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's sole judgment, might
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c)
any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date. In addition, either
(i) Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of
18
<PAGE>
such Old Notes, if such procedure is available, into the Exchange Agent's
account at the Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the holder
must comply with the guaranteed delivery procedures described below. To be
tendered effectively, the Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under "The
Exchange Offer -- Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder of Old Notes. The transfer of registered ownership
may take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter Transmittal or a notice of withdrawal, as the case may be, are required
to be guaranteed, such guarantor must be a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of
19
<PAGE>
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holder, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Notes or a timely Book-Entry Confirmation of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Dates, may effect a tender if:
(a)
The tender is made through an Eligible Institution;
(b)
Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
20
<PAGE>
(c)
Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes were registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Old Notes" above
at any time on or prior to the Expiration Date.
21
<PAGE>
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and request for assistance, request for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Corporate Trust Administration c/o Harris Trust Company of New York,
1100 North Market Street as Agent
Rodney Square North 75 Water Street
Wilmington, Delaware 19890-0001 New York, New York 10004
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-8864
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Old Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of Notes tendered, or if tendered Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
22
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth (i) in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws and (ii) otherwise set forth under
"Transfer Restrictions" in the Offering Memorandum dated June 21, 1996
distributed in connection with the Initial Offering. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the Commission, New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. In addition,
to comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or such
securities laws have been complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the New Notes
reasonably requests in writing.
23
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following Unaudited Pro Forma Combined Consolidated Statements of Income
give effect to the Transactions as if they had occurred on January 1, 1995. The
unaudited pro forma financial data are based on the historical financial
statements of NFC and Transkrit and the assumptions and adjustments described in
the accompanying notes. The Unaudited Pro Forma Combined Consolidated Statements
of Income do not (a) purport to represent what the Company's results of
operations actually would have been if the Transactions had occurred as of the
date indicated or what such results will be for any future periods or (b) give
effect to certain non-recurring charges expected to result from the
Transactions.
The following Unaudited Pro Forma Combined Consolidated Balance Sheet as of
March 31, 1996 was prepared as if the Transactions had occurred on such date.
The Unaudited Pro Forma Combined Consolidated Balance Sheet reflects the
preliminary allocation of the purchase price for the Acquisition to the
Company's tangible and intangible assets and liabilities. The final allocation
of such purchase price, and the resulting amortization expense in the
accompanying Unaudited Pro Forma Combined Statements of Income, will differ from
the preliminary estimates due to the final allocation being based on: (a) actual
closing date amounts of assets and liabilities, and (b) actual values of
property, plant and equipment and any identifiable intangible assets.
The unaudited pro forma financial data are based upon assumptions that the
Company believes are reasonable and should be read in conjunction with the
Financial Statements of NFC and the accompanying notes thereto and the
Consolidated Financial Statements of Transkrit and the accompanying notes
thereto included elsewhere in this Prospectus.
24
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
---------------------- OFFERING ACQUISITION COMPANY
NFC TRANSKRIT ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.................... $ 384 $ 1,028 $ 83,537(b) $ (84,745)(d) $ 204
Accounts receivable, net..................... 8,329 10,679 -- -- 19,008
Inventories.................................. 4,800 4,287 -- 2,966(a) 12,053
Prepaid expenses and other current assets.... 582 12,597 (8,046)(f) -- 5,133
---------- ---------- ------------ ----------- -----------
Total current assets....................... 14,095 28,591 75,491 (81,779) 36,398
Property, and equipment, net................. 12,142 23,230 -- 10,243(a) 45,615
Deferred income taxes........................ 2,069 4,943 -- (7,012)(a) --
Goodwill and other intangible assets......... 8,087 8,294 -- 11,260(a) 27,641
Other assets................................. 1,479 355 -- 19,310(a) 21,144
Deferred financing........................... 538 -- 3,462(c) -- 4,000
---------- ---------- ------------ ----------- -----------
Total Assets............................... $ 38,410 $ 65,413 $ 78,953 $ (47,978) $ 134,798
---------- ---------- ------------ ----------- -----------
---------- ---------- ------------ ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Revolving credit facility.................... $ -- $ -- $ -- $ -- $ --
Accounts payable............................. 2,414 1,265 -- -- 3,679
Bank float................................... 1,515 1,179 -- -- 2,694
Accrued liabilities and others............... 1,581 8,072 (4,275)(e) 475(g) 5,853
Income taxes payable......................... -- 679 (499)(h) 190(a) 370
Deferred income taxes........................ -- -- -- 952(a) 952
Current maturities of long-term debt......... 2,053 1 (1,700)(b) -- 354
---------- ---------- ------------ ----------- -----------
Total current liabilities.................. 7,563 11,196 (6,474) 1,617 13,902
Noncurrent liabilities......................... 1,557 256 (205)(e) -- 1,608
Deferred income taxes.......................... -- -- -- 4,366(a) 4,366
Long-Term Debt:
Subordinated debt............................ 4,533 -- (4,533)(b) -- --
Long-term debt............................... 11,092 -- (9,241)(b) -- 1,851
Revolving credit facility.................... 7,200 -- (7,200)(b) -- --
Senior Notes................................. -- -- 100,000(b) -- 100,000
---------- ---------- ------------ ----------- -----------
Total liabilities.......................... 31,945 11,452 72,347 5,983 121,727
---------- ---------- ------------ ----------- -----------
Stockholder's Equity:
Common stock................................. 3 9 -- (9)(i) 3
Additional paid-in capital................... 14,532 12,122 7,421(b) (12,122)(i) 21,953
Note receivable from stockholder............. -- (1,000) -- 1,000(i) --
Retained earnings (deficit).................. (8,070) 42,830 (815)(h) (42,830)(i) (8,885)
---------- ---------- ------------ ----------- -----------
Total stockholder's equity................. 6,465 53,961 6,606 (53,961) 13,071
---------- ---------- ------------ ----------- -----------
Total Liabilities and Stockholder's
Equity.................................... $ 38,410 $ 65,413 $ 78,953 $ (47,978) $ 134,798
---------- ---------- ------------ ----------- -----------
---------- ---------- ------------ ----------- -----------
</TABLE>
See accompanying notes.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
The Pro Forma Combined Consolidated Balance Sheet reflects the Transactions
as if they had occurred as of March 31, 1996 as follows (the actual purchase
price will be based upon the June 28, 1996 closing balance sheet of Transkrit
and its subsidiaries prepared in accordance with the Stock Purchase Agreement.
As a result, the amounts shown below may be different upon completion of the
Transaction):
(a) The Acquisition will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations." The
purchase price is being allocated first to the tangible and identifiable
intangible assets and liabilities of the Company based upon preliminary
estimates of their fair market values, with the remainder allocated to
goodwill. The total purchase price is as follows:
<TABLE>
<CAPTION>
Purchase Price -- Acquisition of 8,897 shares (see footnote (d))...... $ 84,245
<S> <C>
Acquisition expenses.................................................. 500
Book value of net assets acquired..................................... (53,961)
-----------
Increase in basis..................................................... $ 30,784
-----------
-----------
Allocation of increase in basis:
Increase in inventory value to convert LIFO to FIFO................. $ 2,966
Increase in fair value of property and equipment.................... 10,243
Increase in fair value of patents................................... 19,310
Increase in goodwill................................................ 11,260
Increase in income taxes payable resulting from election to convert
to
FIFO from LIFO..................................................... (190)
Accrual for Acquisition-related severance, training and relocation
costs to be incurred at Transkrit (see footnote (g))............... (475)
Changes in deferred income taxes:
Decrease in deferred tax assets -- long-term...................... (7,012)
Increase in deferred tax liabilities -- current................... (952)
Increase in deferred tax liabilities -- long-term................. (4,366)
-----------
$ 30,784
-----------
-----------
</TABLE>
(b) Reflects the Parent Capital Contribution and the issuance of Notes and
application of proceeds therefrom:
<TABLE>
<S> <C>
Issuance of Notes................................................. $ 100,000
Parent cash Capital Contribution.................................. 7,421
Net Financial Assets to be converted to cash (see footnote (f))... 4,128
Expenses for issuance of Notes.................................... (4,000)
Refinancing of long-term debt..................................... (9,241)
Retirement of revolving line of credit............................ (7,200)
Retirement of subordinated debt................................... (4,533)
Refinancing of current maturities of long-term debt............... (1,700)
Elimination of debt discount upon debt retirement................. (626)
Payment of accrued MDC management fees............................ (562)
Payment of prepayment penalty associated with early retirement of
debt............................................................. (150)
-----------
$ 83,537
-----------
-----------
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C>
Deferred debt issuance costs related to the Offering.............. $ 4,000
Write off existing deferred financing fees and expenses upon
retirement of debt............................................... (538)
-----------
$ 3,462
-----------
-----------
</TABLE>
26
<PAGE>
(d) Represents the following cash payments related to the Acquisition:
<TABLE>
<S> <C>
Purchase price.................................................... $ (78,000)
Net Current Financial Assets adjustment (see footnote (f))........ (5,156)
Net Working Capital adjustment.................................... (1,089)
-----------
Payment to sellers.............................................. (84,245)
Acquisition expenses.............................................. (500)
-----------
$ (84,745)
-----------
-----------
</TABLE>
(e) Reflects the following:
<TABLE>
<S> <C>
Accrued management fees to be paid to MDC at the closing of the
Acquisition...................................................... $ (562)
Accrued deferred compensation paid to Transkrit management at the
closing of the Acquisition pursuant to equity participation plans
to be terminated at closing...................................... (3,918)
-----------
$ (4,480)
-----------
-----------
</TABLE>
(f) Reflects cash and other Net Financial Assets to be converted to cash and
paid to sellers:
<TABLE>
<S> <C>
Notes receivables and investment securities....................... $ 8,046
Accrued deferred compensation paid to Transkrit management at the
closing of the Acquisition pursuant to equity participation plans
to be terminated at closing...................................... (3,918)
-----------
Net Financial Assets to be converted to cash.................... 4,128
Cash.............................................................. 1,028
-----------
$ 5,156
-----------
-----------
</TABLE>
(g) Reflects accruals for Acquisition-related severance, training, and
relocation costs to be incurred at Transkrit
(h) Reflects the following:
<TABLE>
<S> <C>
Elimination of debt discount upon debt retirement................. $ (626)
Payment of prepayment penalty associated with early retirement of
debt............................................................. (150)
Write off existing deferred financing fees and expenses upon
retirement of debt............................................... (538)
Tax benefit from the above adjustments............................ 499
-----------
$ (815)
-----------
-----------
</TABLE>
(i) Reflects the elimination of Transkrit equity balances.
27
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTED
HISTORICAL HISTORICAL TRANSKRIT HISTORICAL TRANSACTION COMPANY
NFC TRANSKRIT ADJUSTMENTS TRANSKRIT ADJUSTMENTS PRO FORMA
----------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.............................. $ 71,257 $ 97,681 $ (178)(a) $ 97,503 $ -- $ 168,760
Cost of products sold.................. 55,708 64,223 (1,629)(b) 62,594 (1,762)(g) 116,540
----------- ----------- ------------- ----------- ------------- -----------
Gross profit....................... 15,549 33,458 1,451 34,909 1,762 52,220
Selling, general and administrative
expenses............................. 13,410 29,412 (3,935)(c) 25,477 (240)(h) 38,647
Relocation expenses.................... -- 657 (657)(d) -- -- --
----------- ----------- ------------- ----------- ------------- -----------
Operating income....................... 2,139 3,389 6,043 9,432 2,002 13,573
Interest (income) expense.............. 3,179 (697) 765(e) 68 9,434(i) 12,681
Other (income) expense................. -- (871) 389(f) (482) -- (482)
----------- ----------- ------------- ----------- ------------- -----------
Income (loss) before income
taxes............................. (1,040) 4,957 4,889 9,846 (7,432) 1,374
Income tax provision (benefit)......... (1,900) 1,380 1,882(j) 3,262 (2,822)(j) (1,460)
----------- ----------- ------------- ----------- ------------- -----------
Net income............................. $ 860 $ 3,577 $ 3,007 $ 6,584 $ (4,610) $ 2,834
----------- ----------- ------------- ----------- ------------- -----------
----------- ----------- ------------- ----------- ------------- -----------
OTHER DATA:
EBITDA (k)........................... $ 5,159 $ 15,556 $ 22,966
Depreciation and amortization........ 4,005 5,962 10,651
Capital expenditures................. 2,308 4,172 6,480
Ratio of Earnings to Fixed Charges
(l)................................. .67x 25.68x 1.11x
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
The Pro Forma Combined Consolidated Statement of Income for the year ended
December 31, 1995 reflects the Transactions as if they had occurred on January
1, 1995 as follows:
<TABLE>
<S> <C> <C>
(a) Reflects the disposal of the Tax Forms product line, excluding continuing product sales
transferred to another Transkrit division.
(b) Reflects the following:
Disposal of Tax Forms product line (see footnote (a)).................................... $ (227)
Conversion of Transkrit inventory valuation method from LIFO to FIFO..................... (1,402)
---------
$ (1,629)
---------
---------
(c) Reflects the following:
Reversal of deferred compensation expenses............................................... $ (2,462)
Disposal of Tax Forms product line (see footnote (a)).................................... (214)
Remove the duplicate costs incurred to maintain both the Brewster, New York and Roanoke,
Virginia facilities during the relocation from Brewster and Roanoke..................... (294)
Eliminate rent expense at Transkrit related to former related-party transaction.......... (765)
Additional annual management fees to be incurred upon consummation of the Acquisition.... 100
Reversal of management fees paid to previous affiliate................................... (300)
---------
$ (3,935)
---------
---------
(d) Reflects the elimination of relocation costs incurred to move from Brewster, New York to
Roanoke, Virginia as these are not costs incurred from ongoing operations
(e) Reflects the elimination of interest income at Transkrit related to former related-party
transaction
(f) Reflects the net gain on the disposal of the Tax Forms product line and an adjustment to
the net loss on the disposal of Pegboard Accounting System product line.
(g) Reflects the following:
Reduction in depreciation expense due to conversion of Transkrit to straight-line method,
net of depreciation on increased property basis due to purchase accounting adjustment... $ (1,362)
Reduction in raw material costs due to contractual commitments from suppliers based on
higher volume of purchases, headcount and operational expenses due to integration of
Transkrit............................................................................... (400)
---------
$ (1,762)
---------
---------
(h) Reflects the following:
Reduction in headcount and operational expenses due to integration of Transkrit.......... $ (1,850)
Reduction in depreciation expense due to conversion of Transkrit to straight-line method,
net of depreciation on increased property basis due to purchase accounting adjustment... (556)
Additional amortization of goodwill...................................................... 102
Provide additional amortization related to patents....................................... 2,064
---------
$ (240)
---------
---------
(i) Reflects the following amounts:
Additional debt cost amortization........................................................ $ 436
Additional interest expense on borrowings for working capital needs...................... 360
Additional interest expense associated with the Notes.................................... 8,638
---------
$ 9,434
---------
---------
(j) Reflects the net additional income tax provision (benefit) as a result of the above
adjustments, except the goodwill amortization adjustment, at an effective tax rate of
38.5%
(k) EBITDA is defined as operating income, plus depreciation and amortization and reflects
(a) with respect to NFC, the provision for plant shutdown cost in 1993 related to the
shutdown of NFC's Philadelphia, Pennsylvania facility and the non-cash charges related
to pension, deferred financing and change in vacation policy, and (b) with respect to
Transkrit (i) the conversion of Transkrit's inventory valuation method from LIFO to
FIFO, (ii) the disposal of the Pegboard Accounting System and Tax Forms product lines on
December 2, 1994 and April 19, 1995, respectively, (iii) the elimination of the
relocation and duplicate costs incurred in connection with the relocation of Transkrit's
headquarters to Roanoke, Virginia from Brewster, New York, (iv) deferred compensation
and pension expenses and (v) incremental management fees and rental expenses paid to
Transkrit's parent. EBITDA is provided because it is a measure of an issuer's ability to
service its indebtedness commonly used by certain investors. EBITDA is not a measurement
of financial performance under generally accepted accounting principles and should not
be considered an alternative to net income as a measure of performance or to cash flow
as a measure of liquidity.
(l) The ratio of earnings to fixed charges is computed by adding fixed charges (interest and
amortization of deferred financing costs and discounts) to income before provision for
income taxes and dividing that sum by the sum of fixed charges. Historical NFC earnings
were insufficient to cover fixed charges by $1,040.
</TABLE>
29
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTED
HISTORICAL HISTORICAL TRANSKRIT HISTORICAL TRANSACTION COMPANY PRO
NFC TRANSKRIT ADJUSTMENTS TRANSKRIT ADJUSTMENTS FORMA
----------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............................ $ 17,097 $ 24,404 $ -- $ 24,404 $ -- $ 41,501
Cost of products sold................ 13,480 15,713 128(a) 15,841 (405)(d) 28,916
----------- ----------- ------------- ----------- ------------- -----------
Gross profit......................... 3,617 8,691 (128) 8,563 405 12,585
Selling, general and admin.
expenses........................... 3,297 6,870 (368)(b) 6,502 68(e) 9,867
----------- ----------- ------------- ----------- ------------- -----------
Operating Income..................... 320 1,821 240 2,061 337 2,718
Interest (income) expense............ 750 (211) 183(c) (28) 2,478(f) 3,200
Other (income) expense............... -- 35 -- 35 -- 35
----------- ----------- ------------- ----------- ------------- -----------
Income (loss) before income taxes.... (430) 1,997 57 2,054 (2,141) (517)
Income tax provision (benefit)....... (168) 760 22(g) 782 (812)(g) (198)
----------- ----------- ------------- ----------- ------------- -----------
Net income (loss).................... $ (262) $ 1,237 $ 35 $ 1,272 $ (1,329) $ (319)
----------- ----------- ------------- ----------- ------------- -----------
----------- ----------- ------------- ----------- ------------- -----------
Other Data:
EDITDA (h) $ 1,256 $ 3,438 $ 5,257
Depreciation and amortization...... 911 1,342 2,596
Capital expenditures............... 2,307 695 3,002
Ratio of Earnings to Fixed Charges
(i)............................... .43x 83.16x .84x
</TABLE>
See accompanying notes.
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
The Pro Forma Combined Consolidated Statement of Income for the period ended
March 31, 1996 reflects the Transactions as if they had occurred on January 1,
1995 as follows:
<TABLE>
<S> <C> <C>
(a) Reflects the conversion of Transkrit inventory valuation method from LIFO to FIFO
(b) Reflects the following:
Reversal of accrual for payroll taxes on deferred compensation plan..................... $ (73)
Additional management fees to be incurred upon consummation of the Acquisition.......... 25
Reversal of management fees paid to previous affiliate.................................. (320)
---------
(368)
---------
---------
(c) Elimination of interest income at Transkrit related to former related-party transaction.
(d) Reflects the following:
Reduction in depreciation expense due to conversion of Transkrit to straight-line
method, net of depreciation on increased property basis due to purchase accounting
adjustment............................................................................. $ (305)
Reduction in raw material costs due to contractual commitments from suppliers based on
higher purchases, headcount, and operational expenses due to integration of
Transkrit.............................................................................. (100)
---------
$ (405)
---------
---------
(e) Reflects the following:
Reduction in headcount and operational expenses due to integration of Transkrit......... $ (463)
Reduction in depreciation expense due to conversion of Transkrit to straight-line
method, net of depreciation on increased property bases due to purchase accounting
adjustment............................................................................. (16)
Additional amortization of goodwill..................................................... 31
Provide additional amortization related to patents...................................... 516
---------
$ 68
---------
---------
(f) Reflects the following amounts:
Additional debt cost amortization....................................................... $ 117
Additional interest expense on borrowings for working capital needs..................... 90
Additional interest expense associated with Notes....................................... 2,271
---------
$ 2,478
---------
---------
(g) Reflects the net additional income tax benefit as a result of all transaction
adjustments, except the goodwill amortization adjustment, at an effective tax rate of
38.5%
(h) EBITDA is defined as operating income, plus depreciation and amortization and reflects
(a) with respect to NFC, the provision for plant shutdown cost in 1993 related to the
shutdown of NFC's Philadelphia, Pennsylvania facility and the non-cash charges related
to pension, deferred financing and change in vacation policy, and (b) with respect to
Transkrit (i) the conversion of Transkrit's inventory valuation method from LIFO to
FIFO, (ii) the disposal of the Pegboard Accounting System and Tax Forms product lines
on December 2, 1994 and April 19, 1995, respectively, (iii) the elimination of the
relocation and duplicate costs incurred in connection with the relocation of
Transkrit's headquarters to Roanoke, Virginia from Brewster, New York, (iv) deferred
compensation and pension expenses and (v) incremental management fees and rental
expenses paid to Transkrit's parent. EBITDA is provided because it is a measure of an
issuer's ability to service its indebtedness commonly used by certain investors. EBITDA
is not a measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a measure of
performance or to cash flow as a measure of liquidity.
(i) The ratio of earnings to fixed charges is computed by adding fixed charges (interest and
amortization of deferred financing costs and discounts) to income before provision for
income taxes and dividing that sum by the sum of fixed charges. Historical NFC and pro
forma earnings were insufficient to cover fixed charges by $430 and $517, respectively.
</TABLE>
31
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTED
HISTORICAL HISTORICAL TRANSKRIT HISTORICAL TRANSACTION COMPANY
NFC TRANSKRIT ADJUSTMENTS TRANSKRIT ADJUSTMENTS PRO FORMA
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales................................... $ 17,777 $ 23,351 $ (178)(a) $ 23,173 $ -- $ 40,950
Cost of products sold....................... 13,666 15,843 (362)(b) 15,481 (447)(g) 28,700
----------- ----------- ----- ----------- ----------- -----------
Gross profit................................ 4,111 7,508 184 7,692 447 12,250
Selling, general and administrative
expenses................................... 3,596 7,494 (853)(c) 6,641 (22)(h) 10,215
Relocation expenses......................... -- 133 (133)(d) -- -- --
----------- ----------- ----- ----------- ----------- -----------
Operating Income............................ 515 (119) 1,170 1,051 469 2,035
Interest (income) expense................... 784 (132) 216(e) 84 2,318(i) 3,186
Other (income) expense...................... -- (541) (14)(f) (555) -- (555)
----------- ----------- ----- ----------- ----------- -----------
Income (loss) before income taxes........... (269) 554 968 1,522 (1,849) (596)
Income tax provision (benefit).............. -- 218 373(j) 591 (702)(j) (111)
----------- ----------- ----- ----------- ----------- -----------
Net income (loss)........................... $ (269) $ 336 $ 595 $ 931 $ (1,147) $ (485)
----------- ----------- ----- ----------- ----------- -----------
----------- ----------- ----- ----------- ----------- -----------
Other Data:
EBITDA (k)................................ $ 1,301 $ 2,518 $ 4,382
Depreciation and amortization............. 889 1,434 2,526
Capital expenditures...................... 66 1,481 1,547
Ratio of Earnings to Fixed Charges (l).... .66x 11.08x .82x
</TABLE>
See accompanying notes.
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
The Pro Forma Combined Consolidated Statement of Income for the period ended
March 31, 1995 reflects the Transactions as if they had occurred on January 1,
1995 as follows:
(a) Reflects the disposal of the Tax Forms product line excluding continuing
product sales
transferred to another Transkrit division.
(b) Reflects the following:
<TABLE>
<S> <C>
Disposal of Tax Forms product line (see footnote (a)).................... $ (227)
Conversion of Transkrit inventory valuation method from LIFO to FIFO..... (135)
---------
$ (362)
---------
---------
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C>
Reversal of deferred compensation expenses........................... $ (441)
Disposal of Tax Forms product line (see footnote (a))................ (53)
Remove the duplicate costs incurred to maintain both the Brewster,
New York and Roanoke, Virginia facilities during the relocation from
Brewster and Roanoke................................................ (93)
Eliminate rent expense at Transkrit related to former related-party
transaction......................................................... (216)
Additional management fees to be incurred upon consummation of the
Acquisition......................................................... 25
Reversal of management fees paid to previous affiliate............... (75)
---------
$ (853)
---------
---------
</TABLE>
(d) Reflects the elimination of relocation costs incurred to move from Brewster,
New York to
Roanoke, Virginia as these are not costs incurred from ongoing operations.
(e) Reflects the elimination of interest income at Transkrit related to former
related-party transaction.
(f) Reflects an adjustment to the net loss on the disposal of the Pegboard
Accounting System product line.
(g) Reflects the following:
<TABLE>
<S> <C>
Reduction in depreciation expense due to conversion of Transkrit to
straight- line method, net of depreciation on increased property
basis due to purchase accounting adjustment......................... $ (347)
Reduction in raw material costs due to contractual commitments from
suppliers based on higher volume of purchases, headcount and
operational expenses due to integration of Transkrit................ (100)
---------
$ (447)
---------
---------
</TABLE>
(h) Reflects the following:
<TABLE>
<S> <C>
Reduction in headcount and operational expenses due to integration of
Transkrit........................................................... $ (463)
Reduction in depreciation expense due to conversion of Transkrit to
straight-line method, net of depreciation on increased property
basis due to purchase accounting adjustment......................... (100)
Additional amortization of goodwill.................................. 25
Provide additional amortization related to patents................... 516
---------
$ (22)
---------
---------
</TABLE>
33
<PAGE>
(i) Reflects the following amounts:
<TABLE>
<S> <C>
Additional debt cost amortization.................................... $ 109
Additional interest expense on borrowings for working capital
needs............................................................... 90
Additional interest expense associated with the Notes................ 2,119
---------
$ 2,318
---------
---------
</TABLE>
(j) Reflects the net additional income tax provision (benefit) as a result of
the above transaction
adjustments, except the goodwill amortization adjustment, at an effective
tax rate of 38.5%.
(k) EBITDA is defined as operating income, plus depreciation and amortization
and reflects (a) with respect to NFC, the provision for plant shutdown cost
in 1993 related to the shutdown of NFC's Philadelphia, Pennsylvania facility
and the non-cash charges related to pension, deferred financing and change
in vacation policy, and (b) with respect to Transkrit (i) the conversion of
Transkrit's inventory valuation method from LIFO to FIFO, (ii) the disposal
of the Pegboard Accounting System and Tax Forms product lines on December 2,
1994 and April 19, 1995, respectively, (iii) the elimination of the
relocation and duplicate costs incurred in connection with the relocation of
Transkrit's headquarters to Roanoke, Virginia from Brewster, New York, (iv)
deferred compensation and pension expenses and (v) incremental management
fees and rental expenses paid to Transkrit's parent. EBITDA is provided
because it is a measure of an issuer's ability to service its indebtedness
commonly used by certain investors. EBITDA is not a measurement of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to
cash flow as a measure of liquidity.
(l) The ratio of earnings to fixed charges is computed by adding fixed charges
(interest and amortization of deferred financing costs and discounts) to
income before provision for income taxes and dividing that sum by the sum of
fixed charges. Historical NFC and pro forma earnings were insufficient to
cover fixed charges by $269 and $596, respectively.
34
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
NATIONAL FIBERSTOK CORPORATION
The following selected historical financial data for each of the years in
the three-year period ended December 31, 1995 have been derived from, and are
qualified by reference to, the audited Financial Statements of NFC included
elsewhere in this Prospectus. The selected historical financial data set forth
below for the years ended December 31, 1991 and 1992 have been derived from the
unaudited financial statements of NFC. The selected historical consolidated
unaudited financial data set forth below for the three month periods ended March
31, 1995 and 1996 have been derived from, and are qualified by reference to,
NFC's unaudited financial statements included elsewhere herein and include all
adjustments, consisting of normal recurring adjustments, which management
considers necessary for a fair presentation of the results of NFC for such
periods. Results for the interim periods are not necessarily indicative of the
results for the full year. The selected historical financial data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of NFC and accompanying notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- --------------------
1991 1992(A) 1993 1994 1995 1995 1996
----------- ----------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS) (DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................ $ 4,359 $ 17,905 $ 64,545 $ 65,998 $ 71,257 $ 17,777 $ 17,097
Cost of products sold.................... 3,789 14,145 51,384 52,610 55,708 13,666 13,480
----------- ----------- --------- --------- --------- --------- ---------
Gross profit........................... 570 3,760 13,161 13,388 15,549 4,111 3,617
Selling, general and administrative
expenses................................ 1,117 3,714 12,930 12,428 13,410 3,596 3,297
Provision for plan shutdown cost......... -- -- 2,251 -- -- -- --
----------- ----------- --------- --------- --------- --------- ---------
Operating income (loss).................. (547) 46 (2,020) 960 2,139 515 320
Interest expense......................... 213 803 2,873 2,975 3,179 784 750
----------- ----------- --------- --------- --------- --------- ---------
Income (loss) before income taxes...... (760) (757) (4,893) (2,015) (1,040) (269) (430)
Income tax provision (benefit)........... -- (123) (1,343) -- (1,900) -- (168)
----------- ----------- --------- --------- --------- --------- ---------
Net income (loss)........................ $ (760) $ (634) $ (3,550) $ (2,015) $ 860 $ (269) $ (262)
----------- ----------- --------- --------- --------- --------- ---------
----------- ----------- --------- --------- --------- --------- ---------
OTHER DATA:
EBITDA (b)............................... $ (355) $ 1,094 $ 3,610 $ 4,308 $ 5,159 $ 1,301 $ 1,256
Depreciation and amortization............ 192 1,078 3,521 3,685 4,005 889 911
Capital expenditures..................... 18 104 1,179 940 2,308 66 2,307
Ratio of Earnings to Fixed Charges (c)... -2.57x .06x -.70x .32x .67x .66x .43x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
BALANCE SHEET DATA:
Working capital...................................................................................... $ 6,532
Total assets......................................................................................... 38,410
Long-term debt, less current maturities.............................................................. 22,825
</TABLE>
- ------------------------------
(a) Reflects the acquisition of Diversified Assembly, Inc. and DEC
International Corporation, including its wholly-owned subsidiary, Double
Envelope Company, on March 27, 1992 and October 16, 1992, respectively. The
acquisitions were accounted for as purchases.
(b) EBITDA is defined as operating income, plus depreciation and amortization
and reflects (a) with respect to NFC, the provision for plant shutdown cost
in 1993 related to the shutdown of NFC's Philadelphia, Pennsylvania
facility and the non-cash charges related to pension, deferred financing
and change in vacation policy (consisting of $0, $(30) , $(142) (and $2,251
of provision for plant shut down cost), $(337), $(985), $(103), and $25,
for years ended December 31, 1991, 1992, 1993, 1994 and 1995 and the three
months ended March 31, 1995 and 1996, respectively), and (b) with respect
to Transkrit (i) the conversion of Transkrit's inventory valuation method
from LIFO to FIFO, (ii) the disposal of the Pegboard Accounting System and
Tax Forms product lines on December 2, 1994 and April 19, 1995,
respectively, (iii) the elimination of the relocation and duplicate costs
incurred in connection with the relocation of Transkrit's headquarters to
Roanoke, Virginia from Brewster, New York, (iv) deferred compensation and
pension expenses and (v) incremental management fees and rental expenses
paid to Transkrit's parent. EBITDA is provided because it is a measure of
an issuer's ability to service its indebtedness commonly used by certain
investors. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and should not be considered an
alternative to net income as a measure of performance or to cash flow as a
measure of liquidity.
(c) The ratio of earnings to fixed charges is computed by adding fixed charges
(interest and amortization of deferred financing costs and discounts) to
income before provision for income taxes and dividing that sum by the sum
of fixed charges. Earnings were insufficient to cover fixed charges by
$760, $757, $4,893, $3,015, $1,040, $269 and $430 for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996, respectively.
35
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
TRANSKRIT CORPORATION
The following selected historical consolidated financial data for each of
the years in the three year period ended December 31, 1995 have been derived
from, and are qualified by reference to, the audited consolidated financial
statements of Transkrit included elsewhere in this Prospectus. The selected
historical consolidated financial data for each of the years in the two year
period ended December 31, 1992 have been derived from the unaudited financial
statements of Transkrit. The selected historical consolidated financial data for
the three month periods ended March 31, 1995 and 1996 have been derived from,
and are qualified by reference to, the unaudited financial statements of
Transkrit, included elsewhere herein, and include all adjustments, consisting
only of normal recurring adjustments, which management considers necessary for a
fair presentation of the results of Transkrit for such periods. Results for the
interim periods are not necessarily indicative of results for the full year. The
selected historical consolidated financial data set forth below should be read
in conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of Transkrit and accompanying notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
-------------------- --------------------------------- ---------
1991 1992 1993(A) 1994 1995 1995
--------- --------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................ $ 86,637 $ 88,464 $ 96,003 $ 98,124 $ 97,681 $ 23,351
Cost of products sold.................................... 59,763 61,829 64,921 64,851 64,223 15,843
--------- --------- ----------- --------- --------- ---------
Gross profit........................................... 26,874 26,635 31,082 33,273 33,458 7,508
Selling, general and administrative expenses............. 22,099 24,702 26,914 30,700 29,412 7,494
Relocation expenses (b).................................. -- 955 3,290 413 657 133
--------- --------- ----------- --------- --------- ---------
Operating income (loss).................................. 4,775 978 878 2,160 3,389 (119)
Interest (income) expense, net........................... 262 268 471 713 (697) (132)
Gain on disposal of product lines and fixed assets (c)... (21) (54) (71) (2,852) (558) (500)
Other (income) expense................................... (154) (88) (337) (207) (313) (41)
--------- --------- ----------- --------- --------- ---------
Income before income taxes............................. 4,688 852 815 4,506 4,957 554
Income taxes............................................. 1,892 417 379 1,799 1,380 218
--------- --------- ----------- --------- --------- ---------
Net income............................................... $ 2,796 $ 435 $ 436 $ 2,707 $ 3,577 $ 336
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
<CAPTION>
1996
---------
<S> <C>
INCOME STATEMENT DATA:
Net sales................................................ $ 24,404
Cost of products sold.................................... 15,713
---------
Gross profit........................................... 8,691
Selling, general and administrative expenses............. 6,870
Relocation expenses (b).................................. --
---------
Operating income (loss).................................. 1,821
Interest (income) expense, net........................... (211)
Gain on disposal of product lines and fixed assets (c)... --
Other (income) expense................................... 35
---------
Income before income taxes............................. 1,997
Income taxes............................................. 760
---------
Net income............................................... $ 1,237
---------
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (d)............................................... $ 8,332 $ 7,647 $10,194 $ 12,045 $ 15,556 $ 2,518
Depreciation and amortization............................ 4,921 5,503 6,345 6,776 6,024 1,474
Capital expenditures..................................... 10,565 8,642 8,529 7,187 4,172 1,481
Ratio of Earnings to Fixed Chares (e).................... 7.82x 2.88x 2.26x 5.89x 13.42x 4.67x
<CAPTION>
OTHER DATA:
<S> <C>
EBITDA (d)............................................... $ 3,438
Depreciation and amortization............................ 1,342
Capital expenditures..................................... 695
Ratio of Earnings to Fixed Chares (e).................... 80.88x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
BALANCE SHEET DATA:
Working capital.................................................................................................. $ 17,395
Total assets..................................................................................................... 65,413
Long-term debt, less current maturities.......................................................................... --
</TABLE>
- ------------------------------
(a) Reflects the acquisition and results of Short Run Labels, Inc. since the
date of its acquisition on August 11, 1993.
(b) Represents the incremental costs (including severance, moving and other
relocation costs) incurred to move the corporate and related production
facilities.
(c) Includes the sale of the Pegboard Accounting System product line and the
Tax Forms product line on December 2, 1994 and April 19, 1995,
respectively.
(d) EBITDA is defined as operating income, plus depreciation and amortization
and reflects (a) with respect to NFC, the provision for plant shutdown cost
in 1993 related to the shutdown of NFC's Philadelphia, Pennsylvania
facility and the non-cash charges related to pension, deferred financing
and change in vacation policy, and (b) with respect to Transkrit (i) the
conversion of Transkrit's inventory valuation method from LIFO to FIFO,
(ii) the disposal of the Pegboard Accounting System and Tax Forms product
lines on December 2, 1994 and April 19, 1995, respectively, (iii) the
elimination of the relocation and duplicate costs incurred in connection
with the relocation of Transkrit's headquarters to Roanoke, Virginia from
Brewster, New York, (iv) deferred compensation and pension expenses and (v)
incremental management fees and rental expenses paid to Transkrit's parent.
EBITDA is provided because it is a measure of an issuer's ability to
service its indebtedness commonly used by certain investors. EBITDA is not
a measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity.
(e) The ratio of earnings to fixed charges is computed by adding fixed charges
(interest and amortization of deferred financing costs and discounts) to
income before provision for income taxes and dividing that sum by the sum
of fixed charges.
EBITDA reflects the following adjustments:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFO to FIFO inventory valuation
change.............................. $ (281) $ 144 $ (272) $ (95) $ 1,402 $ 135 $ (128)
Product line disposals............... (1,610) (347) (564) (41) 200 62 --
Relocation and duplicate costs....... -- 955 3,290 1,320 951 226 --
Parent charges....................... 295 307 309 564 965 266 295
Deferred compensation and pension.... 232 107 208 1,361 2,625 474 108
--------- --------- --------- --------- --------- --------- ---------
Total adjustments...................... $ (1,364) $ 1,166 $ 2,971 $ 3,109 $ 6,143 $ 1,163 $ 275
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading manufacturer of custom paper-based products
primarily for the mailer, direct mail, custom pressure sensitive label and
custom envelope markets. Pursuant to the Stock Purchase Agreement, NFC purchased
all of the outstanding capital stock of Transkrit. In connection with the
Acquisition, the Company expects to realize approximately $2.3 million of
annualized cost savings through raw material purchasing efficiencies, and
reductions in headcount and operating expenses. The Company believes that its
future operating results may not be directly comparable to historical operating
results of either NFC or Transkrit due to the Company's increased size,
integration of the two businesses and related cost savings. Certain factors
which have affected the operating results of the Company are discussed below.
PURCHASE ACCOUNTING. The Acquisition was accounted for as a purchase of
Transkrit by NFC. As a result, the assets and liabilities of Transkrit have been
recorded at their estimated fair market value. An amount equal to the excess of
the purchase price over the fair value of assumed liabilities will be allocated
to inventories, property and equipment, identifiable intangible assets and
goodwill. The Company's patents will be amortized over their remaining lives
(approximately 10 years), and goodwill will be amortized over 40 years.
Consequently, the post-Acquisition statements of income will be affected by the
amortization of such excess purchase price. See "Unaudited Pro Forma Financial
Data."
STRATEGIC ACQUISITION AND DISPOSITIONS. On August 11, 1993, Transkrit
acquired all of the outstanding capital stock of Short Run Labels, Inc. for
approximately $5.7 million, and consequently, 1993 results of operations reflect
only a portion of the financial results of Short Run Labels, Inc. On December 2,
1994, Transkrit disposed of its Pegboard Accounting System product line for
approximately $4.0 million. In addition, on April 19, 1995, Transkrit disposed
of its Tax Forms product line for $0.4 million.
RELOCATION OF OPERATIONS AND CORPORATE HEADQUARTERS. Transkrit relocated
its corporate headquarters and primary production facility from Brewster, New
York to Roanoke, Virginia between May 1994 and April 1995. Transkrit recorded
relocation expenses of $0.1 million, $0.7 million, $0.4 million and $3.3 million
during the three months ended 1995 and the fiscal years ended 1995, 1994 and
1993, respectively.
NFC recorded a non-recurring charge of $2.3 million during the year ended
December 31, 1993 relating to the shutdown of its Philadelphia, Pennsylvania
facility.
RAW MATERIALS. Paper is the Company's primary raw material requirement, and
accounted for approximately 49% of the Company's 1995 pro forma costs of goods
sold. Generally, when the price of paper decreases, the Company has short-term
opportunity to improve its operating margins due to delay in passing price
reductions through to customers. In the long-term, however, since paper price
declines tend to occur in a weak economy, net sales and operating margins tend
to decline due to lower levels of demand. Conversely, when paper prices are
increasing, operating margins may be negatively affected in the short-term since
it generally takes from 30 to 90 days to pass on such increases to customers. In
the longer-term, however, since paper price increases tend to occur in a strong
economy, the Company is generally able to pass through increases in its cost of
paper to customers and therefore maintain or improve operating margins.
EBITDA is defined as operating income plus depreciation and amortization and
reflects (a) with respect to NFC, the provision for plant shutdown cost in 1993
related to the shutdown of NFC's Philadelphia, Pennsylvania facility and the
non-cash charges related to pension, deferred financing and change in vacation
policy, and (b) with respect to Transkrit (i) the conversion of Transkrit's
inventory valuation method from LIFO to FIFO, (ii) the disposal of the Pegboard
Accounting System and Tax Forms product lines on December 2, 1994 and April 19,
1995, respectively, (iii) the elimination of the relocation and duplicate costs
incurred in connection with the relocation of Transkrit's headquarters to
Roanoke, Virginia from Brewster, New York, (iv) deferred compensation and
pension expenses and (v) incremental management fees and rental expenses paid to
Transkrit's parent. EBITDA is provided because it is a measure of an issuer's
ability
37
<PAGE>
to service its indebtedness commonly used by certain investors. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity.
RESULTS OF OPERATIONS
NATIONAL FIBERSTOK CORPORATION
NFC has three principal product lines: custom envelopes, direct mail
products and custom pressure sensitive labels. The following table summarizes
NFC's historical net sales by product line.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Custom Envelopes..................................... $ 47,964 $ 49,585 $ 54,527 $ 13,455 $ 13,634
Direct Mail Products................................. 13,492 13,558 13,087 3,520 2,583
Custom Pressure Sensitive Labels..................... 3,089 2,855 3,643 802 880
--------- --------- --------- --------- ---------
$ 64,545 $ 65,998 $ 71,257 $ 17,777 $ 17,097
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
NET SALES for the three-month period ended March 31, 1996 decreased $0.7
million to $17.1 million, or 3.8%, from the comparable 1995 period. Sales of
direct mail products during the three-months ended March 31, 1996 declined 26.6%
as compared to the comparable period of 1995 due to historically high paper
costs which caused customers to defer or reduce order sizes. Since early 1996,
paper prices have returned to, and have remained at, more normal levels, thereby
lowering net sales; however, the Company has recently experienced an increase in
order volume. Custom envelope unit shipments decreased by 11% during the 1996
period due to generally weak industry conditions and unusually harsh weather,
which caused a temporary shutdown of certain facilities of NFC. The decrease in
envelope unit shipments was more than offset by an increase in the average unit
sales price, leading to a slight increase in net sales.
GROSS PROFIT as a percentage of net sales declined to 21.2% for the
three-month period ended March 31, 1996 from 23.1% for the comparable 1995
period, primarily due to the reduction in volume of direct mail products. Gross
profit for the period declined $0.5 million to $3.6 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the three-month period
ended March 31, 1996 decreased to $3.3 million from $3.6 million for the
comparable 1995 period. Selling, general and administrative expenses as a
percentage of net sales decreased to 19.3% for the three-month period ended
March 31, 1996 from 20.2% for the comparable 1995 period. This decrease in
expenses was due to a reduction in administrative personnel in mid-1995. Selling
costs as a percentage of net sales increased 0.5% compared to the same period in
1995.
EBITDA as a percent of net sales was 7.3% for both the three-month period
ended March 31, 1996 and the comparable 1995 period. EBITDA for both three-month
periods was $1.3 million as the decrease in gross profit was offset by the
reduction in administrative costs.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES for the year ended December 31, 1995 increased $5.3 million to
$71.3 million, or 8.0%, from the comparable 1994 period. Net sales of custom
envelopes increased 10.0%, or $4.9 million from 1994 to 1995. This increase in
net sales was due to a rise in the average unit sales price resulting from
passing on a portion of paper cost increases while units shipped remained
stable. While the average unit sales price for direct mail products increased
13.1% from 1994 to 1995, this was more than offset by a 14.6% decrease in
38
<PAGE>
units shipped over the same period. The decrease in direct mail product units
shipped reflects a deferral or reduction in orders due to historically high
paper costs. The 27.6% increase in net sales of custom pressure sensitive labels
resulted from a 14.1% increase in units shipped and a 12.1% increase in average
unit sales price. The increase in units shipped represents new business, while
the increase in average unit sales price reflects the increase in underlying
paper costs.
GROSS PROFIT as a percentage of net sales increased to 21.8% for the year
ended December 31, 1995 from 20.3% for the comparable 1994 period as gross
profit for the period increased $2.1 million to $15.5 million. This increase was
attributable to price increases for custom envelopes and direct mail products, a
portion of which reflected paper cost increases, and improved coverage of fixed
costs due to increased production volumes of custom pressure sensitive labels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of net sales
remained unchanged at 18.8% for the year ended December 31, 1995 and the
comparable 1994 period. Selling, general and administrative expense for 1995
increased to $13.4 million from $12.4 million in 1994 to support the increased
level of net sales and higher corporate development expenditures.
EBITDA as a percentage of net sales increased to 7.3% for the year ended
December 31, 1995 from 6.5% for the comparable 1994 period. EBITDA for 1995
increased to $5.2 million from $4.3 million in 1994. The increase in EBITDA as a
percentage of net sales was attributable to the increase in gross profit as a
percentage of net sales and the decline in selling, general and administrative
expense as a percentage of net sales, both of which contributed to improved
overall profitability.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES for the year ended December 31, 1994 increased $1.5 million to
$66.0, or 2.3%, from the comparable 1993 period. Net sales of custom envelopes
increased 3.4% or $1.6 million from 1993 to 1994. The increase in net sales was
primarily attributable to an increase in the number of units shipped while unit
sales prices remained relatively stable. This increase in net sales was
partially offset by the discontinuance of certain low margin custom expanding
envelope contract business which decreased net sales by $1.4 million.
GROSS PROFIT as a percentage of net sales was essentially unchanged at 20.3%
for the year ended December 31, 1994 from 20.4% for the comparable 1993 period.
Gross profit for the period increased $0.2 million to $13.4 million. Custom
envelope gross profit increased slightly with sales volumes, but gross margin
results for the rest of the Company remained largely unchanged.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of net sales
declined to 18.8% for the year ended December 31, 1994 from 23.5% for the
comparable 1993 period. Selling, general and administrative expense for 1994
declined sharply to $12.4 million from the 1993 level of $15.2 million, which
included costs associated with the closure of the Company's Philadelphia
manufacturing facility. If the $2.3 million of closure expenses were excluded,
selling, general and administrative expenses would have declined by $0.5 million
from 1993 to 1994. This decline was attributable to personnel and other overhead
cost reductions.
EBITDA as a percentage of net sales, excluding the Philadelphia facility
closure costs, increased to 6.5% for the year ended December 31, 1994 from 5.6%
for the comparable 1993 period. EBITDA for 1994 increased to $4.3 million from
$3.6 million in 1993. This increase was attributable to the minor increase in
gross profit and reductions in selling, general and administrative expenses.
39
<PAGE>
TRANSKRIT CORPORATION
Transkrit has three principal product lines: mailer systems, direct
marketing products and custom pressure sensitive labels. The following table
summarizes Transkrit's historical net sales by product line. Transkrit's mailer
systems product line include impact and non-impact
InfoSeal-Registered Trademark- mailer products and SelfLabel-TM- products.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mailer Systems (a)......................................... $ 54,778 $ 50,707 $ 52,159 $ 12,106 $ 12,156
Direct Mail Products and Services.......................... 6,055 6,476 8,624 1,748 2,876
Custom Pressure Sensitive Labels........................... 27,568 34,378 36,720 9,319 9,372
--------- --------- --------- --------- ---------
Total Net Sales (a)...................................... $ 88,401 $ 91,561 $ 97,503 $ 23,173 $ 24,404
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------------
(a) Excludes net sales attributable to the Pegboard Accounting System product
line and the Tax Form product line. Prior to the effect of the sale of the
Pegboard Accounting System and the Tax Form product lines, net sales of
mailer systems for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 would have been $62.4 million, $57.3
million, $52.3 million and $12.3 million, respectively, and net sales for
the years ended December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1995 would have been $96.0 million, $98.1 million, $97.7
million and $23.4 million, respectively.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
NET SALES for the three-month period ended March 31, 1996 increased by $1.0
million to $24.4 million, or 4.5%, from the comparable 1995 period. This
increase was primarily attributable to an increase of $1.1 million, or 64.5% in
net sales of direct mail products and services and an increase of $0.4 million,
or 20.4% in the sales of InfoSeal-Registered Trademark- products. The increase
in net sales of direct mail products was largely due to an increase in demand
from existing customers. The increase in net sales of
InfoSeal-Registered Trademark- products resulted primarily from an increase in
the number of installed InfoSeal-Registered Trademark- systems. Partially
offsetting these net sales increases was a decrease of $0.7 million, or 6.9%, in
impact mailer net sales.
GROSS PROFIT for the three-month period ended March 31, 1996 increased by
$1.2 million to $8.7 million from the comparable 1995 period. Gross profit as a
percentage of net sales increased 3.4%, to 35.6% from 32.2%. This increase was
attributable primarily to lower paper prices and reduced labor costs and
operating expenses associated with Transkrit's move to the new Roanoke, Virginia
facility.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the three-month period
ended March 31, 1996 decreased by $0.6 million to $6.9 million from the
comparable 1995 period. Selling, general and administrative expenses as a
percent of net sales for the quarter ended March 31, 1996 decreased to 28.2%
from 32.1% for the comparable period in 1995, due primarily to higher net sales
and cost efficiencies achieved from the elimination of duplicative expenses as a
result of the closure of the Brewster, New York facility.
EBITDA as a percentage of net sales increased to 14.1% for the period ended
March 31, 1996 from 10.8% in the comparable 1995 period. EBITDA increased by
$0.9 million to $3.4 million for the period due to the improvement in gross
profit and the reduction in selling, general and administrative expense.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES for the year ended December 31, 1995, decreased by $0.4 million to
$97.7 million, or 0.5%, from the comparable 1994 period. In 1994, Transkrit net
sales from the Pegboard Accounting System product line were $5.7 million and
were $0.8 million for the Tax Form product line. The Pegboard Accounting System
product line was sold in late 1994. In 1995, net sales for the Tax Form product
line prior to its sale in early 1995 were $0.2 million. If the above net sales
from these disposed product lines were excluded from 1994 and 1995 results, net
sales would have been $5.9 million, or 6.4%, higher in 1995 when compared to
1994. The growth in net sales is primarily attributable to increased net sales
in all three of Transkrit's product lines. Net sales of pressure sensitive
labels increased approximately 6.8%, or $2.3 million, from the prior period due
to increased net sales to existing customers. Net sales of direct mail products
and services
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increased approximately 33.2%, or $2.1 million, from the prior period as a
result of increased sales to existing customers. Net sales of
InfoSeal-Registered Trademark- products increased 23.2%, or $1.8 million, for
the 1995 period as a result of increased raw materials prices which were passed
on to customers and an increase in the installed based of
InfoSeal-Registered Trademark- users. Transkrit's net sales growth in 1995 was
offset by a decrease of $1.5 million, or 3.4%, in net sales of impact mailers.
GROSS PROFIT for the year ended December 31, 1995 was $33.5 million, which
was relatively unchanged from $33.3 million for the year ended December 31,
1994. Gross profit as a percentage of net sales increased to 34.3% for the year
ended December 31, 1995 from 33.9% for the year ended December 31, 1994. If the
Company's Pegboard Accounting System and Tax Forms product lines were excluded,
gross profit as a percentage of net sales would not have been materially
different. During 1995, gross profit from mailer products and direct mail
products and services was negatively impacted as a result of rapidly rising
paper prices, only a portion of which Transkrit was able to pass on to
customers. Relatively stable prices for pressure sensitive label stock and
increased sales volume during 1995 more than offset the decrease in gross profit
in the other product areas. In addition, Transkrit's gross profit in 1995
benefitted from $0.6 million in reduced workers' compensation and health
insurance claims.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended December 31,
1995, decreased by $1.3 million to $29.4 million from the comparable 1994
period. This decline was due to savings as result of reduced workers'
compensation and health insurance claims, lower operating and employee costs
associated with the Roanoke, Virginia facility relative to the Brewster, New
York facility and the reduction of $0.6 million in duplicate costs resulting
from the shutdown of the Brewster, New York facility in April, 1995. These
savings were partially offset by a $1.2 million increase in deferred employee
compensation charges.
EBITDA for the year ended December 31, 1995, increased by $3.5 million to
$15.6 million from the comparable 1994 period. EBITDA as a percentage of net
sales increased to 15.9% from 12.3% for the comparable 1994 period. The increase
in 1995 EBITDA was primarily attributable to the increase in gross profit and
the reduction in selling, general and administrative expenses.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES in 1994 increased $2.1 million to $98.1 million, or 2.2%, from the
comparable 1993 period. If the Pegboard Accounting System and Tax Forms product
lines were excluded from net sales in 1993 and 1994, net sales of Transkrit
would have increased by $3.2 million or 3.6%. The increase in net sales from
December 31, 1993 to December 31, 1994 consisted of a 24.7%, or $6.8 million,
increase in net sales of custom pressure sensitive labels, which more than
offset a 7.4%, or $4.1 million, decrease in mailer systems sales. The mailer
systems net decline resulted from the general decline in the impact mailer
market and the loss of an InfoSeal-Registered Trademark- customer. Growth in the
custom pressure-sensitive label business was due to overall volume increases and
a full-year's contribution from Short Run Labels, Inc., which contributed
approximately $4.6 million more in net sales in 1994 than in 1993.
GROSS PROFIT for the year ended December 31, 1994 increased by $2.2 million
to $33.3 million from the comparable 1993 period. Gross profit as a percent of
net sales increased to 33.9% for the year ended December 31, 1994 from 32.4% for
the 1993 period. This increase was primarily due to higher custom
pressure-sensitive label net sales and a shift in mix to higher margin products,
particularly those of the newly acquired Short Run Labels, Inc. If the Company's
Pegboard Accounting System and Tax Forms product lines were excluded, gross
profit as a percentage of net sales would not have been materially different.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended December 31,
1994 increased $3.8 million to $30.7 million from the comparable 1993 period.
Selling, general and administrative expense as a percentage of net sales was
31.3% in 1994 compared to 28.0% in 1993. The increase was primarily due to
higher selling, general and administrative expense in the custom pressure
sensitive label business as a result of a full year's impact from Short Run
Labels, Inc., which has a higher ratio of selling, general and administrative
expense to net sales due to its low average price per order, and $0.9 million of
duplicate costs in 1994 as a result of Transkrit's relocation of its Brewster,
New York operations and headquarters to Roanoke, Virginia.
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EBITDA for the year ended December 31, 1994 increased $1.9 million to $12.0
million from the comparable 1993 period. EBITDA as a percentage of net sales
increased to 12.3% from 10.6% for the comparable 1993 period. The $1.9 million
increase in 1994 EBITDA is primarily attributable to higher net sales and higher
gross profit, which offset increases in selling, general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
Following the Transactions, the debt service costs associated with the
borrowings under the New Bank Credit Facility and the Notes will significantly
increase liquidity requirements. Management believes that based on current
financial performance and anticipated growth, cash flow from operations,
together with the available sources of funds including borrowings under the New
Bank Credit Facility, will be adequate for the foreseeable future to make
required payments of interest on the Company's indebtedness, to fund anticipated
capital expenditures and working capital requirements and to enable the Company
and its subsidiaries to comply with the terms of their debt agreements. However,
actual capital requirements may change, particularly as a result of acquisitions
the Company may make. The Company expects that capital expenditures (exclusive
of acquisitions) will be approximately $5.2 million annually from 1996 and 1999.
The Company believes that these capital expenditure levels will be sufficient to
maintain competitiveness and to provide sufficient manufacturing capacity. The
Company also anticipates that it will be required to refinance the Notes at
maturity. No assurance can be given that the Company will be able to refinance
the Notes on terms acceptable to it, if at all. The ability of the Company to
meet its debt service obligations and reduce its total debt will be dependent,
however, upon the future performance of the Company and its subsidiaries which,
in turn, will be subject to general economic conditions and to financial,
business and other factors, including factors beyond the Company's control.
INFLATION
The Company believes that inflation, exclusive of paper prices increases,
has not had a material impact on its result of operations for the three years
ended December 31, 1995 or the three months ended March 31, 1995 and 1996.
CHANGE IN ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of."
The adoption did not have a material impact on the Company's financial condition
or results of operations.
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INDUSTRY
MAILER INDUSTRY
The Company competes in the U.S. mailer market, which includes both impact
mailers and non-impact mailer systems. Mailers are used by a wide variety of
businesses and organizations as a substitute for the most commonly used mailing
method, a printed flatsheet which is folded and inserted into envelopes. Because
of their convenience and cost advantages, mailers are widely used for the
preparation and mailing of invoices, payroll checks, account and direct deposit
statements, W-2 forms and university grade reports. Management believes that
mailers are popular with direct marketers due to the cost effectiveness of this
form of solicitation. The introduction of laser and other non-impact printer
compatible mailers, which have numerous advantages relative to traditional spot
carbon impact mailers, has expanded the range of potential applications for
customers who are willing to substitute mailers for traditional fold and insert
methods. Management believes that the growth of the overall mailer market has
been relatively flat over the past five years as a decline in impact mailer
sales during that period has been largely offset by rapid growth in sales of
non-impact mailers.
Impact mailers are an integrated mailing package with addresses and other
data printed inside the package using built-in carbonized paper and an impact
printer. With estimated annual revenues of $180 million, this market has a core
group of customers who use impact mailers for the preparation and mailing of
payroll checks, vendor payments, direct deposit statements, collection notices,
medical and utility bills and tax notices. Since the early 1990's, the impact
mailer market has decreased in size due to the rapid growth of laser, ink-jet
and other non-impact printers which are not compatible with impact mailers. This
contraction in the impact mailer market has resulted in industry consolidation.
Management believes that the decline in this market will continue, and that the
exit of certain manufacturers provides further consolidation opportunities for
focused competitors such as the Company.
Responding to the changes in office printing technology, a small number of
manufacturers, including the Company, have developed mailers which are
compatible with laser and other non-impact printer systems. Unlike impact
mailers, non-impact mailers are typically sold as an integrated system with
mailer forms and dedicated and patented folding and sealing equipment. The
non-impact mailer offers the cost advantages and convenience of a mailer form
and the versatility and image quality of a laser printed product. Non-impact
mailers have experienced rapid acceptance for the preparation and mailing of
payroll checks, vendor payments, direct deposit statements and university grade
reports. Management believes that non-impact mailer technology provides an
attractive alternative to traditional mailing methods.
DIRECT MAIL INDUSTRY
Direct marketing has become an increasingly important advertising medium and
an integral component of many companies' overall marketing programs. Direct
marketing programs are delivered to a targeted audience through a variety of
channels, including direct mail, telemarketing, print, radio and television. As
consumer data and marketing analyses have become more sophisticated, advertisers
have been able to target more specific audiences. As a result, advertisers have
used a greater number of more customized, feature-oriented marketing campaigns.
Manufacturers and fulfillment providers, such as the Company, have capitalized
on this industry trend as advertisers have demanded more specialized products
and have outsourced the execution of these campaigns.
Direct mail is the second largest direct marketing segment (after
telemarketing) with 1995 revenues of approximately $30 billion, representing
approximately 23% of total industry expenditures. Over the past five years,
direct mail expenditures have grown at a compound annual rate of approximately
6%. The Company competes in the highly fragmented direct mail segment, where the
majority of industry participants are small, specialized firms formed to
capitalize on the industry's growth. Most competitors offer customers a range of
services including strategic and creative design, information and data base
management and tracking and fulfillment production. Large corporations often
undertake direct mail campaigns internally and represent the other component of
the direct mail segment.
The Company offers a selection of products, including catalog bind-in order
forms, advertising insert booklets and coupons, which are sold exclusively to
the direct mail segment of the direct marketing industry.
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The Company also provides direct mail fullfillment services, which include
personalization, addressing and mailing. To complement these direct marketing
products, mailers, envelopes and labels produced by the Company are customized
and sold for use in direct marketing applications.
PRESSURE SENSITIVE LABEL INDUSTRY
Management estimates that the total U.S. label market (excluding
non-customized labels sold primarily in office supply stores) had 1994 revenues
of approximately $8.5 billion. The pressure sensitive label segment had
estimated 1994 revenues of $3.8 billion, representing approximately 45% of the
overall U.S. label market. The Company competes in this segment and is the
largest manufacturer selling custom pressure sensitive labels to independent
distributors. The other major segment, glue-applied labels, had estimated 1994
revenues of $4.3 billion, representing approximately 50% of the overall market.
Management estimates that the more mature glue applied label segment is growing
at 2% annually, while pressure sensitive label market is growing at 10%
annually. The rapid growth in this market is attributable to several advantages
pressure sensitive labels have over traditional glue-applied labels, such as
reduced wrinkling and superior adhesion and durability.
A number of other factors have contributed to the rapid growth of pressure
sensitive labels including: (i) new government regulations requiring an increase
in the amount of information displayed on consumer and industrial products,
including food, bulk chemicals, household appliances and automobiles; (ii)
increased use of barcoding to track retail sales of consumer products and
business inventories in a wide variety of manufacturing industries; (iii)
continued demand from businesses of all types for targeted promotional material;
and (iv) continued need for manufacturers to reduce potential product
liabilities by providing consumers with more information on the proper usage of
products. Pressure sensitive labels are used by virtually all industries,
including airlines (baggage tags), automotive (warning labels), consumer
durables (operating instructions and warnings), food and beverage (product
labeling), health and beauty (product labeling), household chemicals (product
labeling and warnings), industrial chemicals (hazard warnings), pharmaceutical
(dosage information), retail (price and inventory data) and transportation and
distribution (logistics).
The pressure sensitive label industry is served by approximately 2,000
manufacturers, most of whom operate one production facility and maintain close
relationships with local and regional customers. The fact that many pressure
sensitive label customers are accustomed to conducting business with local
manufacturers, has contributed to the fragmentation of the industry. Due to
significant economies of scale achieved through consolidation, however, national
manufacturers have acquired small regional firms and integrated them into
national networks.
CUSTOM ENVELOPE INDUSTRY
The custom envelope market accounted for 65%, or $1.9 billion, of the
overall $3 billion U.S. envelope market. Custom envelopes are distinguished from
commodity envelopes by design, printing and other finishing features which are
tailored to specific customer needs. Custom envelope features include special
shapes, labels, multiple windows and flap lengths, often designed for
compatability with specific direct-mail insertion equipment, and a large variety
of paper and printing options designed to meet specific customer needs. Major
customers in the custom envelope segment include direct mail firms, financial
institutions, publishers, utilities and businesses using the mail for billing
and advertising purposes. Due to the specific value-added features of custom
envelopes, including complex graphics and envelope enhancements, products
generally have a higher average selling price, higher gross margins and are sold
to customers under one to three year fixed term contracts.
Manufacturers of custom and specialty envelopes are generally separated into
two groups. The first group is composed of a small number of large multi-plant
companies with sales in excess of $50 million who produce both commodity and
custom envelopes for the national market or broadly cover specific regional
markets. The rest of the market consists of smaller one-plant manufacturers with
sales ranging from $1 million to $25 million and which produce custom envelopes
for local and regional customers.
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BUSINESS
HISTORY
DEC's predecessor company was formed in 1989 by McCown De Leeuw, a private
investment firm specializing in buying and building middle market businesses.
Since its inception, DEC has pursued an acquisition strategy aimed at creating a
leading manufacturer of custom paper-based communications products targeting the
direct mail and data processing industries. McCown De Leeuw initiated this
investment strategy with the acquisition of NFC, a manufacturer of custom file
folders, in 1989. In 1992, NFC acquired Diversified Assembly, Inc., a
manufacturer of expanding envelopes, pockets, wallets and other products for the
professional office. In late 1992, NFC acquired Double Envelope Corporation, a
manufacturer and distributor of custom envelopes, catalog bind-in order forms
and pressure sensitive labels. NFC is headquartered in Atlanta, Georgia and
operates five manufacturing facilities.
Transkrit was established in 1938 as a privately owned producer of
spot-carbonized sheets supplied to business forms printers and binders. During
the following thirty years, Transkrit expanded from a single plant and product
company into a multi-plant operation supplying the pressure sensitive label and
business forms markets. In 1968, Transkrit began producing impact mailers with
the opening of a rotary press facility in Mount Vernon, New York. In 1980,
Transkrit was acquired by Maclean Hunter Ltd., a Canadian communications
company. Transkrit diversified its product line with the acquisition of Label
Art, Inc., a leading producer of custom pressure sensitive labels in 1986.
Transkrit increased its presence in the label market with the acquisition of
Short Run Labels, Inc., a 24-hour turnaround producer of custom pressure
sensitive labels in 1993. Transkrit increased its leadership position in the
impact mailer market with the acquisition of the mailer division of Wright
Business Forms, Inc. and Bedinghaus Communications, Inc. in 1991 and 1992,
respectively. In 1994, Transkrit identified certain non-core product lines, the
Pegboard Accounting and Tax Forms, which were subsequently sold. In an effort to
reduce costs in 1995, Transkrit closed its Brewster, New York manufacturing
facility and relocated its headquarters from Brewster, New York to Roanoke,
Virginia. Transkrit has manufacturing facilities across the United States.
Pursuant to the Stock Purchase Agreement, NFC has acquired Transkrit for
$86.4 million. The purchase price is subject to certain post-closing adjustments
for certain changes in Transkrit's working capital, other net assets and capital
expenditures from the amounts estimated at the closing of the Acquisition. The
Company is a leading manufacturer of solution-oriented paper-based products
primarily for the mailer, direct mail, custom pressure sensitive label and
custom envelope markets. The Company had pro forma LTM net sales and pro forma
EBITDA of $169.3 million and $23.8 million, respectively, for the twelve month
period ended March 31, 1996.
BUSINESS STRATEGY
The Company expects to strengthen its leadership position by focusing on the
following core business strategies:
-EXPAND MARKET FOR THE INFOSEAL-REGISTERED TRADEMARK- SYSTEM. Management
believes that the proliferation of laser and other non-impact printing
technologies has created a significant new marketing opportunity for the
Company's InfoSeal-Registered Trademark- mailer system.
InfoSeal-Registered Trademark-, which is compatible with laser and other
non-impact printers, allows customers to address a variety of mailing
requirements more cost effectively than traditional fold and insert
methods. To further broaden InfoSeal-Registered Trademark-'s potential
markets, the Company has recently developed a new desktop folder/sealer
which it expects will address the needs of a broad range of potential
customers.
-CONTINUED INVESTMENT IN GROWING MARKETS. The Company has invested
significant capital resources to develop products serving high growth niche
markets, including an estimated $8.0 million in the development of the
InfoSeal-Registered Trademark- system and an estimated $4.4 million in
state-of-the art equipment to enhance production capabilities for custom
pressure sensitive label products. Sales of these two product lines, which
accounted for 30% of the Company's pro forma 1995 net sales, achieved
compound annual net sales growth of 13% over the past two years.
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-EXPAND AND DEVELOP PRESENCE IN DIRECT MAIL INDUSTRY. The Acquisition will
broaden the Company's product and service offerings to the growing direct
mail industry. The Company intends to further develop its presence in this
market and has made significant capital investments designed to enhance its
product offerings for direct mail customers. The Company has recently
invested an estimated $5.9 million in state-of-the-art equipment to upgrade
and increase production capacity of catalog bind-in order forms and direct
mail personalization capabilities. These investments will improve the
Company's product and service offerings to its direct mail customers.
-CROSS-SELL PRODUCTS AND SERVICES. The Company has a dedicated direct sales
force through which it sells custom envelopes and direct mail products and
services and has strong relationships with its independent distributors
through which it sells mailer products and custom pressure sensitive
labels. As a result of the Acquisition, the Company will be able to
cross-sell a broader range of products through both of these well
established distribution channels.
-CONTINUED COST REDUCTIONS. The Company intends to continue to improve its
financial results through the rationalization of operations. The Company's
current management team has a successful track record of achieving cost
reductions through facility consolidation, improved management information
systems and the elimination of redundant corporate and administrative
expenses. In connection with the Acquisition, the Company expects to
realize approximately $2.3 million of annualized cost savings through raw
material purchasing efficiencies and reductions in headcount and operating
expenses.
-PURSUE COMPLEMENTARY PRODUCT LINE ACQUISITIONS. The Company plans to
pursue acquisitions which complement its existing product lines.
Specifically, the Company intends to acquire related direct mail product
and fulfillment businesses in order to expand the array of products and
services sold to its direct mail customers. To strengthen its leading
positions in other key markets, the Company plans to continue to pursue
acquisitions of small impact mailer and custom pressure sensitive label
manufacturers.
PRODUCTS AND SERVICES
The following chart displays pro forma net sales of the Company by product
category.
<TABLE>
<CAPTION>
PRO FORMA
SALES BY PRODUCT
CATEGORY
DECEMBER 31, 1995
---------------------
$ %
---------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Mailer Products.............................................................. $ 52,159 30.9
Direct Mail Products and Services............................................ 21,711 12.9
Custom Pressure Sensitive Labels............................................. 40,363 23.9
Custom Envelopes............................................................. 54,527 32.3
---------- ---------
Total Sales.............................................................. $ 168,760 100.0%
---------- ---------
---------- ---------
</TABLE>
MAILER PRODUCTS. The Company believes it is the largest U.S. manufacturer
of spot carbon impact mailers and has the largest installed base of laser and
other non-impact printer compatible mailer systems. Impact mailers are
ready-to-mail, multi-part spot carbon forms which are widely used to print
correspondence such as account statements, invoices, tax notices and utility and
medical bills, and can be printed without opening or sealing the envelope.
Non-impact mailers are laser printer compatible self-mailer forms which are
printed, folded, sealed and mailed as payroll checks, direct deposit statements
and vendor remittances. The Company's ability to produce mailers in all popular
sizes and with a wide variety of custom features enables it to offer a broad
line of high quality stock and custom mailers.
As the leading U.S. producer of impact mailers, the Company offers one of
the most complete product lines in the industry. For one-way (without a return
envelope) and two-way (with a return envelope) impact mailers, customers can
have mailers custom designed and manufactured utilizing any combination of
colors, sizes and opening features or can select from an inventory of over 150
different stock products. Management
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believes that the Company's ability to provide high quality color, complex and
innovative designs and creative design support for its products is among the
best in the industry. Management estimates that the Company has an impact mailer
market share of approximately 25%.
With its InfoSeal-Registered Trademark- product line, the Company is the
leader in the development of non-impact printed mailers which management
believes represent a significant growth opportunity.
InfoSeal-Registered Trademark- offers a turn-key solution using a patented
one-way or two-way self-mailer form which can be impact or non-impact printed,
then folded and sealed by the end user utilizing dedicated equipment. Tab
Products Co. currently markets the dedicated folding/sealing equipment which is
sold as part of the InfoSeal-Registered Trademark- system sold to moderate and
high-volume users. The Company believes that this equipment, which is the only
product currently available with easy-to-use water-based sealing technology and
which can only be used with proprietary InfoSeal-Registered Trademark- mailer
forms, enjoys an installed base of over 1400 units. The Company's
InfoSeal-Registered Trademark- end users include the United Parcel Service,
NYNEX Corporation, Automatic Data Processing, Inc. and Georgetown University
Medical Center. Later this year, the Company will begin selling its new line of
patented desk-top InfoSeal-Registered Trademark- machines, which the Company
believes will establish it as the sole provider of non-impact printer technology
to the currently untapped low volume user market. Management expects the desktop
unit to significantly expand the market for the InfoSeal-Registered Trademark-
system by targeting small businesses and satellite offices of large companies.
Management believes that the market for non-impact printed mailer systems will
experience significant growth in the near future. A broad range of corporations
and institutions are expected to use non-impact self-mailer systems as a cost
effective and laser printer compatible alternative to traditional methods for
various information processing requirements such as payment remittances, vendor
invoicing, payroll checks, direct deposit notices and monthly account
statements.
DIRECT MAIL PRODUCTS AND SERVICES. The Company offers a selection of
products sold exclusively to the direct mail industry, which include catalog
bind-in order forms, advertising inserts, coupons and promotional mailers. Often
these products include an integrated envelope or are structured such that the
order form can be folded into an envelope and mailed. The Company has developed
extensive customization capabilities enabling it to produce these inserts and
envelopes in a wide variety of sizes and styles on coated and uncoated paper
stock, using high quality lithography with options for complex multi-color
printing. The Company also provides direct mail fulfillment services, which
include personalization, addressing and mailing. To complement these direct mail
products, the Company's mailers, envelopes and labels are customized and sold
for use in direct mail applications. The Company's direct mail customers include
Bear Creek Direct (Harry & David), Frederick's of Hollywood, Inc., the American
Red Cross and American Bankers Insurance Group.
CUSTOM PRESSURE SENSITIVE LABELS. The Company is the largest U.S.
manufacturer of custom pressure sensitive labels sold to independent
distributors, focusing on customized high value-added products rather than
commodity labels. Operating out of five strategically located manufacturing
facilities, the Company offers a variety of value-added products aimed at short
and medium-run customer orders. Management believes that the Company is
recognized in the industry for its high quality products, excellent customer
service and an ability to respond quickly to time-sensitive customer orders. The
Company recently introduced Label Launch-TM- service, an on-line software
application which enables pressure sensitive label customers to electronically
process orders and transfer artwork directly to the Company's facilities,
thereby reducing pre-press set up time, order entry and shipping costs.
The Company's custom pressure sensitive label products are used by a wide
range of businesses and institutions in numerous end-use applications, including
mailing labels, promotional literature, inventory routing, packaging and retail
pricing. The Company's largest end-user markets are the retail, food and
beverage, health and beauty, toy manufacturing and chemical industries. The
Company also provides national 24-hour order processing for short production
runs requiring rapid turnaround. The Company's customers include distributors
such as Bank-N-Business Forms, Taylor Business Products and Standard Forms, Inc.
Direct customers include the Paralyzed Veterans of America, Boston Scientific
Corporation, Hasbro, Inc. and Sterilite, Inc. No single customer represented
greater than 10% of the Company's pro forma 1995 custom pressure sensitive label
net sales.
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CUSTOM ENVELOPES. The Company is a leading designer and manufacturer of
custom envelopes in the growing Southeastern U.S. regional market. The Company
has focused on the high value-added specialty segments of the envelope market,
placing a particular emphasis on the direct mail, photo-finishing by mail and
banking industries where it has established leadership positions. Almost all of
the Company's envelope products are specially printed or manufactured to
end-user specifications and generally have higher margins than blank commodity
envelopes. The Company also produces custom expanding envelopes, pockets,
wallets and other products for the professional office. These products are hand
assembled, medium to large sized folders used to file legal documents or store
and carry artwork. From its five production facilities, the Company manufactures
in excess of 2.5 billion envelopes per year.
SALES, DISTRIBUTION AND MARKETING
MAILER PRODUCTS. The Company markets mailers to approximately 5,000
independent distributors across the U.S. through nine regional sales managers.
Distributors, in turn, sell these products to the end-user. In 1995 independent
distributors accounted for approximately 91% of the Company's mailer product net
sales with the balance sold directly to end-use customers. In addition to the
independent distributor network, the Company benefits from the marketing efforts
of its corporate partners -- the Xerox Corporation and Tab Products Co. The
Xerox Supplies Group has recently selected the Company's
InfoSeal-Registered Trademark- system as the non-impact mailer system to be
marketed by its sales force. InfoSeal-Registered Trademark- equipment for high
and moderate volume users is marketed by Tab Products Co. which manufactures the
machines. Since InfoSeal-Registered Trademark- equipment can only be used with
InfoSeal-Registered Trademark- forms, the Company expects to realize significant
repeat form sales as the installed base of these systems grows. The Company will
continue to look for innovative, cost effective ways to attract customers,
including a plan to cross-sell products to selected customers through the
Company's direct sales force.
DIRECT MAIL PRODUCTS AND SERVICES. The Company primarily sells its direct
mail products through its seven person in-house sales force which solicits
business from direct marketing companies. The Company has in excess of 150
active customers. Given long term customer relationships and large average order
sizes, the Company's sales professionals, which average over 15 years of
industry experience, are compensated on a salaried basis.
CUSTOM PRESSURE SENSITIVE LABELS. The Company markets its custom pressure
sensitive labels to both independent distributors and directly to end-users.
Over the past 24 months the Company has conducted business with approximately
26,000 independent distributors, such as business forms companies, printing
brokers, printers and quick printers. Sales to independent distributors
collectively accounted for approximately 70% of pro forma 1995 net sales with
the top 20 distributor accounts accounting for approximately 10% of pro forma
1995 custom pressure sensitive label net sales. Direct sales customers
constitute the remaining 30%.
CUSTOM ENVELOPES. Due to the exacting specifications and high volume
requirements of the custom envelope customer, the Company sells these products
directly to end-users. The Company maintains a 34 person sales force which
primarily covers the Southeastern U.S. and averages 12 years of industry
experience. These sales people receive commissions determined by the
relationship between selling price and estimated full production cost. The
Company maintains a diverse customer base with the top 20 envelope accounts
providing 43% of total 1995 envelope net sales. Expanding envelopes, pockets and
wallets are sold primarily through independent distributors due to the smaller
order size, which is typical of sales of these products.
COMPETITION
The markets for the Company's products are highly fragmented and
competitive. Competition is based upon product breadth, geographic reach,
delivery time, product quality and customer service. Customer relationships in
the markets in which the Company competes tend to be long-term, and service and
familiarity with a customer's needs, as well as personal factors, are important
in building and maintaining such relationships. Competitors range from large
manufacturers to regional and local firms.
48
<PAGE>
MAILER PRODUCTS. Impact mailers are sold through two principal distribution
channels, direct to customers and to independent distributors. The direct
channel is dominated by large manufacturers, which include Wallace Computer
Services, Inc., Moore Corporation Limited, Uarco Business Forms and the Standard
Register Company. These manufacturers generally maintain long term relationships
and tend to offer a full range of business form products, with mailers generally
representing a small percentage of total sales to customers. The Company, which
is the leading supplier of impact mailer products with an estimated 25% market
share, sells its products primarily to independent distributors. The Company
believes that it is the only major supplier to independent distributors with an
estimated 60% market share. The remainder of the independent distributor channel
is composed of several competitors, none of which, the Company believes, have
more than a 5% market share.
The non-impact mailer market is comprised of three primary competitors: the
Company, Moore Corporation Limited and the Standard Register Company. These
three competitors offer self-mailer systems, that consist of one piece forms and
dedicated folder/sealer equipment and target medium and high-volume customers.
Management believes that the Company, through its patented
Infoseal-Registered Trademark- system, has the largest number of non-impact
self-mailer installations with over 1,400. The Company has recently developed a
patented low cost desktop folder/sealer machine to specifically address the low
volume small business segment. Management believes that it is the first
manufacturer to develop a self-mailer system targeting small businesses and
satellite offices of large companies.
DIRECT MAIL PRODUCTS AND SERVICES. Direct mail products and services are
primarily sold directly to end-users. Competitors which manufacture bind-in
catalog order forms and related direct mail products include Webcraft
Technologies, Inc., the Cyrill Scott Company, American In-Line Graphics, Inc.
(R.R. Donnelly & Sons Co.) and Web Inserts (World Color Press, Inc.). Other than
Webcraft, most competitors are single plant operations. The Company believes
that it is among the four largest suppliers of direct mail inserts and other
bind-in mailing products. The Company's direct mail fulfillment business
competes primarily with Communicolor (the Standard Register Company) and
ColorForms (Wallace Computer Services, Inc.).
CUSTOM PRESSURE SENSITIVE LABELS. Competitors in the custom label market
sell their products either directly to end-use customers or to independent
distributors. Those competitors that sell directly to end-users include the
Standard Register Company, Moore Corporation Limited, Uarco Business Forms and
Wallace Computer Services, Inc. These companies primarily produce stock labels
but also compete in the market for custom labels. The Company is recognized as
the market leader in the independent distribution channel. Major competitors in
this highly fragmented channel include Discount Labels, Inc., Data Labels, Inc.,
Continental Datalabel, Inc., Rittenhouse, Inc. and Lancer Labels, Inc.
Competitors in this channel are typically small regional, privately-owned
operators with a single production facility.
CUSTOM ENVELOPES. Due to the high bulk and weight characteristics of
envelopes, transportation and freight costs are generally an important component
of the total cost of envelope production. With transportation costs typically
accounting for 3% of total envelope production costs, long distance trade is
often limited to high value-added products. As a result, envelope manufacturers
generally focus production facilities on immediate regional markets. The Company
has a major presence in the Southeastern U.S. market, where management estimates
it has approximately 15% market share of the custom envelope market. The
Company's major competitors in this region are Atlantic Envelope Co. (National
Service Industries, Inc.), Allen Envelope Corp., Tri State Envelope Corp., Oles
Envelope Corp. and, to a lesser extent, Mail-Well Inc. and Westvaco Corp. Like
the Company, most of these competitors maintain an in-house sales force.
SUPPLIERS
The Company has a broad base of high quality, national suppliers. The
primary raw materials used by the Company are uncoated and coated papers,
plastic films, inks and adhesives. Paper represents the Company's single largest
raw material. Union Camp Corp., International Paper Co., Georgia-Pacific Corp.,
Kimberly-Clark Corp. and Appleton Paper are the largest paper suppliers for the
Company's transactional
49
<PAGE>
mailers, direct mail products and custom envelopes. In 1995, the Company
purchased paper from more than nine major suppliers. The Company's custom
pressure sensitive label business purchases paper and other key substrates from
Fasson and Flexcon Inc.
MANUFACTURING
MAILER PRODUCTS. Mailers are produced in three facilities located in
Roanoke, Virginia, Fort Smith, Arkansas and Sparks, Nevada, thereby allowing
cost-effective national distribution. In total, these facilities utilize 20 web
offset presses ranging in width from 20 1/2" to 30 1/2" to create rolls of
printed materials which are then further converted on 18 high-speed collators
into multiple ply mailer sets. Additional major pieces of equipment in these
plants include three MICR routing encryption and five
InfoSeal-Registered Trademark- converting lines.
DIRECT MAIL PRODUCTS AND SERVICES. Direct mail products are produced in two
facilities both of which are located in Roanoke, Virginia. One of these plants
utilizes four high volume heat-set, web offset printing presses to produce a
wide range of bind-in catalog order forms, advertising inserts and other direct
mail items. These presses range in web width from 26" to 38" and are equipped
with state-of-the-art, in-line finishing equipment to functionally customize
printed products. The other facility includes six impact printers, multiple ion
deposition engines and in jet printers to personalize mailers for direct mail
applications. This equipment is controlled by in-house software.
CUSTOM PRESSURE SENSITIVE LABELS. Pressure sensitive labels are produced in
five facilities located in Fort Smith, Arkansas, San Carlos, California,
Linthicum, Maryland, Wilton, New Hampshire and Roanoke, Virginia, which are
strategically positioned throughout the U.S. Three of these plants incorporate
28 traditional flexographic presses ranging in web width from 6 1/2" to 16",
which produce a full complement of label graphics, including process printing
and foil stamping. The other two plants are designed to meet quick response
label orders and utilize 29 highly customized letter presses designed to cost
effectively produce labels in small order quantities.
CUSTOM ENVELOPES. Custom envelopes are produced in four plants located
throughout the Company's core Southeastern U.S. regional market in Gainesville,
Florida, Louisville, Kentucky, Greenville, South Carolina and Roanoke, Virginia.
Production equipment at the four envelope plants includes eight high-speed web
folding machines with in-line flexographic printing capacity which can produce
finished, customized envelopes in one pass. In addition, these plants house 44
folding machines which convert die-cut blanks into finished envelopes. Other
equipment includes computer controlled high-speed die-cutters and a variety of
off-line printing equipment. Custom expanding envelopes, pockets, wallets and
other products for the professional office are produced at the facility in
Austell, Georgia, which incorporates a wide array of specialized die-cutters and
assembly equipment.
All of the Company's mailer, direct marketing and pressure sensitive label
facilities are supported by state of the art, electronic pre-press capabilities.
These services are also available to the Company's custom envelope plants via
electronic file transfer on the Company's frame relay based intranet. The
Company's pre-press design capability is composed of Apple MacIntosh and Mecca
hardware architecture.
FACILITIES
As of March 31, 1996 the Company operated manufacturing, warehouse and
distribution facilities in the U.S. with a total floor area of approximately
808,000 square feet. Of this footage, approximately 304,000 square feet are
leased and approximately 504,000 square feet are owned.
50
<PAGE>
The following table describes the manufacturing, warehouse and distribution
facilities of the Company as of March 31, 1996.
<TABLE>
<CAPTION>
SQUARE FEET
TRANSKRIT/ OWNED/ EXPIRATION -----------------
LOCATION NFC PRODUCT(1) LEASED(2) OF LEASE
- --------------- ---------- ------------- --------- ------------ (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ARKANSAS
Fort Smith Transkrit M, SM, D O 125
Fort Smith Transkrit L L 12/31/1997 20
CALIFORNIA
San Carlos Transkrit L L Monthly 24
FLORIDA
Gainesville NFC E O 52
GEORGIA
Atlanta NFC A L 8/31/2000 5
Austell NFC E L 9/1/2001 39
KENTUCKY
Louisville NFC E L 3/31/2000 70
MARYLAND
Linthicum Transkrit L L 6/30/2000 15
NEW HAMPSHIRE
Wilton Transkrit L O 79
NEVADA
Sparks Transkrit M L 11/30/1998 42
PENNSYLVANIA
Norristown NFC D,S L 4/30/2001 15
SOUTH CAROLINA
Greenville NFC E L 6/18/1997 46
VIRGINIA
Roanoke NFC E, DMI, L O 137
Roanoke Transkrit M, SM O 111
Salem Transkrit DMF L 1/31/1998 27
</TABLE>
- ------------------------------
1. DMF=Direct Mail Fulfillment; DMI=Direct Mail Inserts; D=Distribution
Warehouse; E=Envelopes; L=Labels; M=Mailers; S=Sales Office; SM=Stock
Mailers; A=Administrative
2. O=Owned
L=Leased
EMPLOYEES
As of March 31, 1996, the Company employed approximately 1,420 people, of
which 1,040 work in manufacturing facilities and 380 work in
corporate/administrative functions. None of the Company's employees are
unionized, and the Company believes its relations with employees are good.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Like similar companies, the Company's operations and properties are subject
to a wide variety of federal, state and local laws and regulations, including
those governing the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees. As such, the nature of the Company's operations exposes it to the
risk of claims with respect to environmental protection and health and safety
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims.
51
<PAGE>
In January 1988, the Company was notified by the United States Environmental
Protection Agency ("EPA") that it and 11 other parties are potentially liable
for costs incurred by the EPA in responding to the cleanup of the Dixie Caverns
Landfill Superfund Site in Roanoke County, Virginia. Subsequently, Roanoke
County expended $2.0 million to clean up a portion of the Dixie Cavern Landfill
Site and has filed suit against the Company and the 11 other potentially
responsible parties ("PRPs") for reimbursement of these cleanup costs. Although,
under Superfund, the PRPs may be jointly and severally liable for cleanup costs,
management believes that the Company's potential liability in connection with
the County's claim is de minimis, based upon the amount of waste attributable to
it in relation to the other parties. Management believes that the Company will
have no liability in connection with the remaining portion of the site, and that
the ultimate outcome of this matter will not have a material adverse impact on
the financial position or results of operations of the Company.
The EPA has also named the Company as one of a number of PRPs in connection
with the alleged disposal of hazardous substances at the Smiths Farm Landfill
Superfund Site in Kentucky. In February 1992, the Company and 35 other parties
entered into an alternative dispute resolution process ("ADRP") to allocate
liability. Subsequently, a number of the PRPs responsible for contributions of
waste to the site dropped out of the ADRP group. The remaining ADRP group
members, including the Company, have proposed a de minimis settlement to the
EPA, which, if accepted, would resolve the Company's liability in connection
with the site. Management believes that the ultimate outcome of this matter will
not have a material adverse impact on the financial position or results of
operations of the Company.
Although the Company does not anticipate that material expenditures will be
required to achieve or maintain compliance with, or resolve liability under,
environmental protection and occupational health and safety laws and
regulations, changing laws and regulations might affect the industries in which
the Company participates. Accordingly, there can be no assurance that additional
environmental, health or safety matters resulting in material liabilities or
expenditures will not be discovered or that, in the future, material
expenditures for environmental, health or safety matters will not be required by
changes in applicable laws or regulations.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors of NFC are elected annually by its shareholder to serve during the
ensuing year or until a successor is duly elected and qualified. Executive
officers of NFC are duly elected by its Board of Directors to serve until their
respective successors are elected and qualified. The following table sets forth
certain information with respect to the directors and executive officers of NFC
following the Acquisition.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --------- ------------------------------------------------
<S> <C> <C>
John D. Weil 48 Chairman of the Board of Directors
Robert M. Miklas 44 Director, President and Chief Executive Officer
David E. De Leeuw 52 Director
David E. King 37 Director
Glenn S. McKenzie 43 Director
Calvin Ingram 62 Director
Robert B. Webster 48 Executive Vice President and Chief Financial
Officer
William Britts 63 Senior Vice President/Sales and Marketing
Thomas J. Cobery 49 Senior Vice President/President-Label Art
Jack Resnick 49 Senior Vice President/President-Transkrit
</TABLE>
John D. Weil (48), Chairman of the Board of Directors of NFC since October
1995. In 1995, Mr. Weil joined McCown De Leeuw & Co. as an operating affiliate
to assist in portfolio management. From 1991 to 1994, Mr. Weil served as
President and Chief Executive Officer of American Envelope Company. Between 1983
and 1994, Mr. Weil served as a director of the Envelope Manufacturers
Association (the "EMA"), as Chairman of the EMA's Public Affairs Committee and
has served on its Technical, Training, Plant Operations and Finance Committees.
Mr. Weil also serves as a director of Specialty Paperboard, Inc., Tiara
Motorcoach Corporation, International Data Response Corporation and Sage
Enterprises, Inc.
Robert M. Miklas (44), Director, President and Chief Executive Officer of
NFC since June 1990. Mr. Miklas has been Director, President and Chief Executive
Officer of DEC since June 1990. Prior to joining DEC, Mr. Miklas worked for 15
years with the consumer packaging division of the Boise Cascade Corporation and
its successor, Sonoco Products Company.
David E. De Leeuw (52), Director of NFC since September 1989. Mr. De Leeuw
is a managing general partner of MDC Management Company II, L.P., which is the
general partner of McCown De Leeuw & Co. II, L.P. and McCown De Leeuw
Associates, L.P., MDC Management Company IIE, L.P., the general partner of
McCown De Leeuw & Co. Offshore (Europe), L.P. and MDC Management Company IIA,
L.P., the general partner of McCown De Leeuw & Co. Offshore (Asia), L.P. He
currently serves as a director of Victoria Mortgage Corporation, OSI Holdings
Corp., Nimbus CD International, Inc., Tiara Motorcoach Corporation and Papa
Gino's Inc.
David E. King (37), Director of NFC since April 1991. Mr. King is a general
partner of MDC Management Company II, L.P., which is the general partner of
McCown De Leeuw & Co. II, L.P. and McCown De Leeuw Associates, L.P., MDC
Management Company IIE, L.P., the general partner of McCown De Leeuw & Co.
Offshore (Europe), L.P. and MDC Management Company IIA, L.P., the general
partner of McCown De Leeuw & Co. Offshore (Asia), L.P. Mr. King has been
associated with McCown De Leeuw & Co. since 1990. He currently serves as a
director of OSI Holdings Corp., International Data Response Corporation, Nimbus
CD International, Inc., Fitness Holdings, Inc. and ASC Networks, Inc.
53
<PAGE>
Glenn S. McKenzie (43), Director of NFC since October 1992. Mr. McKenzie has
been President of Alpha Investments, Inc., a management consulting firm, since
October 1991. He currently serves as a director of Specialty Paperboard, Inc.,
Nimbus CD International, Inc., Exeter Health Resources, Inc. and Tiara
Motorcoach Corporation.
Calvin Ingram (62), Director of NFC since January 1995. Mr. Ingram has
served as Chairman of AmeriComm Direct Marketing since January 1991. Mr. Ingram
currently serves as a director of AmeriMarketing Group, AmeriComm Direct
Marketing, Associated Premium and National Association of Advertising
Distributors.
Robert B. Webster (48), Executive Vice President and Chief Financial Officer
of NFC since June 1995. Mr. Webster has been the Executive Vice President and
Chief Financial Officer of DEC since June 1995. Mr. Webster served as Vice
President and Chief Financial Officer of Sunds Defibrator North America, a paper
manufacturing and converting company from March 1991 to November 1994.
William Britts (63), Senior Vice President/Sales and Marketing of NFC since
October 1992. From October 1992 to June 1996, Mr. Britts served as a Vice
President of Sales and Marketing for DEC. He joined Double Envelope Company in
1958.
Thomas J. Cobery (49), Senior Vice President of NFC since June 1996. Mr.
Cobery has been President of Label Art, Inc. since November 1987.
Jack Resnick (49), Senior Vice President of NFC since June 1996 and
President of Transkrit since January 1991. Mr. Resnick was Chief Operating
Officer of Transkrit from January 1991 until June 1996.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for the year ended December 31, 1995 for the Chief Executive Officer
of NFC and each of the four other most highly compensated executive officers of
the Company. The compensation of Messrs. Miklas, Webster and Britts was paid by
NFC and the compensation of Messrs. Resnick and Cobery was paid by Transkrit.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
COMMON STOCK ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($)(1) OPTIONS (#) COMPENSATION ($)(2)
- ------------------------------------------------- ------------ ----------- -------------- -------------------
<S> <C> <C> <C> <C>
Robert M. Miklas ................................
President and Chief Executive Officer 169,937 14,559 -0- 696(3)
Robert B. Webster ...............................
Executive Vice President and Chief Financial
Officer 84,571 30,600 -0- -0-
William Britts ..................................
Senior Vice President/Sales and Marketing 149,512 12,729 -0- 4,138(4)
Thomas J. Cobery ................................
Senior Vice President/President - Label Art 154,265 57,279 -0- 34,815(5)
Jack Resnick ....................................
Senior Vice President/President - Transkrit 185,328 34,731 -0- 43,400(6)
</TABLE>
- ------------------------
(1) Includes amounts earned and accrued in 1995.
54
<PAGE>
(2) Represents the dollar value of annual compensation not properly
characterized as salary or bonus. Following Commission rules, perquisites
and other personal benefits which do not exceed 25% of the total perquisites
and other personal benefits for each of the named executive officers have
been omitted from these footnotes.
(3) Consists of the taxable portion of group term life insurance premiums for
Mr. Miklas paid by NFC.
(4) Consists of the taxable portion of medical insurance premiums for Mr. Britts
paid by NFC.
(5) Includes bonus payments to Mr. Cobery under the Label Art, Inc. Equity Share
Plan (the "Equity Share Plan"). Pursuant to the Equity Share Plan, Mr.
Cobery has received 138,468 equity shares ("Equity Shares") simulating
ownership in Label Art, Inc. The Equity Share Plan provides that if Label
Art, Inc. declares a dividend on its common stock at any time during which a
participant has been allocated Equity Shares, the participant shall receive
a bonus, equal to the dividend he or she would have received if his or her
Equity Shares were common stock of Label Art, Inc. The Equity Share Plan
will be terminated concurrently with the consummation of the Transactions.
Mr. Cobery sold 4,898 Equity Shares back to Label Art, Inc. in February,
1994 for which he received $22,114.
(6) Includes $27,416 representing dividends on 220.5 equity shares ("Stock
Credits") simulating economic ownership in Transkrit issued to Mr. Resnick
under his employment agreement with Transkrit, dated January 9, 1991 (the
"Employment Agreement"). As holder of Stock Credits, Mr. Resnick is entitled
to receive amounts equal to the cash dividends that he would have received
had he owned a number of shares of common stock of Transkrit equal to the
number of Stock Credits then credited to Mr. Resnick's account. The
Employment Agreement will be terminated concurrently with consummation of
the Transactions. Also includes $15,984 representing reimbursement for
relocation expenses.
DIRECTOR COMPENSATION
Mr. Weil received $2,000 per meeting of the Board of Directors of NFC for
each of the first two quarterly meetings in 1995 and was reimbursed for his
travel and out-of-pocket expenses incurred in connection with his attendance at
such meetings. Mr. Ingram received $2,000 per meeting of the Board of Directors
of NFC in 1995, plus reimbursement for his travel and out-of-pocket expenses
incurred in connection with attendance at such meetings. Non-employee directors
of NFC are expected to receive $2,000 per regularly scheduled meeting of the
Board of Directors, $1,000 per special meeting of the Board of Directors and
$500 per Committee meeting plus, in each case, reimbursement for travel and
out-of-pocket expenses incurred in connection with attendance at all such
meetings. No other director of NFC is expected to receive compensation from NFC
for performance of services as a director of NFC (other than reimbursement for
travel and out-of-pocket expenses incurred in connection with attendance at
Board of Director meetings.)
STOCK OPTION PLAN AND OTHER BENEFIT PLANS AND ARRANGEMENTS
DEC INTERNATIONAL, INC. 1996 STOCK INCENTIVE PLAN
DEC adopted the DEC International, Inc. 1996 Stock Incentive Plan (the "1996
Plan") on June 28, 1996. The 1996 Plan is administered by the Compensation
Committee of the Board of Directors (the "Board") of DEC (or such other Board
committee as may be designated by the Board) (the "Committee"). Under the 1996
Plan, the Committee may grant or award (a) stock options (which may be either
incentive stock options ("ISOs"), within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or stock options other than ISOs),
(b) stock appreciation rights granted in conjunction with stock options or
independently, (c) restricted stock, (d) bonuses or other compensation payable
in stock and/or (e) other stock-based awards to executive and other key salaried
employees, including officers, as well as to consultants of NFC and its
subsidiaries and affiliates designated by the Committee, but excluding non-
employee directors and members of the Committee.
55
<PAGE>
RETIREMENT PLANS
NFC sponsors two defined benefit plans, the Employees' Retirement Plan of
National Fiberstok Corporation, which covers Mr. Britts and the Transkrit
Corporation Employees' Pension Plan, which covers Mr. Resnick. In addition, NFC
has entered into a Management Supplemental Retirement Agreement with Mr. Britts,
which provides a supplemental benefit to the Employees' Retirement Plan of
National Fiberstok Corporation.
EMPLOYEES' RETIREMENT PLAN OF NATIONAL FIBERSTOK CORPORATION The Employees'
Retirement Plan of National Fiberstok Corporation (the "NFC Plan") provides an
annual retirement benefit equal to .75% of "final average monthly compensation,"
plus .65% of "final average monthly compensation" in excess of monthly "covered
compensation," multiplied by years of credited service up to 35. Final average
monthly compensation is determined by averaging a participant's compensation
over the 60 consecutive months for which compensation was highest during the 120
months of employment ending on December 31, 1994 (or the average for such
shorter period of months if less than 60). Monthly covered compensation under
the NFC Plan is the average of the taxable wage base in effect under the Social
Security Act over the 35 year period ending with the year in which the
participant reaches his or her social security retirement age, divided by
twelve.
The following table gives the estimated annual benefit payable upon
retirement for participants in the NFC Plan:
NFC PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ---------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
125,000........................... 23,618 31,490 39,363 47,235 55,108
150,000........................... 28,868 38,490 48,113 57,735 67,358
175,000........................... 28,868 38,490 48,113 57,735 67,358
200,000........................... 28,868 38,490 48,113 57,735 67,358
225,000........................... 28,868 38,490 48,113 57,735 67,358
250,000........................... 28,868 38,490 48,113 57,735 67,358
275,000........................... 28,868 38,490 48,113 57,735 67,358
300,000........................... 28,868 38,490 48,113 57,735 67,358
325,000........................... 28,868 38,490 48,113 57,735 67,358
350,000........................... 28,868 38,490 48,113 57,735 67,358
375,000........................... 28,868 38,490 48,113 57,735 67,358
400,000........................... 28,868 38,490 48,113 57,735 67,358
425,000........................... 28,868 38,490 48,113 57,735 67,358
450,000........................... 28,868 38,490 48,113 57,735 67,358
475,000........................... 28,868 38,490 48,113 57,735 67,358
500,000........................... 28,868 38,490 48,113 57,735 67,358
</TABLE>
Benefits shown above are computed as a single life annuity beginning at age
65 and are not subject to any deduction for offset amounts other than Social
Security as described above.
Compensation for purposes of the NFC Plan is the total monthly earnings paid
to a participant, which includes salary and bonus, as shown in columns (c) and
(d) on the Summary Compensation Table; provided, however, compensation in excess
of $150,000 is disregarded.
The estimated years of credited service for purposes of calculating benefits
under the NFC Plan for Mr. Britts is 35.
56
<PAGE>
MANAGEMENT SUPPLEMENTAL RETIREMENT AGREEMENT NFC has entered into a
Management Supplemental Retirement Agreement ("SERP") with Mr. Britts which is
not qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended ("Code"). The SERP provides an annual benefit equal to the benefit which
Mr. Britts would have been entitled to receive under the terms of the NFC Plan
in effect as of December 31, 1988, if it had continued in effect until his
benefit commencement date, less the greater of (i) the benefit which Mr. Britts
will actually receive under the NFC Plan or (ii) the benefit which Mr. Britts
would have been entitled to receive on his benefit commencement date under the
terms of the NFC Plan, as amended and restated as of January 1, 1989, with no
further amendment.
The following table gives the estimated annual benefit payable upon
retirement to Mr. Britts under the SERP:
SERP TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ---------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
125,000........................... 6,785 9,047 11,308 9,686 8,063
150,000........................... 9,035 12,047 15,058 12,936 10,813
175,000........................... 16,535 22,047 27,558 26,686 25,813
200,000........................... 24,035 32,047 40,058 40,436 40,813
225,000........................... 31,535 42,047 52,558 54,186 55,813
250,000........................... 32,339 43,119 53,898 55,660 57,421
275,000........................... 32,339 43,119 53,898 55,660 57,421
300,000........................... 32,339 43,119 53,898 55,660 57,421
325,000........................... 32,339 43,119 53,898 55,660 57,421
350,000........................... 32,339 43,119 53,898 55,660 57,421
375,000........................... 32,339 43,119 53,898 55,660 57,421
400,000........................... 32,339 43,119 53,898 55,660 57,421
425,000........................... 32,339 43,119 53,898 55,660 57,421
450,000........................... 32,339 43,119 53,898 55,660 57,421
475,000........................... 32,339 43,119 53,898 55,660 57,421
500,000........................... 32,339 43,119 53,898 55,660 57,421
</TABLE>
Benefits shown above are computed as a single life annuity beginning at age
65 and are not subject to any deduction for offset amounts other than Social
Security, as described under the description of the NFC Plan above.
Compensation covered by the SERP is the same as compensation covered under
the NFC Plan.
The estimated years of credited service for purposes of calculating benefits
under the SERP for Mr. Britts is 35.
TRANSKRIT CORPORATION EMPLOYEES' PENSION PLAN The Transkrit Corporation
Employees' Pension Plan (the "Transkrit Plan") provides an annual benefit equal
to .4% of "average final compensation" multiplied by benefit service completed
before July 15, 1971, plus .7% of "average final compensation" multiplied by
benefit service completed after July 15, 1971, plus an additional 3% of "average
final compensation" multiplied by benefit service earned while an employee of
Short Run Labels, Inc., if any. Average final compensation is determined by
averaging a participant's compensation for the five consecutive calendar years
during the ten years immediately preceding retirement, termination of
employment, or death that give the highest average.
57
<PAGE>
The following table gives the estimated annual benefit payable upon
retirement for participants in the Transkrit Plan:
TRANSKRIT PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
100,000........ 10,500 14,000 17,500 21,000 24,500
125,000........ 13,100 17,500 21,900 26,300 30,600
150,000........ 15,800 21,000 26,300 31,500 36,800
175,000........ 18,000 24,200 30,300 36,400 42,500
200,000........ 20,300 27,300 34,300 41,300 48,300
225,000........ 22,000 29,700 37,400 45,100 52,700
250,000........ 22,000 29,700 37,400 45,100 52,700
275,000........ 22,000 29,700 37,400 45,100 52,700
300,000........ 22,000 29,700 37,400 45,100 52,700
325,000........ 22,000 29,700 37,400 45,100 52,700
350,000........ 22,000 29,700 37,400 45,100 52,700
375,000........ 22,000 29,700 37,400 45,100 52,700
400,000........ 22,000 29,700 37,400 45,100 52,700
425,000........ 22,000 29,700 37,400 45,100 52,700
450,000........ 22,000 29,700 37,400 45,100 52,700
475,000........ 22,000 29,700 37,400 45,100 52,700
500,000........ 22,000 29,700 37,400 45,100 52,700
</TABLE>
Compensation covered by the Transkrit Plan is equal to the annual amount
paid to a participant by Transkrit which includes base salary, overtime and
commissions, as shown in the Summary Compensation Table, but excluding bonuses
as shown in the Summary Compensation Table; provided, however, compensation in
excess of $150,000 is disregarded.
The estimated years of credited service for purposes of calculating benefits
for Mr. Resnick is five. The current amount of compensation covered by the
Transkrit Plan for Mr. Resnick is $190,890.
Benefits shown above are computed as a single life annuity beginning at age
65 and are not subject to any offset amounts.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
NFC and Robert M. Miklas entered into an agreement dated as of June 28, 1996
which sets forth certain terms of the employment of Mr. Miklas as President and
CEO of NFC and DEC. This agreement provides for an annual base salary which may
be increased pursuant to an agreed upon plan subject to the approval of the
Compensation Committee of the Board of Directors of DEC and NFC. Mr. Miklas is
eligible to receive bonus compensation as determined from time to time by the
Board of Directors of DEC and NFC. In the event that NFC terminates Mr. Miklas'
employment under certain circumstances, Mr. Miklas shall be entitled to
continuation of his base compensation for a period of one year.
NFC and Jack Resnick entered into an agreement dated as of June 28, 1996
which sets forth certain terms of the employment of Mr. Resnick as Senior Vice
President of NFC and DEC and President of Chief Executive Officer -- Transkrit
Division. This agreement provides for an annual base salary which may be
increased pursuant to an agreed upon plan subject to the approval of the
Compensation Committee of the Board of Directors of DEC or NFC. The agreement
also provides a plan under which bonus compensation is to be awarded. In the
event that NFC terminates Mr. Resnick's employment under certain circumstances,
Mr. Resnick shall be entitled to continuation of his base compensation for a
period of one year.
58
<PAGE>
Label Art and Thomas J. Cobery entered into an agreement dated as of March
13, 1986 which sets forth certain terms of the employment of Mr. Cobery as
President of Label Art. The agreement provides for base compensation and bonus
compensation. The rate of such compensation is subject to yearly modification
upon the agreement of Mr. Cobery and Label Art. If Mr. Cobery and Label Art are
unable to agree by March 30 of any year as to any such modification, the
agreement will cease to be in force. Termination of employment by Label Art
under certain circumstances will entitle Mr. Cobery to receive his base
compensation and insurance benefits for a period of six months. If such
termination occurs after the eighth month of any year, Mr. Cobery will also be
entitled to his bonus payment for that year.
NFC and Robert B. Webster entered into an agreement on June 9, 1995 which
sets forth certain terms of employment of Mr. Webster as Executive Vice
President and Chief Financial Officer of NFC. The agreement provides for an
annual base salary that is subject to annual upward adjustment at the discretion
of the Board of Directors of NFC. The agreement also provides for bonus
compensation based upon an agreed upon plan. In the event that NFC terminates
Mr. Webster's employment for any reason under certain circumstances, Mr. Webster
shall be entitled to his base compensation for a period of nine months.
William C. Britts and NFC are parties to an agreement dated as of April 5,
1983 which sets forth certain terms of the employment of Mr. Britts as Senior
Vice President of NFC. The agreement provides for base compensation which may be
increased by the Board of Directors of NFC. NFC may not terminate Mr. Britts'
employment without cause (as defined in such agreement). Cause included
misappropriation of funds, improper personal gain, neglect or change of control.
SECURITY OWNERSHIP
NFC
The authorized capital stock of NFC consists of 300,000 shares of common
stock, par value $.01 per share, of which 283,807 shares are issued and
outstanding, all of which have voting rights and are presently held by DEC.
DEC
The authorized capital stock of the DEC consists of (i) 4,000,000 shares of
Class A common stock, par value $.0001 per share, of which 2,512,551 shares are
issued and outstanding, and which have voting rights. In addition, DEC has
issued options to purchase 247,814 shares of Class A common stock to the
management of DEC and NFC pursuant to the 1996 Plan and warrants to purchase
132,240 shares of Class A common stock to certain investors, all of which are
outstanding; (ii) 300,000 shares of Class B common stock, par value $.0001 per
share, of which no shares are issued and outstanding, and which have no voting
rights; and (iii) 250,000 shares of Cumulative Redeemable Preferred Stock, par
value .0001 per share, of which 10,000 shares are issued and outstanding.
59
<PAGE>
The following table sets forth as of the consummation of the Transactions
the number and percentage of shares of DEC Class A Common Stock capital stock
beneficially owned by (i) each person known to the Company to be the beneficial
owner of more than 5% of any class of DEC's equity securities, (ii) each
director of the Company or DEC, and (iii) all directors and executive officers
of DEC as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE OF
OWNERSHIP DEC CLASS A
OF DEC CLASS A COMMON STOCK
COMMON STOCK (1) OUTSTANDING
------------------- ---------------
<S> <C> <C>
McCown De Leeuw & Co. II, L.P. ................................................ 1,403,104 55.8%
c/o McCown De Leeuw & Company
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
McCown De Leeuw Associates, L.P. .............................................. 755,603 30.1%
c/o McCown De Leeuw & Company
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
MDC/JAFCO Ventures, L.P. ...................................................... 52,174 2.1%
c/o McCown De Leeuw & Company
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
Glenn McKenzie ................................................................ 9,294 0.4%
24 Beach Plum Way
Hampton, NH 03842
Robert Miklas ................................................................. 57,736 2.3%
4982 Carol Lane
Atlanta, GA 30327
All directors and executive officers as a group................................ 101,672 4.0%
</TABLE>
- --------------------------
(1) Class A Common Stock is the only class of capital stock of DEC which has
voting rights. Beneficial ownership is determined in accordance with the
rules of the Commission. Shares of capital stock subject to options,
warrants and convertible securities currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, the persons named in the table above have sole
voting and investment power with respect to all shares of capital stock
indicated as beneficially owned by them.
60
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION ARRANGEMENTS
In connection with the Acquisition, certain members of management received
substantial payments for their equity interests in Transkrit. Messrs. Neubauer
and Resnick received an aggregate of approximately $9.7 million at the closing
of the Acquisition for their shares of Transkrit and pursuant to other
equity-based arrangements.
ADVISORY SERVICES AGREEMENT
NFC maintains a Advisory Services Agreement (the "Advisory Services
Agreement") with MDC Management Company II, L.P. ("MDC Management"), an
affiliate. Under the Advisory Services Agreement, MDC Management provides
certain consulting, financial, and managerial functions to the Company for a fee
initially in an amount not to exceed $350,000 in any fiscal year, which amount
may be increased to an amount not to exceed $500,000 in any fiscal year with the
approval of the members of the Board of Directors of the Company who do not have
a direct financial interest in any person receiving such payments under the
Advisory Services Agreement. MDC Management has agreed to subordinate its right
to receive such fees in the event of an acceleration of maturity of the Notes or
a bankruptcy, liquidation or insolvency proceeding involving the Company. In
1995, $187,500 was paid. NFC has recorded a liability of $562,000 on its
consolidated balance sheet for the year ended December 31, 1995 related to the
unpaid portion of these costs as of December 31, 1995, which portion was paid
upon consummation of the Transactions. The Advisory Services Agreement expires
December 31, 2000 and is renewable annually thereafter, unless terminated by NFC
for justifiable cause, as defined. NFC believes that the fees received for the
professional services rendered are at least as favorable to NFC as those which
could be negotiated with a third party.
61
<PAGE>
DESCRIPTION OF NEW BANK CREDIT FACILITY
The Company and its subsidiaries entered into a loan agreement with a
financial institution (the "Lender") pursuant to which the Lender provides to
the Company and its subsidiaries a revolving credit facility (the "New Bank
Credit Facility"). Subject to borrowing base limitations and the satisfaction of
customary borrowing conditions, the Company and its subsidiaries are permitted
to borrow up to $20.0 million under the New Bank Credit Facility. The terms of
such New Bank Credit Facility are substantially as follows:
The New Bank Credit Facility enables the Company and its subsidiaries to
obtain revolving credit loans from time to time for working capital and general
corporate purposes in an aggregate amount outstanding not to exceed the lesser
of (x) $20.0 million and (y) 80% of eligible accounts receivable plus 50% of
eligible inventory, in each case less any outstanding letter of credit
liability.
The revolving credit loans bear interest, depending on the Company's
election, at either (i) the Prime Rate (as defined therein) plus 1% per annum or
(ii) LIBOR (as defined therein) plus 2.25% per annum. The Company is obligated
to pay an annual fee of 0.5% per annum of the amount of the average unused
commitments, payable quarterly in arrears. The New Bank Credit Facility will
terminate on the fifth anniversary of the date of the consummation of the
Initial Offering, unless terminated sooner upon an event of default (as defined
therein), and outstanding revolving credit loans will be payable on such date or
such earlier date as may be accelerated following the occurrence of any event of
default.
The New Bank Credit Facility ranks PARI PASSU in right of payment with the
Notes and is secured by a lien on all of the Company's and its subsidiaries'
accounts receivable, inventory, patents, trademarks and other intangibles and
the proceeds thereof. The New Bank Credit Facility contains various restrictive
covenants and events of default customary for a transaction of this type.
62
<PAGE>
DESCRIPTION OF THE NOTES
The New Notes will be issued, and the Old Notes were issued under an
Indenture dated as of June 15, 1996 (the "Indenture") among the Company, the
Guarantors and Wilmington Trust Company, as trustee (the "Trustee"). For
purposes of the following summary, the Old Notes and the New Notes shall be
collectively referred to as the "Notes." The terms and conditions of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 as in effect on the date of the
Indenture. The following statements are summaries of the provisions of the Notes
and the Indenture and do not purport to be complete. Such summaries make use of
certain terms defined in the Indenture and are qualified in their entirety by
express reference to the Indenture. The definitions of certain capitalized terms
used in the following summary are set forth below under "-- Certain
Definitions." A copy of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Notes will be senior obligations of the Company, ranking PARI PASSU in
right of payment with all other senior obligations of the Company. Each
Guarantee will be a senior obligation of the applicable Guarantor, ranking PARI
PASSU in right of payment with all other senior obligations of such Guarantor.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as paying agent and registrar for the Notes. The Notes may be presented
for registration of transfer and exchange at the offices of the registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any paying agent and registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered addresses of the Holders. Any Old Notes that remain
outstanding after the completion of the Exchange Offer, together with the New
Notes issued in connection with the Exchange Offer, will be treated as a single
class of securities under the Indenture. See "The Exchange Offer; Old Notes
Registration Rights."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100,000,000 and will
mature on June 15, 2002. Interest on the Notes will accrue at the rate of
11 5/8% PER ANNUM and will be payable semi-annually in cash on each June 15 and
December 15, commencing on December 15, 1996, to the Persons who are registered
Holders at the close of business on the June 1 and December 1, respectively,
immediately preceding the applicable interest payment date. Interest on the
Notes will accrue from and including the most recent date to which interest has
been paid or, if no interest has been paid, from and including the date of
issuance.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
OPTIONAL REDEMPTION.
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after June 15, 1999, upon not less than 30
nor more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on June 15 of the years set forth below, plus, in each case,
accrued and unpaid interest, if any, thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
1999................................................................................................. 105.813%
2000................................................................................................. 102.906%
2001 and thereafter.................................................................................. 100.000%
</TABLE>
63
<PAGE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time, or from time
to time, on or prior to June 15, 1999, the Company may, at its option, use the
net cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to $35.0 million aggregate principal amount of Notes at a redemption
price equal to 111.625% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of redemption; provided that at least 65%
of the principal amount of Notes originally issued remains outstanding
immediately after giving effect to any such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 60 days after the consummation
of any such Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of either DEC
International, Inc. ("Holdings") or the Company pursuant to a registration
statement filed with and declared effective by the Commission in accordance with
the Securities Act; PROVIDED that, in the event of a Public Equity Offering by
Holdings, Holdings contributes to the capital of the Company the portion of the
net cash proceeds of such Public Equity Offering necessary to pay the aggregate
redemption price, plus accrued and unpaid interest, if any, to the redemption
date of the Notes to be redeemed pursuant to the preceding paragraph.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not then listed on a national
securities exchange, on a PRO RATA basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; and PROVIDED,
FURTHER, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a PRO RATA basis or on as nearly a PRO RATA basis
as is practicable (subject to the procedures of The Depository Trust Company),
unless such method is otherwise prohibited. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the paying agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior basis, jointly and
severally, to each Holder and the Trustee, the full and prompt performance of
the Company's obligations under the Indenture and the Notes, including the
payment of principal of and interest on the Notes. The obligations of each
Guarantor are limited to the maximum amount which, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under Federal or state law. Each Guarantor
that makes a payment or distribution under its Guarantee shall be entitled to a
contribution from each other Guarantor in an amount PRO RATA, based on the net
assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. See "-- Certain Covenants -- Merger, Consolidation and
Sale of Assets." In the event all of the Capital Stock of a Guarantor is sold by
the Company and/or one or more of its Subsidiaries and the sale complies with
the provisions set forth in "-- Certain Covenants -- Limitation on Asset Sales,"
such Guarantor's Guarantee will be released.
64
<PAGE>
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations under the Indenture and the Notes, and the aggregate net
assets, earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
SECURITY
The Notes will be secured by a first priority Lien on and security interest
in (a) all of the issued and outstanding Capital Stock of (i) each Guarantor on
the Issue Date and (ii) each other Subsidiary of the Company that becomes a
Guarantor after the Issue Date to the extent owned by the Company or any of its
Subsidiaries and (b) so long as a Default or an Event of Default shall have
occurred and be continuing, all dividends and distributions with respect to
Capital Stock of a Guarantor.
The Indenture and the Security Documents will provide that the Capital Stock
of a Guarantor will be released from the Lien of the Indenture and the Security
Documents in the event all of the Capital Stock of such Guarantor is sold by the
Company and/or one or more of its Subsidiaries and the sale complies with the
provisions set forth in "-- Certain Covenants -- Limitation on Asset Sales."
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the date of
purchase.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law (the "Change of Control Payment
Date"). A Change of Control Offer shall remain open for a period of 20 business
days or such longer period as may be required by law. Holders electing to have a
Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the paying agent for the Notes at the
address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to the Company's obligation to make a Change of Control Offer.
Restrictions in the Indenture described herein on the ability of the Company and
the Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
their property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require repurchase of the Notes, and there can be
no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such repurchase. Such restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of the Company by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
65
<PAGE>
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); PROVIDED, HOWEVER, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Guarantor may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and any
Restricted Subsidiary may incur Acquired Indebtedness, in each case, if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than (a) 1.75 to 1.0, if the date of such incurrence is on or prior
to June 15, 1997, (b) 2.00 to 1.0, if the date of such incurrence is after June
15, 1997 and on or prior to June 15, 1998, or (c) 2.25 to 1.0, if the date of
such incurrence is after June 15, 1998.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by the
Company or a Restricted Subsidiary (whether or not such Indebtedness is assumed
by the acquiring Person) shall be deemed incurred at the time the person becomes
a Restricted Subsidiary or at the time of the asset acquisition, as the case may
be.
The Company will not, and will not permit any Guarantor to incur any
Indebtedness (other than Acquired Indebtedness which is subordinated in right of
payment to other Acquired Indebtedness which is incurred in connection with the
same Asset Acquisition as such subordinated Acquired Indebtedness) which by its
terms (or by the terms of any agreement governing such Indebtedness) is
subordinated in right of payment to any other Indebtedness of the Company or
such Guarantor unless such Indebtedness is also by its terms (or by the terms of
any agreement governing such Indebtedness) made expressly subordinate in right
of payment to the Notes or the Gurantee of such Guarantor, as the case may be,
pursuant to subordination provisions that are substantively identical to the
subordination provisions of such Indebtedness (or such agreement) that are most
favorable to the holders of any other Indebtedness of the Company or such
Guarantor, as the case may be.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not cause
or permit any of the Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's or Holding's Capital Stock to holders of such
Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or Holdings or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock, (c) make any
principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company or
a Guarantor that is subordinate or junior in right of payment to the Notes or
such Guarantor's Guarantee, as the case may be, or (d) make any Investment
(other than a Permitted Investment) (each of the foregoing actions set forth in
clauses (a), (b) (c) and (d) being referred to as a "Restricted Payment"), if at
the time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the covenant described
under "-- Limitation on Incurrence of Additional Indebtedness" or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount
66
<PAGE>
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the Board of
Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); PLUS (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company; PLUS (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (y), any net cash proceeds
from (A) a Public Equity Offering to the extent used to redeem the Notes and (B)
the Parent Capital Contribution); PLUS (z) an amount equal to the consolidated
net Investments on the date of Revocation made by the Company and/or any of the
Restricted Subsidiaries in any Subsidiary of the Company that has been
designated an Unrestricted Subsidiary after the Issue Date upon its
redesignation as a Restricted Subsidiary in accordance with the covenant
described under "-- Limitation on Designations of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend or
redemption payment within 60 days after the date of declaration of such dividend
or the applicable redemption if the dividend or redemption payment, as the case
may be, would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company or Holdings, either (A) solely in
exchange for shares of Qualified Capital Stock of the Company or (B) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company or a Guarantor
that is subordinate or junior in right of payment to the Notes or such
Guarantor's Guarantee, as the case may be, either (A) solely in exchange for
shares of Qualified Capital Stock of the Company, or (B) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of (I) shares of Qualified Capital Stock of the
Company or (II) Refinancing Indebtedness; (4) the making of payments by the
Company to Holdings in an amount not in excess of the federal, state and local
income tax liability that the Company and its Subsidiaries would have been
liable for if the Company, together with its Subsidiaries, had filed its
consolidated tax return on a stand-alone basis; PROVIDED that such payments
shall be made by the Company no earlier than five days prior to the date on
which Holdings is required to make its payments to the Internal Revenue Service
or state or local taxing authorities, as the case may be; (5) the making of
payments by the Company to Holdings to pay operating expenses, not to exceed
$500,000 in any fiscal year; (6) the making of payments, by the Company to
Holdings to purchase Capital Stock of Holdings beneficially owned by directors,
officers and employees of the Company or any of its Subsidiaries pursuant to the
terms of employment contracts or employee benefit plans of the Company or any of
its Subsidiaries not to exceed $250,000 in any fiscal year; (7) if no Default or
Event of Default shall have occurred and be continuing, the making of payments
by the Company to Holdings to pay regularly scheduled dividends on the Holdings
Preferred Stock; and (8) if no Default or Event of Default shall have occurred
and be continuing, the making of other Restricted Payments not to exceed $2.0
million in the aggregate. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2), (6), (7) and (8) shall be included in such calculation.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any of
the Restricted Subsidiaries to, consummate an Asset Sale unless (a) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (b) at least 80% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition; and (c) upon the consummation of an Asset Sale,
the Company shall apply, or cause such
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Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 270 days of receipt thereof either (i) to the extent the properties
or assets that were the subject of such Asset Sale secured Indebtedness
permitted to be incurred under the Indenture pursuant to a Lien permitted under
the Indenture, to prepay any such Indebtedness and effect a permanent reduction
in the availability of borrowing under the agreement(s) governing such
Indebtedness, (ii) to make an investment in properties or assets that replace
the properties or assets that were the subject of such Asset Sale or in
properties or assets that will be used in the business of the Company and the
Restricted Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"), or (iii) a combination of
prepayment and investment permitted by the foregoing clauses (c)(i) and (c)(ii).
On the 271st day after an Asset Sale or such earlier date, if any, as the Board
of Directors of the Company determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (c)(i), (c)(ii) and (c)(iii)
of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (c)(i), (c)(ii) and
(c)(iii) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by the Company or such Restricted Subsidiary, as the case may
be, to make an offer to purchase (a "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 45 days following
the applicable Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA
basis, that principal amount of Notes equal to the Net Proceeds Offer Amount at
a price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest, if any, thereon to the date of purchase; PROVIDED,
HOWEVER, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance with this
covenant. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0
million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or the Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
the Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (a) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (b) such
Asset Sale is for fair market value; PROVIDED that any consideration not
constituting Replacement Assets received by the Company or any of the Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two immediately preceding paragraphs.
Notice of each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes with an aggregate principal amount exceeding the Net Proceeds Offer
Amount, Notes of tendering Holders will be purchased on a PRO RATA basis (based
on principal amounts tendered). A Net Proceeds Offer shall remain open for a
period of 20 business days or such longer period as may be required by law.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of: (i) applicable law; (ii) the
Indenture; (iii) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary; (iv) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (v)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; or (vi) an agreement governing
Refinancing Indebtedness incurred to Refinance the Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clause (ii), (iv) or (v)
above; PROVIDED, HOWEVER, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are no less favorable
to the Holders in any material respect as determined by the Board of Directors
of the Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in the applicable
agreement referred to in such clause (ii), (iv) or (v).
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of the Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary) or permit
any Person (other than the Company or a Wholly Owned Restricted Subsidiary) to
own any Preferred Stock of any Restricted Subsidiary.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of the Restricted Subsidiaries, whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (a) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes or such Guarantee as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (b) in
all other cases, the Notes and the Guarantees are equally and ratably secured,
except for (i) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date (and any extentions,
replacements or renewals thereof covering property or assets secured by such
Liens on the Issue Date); (ii) Liens securing the Notes and the Guarantees;
(iii) Liens of the Company or a Restricted Subsidiary on assets of any
Restricted Subsidiary; (iv) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; PROVIDED, HOWEVER, that such Liens (x) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of the Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (v) Permitted Liens.
MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries), whether as an entirety or substantially as an entirety to any
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Person unless: (a) either (i) the Company shall be the surviving or continuing
corporation or (ii) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and the Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a corporation
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture, the Security
Documents to which the Company is a party and the Registration Rights Agreement
on the part of the Company to be performed or observed; (b) immediately after
giving effect to such transaction and the assumption contemplated by clause
(a)(ii)(y) above (including giving effect to any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (i)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (ii) shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "-- Limitation on
Incurrence of Additional Indebtedness"; (c) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (a)(ii)(y) above (including, without limitation, giving effect to any
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (d) the Company or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable provisions
of the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
in which the Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, lease or transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Indenture
and the Notes with the same effect as if such surviving entity had been named as
such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of the Indenture described
under "-- Limitation on Asset Sales") will not, and the Company will not cause
or permit any Guarantor to, consolidate with or merge with or into any Person
other than the Company or another Guarantor unless: (a) the entity formed by or
surviving any such consolidation or merger (if other than the Guarantor) or to
which such sale, lease, conveyance or other disposition shall have been made is
a corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia; (b) such entity assumes by
supplemental indenture all of the obligations of the Guarantor under its
Guarantee and any Security Documents to which such Guarantor is a party; (c)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (d) immediately after giving
effect to such transaction and the use of any net proceeds therefrom on a PRO
FORMA basis, the Company could satisfy the provisions of clause (b) of the first
paragraph of this covenant. Any merger or consolidation of a Guarantor with and
into the Company (with the Company being the surviving entity) or another
Guarantor need only comply with clause (d) of the first paragraph of this
covenant.
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LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
their respective Affiliates (each an "Affiliate Transaction"), other than (i)
Affiliate Transactions permitted under paragraph (b) of this covenant and (ii)
Affiliate Transactions on terms that are no less favorable to the Company on the
applicable Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the Board of Directors of the Company, such approval to be evidenced
by a Board Resolution stating that such Board of Directors has determined that
such transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $5.0 million, the Company shall, prior
to the consummation thereof, obtain a favorable opinion as to the fairness of
such transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary as determined in good faith by the Company's Board of Directors; (ii)
transactions exclusively between or among the Company and any of the Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by the Indenture; (iii)
Restricted Payments permitted by the Indenture; (iv) payments by the Company to
MDC Entities pursuant to the terms of the Advisory Services Agreement initially
in an amount not to exceed $350,000 in any fiscal year, which amount may be
increased to an amount not to exceed $500,000 in any fiscal year with the
approval of the members of the Board of Directors of the Company who do not have
a direct financial interest in any Person receiving such payments under the
Advisory Services Agreement; and (v) the purchase by the Company of notes
payable by shareholders of Holdings from MDC Entities in an aggregate amount not
to exceed $685,000; PROVIDED that any such purchase shall be a Restricted
Payment for purposes of the covenant described under "-- Limitation on
Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of the Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary that
is not a Guarantor, or if the Company or any of the Restricted Subsidiaries
shall organize, acquire or otherwise invest in or hold an Investment in another
Restricted Subsidiary having total consolidated assets with a book value in
excess of $500,000, then such transferee or acquired or other Restricted
Subsidiary shall (a) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes and the Indenture on the terms set forth in the Indenture and
(b) deliver to the Trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable obligation of
such Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of the Indenture.
REPORTS TO HOLDERS. The Company will deliver to the Trustee within 15 days
after the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of 314(a) of the
TIA.
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LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a)
no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b)
the Company would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of
such Designation) in an amount (the "Designation Amount") equal to the sum
of (i) fair market value of the Capital Stock of such Subsidiary owned by
the Company and the Restricted Subsidiaries on such date and (ii) the
aggregate amount of other Investments of the Company and the Restricted
Subsidiaries in such Subsidiary on such date; and
(c)
the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Incurrence of Additional
Indebtedness" at the time of Designation (assuming the effectiveness of such
Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "-- Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount. The Indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including of any undertaking,
agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except, in the case of
clause (x) or (y), to the extent permitted under the covenant described under
"-- Limitation on Restricted Payments."
The Indenture will further provide that the Company may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation"),
whereupon such Subsidiary shall then constitute a Restricted Subsidiary, if:
(a)
no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b)
all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred
at such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
EVENTS OF DEFAULT
The following events will be defined in the Indenture as "Events of
Default":
(a)
the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days;
(b)
the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer);
(c)
a default in the observance or performance of any other covenant or
agreement contained in the Indenture or the Security Documents which
default continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be remedied)
from the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes
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(except in the case of a default with respect to the covenant described
under "-- Certain Covenants -- Merger, Consolidation and Sale of Assets",
which will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(d)
a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness now exists or is created after the Issue Date, which
default (i) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness after any applicable grace period provided
in such Indebtedness on the date of such default (a "payment default") or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a payment default or the maturity of which has been so
accelerated, aggregates at least $5.0 million;
(e)
one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of the
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(f)
certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries;
(g)
any Guarantee of a Significant Subsidiary ceases to be in full force
and effect or any Guarantee of a Significant Subsidiary is declared
to be null and void and unenforceable or any Guarantee of a Significant
Subsidiary is found to be invalid or any Guarantor which is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason of
release of such Guarantor in accordance with the terms of the Indenture); or
(h)
except as contemplated by their terms, any of the Security Documents
ceases to be in full force or effect or ceases to give the Trustee,
in any material respect, the Liens, rights, powers and privileges purported
to be created thereby.
If an Event of Default (other than an Event of Default specified in clause
(f) above) shall occur and be continuing, the Trustee or the Holders of at least
25% in principal amount of outstanding Notes may declare the principal of,
premium, if any, and accrued and unpaid interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration", and the
same shall become immediately due and payable. If an Event of Default specified
in clause (f) above occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding Notes
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (a) if the rescission would not
conflict with any judgment or decree, (b) if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) of the description of
Events of Default above, the Trustee shall have received an officers'
certificate and an opinion of counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
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Holders of the Notes may not enforce the Indenture, the Security Documents
or the Notes except as provided in the Indenture and under the TIA. Subject to
the provisions of the Indenture relating to the duties of the Trustee, the
Trustee is under no obligation to exercise any of its rights or powers under the
Indenture or the Security Documents at the request, order or direction of any of
the Holders, unless such Holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the then outstanding
Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, and satisfied all of its obligations with
respect to the Notes, except for (a) the rights of Holders to receive payments
in respect of the principal of, premium, if any, and interest on the Notes when
such payments are due, (b) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payments,
(c) the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (d) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "-- Events
of Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (a) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in United States dollars, non-callable United States government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (ii) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (c) in the case of Covenant Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (d) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (e) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which
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the Company or any of its Subsidiaries is bound; (f) the Company shall have
delivered to the Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; (g) the Company shall
have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with; (h) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (i) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (a) either (i) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Company has paid all other sums payable under the Indenture by the Company;
and (c) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture and the Security Documents for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an opinion of counsel. Other modifications and amendments of the Indenture and
the Security Documents may be made with the consent of the Holders of a majority
in principal amount of the then outstanding Notes issued under the Indenture,
except that, without the consent of each Holder affected thereby, no amendment
may: (a) reduce the amount of Notes whose Holders must consent to an amendment;
(b) reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any Notes; (c) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (d) make any
Notes payable in money other than that stated in the Notes; (e) make any change
in provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(f) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto; (g) modify or change any provision of the
Indenture or the related definitions affecting ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; (h) release any
Guarantor from any of its
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obligations under its Guarantee or the Indenture otherwise than in accordance
with the terms of the Indenture or (i) release or adversely affect the ranking
of any Lien on assets or property securing the Notes except in compliance with
the provisions of the Indenture and the Security Documents.
GOVERNING LAW
The Indenture and the Security Documents will provide that the Indenture,
the Security Documents, the Notes and the Guarantees will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it by the Indenture, and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company or a
Guarantor, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee will be permitted to engage in other
transactions; PROVIDED that if the Trustee acquires any conflicting interest as
described in the TIA, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms to be used in
the Indenture. Reference is made to the form of Indenture for the full
definition of all such terms, as well as any other terms used herein for which
no definition is provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed by the Company or a Restricted Subsidiary in connection
with the acquisition of assets from such Person and in each case not incurred in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.
"ADVISORY SERVICES AGREEMENT" means the Advisory Services Agreement dated as
of October 16, 1992 among MDC Management Company II, L.P., MDC Management
Company and the Company, as the same may be amended from time to time.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning set forth under "-- Certain
Covenants -- Limitation on Transactions with Affiliates."
"ASSET ACQUISITION" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into the Company or any
Restricted Subsidiary, or (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
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"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
the Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of (a) any Capital
Stock of any Restricted Subsidiary; or (b) any other property or assets of the
Company or any Restricted Subsidiary other than in the ordinary course of
business; PROVIDED, HOWEVER, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or the
Restricted Subsidiaries receive aggregate consideration of less than $350,000,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "-- Certain
Covenants -- Merger, Consolidation and Sale of Assets" (iii) disposals or
replacements of obsolete equipment in the ordinary course of business and (iv)
the sale, lease, conveyance, disposition or other transfer by the Company or any
Restricted Subsidiary of assets or property to one or more Restricted
Subsidiaries.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"CAPITAL STOCK" means (a) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (b) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (c) commercial paper maturing no more than
one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (d)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any United States branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (e)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (a) above entered into with any bank
meeting the qualifications specified in clause (d) above; and (f) investments in
money market funds which invest substantially all their assets in securities of
the types described in clauses (a) through (e) of this definition.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (a) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company or Holdings to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in
compliance with the provisions of the Indenture) other than Permitted Holder(s);
(b) the approval by the holders of Capital Stock of the Company or Holdings, as
the case may be, of any plan or proposal for the liquidation or dissolution of
the Company or Holdings, as the case may be, (whether or not otherwise in
compliance with the provisions of the Indenture); (c) any Person or Group (other
than the Permitted Holders(s)) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the aggregate
ordinary voting
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power represented by the issued and outstanding Capital Stock of the Company or
Holdings; or (d) the replacement of a majority of the Board of Directors of the
Company or Holdings over a two-year period from the directors who constituted
the Board of Directors of the Company or Holdings, as the case may be, at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company or
Holdings, as the case may be, then still in office who either were members of
such Board of Directors at the beginning of such period or whose election as a
member of such Board of Directors was previously so approved.
"CHANGE OF CONTROL OFFER" has the meaning set forth under "-- Change of
Control."
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth under "-- Change
of Control."
"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means National Fiberstok Corporation.
"CONSOLIDATED EBITDA" means, for any period, the sum (without duplication)
of (a) Consolidated Net Income and (b) to the extent Consolidated Net Income has
been reduced thereby, (i) all income taxes of the Company and the Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the ordinary
course of business), (ii) Consolidated Interest Expense and (iii) Consolidated
Non-cash Charges, LESS any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for the Company and the
Restricted Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA (including any PRO FORMA expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) basis for the period of
such calculation to (a) the incurrence or repayment of any Indebtedness of the
Company or any of the Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (b) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Company or any of the
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Company or the Restricted Subsidiary, as the
case may be, had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed
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Charge Coverage Ratio," (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate PER ANNUM
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (ii) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (iii) notwithstanding clause
(i) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate PER ANNUM resulting after
giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to the Company for any
period, the sum, without duplication, of (a) Consolidated Interest Expense
(including any premium or penalty paid in connection with redeeming or retiring
Indebtedness of the Company and the Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness), plus
(b) the product of (i) the amount of all dividend payments on the Holdings
Preferred Stock and any series of Preferred Stock of the Company (other than
dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid
or accrued during such period times (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated federal, state and local income tax rate of such Person, expressed
as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company for any
period, the sum of, without duplication: (a) the aggregate of the interest
expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii) the net costs
under Interest Swap Obligations, (iii) all capitalized interest and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company for any period,
the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary or is merged or consolidated with the
Company or any Restricted Subsidiary, (d) the net income (but not loss) of any
Restricted Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such Person,
(f) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued), and (g) in the case of a successor
to the Company by consolidation or merger or as a transferee of the Company's
assets, any net income (or loss) of the successor corporation prior to such
consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person; PROVIDED that the Consolidated Net Worth of any Person
shall exclude the effect of any non-cash charges relating the acceleration of
stock options or similar securities of such Person or another Person with which
such Person is merged or consolidated.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charges constituting an extraordinary item or loss
or any such charge which requires an accrual of or a reserve for cash charges
for any future period).
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"COVENANT DEFEASANCE" has the meaning set forth under "-- Legal Defeasance
and Covenant Defeasance."
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"DESIGNATION" has the meaning set forth under "-- Certain Covenants --
Limitation on Designations of Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair market value shall be
determined by the Board of Directors of the Company acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the Company delivered
to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GUARANTOR" means (a) each of the Company's Subsidiaries as of the Issue
Date and (b) each of the Company's Subsidiaries that in the future executes a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture as a Guarantor; provided that any Person constituting a
Guarantor as described above shall cease to constitute a Guarantor when its
Guarantee is released in accordance with the terms of the Indenture.
"HOLDINGS" has the meaning set forth under "-- Redemption -- Optional
Redemption upon Public Equity Offerings."
"HOLDINGS PREFERRED STOCK" means the $10.0 million aggregate liquidation
preference of 9.0% Preferred Stock of Holdings issued on the Issue Date.
"INCUR" has the meaning set forth under "-- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness."
"INDEBTEDNESS" means with respect to any Person, without duplication, (a)
all Obligations of such Person for borrowed money, (b) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all Capitalized Lease Obligations of such Person, (d) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 120 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (e) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (f) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (a) through (e) above and clause (h) below,
(g) all Obligations of any other Person of the type referred to in clauses (a)
through (f) above which are secured by any Lien on any property or asset of such
Person, the amount of such Obligation being deemed to be the lesser of the fair
market value of such
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property or asset or the amount of the Obligation so secured, (h) all
Obligations under currency agreements and interest swap agreements of such
Person and (i) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the
Company.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (a) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (b) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"INITIAL PURCHASERS" means, collectively, BT Securities Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
such that, after giving effect to any such sale or disposition, it ceases to be
a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Capital Stock of such Restricted Subsidiary not sold or disposed
of.
"ISSUE DATE" means the date of original issuance of the Notes.
"LEGAL DEFEASANCE" has the meaning set forth under "-- Legal Defeasance and
Covenant Defeasance."
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"MDC ENTITIES" means collectively McCown DeLeeuw & Co. II, LP, McCown
DeLeeuw Associates, LP and MDC/JAF CO Vendors, LP and any of their respective
Affiliates.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of the Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset
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Sale and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any post closing adjustments or liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"NET PROCEEDS OFFER" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Asset Sales."
"NET PROCEEDS OFFER AMOUNT" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning set forth under "--
Certain Covenants -- Limitation on Asset Sales."
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning set forth under "--
Certain Covenants -- Limitation on Asset Sales."
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PARENT CAPITAL CONTRIBUTION" means the equity capital contribution of
approximately $7.4 million made by Holdings to the Company on the Issue Date
with a portion of the proceeds from the issuance of the Holdings Preferred
Stock.
"PERMITTED HOLDER" means each of the general partners of MDC Management
Company II, LP, MDC Management Company IIE, LP and MDC Management Company IIA,
LP and any Person controlled by one or more of such general partners.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(a)
Indebtedness under the Notes, the Indenture and the Guarantees;
(b)
Indebtedness incurred pursuant to the Revolving Credit Facility in an
aggregate principal amount at any time outstanding not to exceed the
greater of (i) the sum of (x) 80.0% of the net book value of accounts receivable
of the Company and its Restricted Subsidiaries and (y) 60.0% of the net book
value of the inventory of the Company and its Restricted Subsidiaries and (ii)
$20.0 million, in each case, reduced by any required permanent repayments (which
are accompanied by a corresponding permanent commitment reduction) thereunder;
(c)
Interest Swap Obligations of the Company or a Guarantor covering
Indebtedness of the Company or any of the Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary (other than a Guarantor)
covering Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that
such Interest Swap Obligations are entered into to protect the Company and the
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation relates;
(d)
Indebtedness of a Restricted Subsidiary to the Company or to another
Restricted Subsidiary for so long as such Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien held by a
Person other than the Company or a Restricted Subsidiary; provided that if as of
any date any Person other than the Company or a Restricted Subsidiary owns or
holds any such Indebtedness or holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(e)
Indebtedness of the Company to a Restricted Subsidiary for so long as
such Indebtedness is held by a Restricted Subsidiary, in each case
subject to no Lien; PROVIDED that (i) any Indebtedness of the Company to any
Restricted Subsidiary that is not a Guarantor is unsecured and subordinated,
pursuant to a written
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agreement, to the Company's obligations under the Indenture and the Notes and
(ii) if as of any date any Person other than a Restricted Subsidiary owns or
holds any such Indebtedness or holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(f)
Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is
extinguished within two business days of incurrence;
(g)
Indebtedness of the Company or any of the Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(h)
Refinancing Indebtedness;
(i)
Capitalized Lease Obligations of the Company outstanding on the Issue
Date;
(j)
Capitalized Lease Obligations and Purchase Money Indebtedness of the
Company or any of the Restricted Subsidiaries (and any refinancings
thereof) not to exceed $7.5 million at any one time outstanding; and
(k)
additional Indebtedness of the Company or any of the Guarantors in an
aggregate principal amount not to exceed $5.0 million at any one time
outstanding (which Indebtedness may, but need not, be incurred under the
Revolving Credit Facility).
"PERMITTED INVESTMENTS" means (a) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Company or a Restricted Subsidiary, (b) Investments in the Company by any
Restricted Subsidiary; PROVIDED that any Indebtedness evidencing any such
Investment held by a Restricted Subsidiary that is not a Guarantor is unsecured
and subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (c) investments in cash and Cash Equivalents;
(d) loans and advances to employees and officers of the Company or any of the
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1.0 million at any one time outstanding; (e)
Interest Swap Obligations entered into in the ordinary course of the Company's
or the Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture; (f) Investments in Unrestricted Subsidiaries not to exceed $1.5
million at any one time outstanding; (g) Investments in Persons other than
Subsidiaries not to exceed $500,000 at any one time outstanding; (h) Investments
in securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and (i) Investments made by the Company or the
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Asset Sales" covenant.
"PERMITTED LIENS" means the following types of Liens:
(a)
Liens for taxes, assessments or governmental charges or claims either (i)
not delinquent or (ii) contested in good faith by appropriate proceedings
and as to which the Company or a Restricted Subsidiary, as the case may be,
shall have set aside on its books such reserves as may be required pursuant to
GAAP;
(b)
statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made in respect thereof;
(c)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing
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letters of credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d)
judgment Liens not giving rise to an Event of Default;
(e)
easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or any
of the Restricted Subsidiaries;
(f)
any interest or title of a lessor under any Capitalized Lease Obligation;
provided that such Liens do not extend to any property or assets which is
not leased property subject to such Capitalized Lease Obligation;
(g)
Liens securing Purchase Money Indebtedness of the Company or any
Restricted Subsidiary; PROVIDED, HOWEVER, that (i) the Purchase Money
Indebtedness shall not be secured by any property or assets of the Company or
any Restricted Subsidiary other than the property and assets so acquired and
(ii) the Lien securing such Indebtedness shall be created within 90 days of such
acquisition;
(h)
Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(i)
Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset and
set-off;
(j)
Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under the Indenture;
(k)
Lien on accounts receivable, inventory, patents, trademarks and other
intangibles and proceeds thereof of the Company and the Restricted
Subsidiaries securing Indebtedness under the Revolving Credit Facility; and
(l)
Liens securing Acquired Indebtedness incurred in accordance with the
covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness;" PROVIDED that (i) such Liens secured
such Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (ii) such
Liens do not extend to or cover any property or assets of the Company or of any
of the Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary and are no more favorable
to the lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PUBLIC EQUITY OFFERING" has the meaning set forth under "-- Redemption --
Optional Redemption upon Public Equity Offerings."
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness the net proceeds of which
are used for the purchase of property or assets acquired in the normal course of
business by the Person incurring such Indebtedness.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
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"REFERENCE DATE" has the meaning set forth under "-- Certain Covenants --
Limitation on Restricted Payments."
"REFINANCE" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness" covenant (other than pursuant to clause (b), (c),
(d), (e), (f), (g), (j) or (k) of the definition of Permitted Indebtedness), in
each case that does not (i) result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company and the Restricted Subsidiaries in connection
with such Refinancing) or (ii) create Indebtedness with (x) a Weighted Average
Life to Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (y) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; PROVIDED that (1) if such
Indebtedness being Refinanced is Indebtedness of the Company or a Guarantor,
then such Refinancing Indebtedness shall be Indebtedness solely of the Company
and/or such Guarantor and (2) if such Indebtedness being Refinanced is
subordinate or junior to the Notes or a Guarantee, then such Refinancing
Indebtedness shall be subordinate to the Notes or such Guarantee, as the case
may be, at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Guarantors and the Initial
Purchasers.
"REPLACEMENT ASSETS" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Asset Sales."
"RESTRICTED PAYMENT" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Restricted Payments."
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Designations of Unrestricted Subsidiaries." Any such Designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"REVOCATION" has the meaning set forth under "-- Certain Covenants --
Limitation on Designations of Unrestricted Subsidiaries."
"REVOLVING CREDIT FACILITY" means the Credit Agreement dated as of June 28,
1996, between the Company, one or more of the Guarantors and Heller Financial,
Inc., together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (PROVIDED that such increase in borrowings is permitted by the
covenant described under "-- Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness") or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
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which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property.
"SECURITY DOCUMENTS" means, collectively, each of the securities pledge
agreements between the Company or one of its Subsidiaries, as the case may be,
and the Trustee pursuant to which capital stock of the Guarantors will be
pledged to secure the Notes in accordance with the provisions of the Indenture
and all other instruments evidencing or creating any security interest in favor
of the Trustee for the benefit of the Holders, as the same may be amended from
time to time in accordance with their terms.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"SUBSIDIARY", with respect to any Person, means (a) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (b) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"SURVIVING ENTITY" has the meaning set forth under "-- Certain Covenants --
Merger, Consolidation and Sale of Assets."
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
which all the outstanding voting securities (other than in the case of a foreign
Restricted Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by the Company or another Wholly Owned Restricted Subsidiary.
OLD NOTES REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, NFC and the Guarantors have
agreed to file with the Commission the Exchange Offer Registration Statement on
an appropriate form under the Securities Act with respect to an offer to
exchange the Old Notes for the New Notes. Upon the effectiveness of the Exchange
Offer Registration Statement, NFC will offer to the holders of Old Notes who are
able to make certain representations the opportunity to exchange their Old Notes
for New Notes. If (a) NFC is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (b) any holder
of Old Notes notifies NFC on or prior to the 30th day following the Issue Date
that (i) due to a change in applicable law or policy it is not entitled to
participate in the Exchange Offer, (ii) due to a change in applicable law or
policy it may not resell the New Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such holder or (iii) it owns Old Notes acquired directly from NFC or
an affiliate of NFC, NFC and the Guarantors will file with the Commission the
Shelf Registration Statement to cover resales of each Transfer Restricted Note
(as defined) by the holder thereof. NFC and the Guarantors will use their best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing, a
"Transfer Restricted Note" means each Old
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Note until (a) the date on which such Old Note has been exchanged by a person
other than a broker-dealer for a New Note in the Exchange Offer, (b) following
the exchange by a broker-dealer in the Exchange Offer of an Old Note for a New
Note, the date on which such Old Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (c) the date on which
such New Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement, (d) the day on
which such Old Note is eligible for sale to the public without volume or manner
of sale restrictions under Rule 144(k) under the Securities Act, or (e) such Old
Note ceases to be outstanding.
Under existing Commission interpretations, the New Notes would, in general,
be freely transferable after the Exchange Offer without further registration
under the Securities Act; provided that in the case of broker-dealers
participating in the Exchange Offer, a prospectus meeting the requirements of
the Securities Act will be delivered upon resale by such broker-dealer in
connection with resales of the New Notes. NFC and the Guarantors have agreed,
for a period of 180 days after consummation of the Exchange Offer, to make
available a prospectus meeting the requirements of the Securities Act to any
such broker-dealer for use in connection with any resale of any New Notes
acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus
to purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of Notes who wishes to exchange such Old Notes for New Notes in
the Exchange Offer will be required to make certain representations, including
representations that (a) any New Notes to be received by it will be acquired in
the ordinary course of its business, (b) it has no arrangement with any person
to participate in the distribution of the New Notes and (c) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of NFC, or, if it is
an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
New Notes. If the holder is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
The Registration Rights Agreement provides that: (a) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, NFC and the
Guarantors will file the Exchange Offer Registration Statement with the
Commission on or prior to the 30th day after the Issue Date, (b) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
NFC and the Guarantors will use their best efforts to have the Exchange Offer
Registration Statement declared effective by the Commission on or prior to the
120th day after the Issue Date, (c) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, NFC will commence the Exchange
Offer and use its best efforts to issue, on or prior to 20 business days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission, New Notes in exchange for all Old Notes tendered
prior thereto in the Exchange Offer and (d) if obligated to file the Shelf
Registration Statement, NFC and the Guarantors will file the Shelf Registration
Statement prior to the later of (i) 60 days after the Issue Date or (ii) 30 days
after such filing obligation arises and use their best efforts to cause the
Shelf Registration Statement to be declared effective by the Commission on or
prior to 90 days after the filing thereof; PROVIDED that if NFC has not
commenced the Exchange Offer within 120 days of the Issue Date, NFC and the
Guarantors will file the Shelf Registration with the Commission on or prior to
the 121st day after the Issue Date. NFC and the Guarantors shall use their best
efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended until the third anniversary of the Issue Date or such
shorter prior that will terminate when all the Transfer Restricted Notes covered
by the Shelf Registration Statement have been sold pursuant thereto.
If (a) NFC fails to file any of the registration statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such registration statements are not declared
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effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) NFC fails to consummate the
Exchange Offer within 20 business days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter, subject to certain exceptions, ceases to be effective
or usable in connection with the Exchange Offer or resales of Transfer
Restricted Notes, as the case may be, during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above, a "Registration Default"), then the interest rate on Transfer
Restricted Notes will increase ("Additional Interest"), with respect to the
first 90-day period immediately following the occurrence of such Registration
Default by 0.5% PER ANNUM and will increase by an additional 0.5% per annum with
respect to each subsequent 90-day period until such Registration Default has
been cured, up to a maximum amount of 1.0% PER ANNUM. Following the cure of all
Registration Defaults, the accrual of Additional Interest will cease and the
interest rate will revert to the original rate.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material anticipated federal income tax
consequences of the issuance of New Notes and the Exchange Offer is based upon
the provisions of the Internal Revenue Code of 1986, as amended, the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. The following
summary is not binding on the Internal Revenue Service ("IRS") and there can be
no assurance that the IRS will take a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Company from the IRS on any tax matters relating to the New Notes or the
Exchange Offer. This discussion is for general information only and does not
purport to address all of the possible federal income tax consequences or any
state, local or foreign tax consequences of the acquisition, ownership and
disposition of the Old Notes, the New Notes or the Exchange Offer. It is limited
to investors who will hold the Old Notes and the New Notes as capital assets and
does not address the federal income tax consequences that may be relevant to
particular investors in light of their unique circumstances or to certain types
of investors (such as dealers in securities, insurance companies, financial
institutions, foreign corporations, partnerships, trusts, nonresident
individuals, and tax-exempt entities) who may be subject to special treatment
under federal income tax laws.
INDEBTEDNESS
The Old Notes and the New Notes should be treated as indebtedness of the
Company. In the unlikely event the Old Notes or the New Notes were treated as
equity, the amount treated as a distribution on any such Old Note or New Note
would first be taxable to the holder as dividend income to the extent of the
Company's current and accumulated earnings and profits, and would next be
treated as a return of capital to the extent of the holder's tax basis in the
Old Notes or New Notes, with any remaining amount treated as a gain from the
sale of an Old Note or a New Note. In addition, in the event of equity
treatment, amounts received in retirement of an Old Note or a New Note might in
certain circumstances be treated as a dividend, and the Company could not deduct
amounts paid as interest on such Old Notes or New Notes. The remainder of this
discussion assumes that the Old Notes and the New Notes will constitute
indebtedness.
EXCHANGE OFFER
The exchange of the Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an "exchange" because the New Notes should not be
considered to differ materially in kind or extent from the Old Notes. Rather,
the New Notes received by a holder of the Old Notes should be treated as a
continuation of the Old Notes in the hands of such holder. As a result, there
should be no federal income tax consequences to holders exchanging the Old Notes
for the New Notes pursuant to the Exchange Offer, and the holding period of New
Notes in the hands of a holder should include the holding period of the Old
Notes exchanged into such New Notes.
INTEREST
A holder of an Old Note or a New Note will be required to report stated
interest on the Old Note and the New Note as interest income in accordance with
the holder's method of accounting for tax purposes. Because the Old Notes were
issued at par there is no original issue discount pursuant to the de minimis
exception to the "original issue discount" rules.
TAX BASIS IN OLD NOTES AND NEW NOTES
A holder's tax basis in an Old Note will generally be the holder's purchase
price for the Old Note. If a holder of an Old Note exchanges the Old Note for a
New Note pursuant to the Exchange Offer, the tax basis of the New Note
immediately after such exchange should equal the holder's tax basis in the Old
Note immediately prior to the exchange.
DISPOSITION OF OLD NOTES OR NEW NOTES
The sale, exchange, redemption or other disposition of an Old Note or a New
Note, except in the case of an exchange pursuant to the Exchange Offer (see the
above discussion), generally will be a taxable event. A holder generally will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of any property received upon such sale, exchange,
redemption or other taxable disposition
89
<PAGE>
of the Old Note or the New Note (except to the extent attributable to accrued
interest) and (ii) the holder's adjusted tax basis in such debt instrument. Such
gain or loss will be capital gain or loss, and will be long term if the Old
Notes or the New Notes have been held for more than one year at the time of the
sale or other disposition.
PURCHASERS OF OLD NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Old Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount," and "amortizable bond premium." Any such purchaser should consult its
tax advisor as to the consequences to him of the acquisition, ownership, and
disposition of Old Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Old Notes and the
New Notes, and (2) proceeds of sale of the Old Notes and the New Notes, must be
withheld and remitted to the United States Treasury. Therefore, each holder
should complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a foreign
individual holder to qualify as an exempt foreign recipient, that holder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt foreign status. Such statements can be obtained from the
Company. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if the Old Notes are held in more than one name), contact the Company's
assistant Secretary, 5775 Peachtree Dunwoody Road, Suite C150, Atlanta, GA 30342
or telephone number (404) 256-1123, Ext. 304.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
BOOK-ENTRY; DELIVERY AND FORM
The New Notes initially will be represented by a single, permanent global
certificate in definitive, fully registered form (the "Global Note"). The Global
Note will be deposited on the Closing Date with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of a nominee of DTC.
THE GLOBAL NOTES. NFC expects that pursuant to procedures established by
DTC (a) upon the issuance of the Global Notes, DTC or its custodian will credit,
on its internal system, the principal amount of Notes of the individual
beneficial interests represented by the Global Notes to the respective accounts
of persons who have accounts with DTC and (b) ownership of beneficial interests
in the Global Notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of Participants (as defined herein)) and the records of Participants
(with respect to interests of persons other than Participants). Such accounts
initially will be designated by or on behalf of the Initial Purchasers and
ownership of beneficial interests in the Global Notes will be limited to persons
who have accounts with DTC ("Participants") or persons who hold interests
through Participants. Interests in the Global Notes may be held directly through
DTC, by Participants, or indirectly through organizations which are
Participants.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Notes represented by such Global Notes for all
purposes under the Indenture. No beneficial owner of an interest in any Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of
90
<PAGE>
NFC, the Trustee or any paying agent will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
NFC expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Notes, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Notes as shown on the records of DTC or its nominee. NFC
also expects that payments by Participants to owners of benefits interests in
the Global Notes held through such Participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such Participants.
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Note for any reason,
including to sell New Notes to persons in states which require physical delivery
of the New Notes, or to pledge such securities, such holder must transfer its
interest in a Global Note in accordance with the normal procedures of DTC and
with the procedures set forth in the Indenture.
DTC has advised NFC that it will take any action permitted to be taken by a
holder of New Notes (including the presentation of New Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of New Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
in whole for Certificated Notes, which it will distribute to the Participants
and which will be legended as set forth under the heading "Transfer
Restrictions."
DTC has advised NFC as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among Participants, it is under no
obligation to perform such procedures, and such procedures may be discontinued
at any time. Neither NFC nor the Trustee will have any responsibility for the
performance by DTC or the Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Notes and a successor depositary is not appointed
by NFC within 90 days, Certificated Notes will be issued in exchange for the
Global Notes.
91
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is (i)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business, and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such New Notes; provided that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such New Notes. To date, the
Staff has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Old Notes to
the Initial Purchasers) with the Prospectus, contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this Prospectus
in connection with the resale of such New Notes. The Company and the Guarantors
have agreed that, for a period of 180 days after the Expiration Date, they will
make this Prospectus, and any amendment or supplement to this Prospectus,
available to any broker-dealer that requests such documents in the Letter of
Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer -- Terms and Conditions of the
Letter of Transmittal." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
92
<PAGE>
EXPERTS
The NFC balance sheets as of December 31, 1994 and 1995 and the statements
of operations, stockholder's equity and cash flows for each of the three years
in the period ended December 31, 1995 included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report with respect thereto, and are included herein on reliance upon the
authority of said firm as experts in giving said report.
The Transkrit consolidated balance sheets as of December 31, 1994 and 1995,
and the consolidated statements of income, changes in shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1995 have been included in this Prospectus and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the issuance of securities offered hereby will be passed
upon for NFC by White & Case, New York, New York.
93
<PAGE>
INDEX TO FINANCIAL STATEMENTS
NATIONAL FIBERSTOK CORPORATION
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets at December 31, 1994 and 1995 and March 31, 1996 (unaudited)................................ F-4
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996 (unaudited)...................................................................... F-6
Statements of Stockholder's Equity for the years ended December 31, 1993, 1994 and 1995.................... F-7
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996 (unaudited)...................................................................... F-8
Notes to Financial Statements.............................................................................. F-9
</TABLE>
TRANSKRIT AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-19
Consolidated Balance Sheets at December 31, 1994 and 1995
and March 31, 1996 (unaudited)........................................................................... F-20
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995 and the three months
ended March 31, 1995 and 1996 (unaudited)................................................................ F-22
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1993, 1994 and
1995 and for the three months ended March 31, 1996 (unaudited)........................................... F-23
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the three
months ended March 31, 1995 and 1996 (unaudited)......................................................... F-24
Notes to Consolidated Financial Statements................................................................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of National Fiberstok
Corporation:
We have audited the accompanying balance sheets of NATIONAL FIBERSTOK
CORPORATION (a Delaware corporation) as of December 31, 1994 and 1995 and the
related statements of operations, stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of National Fiberstok
Corporation as of December 31, 1994 and 1995 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 24, 1996
F-2
<PAGE>
(This page has been left blank intentionally.)
F-3
<PAGE>
NATIONAL FIBERSTOK CORPORATION
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1995
------------- ------------- MARCH 31 1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash.............................................................. $ 283,322 $ 444,422 $ 384,039
Accounts receivable, net of allowance for doubtful accounts of
$141,841, $171,950, and $92,020, respectively.................... 9,091,880 8,875,098 8,328,761
Inventories....................................................... 5,733,570 5,591,888 4,799,818
Other............................................................. 355,981 363,935 582,460
------------- ------------- -------------
Total current assets........................................ 15,464,753 15,275,343 14,095,078
------------- ------------- -------------
Property and Equipment:
Land.............................................................. 360,369 335,982 335,982
Buildings......................................................... 1,759,649 1,762,147 1,762,147
Machinery and equipment........................................... 10,982,694 11,247,136 11,359,923
Office equipment.................................................. 366,546 890,809 925,685
Leasehold improvements............................................ 53,547 70,290 77,096
Construction in progress.......................................... -- 1,383,915 3,520,502
------------- ------------- -------------
13,522,805 15,690,279 17,981,335
Less accumulated depreciation and amortization.................... (3,642,232) (5,388,670) (5,839,408)
------------- ------------- -------------
Net property and equipment.................................. 9,880,573 10,301,609 12,141,927
------------- ------------- -------------
Other Assets:
Goodwill, net of accumulated amortization of $594,355, $830,468,
and $889,496, respectively....................................... 8,382,301 8,146,188 8,087,160
Covenants not to compete, net of accumulated amortization of
$3,242,741, $4,667,741, and $5,018,783, respectively............. 2,407,292 982,292 631,250
Deferred financing costs, net of accumulated amortization of
$602,755, $833,339, and $883,409 respectively.................... 819,038 588,454 538,384
Prepaid pension cost (Note 8)..................................... 742,126 922,436 847,400
Deferred income taxes (Note 5).................................... -- 1,900,000 2,068,629
Other............................................................. 140,519 -- --
------------- ------------- -------------
Total other assets.......................................... 12,491,276 12,539,370 12,172,823
------------- ------------- -------------
Total assets................................................ $ 37,836,602 $ 38,116,322 $ 38,409,828
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
NATIONAL FIBERSTOK CORPORATION
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996 (UNAUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1995
------------- ------------- MARCH 31 1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Current Liabilities:
Current portion of long-term debt................................. $ 1,473,064 $ 2,105,935 $ 2,052,903
Bank overdraft.................................................... -- 2,354,439 1,514,752
Accounts payable.................................................. 4,226,033 2,082,277 2,414,374
Accrued expenses and other........................................ 2,563,747 1,550,494 1,581,168
------------- ------------- -------------
Total current liabilities....................................... 8,262,844 8,093,145 7,563,197
------------- ------------- -------------
Noncurrent Liabilities.............................................. 1,930,517 1,883,713 1,556,451
------------- ------------- -------------
Long-Term Debt (Note 4):
Long-term debt.................................................... 10,322,488 9,847,535 11,092,480
Revolving line of credit.......................................... 7,000,000 7,050,000 7,200,000
Subordinated debt................................................. 4,453,524 4,514,710 4,532,851
------------- ------------- -------------
Total long-term debt............................................ 21,776,012 21,412,245 22,825,331
------------- ------------- -------------
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, $.01 par value, 300,000 shares authorized, 283,807
shares issued and outstanding.................................... 2,838 2,838 2,838
Additional paid-in capital........................................ 14,532,070 14,532,070 14,532,070
Accumulated deficit............................................... (8,667,679) (7,807,689) (8,070,059)
------------- ------------- -------------
Total stockholder's equity...................................... 5,867,229 6,727,219 6,464,849
------------- ------------- -------------
Total liabilities and stockholder's equity...................... $ 37,836,602 $ 38,116,322 $ 38,409,828
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-5
<PAGE>
NATIONAL FIBERSTOK CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
AND THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $ 64,544,948 $ 65,998,093 $ 71,257,112 $ 17,777,445 $ 17,097,178
Cost of products sold................ 51,383,635 52,610,089 55,708,018 13,666,196 13,479,591
------------- ------------- ------------- ------------- -------------
Gross profit......................... 13,161,313 13,388,004 15,549,094 4,111,249 3,617,587
------------- ------------- ------------- ------------- -------------
Operating expenses:
Selling............................ 5,887,840 5,936,621 6,760,438 1,833,075 1,861,447
General and administrative......... 5,401,862 4,777,837 4,833,618 1,274,573 951,325
Amortization:
Covenants not to compete......... 1,396,133 1,425,000 1,439,607 356,250 351,042
Goodwill......................... 195,946 240,433 236,113 57,487 59,028
Other............................ 48,000 48,000 140,000 74,456 75,035
Provision for plant shutdown....... 1,595,277 -- -- -- --
Provision for building disposal.... 656,000 -- -- -- --
------------- ------------- ------------- ------------- -------------
Total operating expenses......... 15,181,058 12,427,891 13,409,776 3,595,841 3,297,877
------------- ------------- ------------- ------------- -------------
Income (loss) from operations........ (2,019,745) 960,113 2,139,318 515,408 319,710
Interest expense..................... 2,872,483 2,974,755 3,179,328 783,959 749,724
------------- ------------- ------------- ------------- -------------
Net loss before income taxes......... (4,892,228) (2,014,642) (1,040,010) (268,551) (430,014)
Income tax benefit................... 1,342,723 -- 1,900,000 -- 167,644
------------- ------------- ------------- ------------- -------------
Net income (loss).................... $ (3,549,505) $ (2,014,642) $ 859,990 $ (268,551) $ (262,370)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
NATIONAL FIBERSTOK CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
SHARES ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992................... 283,807 $ 2,838 $ 14,532,070 $ (3,103,532) $ 11,431,376
Net loss..................................... -- -- -- (3,549,505) (3,549,505)
---------- ----------- ------------- ------------- -------------
Balance, December 31, 1993................... 283,807 2,838 14,532,070 (6,653,037) 7,881,871
Net loss..................................... -- -- -- (2,014,642) (2,014,642)
---------- ----------- ------------- ------------- -------------
Balance, December 31, 1994................... 283,807 2,838 14,532,070 (8,667,679) 5,867,229
Net income................................... -- -- -- 859,990 859,990
---------- ----------- ------------- ------------- -------------
Balance, December 31, 1995................... 283,807 $ 2,838 $ 14,532,070 $ (7,807,689) $ 6,727,219
---------- ----------- ------------- ------------- -------------
---------- ----------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
NATIONAL FIBERSTOK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
AND THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ---------- MARCH 31
------------------------
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.............................. $(3,549,505) $(2,014,642) $ 859,990 $(268,551) $(262,370)
---------- ---------- ---------- ----------- -----------
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization................ 3,521,041 3,685,439 4,004,992 888,513 910,878
Provision for plant shutdown................. 1,595,277 -- -- -- --
Provision for building disposal.............. 656,000 -- -- -- --
Provision for deferred income taxes.......... (1,342,723) -- (1,900,000) -- (168,629)
Net gain on disposal of property and
equipment................................... -- (86,604) (173,646) -- --
Amortization of prepaid pension asset........ 172,184 (77,853) (180,310) (45,945) 75,036
Imputed interest............................. 117,344 134,501 130,172 32,543 33,702
Changes in operating assets and liabilities:
Accounts receivable........................ (593,182) (1,117,611) 216,782 32,684 546,337
Inventories................................ 281,347 (459,217) 141,682 (295,771) 792,070
Other assets............................... 348,879 (257,594) (1,137,177) (303,384) (218,525)
Accounts payable and bank overdraft........ (522,834) 2,563,236 210,683 798,481 (507,590)
Accrued expenses and other................. 1,163,032 (1,166,381) (1,165,768) (251,247) (307,335)
---------- ---------- ---------- ----------- -----------
Total adjustments........................ 5,396,365 3,217,916 147,410 855,874 1,155,944
---------- ---------- ---------- ----------- -----------
Net cash provided by operating
activities.............................. 1,846,860 1,203,274 1,007,400 587,323 893,574
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (1,179,251) (940,387) (1,178,364) (65,855) (292,322)
Proceeds from sale of property and equipment... -- 546,959 369,194 -- --
Restricted certificate of deposit.............. 125,000 125,000 -- -- --
Cash paid for assets acquired.................. (229,000) -- -- -- --
---------- ---------- ---------- ----------- -----------
Net cash used in investing activities.... (1,283,251) (268,428) (809,170) (65,855) (292,322)
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Term Loan B...................... -- -- 1,000,000 -- --
Payments on Term Loan A........................ (1,050,000) (1,250,000) (1,050,000) (350,000) (800,000)
Payments on other long-term debt............... (300,000) (100,000) -- -- --
Payments on capital leases..................... (7,924) (8,206) (37,130) (7,522) (11,635)
Net borrowings (payments) on revolving line of
credit........................................ 200,000 500,000 50,000 (200,000) 150,000
---------- ---------- ---------- ----------- -----------
Net cash used in financing activities.... (1,157,924) (858,206) (37,130) (557,522) (661,635)
---------- ---------- ---------- ----------- -----------
NET (DECREASE) INCREASE IN CASH.................. (594,315) 76,640 161,100 (36,054) (60,383)
CASH, BEGINNING OF PERIOD........................ 800,997 206,682 283,322 283,322 444,422
---------- ---------- ---------- ----------- -----------
CASH, END OF PERIOD.............................. $ 206,682 $ 283,322 $ 444,422 $ 247,268 $ 384,039
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR
INTEREST........................................ $2,470,000 $2,412,000 $2,821,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
NATIONAL FIBERSTOK CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
1. BACKGROUND
National Fiberstok Corporation ("NFC" or the "Company"), a wholly-owned
subsidiary of DEC International, Inc. ("DEC"), manufactures and distributes a
broad range of stationery products, including envelopes, catalog inserts,
labels, and office supplies. The Company markets its products to customers
throughout the United States through divisions in Roanoke, Virginia; Austell,
Georgia; Louisville, Kentucky; Gainesville, Florida; and Greenville, South
Carolina.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly
liquid investments, principally with an original maturity of 90 days or less, to
be cash equivalents.
ACCOUNTS RECEIVABLE
A summary of changes in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Balance, beginning of period................................................ $ 237,330 $ 148,084 $ 141,841
Provisions.................................................................. -- 83,602 78,089
Recoveries.................................................................. 1,077 18,770 18,679
Write-offs.................................................................. (90,323) (108,615) (66,659)
---------- ----------- ----------
Balance, end of period...................................................... $ 148,084 $ 141,841 $ 171,950
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market. Costs of raw
materials are determined using the first-in, first-out ("FIFO") method. Costs of
work in process, finished goods, and customized stock (net of an obsolescence
reserve) are determined using the average cost (which approximates FIFO) or FIFO
method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- ------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials........................................................... $ 3,342,522 $ 2,764,452 $ 2,448,455
Work in process......................................................... 799,460 968,671 582,797
Finished goods.......................................................... 414,393 556,649 573,439
Customized stock........................................................ 1,177,195 1,302,116 1,195,127
------------ ------------ ------------
$ 5,733,570 $ 5,591,888 $ 4,799,818
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the following lives:
<TABLE>
<CAPTION>
Buildings..................................................................... 30 years
<S> <C>
Machinery and equipment....................................................... 5 to 7 years
Office equipment.............................................................. 4 to 5 years
4 to 30
Leasehold improvements........................................................ years
</TABLE>
Leasehold improvements are depreciated over the lesser of the useful lives
of the assets or the lease term.
The Company's policy is to remove the cost and accumulated depreciation of
retirements from the accounts and recognize the related gain or loss upon the
disposition of assets.
F-9
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill is stated at cost less accumulated amortization and is amortized
over 15 to 40 years using the straight-line method. The recoverability of
goodwill is periodically reviewed by management based on current and anticipated
conditions. The amount of goodwill considered realizable, however, could be
reduced in the near term if changes occur in anticipated conditions. Management
is of the opinion that there has been no diminution in the value assigned to
goodwill.
COVENANTS NOT TO COMPETE
Covenants not to compete have been recorded at cost and are being amortized
on a straight-line basis over the terms (three to four years) of the agreements.
DEFERRED FINANCING COSTS
Deferred financing costs represent costs incurred to raise financing and are
amortized over the relevant terms of the borrowings (Note 4).
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
for recognition of deferred tax liabilities and assets. Under the asset and
liability method, deferred income taxes are recognized for the tax consequences
of temporary differences, net operating losses, and tax credits by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities.
REVENUE RECOGNITION
Sales are recorded as products are shipped, except for certain sales for
which revenue is recognized when the customer is billed based on passage of
legal title at the date of billing. Such "bill and hold" sales are not material
to the Company's results of operations.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as during the reporting period.
Actual results could differ from these estimates.
CONCENTRATION OF RISK
During 1993, 1994, and 1995, the Company's ten largest customers accounted
for 27%, 29%, and 25%, respectively, of total company sales. No individual
customer accounted for more than 6% of sales in any year. In management's
opinion, a loss of any one individual customer would not have a material impact
on the Company's financial position or operations.
The Company's largest purchased raw material is paper. While the Company
utilizes multiple paper suppliers, it obtained 44%, 49% and 67% of its paper
from two suppliers in 1993, 1994, and 1995, respectively. Further, the supply
and price of paper are cyclical in nature. As a result, the Company is subject
to the risk that pricing may significantly impact results of operations and that
it may be unable to purchase sufficient quantities of paper to meet production
requirements during times of tight supply. While the Company believes that it
could obtain other suppliers of paper, industry conditions previously discussed
may have a material effect on the Company's results of operations.
VACATION POLICY
In 1995, the Company revised its vacation policy, whereby employees must
take vacation earned during the year prior to December 31 or forfeit the
balance. As a result of this change in policy, a vacation accrual is no longer
required as of December 31, 1995, and approximately $575,000 of accrued vacation
was reversed and is reflected as a reduction in cost of products sold in 1995.
Accrued vacation at December 31, 1994 was $557,000.
F-10
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, and debt. The carrying amounts of cash, accounts
receivable, and accounts payable approximate their fair values because of the
short-term maturity of such instruments. The carrying value of the debt, except
the Rice Note, (Note 4) approximates its fair value, because interest rates on
the debt are periodically adjusted and approximate current market rates. The
fair value of the Rice Note, discounted at 10.5%, which approximates market, is
$5,648,000.
ADOPTION OF ACCOUNTING STANDARD
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used as well as
long-lived assets and certain identifiable intangibles to be disposed of. The
adoption of this standard was not material to the Company's financial position
or results of operations.
INTERIM UNAUDITED DATA FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
In the opinion of management, the unaudited financial statements contain all
the normal and recurring adjustments necessary to present fairly the financial
position of the Company as of March 31, 1996 and the results of the Company's
operations and its cash flows for the three months ended March 31, 1995 and 1996
in conformity with generally accepted accounting principles. The results of
operations for the three month period ended March 31, 1996 are not necessarily
indicative of the results to be expected for the year.
3. BUILDING DISPOSAL AND PLANT SHUTDOWN
During 1993, the Company adopted a formal plan to discontinue operations at
the Philadelphia division and move portions of that operation to the Austell,
Georgia location. As part of such plan, the Company discontinued production in
August 1994 and moved a large portion of the equipment and inventory to the
Austell location. As a result, the Company recorded a charge of $1,595,277 to
write down the division's assets to their net realizable values and to accrue
for future operating lease commitments, severance costs, and costs of relocating
portions of the Philadelphia operation to Austell, Georgia. In conjunction with
the relocation of certain portions of the Philadelphia operations to Austell,
management decided to sell the former Austell facility and relocate to a larger
facility in Austell. Accordingly, the net book value of the building to be
disposed of was adjusted to the estimated fair market value. The impact of the
asset write-down was $656,000 and is recorded as a charge to 1993 earnings.
F-11
<PAGE>
4. LONG-TERM DEBT
Long-term debt as of December 31, 1994 and 1995 consists of the following:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Term Loan A payable to Heller Financial, Inc. ("Heller"), quarterly principal
payments ranging from $250,000 to $500,000 for the period commencing December 31,
1992 through September 30, 1999, bearing interest at a base rate plus 1.75%
(10.25% at December 31, 1994 and 1995)............................................ $ 8,450,000 $ 7,400,000
Term Loan B payable to Heller, payable in four successive quarterly principal
payments of $875,000 commencing the earlier of December 31, 1999 or upon full
payment of Term Loan A and the balance due on December 31, 2000, bearing interest
at a base rate plus 5% (13.5% at December 31, 1994 and 1995)...................... 3,500,000 4,500,000
Revolving line of credit payable to Heller, principal payable in full upon the
earlier of termination, as defined, or September 30, 2000, bearing interest at a
base rate plus 1.75% (10.25% at December 31, 1994 and 1995)....................... 7,000,000 7,050,000
Subordinated note payable to Rice Mezzanine Lenders, L.P. ("Rice"), principal
balloon payment due on the earlier of termination, as defined, or September 30,
2000, bearing interest at 14%..................................................... 5,000,000 5,000,000
Other.............................................................................. 84,673 226,991
Less unamortized portion of discount due to value assigned to parent company
warrants attached to Term Loans A and B and subordinated note payable............. (785,597) (658,811)
------------- -------------
23,249,076 23,518,180
Less current portion............................................................... (1,473,064) (2,105,935)
------------- -------------
$ 21,776,012 $ 21,412,245
------------- -------------
------------- -------------
</TABLE>
Maturities of long-term debt and capital lease obligations at December 31,
1995 are as follows:
<TABLE>
<CAPTION>
LONG-TERM SUBORDINATED
DEBT DEBT
------------- ------------
<S> <C> <C>
1996................................................................................ $ 2,105,935 $ --
1997................................................................................ 1,901,129 --
1998................................................................................ 2,056,792 --
1999................................................................................ 2,436,369 --
2000................................................................................ 10,676,766 5,000,000
------------- ------------
$ 19,176,991 $5,000,000
------------- ------------
------------- ------------
</TABLE>
The Company maintains a term loan and line-of-credit agreement (the "Credit
Agreement") with Heller. Under the terms of the Credit Agreement, as amended,
the Company has an $11,000,000 term loan ("Term Loan A"), a $4,500,000 term loan
("Term Loan B"), and a $8,500,000 revolving line-of-credit facility (the "Line")
as of December 31, 1995. As consideration for the Credit Agreement, the parent
made available to the Company stock warrants to purchase 254,435 shares of DEC
Class B common stock. The warrants were transferred to Heller in connection with
the initiation of the Credit Agreement. The warrants were valued at $400,000 and
were recorded as a discount to the face value of Term Loan A and Term Loan B.
The effect of the warrants at the inception of Term Loan A and Term Loan B was
to cause effective yields of 10.35% and 13.33%, respectively. The effective
yield for Term Loan A was 9.9% and 10.6% for the years
F-12
<PAGE>
4. LONG-TERM DEBT (CONTINUED)
ended December 31, 1994 and 1995, respectively. The effective yield for Term
Loan B was 14.0% and 13.8% for the years ended December 31, 1994 and 1995,
respectively. Maximum borrowings under the Line are $8,500,000, reduced by the
amount of the lender guaranty reserve, as defined, which was $0 at December 31,
1994 and 1995. Borrowings under the Credit Agreement are subject to certain
financial covenants that include, among others, limits on capital expenditures,
a minimum ratio of fixed charge coverages, and a minimum amount of earnings
before income taxes, depreciation, interest, and amortization, as defined. The
Company is in compliance with each of these covenants as of December 31, 1995
and March 31, 1996.
The Company also maintains a $5,000,000 note purchase agreement (the "Rice
Note"), as amended, with Rice. The Rice Note is subordinate to the Credit
Agreement. As consideration for the Rice Note, the parent made available to the
Company stock warrants to purchase 413,457 shares of DEC's Class A common stock.
The warrants were transferred to Rice with the issuance of the Rice Note. The
warrants were valued at $649,954 and were recorded as a discount to the debt.
The effective interest rate on the Rice Note, after discounting for the
warrants, is 17.12%. The Rice Note is subject to certain financial covenants
which include, among others, limits on capital expenditures, minimum levels of
fixed charge coverages, and minimum earnings before income taxes, depreciation,
interest, and amortization, as defined. The Company is in compliance with each
of these covenants as of December 31, 1995 and March 31, 1996. In addition, the
Rice Note has cross-default provisions with the Credit Agreement.
Interest expense on long-term debt and capital leases in 1993, 1994, and
1995 was approximately $2,872,000, $2,975,000, and $3,179,000, respectively,
including approximately $117,000, $123,000, and $127,000, respectively, of
warrant-related discount amortization and $314,000, $259,000, and $231,000,
respectively, of deferred finance cost amortization.
5. INCOME TAXES
The income tax benefits for the years ended December 31, 1993, 1994 and 1995
represent the income tax benefit from operating losses. As a result, income tax
beenfits for all periods presented consist of deferred tax benefits.
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate for the 1993, 1994, and 1995 benefit for income taxes
is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ----------- -------------
<S> <C> <C> <C>
Federal tax benefit at statutory rate.................................. $ (1,663,358) $ (684,978) $ (353,600)
State, net of federal benefit.......................................... (220,150) -- (34,000)
Change in valuation allowance.......................................... 533,242 612,467 (1,485,000)
Other, net............................................................. 7,543 72,511 (27,400)
------------- ----------- -------------
Actual income tax benefit.............................................. $ (1,342,723) $ -- $ (1,900,000)
------------- ----------- -------------
------------- ----------- -------------
Effective tax rate..................................................... 27% 0% 183%
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
F-13
<PAGE>
5. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred tax assets as of
December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards.................................................. $ 2,059,000 $ 2,692,000
Book basis in property over tax basis............................................. (2,473,000) (2,710,000)
Goodwill.......................................................................... 12,000 (143,000)
Prepaid pension cost.............................................................. (282,000) (369,000)
Employee benefit accruals......................................................... 711,000 490,000
Accrued liabilities not currently deductible...................................... 1,442,000 1,859,000
Other, net........................................................................ 16,000 81,000
------------- -------------
Net deferred tax assets before valuation allowance.................................. 1,485,000 1,900,000
Valuation allowance................................................................. (1,485,000) --
------------- -------------
Net deferred tax assets............................................................. $ -- $ 1,900,000
------------- -------------
------------- -------------
</TABLE>
In 1993, the Company recorded the benefit of its net operating loss
carryforwards generated in that year reduced by a valuation allowance of
$533,000. The valuation allowance reduced the net deferred tax asset to zero, as
management determined that, based upon its expectations at that time regarding
future taxable income, realization was not more likely than not. In 1994, the
Company recorded an additional valuation allowance of $612,000 consistent with
the 1993 treatment. The decrease in the valuation allowance in 1995 results from
benefiting net operating losses expected to be realized in the future based on
improvements in operating results during 1995 and anticipated future earnings.
As a result, the Company has recorded a deferred tax asset of $1,900,000 as of
December 31, 1995 for income tax loss carryforwards.
The net operating loss carryforwards will be used to offset future taxable
income, subject to their expirations beginning in 2004 and continuing through
2010. Any future issuance of stock by the Company could result in an ownership
change, as defined by the Tax Reform Act of 1986, and could limit utilization of
net operating loss carryforwards. Also, benefits derived from using net
operating loss carryforwards to offset any taxes calculated as alternative
minimum tax could be less than the recorded amount of the net operating loss
carryforwards. Although realization is not assured, management believes it will
be realized.
6. CAPITAL STOCK
The Company has authorized 300,000 shares of common stock with a par value
of $.01 per share. As of December 31, 1995, 283,807 shares are issued and
outstanding.
7. RELATED-PARTY TRANSACTIONS
MANAGEMENT FEE
The Company maintains a Advisory Services Agreement (the "Agreement") with
MDC Management Company II, L.P. ("MDC"), an affiliate. Under the Agreement, MDC
provides certain consulting, financial, and managerial functions for a $250,000
annual fee. In 1994 and 1995, $0 and $187,500, respectively, were paid. The
Company has recorded a liability of $500,000, $562,000, and $562,000 on the
accompanying balance sheets related to the unpaid portion of these costs as of
December 31, 1994 and 1995 and March 31, 1996, respectively. No payments shall
be made by the Company to MDC under the Agreement if there is an event of
default, as defined, under the Credit Agreement (Note 4). As of March 31, 1996,
there are no such events of default. In addition, payments under the Agreement
are limited until certain events are satisfied under the Credit Agreement. As a
result of and concurrent with the anticipated transactions (Note 10), the
F-14
<PAGE>
7. RELATED-PARTY TRANSACTIONS (CONTINUED)
Company expects to pay the accrued management fees and to continue with the
terms of the Agreement. The Agreement expires December 31, 2000 and is renewable
annually thereafter, unless terminated by the Company for justifiable cause, as
defined.
STOCKHOLDERS' AGREEMENT
In 1992, certain NFC officers and former officers purchased an aggregate of
298,150 shares of DEC common stock, representing 12% of the voting common stock
of DEC. The stock was purchased at $4.33, the fair value at the date of
purchase, and were paid for with $620,000 of cash and $670,000 of 6% nonrecourse
notes. All stockholders of DEC are subject to the terms of a stockholders'
agreement. This agreement restricts the stockholders' ability to sell, transfer,
and assign the DEC common stock, with DEC having the first right of purchase.
The holders of the stock may be forced to sell the shares to DEC under certain
conditions. In addition, on expiration of a stockholder's employment with the
Company, the Company has the option to buy back the stockholder's common stock
at a specified price primarily based upon either the cost of the shares or the
book value of DEC.
8. EMPLOYEE BENEFIT PLANS
EMPLOYEES' RETIREMENT PLAN
The Company has a defined benefit pension plan (the "Plan") covering certain
employees. On December 20, 1993, the Company again amended the Plan, freezing
future participation to any new employees of the Company effective December 31,
1993. Effective December 31, 1994, the Company again amended the Plan, freezing
future accrual of benefits for all participants. In conjunction with this
amendment, all participants in the Plan have been retroactively vested. As a
result of these amendments, a curtailment gain of $399,333 was recorded in 1994
as a reduction to the related net periodic pension cost.
The funded status of the Plan as of December 31, 1994 and 1995 is as
follows:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated projected benefit obligation........................................ $ (16,035,066) $ (17,030,297)
Plan assets at fair value....................................................... 16,777,196 17,345,512
Plan assets greater than projected benefit obligation............................. 742,130 315,215
Unrecognized net loss from past experience........................................ -- 607,221
-------------- --------------
Prepaid pension cost.............................................................. $ 742,130 $ 922,436
-------------- --------------
-------------- --------------
</TABLE>
The weighted average discount rates used to measure the accumulated
projected benefit obligation are 8.00% and 7.75% for 1994 and 1995,
respectively. The assumed rates of increase in future compensation levels are
5%, and the expected long-term rates of return on assets are 8.75% for both 1994
and 1995.
Net periodic pension costs for 1993, 1994, and 1995 include the following:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Service cost--benefits earned during the period...................... $ 368,825 $ 437,088 $ --
Interest cost on projected benefit obligation........................ 1,316,812 1,388,943 1,230,610
Actual return on plan assets......................................... (1,498,941) 521,415 (1,772,831)
Net amortization and deferral........................................ (14,512) (2,025,970) 361,915
------------- ------------- -------------
$ 172,184 $ 321,476 $ (180,306)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-15
<PAGE>
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
DEFERRED COMPENSATION PLANS
The Company has unfunded deferred compensation plans that provide retirement
benefits to a certain officer and former key employees. The plans provide
retirement benefits generally based on the service provided by the employees to
the Company. Benefits are vested as service is provided. Plan participants have
the option of receiving a lump-sum payment at retirement or periodic payments
after retirement, subject to approval from the Company's board of directors. The
Company provides for these plans during the related service lives of the
participants at amounts sufficient to accrue the present value of benefits
earned to their retirement dates. Effective December 31, 1994, the Company froze
future benefit accruals under these deferred compensation agreements. Included
in the accompanying balance sheets are liabilities of $550,000 and $426,000 for
these plans as of December 31, 1994 and 1995, respectively.
401(K) SAVINGS PLAN
In July 1992, the Company instituted a retirement savings plan, (the "401(k)
Plan") for nonunion employees at certain locations. The 401(k) Plan provides for
employee contributions of up to 10% of employee compensation and company
matching contributions of 50% of employee contributions up to 6% of employee
compensation, as defined. Effective January 1, 1995, the Company amended the
401(k) savings plan to increase company matching contributions to 60% of
employee contributions and to allow participation by all employees (meeting
eligibility requirements, as defined) of the Company. The Company recorded an
expense of approximately $21,000, $41,000, and $404,000 in 1993, 1994 and 1995,
respectively, as a result of contributions to the 401(k) Plan.
POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits for
certain retired individuals. The Company accounts for these benefits in
accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." This statement requires the accrual of the costs of
providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee. The plan was frozen
in 1993 and all eligible participants of the plan are retired.
Interest cost, representing all of the net periodic postretirement benefit
expense for the years ended December 31, 1993, 1994, and 1995, was $37,000, $0,
and $0, respectively.
The accrued postretirement benefit obligation at December 31, 1994 and 1995
was $957,000 and $771,000, respectively.
Assumptions used in the computation of postretirement benefit expense and
the related obligation are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Discount rate used to determine accumulated postretirement benefit
obligation................................................................... 7% 8%
Initial health care cost trend rate........................................... 13% 13%
Ultimate health care cost trend rate.......................................... 5% 5%
Year ultimate health care cost trend rate reached............................. 2003 2004
</TABLE>
If the health care trend rates increased 1% for all future years, the
accumulated postretirement benefit obligation as of December 31, 1995 would have
increased by 7%. The effect of such a change on the interest cost for 1995 would
have been an increase of 64%.
F-16
<PAGE>
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has certain noncancelable operating leases for office and plant
facilities and office equipment. The total rental expense was $790,000,
$641,000, and $351,000 in 1993, 1994, and 1995, respectively. Minimum annual
rental payments remaining under noncancelable operating leases as of December
31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C>
1996................................................................................................ $445,000
1997................................................................................................ 411,000
1998................................................................................................ 384,000
1999................................................................................................ 393,000
2000................................................................................................ 290,000
Thereafter.......................................................................................... 127,000
------------
$2,050,000
------------
------------
</TABLE>
ENVIRONMENTAL LIABILITIES
In January 1988, the Company was notified by the United States Environmental
Protection Agency ("EPA') that it and 11 other parties are potentially liable
for costs incurred by the EPA in responding to the cleanup of the Dixie Caverns
Landfill Superfund Site in Roanoke County, Virginia. Subsequently, Roanoke
County expended $2,000,000 to clean up a portion of the Dixie Cavern landfill
site and has filed suit against the Company and the 11 other potentially
responsible parties ("PRPs")for reimbursement of these cleanup costs. Although,
under Superfund, the PRPs may be jointly and severally liable for cleanup costs,
management believes that the Company's potential liability in connection with
the County's claim is de minimis, based upon the amount of waste attributable to
it in relation to the other parties. Management believes that the Company will
have no liability in connection with the remaining portion of the site, and that
the ultimate outcome of this matter will not have a material adverse impact on
the financial position or results of operations of the Company.
The EPA has also named the Company as one of a number of PRPs in connection
with the alleged disposal of hazardous substances at the Smiths Farm Landfill
Superfund Site in Kentucky. In February 1992, the Company and 35 other parties
entered into an alternative dispute resolution process ("ADRP") to allocate
liability. Subsequently, a number of the PRPs responsible for contributions of
waste to the site dropped out of the ADRP group. The remaining ADRP group
members, including the Company, have proposed a de minimis settlement to the
EPA, which, if accepted, would resolve the Company's liability in connection
with the site. Management believes that the ultimate outcome of this matter will
not have a material adverse impact on the financial position or results of
operations of the Company.
EQUIPMENT CONSTRUCTION
The Company entered into contracts with various vendors to purchase and
construct a new equipment line (the "Equipment"). The contracts commenced in
October 1995, and installation was completed in April 1996. The aggregate
purchase and installation costs are approximately $3,600,000. The Equipment is
being financed with a $1,000,000 borrowing from Heller under Term Loan B and a
$2,600,000 borrowing from The CIT Group ("CIT").
Under the CIT lease agreement, CIT will have a first-perfected security
interest in the Equipment. Upon completion of the installation of the Equipment,
monthly principal and interest payments will be made over five years. Interest
will be charged based on the base rental factor, as defined. At the end of the
lease term, the Company will have the option to purchase the Equipment at 20% of
the original cost of the Equipment, as defined. The CIT loan document is
cross-defaulted with the Credit Agreement if such default is not cured within 90
days following the default to the satisfaction of Heller.
F-17
<PAGE>
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Through December 31, 1995, the Company expended $1,130,000 for the purchase
and installation of the Equipment included in the accompanying balance sheet in
construction in progress. This was financed through the $1,000,000 borrowed from
Heller on Term Loan B and the Company's working capital.
10. SUBSEQUENT EVENT
The Company plans to proceed with the offering of $100,000,000 aggregate
principal amount of Senior Notes due 2002 (the "Senior Notes"), with principal
and interest payable semiannually. These Senior Notes are being offered in
conjunction with the acquisition of all the issued and outstanding stock of
Transkrit Corporation ("Transkrit"). The purchase price is expected to be
approximately $79 million. Subsequent to the acquisition, Transkrit will be
merged into NFC. The Senior Notes will be senior obligations of the Company and
will be PARI PASSU in right of payment to all existing and future Senior
Indebtedness (Note 4). The Senior Notes will be guaranteed by each of the
existing subsidiaries and will be secured by a lien on and a security interest
in all of the issued and outstanding capital stock of the subsidiaries.
The purchase of the Senior Notes is subject to certain risks. See "Risk
Factors" elsewhere in the accompanying Prospectus.
Concurrently with the offering, the Company and DEC, as applicable, will
enter into certain transactions. DEC will contribute additional equity capital
to NFC of $7,421,000. NFC will repay its existing long-term debt under a term
loan and line-of-credit agreement with Heller and under a Note Purchase
Agreement with Rice. Also, the merged Company and DEC will enter into a new
senior secured revolving credit facility which will provide approximately $20.0
million in revolving credit.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TRANSKRIT Corporation:
We have audited the accompanying consolidated balance sheets of TRANSKRIT
Corporation and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TRANSKRIT
Corporation and subsidiaries as of December 31, 1994 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in note 9 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES, as of January 1, 1993.
KPMG PEAT MARWICK LLP
Roanoke, Virginia
May 24, 1996
F-19
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- --------- MARCH 31,
-----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 759 $ 280 $ 1,028
Accounts receivable, less allowance of $704 in 1994, $495 in 1995 and $514 in
1996........................................................................ 11,432 11,923 10,679
Inventories.................................................................. 5,089 4,118 4,287
Prepaid expenses and other current assets.................................... 1,560 1,407 930
Deferred income taxes........................................................ 662 1,649 3,621
Notes and other receivables from affiliates, net............................. -- 5,528 5,510
Investment securities........................................................ -- 2,508 2,536
--------- --------- -----------
Total current assets....................................................... 19,502 27,413 28,591
Investment securities.......................................................... 2,299 -- --
Property, plant and equipment, net............................................. 25,822 23,735 23,230
Goodwill and other intangible assets, net...................................... 9,026 8,436 8,294
Notes receivable from affiliates............................................... 7,711 -- --
Deferred income taxes.......................................................... 7,994 7,117 4,943
Other assets................................................................... 348 341 355
--------- --------- -----------
Total assets............................................................... $ 72,702 $ 67,042 $ 65,413
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996
(DOLLARS IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- --------- MARCH 31,
-----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term debt............................................ $ 45 $ 2 $ 1
Bank overdraft............................................................... 1,494 1,455 1,179
Accounts payable............................................................. 3,216 2,218 1,265
Accrued relocation expenses.................................................. 754 -- --
Other accrued expenses....................................................... 4,493 4,120 4,001
Income taxes payable to parent............................................... 1,096 -- --
Income taxes payable......................................................... 283 133 679
Deferred gain from sale of real estate....................................... -- 358 358
Deferred compensation liability.............................................. -- -- 3,713
--------- --------- -----------
Total current liabilities.................................................. 11,381 8,286 11,196
Long-term debt, excluding current portion...................................... 7,944 2,036 --
Deferred gain from sale of real estate......................................... 2,426 -- --
Deferred compensation liability................................................ 1,573 3,735 --
Other liabilities.............................................................. 205 256 256
--------- --------- -----------
Total liabilities.......................................................... 23,529 14,313 11,452
--------- --------- -----------
Shareholders' equity:
Common stock, $1 par value:
Authorized shares, 10,000; issued and outstanding shares, 8,709 in 1994,
and 8,897 in 1995 and 1996................................................ 9 9 9
Class B common stock, $1 par value:
Authorized shares, 10,000; issued and outstanding shares, none............. -- -- --
Additional paid-in capital................................................... 11,622 12,122 12,122
Notes receivable from shareholder............................................ (500) (1,000) (1,000)
Retained earnings............................................................ 38,042 41,598 42,830
--------- --------- -----------
Total shareholders' equity................................................. 49,173 52,729 53,961
Commitments and contingencies
--------- --------- -----------
Total liabilities and shareholders' equity................................. $ 72,702 $ 67,042 $ 65,413
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................................. $ 96,003 $ 98,124 $ 97,681 $ 23,351 $ 24,404
Cost of products sold...................................... 64,921 64,851 64,223 15,843 15,713
--------- --------- --------- --------- ---------
Gross profit............................................... 31,082 33,273 33,458 7,508 8,691
Operating expenses:
Selling, general and administrative expenses............. 26,914 30,700 29,412 7,494 6,870
Relocation expenses...................................... 3,290 413 657 133 --
--------- --------- --------- --------- ---------
Operating income (loss).................................... 878 2,160 3,389 (119) 1,821
Other income (expense):
Interest expense to parent, net.......................... (560) (820) -- -- --
Other interest expense................................... (87) (102) (399) (151) (25)
Interest income.......................................... 176 209 1,096 283 236
Gain (loss) on disposal of product lines................. -- 2,829 389 (14) --
Gain on disposal of property, plant and equipment........ 71 23 169 514 --
Other, net............................................... 337 207 313 41 (35)
--------- --------- --------- --------- ---------
Other income (expense), net................................ (63) 2,346 1,568 673 176
--------- --------- --------- --------- ---------
Income before income taxes................................. 815 4,506 4,957 554 1,997
Income taxes............................................... 379 1,799 1,380 218 760
--------- --------- --------- --------- ---------
Net income................................................. $ 436 $ 2,707 $ 3,577 $ 336 $ 1,237
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
ADDITIONAL RECEIVABLE
PAID-IN FROM RETAINED
COMMON STOCK CAPITAL SHAREHOLDER EARNINGS TOTAL
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992 (unaudited)............... $ 8 $ 824 $ -- $ 35,250 $ 36,082
Net income.............................................. -- -- -- 436 436
Dividends paid ($20.55 per share)....................... -- -- -- (174) (174)
Capital contribution.................................... -- 1,756 -- -- 1,756
--
----------- ----------- --------- ---------
Balances at December 31, 1993........................... 8 2,580 -- 35,512 38,100
Net income.............................................. -- -- -- 2,707 2,707
Dividends paid ($20.90 per share)....................... -- -- -- (177) (177)
Capital contributions................................... -- 8,543 -- -- 8,543
Issuance of common stock (239 shares)................... 1 499 (500) -- --
--
----------- ----------- --------- ---------
Balances at December 31, 1994........................... 9 11,622 (500) 38,042 49,173
Net income.............................................. -- -- -- 3,577 3,577
Issuance of common stock (188 shares)................... -- 500 (500) -- --
Other deductions........................................ -- -- -- (21) (21)
--
----------- ----------- --------- ---------
Balances at December 31, 1995........................... 9 12,122 (1,000) 41,598 52,729
Net income (unaudited).................................. -- -- -- 1,237 1,237
Other deductions (unaudited)............................ -- -- -- (5) (5)
--
----------- ----------- --------- ---------
Balances at March 31, 1996 (unaudited).................. $ 9 $ 12,122 $ (1,000) $ 42,830 $ 53,961
--
--
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 436 $ 2,707 $ 3,577 $ 336 $ 1,237
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of property, plant and
equipment.............................................. 5,885 6,163 5,434 1,326 1,200
Amortization of goodwill and other intangible assets.... 460 613 590 148 142
Loss on disposal of product line fixed assets........... -- 131 -- -- --
Gain on disposal of property, plant and equipment....... (71) (23) (169) (514) --
Deferred income taxes................................... (933) (8,041) (110) 4 202
Accrued interest receivable on investment securities.... (176) (191) (209) (52) (28)
(Increase) decrease in:
Accounts receivable, net.............................. (187) (1) (491) 1,570 1,244
Inventories........................................... (146) 705 971 (51) (169)
Prepaid expenses and other assets..................... 545 (686) 160 690 463
Other receivables from affiliates, net................ -- -- (425) 9 18
Increase (decrease) in:
Bank overdraft........................................ 633 (607) (39) (712) (276)
Accounts payable and accrued expenses................. 2,803 (1,022) (2,125) (2,034) (1,072)
Income taxes payable.................................. 367 1,007 (1,246) (15) 546
Due to parent......................................... 32 (422) -- -- --
Deferred compensation liability....................... (151) 1,072 2,162 404 (22)
Other liabilities..................................... -- 205 51 -- --
--------- --------- --------- --------- ---------
Net cash provided by operating activities................... 9,497 1,610 8,131 1,109 3,485
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (8,529) (7,187) (4,172) (1,481) (695)
Proceeds from disposal of property, plant and equipment... 908 338 327 289 --
Proceeds from disposal of product line fixed assets....... -- 369 -- -- --
Collections of notes receivable from affiliates........... -- -- 1,207 1,207 --
Acquisition of Short Run Labels, Inc., net of cash
acquired................................................. (5,532) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities......... (13,153) (6,480) (2,638) 15 (695)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution...................................... 1,756 8,543 -- -- --
Proceeds from long-term debt.............................. -- 17,486 18,188 5,038 4,578
Principal payments on long-term debt...................... (1,274) (10,242) (24,139) (6,458) (6,615)
Long-term advances from parent............................ 5,491 -- -- -- --
Principal payments on long-term advances from parent...... (1,700) (10,973) -- -- --
Other deductions.......................................... -- -- (21) (21) (5)
Dividends paid............................................ (174) (177) -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities......... 4,099 4,637 (5,972) (1,441) (2,042)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 443 (233) (479) (317) 748
Cash and cash equivalents at beginning of the period........ 549 992 759 759 280
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of the period.............. $ 992 $ 759 $ 280 $ 442 $ 1,028
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE>
TRANSKRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995 AND
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
(1) OWNERSHIP AND CORPORATE REORGANIZATION
TRANSKRIT Corporation (the "Company") is headquartered in Roanoke, Virginia
and is a national manufacturer of business forms, labels and other printed
products for the trade. The Company has been operating in the United States
since 1938. Effective December 22, 1994, upon the acquisition of Maclean Hunter,
Ltd. (MHL), a Canadian corporation, by Rogers Communications, Inc. (Rogers), a
Canadian corporation, the Company became an 89.2 percent owned subsidiary of
Rogers. Prior to December 22, 1994, the Company was an 89.2 percent owned
subsidiary of Maclean Hunter, Inc. (MHI), a wholly-owned subsidiary of MHL. As
of December 31, 1995 and March 31, 1996, Rogers owns 87.3 percent of the
Company's outstanding common shares. The Company's financial statements have
been presented on a historical cost basis and do not reflect a basis adjustment
for the purchase method of accounting.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
PRINCIPLES OF CONSOLIDATION
The Company's results have been consolidated with its subsidiaries, Label
Art, Inc. (Label Art), InfoSeal-Registered Trademark- International, Inc.,
Putnam Graphic Innovations, Inc., and Government Forms and Systems, Inc. All
significant related intercompany balances and transactions have been eliminated
in consolidation.
CASH EQUIVALENTS
Cash equivalents of $570,000 at March 31, 1996 consists of money market
funds. For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with a maturity at date of purchase
of three months or less to be cash equivalents.
The Company does not believe it is exposed to any significant credit risk on
money market funds with commercial banks because its policy is to make such
deposits only with highly rated institutions.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out method.
INVESTMENT SECURITIES
Investment securities at December 31, 1994 and 1995 and March 31, 1996
consist of zero-coupon municipal debt securities which are classified as
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities are classified as
held-to-maturity when the Company has the positive intent and the ability to
hold the securities to maturity. Held-to-maturity securities are stated at cost.
Interest income on securities classified as held-to-maturity is recognized when
earned.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation of property, plant and equipment is
calculated using both straight-line and accelerated methods over the estimated
useful lives of the assets. Estimated useful lives are 25 to 33 years for
buildings, 8 years for building improvements, 3 to 8 years for machinery and
equipment and 5 to 7 years for furniture and fixtures. Leasehold improvements
are amortized over the shorter of the lease term or estimated life of the asset.
Maintenance, repairs and minor replacements are charged to expense as incurred;
major renewals and betterments are capitalized. The cost and related accumulated
depreciation or amortization on property, plant and equipment are eliminated
from the accounts upon disposal, and any resulting gain or loss is included in
the determination of net income.
F-25
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
assets acquired, is amortized on a straight-line basis over 15 to 40 years and
relates to the acquisitions of subsidiaries. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The
assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
Other intangible assets include various noncompete agreements which are
amortized over the lives of the agreements (5 to 10 years) using the
straight-line method.
REVENUE RECOGNITION
Sales and cost of products sold are recognized primarily upon shipment of
products.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. For the years ended
December 31, 1993, 1994 and 1995, research and development costs charged to
expense were approximately $289,000, $50,000 and $30,000, respectively, and for
the three months ended March 31, 1995 and 1996, $3,000 and $8,000, respectively.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
ADVERTISING COSTS
Advertising costs consist of various marketing expenses, including
advertisements, and are expensed as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements to place them on a comparable basis.
UNAUDITED INTERIM INFORMATION
The financial information with respect to March 31, 1996 and the three
months ended March 31, 1995 and 1996 is unaudited. In the opinion of management,
such information contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of such periods.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
F-26
<PAGE>
(3) ALLOWANCE FOR ACCOUNTS RECEIVABLE
A summary of the changes in the allowance for accounts receivable follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balances, beginning of period............................ $ 713 $ 782 $ 704 $ 704 $ 495
Provisions............................................... 226 134 (3) 26 32
Recoveries............................................... 9 6 6 8 13
Write-offs............................................... (166) (218) (212) (33) (26)
--------- --------- --------- --------- ---------
Balances, end of period.................................. $ 782 $ 704 $ 495 $ 705 $ 514
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(4) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials and supplies............................................... $ 2,341 $ 1,880 $ 2,094
Work in process.......................................................... 560 843 504
Finished products........................................................ 2,188 1,395 1,689
--------- --------- -----------
$ 5,089 $ 4,118 $ 4,287
--------- --------- -----------
--------- --------- -----------
</TABLE>
If the first-in, first-out method of inventory accounting had been used,
inventories would have been approximately $1,692,000, $3,094,000 and $2,966,000
higher than reported at December 31, 1994 and 1995 and March 31, 1996,
respectively.
(5) INVESTMENT SECURITIES
The following is a summary of held-to-maturity securities (in thousands):
<TABLE>
<CAPTION>
GROSS
UNREALIZED ESTIMATED
COST GAINS FAIR VALUE
--------- ------------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1994
Debt securities....................................................... $ 2,299 $ 111 $ 2,410
--------- ----- -----------
--------- ----- -----------
DECEMBER 31, 1995
Debt securities....................................................... $ 2,508 $ 69 $ 2,577
--------- ----- -----------
--------- ----- -----------
MARCH 31, 1996
Debt securities....................................................... $ 2,536 $ 70 $ 2,606
--------- ----- -----------
--------- ----- -----------
</TABLE>
The above securities mature in July 1996.
F-27
<PAGE>
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land.................................................................. $ 1,285 $ 1,285 $ 1,285
Buildings and improvements............................................ 12,411 12,479 12,495
Machinery and equipment............................................... 45,479 41,564 43,549
Furniture and fixtures................................................ 2,506 2,395 2,343
Leasehold improvements................................................ 2,326 2,629 2,662
Construction in progress.............................................. 1,492 1,946 448
--------- --------- -----------
65,499 62,298 62,782
Less accumulated depreciation and amortization........................ 39,677 38,563 39,552
--------- --------- -----------
Property, plant and equipment, net.................................... $ 25,822 $ 23,735 $ 23,230
--------- --------- -----------
--------- --------- -----------
</TABLE>
(7) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets, net of accumulated amortization,
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill................................................................. $ 9,783 $ 9,783 $ 9,783
Noncompete agreements.................................................... 1,161 1,161 1,161
--------- --------- -----------
10,944 10,944 10,944
Less accumulated amortization............................................ 1,918 2,508 2,650
--------- --------- -----------
Goodwill and other intangible assets, net................................ $ 9,026 $ 8,436 $ 8,294
--------- --------- -----------
--------- --------- -----------
</TABLE>
(8) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to financial institution.................................... $ 7,943 $ 2,036 $ --
Other.................................................................... 46 2 1
--------- --------- -----
7,989 2,038 1
Less current portion..................................................... 45 2 1
--------- --------- -----
Long-term debt, excluding current portion................................ $ 7,944 $ 2,036 $ --
--------- --------- -----
--------- --------- -----
</TABLE>
The note payable to financial institution represents an unsecured revolving
credit arrangement with First Union National Bank of Virginia (the "Bank") in
the original amount of $17,500,000 that reduced to $16,250,000 on December 31,
1995, reduces further to $15,000,000 on December 31, 1996, and has a maturity
date of January 31, 1997. Interest is based upon the 30-day London Interbank
Offered Rate (LIBOR) plus .95 percent (6.92 percent at December 31, 1995 and
6.26 percent at March 31, 1996) due and payable every 30 days in arrears. The
Company is required to provide the Bank with certain financial information on a
quarterly basis and has agreed to certain financial covenants which are also
reported to the Bank quarterly.
Interest paid for the years ended December 31, 1993, 1994 and 1995 was
$702,000, $920,000 and $424,000, respectively, and $148,000 and $34,000 for the
three months ended March 31, 1995 and 1996, respectively.
F-28
<PAGE>
(9) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. The adoption of this
statement did not have a significant effect on the Company's consolidated
financial statements.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................................... $ 1,034 $ 8,125 $ 1,408
State................................................................. 278 1,715 82
--------- --------- ---------
1,312 9,840 1,490
--------- --------- ---------
Deferred:
Federal............................................................... (729) (6,614) (134)
State................................................................. (204) (1,427) 24
--------- --------- ---------
(933) (8,041) (110)
--------- --------- ---------
Total income taxes...................................................... $ 379 $ 1,799 $ 1,380
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's income tax expense for the years ended December 31, 1993, 1994
and 1995, differed from amounts computed by applying the U.S. Federal income tax
rate of 34 percent to the Company's income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" income tax expense..................................... $ 277 $ 1,532 $ 1,685
Increase in (reduction of) income tax expense resulting from:
Decrease in beginning-of-the-year balance of the valuation allowance for
deferred tax assets..................................................... (472) (1,174) --
Expiration of state investment tax credit carryforwards.................. 472 1,174 --
State tax expense, net of federal impact................................. 49 232 242
Adjustment of current tax liability...................................... 87 (64) (520)
Tax-exempt interest income............................................... (60) (65) (71)
Goodwill amortization.................................................... 43 43 43
Nondeductible meals and entertainment.................................... 20 52 44
Other, net............................................................... (37) 69 (43)
--------- --------- ---------
Reported income tax expense................................................ $ 379 $ 1,799 $ 1,380
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-29
<PAGE>
(9) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Tax basis of InfoSeal-Registered Trademark- intangible assets in excess of book
basis............................................................................. $ 6,617 $ 6,073
Deferred gain from sale of real estate............................................. 949 143
Tax basis of receivables from affiliate in excess of book basis.................... -- 541
Equity share plan accruals and other deferred compensation......................... 694 1,604
Relocation accrual................................................................. 291 --
Accounts receivable allowance...................................................... 160 124
Inventories, due to additional costs inventoried for tax purposes.................. 71 67
Vacation accrual................................................................... 114 160
Pension and welfare plans.......................................................... 11 34
Other.............................................................................. 138 138
--------- ---------
Total gross deferred tax assets...................................................... 9,045 8,884
Less valuation allowance............................................................. -- --
--------- ---------
Net deferred tax assets.............................................................. 9,045 8,884
--------- ---------
</TABLE>
<TABLE>
<S> <C> <C>
Deferred tax liabilities:
Depreciation...................................................... $ (270) $ (109)
Pension and welfare plans......................................... (118) (9)
Other............................................................. (1) --
--------- ---------
Total gross deferred tax liabilities................................ (389) (118)
--------- ---------
Net deferred tax asset, including current net asset of $662 in 1994
and $1,649 in 1995................................................. $ 8,656 $ 8,766
--------- ---------
--------- ---------
</TABLE>
Based on the Company's historical and current pretax earnings, management
believes that is more likely than not that the recorded deferred tax assets will
be realized.
Income taxes paid, net of refunds received, for the years ended December 31,
1993, 1994 and 1995 were $945,000, $8,833,000 and $2,736,000, respectively, and
$229,000 and $12,000 for the three months ended March 31, 1995 and 1996,
respectively.
(10)PENSION AND OTHER EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PENSION PLAN
The Company maintains a noncontributory defined benefit pension plan
covering all eligible employees. Normal retirement age is 65, but a provision is
made for early retirement. Benefits are based on the employee's compensation and
years of service. The Company makes annual contributions to the plan equal to
the maximum amount that can be deducted for income tax purposes. Plan assets
consist principally of equity and debt securities.
The 1994 and 1995 projected benefit obligation was computed using the
"projected unit credit method," assuming a discount rate on benefit obligations
of 8 and 7.25 percent, respectively, an expected long-term rate of return on
plan assets of 9 percent and annual salary increases of 5 and 4 percent,
respectively, over the average remaining service lives of employees in the
plans.
F-30
<PAGE>
(10)PENSION AND OTHER EMPLOYEE BENEFIT PLANS (CONTINUED)
The following sets forth the funded status of the plan and amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits of $2,832 and $2,011,
respectively...................................................................... $ 2,895 $ 2,147
--------- ---------
--------- ---------
Projected benefit obligations........................................................ (4,993) (3,854)
Plan assets at fair value............................................................ 5,802 5,107
--------- ---------
Projected benefit obligation less than plan assets................................... 809 1,253
Unrecognized net gain................................................................ (253) (945)
Unrecognized prior service cost...................................................... 113 105
Unrecognized net asset at January 1, 1986 being amortized over 15 years.............. (558) (465)
--------- ---------
(Accrued) prepaid pension costs included in other noncurrent (liabilities) assets.... $ 111 $ (52)
--------- ---------
--------- ---------
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................................... $ 440 $ 494 $ 406
Interest cost on projected benefit obligation.............................. 345 350 334
Return on assets........................................................... (638) 386 (1,435)
Net amortization and deferral.............................................. (100) (1,145) 858
--------- --------- ---------
Net pension cost........................................................... $ 47 $ 85 $ 163
--------- --------- ---------
--------- --------- ---------
</TABLE>
Net pension cost for the three months ended March 31, 1995 and 1996 was
$33,000 and $26,000, respectively.
DEFINED CONTRIBUTION PLAN
The Company has a salary reduction plan covering all eligible employees
under Section 401(k) of the Internal Revenue Code. The Plan includes a provision
which allows employees to make pretax contributions. The Company matches between
15 to 45 percent of employee contributions up to 4 to 6 percent of the
employee's salary. The Company recognized contribution expense of $315,000,
$303,000 and $260,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $78,000 and $88,000 for the three months ended March 31, 1995
and 1996, respectively.
HEALTH AND WELFARE
The Company's independently administered self-insurance program provides
health insurance coverage for employees and their dependents on a
cost-reimbursement basis. Under the program, the Company is obligated for claims
payments. A stop loss insurance contract executed with an insurance carrier
covers claims in excess of $100,000 per covered individual per year. During the
years ended December 31, 1993, 1994 and 1995, total claims expense of
$3,916,000, $3,348,000 and $2,658,000, respectively, was incurred, which
represents claims processed, premium expenses, administration fees and an
estimate for claims incurred but not reported. Total claims expense for the
three months ended March 31, 1995 and 1996 was $890,000 and $886,000,
respectively.
The Company is also self-insured for workers' compensation. Workers'
compensation expense was $654,000, $687,000 and $556,000 for the years ended
December 31, 1993, 1994 and 1995, respectively, and $164,000 and $133,000 for
the three months ended March 31, 1995 and 1996, respectively.
F-31
<PAGE>
(11)DEFERRED COMPENSATION
EQUITY SHARE PLAN
The Company's Label Art subsidiary has an Equity Share Plan which awards
shares simulating equity ownership to key employees. These equity shares do not
represent common stock or any rights associated with stock ownership of Label
Art. The units vest immediately to the employees and the value of a share is
determined annually based on Label Art's operating performance or net worth, as
defined in the plan. At December 31, 1994 and 1995 and March 31, 1996, there
were 345,944 shares outstanding. Provisions of approximately $161,000,
$1,271,000 and $2,138,000 were charged against income related to this plan for
the years ended December 31, 1993, 1994 and 1995, respectively, and $374,000 for
the three months ended March 31, 1995. As of December 31, 1994 and 1995 and
March 31, 1996, deferred compensation liability included $1,358,000, $3,224,000
and $3,224,000, respectively, related to this plan.
CLASS B COMMON STOCK INCENTIVE PLAN
The Company has a long-term incentive plan which provides for a cash payment
at retirement, death or disability based on the difference between (a) the entry
level price per Class B common share adjusted for cumulative earnings per share
and (b) the price per share paid to Class B shareholders in connection with a
1980 redemption of Class B common shares compounded at 6 percent per annum.
Provisions of $5,000 and $9,000 were charged against income related to this plan
for the year ended December 31, 1995 and the three months ended March 31, 1996,
respectively. For the years ended December 31, 1993 and 1994 and the three
months ended March 31, 1995, there were no charges to income for this plan. As
of December 31, 1994 and 1995 and March 31, 1996, deferred compensation
liability included $215,000, $220,000 and $198,000, respectively, related to
this plan.
STOCK CREDITS
At December 31, 1995 and March 31, 1996, there were 220.5 stock credits
outstanding to the Company's President. This executive is entitled to receive
additional stock credits, if employed by the Company, on March 1, 1997. These
stock credits do not represent common stock or any rights associated with stock
ownership of the Company. The calculation of stock credits is determined by
dividing 500,000 by the product of the preceding fiscal year's earnings per
share, as adjusted, multiplied by 13.
Upon death, disability or other termination of employment, other than for
cause, the Company shall redeem the stock credits and pay the executive or his
heirs additional compensation equal to the appreciation in the value of the
stock credits, if any. This is calculated by the product of the executive's
outstanding stock credits and the most recent fiscal year's earnings per share,
as adjusted, multiplied by 13 less the cumulative value of the stock credits at
the time they were awarded to the executive.
In addition, the executive shall be entitled to receive additional
compensation in lieu of dividends that would have been paid to the executive had
he owned a number of common shares equal to the number of stock credits credited
to his account.
The interest of the executive in and the right to redeem stock credits
cannot be assigned or pledged by the executive. For the year ended December 31,
1993, there were no charges to income related to stock credits. Provisions of
$5,000 and $319,000 were charged against income related to the appreciation of
the value of the stock credits and additional compensation in lieu of dividends
for the years ended December 31, 1994 and 1995, respectively. A provision of
$67,000 was charged against income for the three months ended March 31, 1995. As
of December 31, 1995 and March 31, 1996, deferred compensation liability
included $291,000 related to stock credits.
STOCK PURCHASE AGREEMENT
Under the Stock Purchase Agreement described in note 21, the Company is
required to satisfy all liabilities related to the above deferred compensation
arrangements prior to the closing date of the transaction described in note 21.
Accordingly, the deferred compensation liability is reflected as a current
liability in the March 31, 1996 consolidated balance sheet.
F-32
<PAGE>
(12)LEASES
The Company rents facilities and equipment under noncancelable operating
lease agreements. Total rental expense for all operating leases was $607,000,
$666,000 and $1,399,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $406,000 and $182,000 for the three months ended March 31,
1995 and 1996, respectively.
Future minimum lease payments under all noncancelable operating leases at
December 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------------------
<S> <C>
1996.......................................................................................... $ 577
1997......................................................................................... 523
1998......................................................................................... 311
1999......................................................................................... 122
2000......................................................................................... 59
---------
$ 1,592
---------
---------
</TABLE>
(13)CORPORATE RELOCATION EXPENSES
On May 27, 1993, the Board of Directors decided to relocate corporate
facilities from Brewster, New York to Roanoke, Virginia. As a result, the
Company has taken a charge to operations of approximately $3,290,000, $413,000
and $657,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
The relocation charge for the three months ended March 31, 1995 was
approximately $133,000. The initial phase of this relocation occurred on
February 18, 1994 and was substantially completed by the end of the first
quarter, 1995. This process contributed to the voluntary severance of
approximately 163 employees. Included in relocation charges to operations are
$1,081,000, $413,000 and $514,000 in 1993, 1994 and 1995, which relates to
severance for employees who elected not to relocate to Roanoke, Virginia. The
remaining relocation charges relate to moving and other expenses incurred by the
Company and its employees to relocate from Brewster, New York.
(14)RELATED PARTY TRANSACTIONS
In accordance with the terms of certain agreements with MHI and MHL, which
expired on December 22, 1994, the Company charged interest on advances made to
MHI, paid interest on advances from MHI and reimbursed MHL for management
advisory services rendered to the Company. Net interest expense paid to MHI was
$560,000 in 1993 and $820,000 in 1994. The rate of interest charged on advances
to MHI was based on independent quotes of 30-day commercial paper. The Company
paid MHI the current prime rate and the current prime rate less 1 percent for
advances to the Company for 1993 and 1994, respectively. There were no amounts
due to/from MHI as of December 31, 1994.
The Company paid $309,000 and $564,000 to MHL for the cost of management
services in 1993 and 1994. The 1994 expense includes $286,000 related to a
one-time charge related to the acquisitions of MHL by Rogers.
Pursuant to the terms of certain agreements with Rogers, the Company was
charged an amount for management advisory services by Rogers on a monthly basis
through December 31, 1995 based on the greater of $25,000 or a percentage of net
sales, as defined. Beginning in 1996, the monthly cost of management services
was increased to a minimum of $86,000. During 1995, the Company incurred
$300,000 for the cost of management services, of which $25,000 payable to Rogers
has been netted against other receivables from affiliates at December 31, 1995.
The cost of management services was $75,000 and $320,000 for the three months
ended March 31, 1995 and 1996, respectively. As of March 31, 1996, $345,000
payable to Rogers has been netted against other receivables from affiliates.
There were no amounts directly due to/ from Rogers as of December 31, 1994.
On December 22, 1994, the Company sold certain real property located in
Brewster, New York and Miami, Florida to affiliated real estate subsidiaries
(Rogers Realty Corporation of New York and Rogers
F-33
<PAGE>
(14)RELATED PARTY TRANSACTIONS (CONTINUED)
Realty Corporation of Florida) which are indirectly owned by Rogers. As a result
of these transactions, the Company recorded notes receivable of $7.7 million and
deferred gains of $2.4 million which are not reflected on the 1994 consolidated
statement of cash flows. These properties were leased by the Company on a month-
to-month basis pursuant to sale and leaseback arrangements with these affiliates
of Rogers. For the three months ended March 31, 1995 and the year ended December
31, 1995, total rent expense incurred on these related party leases totaled
$216,000 and $765,000, respectively. Effective December 31, 1995, these lease
arrangements were terminated.
On March 31, 1995, Rogers Realty Corporation of Florida sold its real
property in Miami, Florida to an unrelated party. Consequently, the Company was
paid in full for its outstanding note receivable of $1.2 million and all accrued
interest thereon. As a result, the deferred gain on the sale of $667,000,
recorded in 1994 when such real property was sold to Rogers Realty Corporation
of Florida, has been recognized as income for the three months ended March 31,
1995 and the year ended December 31, 1995. Total interest income recorded on
these related party notes receivable totaled $765,000, $216,000 and $183,000 for
the year ended December 31, 1995 and the three months ended March 31, 1995 and
1996, respectively.
During 1995, Rogers Realty Corporation of New York entered into a sales
agreement with an unrelated party to purchase the Brewster, New York real
property. In order to refurbish the facility to improve its marketability, the
Company advanced $504,000 to Rogers Realty Corporation of New York during 1995
to pay for building improvements and environmental remediation costs and has
recorded these advances as a receivable from the affiliate as of December 31,
1995 and March 31, 1996. Based on the estimated net proceeds of approximately
$5.6 million expected from the pending sale of the Brewster facility, the
Company has determined that a portion of the aggregate receivable from this
affiliate will not be collected. Accordingly, the deferred gain determined as of
December 22, 1994 and the aggregate receivable have been reduced by
approximately $1.4 million as of December 31, 1995 and March 31, 1996. This has
not been reflected on the consolidated statements of cash flows.
Effective December 22, 1994, the Company formed a new operating subsidiary,
InfoSeal-Registered Trademark- International, Inc.
(InfoSeal-Registered Trademark-), that is 99 percent owned by the Company. The
Company transferred principally all of the tangible and intangible assets of its
InfoSeal-Registered Trademark- business to InfoSeal-Registered Trademark-. The
transfer of assets to InfoSeal-Registered Trademark- and sale of real property
to affiliated entities described above resulted in a taxable event under the
Internal Revenue Code.
As of December 31, 1994 and 1995 and March 31, 1996, prepaid expenses and
other current assets includes $62,000, $47,000 and $100,000, respectively, due
from officers and employees, and other noncurrent assets includes notes and
accrued interest receivable from officers in the amount of $107,000, $235,000
and $250,000, respectively, of which $15,000, $77,000 and $91,000, respectively,
represents accrued interest receivable on notes receivable from shareholder (see
note 15).
(15)SHAREHOLDERS' EQUITY
On July 11, 1994, the Company sold 239 common shares to the Company's
President and accepted a $500,000 note receivable in return. On March 1, 1995,
the Company sold 188 shares to the same Company executive and accepted a
$500,000 note receivable. These notes receivable are due and payable upon death,
disability or termination of employment, bear interest compounded semiannually
on June 30 and December 31 at an annual rate equal to the greater of 6 percent
or the applicable federal rate on each semiannual date per the Internal Revenue
Code and are recorded as a reduction of shareholders' equity. These transactions
are not reflected on the accompanying consolidated statements of cash flows.
Included in interest income for the years ended December 31, 1994 and 1995 and
the three months ended March 31, 1995 and 1996 was $15,000, $62,000, $14,000 and
$14,000, respectively, related to these notes.
The Company's President, if employed by the Company, has the option of
purchasing additional common shares for $500,000 during the three-year period
commencing March 1, 1998. The amount of shares that can be purchased during the
three-year period will be calculated based on a defined formula. This option
will terminate upon the closing of the transaction described in note 21.
F-34
<PAGE>
(15)SHAREHOLDERS' EQUITY (CONTINUED)
The Company has a Stock Redemption Agreement with its two minority
shareholders who own a total of 12.7 percent of the Company's outstanding common
stock. Under this agreement, the redemption price per share is calculated by the
average consolidated earnings per share of the two preceding fiscal years, as
adjusted, prior to the date of redemption multiplied by 13. Upon death,
disability or termination, the minority shareholders must sell to the Company,
and the Company must purchase, any and all option shares outstanding. The Stock
Redemption Agreement will terminate upon the closing of the transaction
described in note 21.
(16)ACQUISITION OF SUBSIDIARY AND DISPOSAL OF PRODUCT LINES
On August 11, 1993, Label Art, Inc., a wholly-owned subsidiary of the
Company, acquired Short Run Labels, Inc. in exchange for $5,736,000 cash. The
acquisition was accounted for as a purchase; accordingly, the results of
operations for Short Run Labels, Inc. are included in the consolidated financial
statements only from the date of acquisition. Pro forma results of operations
are not presented because the effect is not material to the consolidated
statements of income. The goodwill arising as a result of the excess of the
purchase price over the fair value of net assets acquired is being amortized on
the straight-line method over 15 years.
The following table summarizes the acquisition:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
---------------------
<S> <C>
Purchase price................................................................... $ 5,736
------
Cash............................................................................. 204
Accounts receivable.............................................................. 66
Inventory........................................................................ 151
Property, plant and equipment.................................................... 1,100
Other assets..................................................................... 154
Accounts payable and accrued expenses............................................ (279)
Long-term debt................................................................... (440)
------
Net assets acquired (estimated fair market value)................................ 956
------
Excess of purchase price over fair value of net assets acquired (goodwill)....... $ 4,780
------
------
</TABLE>
On December 2, 1994, the Company sold certain assets of its Flat Division
product line to The Reynolds and Reynolds Company ("Reynolds") resulting in a
net gain of $2,829,000 in 1994. In 1995, the Company recognized additional costs
of $16,000 relating to the disposal of its Flat Division. The asset purchase
agreement provided, among other things, that the Company covenant not to compete
with Reynolds in the pegboard, one-write accounting system and HCFA medical
claim form businesses for a period of five years from the date of sale.
On April 19, 1995, the Company sold certain assets of its Tax Forms Business
product line to Taylor Corporation ("Taylor") resulting in a net gain of
$405,000. The asset purchase agreement provided, among other things, that the
Company covenant not to compete with Taylor in the manufacturing or imprinting,
and sale or distribution of generic or custom tax forms in the U.S. for a period
of five years from the date of sale. In addition, on April 19, 1995, the Company
entered into a manufacturing agreement with Taylor whereby Taylor will purchase
no less than 75 percent of its tax form mailer requirements for a period of five
years up to an agreed-upon maximum dollar value.
(17)FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires the Company to disclose estimated fair
values of its financial instruments. SFAS 107 defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties.
F-35
<PAGE>
(17)FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments: The carrying amounts reported in the
consolidated balance sheet for cash, notes receivable and long-term debt
approximate fair value. The fair value of long-term debt is estimated by
discounting the future cash flows of each instrument at rates currently offered
to the Company for similar debt instruments of comparable maturities by the
Company's bank. The fair values of investment securities (see note 5) are based
on dealer quotes at the reporting date for those or similar investments.
(18)CONTINGENCIES
In the normal course of business, the Company is subject to proceedings,
lawsuits and other claims. Such matters are subject to many uncertainties, and
outcomes are not predictable with assurance. There are no legal proceedings,
lawsuits or other claims pending against or involving the Company which, in the
opinion of management, will have a material adverse impact upon the consolidated
financial position, results of operations or liquidity of the Company.
(19)BUSINESS AND CREDIT CONCENTRATIONS
The Company provides credit, in the normal course of business, to industry
dealers and distributors. Concentration of credit risk with respect to trade
receivables is limited due to the Company's large number of customers. The
Company also performs ongoing credit evaluations of its customers. Management
believes that credit risks at December31, 1994 and 1995 and March31, 1996 have
been adequately provided for in the consolidated financial statements.
The Company's raw materials are readily available, and the Company is not
dependent on a single supplier or only a few suppliers.
(20)NEW ACCOUNTING STANDARD
In March1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS 121 requires
companies to review long-lived assets and certain identifiable intangibles to be
held, used or disposed of, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted this statement effective January1, 1996. The
adoption of this statement did not have a significant effect on the Company's
consolidated financial statements.
(21)SUBSEQUENT EVENT (UNAUDITED)
On April 25, 1996, Rogers and National Fiberstock Corporation (the "Buyer")
signed a letter of intent whereby the Buyer would acquire the Company. It is the
further intention of both parties and the Company's two minority shareholders,
to enter into a Stock Purchase Agreement (the "Agreement") which contemplates a
transaction in which the Buyer will purchase from the Sellers, and the Sellers
will sell to the Buyer, all of the outstanding capital stock of the Company in
return for cash. In addition, the Agreement stipulates that on or prior to the
closing date of the transaction, the Company shall satisfy all liabilities under
and terminate each of the deferred compensation arrangements described in
note11.
F-36
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO
WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION
OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... ii
Prospectus Summary............................. 1
Risk Factors................................... 10
The Transactions............................... 14
Use of Proceeds of the New Notes............... 14
Pro Forma Capitalization....................... 15
The Exchange Offer............................. 16
Unaudited Pro Forma Financial Data............. 24
Selected Historical Financial Data -- National
Fiberstok Corporation......................... 35
Selected Historical Consolidated Financial Data
-- Transkrit Corporation...................... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 37
Industry....................................... 43
Business....................................... 45
Management..................................... 53
Security Ownership............................. 59
Certain Relationships and Related
Transactions.................................. 61
Description of New Bank Credit Facility........ 62
Description of Notes........................... 63
Certain U.S. Federal Income Tax Consequences... 89
Transfer Restrictions..........................
Book-Entry; Delivery and Form.................. 90
Plan of Distribution........................... 92
Experts........................................ 93
Legal Matters.................................. 93
Index to Financial Statements.................. F-1
</TABLE>
--------------
PROSPECTUS
--------------
NATIONAL FIBERSTOK
CORPORATION
OFFER TO EXCHANGE
11 5/8% SENIOR NOTES DUE 2002, SERIES B
FOR ALL OUTSTANDING 11 5/8% SENIOR NOTES DUE 2002, SERIES A
, 1996
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Company provides that no director
shall be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent
provided by Delaware General Corporation Law, (i) for breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct of a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any tranaction from which director derived an
improper prsonal benefit.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlememt of such actions, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's bylaws,
disinterested director vote, stockholder vote, agreement or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
1. Purchase Agreement dated as of June 21, 1996 among the Company, Label Art, Inc., Putnam Graphic
Innovations, Inc., InfoSeal International, Inc., Government Forms and Systems, Inc., Boharb
Corporation, Short Run Labels, Inc., BT Securities Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation.
2. Certificate of Ownership and Merger merging Transkrit Corporation into the Company filed with the
Secretary of State of Delaware on June 28, 1996.
3.1 Certificate of Incorporation of the Company, as amended to date, filed with the Secretary of State
of the State of Delaware on August 18, 1989.
3.2 By-laws of the Company.
4.1 Indenture dated as of June 15, 1996 among the Company, Label Art, Inc., Putnam Graphic Innovations,
Inc., InfoSeal International, Inc., Government Forms and Systems, Inc., Boharb Corporation, Short
Run Labels, Inc. and Wilmington Trust Company (the "Indenture").
4.2 Specimen Certificate of 11 5/8% Series A Senior Note due 2002 (included in Exhibit 4.1 hereto).
4.3 Specimen Certificate of 11 5/8% Series B Senior Note due 2002 (the "New Notes") (included in Exhibit
4.1 hereto).
4.4 Form of Guarantee of securities issued pursuant to the Indenture (included in Exhibit 4.1 hereto).
4.5 The Registration Rights Agreement dated as of June 28, 1996 among the Company, Label Art, Inc.,
Putnam Graphic Innovations, Inc., InfoSeal International, Inc., Government Forms and Systems, Inc.,
Boharb Corporation, Short Run Labels, Inc., BT Securities Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.6 Securities Pledge Agreement dated as of June 28, 1996 between National Fiberstok Corporation and
Wilmington Trust Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
4.7 Securities Pledge Agreement dated as of June 28, 1996 between Label Art, Inc. and Wilmington Trust
Company.
<C> <S>
4.9 Securities Pledge Agreement dated as of June 28, 1996 between Boharb Corporation and Wilmington
Trust Company.
*5.1 Opinion of White & Case regarding the legality of the New Notes.
10.1 Master Lease Agreement dated as of December 21, 1995 between the CIT Group Equipment Financing, Inc.
and the Company.
10.2 Lease Agreement dated October 4, 1990 by and between Dermody Industrial Group as Landlord and the
Company as Tenant for the property located at 855 Linda Way, Sparks, Nevada.
10.3 Lease Agreement dated September 1, 1988 by and between Klein Tools as Landlord and Label Art, Inc.
as Tenant for the property located at 5721 South Zero Street, Fort Smith, Arkansas.
10.4 Occupancy Agreement dated as of August 11, 1993 among Gailerd Smith and Eileen Ruder as Landlords
and Short Run Labels, Inc. as Tenant for the property located at 1681 Industrial Road, San Carlos,
California.
10.5 Lease Agreement dated as of May 23, 1995 between FRP Development Corp. as Landlord and Short Run
Labels, Inc. as Tenant for the property located at 812 Oregon Avenue, Linthicum, Maryland.
10.6 Lease Agreement dated as of March 28, 1991 between the Company as Tenant and the Prudential Jimmie
Taylor Realtors as Landlord for the property located at 4407 South 16th Street, Fort Smith,
Arkansas.
10.7 Indenture of Lease dated as of June 19, 1992 between C.E. Runion as Landlord and the Company as
Tenant for the property located at Highway 25, Travelers Rest, Greenville County, South Carolina.
10.8 Lease Agreement dated as of September 2, 1994 between Tornetta Realty Corp. as Landlord and the
Company as Tenant for the property located at 2051A Potshop Lane, Norristown, PA.
10.9 Lease Agreement dated as of April 1, 1980 between C-S-K Louisville as Landlord and the Company as
Tenant for the property located at 7707 National Turnpike, Louisville, Kentucky 40214.
10.10 Lease Agreement dated as of May 10, 1994 between Jadow Realty Company, L.P. as Landlord and the
Company as Tenant for the premises located at 7990 Second Flag Drive, Cobb County, Georgia.
10.11 Office Building Lease dated as of June 20, 1995 between Peachtree Dunwoody Partners, L.P. as
Landlord and the Company as Tenant for the property located at 5775 Peachtree Dunwoody Road,
Atlanta, GA.
10.12 Transkrit Corporation, Employees' Pension Plan Restated as of January 1, 1989.
10.13 Management Supplemental Retirement Agreement dated as of January 1, 1990 between the Company and
William C. Britts.
10.14 Employee's Retirement Plan of National Fiberstok Corporation.
10.15 Amended and Restated Advisory Services Agreement dated as of June 28, 1996 among the Company, MDC
Management Company II, L.P. and MDC Management Company.
10.16 Employment Agreement dated as of June 28, 1996 between Robert M. Miklas and the Company.
*10.17 Employment Agreement dated as of June 9, 1995, as amended, between Robert B. Webster and the
Company.
10.18 Employment Agreement dated as of June 28, 1996 between Jack Resnick and the Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
*10.19 Employment Agreement dated as of March 13, 1986 between Thomas J. Cobery and the Company.
<C> <S>
*10.20 Non-Competition Agreement dated as of March 13, 1986 between the Company and Thomas J. Cobery.
10.21 Employment Agreement dated as of April 5, 1983 between the Company and William C. Britts.
10.22 DEC International, Inc. 1996 Stock Incentive Plan.
10.23 Credit Agreement dated as of June 28, 1996 among the Company, Label Art, Inc., Putnam Graphic
Innovations, Inc., InfoSeal International, Inc., Government Forms and Systems, Inc., Boharb
Corporation, Short Run Labels, Inc. and Heller Financial, Inc.
12.1 Statement re computation of ratios.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of White & Case (contained in the opinion filed as Exhibit 5.1 hereto).
24.1 Power of Attorney (see pages II-4 through II-11).
25.1 Statement of eligibility of trustee.
*99.1 Form of Letter of Transmittal for New Notes.
*99.2 Form of Notice of Guaranteed Delivery for New Notes.
*99.3 Letter to Brokers.
*99.4 Letter to Clients.
*99.5 Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Number on substitute Form W-9.
</TABLE>
- ------------------------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by its is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT 1
NATIONAL FIBERSTOK CORPORATION
$100,000,000
11-5/8% SENIOR NOTES due 2002
PURCHASE AGREEMENT
June 21, 1996
BT SECURITIES CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
National Fiberstok Corporation, a Delaware corporation (the
"COMPANY"), Label Art, Inc., a Delaware corporation, InfoSeal International,
Inc., a Delaware corporation, Government Forms and Systems, Inc., a Delaware
corporation, Putnam Graphic Innovations, Inc., a Delaware corporation, Short Run
Labels, Inc., a Delaware corporation, Boharb Corporation, a Delaware
corporation, and A/L Systems, Inc., a Delaware corporation (collectively, the
"GUARANTORS" and, together with the Company, the "ISSUERS") hereby confirm
their agreement with you (the "INITIAL PURCHASERS") as set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$100,000,000 aggregate principal amount of its 11-5/8% Senior Notes due 2002
(the "NOTES"). The Notes will be guaranteed (collectively, the
"GUARANTEES") on a senior basis by each of the Guarantors. The Notes and the
Guarantees are collectively referred to herein as the "SECURITIES". The Notes
are to be issued under an indenture (the "INDENTURE") to be dated as of June
15, 1996 by and among the Company, the Guarantors and Wilmington Trust Company,
as Trustee (the "TRUSTEE"). The Company and certain of the Guarantors will
execute and deliver on the Closing Date the Security Documents (as defined in
the Indenture) pursuant to which the Notes and the Guarantees will be secured by
<PAGE>
-2-
first priority liens on and security interest in all of the issued and
outstanding capital stock of the Guarantors.
The Company has entered into a Stock Purchase Agreement (the
"ACQUISITION AGREEMENT") dated as of June 20, 1996, pursuant to which the
Company has agreed to purchase all of the outstanding capital stock of Transkrit
Corporation ("TRANSKRIT"). Pursuant to a Certificate and Plan of Merger (the
"MERGER CERTIFICATE), immediately after the purchase of such capital stock,
Transkrit will be merged (the "MERGER") with and into the Company. The
purchase of the capital stock of Transkrit by the Company and the Merger are
together referred to herein as the "ACQUISITION"
Pursuant to a Capital Contribution Agreement to be dated as of June
28, 1996 between the Company and DEC International Inc., a Delaware corporation
("DEC") (the "CAPITAL CONTRIBUTION AGREEMENT"), DEC has agreed to make a
Capital Contribution to the Company (the "PARENT CAPITAL CONTRIBUTION") on the
Closing Date in an amount of $7,421,000.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"ACT"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated June 4, 1996 (the "PRELIMINARY
MEMORANDUM"), and a final offering memorandum dated June 21, 1996 (the "FINAL
MEMORANDUM"; the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "MEMORANDUM") setting forth or including a description
of the terms of the Securities, the terms of the offering of the Securities, a
description of the Company and Transkrit and its subsidiaries and any material
developments relating to the Company and Transkrit and its subsidiaries
occurring after the date of the most recent historical financial statements
included therein.
The Initial Purchasers and their direct and indirect transferees of
the Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as EXHIBIT A (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Issuers have agreed,
among other things, to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Securities or the Exchange Notes (as defined in the
Registration Rights Agreement) and related guarantees under the Act.
<PAGE>
-3-
2. REPRESENTATIONS AND WARRANTIES. The Issuers, jointly and
severally, represent and warrant to and agree with each of the Initial
Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor
the Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as defined
in Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to either of the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in the Final Memorandum; as of
the date hereof (i) the Company has no subsidiaries and (ii) all of the
subsidiaries of Transkrit are listed in SCHEDULE 2 attached hereto (each, a
"TRANSKRIT SUBSIDIARY" and collectively, the "TRANSKRIT SUBSIDIARIES"); all
of the outstanding shares of capital stock of the Company, Transkrit and the
Transkrit Subsidiaries have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; all of the outstanding
shares of capital stock of the Company, Transkrit and of each of the Transkrit
Subsidiaries will be free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the Act
and the securities or "Blue Sky" laws of certain jurisdictions) or voting;
except as set forth in the Final Memorandum, there are no (i) options, warrants
or other rights to purchase, (ii) agreements or other obligations to issue or
(iii) other rights to convert any obligation into, or exchange any securities
for, shares of capital stock of or ownership interests in the Company, Transkrit
or any of the Transkrit Subsidiaries outstanding. Except for the Transkrit
Subsidiaries or as disclosed in the Final Memorandum, neither the Company nor
Transkrit owns, directly or indirectly, any shares of capital stock or any other
equity or long-term debt securities or have any equity interest in any firm,
partnership, joint venture or other entity.
<PAGE>
-4-
(c) Each of the Company, Transkrit and the Transkrit Subsidiaries
is duly incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation and has all requisite corporate
power and authority to own its properties and conduct its business as now
conducted and as described in the Final Memorandum; each of the Company,
Transkrit and the Transkrit Subsidiaries is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or otherwise), prospects or results of operations
of the Company, Transkrit and the Transkrit Subsidiaries, taken as a whole (any
such event, a "MATERIAL ADVERSE EFFECT").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the Registration
Rights Agreement). The Notes, when issued, will be in the form contemplated by
the Indenture. The Notes, the Exchange Notes and the Private Exchange Notes
have each been duly and validly authorized by the Company and, when executed by
the Company and authenticated by the Trustee in accordance with the provisions
of the Indenture and, in the case of the Notes, when delivered to and paid for
by the Initial Purchasers in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company in accordance
with their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(e) Each Guarantor has all requisite corporate power and authority
to execute, deliver and perform each of its obligations under its Guarantee, its
guarantee of the Exchange Notes (each, an "EXCHANGE NOTES GUARANTEE") and its
guarantee of the Private Exchange Notes (each, "PRIVATE EXCHANGE NOTES
GUARANTEE"). The Guarantees, when issued, will be in the form contemplated by
the Indenture. The Guarantees, the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees have each been duly and validly authorized by the
Guarantors and, in the case of the Guarantees, when delivered to and paid for by
the Initial Purchasers in
<PAGE>
-5-
accordance with the terms of this Agreement, will constitute valid and
legally binding obligations of the Guarantors, entitled to the benefits of
the Indenture, and enforceable against the Guarantors in accordance with
their terms, except that enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(f) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by the Issuers and, when executed and delivered by the Issuers
(assuming the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(g) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and, when executed and delivered by the
Issuers, will constitute a valid and legally binding agreement of each of the
Issuers, enforceable against each of the Issuers in accordance with its terms,
except that (a) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought and (b) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(h) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by the Issuers of the transactions
contemplated hereby have been duly and
<PAGE>
-6-
validly authorized by the Issuers. This Agreement has been duly executed and
delivered by the Issuers.
(i) Each of Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Security
Documents, to the extent a party thereto. Each of the Security Documents has
been duly and validly authorized by the Issuers, to the extent a party thereto,
and, when executed and delivered by such Issuers, will constitute a valid and
legally binding obligation of such Issuers enforceable against such Issuers in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar law now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(j) No consent, approval, authorization or order of any court
or governmental agency or body, or third party is required for (i) the
issuance and sale by the Company of the Notes to the Initial Purchasers or
the consummation by the Company of the other transactions contemplated
hereby, (ii) the issuance and sale by the Guarantors of the Guarantees or the
consummation by the Guarantors of the other transactions contemplated hereby,
(iii) the consummation by the Issuers, to the extent a party thereto, of the
transactions contemplated by the Security Documents, (iv) the consummation by
the Company of the transactions contemplated by the Acquisition Agreement,
(v) the consummation by the Company and DEC of the transactions contemplated
by the Capital Contribution Agreement and (vi) the consummation by the
Issuers, to the extent a party thereto, of the transactions contemplated by
New Bank Credit Facility (as defined in the Final Memorandum), except such as
have been or, prior to the Closing Date, will be obtained and such as may be
required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Securities by the Initial Purchasers. None of
DEC, the Company, Transkrit or the Transkrit Subsidiaries is (i) in violation
of its certificate of incorporation or bylaws (or similar organizational
document), (ii) in breach or violation of any statute, judgment, decree,
order, rule or regulation applicable to any of them or any of their
respective properties or assets, except for any such breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach of or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a default
under) or in violation of any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement,
<PAGE>
-7-
permit, certificate, contract or other agreement or instrument to which any
of them is a party or to which any of them or their respective properties or
assets is subject (collectively, "CONTRACTS"), except for any such breach,
default, violation or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(k) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture, the Registration Rights Agreement and the Security
Documents (to the extent a party thereto) and the consummation by the Issuers of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance and sale of the Securities to the Initial Purchasers), the
execution, delivery and performance by the Company of the Acquisition Agreement
and the consummation of the Merger and the execution, delivery and performance
by the Company and DEC of the Capital Contribution Agreement will not conflict
with or constitute or result in a breach of or a default under (or an event
which with notice or passage of time or both would constitute a default under)
or violation of any of (a) the terms or provisions of any Contract, except for
any such conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect, (b) the
certificate of incorporation or bylaws (or similar organizational document) of
DEC, the Company, Transkrit or any of the Transkrit Subsidiaries, or (c)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation applicable to DEC, the Company, Transkrit or any of the Transkrit
Subsidiaries or any of their respective properties or assets, except for any
such conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(l) Arthur Andersen LLP, who are reporting on the audited
financial statements of the Company included in the Final Memorandum, are
independent public accountants within the meaning of the Act. KPMG Peat
Marwick LLP, who are reporting on the audited consolidated financial
statements of Transkrit included in the Final Memorandum, are independent
public accountants within the meaning of the Act. The financial statements
of the Company and related notes thereto included in the Final Memorandum
present fairly in all material respects the financial position of the Company
as of the dates indicated and the results of its operations and the changes
in the cash flow for the periods specified. The consolidated financial
statements of Transkrit included in the Final Memorandum present fairly in
all material respects the
<PAGE>
-8-
consolidated financial position of Transkrit and its consolidated
subsidiaries as of the dates indicated and the results of their operations
and the changes in their consolidated cash flows for the periods specified.
(m) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), (ii) have been prepared in all material
respects in accordance with the Commission's rules and guidelines with respect
to pro forma financial statements, and (iii) have been correctly computed on the
bases described therein; the assumptions used in the preparation of the pro
forma financial data and other pro forma financial information included in the
Final Memorandum are reasonable and the adjustments used therein fairly and
accurately, in all material respects, give effect to the transactions or
circumstances referred to therein. The supplemental combined adjusted
historical data included in the Final Memorandum have been correctly computed on
the basis described therein; the assumptions used in the preparation of the
supplemental combined adjusted historical data included in the Final Memorandum
are reasonable and the adjustments used give effect to the transactions or
circumstances referred to therein.
(n) There is not pending or, to the knowledge of the Issuers,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company, Transkrit or any of the Transkrit Subsidiaries is a party, or to which
the property or assets of the Company, Transkrit or any of the Transkrit
Subsidiaries are subject, before or brought by any court, arbitrator or
governmental agency or body which, if determined adversely to the Company,
Transkrit or any of the Transkrit Subsidiaries, would, individually or in the
aggregate, have a Material Adverse Effect or which seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other transactions
described in the Final Memorandum.
(o) Each of the Company, Transkrit and the Transkrit
Subsidiaries possesses all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be, and to
<PAGE>
-9-
operate its respective properties and to carry on its respective businesses
as now or proposed to be conducted as set forth in the Final Memorandum
("PERMITS"), except where the failure to obtain such Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; each of the Company, Transkrit and the Transkrit Subsidiaries
has fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit; and none
of the Company, Transkrit or the Transkrit Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Final Memorandum and except where such
revocation or modification would not, individually or in the aggregate, have
a Material Adverse Effect.
(p) Since the date of the most recent financial statements
appearing in the Final Memorandum, except as described therein, (i) none of the
Company, Transkrit or the Transkrit Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter into any
transactions or contracts (written or oral) not in the ordinary course of
business, which liabilities, obligations, transactions or contracts would,
individually or in the aggregate, be material to the business, condition
(financial or otherwise), prospects or results of operations of the Company,
Transkrit and the Transkrit Subsidiaries, taken as a whole, (ii) none of the
Company, Transkrit or the Transkrit Subsidiaries has purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock (other than with respect to any of
such Transkrit Subsidiaries, the purchase of, or dividend or distribution on,
capital stock owned by Transkrit or another Transkrit Subsidiary) and (iii)
there shall not have been any material change in the capital stock or long-term
indebtedness of the Company, Transkrit or the Transkrit Subsidiaries.
(q) Each of the Company, Transkrit and the Transkrit
Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns, except where the failure to so file such returns would
not, individually or in the aggregate, have a Material Adverse Effect, and
has paid all taxes shown as due thereon; and other than tax deficiencies
which the Company, Transkrit or any Transkrit Subsidiary is contesting in
good faith and for which the Company, Transkrit or such Transkrit Subsidiary
has provided reserves in accordance with generally accepted accounting
principles, there is no tax deficiency that has been
<PAGE>
-10-
asserted against the Company, Transkrit or any of the Transkrit Subsidiaries
that would have, individually or in the aggregate, a Material Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Issuers believe to be
reliable and accurate.
(s) None of the Company, Transkrit, the Transkrit Subsidiaries or
any agent acting on their behalf has taken or will take any action that might
cause this Agreement or the sale of the Securities to violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(t) Each of the Company, Transkrit and the Transkrit Subsidiaries
has good and marketable title to all real property and good title to all
personal property described in the Final Memorandum as being owned by it and
good and marketable title to a leasehold estate in the real and personal
property described in the Final Memorandum as being leased by it free and clear
of all liens, charges, encumbrances or restrictions, except as described in the
Final Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would not,
individually or in the aggregate, have a Material Adverse Effect. All leases,
contracts and agreements to which the Company, Transkrit or any of the Transkrit
Subsidiaries is a party or by which any of them is bound are valid and
enforceable against the Company, Transkrit or such Transkrit Subsidiary, as the
case may be, and are valid and enforceable against the other party or parties
thereto and are in full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company,
Transkrit and the Transkrit Subsidiaries own or possess adequate licenses or
other rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how necessary to conduct the businesses now or proposed to
be operated by them as described in the Final Memorandum, and none of the
Company, Transkrit or the Transkrit Subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would have a Material
Adverse Effect.
(u) There are no legal or governmental proceedings involving or
affecting the Company, Transkrit or any Transkrit
<PAGE>
-11-
Subsidiary or any of their respective properties or assets which would be
required to be described in a prospectus pursuant to the Act that are not
described in the Final Memorandum, nor are there any material contracts or
other documents which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum.
(v) Except as described in the Final Memorandum or as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (a) each of the Company, Transkrit and the Transkrit Subsidiaries
is in compliance with and not subject to liability under applicable
Environmental Laws (as defined below), (b) each of the Company, Transkrit and
the Transkrit Subsidiaries has made all filings and provided all notices
required under any applicable Environmental Law, and has, and is in compliance
with, all Permits required under any applicable Environmental Laws and each of
them is in full force and effect, (c) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter or request for information
pending or, to the knowledge of the Issuers, threatened against the Company,
Transkrit or any of the Transkrit Subsidiaries under any Environmental Law, (d)
no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property owned,
operated, leased or controlled by the Company, Transkrit or any of the Transkrit
Subsidiaries, (e) none of the Company, Transkrit or the Transkrit Subsidiaries
has received notice that it has been identified as a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or any comparable state law, (f) no
property or facility of the Company, Transkrit or any of the Transkrit
Subsidiaries is (i) listed or proposed for listing on the National Priorities
List under CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "ENVIRONMENTAL LAWS" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder, relating to pollution or protection of public
or employee health and safety or the environment, including, without
limitation, laws relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials into the environment (including,
without limitation, ambient air, surface water, ground water, land
<PAGE>
-12-
surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of hazardous materials, and (iii) underground and above ground
storage tanks and related piping, and emissions, discharges, releases or
threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company, Transkrit or any of the Transkrit
Subsidiaries which is pending or, to the knowledge of the Issuers, threatened.
(x) Each of the Company, Transkrit and the Transkrit Subsidiaries
carries insurance in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties.
(y) None of the Company, Transkrit or the Transkrit Subsidiaries
has incurred any liability for any prohibited transaction or funding deficiency
or any complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the Company, Transkrit or
any of the Transkrit Subsidiaries makes or ever has made a contribution and in
which any employee of the Company, Transkrit or of any Transkrit Subsidiary is
or has ever been a participant, which in the aggregate could have a Material
Adverse Effect. With respect to such plans, the Company, Transkrit and each
Transkrit Subsidiary is in compliance in all respects with all applicable
provisions of ERISA, except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
(z) Each of the Company, Transkrit and the Transkrit Subsidiaries
(i) makes and keeps accurate books and records and (ii) maintains internal
accounting controls which provide reasonable assurance that (a) transactions are
executed in accordance with management's authorization, (b) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (c) access to its assets is permitted
only in accordance with management's authorization and (d) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.
(aa) None of the Company, Transkrit or the Transkrit
Subsidiaries will be an "investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms
<PAGE>
-13-
are defined in the Investment Company Act of 1940, as amended, and the rules
and regulations thereunder.
(ab) The Notes, the Guarantees, the Indenture, the Security
Documents, the Registration Rights Agreement, the Acquisition Agreement and the
New Bank Credit Facility will conform in all material respects to the
descriptions thereof in the Final Memorandum.
(ac) No holder of securities of the Company, Transkrit or any
Transkrit Subsidiary will be entitled to have such securities registered under
the registration statements required to be filed by the Issuers pursuant to the
Registration Rights Agreement, other than as expressly permitted thereby.
(ad) Immediately after the consummation of the transactions
contemplated by the Acquisition Agreement, the Capital Contribution Agreement,
this Agreement and the Indenture, the fair value and present fair saleable value
of the assets of each of the Issuers will exceed the sum of its stated
liabilities and identified contingent liabilities; none of the Issuers is, nor
will any of the Issuers be, after giving effect to the execution, delivery and
performance of the Acquisition Agreement, the Capital Contribution Agreement,
this Agreement and the Indenture, and the consummation of the transactions
contemplated hereby and thereby, (a) left with unreasonably small capital with
which to carry on its business as it is proposed to be conducted, (b) unable to
pay its debts (contingent or otherwise) as they mature or (c) otherwise
insolvent.
(ae) None of the Issuers or any of their respective Affiliates
(as defined in Rule 501(b) of Regulation D under the Act) has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the Act)
which is or could be integrated with the sale of the Securities in a manner
that would require the registration under the Act of the Securities or (ii)
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) in connection with the offering
of the Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act. Assuming the accuracy of the
representations and warranties of the Initial Purchasers in Section 8 hereof,
it is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by this
Agreement to register any of the Securities under the Act or to qualify the
Indenture under the TIA.
<PAGE>
-14-
(af) No securities of any of the Issuers are of the same class
(within the meaning of Rule 144A under the Act) as any of the Securities and
listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(ag) None of the Issuers has taken, nor will any of them take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
the Securities.
(ah) None of the Issuers, any of their respective Affiliates or any
person acting on any of their behalf (other than the Initial Purchasers) has
engaged in any directed selling efforts (as that term is defined in Regulation S
under the Act ("Regulation S")) with respect to the Securities; the Issuers and
their respective Affiliates and any person acting on any of their behalf (other
than the Initial Purchasers) have complied with the offering restrictions
requirement of Regulation S.
Any certificate signed by any officer of any Issuer and delivered to
any Initial Purchaser or to counsel for the Initial Purchasers shall be deemed a
joint and several representation and warranty by the Issuers to each Initial
Purchaser as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the
Issuers agree to issue and sell to the Initial Purchasers, and the Initial
Purchasers, acting severally and not jointly, agree to purchase the Notes
(and the related Guarantees) in the respective amounts set forth on SCHEDULE
1 hereto at 97% of their principal amount. One or more certificates in
definitive form for the Notes and Guarantees that the Initial Purchasers have
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchasers request upon
notice to the Company at least 36 hours prior to the Closing Date, shall be
delivered by or on behalf of the Issuers to the Initial Purchasers, against
payment by or on behalf of the Initial Purchasers of the purchase price
therefor by wire transfer (same day funds) to such account or accounts as the
Company shall specify prior to the Closing Date, or by such means as the
parties hereto shall agree prior to the Closing Date. Such delivery of and
payment for the Securities shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New York time, on
<PAGE>
-15-
June 28, 1996, or at such other place, time or date as the Initial
Purchasers, on the one hand, and the Company, on the other hand, may agree
upon, such time and date of delivery against payment being herein referred to
as the "CLOSING DATE." The Company will make such certificate or
certificates for the Securities available for checking and packaging by the
Initial Purchasers at the offices of BT Securities Corporation in New York,
New York, or at such other place as BT Securities Corporation may designate,
at least 24 hours prior to the Closing Date.
4. OFFERING BY THE INITIAL PURCHASERS. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
5. COVENANTS OF THE ISSUERS. The Issuers covenant and agree
with each of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final Memorandum
or any amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given their consent. The Issuers will promptly, upon
the reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in connection with the
resale of the Securities by the Initial Purchasers.
(b) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of which jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in effect for as
long as may be necessary to complete the resale of the Securities; PROVIDED,
HOWEVER, that in connection therewith, none of the Issuers shall be required
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction or subject itself to taxation in excess of a
nominal dollar amount in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Securities or the Private Exchange Notes and
Private Exchange Notes Guarantees, any event occurs or information becomes known
as a result of which the
<PAGE>
-16-
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly notify the Initial Purchasers
thereof and will prepare, at the expense of the Issuers, an amendment or
supplement to the Final Memorandum that corrects such statement or omission
or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Securities remain outstanding, the
Company will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company with the Commission
or any national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any available
unaudited interim financial statements of the Company and any available
unaudited interim consolidated financial statements of Transkrit for any period
subsequent to the period covered by the most recent financial statements of the
Company or the most recent consolidated financial statements of Transkrit
appearing in the Final Memorandum.
(h) None of the Issuers or any of their Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of
any "security" (as defined in the Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Act of the Securities.
<PAGE>
-17-
(i) The Issuers will not engage in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Securities or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act.
(j) For so long as any of the Securities remain outstanding, the
Company will make available at its expense, upon request, to any holder of such
Securities and any prospective purchasers thereof the information specified in
Rule 144A(d)(4) under the Act, unless the Company is then subject to Section 13
or 15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "PORTAL MARKET")
and (ii) permit the Securities to be eligible for clearance and settlement
through The Depository Trust Company.
(l) In connection with Securities offered and sold in an off-shore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
6. EXPENSES. The Issuers jointly and severally agree to pay
all costs and expenses incident to the performance of their respective
obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant
to Section 11 hereof, including all costs and expenses incident to (i) the
printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or
supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants
and any other experts or advisors retained by the Issuers, (iv) preparation
(including printing), issuance and delivery to the Initial Purchasers of the
Securities, (v) the qualification of the Securities under state securities
and "Blue Sky" laws, including filing fees and fees and disbursements of
counsel for the Initial Purchasers relating thereto, (vi) expenses in
connection with any meetings with prospective
<PAGE>
-18-
investors in the Securities, (vii) fees and expenses of the Trustee
including fees and expenses of its counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation of the
Securities on the PORTAL Market and (ix) any fees charged by investment
rating agencies for the rating of the Securities. If the sale of the
Securities provided for herein is not consummated because any condition to
the obligations of the Initial Purchasers set forth in Section 7 hereof is
not satisfied, because this Agreement is terminated or because of any
failure, refusal or inability on the part of the Issuers to perform all
obligations and satisfy all conditions on their part to be performed or
satisfied hereunder (other than solely by reason of a default by the Initial
Purchasers of their obligations hereunder after all conditions hereunder have
been satisfied in accordance herewith), the Issuers jointly and severally
agree to promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees, disbursements and charges
of Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall
have been incurred by the Initial Purchasers in connection with the proposed
purchase and sale of the Securities.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of White & Case, counsel for the Issuers, in form and substance
satisfactory to counsel for the Initial Purchasers, to the effect that:
(i) Each of the Issuers is duly incorporated, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power and authority to own
its properties and to conduct its business as described in the Final
Memorandum. Each of the Issuers is duly qualified to do business as a
foreign corporation in good standing in the jurisdictions listed on a
schedule to such opinion (which the Company shall have certified are the
only jurisdictions where the failure to be so qualified could,
individually or in the aggregate, have a Material Adverse Effect).
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum;
<PAGE>
-19-
all of the outstanding shares of capital stock of the Issuers have been
duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights;
after consummation of the Acquisition, all of the outstanding shares of
capital stock of the Transkrit Subsidiaries will be owned, directly or
indirectly, by the Company, free and clear of all perfected security
interests and, to the knowledge of such counsel, free and clear of all
other liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Security Documents,
the Act and the securities or "Blue Sky" laws of certain jurisdictions)
or voting.
(iii) To the knowledge of such counsel, except as set forth in
the Final Memorandum (a) no options, warrants or other rights to purchase
from the Company, Transkrit or any Transkrit Subsidiary shares of capital
stock or ownership interests in the Company, Transkrit or any Transkrit
Subsidiary are outstanding, (b) no agreements or other obligations to
issue, or other rights to convert, any obligation into, or exchange any
securities for, shares of capital stock or ownership interests in the
Company, Transkrit or any Transkrit Subsidiary are outstanding and (c) no
holder of securities of the Company, Transkrit or any Transkrit Subsidiary
is entitled to have such securities registered under a registration
statement filed pursuant to the Registration Rights Agreement.
(iv) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Indenture,
the Notes, the Exchange Notes and the Private Exchange Notes; each
Guarantor has all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Indenture, its
Guarantees, its Exchange Notes Guarantees and its Private Exchange Notes
Guarantees; the Indenture meets the requirements for qualification under
the TIA; the Indenture has been duly and validly authorized by each of the
Issuers and, when duly executed and delivered by each of the Issuers
(assuming the due authorization, execution and delivery thereof by the
Trustee), will constitute the valid and legally binding agreement of each
of the Issuers, enforceable against each of the Issuers in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the
<PAGE>
-20-
discretion of the court before which any proceeding therefor may be
brought.
(v) The Notes are in the form contemplated by the Indenture. The
Notes have each been duly and validly authorized by the Company and, when
duly executed and delivered by the Company and paid for by the Initial
Purchasers in accordance with the terms of this Agreement (assuming the
due authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Notes by the Trustee in
accordance with the Indenture), will constitute the valid and legally
binding obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vi) The Guarantees are in the form contemplated by the Indenture.
The Guarantees have each been duly and validly authorized by the
Guarantors and, when duly executed and delivered by the Guarantors and
paid for by the Initial Purchasers in accordance with terms of this
Agreement (assuming the due authorization, execution and delivery of the
Indenture by the Trustee), will constitute the valid and legally binding
obligations of the Guarantors, entitled to the benefits of the Indenture,
and enforceable against the Guarantors in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought.
(vii) The Exchange Notes and the Private Exchange Notes
have been duly and validly authorized by the Company, and when the
Exchange Notes and the Private Exchange Notes have been duly executed
and delivered by the Company in accordance with the terms of the
Registration Rights Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
<PAGE>
-21-
Indenture), will constitute the valid and legally binding obligations
of the Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(viii) The Exchange Notes Guarantees and the Private Exchange
Notes have been duly and validly authorized by the Guarantors, and when
the Exchange Notes Guarantees and the Private Exchange Notes Guarantees
have been duly executed and delivered by the Guarantors in accordance with
the terms of the Registration Rights Agreement and the Indenture (assuming
due authorization, execution and delivery of the Indenture by the
Trustee), will constitute the valid and legally binding obligations of the
Guarantors, entitled to the benefits of the Indenture, and enforceable
against the Guarantors in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles
of equity and the discretion before which any proceeding therefor may be
brought.
(ix) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights Agreement has been
duly and validly authorized by each of the Issuers and, when duly executed
and delivered by each of the Issuers (assuming due authorization,
execution and delivery thereof by the Initial Purchasers), will constitute
the valid and legally binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms,
except that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and state securities
laws and public policy considerations.
<PAGE>
-22-
(x) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Security Documents to be delivered to the Trustee under the Indenture on
the Closing Date to which it is a party; such Security Documents have been
duly and validly authorized by the Issuers party thereto and, when
executed and delivered by the Issuer party thereto (assuming due
authorization, execution and delivery thereof by the Trustee), will
constitute the valid and legally binding agreement of the Issuers party
thereto, enforceable against the Issuers party thereto in accordance with
their respective terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(xi) Assuming (i) continued possession by the Trustee of the
Pledged Securities, (ii) that the Trustee has taken possession of the
Pledged Securities in good faith, (iii) that neither the Trustee nor
either of the Initial Purchasers has notice of an adverse claim within the
meaning of the Uniform Commercial Code of the State of New York, upon the
taking of possession by the Trustee of the Pledged Securities (as defined
in the Indenture) to be delivered to the Trustee under the Indenture on
the Closing Date, the provisions of the Security Documents will create in
favor of the Trustee a valid first priority perfected security interest in
such Pledged Securities, except as follows:
(x) such counsel need not express any opinion as to the
Company's right in or title to the Pledged Securities; and
(y) priority may be subject to claims or liens in favor of
the United States, of any State of the United States or any agency,
instrumentality or political subdivision thereof.
The Security Documents create a valid security interest in the
proceeds of such Pledged Securities under the law of the State of
New York.
(xii) Each of the Company and DEC has all requisite corporate
power and authority to execute, deliver and perform its obligations under
the Capital Contribution Agreement and
<PAGE>
-23-
to consummate the transactions contemplated thereby; the Capital
Contribution Agreement and the consummation by the Company and DEC of the
transactions contemplated thereby have been duly and validly authorized by
each of the Company and DEC. The Capital Contribution Agreement has been
duly executed and delivered by each of the Company and DEC and constitutes
the valid and binding agreement of each of the Company and DEC,
enforceable against each of the Company and DEC in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(xiii) The Merger has been duly authorized by all requisite
corporate action on the part of the Company and Transkrit; the Merger
Certificate has been filed with the Secretary of State of Delaware and has
become effective.
(xiv) Each of the Issuers has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby; this
Agreement and the consummation by each of the Issuers of the transactions
contemplated hereby have been duly and validly authorized by each of the
Issuers. This Agreement has been duly executed and delivered by each of
the Issuers.
(xv) The Indenture, the Notes, the Guarantees, the Security
Documents, the Registration Rights Agreement, the Acquisition Agreement
and the New Bank Credit Facility conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(xvi) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which any of the
Company, Transkrit or the Transkrit Subsidiaries is a party or to which
the property or assets of the Company, Transkrit or any Transkrit
Subsidiary is subject which, if determined adversely to the Company,
Transkrit or the Transkrit Subsidiaries, would result, individually or in
the aggregate, in a Material Adverse Effect, or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance or
sale of the Securities to be sold hereunder or the consummation of the
other transactions
<PAGE>
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described in the Final Memorandum under the caption "Use of Proceeds."
(xvii) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement, the Security
Documents, the Acquisition Agreement, the Capital Contribution Agreement,
the New Bank Credit Facility and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and sale of the Securities to the Initial Purchasers) will not
conflict with or constitute or result in a breach or a default under (or
an event which with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or provisions of any
Contract known to such counsel, except for any such conflict, breach,
violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of DEC, the
Company, Transkrit or any of the Transkrit Subsidiaries, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof) any statute, judgment, decree,
order, rule or regulation known to such counsel to be applicable to DEC,
the Company, Transkrit or any of the Transkrit Subsidiaries or any of
their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(xviii) No consent, approval, authorization or order of any
governmental authority is required for (i) the issuance and sale by the
Company of the Notes to the Initial Purchasers or the consummation by the
Company of the other transactions contemplated hereby, (ii) the issuance
and sale by the Guarantors of the Guarantees or the consummation by the
Guarantors of the other transactions contemplated hereby, (iii) the
consummation by the Issuers, to the extent a party thereto, of the
transactions contemplated by the Security Documents, (iv) the consummation
by the Company of the transactions contemplated by the Acquisition
Agreement, (v) the consummation by the Company and DEC of the transactions
contemplated by the Capital Contribution Agreement and (vi) the
consummation by the Issuers, to the extent a party thereto, of the
transactions contemplated by the New Bank Credit Facility (as defined in
the Final Memorandum), except such as may be required under Blue Sky
<PAGE>
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laws, as to which such counsel need express no opinion, and those which
have previously been obtained.
(xix) To the knowledge of such counsel, there are no legal or
governmental proceedings involving or affecting the Company, Transkrit or
the Transkrit Subsidiaries or any of their respective properties or assets
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum, nor are there any
material contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described in
the Final Memorandum.
(xx) None of the Company, Transkrit or the Transkrit Subsidiaries
is, or immediately after the sale of the Securities to be sold hereunder
and the application of the proceeds from such sale (as described in the
Final Memorandum under the caption "Use of Proceeds") will be, an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
(xxi) No registration under the Act of the Securities is
required in connection with the sale of the Securities to the Initial
Purchasers as contemplated by this Agreement and the Final Memorandum or
in connection with the initial resale of the Securities by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration Statement
(as defined in the Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case assuming (i) (a) that
the purchasers who buy such Securities in the initial resale thereof are
qualified institutional buyers as defined in Rule 144A promulgated under
the Act ("QIBS") or accredited investors as defined in Rule 501(a) (1),
(2), (3) or (7) promulgated under the Act ("Accredited Investors") or (b)
that the offer or sale of the Securities is made in an offshore
transaction as defined in Regulation S, (ii) the accuracy of the Initial
Purchasers' representations in Section 8 and those of the Issuers
contained in this Agreement regarding the absence of a general
solicitation in connection with the sale of such Securities to the Initial
Purchasers and the initial resale thereof and (iii) the due performance by
the Initial Purchasers of the agreements set forth in Section 8 hereof.
<PAGE>
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(xxii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, White & Case shall
additionally state that it has participated in conferences with officers and
other representatives of the Issuers, representatives of the independent public
accountants for the Issuers, representatives of the Initial Purchasers and
counsel for the Initial Purchasers, at which conferences the contents of the
Final Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no responsibility for
the accuracy, completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsection 7(a)(xv)), and that its
judgments as to materiality are, to the extent it deems proper, based in part
upon the views of appropriate officers and other representatives of the Company,
it does not believe that the Final Memorandum, on the date thereof or at the
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading (it being understood that such firm need express no
opinion with respect to the financial statements and related notes thereto and
the other financial, statistical and accounting data included in the Final
Memorandum).
In rendering the foregoing opinions, White & Case may (i) state that
their opinion is limited to matters governed by the federal laws of the United
States of America, the laws of the State of New York and the corporate laws of
the State of Delaware, and (ii) rely, to the extent such counsel deems proper,
upon the representations set forth herein and on certificates of public
officials and officers of the Company, with respect to the accuracy of factual
matters contained therein which were not independently established.
References to the Final Memorandum in this subsection shall include
any amendment or supplement thereto prepared in accordance with the provisions
of this Agreement at the Closing Date.
(a) On the Closing Date, the Initial Purchasers shall have received the
opinion, in form and substance satisfactory to the
<PAGE>
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Initial Purchasers, dated as of the Closing Date and addressed to the Initial
Purchasers, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with
respect to certain legal matters relating to this Agreement and such other
related matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received and may rely upon such
certificates and other documents and information as it may reasonably request to
pass upon such matters.
(b) The Initial Purchasers shall have received from each of Arthur
Andersen LLP and KPMG Peat Marwick LLP a comfort letter or letters dated the
date hereof and the Closing Date, in form and substance satisfactory to counsel
for the Initial Purchasers.
(c) The representations and warranties of the Issuers contained in this
Agreement shall be true and correct in all material respects on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date; the statements of the Issuers' officers made pursuant to any
certificate delivered in accordance with the provisions hereof shall be true and
correct in all material respects on and as of the date made and on and as of
the Closing Date; the Issuers shall have performed all covenants and agreements
and satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as described in the Final
Memorandum (exclusive of any amendment or supplement thereto after the date
hereof), subsequent to the date of the most recent financial statements in such
Final Memorandum, there shall have been no event or development, and no
information shall have become known, that, individually or in the aggregate, has
or would be reasonably likely to have a Material Adverse Effect.
(d) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(e) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), none of the Company, Transkrit or any of the Transkrit
Subsidiaries shall have sustained any loss or interference with respect to its
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor dispute, slow
down or work stoppage or from any legal or governmental proceeding, order or
decree, which loss or interference, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect.
<PAGE>
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(f) The Initial Purchasers shall have received a certificate of each of
the Issuers, dated the Closing Date, signed on behalf of each of the Issuers by
its Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) The representations and warranties of the Issuers contained
in this Agreement are true and correct in all material respects on and as
of the date hereof and on and as of the Closing Date, and the Issuers have
performed in all material respects all covenants and agreements and
satisfied in all material respects all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the date
of the most recent financial statements in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), no event or
development has occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has not been enjoined
(temporarily or permanently).
(g) On the Closing Date, the Initial Purchasers shall have received the
Registration Rights Agreement executed by each of the Issuers and such agreement
shall be in full force and effect at all times from and after the Closing Date.
(h) The Company shall have delivered to the Initial Purchasers a true,
correct and complete copy of the New Bank Credit Facility; the Company and the
other parties thereto shall have executed and delivered the New Bank Credit
Facility; and the New Bank Credit Facility shall be in full force and effect.
(i) The acquisition of all of the outstanding capital stock of Transkrit
pursuant to the Acquisition Agreement shall have been consummated and the Merger
Certificate shall have been filed with the Secretary of State of Delaware and
shall have become effective and the Merger shall have been consummated.
(j) The Company shall have taken all necessary acts to (A) repay
approximately $23.4 million long term debt of NFC and (B) terminate the related
credit agreements.
<PAGE>
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(k) The Trustee shall have received each of the Security Documents to be
delivered to it on the Closing Date under the Indenture, duly executed by each
Issuer party thereto, together with (i) certificates representing all of the
Pledged Securities (together with stock powers executed in blank) to be
delivered to the Trustee on the Closing Date under the Indenture and (ii) all
UCC financing statements reasonably requested by the Initial Purchasers or
counsel for the Initial Purchasers relating to the Collateral, duly executed and
in proper form for filing, and all other documents duly executed and in proper
form for filing in each office where such filing is necessary or appropriate to
grant the Trustee a first priority perfected security interest in the
Collateral.
(l) The Parent Capital Contribution shall have been consummated in
accordance with the provisions of the Capital Contribution Agreement.
On or before the Closing Date, the Initial Purchasers and counsel
for the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company, Transkrit and the
Transkrit Subsidiaries as they shall have heretofore reasonably requested.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER.
(a) Each of the Initial Purchasers represents and warrants (as to itself
only) that it is a QIB. Each of the Initial Purchasers agrees with the Issuers
(as to itself only) that (i) it has not and will not solicit offers for, or
offer or sell, the Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; and (ii) it has and will solicit offers for the Securities only from, and
will offer the Securities only to (A) in the case of offers inside the United
<PAGE>
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States, (x) persons whom the Initial Purchasers reasonably believe to be QIBs
or, if any such person is buying for one or more institutional accounts for
which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchasers that each such account is a QIB, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, and, in each case, in transactions under Rule 144A or (y) a limited
number of other institutional investors reasonably believed by the Initial
Purchasers to be Accredited Investors that, prior to their purchase of the
Securities, deliver to the Initial Purchasers a letter containing the
representations and agreements set forth in Annex A to the Final Memorandum and
(B) in the case of offers outside the United States, to persons other than U.S.
persons ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); PROVIDED,
HOWEVER, that, in the case of this clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided under the
caption "Transfer Restrictions" contained in the Final Memorandum (or, if the
Final Memorandum is not in existence, in the most recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as to itself
only) with respect to offers and sales outside the United States that (i) it has
and will comply with all applicable laws and regulations in each jurisdiction in
which it acquires, offers, sells or delivers Securities or has in its possession
or distributes any Memorandum or any such other material, in all cases at its
own expense; (ii) the Securities have not been and will not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S under the Act or pursuant to an exemption
from the registration requirements of the Act; (iii) it has offered the
Securities and will offer and sell the Securities (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance with Rule
903 of Regulation S and, accordingly, neither it nor any persons acting on its
behalf have engaged or will engage in any directed selling efforts (within the
meaning of Regulation S) with respect to the Securities, and any such persons
have complied and will comply with the offering restrictions requirement of
Regulation S; and (iv) it agrees that, at or prior to confirmation of sales of
the Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration
<PAGE>
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that purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the United
States Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of the distribution of the Securities
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date of the offering, except
in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the meaning
given to them in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) Each of the Initial Purchasers represents and warrants (as to itself
only) that the source of funds being used by it to acquire the Notes does not
include the assets of any "employee benefit plan" (within the meaning of Section
3 of ERISA) or any "plan" (within the meaning of Section 4975 of the Code).
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuers jointly and severally agree to indemnify and hold
harmless the Initial Purchasers, and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities to which
any Initial Purchaser or such controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any application or other document, or any amendment or
supplement thereto, executed by an Issuer or based upon written
information furnished by or on behalf of an Issuer filed in any
jurisdiction in order to qualify the Securities under the securities or
"Blue Sky" laws thereof or filed with any securities association or
securities exchange (each an "APPLICATION"); or
<PAGE>
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(ii) the omission or alleged omission to state, in any Memorandum
or any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any reasonable legal or other expenses incurred by the
Initial Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, the
Issuers will not be liable (i) in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information concerning the Initial
Purchasers furnished to an Issuer by the Initial Purchasers specifically for use
therein or (ii) with respect to the Preliminary Memorandum, to the extent that
any such loss, claim, damage or liability arises solely from the fact that the
Initial Purchasers sold Securities to a person to whom there was not sent or
given, on or prior to the written confirmation of such sale, a copy of the Final
Memorandum, as amended and supplemented, if the Company shall have previously
furnished copies thereof to the Initial Purchasers in accordance with this
Agreement and the Final Memorandum, as amended and supplemented, would have
corrected any such untrue statement or omission. This indemnity agreement will
be in addition to any liability that the Issuers may otherwise have to the
indemnified parties. The Issuers shall not be liable under this Section 9 for
any settlement of any claim or action effected without their prior written
consent, which shall not be unreasonably withheld. The Initial Purchasers shall
not, without the prior written consent of the Issuers, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Issuer is or could have been a party, or indemnity could have been sought
hereunder by any Issuer, unless such settlement (A) included an unconditional
written release of the Issuers, in form and substance reasonably satisfactory to
the Issuers, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Issuer.
<PAGE>
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(b) The Initial Purchasers agree to indemnify and hold harmless the
Issuers, their respective directors, their respective officers and each person,
if any, who controls an Issuer within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which an Issuer or any such director, officer or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendment or
supplement thereto or any Application, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information concerning such Initial Purchaser, furnished to an Issuer by
the Initial Purchasers specifically for use therein; and subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any reasonable legal or other expenses incurred by an Issuer or any
such director, officer or controlling person in connection with investigating or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability that the Initial
Purchasers may otherwise have to the indemnified parties. The Initial
Purchasers shall not be liable under this Section 9 for any settlement of any
claim or action effected without their consent, which shall not be unreasonably
withheld. The Issuers shall not, without the prior written consent of the
Initial Purchasers, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Initial Purchaser is or could have
been a party, or indemnity could have been sought hereunder by any Initial
Purchaser, unless such settlement (A) includes an unconditional written release
of the Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action for
<PAGE>
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which such indemnified party is entitled to indemnification under this Section
9, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 9, notify the indemnifying
party of the commencement thereof in writing; but the omission to so notify the
indemnifying party (i) will not relieve it from any liability under paragraph
(a) or (b) above unless and to the extent such failure results in the forfeiture
by the indemnifying party of substantial rights and defenses and (ii) will not,
in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; PROVIDED, HOWEVER, that if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the defendants in any
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more
<PAGE>
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than one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the Initial
Purchasers in the case of paragraph (a) of this Section 9 or the Company in the
case of paragraph (b) of this Section 9, representing the indemnified parties
under such paragraph (a) or paragraph (b), as the case may be, who are parties
to such action or actions) or (ii) the indemnifying party has authorized in
writing the employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Issuers on the one hand and any Initial Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering (before deducting expenses) received by the Issuers bear to
the total discounts and commissions received by such Initial Purchaser. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged
<PAGE>
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omission to state a material fact relates to information supplied by the Issuers
on the one hand, or such Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The Issuers and the
Initial Purchasers agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial Purchaser
shall be obligated to make contributions hereunder that in the aggregate exceed
the total discounts, commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchasers, and each director of an Issuer, each officer of an Issuer
and each person, if any, who controls an Issuer within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Issuers.
10. DEFAULT OF INITIAL PURCHASERS. If one of the Initial
Purchasers defaults in its obligation to purchase Notes hereunder and the
aggregate principal amount of such Notes that such defaulting Initial Purchaser
agreed but failed to purchase is ten percent or less of the aggregate principal
amount of Notes to be purchased by the Initial Purchaser at such time hereunder,
the other Initial Purchaser may make arrangements for the purchase of such Notes
by other persons (who may include the non-defaulting Initial Purchaser), but if
no such arrangements are made by the Closing Date, the non-defaulting Initial
Purchaser shall be obligated to purchase the Notes that the defaulting Initial
Purchasers agreed but failed to purchase. If one of the Initial Purchasers so
defaults with respect to an aggregate principal amount of Notes that is more
than ten percent of the Notes to be purchased by the Initial Purchasers at such
<PAGE>
-37-
time hereunder, and if arrangements are not made within 36 hours after such
default for the purchase by other persons (who may include the non-defaulting
Initial Purchaser) of the Notes with respect to which such default occurs, this
Agreement will terminate without liability on the part of the non-defaulting
Initial Purchaser or the Issuers other than as provided in Section 11 hereof.
In the event of any default by one of the Initial Purchasers as described in
this Section 10, the non-defaulting Initial Purchaser shall have the right to
postpone the Closing Date established as provided in Section 3 hereof for not
more than seven business days in order that any necessary changes may be made in
the arrangements or documents for the purchase and delivery of the Notes. As
used in this Agreement, the term "Initial Purchaser" includes any person
substituted for an Initial Purchaser under this Section 10. Nothing herein
shall relieve any defaulting Initial Purchaser from liability for its default.
11. SURVIVAL CLAUSE. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Issuers, their respective officers and the Initial Purchasers set forth in this
Agreement or made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Issuers, any of their respective officers or directors, the
Initial Purchasers or any controlling person referred to in Section 9 hereof and
(ii) delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 16
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. TERMINATION.
(a) This Agreement may be terminated in the sole discretion of the
Initial Purchasers by notice to the Company given prior to the Closing Date in
the event that any of the Issuers shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder at or prior thereto or, if at or prior to the Closing
Date:
(i) any of the Company, Transkrit or the Transkrit Subsidiaries
shall have sustained any loss or interference with respect to its
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any strike, labor
dispute,
<PAGE>
-38-
slow down or work stoppage or any legal or governmental proceeding, which
loss or interference, in the sole judgment of the Initial Purchasers, has
had or has a Material Adverse Effect, or there shall have been, in the
sole judgment of the Initial Purchasers, any event or development that,
individually or in the aggregate, has or could be reasonably likely to
have a Material Adverse Effect (including without limitation a change in
control of the Company, Transkrit or the Transkrit Subsidiaries), except
in each case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii)a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets
of the United States which, in the case of (A), (B) or (C) above and in
the sole judgment of the Initial Purchasers, makes it impracticable or
inadvisable to proceed with the offering or the delivery of the Notes as
contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 12 shall be
without liability of any party to any other party except as provided in Section
11 hereof.
13. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS.
The statements set forth in the last paragraph on the front cover page and in
the second and third sentences of the third paragraph under the heading "Private
Placement" in the Final Memorandum (to the extent such statements relate to the
Initial Purchasers)
<PAGE>
-39-
constitute the only information furnished by the Initial Purchasers to the
Issuers for the purposes of Sections 2(a) and 9 hereof.
14. NOTICES. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered to (i) BT
Securities Corporation, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department; if sent to the Issuers, shall be mailed or
delivered to the Company at 5775 Peachtree Street, Dunwoody Road, Suite C150,
Atlanta, Georgia 30342, Attention: Robert Miklas; with a copy to White & Case,
1155 Avenue of the Americas, New York, New York 10036, Attention: Frank Schiff.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
15. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Issuers and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 9 of this Agreement shall
also be for the benefit of any person or persons who control an Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Issuers, their respective officers and any person or persons who control an
Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act. No purchaser of Securities from the Initial Purchasers will be deemed a
successor because of such purchase.
16. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE
<PAGE>
-40-
PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF
RELATING TO CONFLICTS OF LAW.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. TRANSKRIT SUBSIDIARIES A PARTY. Immediately upon the
acquisition of all of the outstanding capital stock of Transkrit pursuant to the
Acquisition Agreement, the Company shall cause each of the Transkrit
Subsidiaries to become a party hereto as a Guarantor by executing and delivering
to the Initial Purchasers a counterpart hereof.
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement
between the Company and the Initial Purchasers.
Very truly yours,
NATIONAL FIBERSTOK CORPORATION
By: /S/ Robert M. Miklas
-------------------------------
Name: Robert M. Miklas
Title: President and Chief
Financial Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: /S/ Christine Barbella-Foggia
-----------------------------------
Name: Christine Barbella-Foggia
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /S/ Joseph Atencio
-----------------------------------
Name: Joseph Atencio
Title: Managing Director
<PAGE>
Each of the undersigned by its execution hereof agrees to become a
party to this Agreement as a Guarantor as of the date set forth opposite its
name:
Date: 6/28/96 LABEL ART, INC.
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
Date: 6/28/96 INFOSEAL INTERNATIONAL, INC.
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
Date: 6/28/96 GOVERNMENT FORMS AND SYSTEMS, INC.
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
Date: 6/28/96 PUTNAM GRAPHIC INNOVATIONS, INC.
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
Date: 6/28/96 SHORT RUN LABELS, INC.
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
Date: 6/28/96 BOHARB CORPORATION
By: /S/ Jack Resnick
------------------------------------
Name: Jack Resnick
Title: Vice President
<PAGE>
Date: 6/28/96 A/L SYSTEMS, INC.
By: /S/ Jack Resnick
-----------------------------------
Name: Jack Resnick
Title: Vice President
<PAGE>
SCHEDULE 1
Principal
Amount of
Initial Purchaser Notes
----------------- -------------
BT Securities Corporation......................... $65,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation.......................... 35,000,000
------------
Total................................. $100,000,000
<PAGE>
SCHEDULE 2
SUBSIDIARIES OF TRANSKRIT
Jurisdiction of Outstanding
Name Stockholder(s) Incorporation Capital Stock
- ---- -------------- --------------- -------------
Label Art, Inc. Transkrit Delaware 1,410,476
Common
InfoSeal Inter- Transkrit Delaware 50,000
national, Inc. Common
Government Forms Transkrit Delaware 110
and Systems, Inc. Common
Putnam Graphic Transkrit Delaware 100
Innovations, Inc. Common
Short Run Labels, Label Art, Delaware 100
Inc. Inc. Common
Boharb Corporation Label Art, Delaware 1,000
Inc. Common
A/L Systems, Inc. Boharb Delaware 1,000
Corporation Common
<PAGE>
EXHIBIT 2
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
TRANSKRIT CORPORATION ("TRANSKRIT")
INTO
NATIONAL FIBERSTOK CORPORATION ("NFC")
* * * * *
National Fiberstok Corporation ("NFC"), a corporation organized and
existing under the laws of Delaware, DOES HEREBY CERTIFY:
FIRST: That NFC was incorporated on the eighteenth day of August, 1989,
pursuant to the General Corporation Law of the State of Delaware.
SECOND: That NFC owns all of the outstanding shares (of each class) of
the stock of Transkrit, a corporation incorporated on the eighth day of
December, 1995, pursuant to the General Corporation Law of the State of
Delaware.
THIRD: That NFC, by the following resolutions of its Board of Directors,
duly adopted by the unanimous written consent, filed with the minutes of the
Board on the twenty-eighth day of June, 1996, determined to and did merge into
itself said Transkrit:
RESOLVED, that NFC merge, and it hereby does merge into itself Transkrit
and assumes all of Transkrit's obligations; and
FURTHER RESOLVED, that NFC shall be the surviving corporation; and
1
<PAGE>
FURTHER RESOLVED, that the Articles of Incorporation of NFC as heretofore
amended and as in effect on the date of the merger provided for in this
Agreement, shall continue in full force and effect as the Articles of
Incorporation of the surviving corporation; and
FURTHER RESOLVED, that on the effective date of the merger, all of the
outstanding shares of capital stock (of each class) of Transkrit shall be
cancelled and retired; and
FURTHER RESOLVED, that the bylaws of NFC as they exist on the effective
date of the merger shall be and remain the bylaws of the surviving
corporation until the same shall be altered, amended and repealed as
therein provided; and
FURTHER RESOLVED, that the officers of NFC as they exist on the effective
date of the merger shall be and remain officers of the surviving
corporation until the next annual meeting of NFC and/or until his or her
successor shall have been duly elected or qualified; and
FURTHER RESOLVED, that the directors and committee members of NFC shall be
the directors and committee members of the surviving corporation on the
effective date of the merger, each holding the same directorship for the
term elected and until their successors are duly elected or appointed and
qualified; and
FURTHER RESOLVED, that upon the merger becoming effective, all the
property, rights, privileges, franchises, patents, trademarks, licenses,
registrations and other assets of every kind and description of the merged
corporation shall be transferred to, vested in and devolve upon the
surviving corporation without further act or deed and all property,
rights, and every other interest of the surviving corporation and the
merged corporation shall be as effectively the property of the surviving
corporation as they were of the surviving corporation and the merged
corporation respectively, and that, from time to time, as and when
requested by the surviving corporation or by its successors or assigns the
surviving corporation shall execute and deliver or cause to be executed
and delivered all such deeds and instruments and to take or cause to be
taken such further or other action as the surviving corporation may deem
necessary or desirable in order to vest in and confirm to the surviving
corporation title to and possession of any property of the merged
corporation acquired or to be acquired by reason of or as a result of the
merger herein provided for and otherwise to carry out the intent and
purposes hereof and the proper officers and directors of the merged
2
<PAGE>
corporation and the proper officers and directors of the surviving
corporation are fully authorized in the name of the merged corporation or
otherwise to take any and all such action; and
FURTHER RESOLVED, that the merger shall become effective on June 28, 1996;
and
FURTHER RESOLVED, that the proper officer of this corporation be and he or
she is hereby directed to make and execute a Certificate of Ownership and
Merger setting forth a copy of the resolutions to merge Transkrit into
itself and assume its liabilities and obligations, and the date of
adoption thereof, and to cause the same to be filed with the Secretary of
State and to do all acts and things whatsoever, whether within or without
the State of Delaware, which may be in anywise necessary or proper to
effect said merger.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding,
this merger may be amended or terminated and abandoned by the Board of Directors
of NFC at any time prior to the effective date of the merger.
IN WITNESS WHEREOF, NFC has caused this Certificate to be signed by Robert
B. Webster, its Executive Vice President and Chief Financial Officer, this
twenty-eighth day of June, 1996.
By: /S/ ROBERT B. WEBSTER
----------------------
Title: Executive Vice President and
Chief Financial Officer
3
<PAGE>
Exhibit 3.1
Certificate of Incorporation
of
the Company
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "NATIONAL FIBERSTOK ACQUISITION CO., INC.", FILED IN THIS
OFFICE ON THE EIGHTEENTH DAY OF AUGUST, A.D. 1989, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100 AUTHENTICATION: 7989563
960175374 DATE: 06-17-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
NATIONAL FIBERSTOK ACQUISITION CO., INC.
FIRST. The name of this corporation shall be:
NATIONAL FIBERSTOK ACQUISITION CO., INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in Wilmington, County of New Castle 19805, and its
registered agent at such address is Corporation Service Company.
THIRD. The purpose or purposes of the corporation shall be:
To engage in the business of manufacturing stationery products and office
supplies in general; and to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have the authority to issue is: Five Thousand (5,000) shares with a par value
of One Cent ($.01) each, amounting to Fifty Dollars ($50.00).
FIFTH. The name and address of the incorporator is as follows:
Jacqueline N. Casper
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
<PAGE>
SEVENTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law, (i) for breach
of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct of a knowing violation of law, (iii) pursuant to Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which
director derived an improper personal benefit. No amendment to or repeal of
this Article Seventh shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of
incorporation this seventeenth day of August, A.D. 1989.
/s/ JACQUELINE N. CASPER
----------------------------------------
Jacqueline N. Casper
Incorporator
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NATIONAL FIBERSTOK ACQUISITION CO., INC.", FILED IN THIS OFFICE
ON THE EIGHTEENTH DAY OF SEPTEMBER, A.D. 1989, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100 AUTHENTICATION: 7989564
960175374 DATE: 06-17-96
<PAGE>
CERTIFICATE OF AMENDMENT
Before Issuance of Shares
OF
CERTIFICATE OF INCORPORATION
OF
NATIONAL FIBERSTOK ACQUISITION CO., INC.
--------------------
Pursuant to Section 241 of Title 8
the Delaware Code of 1953, as Amended
I, the undersigned, being the Sole Incorporator of the above named
corporation, a corporation organized under and by virtue of the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY:
FIRST. That a meeting of the Sole Incorporator of said corporation, duly
held and convened, resolutions were adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation and
declaring said amendment advisable.
RESOLVED that the Certificate of Incorporation of this Corporation could
be, and it hereby is, amended by changing Article FOURTH to read as follows:
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
One Million Eight Hundred Thousand (1,800,000) shares of Common Stock with
a par value of One Cent ($.01) per share ("Common Stock") for an aggregate
par value of Eighteen Thousand Dollars ($18,000.00), and One Million
(1,000,000) shares of Preferred Stock with a par value of One Dollar ($1.00)
per share ("Preferred Stock") for an aggregate par value of One Million
Dollars ($1,000,000,000), both classes together having an aggregate par value
of One Million Eighteen Thousand Dollars ($1,018,000.00).
The designations and the powers, preferences, rights, qualifications,
limitations or restrictions of the Common Stock and Preferred Stock shall be
as follows:
<PAGE>
(a) In the event of a dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, a consolidation, merger or
reorganization of the corporation with any other corporation or corporations
or a sale of all or substantially all of the assets of the Corporation,
amounts distributable to stockholders shall be paid in the following order of
priority:
(i) First, the holders of any then outstanding shares of any series
of Preferred Stock shall be entitled to receive the sum of One Dollar ($1.00)
for each such share, provided that if there are insufficient funds available
for such payments, the available funds shall be distributed pro-rata among
the then outstanding shares of any series of Preferred Stock.
(ii) Second, after such payment, the holders of any then
outstanding shares of any series of Common Stock shall be entitled to receive
the sum of One Dollar ($1.00) for each such share, provided that if there are
insufficient funds available for such payments, the available funds shall be
distributed pro-rata among the then outstanding shares of any series of
Common Stock.
(iii) Third, the remaining amounts distributable to stockholders
shall then be distributed pro-rata among the then outstanding shares of any
series of Preferred Stock and Common Stock of the Corporation, share and
share alike.
(b) Each share of Preferred Stock may be converted at any time, at the
option of the holder thereof, into one (1) share of Common Stock.
(c) Except as set forth above, in all other respects (including voting
rights), the Common Stock and Preferred Stock shall have identical powers,
preferences, rights, qualifications, limitations and restrictions, share and
share alike.
The Board of Directors of the Corporation is expressly authorized to
designate and issue one or more series of stock within any class of stock
authorized by the Certificate of Incorporation, as amended.
SECOND. That no part of the capital of said corporation having been paid,
this certificate is filed pursuant to Section 241 of Title 8 of the Delaware
Code, as amended.
IN WITNESS WHEREOF, I have duly executed this Certificate of Amendment
this eighteenth day of September, A.D. 1989.
/s/ JACQUELINE N. CASPER
----------------------------------------
Jacqueline N. Casper
Incorporator
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NATIONAL FIBERSTOK ACQUISITION CO., INC." CHANGING ITS NAME
FROM "NATIONAL FIBERSTOK ACQUISITION CO., INC." TO "NATIONAL FIBERSTOK
CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF SEPTEMBER,
A.D. 1989, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100 AUTHENTICATION: 7989565
960175374 DATE: 06-17-96
<PAGE>
NATIONAL FIBERSTOK ACQUISITION CO., INC.
CERTIFICATE OF AMENDMENT
NATIONAL FIBERSTOK ACQUISITION CO., INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (hereinafter called the "Corporation"), does hereby certify:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by striking out ARTICLE FIRST and inserting in lieu thereof the
following:
"FIRST: The name of this Corporation shall be:
NATIONAL FIBERSTOK CORPORATION."
SECOND: The Board of Directors and Stockholders of the Corporation, by
Unanimous Joint Consent dated September 26, 1989, adopted a resolution in
which was set forth the foregoing Amendment to the Certificate of
Incorporation, declaring that said Amendment to the Certificate of
Incorporation was advisable and approved.
THIRD: The Amendment to the Certificate of Incorporation of the
Corporation, as hereinafter set forth, has been duly advised by the Board of
Directors and approved by the Stockholders of the Corporation in accordance
with the applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, National Fiberstok Acquisition Co., Inc. has caused
this Certificate of Amendment to be signed by its President and attested by
its Secretary on this 26 day of September, 1989.
ATTEST: NATIONAL FIBERSTOK ACQUISITION CO., INC.
/s/ KATHERINE S. NAUGHTON By: /s/ RALPH B. HURLBUTT (SEAL)
- ---------------------------- ---------------------------
Katherine S. Naughton, Ralph B. Hurlbutt, CEO
Secretary
<PAGE>
STATE OF DELAWARE
OFFICER OF THE SECRETARY OF STATE
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NATIONAL FIBERSTOK CORPORATION", FILED IN THIS OFFICE ON THE
SIXTH DAY OF SEPTEMBER, A.D. 1990, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100 AUTHENTICATION: 7989566
960175374 DATE: 06-17-96
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/06/1990
710249001 - 2205427 710249001
NATIONAL FIBERSTOK CORPORATION
CERTIFICATE OF AMENDMENT
NATIONAL FIBERSTOK CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), does hereby certify:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by striking out ARTICLE FOURTH and inserting in lieu thereof the
following:
FOURTH: The total number of shares of stock which the Corporation
is authorized to issue is:
CLASS A COMMON STOCK - One Million Eight Hundred Thousand
(1,800,000) shares of Class A Common Stock with a par value of One
Cent ($.01) per share for an aggregate par value of Eighteen
Thousand Dollars ($18,000);
CLASS B COMMON STOCK - Five Million (5,000,000) shares of Class B
Common Stock with a par value of One Hundredth of One Cent ($.0001)
per share for an aggregate of Five Hundred Dollars ($500);
CLASS 1 PREFERRED STOCK - One Million (1,000,000) shares of Class 1
Preferred Stock with a par value of One Dollar ($1.00) per share for
an aggregate par value of One Million Dollars ($1,000,000); and
CLASS 2 PREFERRED STOCK - Two Million Five Hundred Thousand
(2,500,000) shares of Class 2 Preferred Stock with a par value of
One Dollar ($1.00) per share for an aggregate par value of Two
Million Five Hundred Thousand Dollars ($2,500,000);
all classes together having an aggregate par value of Three Million Five
Hundred Eighteen Thousand Five Hundred Dollars ($3,518,500).
The Board of Directors of the Corporation is authorized to designate and
issue one or more series of stock within any class of stock authorized by the
Certificate of Incorporation of the Corporation, as amended.
The designations and the powers, preferences, rights, qualifications,
limitations or restrictions of the various classes of stock shall be as
follows:
(a) VOTING.
Each share of the Class A Common Stock, Class B Common and Class 1
Preferred Stock shall entitle its holder to one vote. Shares of the Class 2
Preferred Stock shall not be entitled to vote on any matter presented to the
stockholders of
<PAGE>
the Corporation for vote, except as required by the General Corporation Law
of the State of Delaware.
(b) DIVIDENDS.
The Class 2 Preferred Stock shall be entitled to receive dividends
at the rate of ten percent (10%) per annum, cumulative, payable annually in
cash or, at the option the Board of Directors of the Corporation, in shares
of Class 2 Preferred Stock valued at One Dollar ($1.00) per share, and in
preference to any dividends upon the Class A Common Stock, Class B Common
Stock or Class 1 Preferred Stock, and no cash dividends shall be paid upon
the Class A Common Stock, Class B Common Stock or Class 1 Preferred Stock if
the payment of the Class 2 Preferred Stock shall be in arrears.
(c) LIQUIDATION OR REORGANIZATION.
In the event of a dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, a consolidation, merger or
reorganization of the Corporation with any other corporation or corporations
or a sale of all or substantially all of the assets of the Corporation,
amounts distributable to stockholders shall be paid in the following order of
priority:
(i) First, the holders of any then outstanding shares of
Class 2 Preferred Stock shall be entitled to receive the sum of One Dollar
($1.00) for each such share plus accrued and unpaid dividends thereon,
provided that if there are insufficient funds available for such payments,
the available funds shall be distributed pro-rata among the then outstanding
shares of Class 2 Preferred Stock.
(ii) Second, after such payment, the holders of any then
outstanding shares of Class A Common Stock and Class 1 Preferred Stock shall
be entitled to receive the sum of One Dollar ($1.00) for each such share,
provided that if there are insufficient funds available for such payments, the
available funds shall be distributed pro-rata among the then outstanding
shares of Class A Common Stock and Class 1 Preferred Stock.
(iii) Third, the remaining amounts distributable to
stockholders shall then be distributed pro-rata among the then outstanding
shares of Class A Common Stock, Class B Common Stock and Class 1 Preferred
Stock, share and share alike.
(d) CONVERTIBILITY.
Each share of Class 1 Preferred Stock may be converted at any time,
at the option of the holder thereof, into one (1) share of Class A Common
Stock.
-2-
<PAGE>
(e) REDEMPTION.
The outstanding shares of Class 2 Preferred Stock are redeemable by
the Corporation as follows:
(i) OPTIONAL. Upon order of the Board of Directors of the
Corporation, the Corporation may call for redemption all, but not less than
all, of the outstanding shares of the Class 2 Preferred Stock, at a
redemption price of One Dollar ($1.00) per share plus accrued and unpaid
dividends thereon.
(ii) MANDATORY. The outstanding shares of Class 2 Preferred
Stock shall be redeemed by the Corporation at a redemption price of One
Dollar ($1.00) per share plus accrued and unpaid dividends thereon, in the
following amounts at the following times:
(1) On June 30, 1998, thirty-three percent (33%) of
the outstanding shares.
(2) On June 30, 1999, fifty percent (50%) of the
outstanding shares, cumulatively.
(3) On June 30, 2000, one hundred percent (100%) of
the outstanding shares, cumulatively.
In the event there is more than one holder of shares of Class 2 Preferred
Stock, the mandatory redemption of shares of Class 2 Preferred Stock
hereinabove set forth shall be made pro-rata among such holders.
SECOND: In order to effect the change in the classes of stock of the
Corporation to be as hereinabove set forth, each of the heretofore outstanding
shares of the Corporation's Common Stock shall be automatically converted
into one (1) share of the Corporation's Class A Common Stock as hereinabove
set forth without further action by the holder thereof, and each of the
heretofore outstanding shares of the Corporation's Preferred Stock shall be
automatically converted into one (1) share of the Corporation's Class 1
Preferred Stock as hereinabove set forth without further action by the holder
thereof.
THIRD: The Board of Directors and Stockholders of the Corporation, by
Joint Consent dated September 5, 1990, adopted a resolution in which was set
forth the foregoing Amendment to the Certificate of Incorporation, declaring
that said Amendment to the Certificate of Incorporation was advisable and
approved.
FOURTH: The Amendment to the Certificate of Incorporation of the
Corporation, as hereinabove set forth, has been duly advised by the Board of
Directors and approved by the
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<PAGE>
Stockholders of the Corporation in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware by
written consent of the Stockholders given in accordance with Section 228 of
the General Corporation Law of the State of Delaware, and written notice to
all Stockholders who have not consented in writing to the Amendment to the
Certificate of Incorporation of the Corporation, as hereinabove set forth,
has been given as provided in Section 220 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, National Fiberstok Corporation has caused this
Certificate of Amendment to be signed by its President and attested by its
Secretary on this 5th day of September, 1990.
ATTEST: NATIONAL FIBERSTOK CORPORATION
/s/ BRIAN C. KERESTER By: /s/ ROBERT M. MIKLAS (SEAL)
- ---------------------------- ---------------------------
Brian C. Kerester, Robert M. Miklas,
Assistant Secretary President
C24138.198
-4-
<PAGE>
[LETTERHEAD]
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NATIONAL FIBERSTOK CORPORATION", FILED IN THIS OFFICE ON THE
SIXTEENTH DAY OF OCTOBER, A.D. 1992, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100 AUTHENTICATION: 7989567
960175374 DATE: 06-17-96
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/16/1992
712290008 - 2205427
NATIONAL FIBERSTOK CORPORATION
CERTIFICATE OF AMENDMENT
National Fiberstok Corporation, a Delaware corporation, the
("Corporation"), does hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article Fourth, and inserting in lieu thereof the
following:
"FOURTH: The total number of shares of stock which the
Corporation is authorized to issue is Three Hundred Thousand
(300,000) shares of Common Stock with a par value of One Cent
($.01) per share for an aggregate par value of Three Thousand
Dollars ($3,000.00)."
SECOND: The Board of Directors and Stockholder of the Corporation, by
Unanimous Joint Consent dated October 16, 1992, adopted a resolution in which
was set forth the foregoing Amendment to the Certificate of Incorporation,
declaring that said Amendment to the Articles of Incorporation was advisable
and approved.
THIRD: The Amendment to the Certificate of Incorporation of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the Stockholder of the Corporation in accordance
with the applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware by written consent of the Stockholder given in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
<PAGE>
FOURTH: All shares of the Corporation's outstanding Class A Common Stock,
Class B Common Stock, Class 1 Preferred Stock and Class 2 Preferred Stock
immediately preceding the effectiveness of this Amendment is owned by the
same stockholder. Each Share of outstanding Class A Common Stock, Class B
Common Stock, Class 1 Preferred Stock and Class 2 Preferred Stock will be
converted into shares of Common Stock at the ratio of twenty-five (25) shares
of Class A Common Stock, Class B Common Stock, Class 1 Preferred Stock and/or
Class 2 Preferred Stock for (1) share of new Common Stock.
IN WITNESS WHEREOF, National Fiberstok Corporation has caused this
Certificate of Amendment to be signed and acknowledged in its name and on its
behalf by its President and attested by its Secretary on this 16th day
October, 1992.
ATTEST: NATIONAL FIBERSTOK CORPORATION
/s/ LORING E. HAWES By: /s/ ZELIG ROBINSON (SEAL)
- ---------------------------- ---------------------------
Loring E. Hawes, Zelig Robinson,
Assistant Secretary Vice President
-2-
<PAGE>
[LETTERHEAD]
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AGREEMENT OF MERGER, WHICH MERGES:
"DEC INTERNATIONAL CORPORATION", A DELAWARE CORPORATION,
WITH AND INTO "NATIONAL FIBERSTOK CORPORATION" UNDER THE NAME OF "NATIONAL
FIBERSTOK CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS
OF THE STATE OF DELAWARE AS RECEIVED AND FILED IN THIS OFFICE THE NINETEENTH
DAY OF OCTOBER, A.D. 1992, AT 9:02 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2205427 8100M AUTHENTICATION: 7989568
960175374 DATE: 06-17-96
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:02 AM 10/19/1992
922945021 - 2205427
AGREEMENT OF MERGER
BETWEEN
DEC INTERNATIONAL CORPORATION
AND
NATIONAL FIBERSTOK CORPORATION
(Pursuant to Section 252)
AGREEMENT OF MERGER, made and entered into this 16th day of October, 1992,
by and between DEC International Corporation, a Delaware corporation (the
"Merging Corporation"), and National Fiberstok Corporation, a Delaware
corporation (the "Surviving Corporation").
FIRST: The parties hereto agree that the Merging Corporation shall be
merged into the Surviving Corporation upon the terms and conditions of this
Agreement.
SECOND: The merger shall be carried into effect as set forth in this
Agreement.
THIRD: No amendment is made to the Charter of the Surviving Corporation
as part of the Merger, and the Certificate of Incorporation of the Surviving
Corporation shall be its Certificate of Incorporation.
FOURTH: No shares of stock of the Surviving Corporation are to be issued
for the shares of the Merging Corporation. However, as both the Merging
Corporation and the Surviving Corporation are both wholly-owned subsidiaries
of the same parent, upon the effective date of these Articles of Merger, the
shares of stock of the Merging Corporation shall be cancelled.
<PAGE>
FIFTH: The Surviving Corporation, which was organized and exists under
the laws of the State of Delaware, shall survive the Merger and shall
continue under the name of National Fiberstok Corporation.
SIXTH: The Merging Corporation was organized and exists under the laws of
the State of Delaware.
SEVENTH: (a) On October 14, 1992, the Board of Directors of the Merging
Corporation by the unanimous vote thereof advised the merger and the
stockholder of the Merging Corporation approved the merger.
(b) On October 16, 1992, the Board of Directors of the
Surviving Corporation by the unanimous vote thereof advised the merger and
the stockholder of the Surviving Corporation approved the merger.
EIGHTH: The Merger shall have the effect described in Section 252 of the
General Corporation Law of the State of Delaware. The Merger shall become
effective upon the filing of this Agreement of Merger with the Secretary of
State of Delaware.
IN WITNESS WHEREOF, each Corporation party to this Agreement has caused
this Agreement to be signed and acknowledged in the name and on behalf of
each such Corporation by its
-2-
<PAGE>
President, or Vice President, and its corporate seal to be affixed and
attested by its Secretary, or Assistant Secretary, the day and year first
above written.
ATTEST: DEC INTERNATIONAL CORPORATION
/s/ LORING E. HAWES By: /s/ ZELIG ROBINSON (SEAL)
- ---------------------------- ---------------------------
Loring E. Hawes, Zelig Robinson,
Assistant Secretary Vice President
ATTEST: NATIONAL FIBERSTOK CORPORATION
/s/ LORING E. HAWES By: /s/ ZELIG ROBINSON (SEAL)
- ---------------------------- ---------------------------
Loring E. Hawes, Zelig Robinson,
Assistant Secretary Vice President
-3-
<PAGE>
Certificate of Assistant Secretary
of
DEC International Corporation
I, Loring E. Hawes, being the Assistant Secretary of DEC International
Corporation (the "Corporation"), hereby certify that the Agreement of Merger
to which this Certificate is attached, after having been first duly signed on
behalf of the Corporation by the Vice President and Assistant Secretary of
the Corporation, was duly approved by the unanimous consent of the
stockholder of the Corporation.
In witness whereof, I have set my hand and seal this 16th day of October,
1992.
/s/ LORING E. HAWES
------------------------------------
Loring E. Hawes,
Assistant Secretary
DEC International Corporation
<PAGE>
Certificate of Assistant Secretary
of
National Fiberstok Corporation
I, Loring E. Hawes, being the Assistant Secretary of National Fiberstok
Corporation (the "Corporation"), hereby certify that the Agreement of Merger
to which this Certificate is attached, after having been first duly signed on
behalf of the Corporation by the Vice President and Assistant Secretary of
the Corporation, was duly approved by the unanimous consent of the
stockholder of the Corporation.
In witness whereof, I have set my hand and seal this 16th day of October,
1992.
/s/ LORING E. HAWES
------------------------------------
Loring E. Hawes
Assistant Secretary
National Fiberstok Corporation
<PAGE>
EXHIBIT 3.2
NATIONAL FIBERSTOK CORPORATION
BY-LAWS
___________
OFFICES
1. The registered office of the corporation shall be in Wilmington,
Delaware, and the registered agent in charge thereof shall be:
CORPORATION SERVICE COMPANY
1013 Centre Road
Wilmington, Delaware 19805
The corporation may also have an office or offices in Philadelphia,
Pennsylvania and at such other places as the board of directors may from time
to time designate.
CORPORATE SEAL
2. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its incorporation and the words "Corporate Seal,
Delaware".
MEETINGS OF STOCKHOLDERS
3. The annual meeting of stockholders for the election of directors
shall be held on the 1st day of November in each year, or if that day be a
legal holiday, on the next succeeding day not a legal holiday, at 10 o'clock
in the morning at which meeting they shall elect by ballot, by plurality
vote, a board of directors and may transact such other business as may come
before the meeting.
<PAGE>
G69la.111 J
1:9/16/89
Special meetings of the stockholders may be called at
any time by the president and shall be called by the president
or secretary on the request in writing or by vote of a majority
of the directors or at the request in writing of stockholders of
record owning a majority in amount of the capital stock outstanding
and entitled to vote.
All meetings of the stockholders for the election of directors
shall be held at the office of the corporation in Philadelphia, Pennsylvania
or at such other place within such city as may be fixed by the board of
directors provided that at least ten days' notice be given to the
stockholders of the place so fixed. All other meetings of the stockholders
shall be held at such place or places, within or without the State of
Delaware, as may from time to time be fixed by the board of directors or as
shall be specified and fixed in the respective notices or waivers of notice
thereof.
No change of the time or other change of place of a meeting for
the election of directors, as fixed by the by-laws shall be made within sixty
days next before the day on such election is to be held. In case of any
change in time or other change of place for the election of directors, notice
thereof shall be given to each stockholder entitled to vote at least twenty
days before the election is held.
A complete list of stockholders entitled to vote, arranged in
alphabetical order, and showing the address of each
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G691a.111 J
1:9/16/89
stockholder and the number of shares registered in name of
each stockholder shall be prepared by the secretary and shall be
open to the examination of any stockholder at the place of
election, for ten days prior thereto, and during the whole time
of the election.
Each stockholder entitled to vote shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy, signed by him,
for each share of voting stock held by him, but no proxy shall be voted on
after three years from its date, unless it provides for a longer period.
Such right to vote shall be subject to the right of the board of directors to
close the transfer books or to fix a record date for voting stockholders as
hereinafter provided and if the directors shall not have exercised such
right, no share of stock shall be voted on at any election for directors
which shall have been transferred on the books of the corporation within
twenty days next preceding such election.
Notice of all meetings shall be mailed by the secretary to each
stockholder of record entitled to vote, at his or her last known post office
address, for annual meetings ten days and for special meetings five days
prior thereto.
The holders of a majority of stock outstanding and entitled to
vote shall constitute a quorum, but the holders of a smaller amount may
adjourn from time to time without further notice until a quorum is secured.
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G691a.111 J
1:9/16/89
DIRECTORS
4. The property and business of the corporation shall be
managed and controlled by its board of directors three (3) in
number. Directors need not be stockholders.
The directors shall hold office until the next annual election
and until their successors are elected and qualified. They shall be elected
by the stockholders, except that if there be any vacancies in the board by
reason of death, resignation or otherwise, or if there be any newly created
directorships resulting from any increase in the authorized number of
directors, such vacancies or newly created directorships may be filled for
the unexpired term by a majority of the directors then in office, though
less than a quorum.
POWERS OF DIRECTORS
5. The board of directors shall have, in addition to such powers as
are hereinafter expressly conferred on it, all such powers as may be
exercised by the corporation, subject to the provisions of the statute, the
certificate of incorporation and the by-laws.
The board of directors shall have power:
To purchase or otherwise acquire property, rights or privileges
for the corporation, which the corporation has power to take, at such prices
and on such terms as the board of directors may deem proper.
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G691a.111 J
1:9/16/89
To pay for such property, rights or privileges in whole or in
part with money, stock, bonds, debentures or other securities of the
corporation, or by the delivery of other property of the corporation.
To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities, secured
by mortgages or otherwise, and to do every act and thing necessary to
effectuate the same.
To appoint agents, clerks, assistants, factors, employees and
trustees, and to dismiss them at its discretion, to fix their duties and
emoluments and to change them from time to time and to require security as it
may deem proper.
To confer on any officer of the corporation the power of
selecting, discharging or suspending such employees.
To determine by whom and in what manner the corporation's bills,
notes, receipts, acceptances, endorsements, checks, releases, contracts or
other documents shall be signed.
MEETINGS OF DIRECTORS
6. After each annual election of directors, the newly elected
directors may meet for the purpose of organization, the election of officers,
and the transaction of the other business, at such place and time as shall be
fixed by the stockholders at the annual meeting, and, if a majority of the
directors be present at such place and time, no prior notice of such meeting
shall be required to be given to the directors. The place and time of
- 5 -
<PAGE>
G691a.111 J
1:9/16/89
such meeting may also be fixed by written consent of the directors.
Regular meetings of the directors shall be held at the office of
the corporation as hereinbefore designated or elsewhere at the following time:
Meetings may be held at other times as may be fixed by resolution
of the board. No notice of regular meetings shall be required.
Special meetings of the directors may be called by the president
on two days' notice in writing or on one day's notice by telegraph to each
director and shall be called by the president in like manner on the written
request of two directors.
Special meetings of the directors may be held within or without
the State of Delaware at such place as is indicated in the notice or waiver
of notice thereof.
A majority of the directors shall constitute a quorum, but a
smaller number may adjourn from time to time, without further notice, until a
quorum is secured.
COMMITTEES
7. From time to time the board may appoint from their own number, any
committee or committees for any purpose, which shall have such powers as
shall be specified in the resolution of appointment.
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G691a.111 J
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COMPENSATION OF DIRECTORS AND MEMBERS
OF COMMITTEES
8. Directors and members of standing committees shall receive such
compensation for attendance at each regular or special meeting as the board
may from time to time prescribe.
OFFICERS OF THE CORPORATION
9. The officers of the corporation may be a chief executive
officer, president, executive vice president, one or more vice presidents,
a secretary, a treasurer and such other officers as may from time to time be
chosen by the board of directors.
Any number of offices may be held by the same person unless the
certificate of incorporation or by-laws otherwise provide.
The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer chosen or
appointed by the board of directors may be removed either with or without
cause at any time by the affirmative vote of a majority of the whole board of
directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of
the whole board of directors.
CHIEF EXECUTIVE OFFICER
10. The chief executive officer shall be the chief executive officer of
the corporation. It shall be his duty to
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<PAGE>
G691a.111 J
1:9/16/89
preside at all meetings of the stockholders and directors; to have general
and active management of the business of the corporation in the ordinary
course of its operations; to see that all orders and resolutions of the board
of directors are carried into effect, to execute all contracts, agreements,
deeds, bonds, mortgages and other obligations and instruments, in the name of
the corporation, and to affix the corporate seal thereto when authorized by
the board.
He shall have general supervision and direction of the other
officers of the corporation and shall see that their duties are properly
performed.
He shall submit a report of the operations of the corporation for
the year to the directors at their meeting next preceding the annual meeting
of the stockholders and to the stockholders at their annual meeting.
He shall be ex-officio a member of all standing committees and
shall have the general duties and powers of supervision and management
usually vested in the office of chief executive officer of a corporation.
PRESIDENT
11. The president shall have primary responsibility for sales and
marketing and shall perform those duties assigned to him by the Company's
executive officer from time to time. The president shall report to the chief
executive officer of the Company.
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G691a.111 J
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EXECUTIVE VICE PRESIDENT
12. The executive vice president shall have and perform those duties
assigned to him by the board of directors and/or chief executive officer from
time to time, with primary responsibility for corporate operations of the
corporation. The executive vice president shall report to the chief
executive officer.
VICE PRESIDENT
13. The vice president or vice presidents, in the order designated by
the board of directors, shall be vested with all the powers and required to
perform all the duties of the president in his absence or disability and
shall perform such other duties as may be prescribed by the board of
directors.
PRESIDENT PRO TEM
14. In the absence or disability of the president and the vice
presidents, the board may appoint from their own number a president pro tem.
SECRETARY
15. The secretary shall attend all meetings of the corporation, the
board of directors, and standing committees. He shall act as clerk thereof
and shall record all of the proceedings of such meetings in a book kept for
that purpose. He shall give proper notice of meetings of stockholders and
directors and shall perform such other duties as shall be assigned to him by
the president or the board of directors.
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G691a.111 J
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TREASURER
16. The treasurer shall have custody of the funds and securities of the
corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
He shall disburse the funds of the corporation as may be ordered
by the board, or president, taking proper vouchers for such disbursements,
and shall render to the president and directors, whenever they may require
it, an account of all his transactions as treasurer and of the financial
condition of the corporation, and at the regular meeting of the board next
preceding the annual stockholders' meeting, a like report for the preceding
year.
He shall keep an account of stock registered and transferred in
such manner and subject to such regulations as the board of directors may
prescribe.
He shall give the corporation a bond, if required by the board of
directors, in such sum and in such a form and with security satisfactory to
the board of directors for the faithful performance of the duties of his
office and the restoration to the corporation, in case of his death,
resignation or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession, belonging to the
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G691a.111 J
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corporation. He shall perform such other duties as the board of directors may,
from time to time prescribe or require.
DUTIES OF OFFICERS MAY BE DELEGATED
17. In case of the absence or disability of any officer of the
corporation or for any other reason deemed sufficient by a majority of the
board, the board of directors may delegate his powers or duties to any other
officer or to any director for the time being.
CERTIFICATES OF STOCK
18. Certificates of stock shall be signed by the chief executive officer,
president or vice president and either the treasurer, assistant treasurer,
secretary or assistant secretary. If a certificate of stock be lost or
destroyed, another may be issued in its stead upon proof of such loss or
destruction and the giving of a satisfactory bond of indemnity, in an amount
sufficient to indemnity the corporation against any claim. A new certificate may
be issued without requiring bond when, in the judgment of the directors, it is
proper to do so.
TRANSFER OF STOCK
19. All transfers of stock of the corporation shall be made upon its
books by the holder of the shares in person or by his lawfully constituted
representative, upon surrender of certificates of stock for cancellation.
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G691a.111 J
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FIXING DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
20. In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders of any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
If no record date is fixed:
The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
The record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
board of directors is necessary, shall be the day on which the first written
consent is expressed.
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G691a.111 J
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The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the board of directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
STOCKHOLDERS OF RECORD
21. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of Delaware.
FISCAL YEAR
22. The year of the corporation shall end: August 31.
DIVIDENDS
23. Dividends upon the capital stock may be declared by the board of
directors at any regular or special meeting and may be paid in cash or in
property or in shares of the capital stock. Before paying any dividend or
making any distribution of profits, the directors may set apart out of any of
the funds of
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G691a.111 J
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the corporation available for dividends a reserve or reserves for any proper
purpose and may alter or abolish any such reserve or reserves.
CHECKS FOR MONEY
24. All checks, drafts or orders for the payment of money shall be signed
by the treasurer or by such other officer or officers as the board of directors
may from time to time designate. No check shall be signed in blank.
BOOKS AND RECORDS
25. The books, accounts and records of the corporation, except as
otherwise acquired by the laws of the State of Delaware, may be kept within or
without the State of Delaware, at such place or places as may from time to time
be designated by the by-laws or by resolution of the directors.
NOTICES
26. Notice required to be given under the provisions of these by-laws to
any director, officer or stockholder shall not be construed to mean personal
notice, but may be given in writing by depositing the same in a post office or
letter-box, in a postpaid sealed wrapper, addressed to such stockholder, officer
or director at such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall be thus
mailed. Any stockholder, officer or director may waive, in writing, any notice
required to
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G691a.111 J
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be given under these by-laws, whether before or after the time stated therein.
AMENDMENTS OF BY-LAWS
27. These by-laws may be amended, altered, repealed or added to at any
regular meeting of the stockholders or board of directors or at any special
meeting called for that purpose, by affirmative vote of a majority of the stock
issued and outstanding and entitled to vote or of a majority of the whole
authorized number of directors, as the case may be.
-15-
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
NATIONAL FIBERSTOK CORPORATION,
as Issuer,
LABELART, INC., INFOSEAL INTERNATIONAL, INC.,
GOVERNMENT FORMS AND SYSTEMS, INC.,
A/L SYSTEMS, INC.,
BOHARB CORPORATION,
SHORT RUN LABELS, INC.
and
PUTNAM GRAPHIC INNOVATIONS, INC.,
as Guarantors,
AND
WILMINGTON TRUST COMPANY,
as Trustee
_________________
INDENTURE
Dated as of June 15, 1996
________________
$100,000,000
11-5/8% Senior Notes due 2002, Series A
11-5/8% Senior Notes due 2002, Series B
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)............................................... 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(a)(5)............................................... 7.08; 7.10
(b).................................................. 7.08; 7.10;
12.02
(c).................................................. N.A.
311(a).................................................. 7.11
(b).................................................. 7.11
(c).................................................. N.A.
312(a).................................................. 2.05
(b).................................................. 12.03
(c).................................................. 12.03
313(a).................................................. 7.06
(b)(1)............................................... 7.06
(b)(2)............................................... 7.06
(c).................................................. 7.06; 12.02
(d).................................................. 7.06
314(a).................................................. 4.08; 4.10;
12.02
(b).................................................. 10.02
(c)(1)............................................... 7.02; 12.04;
12.05
(c)(2)............................................... 7.02; 12.04;
12.05
(c)(3)............................................... N.A.
(d).................................................. 10.02
(e).................................................. 12.05
(f).................................................. N.A.
315(a).................................................. 7.01(b); 7.02
(b).................................................. 7.05; 12.02
(c).................................................. 7.01
(d).................................................. 6.05; 7.01(c);
7.02
(e).................................................. 6.11
316(a)(last sentence)................................... 2.09
(a)(1)(a)............................................ 6.05
(a)(1)(b)............................................ 6.04
(a)(2)............................................... 9.02
(b).................................................. 6.07
317(a)(1)............................................... 6.08
(a)(2)............................................... 6.09
<PAGE>
(b).................................................. 2.04
318(a).................................................. 12.01
(c).................................................. 12.01
______________________
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE ONE
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions........................................... 1
Section 1.02 Incorporation by Reference of TIA..................... 24
Section 1.03 Rules of Construction................................. 25
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating....................................... 26
Section 2.02 Execution and Authentication.......................... 27
Section 2.03 Registrar and Paying Agent............................ 28
Section 2.04 Paying Agent To Hold Assets in Trust.................. 28
Section 2.05 Securityholder Lists.................................. 28
Section 2.06 Transfer and Exchange................................. 29
Section 2.07 Replacement Securities................................ 30
Section 2.08 Outstanding Securities................................ 30
Section 2.09 Treasury Securities................................... 30
Section 2.10 Temporary Securities.................................. 31
Section 2.11 Cancellation.......................................... 31
Section 2.12 Defaulted Interest.................................... 32
Section 2.13 CUSIP Number.......................................... 32
Section 2.14 Deposit of Moneys..................................... 32
Section 2.15 Book-Entry Provisions for Global
Securities.......................................... 32
Section 2.16 Registration of Transfers and Exchanges............... 34
Section 2.17 Designation........................................... 40
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee.................................... 40
Section 3.02 Selection of Securities To Be Redeemed................ 40
Section 3.03 Notice of Redemption.................................. 41
Section 3.04 Effect of Notice of Redemption........................ 42
Section 3.05 Deposit of Redemption Price........................... 42
Section 3.06 Securities Redeemed in Part........................... 43
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ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities................................. 43
Section 4.02 Maintenance of Office or Agency....................... 43
Section 4.03 Limitation on Restricted Payments..................... 44
Section 4.04 Limitation on Incurrence of Additional
Indebtedness........................................ 46
Section 4.05 Corporate Existence................................... 47
Section 4.06 Payment of Taxes and Other Claims..................... 47
Section 4.07 Maintenance of Properties and Insurance............... 48
Section 4.08 Compliance Certificate; Notice of Default............. 48
Section 4.09 Compliance with Laws.................................. 49
Section 4.10 Commission Reports.................................... 50
Section 4.11 Waiver of Stay, Extension or Usury Laws............... 50
Section 4.12 Limitation on Transactions with Affiliates............ 51
Section 4.13 Pledge of Collateral; Security
Documents........................................... 52
Section 4.14 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries................. 52
Section 4.15 Limitation on Liens................................... 53
Section 4.16 Change of Control..................................... 54
Section 4.17 Limitation on Asset Sales............................. 56
Section 4.18 Limitation on Preferred Stock of
Restricted Subsidiaries............................. 60
Section 4.19 Impairment of Security Interest....................... 60
Section 4.20 Limitation on Designations of
Unrestricted Subsidiaries........................... 60
Section 4.21 Additional Guarantees................................. 61
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Mergers, Consolidations and Sale of
Assets.............................................. 62
Section 5.02 Successor Corporation Substituted..................... 64
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default..................................... 65
Section 6.02 Acceleration.......................................... 67
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<PAGE>
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Section 6.03 Other Remedies........................................ 68
Section 6.04 Waiver of Past Defaults............................... 68
Section 6.05 Control by Majority................................... 68
Section 6.06 Limitation on Suits................................... 69
Section 6.07 Rights of Holders To Receive Payment.................. 70
Section 6.08 Collection Suit by Trustee............................ 70
Section 6.09 Trustee May File Proofs of Claim...................... 70
Section 6.10 Priorities............................................ 71
Section 6.11 Undertaking for Costs................................. 71
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee..................................... 72
Section 7.02 Rights of Trustee..................................... 73
Section 7.03 Individual Rights of Trustee.......................... 74
Section 7.04 Trustee's Disclaimer.................................. 75
Section 7.05 Notice of Default..................................... 75
Section 7.06 Reports by Trustee to Holders......................... 75
Section 7.07 Compensation and Indemnity............................ 76
Section 7.08 Replacement of Trustee................................ 77
Section 7.09 Successor Trustee by Merger, Etc...................... 78
Section 7.10 Eligibility; Disqualification......................... 79
Section 7.11 Preferential Collection of Claims Against
Company............................................. 79
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Legal Defeasance and Covenant Defeasance.............. 79
Section 8.02 Satisfaction and Discharge............................ 83
Section 8.03 Survival of Certain Obligations....................... 84
Section 8.04 Acknowledgment of Discharge by Trustee................ 84
Section 8.05 Application of Trust Assets........................... 85
Section 8.06 Repayment to the Company or the
Guarantors; Unclaimed Money......................... 85
Section 8.07 Reinstatement......................................... 86
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<PAGE>
Page
----
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders............................ 86
Section 9.02 With Consent of Holders............................... 87
Section 9.03 Compliance with TIA................................... 89
Section 9.04 Revocation and Effect of Consents..................... 89
Section 9.05 Notation on or Exchange of Securities................. 90
Section 9.06 Trustee To Sign Amendments, Etc....................... 90
ARTICLE TEN
SECURITY
Section 10.01 Pledge and Security Documents......................... 90
Section 10.02 Certificates and Opinions............................. 91
Section 10.03 Authorization of Actions To Be Taken by
the Trustee Under the Security Documents............ 91
Section 10.04 Authorization of Receipt of Funds by the
Trustee Under the Pledge and Security
Agreement........................................... 92
Section 10.05 Specified Releases of Collateral...................... 92
Section 10.06 Termination of Security Interest...................... 93
ARTICLE ELEVEN
GUARANTEE
Section 11.01 Unconditional Guarantee............................... 93
Section 11.02 Severability.......................................... 95
Section 11.03 Limitation of Guarantor's Liability................... 95
Section 11.04 Guarantors May Consolidate, etc., on
Certain Terms....................................... 95
Section 11.05 Contribution.......................................... 96
Section 11.06 Waiver of Subrogation................................. 96
Section 11.07 Execution of Guarantee................................ 97
Section 11.08 Waiver of Stay, Extension or Usury Laws............... 98
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<PAGE>
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ARTICLE TWELVE
MISCELLANEOUS
Section 12.01 TIA Controls.......................................... 98
Section 12.02 Notices............................................... 98
Section 12.03 Communications by Holders with Other
Holders............................................. 100
Section 12.04 Certificate and Opinion as to Conditions
Precedent........................................... 100
Section 12.05 Statements Required in Certificate or
Opinion............................................. 100
Section 12.06 Rules by Trustee, Paying Agent, Registrar............. 101
Section 12.07 Legal Holidays........................................ 101
Section 12.08 Governing Law......................................... 101
Section 12.09 No Adverse Interpretation of Other
Agreements.......................................... 101
Section 12.10 No Recourse Against Others............................ 101
Section 12.11 Successors............................................ 102
Section 12.12 Duplicate Originals................................... 102
Section 12.13 Severability.......................................... 102
Signatures.............................................................. 103
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for
Institutional Accredited Investors
Exhibit F - Form of Transferee Certificate for
Regulation S Transfers
Exhibit G - Form of Securities Pledge Agreement
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
-v-
<PAGE>
INDENTURE dated as of June 15, 1996 among NATIONAL FIBERSTOK
CORPORATION, a Delaware corporation (the "COMPANY"), as Issuer, LABEL ART,
INC., INFOSEAL INTERNATIONAL, INC., GOVERNMENT FORMS AND SYSTEMS, INC., A/L
SYSTEMS, INC., BOHARB CORPORATION, SHORT RUN LABELS, INC. and PUTNAM GRAPHIC
INNOVATIONS, INC., as Guarantors, and WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as Trustee (the "TRUSTEE").
The Company has duly authorized the creation of an issue of 11-5/8%
Senior Notes due 2002, Series A, and 11-5/8% Senior Notes due 2002, Series B, to
be issued in exchange for the 11-5/8% Senior Notes due 2002, Series A, pursuant
to the Registration Rights Agreement and, to provide therefor, the Company and
the Guarantors have duly authorized the execution and delivery of this
Indenture. All things necessary to make the Securities, when duly issued and
executed by the Company and authenticated and delivered hereunder, and the
Guarantees the valid and binding obligations of the Company and the Guarantors,
respectively, and to make this Indenture a valid and binding agreement of the
Company and each of the Guarantors, have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
the Restricted Subsidiaries or assumed by the Company or a Restricted Subsidiary
in connection with the acquisition of assets by such Person and in each case not
incurred in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, merger or consolidation.
"ADVISORY SERVICES AGREEMENT" means the Management Services
Agreement dated as of October 16, 1992 among MDC Management Company II, L.P.,
MDC Management Company and the Company, as the same may be amended from time to
time.
<PAGE>
-2-
"AFFILIATE" means, with respect to any specified Person, any other
Person who, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person. The term "CONTROL" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning set forth in Section 4.12.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of the Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
(a) any Capital Stock of any Restricted Subsidiary or (b) any other property or
assets of the Company or any Restricted Subsidiary other than in the ordinary
course of business; PROVIDED, however, that Asset Sales shall not include (i)
a transaction or series of related transactions for which the Company or the
Restricted Subsidiaries receive aggregate consideration of less than $350,000,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Section 5.01,
(iii) disposals or replacements of obsolete equipment in the ordinary course of
business and (iv) the sale, lease, conveyance, disposition or other transfer by
the Company or any Restricted Subsidiary of assets or property to one or more
Restricted Subsidiaries.
<PAGE>
-3-
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York or Wilmington,
Delaware are required or authorized by law or other governmental action to be
closed.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations at such date, determined in
accordance with GAAP.
"CAPITAL STOCK" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (b) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (c) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (d)
certificates of deposit or bankers'
<PAGE>
-4-
acceptances maturing within one year from the date of acquisition thereof
issued by any bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any United States branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (e) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (a) above entered into with any bank meeting the qualifications specified
in clause (d) above; and (f) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(a) through (e) of this definition.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or Holdings to any Person or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "GROUP") (whether or not
otherwise in compliance with the provisions of this Indenture) other than
Permitted Holder(s); (b) the approval by the holders of Capital Stock of the
Company or Holdings, as the case may be, of any plan or proposal for the
liquidation or dissolution of the Company or Holdings, as the case may be
(whether or not otherwise in compliance with the provisions of this Indenture);
(c) any Person or Group (other than the Permitted Holder(s)) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Company or Holdings; or (d) the replacement
of a majority of the Board of Directors of the Company or Holdings over a
two-year period from the directors who constituted the Board of Directors of the
Company or Holdings, as the case may be, at the beginning of such period, and
such replacement shall not have been approved by a vote of at least a majority
of the Board of Directors of the Company or Holdings, as the case may be, then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"CHANGE OF CONTROL DATE" has the meaning set forth in Section
4.16.
"CHANGE OF CONTROL OFFER" has the meaning set forth in Section
4.16.
<PAGE>
-5-
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth in
Section 4.16.
"COLLATERAL" means the Pledged Securities and all other assets and
property subject to the Lien of the Security Documents.
"COLLATERAL ACCOUNT" has the meaning set forth in Section 10.05.
"COMMON STOCK" of any Person means any and all shares, interests
or other participations in, and other equivalents (however designated and
whether voting or non-voting) of such Person's common stock, whether outstanding
on the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture.
"CONSOLIDATED EBITDA" means, for any period, the sum (without
duplication) of (a) Consolidated Net Income and (b) to the extent Consolidated
Net Income has been reduced thereby, (i) all income taxes of the Company and the
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside the
ordinary course of business), (ii) Consolidated Interest Expense and (iii)
Consolidated Non-cash Charges, less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for the
Company and the Restricted Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to
the Company, the ratio of Consolidated EBITDA of the Company during the four
full fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the
date of the transaction giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the "TRANSACTION DATE") to Consolidated Fixed
Charges of the Company for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "CONSOLIDATED
EBITDA" and "CONSOLIDATED FIXED CHARGES" shall be calculated after giving
effect on a PRO FORMA (including any PRO FORMA expense and cost reductions
calculated on a basis
<PAGE>
-6-
consistent with Regulation S-X under the Securities Act) basis for the period of
such calculation to (a) the incurrence or repayment of any Indebtedness of the
Company or any of the Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (b) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Company or any of the
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Company or the Restricted Subsidiary, as the
case may be, had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "CONSOLIDATED FIXED CHARGES" for
purposes of determining the denominator (but not the numerator) of this
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter
<PAGE>
-7-
Period; and (iii) notwithstanding clause (i) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to accrue at
the rate PER ANNUM resulting after giving effect to the operation of such
agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to the Company
for any period, the sum, without duplication, of (a) Consolidated Interest
Expense (including any premium or penalty paid in connection with redeeming or
retiring Indebtedness of the Company and the Restricted Subsidiaries prior to
the stated maturity thereof pursuant to the agreements governing such
Indebtedness), plus (b) the product of (i) the amount of all dividend payments
on the Holdings Preferred Stock and any series of Preferred Stock of the Company
(other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (ii) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local income tax rate of such
Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company
for any period, the sum of, without duplication: (a) the aggregate of the
interest expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii) the net costs
under Interest Swap Obligations, (iii) all capitalized interest and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company for
any period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "POOLING OF INTERESTS" transaction accrued prior to
the date it becomes a Restricted Subsidiary or is merged or consolidated with
the Company or any Restricted Subsidiary, (d) the net income (but not loss) of
<PAGE>
-8-
any Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such Person,
(f) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued) and (g) in the case of a successor
to the Company by consolidation or merger or as a transferee of the Company's
assets, any net income (or loss) of the successor corporation prior to such
consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person; PROVIDED that the Consolidated Net
Worth of any Person shall exclude the effect of any non-cash charges relating
the acceleration of stock options or similar securities of such Person or
another Person with which such Person is merged or consolidated.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the
Company, for any period, the aggregate depreciation, amortization and other
non-cash expenses of the Company and the Restricted Subsidiaries reducing
Consolidated Net Income of the Company for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"COVENANT DEFEASANCE" has the meaning set forth in Section 8.01.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is,
or with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company,
<PAGE>
-9-
which must be a clearing agency registered under the Exchange Act.
"DESIGNATION" has the meaning set forth in Section 4.20.
"DESIGNATION AMOUNT" has the meaning set forth in Section 4.20.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity of the Securities.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Company
delivered to the Trustee.
"FINAL MATURITY DATE" means June 15, 2002.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"GLOBAL SECURITY" means a security evidencing all or a portion of
the Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in EXHIBIT C.
<PAGE>
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"GUARANTEE" has the meaning set forth in Section 11.01.
"GUARANTOR" means (a) each of the Company's Subsidiaries as of the
Issue Date and (b) each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of this Indenture as a Guarantor; PROVIDED that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its Guarantee is released in accordance with the terms of this
Indenture.
"HOLDINGS" means DEC International, Inc.
"HOLDINGS PREFERRED STOCK" means the $10,000,000 aggregate
liquidation preference of 9% Preferred Stock of Holdings issued on the Issue
Date.
"INCUR" has the meaning set forth in Section 4.04.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (a) all Obligations of such Person for borrowed money, (b) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all Capitalized Lease Obligations of such Person, (d)
all Obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale Obligations and all Obligations under any
title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 120 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (e) all Obligations
for the reimbursement of any obligor on a letter of credit, banker's acceptance
or similar credit transaction, (f) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (a) through (e) above and
clause (h) below, (g) all Obligations of any other Person of the type referred
to in clauses (a) through (f) above which are secured by any Lien on any
property or asset of such Person, the amount of such Obligation being deemed to
be the lesser of the fair market value of such property or asset or the amount
of the Obligation so secured, (h) all Obligations under currency agreements and
interest swap agreements of such Person and (i) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed purchase price. For
purposes
<PAGE>
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hereof, the "MAXIMUM FIXED REPURCHASE PRICE" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the Company.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (a) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect material financial interest in the Company and (b) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"INITIAL PURCHASERS" means, collectively, BT Securities
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Securities.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any
<PAGE>
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payment for property or services for the account or use of others), or any
purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
Person. "INVESTMENT" shall exclude extensions of trade credit by the Company
and the Restricted Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Restricted Subsidiary, as the
case may be. If the Company or any Restricted Subsidiary sells or otherwise
disposes of any Capital Stock of any Restricted Subsidiary such that, after
giving effect to any such sale or disposition, it ceases to be a Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Capital
Stock of such Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Securities
under this Indenture.
"LEGAL DEFEASANCE" has the meaning set forth in Section 8.01.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"MDC ENTITIES" means, collectively, McCown DeLeeuw & Co. II, LP,
McCown, DeLeeuw Associates, LP and MDC/JAF CO Vendors, LP and any of their
respective Affiliates.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of the Restricted Subsidiaries from
such Asset Sale, net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be
<PAGE>
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provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any post closing adjustments or
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"NET PROCEEDS OFFER" has the meaning set forth in Section 4.17.
"NET PROCEEDS OFFER AMOUNT" has the meaning set forth in Section
4.17.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning set forth in
Section 4.17.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning set forth in
Section 4.17.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, or the Secretary of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel
which opinion and counsel are reasonably acceptable to the Trustee.
"PARENT CAPITAL CONTRIBUTION" means the equity capital
contribution of approximately $7,400,000 made by Holdings to the Company on the
Issue Date with a portion of the proceeds from the issuance of the Holdings
Preferred Stock.
"PARTICIPANTS" has the meaning set forth in Section 2.15.
"PAYING AGENT" has the meaning set forth in Section 2.03.
<PAGE>
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"PERMITTED HOLDER" means each of the general partners of MDC
Management Company II, LP, MDC Management Company IIE, LP and MDC Management
Company IIA, LP and any Person controlled by one or more of such general
partners.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
(a) Indebtedness under the Securities, this Indenture and the
Guarantees;
(b) Indebtedness incurred pursuant to the Revolving Credit
Facility in an aggregate principal amount at any time outstanding not to
exceed the greater of (i) the sum of (x) 80% of the net book value of
accounts receivable of the Company and the Restricted Subsidiaries and (y)
60% of the net book value of the inventory of the Company and the
Restricted Subsidiaries and (ii) $20,000,000, in each case, reduced by any
required permanent repayments (which are accompanied by a corresponding
permanent commitment reduction) thereunder;
(c) Interest Swap Obligations of the Company or a Guarantor
covering Indebtedness of the Company or any of the Restricted Subsidiaries
and Interest Swap Obligations of any Restricted Subsidiary (other than a
Guarantor) covering Indebtedness of such Restricted Subsidiary;
PROVIDED, HOWEVER, that such Interest Swap Obligations are entered
into to protect the Company and the Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
this Indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(d) Indebtedness of a Restricted Subsidiary to the Company or to
another Restricted Subsidiary for so long as such Indebtedness is held by
the Company or a Restricted Subsidiary, in each case subject to no Lien
held by a Person other than the Company or a Restricted Subsidiary;
PROVIDED that if as of any date any Person other than the Company or a
Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien
in respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
<PAGE>
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(e) Indebtedness of the Company to a Restricted Subsidiary for so
long as such Indebtedness is held by a Restricted Subsidiary, in each case
subject to no Lien; PROVIDED that (i) any Indebtedness of the Company to
any Restricted Subsidiary that is not a Guarantor is unsecured and
subordinated, pursuant to a written agreement, to the Company's
obligations under this Indenture and the Securities and (ii) if as of any
date any Person other than a Restricted Subsidiary owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(f) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED,
HOWEVER, that such Indebtedness is extinguished within two Business Days
of incurrence;
(g) Indebtedness of the Company or any of the Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(h) Refinancing Indebtedness;
(i) Capitalized Lease Obligations of the Company outstanding on
the Issue Date;
(j) Capitalized Lease Obligations and Purchase Money Indebtedness
of the Company or any of the Restricted Subsidiaries (and any Refinancings
thereof) not to exceed $7,500,000 in the aggregate at any one time
outstanding; and
(k) additional Indebtedness of the Company or any of the
Guarantors in an aggregate principal amount not to exceed $5,000,000 in
the aggregate at any one time outstanding (which Indebtedness may, but
need not, be incurred under the Revolving Credit Facility).
"PERMITTED INVESTMENTS" means (a) Investments by the Company or
any Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or
<PAGE>
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that will merge or consolidate into the Company or a Restricted Subsidiary, (b)
Investments in the Company by any Restricted Subsidiary; PROVIDED that any
Indebtedness evidencing any such Investment held by a Restricted Subsidiary that
is not a Guarantor is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Securities and this Indenture;
(c) investments in cash and Cash Equivalents; (d) loans and advances to
employees and officers of the Company or any of the Restricted Subsidiaries in
the ordinary course of business for bona fide business purposes not in excess of
$1,000,000 at any one time outstanding; (e) Interest Swap Obligations entered
into in the ordinary course of the Company's or the Restricted Subsidiaries'
businesses and otherwise in compliance with this Indenture; (f) Investments in
Unrestricted Subsidiaries not to exceed $1,500,000 at any one time outstanding;
(g) Investments in Persons other than Subsidiaries not to exceed $500,000 at any
one time outstanding; (h) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; and (i)
Investments made by the Company or the Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
Section 4.17.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary, as the
case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters
of credit issued in the ordinary course of business consistent with past
practice in
<PAGE>
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connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of the Restricted Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation incurred pursuant to clauses (i) and (j) of the definition of
Permitted Indebtedness; PROVIDED that such Liens do not extend to any
property or asset which is not leased property subject to such Capitalized
Lease Obligation;
(g) Liens securing Purchase Money Indebtedness of the Company or
any Restricted Subsidiary; PROVIDED, HOWEVER, that (i) the Purchase
Money Indebtedness shall not be secured by any property or assets of the
Company or any Restricted Subsidiary other than the property and assets so
acquired and (ii) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset
and set-off;
(j) Liens securing Interest Swap Obligations, which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
<PAGE>
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(k) Lien on accounts receivable, inventory, patents, trademarks
and other intangibles and proceeds thereof of the Company and the
Restricted Subsidiaries securing Indebtedness under the Revolving Credit
Facility; and
(l) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.04; PROVIDED that (i) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (ii)
such Liens do not extend to or cover any property or assets of the Company
or of any of the Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary and
are no more favorable to the Lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"PHYSICAL SECURITIES" has the meaning set forth in Section 2.01.
"PLEDGED SECURITIES" means the Capital Stock of the Guarantors
made subject to the Lien of this Indenture and the Security Documents pursuant
to Section 4.13.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Qualified Capital Stock of Holdings or the Company pursuant to a registration
statement filed with and declared effective by the Commission in accordance with
the Securities Act; PROVIDED that, in the event of a Public Equity Offering by
Holdings, Holdings contributes to the capital of the Company the portion of the
net cash proceeds of such Public Equity Offering necessary to pay the aggregate
Redemption Price, plus accrued and
<PAGE>
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unpaid interest, if any, to the Redemption Date of the Securities to be
redeemed pursuant to paragraph 6 of the Securities.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Securities in the form set forth on Exhibit A.
"PRO FORMA" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"PURCHASE AGREEMENT" means the purchase agreement dated as of June
21, 1996 by and among the Company, the Guarantors and the Initial Purchasers.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness the net proceeds
of which are used for the purchase of property or assets acquired in the normal
course of business by the Person incurring such Indebtedness.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"RECORD DATE" means the applicable Record Date specified in the
Securities; PROVIDED that if any such date is not a Business Day, the Record
Date shall be the first day immediately preceding such specified day that is a
Business Day.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
"REFERENCE DATE" has the meaning set forth in Section 4.03.
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"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.04 (other than pursuant to clause (b), (c), (d), (e), (f), (g),
(j) or (k) of the definition of Permitted Indebtedness), in each case that does
not (i) result in an increase in the aggregate principal amount of Indebtedness
of such Person as of the date of such proposed Refinancing (plus the amount of
any premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
and the Restricted Subsidiaries in connection with such Refinancing) or (ii)
create Indebtedness with (x) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (y) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; PROVIDED that (1) if such Indebtedness being Refinanced is
Indebtedness of the Company or a Guarantor, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and/or such Guarantor and (2) if
such Indebtedness being Refinanced is subordinate or junior to the Securities or
a Guarantee, then such Refinancing Indebtedness shall be subordinate to the
Securities or such Guarantee, as the case may be, at least to the same extent
and in the same manner as the Indebtedness being Refinanced.
"REGISTERED EXCHANGE OFFER" means the offer to exchange the Series
B Securities for all of the outstanding Series A Securities in accordance with
the Registration Rights Agreement.
"REGISTRAR" has the meaning set forth in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors and the
Initial Purchasers.
"REGULATION S" means Regulation S under the Securities Act.
"REPLACEMENT ASSETS" has the meaning set forth in Section 4.17.
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"RESPONSIBLE OFFICER" means, when used with respect to the
Trustee, any officer in the Corporate Trust Office of the Trustee including any
vice president, assistant vice president, assistant secretary, treasurer,
assistant treasurer, or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"RESTRICTED PAYMENT" has the meaning set forth in Section 4.03.
"RESTRICTED SECURITY" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; PROVIDED that the Trustee shall be entitled to
request and conclusively rely upon an Opinion of Counsel with respect to whether
any Security is a Restricted Security.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that
has not been designated by the Board of Directors of the Company, by a Board
Resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to
and in compliance with the covenant described in Section 4.20. Any such
Designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"REVOCATION" has the meaning set forth in Section 4.20.
"REVOLVING CREDIT FACILITY" means the Credit Agreement dated as of
June 28, 1996, between the Company, the Guarantors and Heller Financial Inc.,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (PROVIDED that such
increase in borrowings is permitted by Section 4.04) or adding Subsidiaries of
the Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"RULE 144A" means Rule 144A under the Securities Act.
<PAGE>
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"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary on the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such property.
"SECURITIES" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms of this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto.
"SECURITY DOCUMENTS" means, collectively, each of the Securities
Pledge Agreements, substantially in the form of EXHIBIT G hereto, between the
Company or one of its Subsidiaries, as the case may be, and the Trustee pursuant
to which Capital Stock of each of the Guarantors will be pledged to secure the
Securities and the Guarantees in accordance with the provisions of Section 4.13
and all other instruments evidencing or creating any security interest in favor
of the Trustee for the benefit of the Holders, as the same may be amended from
time to time in accordance with their terms.
"SECURITYHOLDER" or "HOLDER" means the Person whose name a
Security is registered on the Registrar's books.
"SERIES A SECURITIES" means the 11-5/8% Senior Notes due 2002,
Series A, of the Company issued pursuant to this Indenture and sold pursuant to
the Purchase Agreement.
"SERIES B SECURITIES" means the 11-5/8% Senior Notes due 2002,
Series B, of the Company to be issued in exchange for the Series A Securities
pursuant to the Registered Exchange Offer and the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule
1.02(v) of Regulation S-X under the Securities Act.
"SUBSIDIARY", with respect to any Person, means (a) any
corporation of which the outstanding Capital Stock having at least
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a majority of the votes entitled to be cast in the election of directors under
ordinary circumstances shall at the time be owned, directly or indirectly, by
such Person or (b) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"SURVIVING ENTITY" has the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" shall have the meaning set forth in
Section 8.01.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.20. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of Section 4.20.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
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"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or another Wholly Owned Restricted
Subsidiary.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, any
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
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(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of EXHIBIT A hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of EXHIBIT B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements (including notations relating to the
Guarantees) required by law, stock exchange rule or usage. The Company and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement (including notations relating to the Guarantees) on them. Each
Security shall be dated the date of its issuance and shall show the date of its
authentication.
Securities initially offered and sold by the Initial Purchasers (i)
to Qualified Institutional Buyers in reliance on Rule 144A, (ii) to Accredited
Investors or (iii) in offshore transactions in reliance on Regulation S shall,
unless the applicable Holder requests Securities in the form of Certificated
Securities in registered form ("PHYSICAL SECURITIES") which shall be in
substantially the form set forth in EXHIBIT A), be issued initially in the
form of one or more permanent Global Securities in registered form,
substantially in the form set forth in EXHIBIT A, deposited with the Trustee,
as custodian for the Depository, and shall bear the legend set forth on EXHIBIT
C. One or more separate Global Securities shall be issued to represent
Securities held by (i) Qualified Institutional Buyers (a "QIB GLOBAL
Security"), (ii) Accredited Investors (an "ACCREDITED INVESTOR GLOBAL
Security") and (iii) Persons acquiring Securities in offshore transactions in
reliance on Regulation S (a "REGULATION S GLOBAL
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SECURITY"). The Company shall cause the QIB Global Securities, Accredited
Investor Global Securities and Regulation S Global Securities to have separate
CUSIP numbers. The aggregate principal amount of any Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Securities.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
Guarantor shall execute a Guarantee in the manner set forth in Section 12.07.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount not to exceed $100,000,000 and (ii)
Series B Securities from time to time only in exchange for a like principal
amount of Series A Securities, in each case upon a written order of the Company
in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated, the series of Securities
and the date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$100,000,000, except as provided in Section 2.07. Upon receipt of a written
order of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution for Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities.
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Unless otherwise provided in the appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("REGISTRAR"), (b)
Securities may be presented or surrendered for payment ("PAYING AGENT") and
(c) notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon notice to the Trustee, may have one or
more co-Registrars and one or more additional Paying Agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying Agent. The Company initially appoints the agent of the Trustee
identified in Section 4.02 as Registrar and Paying Agent until such time as the
Trustee has resigned or a successor has been appointed. Neither the Company nor
any Affiliate of the Company may act as Paying Agent.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying
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Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
PROVIDED, HOWEVER, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 3.07,
4.16, 4.17 or 9.05). The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Security (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Security being redeemed in part.
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Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Security
shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee and any Agent from any loss which any of them
may suffer if a Security is replaced. The Company may charge such Holder for
its reasonable out-of-pocket expenses in replacing a Security, including
reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because the
Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
If on a Redemption Date or the Final Maturity Date the Paying Agent
holds U.S. Legal Tender sufficient to pay all of the principal and interest due
on the Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
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SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company, the Guarantors or any of their respective Affiliates shall
be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities that the Trustee knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing Securities
owned by the Company, the Guarantors or their respective Affiliates.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities that it has paid or delivered to the Trustee for
cancellation. If the Company or any Guarantor shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the
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same are surrendered to the Trustee for cancellation pursuant to this Section
2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of principal or interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the rate of 2% PER ANNUM in excess of the rate
shown on the Security.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest Payment Date
and the Final Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Final Maturity Date, as the case may
be, in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date or Final Maturity Date, as the case may
be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in EXHIBIT C.
Members of, or participants in, the Depository ("PARTICIPANTS")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Security, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute
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owner of the Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
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SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number of
Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; PROVIDED, HOWEVER, that the
Physical Securities presented or surrendered for registration of transfer or
exchange:
(I) shall be duly endorsed or accompanied by a written instrument
of transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Company, by
the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar
or co-Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (substantially in the form of EXHIBIT D
hereto); or
(B) if such Physical Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a
certification to that effect (substantially in the form of
EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification
to that effect (substantially in the form of EXHIBIT D
hereto) and a Transferee
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Certificate for Institutional Accredited Investors
substantially in the form of EXHIBIT E hereto; or
(D) if such Physical Security is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of EXHIBIT D hereto) and a
Transferee Certificate for Regulation S Transfers
substantially in the form of EXHIBIT F hereto and an Opinion
of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the Securities
Act; or
(E) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification
to that effect (substantially in the form of EXHIBIT D
hereto) and an Opinion of Counsel reasonably satisfactory to
the Company to the effect that such transfer is in compliance
with the Securities Act; or
(F) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially
in the form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Physical Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
or co-Registrar of a Physical Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Registrar or
co-Registrar, together with:
(A) certification, substantially in the form of EXHIBIT D
hereto, that such Physical Security is being transferred (i)
to a Qualified Institutional Buyer, (ii) to an Accredited
Investor or (iii) in an offshore transaction in reliance on
Regulation S; and
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(B) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depository to make, an endorsement
on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the
Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no Global Security representing
Securities held by Qualified Institutional Buyers, Accredited Investors or
Persons acquiring Securities in offshore transactions in reliance on Regulation
S, as the case may be, is then outstanding, the Company shall issue and the
Trustee shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate such a Global Security in the appropriate principal
amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected thought the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of written
instructions, or such other instruction as is customary for the Depository, from
the Depository or its nominee, requesting the registration of transfer of an
interest in a QIB Global Security, an Accredited Investor Global Security or
Regulation S Global Security, as the case may be, to another type of Global
Security, together with the applicable Global Securities (or, if the applicable
type of Global Security required to represent the interest as requested to be
transferred is not then outstanding, only the Global Security representing the
interest being transferred), the Registrar or Co-Registrar shall cancel such
Global Securities (or Global Security) and the Company shall issue and the
Trustee shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate new Global Securities of the types so cancelled (or
the type so cancelled and applicable type required to represent the interest as
requested to be transferred) reflecting the applicable increase and decrease of
the principal amount of Securities represented by such types of Global
Securities, giving effect to such transfer. If the applicable type of Global
Security required to represent the interest as requested to be transferred is
not
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outstanding at the time of such request, the Company shall issue and the Trustee
shall, upon written instructions from the Company in accordance with Section
2.02, authenticate a new Global Security of such type in principal amount equal
to the principal amount of the interest requested to be transferred.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
PHYSICAL SECURITY.
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar or
co-Registrar of written instructions, or such other form of
instructions as is customary for the Depository, from the
Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt by
the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial
interest containing registration instructions and, in the case
of any such transfer or exchange of a beneficial interest in
Securities the offer and sale of which have not been
registered under the Securities Act, the following additional
information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the
beneficial owner, a certification from such Person to
that effect (substantially in the form of EXHIBIT D
hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule
l44A, a certification to that effect (substantially in
the form of EXHIBIT D hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of EXHIBIT D hereto) and a Certificate for
Institutional
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Accredited Investors substantially in the form of
EXHIBIT E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to
that effect (substantially in the form of EXHIBIT D
hereto) and a Transferee Certificate for Regulation S
Transfers Substantially in the form of EXHIBIT F
hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery
of a certification to that effect (substantially in the
form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of EXHIBIT D
hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Registrar or co-Registrar, the aggregate
principal amount of the applicable Global Security to be reduced
and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver to the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section
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2.16(d) shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Registrar or co-Registrar in writing. The Registrar or co-Registrar
shall deliver such Physical Securities to the Persons in whose
names such Physical Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act.
(g) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
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SECTION 2.17. DESIGNATION.
The Indebtedness evidenced by the Securities and the Guarantees is
hereby irrevocably designated as "senior indebtedness" or such other term
denoting seniority for the purposes of any future Indebtedness of the Company or
a Guarantor which the Company or a Guarantor makes subordinate to any senior
indebtedness or such other term denoting seniority.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5
or Paragraph 6 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Securities to
be redeemed. The Company shall give notice of redemption to the Paying Agent
and Trustee at least 30 days but not more than 60 days before the Redemption
Date (unless a shorter notice shall be agreed to by the Trustee in writing),
together with an Officers' Certificate stating that such redemption will comply
with the conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a PRO RATA basis, by
lot or by such method as the Trustee shall deem fair and appropriate;
PROVIDED, HOWEVER, that no Securities of a principal amount of $1,000 or
less shall be redeemed in part; and PROVIDED, FURTHER, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the Securities or portions thereof for redemption shall be made by the Trustee
only on a PRO RATA basis or on as nearly a PRO RATA basis as is
practicable (subject to the procedures of the Depository), unless such method is
otherwise prohibited.
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The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 or less may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at its registered
address. At the Company's request made at least 45 days before the Redemption
Date, the Trustee shall give the notice of redemption in the Company's name and
at the Company's expense. Each notice for redemption shall identify the
Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in
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aggregate principal amount equal to the unredeemed portion thereof will be
issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be paid
at the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant Record Dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 10:00 a.m. New York Time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Securities to be redeemed will cease to accrue
on and after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part only,
the Trustee shall upon written instruction from the Company authenticate for the
Holder a new Security or Securities in
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a principal amount equal to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company will pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal of or
interest on the Securities shall be considered paid on the date it is due if the
Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and
sufficient to pay the installment.
The Company will pay, to the extent such payments are lawful,
interest on overdue principal and it shall pay interest on overdue installments
of interest (without regard to any applicable grace periods) from time to time
on demand at the rate borne by the Securities plus 2% per annum. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 12.02.
The Company hereby initially designates the office of Harris Trust Company of
New York, 77 Water Street, 4th Floor, New York, New York 10005, as its office or
agency in the Borough of Manhattan, The City of New York.
SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, (a) declare or pay any dividend or make
any distribution (other than dividends or distributions payable in Qualified
Capital Stock of the Company) on
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or in respect of shares of the Company's or Holding's Capital Stock to holders
of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or Holdings, or any warrants, rights or
options to acquire shares of any class of such Capital Stock, (c) make any
principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company or
a Guarantor that is subordinate or junior in right of payment to the Securities
or such Guarantor's Guarantee, as the case may be, or (d) make any Investment
(other than a Permitted Investment) in any Person (each of the foregoing actions
set forth in clauses (a), (b), (c) and (d) being referred to as a "RESTRICTED
PAYMENT"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or an Event of Default shall have occurred
and be continuing, or (ii) the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
paragraph (a) of Section 4.04, or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (w)
50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Issue Date and on or prior to the date the Restricted Payment
occurs (the "REFERENCE DATE") (treating such period as a single accounting
period); PLUS (x) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; PLUS (y) without duplication
of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any
net cash proceeds from (a) a Public Equity Offering to the extent used to redeem
the Securities and (b) the Parent Capital Contribution); PLUS (z) an amount
equal to the consolidated net Investments on the date of Revocation made by the
Company and/or any of the Restricted Subsidiaries in any Subsidiary of the
Company that has been designated an Unrestricted Subsidiary after the Issue Date
upon its redesignation as a Restricted Subsidiary in accordance with Section
4.20.
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Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph shall not prohibit: (1) the payment of any
dividend or redemption payment within 60 days after the date of declaration of
such dividend or the applicable redemption if the dividend or redemption
payment, as the case may be, would have been permitted on the date of
declaration; (2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company or
Holdings, either (a) solely in exchange for shares of Qualified Capital Stock of
the Company or (b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock of the Company; (3) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any Indebtedness of
the Company or a Guarantor that is subordinate or junior in right of payment to
the Securities or such Guarantor's Guarantee, as the case may be, either (a)
solely in exchange for shares of Qualified Capital Stock of the Company, or (b)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of (i) shares of Qualified
Capital Stock of the Company or (ii) Refinancing Indebtedness; (4) the making of
payments by the Company to Holdings in an amount not in excess of the federal,
state and local income tax liability that the Company and its Subsidiaries would
have been liable for if the Company, together with its Subsidiaries, had filed
its consolidated tax return on a stand-alone basis; PROVIDED that such
payments shall be made by the Company no earlier than five days prior to the
date on which Holdings is required to make its payments to the Internal Revenue
Service or state or local taxing authorities, as the case may be; (5) the making
of payments by the Company to Holdings to pay operating expenses, not to exceed
$500,000 in any fiscal year; (6) the making of payments, by the Company to
Holdings to purchase Capital Stock of Holdings beneficially owned by directors,
officers and employees of the Company or any of its Subsidiaries pursuant to the
terms of employment contracts or employee benefit plans of the Company or any of
its Subsidiaries not to exceed $250,000 in any fiscal year; (7) if no Default or
Event of Default shall have occurred and be continuing, the making of payments
by the Company to Holdings to pay regularly scheduled dividends on the Holdings
Preferred Stock; and (8) if no Default or Event of Default shall have occurred
and be continuing, the making of other Restricted Payments not to exceed
$2,000,000 in the aggregate. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts
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expended pursuant to clauses (1), (2), (6), (7) and (8) shall be included in
such calculation.
SECTION 4.04. LIMITATION ON INCURRENCE OF
ADDITIONAL INDEBTEDNESS.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "INCUR") any
Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that if
no Default or Event of Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of any such Indebtedness, the Company
or any Guarantor may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and any Restricted Subsidiary may incur Acquired Indebtedness, in
each case, if on the date of the incurrence of such Indebtedness, after giving
PRO FORMA effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of the Company is greater than (a) 1.75 to 1.0, if the date of
such incurrence is on or prior to June 15, 1997, (b) 2.00 to 1.0, if the date of
such incurrence is after June 15, 1997 and on or prior to June 15, 1998, or (c)
2.25 to 1.0, if the date of such incurrence is after June 15, 1998.
(b) Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary or which is secured by a Lien on an asset
acquired by the Company or a Restricted Subsidiary (whether or not such
Indebtedness is assumed by the Acquiring Person) shall be deemed incurred at the
time the Person becomes a Restricted Subsidiary or at the time of the Asset
Acquisition, as the case may be.
(c) The Company will not, and will not permit any Guarantor to,
incur any Indebtedness (other than Acquired Indebtedness which is subordinated
in right of payment to other Acquired Indebtedness which is incurred in
connection with the same Asset Acquisition as such subordinated Acquired
Indebtedness) which by its terms (or by the terms of any agreement governing
such Indebtedness) is subordinated in right of payment to any other Indebtedness
of the Company or such Guarantor, unless such Indebtedness is also by its terms
(or by the terms of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the Securities or the Guarantee of such
Guarantor, as the case may be, pursuant to subordination provisions that are
substantively identical to the subordination provisions of such
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Indebtedness (or such agreement) that are most favorable to the holders of any
other Indebtedness of the Company or such Guarantor, as the case may be.
SECTION 4.05. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of the Restricted Subsidiaries in accordance with the respective
organizational documents of each Restricted Subsidiary and the rights (charter
and statutory) and material franchises of the Company and each of the Restricted
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right or franchise, or the corporate existence of any
Restricted Subsidiary, if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and each of the Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of the Restricted
Subsidiaries or upon the income, profits or property of it or any of the
Restricted Subsidiaries and (b) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability or Lien upon the property of it or any of the Restricted Subsidiaries;
PROVIDED, HOWEVER, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate provision has been made.
SECTION 4.07. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all material properties owned by or
leased by it or any of the Restricted Subsidiaries used or useful to the conduct
of its business or the business of any of the Restricted Subsidiaries to be
improved or maintained and kept
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in normal condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 4.07 shall prevent the Company or any of the Restricted
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or any Restricted
Subsidiary concerned, or of an officer (or other agent employed by the Company
or of any of the Restricted Subsidiaries) of the Company or any of the
Restricted Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, workers' compensation and
interruption of business insurance.
SECTION 4.08. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 100 days
after the close of each fiscal year an Officers' Certificate stating that a
review of the activities of the Company has been made under the supervision of
the signing Officers with a view to determining whether it has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
his knowledge the Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such covenant and no Default or Event of
Default occurred during such year and at the date of such certificate there is
no Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe its status with particularity. The Officers' Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.
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(b) The annual financial statements delivered pursuant to Section
4.10 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall deliver to the Trustee, forthwith upon
becoming aware of any Default or Event of Default in the performance of any
covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its status
with particularity.
SECTION 4.09. COMPLIANCE WITH LAWS.
The Company will comply, and will cause each of the Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States, all states and municipalities thereof,
and of any governmental department, commission, board, regulatory authority,
bureau, agency and instrumentality of the foregoing, in respect of the conduct
of their respective businesses and the ownership of their respective properties,
except for such noncompliances as would not in the aggregate have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries taken as a whole.
SECTION 4.10. COMMISSION REPORTS.
(a) The Company will file with the Commission all information,
documents and reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act, whether or not the Company is subject
to such filing requirements so long as the Commission will accept such filings.
The Company will file with the Trustee within 15 days after it files them with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Upon
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qualification of this Indenture under the TIA, the Company shall also comply
with the provisions of TIA Section 314(a).
(b) Regardless of whether the Company is required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause its consolidated financial statements, comparable to that which would have
been required to appear in annual or quarterly reports, to be delivered to the
Trustee and the Holders. The Company will also make such reports available to
prospective purchasers of the Securities, securities analysts and broker-dealers
upon their request.
(c) For so long as any of the Securities remain outstanding, the
Company will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the Exchange
Act.
SECTION 4.11. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of and/or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture, and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of their respective
Affiliates (each an "AFFILIATE TRANSACTION"), other than (i) Affiliate
Transactions
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permitted under paragraph (b) of this covenant and (ii) Affiliate Transactions
on terms that are no less favorable to the Company or the applicable Restricted
Subsidiary than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1,000,000 shall be approved by the Board
of Directors of the Company, such approval to be evidenced by a Board Resolution
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If the Company or any Restricted
Subsidiary enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an aggregate fair
market value of more than $5,000,000, the Company shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to
(i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary as determined in good faith by the Company's Board of
Directors; (ii) transactions exclusively between or among the Company and any of
the Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by this
Indenture; (iii) Restricted Payments permitted by this Indenture; (iv) payments
by the Company to MDC Entities pursuant to the terms of the Advisory Services
Agreement initially in an amount not to exceed $350,000 in any fiscal year,
which amount may be increased to an amount not to exceed $500,000 in any fiscal
year with the approval of the members of the Board of Directors of the Company
who do not have a direct financial interest in any Person receiving such
payments under the Advisory Services Agreement; and (v) the purchase by the
Company of notes payable by shareholders of Holdings from MDC Entities in an
aggregate amount not to exceed $685,000; PROVIDED that any such purchase shall
be a Restricted Payment for purposes of Section 4.03.
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SECTION 4.13. PLEDGE OF COLLATERAL; SECURITY DOCUMENTS
(a) On the Issue Date, the Company shall, and shall cause each of
its Subsidiaries which owns Capital Stock of a Guarantor to, execute and deliver
to the Trustee a Securities Pledge Agreement, substantially in the form of
EXHIBIT G hereto, pursuant to which all of the outstanding Capital Stock of
each of the Guarantors as of the Issue Date shall become Pledged Securities.
(b) From and after the Issue Date, upon any Restricted Subsidiary
becoming a Guarantor pursuant to Section 4.21, the Company (if it owns Capital
Stock of such Guarantor) shall, and shall cause each of its Subsidiaries which
owns Capital Stock of such Guarantor to, execute and deliver to the Trustee a
Securities Pledge Agreement, substantially in the form of EXHIBIT G hereto,
pursuant to which all of the outstanding Capital Stock of such Guarantor owned
by the Company or any of its Subsidiaries shall become Pledged Securities.
(c) From and after the Issue Date, upon the acquisition by the
Company or any of its Subsidiaries of Capital Stock of a Guarantor, the Company
shall, and shall cause each such Subsidiary to, execute and deliver to the
Trustee a Securities Pledge Agreement, substantially in the form of EXHIBIT G
hereto, pursuant to which such Capital Stock shall become Pledged Securities.
SECTION 4.14. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or pay any Indebtedness or other obligation owed to the Company or to any
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or to any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of: (i) applicable law; (ii) this
Indenture; (iii) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary; (iv) any
instrument governing Acquired Indebtedness which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or
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asset of the Person so acquired; (v) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date; or
(vi) an agreement governing Refinancing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clauses (ii), (iv) or (v) above; PROVIDED that the provisions relating to such
encumbrance or restriction contained in any such Refinancing Indebtedness are no
less favorable to the Holders in any material respect as determined by the Board
of Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in the
applicable agreement referred to in such clause (ii), (iv) or (v).
SECTION 4.15. LIMITATION ON LIENS.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of the Restricted Subsidiaries, whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (a) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Securities or any Guarantee,
the Securities or such Guarantee, as the case may be, are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(b) in all other cases, the Securities and the Guarantees are equally and
ratably secured, except for (i) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date (and any
extensions, replacements or renewals thereof covering property or assets secured
by such Liens on the Issue Date); (ii) Liens securing the Securities and the
Guarantees; (iii) Liens of the Company or a Restricted Subsidiary on assets of
any Restricted Subsidiary; (iv) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture; PROVIDED, HOWEVER, that such Liens (x) are
no less favorable to the Holders and are not more favorable to the Lienholders
with respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of the Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (v) Permitted Liens.
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Notwithstanding the foregoing, the Company will not, and will not
cause or permit any of its Subsidiaries to, directly or indirectly, create,
incur or permit or suffer to exist any Liens upon any of the Collateral, other
than Liens created by this Indenture and the Security Documents.
SECTION 4.16. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (the "CHANGE OF CONTROL OFFER"), and
shall purchase, on a Business Day (the "CHANGE OF CONTROL PAYMENT DATE") not
more than 45 nor less than 30 days following the occurrence of the Change of
Control, all of the then outstanding Securities at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the Change of Control Payment Date. The Change of Control Offer
shall remain open for at least 20 Business Days and until the close of business
on the Change of Control Payment Date.
(b) Within 15 days following the date upon which a Change of
Control occurs (the "CHANGE OF CONTROL DATE"), the Company shall send, by
first class mail, a notice to each Holder, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer. The notice to the
Holders shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Change of Control Offer. Such
notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.16 and that all Securities tendered and not withdrawn will
be accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the Change of Control Payment Date;
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
a Change of Control Offer will be required to
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surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Securities the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Security
purchased;
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Securities so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
the Holders of Securities so accepted payment in an amount equal to the purchase
price plus accrued interest, if any, and the Trustee shall promptly authenticate
and mail to such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any Securities not so
accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are
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applicable in connection with the purchase of Securities pursuant to a Change of
Control Offer. To the extent the provisions of any securities laws or
regulations conflict with the provisions under this Section 4.16, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.16 by virtue
thereof.
SECTION 4.17. LIMITATION ON ASSET SALES.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors); (b) at least 80% of the consideration received by
the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and (c) upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 270 days of receipt thereof either
(i) to the extent the properties or assets that were the subject of such Asset
Sale secured Indebtedness permitted to be incurred under the Indenture pursuant
to Lien permitted under the Indenture, to prepay any such Indebtedness and
effect a permanent reduction in the availability of borrowing under the
agreement(s) governing such Indebtedness, (ii) to make an investment in
properties or assets that replace the properties or assets that were the subject
of such Asset Sale or in properties or assets that will be used in the business
of the Company and the Restricted Subsidiaries as existing on the Issue Date or
in businesses reasonably related thereto ("REPLACEMENT ASSETS"), or (iii) a
combination of prepayment and investment permitted by the foregoing clauses
(c)(i) and (c)(ii). On the 271st day after an Asset Sale or such earlier date,
if any, as the Board of Directors of the Company determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (c)(i),
(c)(ii) and (c)(iii) of the next preceding sentence (each a "NET PROCEEDS OFFER
TRIGGER DATE"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (c)(i), (c)(ii) and (c)(iii) of the next preceding sentence (each a
"NET PROCEEDS OFFER AMOUNT") shall be applied by the Company or such
Restricted Subsidiary, as the case may be, to make an offer to purchase (a "NET
PROCEEDS OFFER") on a date (the "NET PROCEEDS OFFER PAYMENT DATE") not less
than 30 nor more than 45 days
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following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
PRO RATA basis, that principal amount of Securities equal to the Net
Proceeds Offer Amount at a price equal to 100% of the principal amount of the
Securities to be purchased, plus accrued and unpaid interest, if any, thereon to
the date of purchase; PROVIDED, HOWEVER, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary, as the case
may be, in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this Section 4.17. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5,000,000 resulting from one or more Asset Sales (at
which time, the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5,000,000, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and the Restricted Subsidiaries not so transferred for purposes of
this Section 4.17, and shall comply with the provisions of this Section 4.17
with respect to such deemed sale as if it were an Asset Sale. In addition, the
fair market value of such properties and assets of the Company or the Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.17.
Notwithstanding the two immediately preceding paragraphs, the
Company and the Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (a) at least 80% of
the consideration for such Asset Sale constitutes Replacement Assets and (b)
such Asset Sale is for fair market value; PROVIDED that any consideration not
constituting Replacement Assets received by the Company or any of the Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two immediately preceding paragraphs.
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Notice of each Net Proceeds Offer pursuant to this Section 4.17
shall be mailed or caused to be mailed, by first class mail, by the Company
within 25 days following the applicable Net Proceeds Offer Trigger Date to all
Holders at their last registered addresses, with a copy to the Trustee. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Net Proceeds Offer and shall state
the following terms:
(1) that the Asset Sale Offer is being made pursuant to this
Section 4.13 and that all Securities tendered will be accepted for
payment; PROVIDED, HOWEVER, that if the principal amount of Securities
tendered in the Asset Sale Offer exceeds the aggregate amount of Excess
Proceeds Amount, the Company shall select the Securities to be purchased
on a pro rata basis;
(2) the Asset Sale Offer Price (including the amount of accrued
interest, if any) and the Asset Sale Purchase Date;
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have a Security purchased pursuant to
the Asset Sale Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Asset Sale Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Asset Sale Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount at
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maturity equal to the unpurchased portion of the Securities surrendered.
On or before the Asset Sale Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the Asset
Sale Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the purchase price, plus accrued interest, if any, of all Securities to be
purchased and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to the Holders
of Securities so accepted payment in an amount equal to the purchase price, plus
accrued interest, if any, thereon. For purposes of this Section 4.13, the
Trustee shall act as the Paying Agent.
The Company shall comply with all tender offer rules under state and
federal securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule l4e-1 thereunder, to the extent applicable to such offer.
To the extent that the provisions of any securities laws or regulations conflict
with the foregoing provisions of this Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture by
virtue thereof.
SECTION 4.18. LIMITATION ON PREFERRED STOCK
OF RESTRICTED SUBSIDIARIES.
The Company will not permit any of the Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary) or permit any Person (other than the Company or a Wholly
Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted
Subsidiary.
SECTION 4.19. IMPAIRMENT OF SECURITY INTEREST.
The Company will not and will not permit any of its Subsidiaries to
take or omit to take any action, which action or omission would have the result
of adversely affecting or impairing the security interest in favor of the
Trustee, on behalf of itself and the Holders, with respect to the Collateral,
and the Company will not and will not permit any of its Subsidiaries to grant to
any Person, or suffer any Person (other than the Company) to have
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(other than to the Trustee on behalf of the Trustee and the Holders) any
interest whatsoever in the Collateral.
SECTION 4.20. LIMITATION ON DESIGNATIONS
OF UNRESTRICTED SUBSIDIARIES.
The Company may designate any Subsidiary of the Company (other than
a Subsidiary of the Company which owns Capital Stock of a Restricted Subsidiary)
as an "Unrestricted Subsidiary" under this Indenture (a "DESIGNATION") only
if:
(a) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; and
(b) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "DESIGNATION AMOUNT") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries on such date and (ii) the
aggregate amount of other Investments of the Company and the Restricted
Subsidiaries in such Subsidiary on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to paragraph (a)
of Section 4.04 at the time of Designation (assuming the effectiveness of
such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
4.03 for all purposes of this Indenture in the Designation Amount. The Company
shall not, and shall not permit any Restricted Subsidiary to, at any time (x)
provide direct or indirect credit support for or a guarantee of any Indebtedness
of any Unrestricted Subsidiary (including of any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly liable
for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted
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Subsidiary), except, in the case of clause (x) or (y), to the extent permitted
under Section 4.03.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "REVOCATION"), whereupon such Subsidiary shall then
constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time
of and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 4.21. ADDITIONAL GUARANTEES.
If the Company or any of the Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary that is not a Guarantor,
or if the Company or any of the Restricted Subsidiaries shall organize, acquire
or otherwise invest in or hold an Investment in another Restricted Subsidiary
having total consolidated assets with a book value in excess of $500,000, then
such transferee or acquired or other Restricted Subsidiary shall (a) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and this Indenture on the terms set forth in Article Eleven and (b) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of this Indenture.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, CONSOLIDATIONS AND SALE OF ASSETS.
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) whether as
an entirety or substantially as an entirety to any Person unless: (i) either
(1) the Company shall be the surviving or continuing corporation or (2) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and the Restricted Subsidiaries substantially as an entirety (the
"SURVIVING ENTITY") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Securities, this Indenture, the Security Documents to
which the Company is a party and the Registration Rights Agreement on the part
of the Company to be performed or observed; (ii) immediately after giving
effect to such transaction and the assumption contemplated by clause (i)(2)(y)
above (including giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
paragraph (a) of Section 4.04 hereof; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction) no Default and no Event of
Default shall have occurred
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or be continuing; and (iv) the Company or the Surviving Entity shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with the
applicable provisions of this Indenture and that all conditions precedent in
this Indenture relating to such transaction have been satisfied.
(b) For purposes of the foregoing paragraph (a), the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee is to
be released in accordance with the terms of Article Eleven in connection with
any transaction complying with the provisions of Section 4.17) will not, and the
Company will not cause or permit any Guarantor to, consolidate with or merge
with or into any Person other than the Company or another Guarantor unless: (i)
the entity formed by or surviving any such consolidation or merger (if other
than the Guarantor) or to which such sale, lease, conveyance or other
disposition shall have been made is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) such entity assumes by supplemental indenture all of the obligations of the
Guarantor under its Guarantee and any Security Documents to which such
Guarantor is a party; (iii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and (iv)
immediately after giving effect to such transaction and the use of any net
proceeds therefrom on a PRO FORMA basis, the Company could satisfy the
provisions of clause (a)(ii) of this Section 5.01. Any merger or consolidation
of a Guarantor with and into the Company (with the Company being the surviving
entity) or another Guarantor need only comply with clause (a)(iv) of this
Section 5.01.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any such consolidation, merger, conveyance, lease or transfer
in accordance with the foregoing provisions of this
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Article Five, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
will succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture and the Notes with the same effect as if
such successor had been named as the Company therein, and thereafter (except in
the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture, the Securities, the Security
Documents and the Registration Rights Agreement; PROVIDED that solely for
purposes of computing amounts described in subclauses (w), (x) and (y) of
Section 4.03, any successor Person shall only be deemed to have succeeded to and
be substituted for the Company with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company fails to pay interest on any Securities when the
same becomes due and payable and the default continues for a period of 30
days;
(b) the Company fails to pay the principal on any Securities, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Securities
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(c) the Company or any Restricted Subsidiary defaults in the
observance or performance of any other covenant or agreement contained in
this Indenture or the Security Documents, which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Securities (except in the case of a default with respect to Section 5.01,
which will constitute an
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Event of Default with such notice requirement but without such passage of
time requirement);
(d) the Company or any Restricted Subsidiary defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or
of any Restricted Subsidiary (or the payment of which is guaranteed by the
Company or any Restricted Subsidiary), whether such Indebtedness now
exists or is created after the Issue Date, which default (i) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "PAYMENT DEFAULT") or (ii)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a payment default or the maturity of which has been
so accelerated, aggregates at least $5,000,000;
(e) one or more judgments in an aggregate amount in excess of
$5,000,000 shall have been rendered against the Company or any of the
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(f) the Company or any of its Restricted Subsidiaries (i) admits
in writing its inability to pay its debts generally as they become due,
(ii) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (iii) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (iv) consents to the appointment of a Custodian of it
or for substantially all of its property, (v) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(vi) makes a general assignment for the benefit of its creditors or (vii)
takes any partnership or corporate action, as the case may be, to
authorize or effect any of the foregoing;
(g) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Subsidiaries in
an involuntary case or proceeding under any Bankruptcy Law, which shall
(i) approve as properly filed
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a petition seeking reorganization, arrangement, adjustment or composition
in respect of the Company or any of its Subsidiaries, (ii) appoint a
Custodian of the Company or any of its Subsidiaries or for substantially
all of any of their property or (iii) order the winding-up or liquidation
of its affairs; and such judgment, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days.
(h) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary is declared
to be null and void and unenforceable or any Guarantee of a Significant
Subsidiary is found to be invalid or any Guarantor which is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason
of release of such Guarantor in accordance with the terms of this
Indenture); or
(i) except as contemplated by their terms, any of the Security
Documents ceases to be in full force or effect or ceases to give the
Trustee, in any material respect, the Liens, rights, powers and privileges
purported to be created thereby.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above) shall occur and be continuing, the Trustee or the
Holders of at least 25% in principal amount of outstanding Securities may
declare the principal of, premium, if any, and accrued and unpaid interest on
all the Securities to be due and payable by notice in writing to the Company and
the Trustee specifying the respective Event of Default and that it is a "notice
of acceleration", and the same shall become immediately due and payable. If an
Event of Default specified in clause (f) or (g) above occurs and is continuing,
then all unpaid principal of, and premium, if any, and accrued and unpaid
interest on all of the outstanding Securities shall IPSO FACTO become and be
immediately due and payable without any declaration or other at on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority in
principal amount of the Securities may rescind and cancel such declaration and
its consequences (a) if the rescission would not conflict with any judgment or
decree, (b) if all existing Events of Default have been cured or waived except
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nonpayment of principal or interest that has become due solely because of the
acceleration, (c) to the extent the payment of such interest is lawful, interest
on overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (d) if the
Company has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (e) in the event of the
cure or waiver of an Event of Default of the type described in clause (f) or (g)
of the description of Events of Default above, the Trustee shall have received
an Officers' Certificate and an Opinion of Counsel that such Event of Default
has been cured or waived. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or the Security
Documents.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Each Securityholder, by accepting a Security, (a) acknowledges that
the exercise of remedies by the Trustee with respect to the Collateral is
subject to the terms and conditions of the Security Documents and the proceeds
received upon realization of the Collateral shall be applied by the Trustee in
accordance with Section 6.10 hereof and (b) acknowledges and consents to the
terms of the Security Documents and to the Trustee's performance of its
agreements thereunder.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the
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payment of principal of or interest on any Security as specified in clauses (a)
and (b) of Section 6.01. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01, however, the Trustee may refuse
to follow any direction that conflicts with any law or this Indenture or any
Security Document, that the Trustee determines may be unduly prejudicial to the
rights of another Securityholder, or that may involve the Trustee in personal
liability; PROVIDED that the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture or any Security Document, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture, the Securities or the Security Documents unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of
the outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
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(5) during such 30-day period the Holder or Holders of a majority
in principal amount of the outstanding Securities do not give the Trustee
a direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest and fees remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate PER
ANNUM borne by the Securities and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company, its
creditors or its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by
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each Securityholder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07 and for
amounts due under the Security Documents;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company or the Guarantors, as their respective
interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit
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by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a
Holder or Holders of more than 10% in principal amount of the outstanding
Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default actually known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and the Security Documents and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs. The Trustee will be under no obligation to exercise any of its rights
or powers under this Indenture or the Security Documents at the request of any
of the holders of Securities, unless they shall have offered to the Trustee
security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 12.04 hereof furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture or the Security Documents shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or the Security Documents or
take any action at the request or direction of Holders if it shall have
reasonable grounds for believing that repayment of such funds is not assured to
it or it does not receive an indemnity satisfactory to it in its sole discretion
against such risk, liability, loss, fee or expense which might be incurred by it
in compliance with such request or direction.
(e) Every provision of this Indenture and the Security Documents
that in any way relates to the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which shall
conform to the provisions of Section 12.05. The Trustee shall not be
liable for any action it
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takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or the Security
Documents at the request, order or direction of any of the Holders
pursuant to the provisions of this Indenture or the Security Documents,
unless such Holders shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(g) Subject to Section 9.02 hereof, the Trustee may (but shall not
be obligated to), without the consent of the Holders, give any consent,
waiver or approval required under the Security Documents or by the terms
hereof with respect to the Collateral, but shall not without the consent
of the Holders of not less than a majority in aggregate principal amount
of the Securities at the time outstanding (i) give any consent, waiver or
approval or (ii) agree to any amendment or modification of the Security
Documents, in each case, that shall have a material adverse effect on the
interests of any Holder. The Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any
consent, waiver, approval, amendment or modification shall have a material
adverse effect on the interests of any Holder.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the value of the Collateral or any part thereof, or the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or any document
issued in connection with the sale of Securities or any statement in the
Securities other than the Trustee's certificate of authentication. The Trustee
makes no representations with respect to the effectiveness or adequacy of this
Indenture or any Security Document or the validity or perfection, if any, of
Liens granted under this Indenture or the Security Documents.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 60 days after the Trustee receives such notice. Except in the case of a
Default or an Event of Default in payment of principal of, or interest on, any
Security, including the failure to make payment on (i) the Change of Control
Payment Date pursuant to a Change of Control Offer or (ii) the Net Proceeds
Offer Payment Date pursuant to a Net Proceeds Offer, or the Trustee may withhold
the notice if and so long as the board of directors, the executive committee, or
a trust committee of directors and/or Responsible Officers, of the Trustee in
good faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA,
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and, until such qualification, this Indenture shall be construed as if this
Section 7.06 were not contained herein.
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA Section 313(a) occurred within the
twelve months, but not otherwise, mail to each Securityholder a brief report
previous dated as of such May 15 that complies with TIA Section 313(a). The
comply with TIA Sections 313(b) 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its services hereunder and under the Security Documents (which
shall be agreed to from time to time by the Company and the Trustee). The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances (including
reasonable fees and expenses of counsel) incurred or made by it in addition to
the compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or willful
misconduct. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel and any taxes or other expenses incurred by a trust created pursuant to
Section 8.01 hereof.
The Company shall indemnify the Trustee and each predecessor trustee
for, and hold it harmless against, any loss, liability, claim, damage or expense
incurred by the Trustee without negligence or willful misconduct on its part
arising out of or in connection with the administration of this trust and its
duties under this Indenture and the Security Documents, including the reasonable
expenses and attorneys' fees of defending itself against any claim of liability
arising hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for
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which it may seek indemnity. However, the failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense
(and may employ its own counsel) at the Company's expense. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee if such
violation arose from the Trustee's negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a senior claim prior to the Securities against all money
or property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event
of Default specified in clause (f) or (g) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under
this Section 7.07 and any claim arising hereunder shall survive the resignation
or removal of any Trustee, the discharge of the Company's obligations pursuant
to Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of the Trustee in its capacity as
Trustee under the Security Documents and any appointment of a successor Trustee
pursuant to this Indenture shall be deemed to be an appointment of a successor
Trustee under the Security Documents and such successor shall assume all of the
obligations of the Trustee in its capacity as Trustee under the Security
Documents.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee (and successor Trustee
under the Security Documents).
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its
most Trustee also shall recent published annual report of condition. The
Trustee shall comply with TIA Section 310(b); PROVIDED, HOWEVER, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture
or certificates of interest or participation in other securities, of the
Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee, in its capacity as Trustee hereunder and under the
Security Documents shall comply with TIA Section 311(a), excluding any
creditor indentures under which other securities, or relationship listed in
TIA Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
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(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and the Guarantors shall be deemed
to have been released and discharged from their obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due and any Guarantor's obligations in respect thereof, and (ii) obligations
listed in Section 8.03, subject to compliance with this Section 8.01. The
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with respect to the
Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03 through 4.21 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"COVENANT DEFEASANCE"), and the Securities shall thereafter be deemed to be
not "outstanding" for the purpose of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that, with respect to the outstanding Securities, the Company, its
Subsidiaries and any Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
6.01(c), nor shall any event referred to in Section 6.01(d), (e), (h) or (i)
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thereafter constitute a Default or an Event of Default thereunder but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, U.S. Legal Tender or direct
non-callable obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of America is
pledged ("U.S. GOVERNMENT OBLIGATIONS") maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of the reinvestment of such interest and after payment of
all Federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof (in form and substance reasonably satisfactory to
the Trustee) delivered to the Trustee, to pay the principal of, premium,
if any, and interest on all the outstanding Securities on the dates on
which any such payments are due and payable in accordance with the terms
of this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that no Default or Event of Default or event which with notice or lapse of
time or both would become a Default or an Event of Default with respect to
the Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(f) or (g) is concerned, at any time
during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a
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Default under this Indenture or a breach or violation of, or constitute a
default under, any other material instrument or agreement to which the
Company or any of its Subsidiaries is a party or by which it or its
property is bound;
(5) (i) In the event the Company elects paragraph (b) hereof, the
Company shall deliver to the Trustee an Opinion of Counsel in the United
States, in form and substance reasonably satisfactory to the Trustee to
the effect that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall state that Holders of the Securities will not recognize income gain
or loss for Federal income tax purposes as a result of such deposit and
the defeasance contemplated hereby and will be subject to Federal income
taxes in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred, or (ii) in the event the
Company elects paragraph (c) hereof, the Company shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
hereby and will be subject to Federal income tax in the same amounts and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
(6) The deposit shall not result in the Company, the Trustee or
the trust becoming or being deemed to be an "investment company" under
the Investment Company Act of 1940;
(7) The Company shall have delivered to the Trustee an Officer's
Certificate, in form and substance reasonably satisfactory to the Trustee,
stating that the deposit under clause (1) was not made by the Company or
any Subsidiary of the Company with the intent of preferring the Holders
over any other Creditors of the Company defeating, hindering, delaying or
defrauding any other creditors of the Company or any Subsidiary of the
Company or others;
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that (a) the trust
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funds will not be subject to the rights of holders of Indebtedness of the
Company or any Guarantor other than the Securities and (b) assuming no
intervening bankruptcy of the Company between the date of deposit and the
91st day following the deposit and that no Holder of Securities is an
insider of the Company, after the passage of 90 days following the
deposit, the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally; and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by this
Section 8.01 have been complied with; PROVIDED, HOWEVER, that no
deposit under clause (1) above shall be effective to terminate the
obligations of the Company under the Securities, the Security Documents or
this Indenture prior to 90 days following any such deposit.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 8.02. SATISFACTION AND DISCHARGE.
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when:
(1) either (a) all the Securities, theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Securities not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of,
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premium, if any, and interest on the Securities to the date of deposit
together with irrevocable instructions from the Company directing the
Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(2) the Company has paid all other sums payable under this
Indenture by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and discharge
of this Indenture have been complied with.
SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02, 6.07, Article Seven, Sections
8.05, 8.06 and 8.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this
Article Eight shall abrogate any of the obligations or duties of the Trustee
under this Indenture.
SECTION 8.04. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company and (iii) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's and the Guarantors' obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. APPLICATION OF TRUST ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section
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8.01. The Trustee shall apply the deposited U.S. Legal Tender or the U.S.
Government Obligations, together with earnings thereon, through the Paying
Agent, in accordance with this Indenture and the terms of the irrevocable trust
agreement established pursuant to Section 8.01, to the payment of principal of
and interest on the Securities. The U.S. Legal Tender or U.S. Government
Obligations so held in trust and deposited with the Trustee in compliance with
Section 8.01 shall not be part of the trust estate under this Indenture, but
shall constitute a separate trust fund for the benefit of all Holders entitled
thereto.
SECTION 8.06. Repayment to the Company or the
GUARANTORS; UNCLAIMED MONEY.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company or any Guarantor, as the
case may be, upon receipt by the Trustee or the Paying Agent, as the case may
be, of an Officers' Certificate, any money held by it for the payment of
principal, premium, if any, or interest that remains unclaimed for one year
after payment to the Holders is required; PROVIDED, HOWEVER, that the
Trustee and the Paying Agent before being required to make any payment may, but
need not, at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company or any Guarantor, as the
case may be, Securityholders entitled to money must look solely to the Company
and the Guarantors for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Indenture by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application,
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then and only then the Company's and each Guarantor's, if any, obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time as the Trustee
is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations
in accordance with this Indenture; PROVIDED, HOWEVER, that if the Company or
the Guarantors, as the case may be, have made any payment of principal of,
premium, if any, or interest on any Securities because of the reinstatement of
its obligations, the Company or the Guarantors, as the case may be, shall be,
subrogated to the rights of the holders of such Securities to receive such
payment from the U.S. Legal Tender or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, the Guarantors and the Trustee, together, may amend or
supplement this Indenture, the Security Documents or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the Securities;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder or under the Security
Documents; or
(5) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms of this
Indenture.
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PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, the Guarantors and the
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount of the outstanding Securities, may
amend or supplement this Indenture, the Security Documents or the Securities,
without notice to any other Securityholders. Subject to Section 6.07, the
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture, the Security Documents or the Securities without notice to any other
Securityholder. Without the consent of each Securityholder affected, however,
no amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may:
(1) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate or change the time for payment of interest,
including default interest, on any Security;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Security, or change the date on which
any Securities may be subject to redemption or repurchase, or reduce the
redemption or purchase price therefor;
(4) make any Securities payable in money other than that stated in
the Securities;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
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(7) modify or change any provision of this Indenture or the
related definitions affecting the ranking of the Securities or any
Guarantee, in a manner which adversely affects the Holders;
(8) amend, modify or change in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or, modify any of
the provisions or definitions with respect thereto;
(9) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture; or
(10) release or adversely affect the ranking of any Lien on any
Collateral except in compliance with the provisions of this Indenture and
the Security Documents.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture, the Security Documents,
the Securities or the Guarantees shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any
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Security. However, any such Holder or subsequent Holder may revoke the consent
as to his Security or portion of his Security by notice to the Trustee or the
Company received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; PROVIDED that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal of and interest on a Security, on or after the respective due dates
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
SECTION 9.05.NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Company may require the Holder of the Security to deliver it to
the Trustee. The Company may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and the Security Documents and constituted the legal, valid and
binding obligations of the Company enforceable in accordance with its terms.
Such Opinion of Counsel shall be at the expense of the Company, and the Trustee
shall have a Lien under Section 7.07 for any such expense.
ARTICLE TEN
SECURITY
SECTION 10.01. PLEDGE AND SECURITY DOCUMENTS.
Each Holder, by accepting any Securities, agrees to all of the terms
and provisions of the Security Documents as the same may be in effect or may be
amended from time to time and authorizes and directs the Trustee to act as
secured party with respect thereto. The due and punctual payment of the
principal of and interest on the Securities when and as the same shall be due
and payable, whether on an Interest Payment Date, at maturity, by acceleration,
call for redemption or otherwise, and interest on the overdue principal and
interest, if any, of the Securities and payment and performance of all other
obligations of the Company and the Guarantors to the Holders or the Trustee
under this Indenture and the Securities, according to the terms hereunder or
thereunder, shall be secured as provided in the Security Documents.
SECTION 10.02. CERTIFICATES AND OPINIONS.
The Company shall cause (a) TIA Section 314(b0, relating to
Opinion of Counsel regarding the Lien of the Security Documents and (b) TIA
Section 314(d), relating to Officers' Certificate or other documents
regarding the fair value of the Collateral, to be complied with to the extent
applicable.
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SECTION 10.03. AUTHORIZATION OF ACTIONS TO BE TAKEN BY
THE TRUSTEE UNDER THE SECURITY DOCUMENTS.
The Trustee may (but shall not be obligated to), in its sole
discretion and without the consent of the Holders of the Securities, take all
actions it deems necessary or appropriate in order to (a) enforce or effect the
Security Documents and (b) collect and receive any and all amounts payable in
respect of the obligations of the Company and the Guarantors hereunder. Such
actions shall include, but not be limited to, advising, instructing or otherwise
directing any agent appointed by it in connection with enforcing or effecting
any term or provision of the Security Documents. Subject to the provisions of
the Security Documents and this Indenture, the Trustee shall have power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of the Security Documents or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the holders in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
hereunder or be prejudicial to the interests of the holders of Securities or of
the Trustee). Except as otherwise expressly provided in this Indenture, the
Trustee shall not be obligated to take any action with respect to the exercise
of any rights or remedies, or to inquire into or give any notice of default,
under the Security Documents or with respect to the creation, perfection or
preservation of the security interest in the Collateral granted by the Security
Documents.
SECTION 10.04. AUTHORIZATION OF RECEIPT OF FUNDS BY THE
TRUSTEE UNDER THE SECURITY DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of
the Securityholders distributed under the Security Documents, and to make
further distributions of such funds to the Holders in accordance with the
provisions of this Indenture.
SECTION 10.05. SPECIFIED RELEASES OF COLLATERAL.
(a) SATISFACTION AND DISCHARGE; DEFEASANCE. The Company and its
applicable Subsidiaries shall be entitled to obtain a full release of all of the
Collateral from the Liens of this Indenture
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and of the Security Documents upon compliance with the conditions precedent set
forth in Section 8.02 for satisfaction and discharge of this Indenture or for
defeasance pursuant to Section 8.01(d). Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel, each to the
effect that such conditions precedent have been complied with (and which may be
the same Officers' Certificate and Opinion of Counsel required by Article
Eight), the Trustee shall forthwith take all necessary action (at the request of
and the expense of the Company) to release and reconvey to the Company and its
applicable Subsidiaries all of the Collateral, and shall deliver such Collateral
in its possession to the Company and its applicable Subsidiaries including,
without limitation, the execution and delivery of releases and satisfactions
wherever required.
(b) DISPOSITIONS PERMITTED BY SECTION 4.17. In the event that
all of the Capital Stock of a Guarantor owned by the Company and its
Subsidiaries is sold or otherwise transferred by the Company and/or one or more
of its Subsidiaries to a Person or Persons other than the Company or one of its
Subsidiaries pursuant to an Asset Sale that complies with Section 4.17, the
Company and its applicable Subsidiaries shall be entitled to obtain a release of
the Capital Stock of such Guarantor from Lien of the applicable Security
Documents upon delivery by the Company to the Trustee of (i) an Officers'
Certificate stating that (a) no Default or Event of Default has occurred and is
continuing and (b) the release of such Capital Stock complies with the
provisions of this Indenture and the TIA and (ii) all certificates, opinions and
other documentation required by the TIA. All of the Net Cash Proceeds from any
such Asset Sale shall be deposited in a separate account with the Trustee (a
"COLLATERAL ACCOUNT"), which Collateral Account shall be subject to the Lien
of the applicable Security Documents. The Company and its applicable
Subsidiaries shall be entitled to obtain a release of cash and Cash Equivalents
in a Collateral Account upon delivery by the Company to the Trustee of (i) an
Officers' Certificate stating that (a) no Default or Event Default has occurred
and is continuing, (b) such cash and Cash Equivalents (x) will be applied within
five days of such release to either (1) repay Indebtedness in accordance with
Section 4.17, (2) invest in Replacement Assets or (3) repurchase Securities
pursuant to a Net Proceeds Offer or (y) are no longer required to be applied to
such uses pursuant to Section 4.17 and (c) the release of such cash and Cash
Equivalents complies with the provisions of this Indenture and the TIA and (ii)
all certificates, opinions and other documentation required by the TIA.
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SECTION 10.06. TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all obligations of the Company and the
Guarantors under this Indenture, the Security Documents and the Securities, the
Trustee shall, at the request of the Company together with an Officers'
Certificate to such effect, acknowledge as pledgee under the Security Documents
that such obligations have been paid in full or, if the Trustee is not the
pledgee, send a certificate executed by a Responsible Officer to such pledgee,
stating that such obligations have been paid in full.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally guarantees (such guarantee to
be referred to herein as a "GUARANTEE"), on a senior basis jointly and
severally, to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, the Securities or the
Obligations of the Company hereunder or thereunder, that: (i) the principal of
and interest on the Securities will be promptly paid in full when due, subject
to any applicable grace period, whether at maturity, by acceleration or
otherwise and interest on the overdue principal, if any, and interest on any
interest, to the extent lawful, of the Securities and all other Obligations of
the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; and (ii) in case of any extension of time of payment or renewal of any
Securities or of any such other obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, subject to any applicable grace period, whether at stated maturity, by
acceleration or otherwise, subject, however, in the case of clauses (i) and (ii)
above, to the limitations set forth in Section 11.03. Each Guarantor hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Securities or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Securities with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, and action to enforce the same or
any other circumstance which might otherwise
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constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture and in this Guarantee. If any Securityholder or the Trustee is
required by any court or otherwise to return to the Company, any Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Guarantor, any amount paid by the Company or any Guarantor
to the Trustee or such Securityholder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor
further agrees that, as between each Guarantor, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six for the purposes
of this Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from
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or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to Section
11.05, result in the obligations of such Guarantor under the Guarantee not
constituting such fraudulent transfer or conveyance.
SECTION 11.04. GUARANTORS MAY CONSOLIDATE,
ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or into
the Company or another Guarantor or shall prevent any sale of assets or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety, to the Company or another Guarantor. Upon any such consolidation,
merger, sale or conveyance, the Guarantee given by such Guarantor shall no
longer have any force or effect.
(b) Upon the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Guarantor (or all or substantially all
its assets) to a Person which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with Section 4.17 and the other terms
of this Indenture, such Guarantor shall be deemed released from all obligations
under this Article Eleven without any further action required on the part of the
Trustee or any Holder.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate and Opinion of Counsel certifying as to the compliance with this
Section 11.04. Any Guarantor not so released remains liable for the full amount
of principal of and interest on the Securities as provided in this Article
Eleven.
SECTION 11.05. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Company's obligations with respect to the
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Securities or any other Guarantor's obligations with respect to the Guarantee.
"ADJUSTED NET ASSETS" of such Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the
Guarantee, of such Guarantor at such date and (y) the present fair salable value
of the assets of such Guarantor at such date exceeds the amount that will be
required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), excluding debt in respect of the Guarantee of such Guarantor, as
they become absolute and matured.
SECTION 11.06. WAIVER OF SUBROGATION.
Until all Guarantee Obligations are paid in full, each Guarantor
hereby irrevocably waives any claims or other rights which it may now or
hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Guarantor's obligations under the Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Securities against the Company, whether or not
such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Securities shall not have been paid in full, such amount shall
have been deemed to have been paid to such Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.06 is knowingly made in contemplation of such benefits.
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SECTION 11.07. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Securityholders set forth in this
Article Eleven, the Guarantors hereby agree to execute the Guarantee in
substantially the form included in the Securities, which shall be endorsed on
each Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in this Article Eleven
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee. Each such Guarantee shall be signed
on behalf of each Guarantor by two Officers, or an Officer and an Assistant
Secretary or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to such Guarantee prior to the authentication of
the Security on which it is endorsed, and the delivery of such Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Guarantor. Such signatures upon
the Guarantee may be by manual or facsimile signature of such officers and may
be imprinted or otherwise reproduced on the Guarantee, and in case any such
officer who shall have signed the Guarantee shall cease to be such officer
before the Security on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Security nevertheless may be authenticated and delivered or disposed of as
though the Person who signed the Guarantee had not ceased to be such officer of
the Guarantor.
SECTION 11.08. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each Guarantor convenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive each such Guarantor from
performing its Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance
of this Indenture; and (to the extent that it may lawfully do so) each such
Guarantor hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE TWELVE
<PAGE>
-96-
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company or a Guarantor:
National Fiberstok Corporation
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 50542
Attention: President
with copies to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Francis Schiff
Facsimile: (212) 819-8200
Telephone: (212) 819-7187
if to the Trustee:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 10890
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
Telephone: (302) 651-1118
<PAGE>
-97-
Each of the Company and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Security Documents, the Securities or the Guarantees. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA
Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
at the request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory
to the Trustee, stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
<PAGE>
-98-
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 12.07. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day.
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES, THE SECURITY DOCUMENTS AND THE
GUARANTEES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the
parties hereto agrees
<PAGE>
-99-
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Indenture.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities, this Indenture, the Security Documents or the Guarantees
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Securityholder by accepting a Security waives and releases
all such liability. Such waiver and release are part of the consideration for
the issuance of the Securities.
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
<PAGE>
-100-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
THE COMPANY:
NATIONAL FIBERSTOK CORPORATION
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /S/ ROBERT B. WEBSTER
--------------------------------
THE TRUSTEE:
WILINGTON TRUST COMPANY,
as Trustee
By: /s/ Patricia A. Evans
-------------------------------
Name: Patricia A. Evans
Title: Assistant Secretary
<PAGE>
-101-
THE GUARANTORS:
LABEL ART, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /S/ Robert B. Webster
--------------------------------
INFOSEAL INTERNATIONAL, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /S/ Robert B. Webster
--------------------------------
GOVERNMENT FORMS AND SYSTEMS, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /S/ Robert B. Webster
--------------------------------
A/L SYSTEMS, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /S/ Robert B. Webster
--------------------------------
BOHARB CORPORATION
By: /s/ Jack Resnick
----------------------------
Name: Jack Resnick
Title: Vice President
<PAGE>
-102-
Attest: /s/ Robert B. Webster
---------------------------------
SHORT RUN LABELS, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /s/ Robert B. Webster
---------------------------------
PUTNAM GRAPHIC INNOVATIONS, INC.
By: /s/ Jack Resnick
------------------------------
Name: Jack Resnick
Title: Vice President
Attest: /s/ Robert B. Webster
---------------------------------
<PAGE>
Exhibit A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN
"ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUER SUCH CERTIFICATES, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
-2-
11-5/8% Senior Note
due June 15, 2002, Series A
CUSIP No.:
No. [ ] $[ ]
NATIONAL FIBERSTOK CORPORATION, a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to [ ] or registered assigns, the principal sum of
$[ ] Dollars, on June 15, 2002.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1996
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
NATIONAL FIBERSTOK CORPORATION
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
<PAGE>
-3-
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11-5/8% Senior Notes due 2002, Series A,
described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By
---------------------------------------
Authorized Signatory
<PAGE>
-4-
(REVERSE OF SECURITY)
NATIONAL FIBERSTOK CORPORATION
11-5/8% Senior Note
due June 15, 2002, Series A
1. INTEREST.
NATIONAL FIBERSTOK CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
June 15 and December 15 of each year (the "Interest Payment Date"), commencing
December 15, 1996. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from June
28, 1996. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any
<PAGE>
-5-
Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Registrar or co-Registrar.
4. INDENTURE AND GUARANTEES.
The Company issued the Securities under an Indenture, dated as of
June 15, 1996 (the "Indenture"), among the Company, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the TIA),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and the TIA for a statement of them.
The Securities are general obligations of the Company limited in aggregate
principal amount to $100,000,000. Payment on each Security is guaranteed on
a senior basis, jointly and severally, by the Guarantors pursuant to Article
Eleven of the Indenture.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after June 15, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on June 15 of the years
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
Year Percentage
---- ----------
1999...................................... 105.813%
2000...................................... 102.906%
2001 and thereafter....................... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to June 15, 1999, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem up to $35,000,000 aggregate principal amount of
Securities at a
<PAGE>
-6-
redemption price equal to 111.625% of the principal amount thereof, plus accrued
and unpaid interest, if any, thereon to the date of redemption; provided that
at least 65% of the principal amount of Securities originally issued remains
outstanding immediately after giving effect to any such redemption. In order to
effect the foregoing redemption with the net cash proceeds of a Public Equity
Offering, the Company shall make such redemption not more than 60 days after the
consummation of such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
10. SECURITY DOCUMENTS.
<PAGE>
-7-
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company and certain of its
Subsidiaries have granted Liens on the Collateral to the Trustee for the benefit
of the Holders of Securities pursuant to the Indenture and the Security
Documents.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
any of the Security Documents and the terms and provisions of the Indenture will
not be deemed for any purpose to be an impairment of the security under the
Indenture.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
12. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
13. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain unclaimed
for one year, the Trustee and the Paying Agent will repay the funds to the
Company at its request. After that, all liability
<PAGE>
-8-
of the Trustee and such Paying Agent with respect to such funds shall cease.
14. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Security Documents, the Securities and the
Guarantees except for certain provisions thereof, and may be discharged from
obligations to comply with certain covenants contained in the Indenture, the
Security Documents, the Securities and the Guarantees, in each case upon
satisfaction of certain conditions specified in the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Security
Documents, the Securities and the Guarantees may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture, the Security Documents, the Securities
and the Guarantees to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition to or in place
of certificated Securities or comply with any requirements of the Commission in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
16. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of Restricted Subsidiaries, to sell assets, to permit
restrictions on dividends and other payments by Restricted Subsidiaries to the
Company, to consolidate, merge or sell all or substantially all of its assets,
to engage in transactions with affiliates or to engage in certain businesses.
The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
<PAGE>
-9-
17. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Security Documents, the Securities or the
Guarantees except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture, the Security Documents, the Securities or the Guarantees
unless it has received indemnity satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of certain continuing Defaults or Events of Default
if it determines that withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
20. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
21. ABBREVIATIONS AND DEFINED TERMS.
<PAGE>
-10-
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
23. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for the Company's 11 5/8% Senior Notes due 2002, Series
B, which have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects as the Series A Securities.
The Holders shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture and the Registration Rights
Agreement. Requests may be made to: National Fiberstok Corporation, 5775
Peachtree Dunwoody Road, Suite C150, Atlanta, Georgia 30342, Attn: Chief
Executive Officer.
<PAGE>
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Securities, whether at maturity,
by acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Eleven of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Guarantor shall have any liability under the Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantees shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantees are noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
LABEL ART, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
INFOSEAL INTERNATIONAL, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
<PAGE>
-2-
GOVERNMENT FORMS AND
SYSTEMS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
A/L SYSTEMS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
BOHARB CORPORATION
Attest: _________________ By:
------------------------------------
Name:
Title:
SHORT RUN LABELS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
PUTNAM GRAPHIC INNOVATIONS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Dated: Signed:
--------------------------- ----------------------------
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee:
------------------------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $_____________
Date: Your Signature:
--------------------------- ----------------------------
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee:
--------------------------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT B
[FORM OF SERIES B SECURITY]
NATIONAL FIBERSTOK CORPORATION
11-5/8% Senior Note
due June 15, 2002, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
NATIONAL FIBERSTOK CORPORATION, a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to [ ] or registered assigns, the principal sum of $[
] Dollars, on June 15, 2002.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1996
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
NATIONAL FIBERSTOK CORPORATION
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11-5/8% Senior Notes due 2002, Series B,
described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By
-----------------------------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
NATIONAL FIBERSTOK CORPORATION
11-5/8% Senior Note
due June 15, 2002, Series B
1. INTEREST.
NATIONAL FIBERSTOK CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
June 15 and December 15 of each year (the "Interest Payment Date"), commencing
December 15, 1996. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from June
28, 1996. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar or
co-Registrar.
<PAGE>
-2-
4. INDENTURE AND GUARANTEES.
The Company issued the Securities under an Indenture, dated as of
June 15, 1996 (the "Indenture"), among the Company, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and the TIA for a statement of them. The Securities are
general obligations of the Company limited in aggregate principal amount to
$100,000,000. Payment on each Security is guaranteed on a senior basis, jointly
and severally, by the Guarantors pursuant to Article Eleven of the Indenture.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after June 15, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on June 15 of the years
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
Year Percentage
---- ----------
1999...................................... 105.813%
2000...................................... 102.906%
2001 and thereafter....................... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to June 15, 1999, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem up to $35,000,000 aggregate principal amount of
Securities, at a redemption price equal to 111.625% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided that at least 65% of the principal amount of Securities
originally issued remains outstanding immediately after
<PAGE>
-3-
giving effect to any such redemption. In order to effect the foregoing
redemption with the net cash proceeds of a Public Equity Offering, the Company
shall make such redemption not more than 60 days after the consummation of such
Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
10. SECURITY DOCUMENTS.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by
<PAGE>
-4-
acceleration or otherwise, according to the terms of the Securities and the
Indenture, the Company and certain of its Subsidiaries have granted Liens on the
Collateral to the Trustee for the benefit of the Holders of Securities pursuant
to the Indenture and the Security Documents.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
any of the Security Documents and the terms and provisions of the Indenture will
not be deemed for any purpose to be an impairment of the security under the
Indenture.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
12. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
13. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain unclaimed
for one year, the Trustee and the Paying Agent will repay the funds to the
Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
14. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
<PAGE>
-5-
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Security Documents, the Securities and the
Guarantees except for certain provisions thereof, and may be discharged from
their obligations to comply with certain covenants contained in the Indenture,
the Security Documents, the Securities and the Guarantees, in each case upon
satisfaction of certain conditions specified in the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Security
Documents, the Securities and the Guarantees may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture, the Security Documents, the Securities
and the Guarantees to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition to or in place
of certificated Securities or comply with any requirements of the Commission in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
16. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of Restricted Subsidiaries, to sell assets, to permit
restrictions on dividends and other payments by Restricted Subsidiaries to the
Company, to consolidate, merge or sell all or substantially all of its assets,
to engage in transactions with affiliates or to engage in certain businesses.
The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
17. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal
<PAGE>
-6-
amount of Securities then outstanding may declare all the Securities to be due
and payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture, the Security
Documents, the Securities or the Guarantees except as provided in the Indenture.
The Trustee is not obligated to enforce the Indenture, the Security Documents,
the Securities or the Guarantees unless it has received indemnity satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of certain continuing
Defaults or Events of Default if it determines that withholding notice is in
their interest.
18. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
20. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
21. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
<PAGE>
-7-
22. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
National Fiberstok Corporation, 5775 Peachtree, Dunwoody Road, Suite C150,
Atlanta, Georgia 30342, Attn: Chief Executive Officer.
<PAGE>
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Securities, whether at maturity,
by acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Eleven of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Guarantor shall have any liability under the Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantees shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantees are noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
LABEL ART, INC.
Attest: ________________ By:
------------------------------------
Name:
Title:
INFOSEAL INTERNATIONAL, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
<PAGE>
-2-
GOVERNMENT FORMS
AND SYSTEMS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
A/L SYSTEMS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
BOHARB CORPORATION
Attest: _________________ By:
------------------------------------
Name:
Title:
SHORT RUN LABELS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
PUTNAM GRAPHIC INNOVATIONS, INC.
Attest: _________________ By:
------------------------------------
Name:
Title:
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- -------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Dated: Signed:
----------------------- --------------------------------
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee:
----------------------------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $___________
Date: Your Signature:
------------------- -------------------------------------
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee:
--------------------------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
<PAGE>
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 11-5/8% Senior Notes due 2002, Series A
and 11-5/8% Senior Notes due 2002, Series B
(The "Securities"), of National Fiberstok Corporation
-----------------------------------------------------
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
The Transferor:*
/ / has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
/ / has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of this Securities does not require registration under the
Securities Act of 1933, as amended (the "Act") because*:
/ / Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16(a)(ii)(a) or Section
2.16(d)(i)(a) of the Indenture).
<PAGE>
-2-
/ / Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act.
/ / Such Security is being transferred in reliance on Regulation S
under the Act.
/ / Such Security is being transferred in reliance on Rule 144 under
the Act.
/ / Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 or Regulation S under the Act to a person other than
an institutional "accredited investor."
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
[Authorized Signatory]
Date: _____________
*Check applicable box.
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
_______________, ____
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: National Fiberstok Corporation (the "Company")
Indenture (the "Indenture") relating to
11-5/8% Senior Notes due 2002, Series A,
or 11-5/8% Senior Notes due 2002, Series B
------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 11-5/8% Senior Notes due
2002, Series A, or 11-5/8% Series Notes due 2002, Series B (the "Securities"),
of National Fiberstok Corporation (the "Company"), we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the Securities
is subject to certain restrictions and conditions set forth in the Indenture and
the undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have
not been registered under the Securities Act, and that the Securities may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Securities, we will do so only
(a) to the Company or any subsidiary thereof, (b) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) inside the United States to an institutional
"accredited
<PAGE>
-2-
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (d) outside the United States in accordance
with Regulations S under the Securities Act, (e) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(f) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
4. We understand that, on any proposed resale of Securities, we
will be required to furnish to the Trustee and the Company, such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
<PAGE>
-3-
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
[Authorized Signatory]
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
_______________, ____
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: National Fiberstok Corporation (the "Company") 11-5/8%
Senior Notes due 2002, Series A, and 11-5/8%
Senior Notes due 2002, Series B (the "Securities")
-------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
<PAGE>
-2-
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
[Authorized Signature]
<PAGE>
EXHIBIT 4.5
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 28, 1996
by and among
NATIONAL FIBERSTOK CORPORATION,
THE GUARANTORS NAMED HEREIN
and
BT SECURITIES CORPORATION
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
(as Initial Purchasers)
- -------------------------------------------------------------------------------
$100,000,000
11 5/8% SENIOR NOTES DUE 2002
<PAGE>
This Registration Rights Agreement is dated as of June 28, 1996, by
and among National Fiberstok Corporation, a Delaware corporation (the
"COMPANY"), each of the subsidiaries of the Company listed on the signature
pages hereto as a Guarantor (collectively, the "GUARANTORS" and, together with
the Company, the "ISSUERS"), BT Securities Corporation ("BT"), Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ" and, together with BT, the
"INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement, dated
June 21, 1996, among the Company, the Guarantors and Initial Purchasers (the
"PURCHASE AGREEMENT"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their
respective direct and indirect transferees and assigns. The execution and
delivery of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: As defined in Section 4(a) hereof.
AFFILIATE: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
BUSINESS DAY: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York
<PAGE>
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generally are required or authorized by law or other government action to be
closed.
COMPANY: As defined in the preamble hereof.
CONSUMMATE OR CONSUMMATE: When used to qualify the term "Exchange
Offer", shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the Exchange Offer for all Notes validly tendered and not validly
withdrawn pursuant thereto in accordance with the terms of this Agreement.
CONSUMMATION DATE: The date that is 20 Business Days immediately
following the date that the Exchange Registration Statement shall have been
declared effective by the SEC.
EFFECTIVENESS PERIOD: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC pursuant thereto.
EXCHANGE DATE: As defined in Section 2(d) hereof.
EXCHANGE NOTES: The 11 5/8% Senior Notes due 2002 of the Company,
guaranteed on a senior basis by each of the Guarantors, that are identical to
the Notes in all material respects, except that the provisions regarding
restrictions on transfer shall be modified, as provided in the Indenture (or the
indenture pursuant to which the Exchange Notes are issued), and the issuance
thereof pursuant to the Exchange Offer shall have been registered pursuant to an
effective Registration Statement in compliance with the Securities Act.
EXCHANGE OFFER: An offer to issue, in exchange for any and all of
the Notes, a like aggregate principal amount of Exchange Notes, which offer
shall be made by the Company pursuant to Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: As defined in Section 2(a)
hereof.
GUARANTORS: As defined in the preamble hereof.
INDEMNIFIED PERSON: As defined in Section 7(a) hereof.
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INDENTURE: The Indenture, dated as of June 15, 1996, among the
Issuers and Wilmington Trust Company, as trustee thereunder, pursuant to which
the Notes are issued, as amended or supplemented from time to time in accordance
with the terms thereof.
INITIAL PURCHASERS: As defined in the preamble hereof.
ISSUE DATE: As defined in Section 2(a).
ISSUERS: As defined in the preamble hereof.
NOTES: The 11 5/8% Senior Notes due 2002 of the Company,
guaranteed on a senior basis by each of the Guarantors, issued pursuant to the
Indenture.
PARTICIPATING BROKER-DEALER: As defined in Section 2(e) hereof.
PRIVATE EXCHANGE: As defined in Section 2(c) hereof.
PRIVATE EXCHANGE NOTES: As defined in Section 2(c) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
REGISTRATION DEFAULT: As defined in Section 4(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
and the Guarantors that covers any of the Notes, Exchange Notes or Private
Exchange Notes pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or
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deemed to be incorporated by reference, if any, in such registration statement.
RULE 144(k): Rule 144(k) promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
SHELF FILING EVENT: As defined in Section 3(a) hereof.
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SHELF REGISTRATION: As defined in Section 3(a) hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3(a) hereof.
SPECIAL COUNSEL: Cahill Gordon & Reindel, special counsel to the
holders of Transfer Restricted Notes, or such other counsel as shall be agreed
upon by the Issuers and holders of a majority in aggregate principal amount of
Transfer Restricted Notes, the reasonable expenses of which holders of Transfer
Restricted Notes will be reimbursed by the Issuers pursuant to Section 6 hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED NOTE: Each Note, upon original issuance
thereof, and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(ii) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(ii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer by
means of the Prospectus contained in the Exchange Registration Statement and (y)
the date on which the Exchange Registration Statement has been effective under
the Securities Act for a period of six months after the Consummation Date, (iii)
a Shelf Registration Statement covering such Note, Exchange Note or Private
Exchange Note has been declared effective by the SEC and such Note, Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Shelf Registration Statement, (iv) the date on
which such Note, Exchange Note or Private Exchange Note, as the case may be, is
eligible for distribution to the public without volume or manner of sale
restrictions pursuant to Rule 144(k) or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
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TRUSTEE: The trustee under the Indenture.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in connection with which securities are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. EXCHANGE OFFER
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall (a) prepare
and, on or prior to 30 days after the date of original issuance of the Notes
(the "ISSUE DATE"), file with the SEC a Registration Statement under the
Securities Act with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for Notes, a like
principal amount of Exchange Notes, (b) use their best efforts to cause the
Registration Statement relating to the Exchange Offer to be declared effective
by the SEC under the Securities Act on or prior to 120 days after the Issue
Date, and (c) commence the Exchange Offer and use their best efforts to issue,
on or prior to the Consummation Date, the Exchange Notes. The offer and sale of
the Exchange Notes pursuant to the Exchange Offer shall be registered pursuant
to the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION
STATEMENT") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than that
the Exchange Offer does not violate any applicable law or interpretation of the
staff of the SEC. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Issuers shall have no further registration obligations other
than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held by
Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 3(a)(iii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes, as a condition
to its participation in the Exchange Offer, to represent to the Issuers and
their counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or understanding with
any person to participate in the
<PAGE>
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distribution (within the meaning of the Securities Act) of the Exchange Notes
and (iii) such holder is not an Affiliate of an Issuer, or if it is an Affiliate
of an Issuer, it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, either of the
Initial Purchasers hold any Notes acquired by them and having, or which are
reasonably likely to be determined to have, the status of an unsold allotment in
the initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company, upon the request of an Initial
Purchaser or any such holder, shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "PRIVATE EXCHANGE") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Guarantors
on a senior basis, that are identical in all material respects to the Exchange
Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant to the
same indenture as the Exchange Notes). The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall mail
the Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
that the Exchange Offer is being made pursuant to this Agreement and
that all Notes validly tendered will be accepted for exchange;
(i) the date of acceptance for exchange (the "EXCHANGE DATE"),
which date shall in no event be later than the Consummation Date (unless
otherwise required by applicable law);
(ii) that a holder of a Note electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such Note,
together with the enclosed letters of transmittal, to the institution and
at the address (located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the Exchange
Date; and
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(iii) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company, and issue, cause the Trustee under the Indenture (or the
indenture pursuant to which the Exchange Notes are issued) to
authenticate, and mail to each holder of Notes, Exchange Notes equal in
principal amount to the principal amount of the Notes surrendered by such
holder.
(e) The Issuers and each Initial Purchaser acknowledge that the
staff of the SEC has taken the position that any broker-dealer that owns
Exchange Notes that were received by such broker-dealer for its own account in
the Exchange Offer (a "PARTICIPATING BROKER-DEALER") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Issuers and each Initial Purchaser also acknowledge that it is
the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement
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continuously effective for a period of up to six months after the Consummation
Date or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all Exchange Notes acquired in the Exchange Offer, (y) to comply with the
provisions of Section 5 of this Agreement, as they relate to the Exchange Offer
and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
(f) The Initial Purchasers shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to Section
2(e).
(g) Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of the original issuance of the Notes.
(h) The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and consent together
on all matters as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
3. SHELF REGISTRATION
(a) If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by any applicable law or applicable interpretation of the
staff of the SEC or (ii) any holder of a Note notifies the Company on or prior
to the 30th day following the Issue Date that (a) due to a change in law or
policy it is not entitled to participate in the Exchange Offer, (b) due to a
change in law or policy it may not resell Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
<PAGE>
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contained in the Exchange Registration Statement is not appropriate or available
for such resales by such holder or (c) it owns Notes (including any Initial
Purchaser that holds Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from an Issuer or an Affiliate of an
Issuer or (iii) any holder of Private Exchange Notes so requests after the
consummation of the Private Exchange or (iv) the Company has not consummated the
Exchange Offer within 120 days after the Issue Date (each such event referred to
in clauses (i) through (iv), a "SHELF FILING EVENT"), the Issuers shall cause
to be filed with the SEC pursuant to Rule 415 a shelf registration statement
(the "SHELF REGISTRATION STATEMENT") prior to the later of (x) 60 days after
the Issue Date or (y) 30 days after the occurrence of such Shelf Filing Event,
relating to all Transfer Restricted Notes (the "SHELF REGISTRATION") the
holders of which have provided the information required pursuant to Section 3(b)
hereof (PROVIDED that if the Shelf Filing Event arises pursuant to clause (iv)
above, the Issuers shall file the Shelf Registration Statement on the 121st day
after the Issue Date), and shall use their best efforts to have the Shelf
Registration Statement declared effective by the SEC on or prior to 90 days
after the filing of such Shelf Filing Event. In such circumstances, the Issuers
shall use their best efforts to keep the Shelf Registration Statement
continuously effective under the Securities Act, until (a) 36 months following
the Issue Date or (b) if sooner, the date immediately following the date that
all Transfer Restricted Notes covered by the Shelf Registration Statement have
been sold pursuant thereto or otherwise cease to be Transfer Restricted Notes
(the "EFFECTIVENESS PERIOD"); PROVIDED that the Effectiveness Period shall
be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174.
(b) No holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to this
Agreement unless and until such holder furnishes to the Company in writing,
within 30 days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary prospectus included therein. No holder
of Transfer Restricted Notes shall be entitled to Additional Interest pursuant
to Section 4 hereof unless and until such holder shall have provided all such
reasonably requested information. Each holder of Transfer Restricted Notes as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the
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information previously furnished to the Company by such holder not materially
misleading.
4. ADDITIONAL INTEREST
(a) The parties hereto agree that the holders of Transfer
Restricted Notes will suffer damages if the Issuers fail to fulfill their
obligations pursuant to Section 2 or Section 3, as applicable, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, in the
event that (i) the applicable Registration Statement is not filed with the SEC
on or prior to the date specified herein for such filing, (ii) the applicable
Registration Statement has not been declared effective by the SEC on or prior to
the date specified herein for such effectiveness after such obligation arises,
(iii) if the Exchange Offer is required to be Consummated hereunder, the Company
has not exchanged Exchange Notes for all Notes validly tendered and not validly
withdrawn in accordance with the terms of the Exchange Offer by the Consummation
Date or (iv) the applicable Registration Statement is filed and declared
effective but shall thereafter cease to be effective or usable in connection
with the Exchange Offer or resales of Transfer Restricted Notes during a period
in which it is required to be effective hereunder without being succeeded
immediately by any additional Registration Statement covering the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, which has been
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), then the interest rate on Transfer Restricted
Notes will increase ("ADDITIONAL INTEREST"), with respect to the first 90-day
period immediately following the occurrence of such Registration Default, by
0.5% per annum and will increase by an additional 0.5% per annum with respect
to each subsequent 90-day period until such Registration Default has been cured,
up to a maximum amount of 1.0% per annum with respect to all Registration
Defaults. Following the cure of a Registration Default, the accrual of
Additional Interest with respect to such Registration Default will cease and
upon the cure of all Registration Defaults the interest rate will revert to the
original rate.
(b) The Company shall notify the Trustee and paying agent under
the Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Company shall pay the Additional
Interest due on the Transfer Restricted Notes by depositing with the paying
agent (which shall not be the Company for these
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purposes) for the Transfer Restricted Notes, in trust, for the benefit of the
holders thereof, prior to 11:00 A.M. on the next interest payment date specified
by the Indenture (or such other indenture), sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable on
each interest payment date specified by the Indenture (or such other indenture)
to the record holders entitled to receive the interest payment to be made on
such date. Each obligation to pay Additional Interest shall be deemed to accrue
from and including the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest provided
for in this Section 4 constitutes a reasonable estimate of the damages that will
be suffered by holders of Transfer Restricted Notes by reason of the happening
of any Registration Default.
5. REGISTRATION PROCEDURES
In connection with the Issuers' registration obligations hereunder,
the Issuers shall effect such registrations on the appropriate form available
for the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Notes in
accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Notes, and pursuant thereto the Issuers
shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable period
of time prior to the initial filing of a Shelf Registration
Statement or Prospectus and a reasonable period of time prior to the
filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the holders of the Transfer
Restricted Notes included in such Shelf Registration Statement,
their Special Counsel and the managing underwriters, if any, copies
of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such holders, their Special Counsel
and such underwriters, if any, and cause the officers and directors
of the
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Issuers, counsel to the Issuers and independent certified public
accountants to the Issuers to respond to such reasonable inquiries
as shall be necessary, in the opinion of respective counsel to such
holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act; PROVIDED that the
foregoing inspection and information gathering shall be coordinated
on behalf of the Initial Purchasers by BT and on behalf of any other
persons, by one counsel designated by and on behalf of such other
persons; PROVIDED, HOWEVER, that the Issuers shall not be deemed
to have kept a Shelf Registration Statement effective during the
applicable period if any of them voluntarily takes any unreasonable
action or voluntarily fails to take any reasonable action that
results in holders of the Transfer Restricted Notes covered thereby
not being able to sell such Transfer Restricted Notes pursuant to
Federal securities laws during that period. The Issuers shall not
file any such Shelf Registration Statement or related Prospectus or
any amendments or supplements thereto which the holders of a
majority in principal amount of the Transfer Restricted Notes
included in such Shelf Registration Statement shall reasonably
object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424;
and comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Notes to be
sold or, in the case of an Exchange Offer, tendered for, their
Special Counsel and the managing underwriters, if any, promptly, and
(if requested by any such person), confirm such notice in writing,
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(i)(a) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and (b) with
respect to a Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the SEC
or any other Federal or state governmental authority for amendments
or supplements to a Registration Statement or related Prospectus or
for additional information, (iii) of the issuance by the SEC, any
state securities commission, any other governmental agency or any
court of any stop order or injunction suspending or enjoining the
use of a Prospectus or the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of
any of the Notes, Exchange Notes or Private Exchange Notes for sale
in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event
or information becoming known to any Issuer that makes any statement
made in a Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making
of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not
misleading, and that in the case of a Prospectus, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading;
(d) Use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending
the use of a Prospectus or the effectiveness of a Registration
Statement or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Notes, Exchange Notes or
Private Exchange Notes for sale in any jurisdiction, at the earliest
practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the
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managing underwriters, if any, or the holders of a majority in
aggregate principal amount of the Transfer Restricted Notes being
sold pursuant to such Shelf Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters, if any, and such
holders reasonably believe should be included therein, and (ii) make
all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as
practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Issuers
shall not be required to take any action pursuant to this Section
5(e) that would, in the opinion of counsel for the Issuers, violate
applicable law;
(f) Upon written request to the Company by a holder of
Notes, Exchange Notes or Private Exchange Notes to be exchanged or
sold pursuant to a Registration Statement, their Special Counsel and
each managing underwriter, if any, without charge, furnish at least
one conformed copy of such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested (including those previously
furnished or incorporated by reference) as soon as practicable after
the filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or
Private Exchange Notes to be exchanged or sold pursuant to a
Registration Statement, their Special Counsel, and the
underwriters, if any, without charge, as many copies of the
Prospectus (including each form of prospectus) and each amendment or
supplement thereto as such persons reasonably request; and the
Issuers hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling holders of
Transfer Restricted Notes and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted
Notes in accordance with the terms thereof and with U.S. Federal
securities laws and Blue Sky laws covered by such Prospectus and any
amendment or supplement thereto;
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(h) Prior to any public offering of Notes, Exchange Notes or
Private Exchange Notes, use their best efforts to register or
qualify or cooperate with the holders of Notes, Exchange Notes or
Private Exchange Notes to be sold or tendered for, the underwriters,
if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration
or qualification) of such Notes, Exchange Notes or Private Exchange
Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective hereunder and do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Notes, Exchange Notes or Private Exchange Notes
covered by the applicable Registration Statement; PROVIDED,
HOWEVER, that the Issuers shall not be required to (i) qualify
generally to do business in any jurisdiction where they are not then
so qualified or (ii) take any action which would subject them to
general service of process or to taxation in any jurisdiction where
they are not so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Notes that will result in such securities no longer being
Transfer Restricted Notes, cooperate with the holders thereof and
the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Notes to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with
The Depository Trust Company and to enable such Transfer Restricted
Notes to be in such denominations and registered in such names as
the managing underwriters, if any, or such holders may request at
least two Business Days prior to any sale of Transfer Restricted
Notes;
(j) Upon the occurrence of any event contemplated by Section
5(c)(v), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to
each Registration
<PAGE>
-17-
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and
Private Exchange Notes, if applicable);
(l) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary
in underwritten offerings) and take all such other reasonable
actions in connection therewith (including those reasonably
requested by the managing underwriters, if any, or the holders of a
majority in aggregate principal amount of the Transfer Restricted
Notes being sold) in order to expedite or facilitate the disposition
of such Transfer Restricted Notes, and, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Transfer
Restricted Notes and the underwriters, if any, with respect to the
business of the Issuers and their subsidiaries (including with
respect to businesses or assets acquired or to be acquired by any of
them), and the Shelf Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when customarily requested;
(ii) obtain opinions of counsel to the Issuers and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and
Special Counsel to the holders of the Transfer Restricted Notes
being sold), addressed to each selling holder of Transfer Restricted
Notes and each of the underwriters,
<PAGE>
-18-
if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such Special Counsel and the managing
underwriters, in any; (iii) use their best efforts to obtain
customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuers or of any business acquired by an Issuer
or any such subsidiary for which financial statements and financial
data is, or is required to be, included in the Shelf Registration
Statement), addressed (where reasonably possible) to each selling
holder of Transfer Restricted Notes and each of the underwriters, if
any, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection
with underwritten offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling holders and the
underwriters, if any, than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to holders of a
majority in aggregate principal amount of Transfer Restricted Notes
covered by such Shelf Registration Statement and the managing
underwriters, if any); and (v) deliver such documents and
certificates as may be reasonably requested by the holders of a
majority in aggregate principal amount of the Transfer Restricted
Notes being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and
to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted
Notes being sold, any underwriter participating in any such
disposition of Transfer Restricted Notes, and any attorney,
consultant or accountant retained by such selling holders or
underwriter, at the offices where normally kept, during reasonable
business hours, all relevant financial and other records, pertinent
corporate documents and properties of the Issuers and their
subsidiaries
<PAGE>
-19-
(including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the
Issuers), and cause the officers, directors, agents and employees of
the Issuers and their subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that
such information is available to the Issuers) to supply all
information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; PROVIDED, HOWEVER, that
such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless and
to the extent that (i) disclosure of such information is required by
court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with
the filing of the Shelf Registration Statement or the use of any
Prospectus), (iii) such information becomes generally available to
the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information
becomes available to such person from a source other than the
Issuers and their subsidiaries and such source is not bound by a
confidentiality agreement; and PROVIDED, FURTHER, that the
foregoing inspection and information gathering shall be coordinated
on behalf of the Initial Purchasers by BT and on behalf of any other
persons, by one counsel designated by and on behalf of such other
persons;
(n) Provide an indenture trustee for the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be, and
cause an indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement relating to the
Notes and/or the Exchange Notes and Private Exchange Notes, as the
case may be; and if such indenture shall be the Indenture, in
connection therewith, cooperate with the Trustee and the holders of
the Notes and/or the Exchange Notes and Private
<PAGE>
-20-
Exchange Notes, to effect such changes to the Indenture, if any, as
may be required for the Indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use its reasonable
efforts to cause the Trustee to execute, all customary documents as
may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the Indenture
to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to their securityholders earning
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158, no later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Transfer Restricted Notes are sold to
underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter after the
effective date of a Registration Statement, which statement shall
cover said period, consistent with the requirements of Rule 158;
(p) Cooperate with each seller of Transfer Restricted Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Notes
and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers,
Inc.; and
(q) Use their best efforts to take all other steps reasonably
necessary to effect the registration of the Transfer Restricted
Notes covered by a Registration Statement contemplated hereby.
The Issuers may require a holder of Transfer Restricted Notes to be
included in a Registration Statement to furnish to the Issuers such information
regarding the distribution of such Transfer Restricted Notes as is required by
law to be disclosed in such Registration Statement and the Issuers may exclude
from such Registration Statement the Transfer Restricted Notes of any
<PAGE>
-21-
holder who unreasonably fails to furnish such information within a reasonable
time after receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of an Issuer, then such holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of the Issuers' securities covered thereby
and that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Issuers, or (ii) in the event that such
reference to such holder by name or otherwise is not required by the Securities
Act, the deletion of the reference to such holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3 hereof,
each holder of Transfer Restricted Notes agrees by acquisition of such Transfer
Restricted Notes that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Notes covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
any Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (a) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (b) in compliance with securities or Blue Sky laws), (ii) printing
<PAGE>
-22-
expenses (including, without limitation, expenses of printing certificates for
Notes, Exchange Notes and Private Exchange Notes in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses), (iii)
reasonable fees and disbursements of counsel for the Issuers and the Special
Counsel (not to exceed one firm of counsel), (iv) fees and disbursements of all
independent certified public accountants referred to in Section 2(e) and Section
5(l)(iii) hereof (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(v) if required, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and regulations of
the National Association of Securities Dealers, Inc., and (vi) fees and expenses
of all other persons retained by the Issuers. In addition, the Issuers shall
pay their internal expenses (including, without limitation, all salaries and
expenses of their respective officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Notes, Exchange Notes or Private
Exchange Notes to be registered on any securities exchange. Notwithstanding the
foregoing or anything in this Agreement to the contrary, each holder of Transfer
Restricted Notes shall pay all underwriting discounts and commissions of any
underwriters with respect to any Notes, Exchange Notes or Private Exchange Notes
sold by or on behalf of it.
7. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and
hold harmless (i) each of the Initial Purchasers, each holder of Notes, Exchange
Notes and Private Exchange Notes and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and agents of the Initial Purchasers, each holder of Notes,
Exchange Notes and Private Exchange Notes, each Participating Broker-Dealer and
any controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "INDEMNIFIED PERSON"), from and against any
and all losses, claims, damages, liabilities and judgments arising out of or
relating to any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
in any amendment or supplement
<PAGE>
-23-
thereto, or arising out of or relating to any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or preliminary prospectus
or supplement thereto, in light of the circumstances under which they were made)
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Indemnified Person
furnished in writing to the Issuers by or on behalf of such Indemnified Person
expressly for use therein; PROVIDED that the foregoing indemnity with respect
to any preliminary prospectus shall not inure to the benefit of any Indemnified
Person from whom the person asserting such losses, claims, damages, liabilities
and judgments purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary prospectus is
eliminated or remedied in the Prospectus and a copy of the Prospectus shall not
have been furnished to such person in a timely manner due to the wrongful action
or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or
preliminary prospectus or any amendment or supplement thereto and with respect
to which indemnity may be sought against the Issuers hereunder, such Indemnified
Person shall promptly notify the Issuers in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person and payment of all fees and expenses. Any
Indemnified Person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person, unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Issuers, (ii) the Company shall have failed to assume the defense and employ
counsel or pay all such fees and expenses or (iii) the named parties to any such
action (including any impleaded parties) include both such Indemnified Person
and an Issuer and such Indemnified Person shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to any such Issuer (in which case the
Company shall not have the right to assume the defense of such action on behalf
of such Indemnified Person, it being understood, however, that the Issuers shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction
<PAGE>
-24-
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Persons, which firm
shall be designated in writing by such Indemnified Persons, and that all such
reasonable fees and expenses shall be reimbursed as they are incurred). The
Issuers shall not be liable for any settlement of any such action effected
without their written consent but if settled with the written consent of the
Issuers, the Issuers agree, jointly and severally, to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement. No Issuer shall, without the prior written consent
of each Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to
which a holder of Transfer Restricted Notes offers or sells Transfer Restricted
Notes, such holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuers, their respective directors and officers and any person
controlling an Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to each Indemnified Person but only with respect to information
relating to such holder furnished in writing by or on behalf of such holder
expressly for use in such Registration Statement. In any such case in which any
action shall be brought against an Issuer, any director or officer of an Issuer
or any person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer Restricted
Notes, such holder shall have the rights and duties given to the Issuers (except
that if an Issuer shall have assumed the defense thereof, such holder shall not
be required to do so, but may employ separate counsel therein and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such holder), and the Issuers, their respective directors and
officers and any person controlling an Issuer shall have the rights and duties
given to the Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of
<PAGE>
-25-
any losses, claims, damages, liabilities or judgments referred to herein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party on the one hand and the indemnified party on the other hand
from the offering of the Notes, the Exchange Notes or the Private Exchange
Notes, as the case may be (it being expressly understood and agreed that the
relative benefits received by the Issuers from the offering of the Notes,
Exchange Notes or Private Exchange Notes, as the case may be, shall be the
amount of the net proceeds received by the Company from the sale of the Notes to
the Initial Purchasers), or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each indemnifying party on the one hand and the
indemnified party on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the each indemnifying party on the one hand the indemnified party on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by an indemnifying party
or such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were determined
by PRO RATA allocation (even if all Indemnified Persons were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the net proceeds received by it in connection
<PAGE>
-26-
with the sale of the Notes, Exchange Notes or Private Exchange Notes
contemplated by this Agreement (or, in the case of an underwriter that is an
Indemnified Person, the total underwriting discounts received by such
underwriter) exceeds the amount of any damages which such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Indemnified Person's obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective amount of Notes, Exchange Notes or Private Exchange Notes included in
any such Registration Statement by each Indemnified Person and not joint.
8. RULE 144A
Each of Issuers shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but in
the past had been required to or did file such reports, it will, upon the
request of any holder of Transfer Restricted Notes, make available other
information as required by, and so long as necessary to permit sales of Transfer
Restricted Notes pursuant to Rule 144A. Notwithstanding the foregoing, nothing
in this Section 8 shall be deemed to require an Issuer to register any of its
securities pursuant to the Exchange Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in such offering, subject to the consent
of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Transfer Restricted Notes on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
<PAGE>
-27-
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by an Issuer or by a
holder of Notes, Exchange Notes or Private Exchange Notes of any of its
obligations under this Agreement, each holder of Notes, Exchange Notes or
Private Exchange Notes and each Issuer, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
Notwithstanding the provisions of Section 4 hereof, the Issuers and each holder
of Notes, Exchange Notes and Private Exchange Notes agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
of any of the provisions of this Agreement and each hereby further agrees that,
in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuers will not enter into
any agreement with respect to their securities that is inconsistent with the
rights granted to the holders of Notes, Exchange Notes and Private Exchange
Notes and Indemnified Persons in this Agreement or otherwise conflicts with the
provisions hereof. Without the written consent of the holders of a majority in
aggregate principal amount of the outstanding Transfer Restricted Notes, the
Issuers shall not grant to any person any rights which conflict with or are
inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. The Issuers shall not grant
to any of their securityholders (other than the holders of Transfer Restricted
Notes in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Notes.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the holders
of not less than a majority of the then outstanding aggregate principal amount
of Transfer Restricted Notes; PROVIDED, HOWEVER, that, for the purposes of
this Agreement, Transfer Restricted Notes that are owned, directly or
indirectly, by the Issuers or any of their Affiliates are not deemed
outstanding. Notwithstanding the
<PAGE>
-28-
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holders of Transfer
Restricted Notes whose securities are being sold or tendered pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Transfer Restricted Notes may be given by holders of
a majority in aggregate principal amount of the Transfer Restricted Notes being
sold or tendered by such holders pursuant to such Registration Statement;
PROVIDED, HOWEVER, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the foregoing, no amendment,
modification, supplement, waiver or consent with respect to Section 7 shall be
made or given otherwise than with the prior written consent of each Indemnified
Person affected thereby.
(e) NOTICES. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of
Notes, Exchange Notes or Private Exchange Notes, to the address of such
holder as it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes and each Indemnified Person. The Issuers may
not
<PAGE>
-29-
assign any of their rights or obligations hereunder without the prior written
consent of each holder of Transfer Restricted Notes and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of an Issuer shall have
any of the rights granted under this Agreement until such person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) SEVERABILITY. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement
<PAGE>
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to "Section" and "paragraph" refer to such Section or paragraph of this
Agreement, unless expressly stated otherwise.
(k) This Agreement is intended by the parties as a final
expression of their agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Issuers with respect to
the Notes, the Exchange Notes and the Private Exchange Notes. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE COMPANY:
NATIONAL FIBERSTOK CORPORATION
By: /S/ ROBERT M. MIKLAS
------------------------------------
Name: ROBERT M. MIKLAS
Title: President & Chief Financial
Officer
THE GUARANTORS:
LABEL ART, INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
INFOSEAL INTERNATIONAL, INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
GOVERNMENT FORMS AND SYSTEMS,
INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
PUTNAM GRAPHIC INNOVATIONS, INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
<PAGE>
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SHORT RUN LABELS, INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
BOHARB CORPORATION
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
A/L SYSTEMS, INC.
By: /S/ JACK RESNICK
------------------------------------
Name: JACK RESNICK
Title: Vice President
THE INITIAL PURCHASERS:
BT SECURITIES CORPORATION
By: /S/ CHRISTINE VARBELLA-FOGGIA
-----------------------------------
Name: CHRISTINE VARBELLA-FOGGIA
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /S/ JOSEPH ATENCIO
-----------------------------------
Name: JOSEPH ATENCIO
Title: Managing Director
<PAGE>
EXHIBIT 4.6
SECURITIES PLEDGE AGREEMENT
THIS SECURITIES PLEDGE AGREEMENT (the "AGREEMENT"), dated as of June
28, 1996, made by NATIONAL FIBERSTOK CORPORATION, a Delaware corporation having
an office at 5775 Peach tree Dunwoody Road, Atlanta, Georgia 30342 ("NFC" or the
"PLEDGOR"), in favor of WILMINGTON TRUST COMPANY, a Delaware banking corporation
having an office at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, as trustee (in such capacity and together with any
successors in such capacity, the "TRUSTEE") pursuant to the Indenture (as
hereinafter defined).
R E C I T A L S :
A. Contemporaneously with the execution and delivery of this
Agreement, NFC, Label Art, Inc., InfoSeal International, Inc., Government Forms
and Systems, Inc., A/L Systems, Inc., Boharb, Inc., Short Run Labels, Inc.,
Putnam Graphic Innovations, Inc. and the Trustee are entering into a certain
indenture (as amended from time to time, the "INDENTURE"), dated as of the date
hereof, pursuant to which NFC is issuing its 11-5/8% Senior Notes due 2002,
Series A (the "SERIES A NOTES"), in the aggregate principal amount of
$100,000,000. It is contemplated that NFC may, after the date hereof, issue
exchange notes pursuant to the Indenture (the "EXCHANGE NOTES; together with the
Series A Notes, the "NOTES") in exchange for the Series A Notes.
B. Pledgor is the owner of the Pledged Collateral (as hereinafter
defined).
C. This Agreement is given by Pledgor in favor of the Trustee for
its benefit and the benefit of the Holders of the Notes (collectively, the
"SECURED PARTIES") to secure the payment and performance of the Secured
Obligations (as defined in Section 3).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Trustee hereby agree as follows:
<PAGE>
SECTION I. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings assigned to such terms in the
Indenture. Such definitions shall be applicable equally to the singular and
plural forms of the terms defined.
SECTION II. PLEDGE. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to the Trustee for its benefit and the benefit of
the Secured Parties, a continuing first priority security interest in and to all
of the right, title and interest of Pledgor in, to and under the following
property, whether now existing or hereafter acquired (collectively, the "PLEDGED
COLLATERAL"):
A. all issued and outstanding shares of Capital Stock of each
Person described in SCHEDULE I hereto (the "PLEDGED SHARES") (which are
and shall remain at all times until this Agreement terminates, certificated
shares), including the certificates representing the Pledged Shares and any
interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares;
B. all additional shares of Capital Stock, or options, warrants or
other rights to acquire Capital Stock, of any issuer of the Pledged Shares
from time to time acquired by Pledgor in any manner (which, if
certificated, shall remain at all times until this Agreement terminates,
certificated securities) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
securities and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional securities;
C. so long as a Default or an Event of Default shall have occurred
and is continuing, all dividends, distributions, returns of capital and
other property from time to time received, receivable or otherwise
distributed to Pledgor in respect of or in exchange for any or all of the
Pledged Shares (collectively, "DISTRIBUTIONS"); and
D. all Net Cash Proceeds from an Asset Sale of any of the foregoing
until (i) such cash and Cash Equivalents are applied (A) to repay
Indebtedness in accordance with Section 4.17 of the Indenture, (B) to an
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investment in Replacement Assets or (C) to repurchase Notes pursuant to a
Net Proceeds Offer in accordance with Section 4.17 of the Indenture or
(ii) such Net Cash Proceeds are no longer required to be applied to such
uses pursuant to Section 4.17 of the Indenture.
SECTION III. SECURED OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Law) of (i) all of the obligations, liabilities and indebtedness of
NFC and the Guarantors (collectively, the "OBLIGORS") now existing or hereafter
arising under or in respect of the Indenture, the Notes and the Guarantees
(including, without limitation, the obligation of the Obligors to pay principal
of, premium, if any, and interest on the Notes when due and payable) and all
other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and all other amounts due or to become due under or in connection
with the Indenture, the Notes and the Guarantees and (ii) without duplication of
the amounts described in clause (i), all obligations, indebtedness and
liabilities of Pledgor now existing or hereafter arising under or in respect of
this Agreement, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this Agreement
(the obligations described in clauses (i) and (ii) of this Section 3,
collectively, the "SECURED OBLIGATIONS").
SECTION IV. NO RELEASE. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on the
Trustee or any Secured Party to perform or observe any such term, covenant,
condition or agreement on Pledgor's part to be so performed or observed or shall
impose any liability on the Trustee or any Secured Party for any act or omission
on the part of Pledgor relating thereto or for any breach of any representation
or warranty on the part of Pledgor contained in this Agreement, or under or in
respect of the Pledged Collateral or made in connection herewith or therewith.
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<PAGE>
SECTION V. DELIVERY OF PLEDGED COLLATERAL.
A. All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to the
Trustee, shall immediately upon receipt thereof by Pledgor be delivered to and
held by or on behalf of the Trustee pursuant hereto. All Pledged Collateral
shall be in suitable form for transfer by delivery or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Trustee. The Trustee shall have the
right, at any time upon the occurrence and during the continuance of an Event of
Default, to endorse, assign or otherwise transfer to or to register in the name
of the Trustee or any of its nominees any or all of the Pledged Collateral. In
addition, the Trustee shall have the right at any time upon the occurrence and
during the continuance of an Event of Default to exchange certificates
representing or evidencing Pledged Collateral for certificates of smaller or
larger denominations.
B. If the issuer of Pledged Shares is incorporated in a jurisdiction
which does not permit the use of certificates to evidence equity ownership, then
Pledgor shall, to the extent permitted by applicable law, record such pledge on
the stock register of the issuer, execute any customary stock pledge forms or
other documents necessary or appropriate to complete the pledge and give the
Trustee the right to transfer such Pledged Shares under the terms hereof and
provide to the Trustee an Opinion of Counsel, in form and substance satisfactory
to the Trustee, confirming such pledge.
SECTION VI. SUPPLEMENTS, FURTHER ASSURANCES.
A. Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC-1 financing statements, and take all further action that may
be necessary or that the Trustee may reasonably request, in order to perfect and
protect the pledge, security interest and Lien granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral, and a copy of any
such filing shall be delivered to the Trustee.
B. Pledgor shall, upon obtaining any Pledged
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<PAGE>
Shares of any Person, promptly (and in any event within five Business Days)
deliver to the Trustee a pledge amendment, duly executed by Pledgor, in
substantially the form of EXHIBIT A hereto (each, a "PLEDGE AMENDMENT"), in
respect of the additional Pledged Shares which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien hereby created on and
in respect of such additional shares. Pledgor hereby authorizes the Trustee to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder be considered Pledged Collateral.
SECTION VII. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor
represents, warrants and covenants as follows:
A. NO LIENS. Pledgor is, and at the time of any delivery of any
Pledged Collateral to the Trustee pursuant to Section 5 of this Agreement
will be, the sole legal and beneficial owner of the Pledged Collateral.
All Pledged Collateral is on the date hereof, and will be, so owned by
Pledgor free and clear of any Lien, except for the Lien granted to the
Trustee pursuant to this Agreement.
B. AUTHORIZATION, ENFORCEABILITY. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
C. NO CONSENTS, ETC. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person is
required (x) for the pledge by Pledgor of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor, or (y) for the exercise by the
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<PAGE>
Trustee of the voting or other rights provided for in this Agreement, or
(z) for the exercise by the Trustee of the remedies in respect of the
Pledged Collateral pursuant to this Agreement and except for consents,
authorizations, approvals and other filings and notices required under the
Securities Act or under state or "Blue Sky" securities laws.
D. DUE AUTHORIZATION AND ISSUANCE. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
E. CHIEF EXECUTIVE OFFICE. Pledgor's chief executive office is
located at 5775 Peachtree Dunwoody Road, Atlanta, Georgia 30342. Pledgor
shall not move its chief executive office except to such new location as
Pledgor may establish in accordance with the last sentence of this Section
7(e). Pledgor shall not establish a new location for its chief executive
office nor shall it change its name until (i) it shall have given the
Trustee not less than twenty (20) days' prior written notice of its
intention so to do, clearly describing such new location or name and
providing such other information in connection therewith as the Trustee may
reasonably request, and (ii) with respect to such new location or name,
Pledgor shall have taken all action reasonably satisfactory to the Trustee
to maintain the perfection and priority of the security interest of the
Trustee for the benefit of the Secured Parties in the Pledged Collateral
intended to be granted hereby.
F. DELIVERY OF PLEDGED COLLATERAL; FILINGS. Pledgor has delivered
to the Trustee all certificates representing the Pledged Shares and has
caused to be filed with the Secretary of State of the States of Delaware
and Georgia UCC-1 financing statements evidencing the Lien created by this
Agreement, and such delivery, filing and pledge of the Pledged Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Collateral securing the payment of the
Secured Obligations pursuant to the provisions of the Uniform Commercial
Code as in effect in any relevant jurisdiction (the "UCC"), including,
without limitation, the States of Delaware and Georgia.
G. PLEDGED COLLATERAL. All information set forth
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<PAGE>
herein, including the Schedules annexed hereto, relating to the Pledged
Collateral is accurate and complete in all material respects.
H. NO VIOLATIONS, ETC. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
I. OWNERSHIP OF PLEDGED COLLATERAL. Except as otherwise permitted
by the Indenture, Pledgor at all times will be the sole beneficial owner of
the Pledged Collateral.
J. NO OPTIONS, WARRANTS, ETC. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to issue, deliver or
sell or cause to be issued, delivered or sold, additional Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. There are no voting trusts or other
agreements or understandings to which Pledgor is a party with respect to
the voting of the capital stock of any issuer of the Pledged Shares.
SECTION VIII.VOTING RIGHTS; DISTRIBUTIONS; ETC.
A. So long as no Event of Default shall have occurred and be
continuing:
(a) Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms or
purpose of this Agreement and the Indenture; PROVIDED, HOWEVER, that
Pledgor shall not in any event exercise such rights in any manner
which may have an adverse effect on the value of the Pledged
Collateral or the security intended to be provided by this Agreement.
(b) Subject to the terms of the Indenture, Pledgor shall be
entitled to receive and retain, and to utilize free and clear of the
Lien of this Agreement, any and all Distributions, but only if and to
the extent made in accordance with the provisions of the Indenture.
(c) The Trustee shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating
to voting rights and shall,
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<PAGE>
if necessary, upon written request of Pledgor and at Pledgor's sole
cost and expense, from time to time execute and deliver (or cause to
be executed and delivered) to Pledgor all such instruments as Pledgor
may reasonably request in order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 8(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 8(a)(ii) hereof.
B. Upon the occurrence of an Event of Defaulta), all rights of
Pledgor to exercise the voting and other consensual rights it would otherwise be
entitled to exercise pursuant to Section 8(a)(i) hereof without any action or
the giving of any notice shall cease, and all such rights shall thereupon become
vested in the Trustee, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
C. Upon the occurrence and during the continuance of a Default or
any Event of Default, a)all rights of Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to Section 8(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in the
Trustee, which shall thereupon have the sole right to receive and hold as
Pledged Collateral such Distributions.
D. Pledgor shall, at Pledgor's sole cost and expense, from time to
time execute and deliver to the Trustee appropriate instruments as the Trustee
may reasonably request in order to permit the Trustee to exercise the voting and
other rights which it may be entitled to exercise pursuant to Section 8(b)(i)
hereof and to receive all Distributions which it may be entitled to receive
under Section 8(b)(ii) hereof.
E. All Distributions which are received by Pledgor contrary to the
provisions of Section 8(b)(ii) hereof shall be received in trust for the benefit
of the Trustee, shall be segregated from other funds of Pledgor and shall
immediately be paid over to the Trustee as Pledged Collateral in the same form
as so received (with any necessary endorsement).
SECTION IX.TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES; PRINCIPAL
OFFICE.
A. Pledgor shall not (i) sell, convey, assign or
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otherwise dispose of, or grant any option, right or warrant with respect to, any
of the Pledged Collateral except as permitted by the Indenture, (ii) create or
permit to exist any Lien upon or with respect to any Pledged Collateral other
than the Lien and security interest granted to the Trustee under this
Agreement, or (iii) except as permitted by the Indenture, permit any issuer of
the Pledged Shares to merge, consolidate or change its legal form, unless all of
the outstanding capital stock of the surviving or resulting corporation or
partnership, as the case may be, is, upon such merger or consolidation, pledged
hereunder and no cash, securities or other property is distributed in respect of
the outstanding shares of any other constituent corporation.
B. Pledgor shall (i) not authorize any issuer of the Pledged Shares
to issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock of the issuer of the Pledged
Shares which are required to be pledged hereunder.
SECTION X. REASONABLE CARE. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which the Trustee, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Trustee nor any of the Secured Parties shall
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Trustee or any other Secured Party has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.
SECTION XI. REMEDIES UPON DEFAULT; DECISIONS RELATING TO EXERCISE OF
REMEDIES.
A. If any Event of Default shall have occurred and be continuing,
the Trustee shall have the right, but not the obligation, in addition to other
rights and remedies provided for herein or otherwise available to it to be
exercised in accordance with the terms of, and at the times, if any, specified
in the Indenture, (i) to retain and apply the Distributions to the Secured
Obligations as provided in
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Section 12 hereof, and (ii) to exercise all the rights and remedies of a secured
party on default under the UCC at that time, and the Trustee may also, in
accordance with applicable law, sell the Pledged Collateral or any part thereof
(including, without limitation, any partial interest in the Pledged Shares) at
public or private sale, at any exchange, broker's board or at any of the
Trustee's offices or elsewhere, for cash, on credit or for future delivery, at
commercially reasonable prices and terms. The Trustee or any other Secured
Party may be the purchaser of any or all of the Pledged Collateral at any such
sale and shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Pledged Collateral
sold at such sale, to use and apply any of the Secured Obligations owed to such
Person as a credit on account of the purchase price of any Pledged Collateral
payable by such Person at such sale. Each purchaser at any such sale shall
acquire the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives, to the fullest extent permitted by law, all
rights of redemption and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor acknowledges and agrees that, to the extent notice of sale shall be
required by law, ten days notice to Pledgor of the time and place of any public
sale or the time after which any private sale or other intended disposition is
to take place shall constitute reasonable notification of such matters. The
Trustee shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Pledgor hereby waives, to the fullest
extent permitted by law, any claims against the Trustee arising by reason of the
fact that the price at which any Pledged Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if the Trustee accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree; PROVIDED, HOWEVER, that the
foregoing shall not release the Trustee from its obligation to sell the Pledged
Collateral (or any part thereof) at prices and terms which are commercially
reasonable.
B. Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the
Trustee may be compelled, with
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respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable to the Trustee than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that the Trustee shall have no obligation to engage in public sales
and no obligation to delay the sale of any Pledged Collateral for the period of
time necessary to permit the issuer thereof to register it for a form of public
sale requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would agree to do so.
C. If the Trustee determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall from time to
time furnish to the Trustee all such information as the Trustee may request in
order to determine the number of securities included in the Pledged Collateral
which may be sold by the Trustee as exempt transactions under the Securities Act
and the rules of the Commission thereunder, as the same are from time to time in
effect.
D. Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, the Trustee may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to the Trustee than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
not be deemed to have been made in a commercially unreasonable manner solely for
such reason and that, except as may be required by applicable law, the Trustee
shall have no obligation to engage in public sales.
E. In addition to any of the other rights and remedies hereunder,
the Trustee shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations
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hereunder.
SECTION XII. APPLICATION OF PROCEEDS. The proceeds received by the
Trustee in respect of any sale of, collection from or other realization upon all
or any part of the Pledged Collateral pursuant to the exercise by the Trustee of
its remedies as a secured creditor as provided in Section 11 hereof shall be
applied, together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee in the manner set forth in the Indenture.
SECTION XIII. EXPENSES. Pledgor will upon demand pay to the Trustee
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its outside counsel and the fees and expenses of any experts and
agents which the Trustee may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by Pledgor to perform or observe any of the provisions
hereof. All amounts payable by Pledgor under this Section 13 shall be due upon
demand and shall be part of the Secured Obligations. Pledgor's obligations
under this Section 13 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations hereunder.
SECTION XIV. NO WAIVER; CUMULATIVE REMEDIES. A. No failure on the
part of the Trustee to exercise, no course of dealing with respect to, and no
delay on the part of the Trustee in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then and in every such case, Pledgor, the Trustee and each holder of any of the
Secured Obligations shall be restored to their respective former positions and
rights
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hereunder with respect to the Pledged Collateral, and all rights, remedies and
powers of the Trustee and the Secured Parties shall continue as if no such
proceeding had been instituted.
SECTION XV. TRUSTEE. The Trustee has been appointed as collateral
agent hereunder pursuant to the Indenture. The Trustee shall take or refrain
from taking actions hereunder at the direction of the Holders in accordance with
the provisions of the Indenture. The Trustee shall have the right hereunder to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in accordance
with this Agreement and the Indenture. The Trustee may resign and a successor
Trustee may be appointed in the manner provided in the Indenture. Upon the
acceptance of any appointment as Trustee by a successor Trustee, that successor
Trustee shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Trustee under this Agreement, and
the retiring Trustee shall thereupon be discharged from its duties and
obligations under this Agreement; PROVIDED, HOWEVER, that the foregoing shall
not operate or be construed as a waiver of claims by Pledgor. After any
retiring Trustee's resignation, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Trustee.
SECTION XVI. TRUSTEE MAY PERFORM; TRUSTEE APPOINTED ATTORNEY-IN-FACT.
If Pledgor shall fail to do any act or thing that it has covenanted to do
hereunder or if any warranty on the part of Pledgor contained herein shall be
breached, the Trustee or any Secured Party may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach, and may expend
funds for such purpose. Any and all amounts so expended by the Trustee or such
Secured Party shall be paid by Pledgor promptly upon demand therefor, with
interest at the rate per annum equal to two (2) percent in excess of the rate
payable under the Notes during the period from and including the date on which
such funds were so expended to the date of repayment. Pledgor's obligations
under this Section 16 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations under this Agreement. Pledgor hereby
appoints the Trustee its attorney-in-fact with an interest, with full authority
in the place and stead of Pledgor and in the name of Pledgor, or otherwise, from
time to time in the Trustee's discretion to
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<PAGE>
take any action and to execute any instrument consistent with the terms of this
Agreement and the Indenture which the Trustee may deem necessary or advisable to
assure, perfect, convey, assign, transfer and confirm unto the Trustee the Lien
on the Pledged Collateral intended to be provided by this Agreement and which
Pledgor fails to do or execute and deliver within five (5) Business Days after
Pledgor's receipt of written notice to do or execute and deliver the same. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement.
SECTION XVII. NOTICES. Any notice or other communication herein
required or permitted to be given shall be given in the manner at the address
set forth in the Indenture, or as to any party at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 17.
SECTION XVIII. CONTINUING SECURITY INTEREST; ASSIGNMENT. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon Pledgor, its successors and assigns, and
(ii) inure, together with the rights and remedies of the Trustee hereunder, to
the benefit of the Trustee and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Person (including,
without limitation, any other creditor of Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Secured Party may assign or
otherwise transfer any Note held by it secured by this Agreement to any other
Person in accordance with the terms of the Indenture, the Notes and relevant
federal and state securities laws, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Secured Party,
herein or otherwise, subject however, to the provisions of the Indenture.
SECTION XIX. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
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<PAGE>
SECTION XX. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION XXI. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION XXII. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereto 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 to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION XXIII. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
SECTION XXIV. OBLIGATIONS ABSOLUTE. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
1. any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
2. any lack of validity or enforceability of the Indenture,
the Notes or the Guarantees, or any other agreement or instrument
relating thereto; or the Guarantees
3. any change in the time, manner or place of payment of,
or in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture, the Notes or the Guarantees, or any other agreement or
instrument relating thereto;
4. any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
any departure from any guarantee, for all or any of the Secured
Obligations;
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<PAGE>
5. any exercise or non-exercise, or any waiver of any
right, remedy, power or privilege under or in respect of this
Agreement, the Indenture, the Notes or the Guarantees except as
specifically set forth in a waiver granted pursuant to the provisions
of the Indenture; or
6. any other circumstances which might otherwise constitute
a defense available to, or a discharge of, Pledgor.
SECTION XXV. MODIFICATION IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given.
SECTION XXVI. RELEASE. Upon a request for a release of Pledged
Collateral in accordance with Section 10.05(b) of the Indenture, the Trustee
shall, at the sole cost and expense of Pledgor, forthwith assign, transfer and
deliver to Pledgor, against receipt and without recourse to or warranty by the
Trustee, such Pledged Collateral, on the order of and at the sole cost and
expense of Pledgor, and such proper instruments, and/or instruments (including
UCC termination statements on Form UCC-3) as may be reasonably requested by
Pledgor acknowledging the release of such Pledged Collateral. Upon the payment
in full in cash of all Secured Obligations then due and owing, and the
termination of the Indenture, the Trustee shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by the Trustee,
such of the Pledged Collateral of Pledgor as may be in the possession of the
Trustee and as shall not have been sold or otherwise applied pursuant to the
terms hereof, on the order of and at the sole cost and expense of Pledgor, and
such proper instruments and/or agreements (including UCC termination statements
on Form UCC-3) as may be reasonably requested by Pledgor acknowledging the
termination of this Agreement and/or the release of such Pledged Collateral.
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<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed
and delivered by its duly authorized officer as of the date first above written.
NATIONAL FIBERSTOK CORPORATION,
as Pledgor
By: /s/ Robert B. Webster
----------------------
Title: Vice President
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Patricia A. Evans
----------------------
Title: Financial Services
Officer
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<PAGE>
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS OF CLASS OF
CAPITAL PAR CERTIFICATE NUMBER CAPITAL STOCK
ISSUER STOCK VALUE NO(S). OF SHARES OUTSTANDING
- ------ -------- ----- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
InfoSeal Inter- No par
national, Inc. Common value C-001 50,000 100%
Label Art,
Inc. Common $ .01 50 1,410,476 100%
Putnam Graphic
Innovations,
Inc. Common $ .01 1 100 100%
Government
Forms and
Systems, Inc. Common $1.00 1 and 5 110 100%
</TABLE>
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<PAGE>
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant to
Section 6 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of [ ], 1996 between the undersigned and Wilmington Trust
Company, as Trustee (the "AGREEMENT"; capital
ized terms used herein and not defined have the meanings ascribed to them in the
Agreement), and that the Pledged Shares listed on this Pledge Amendment shall be
deemed to be and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
[ ],
as Pledgor
By:
Name:
Title:
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<PAGE>
EXHIBIT 4.7
SECURITIES PLEDGE AGREEMENT
THIS SECURITIES PLEDGE AGREEMENT (the "AGREEMENT"), dated as of June
28, 1996, made by LABEL ART, INC., a Delaware corporation having an office at
One Riverside Way, Wilton, New Hampshire 03086 ("PLEDGOR"), in favor of
WILMINGTON TRUST COMPANY, a Delaware banking corporation having an office at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
as trustee (in such capacity and together with any successors in such capacity,
the "TRUSTEE") pursuant to the Indenture (as hereinafter defined).
R E C I T A L S :
A. Contemporaneously with the execution and delivery of this
Agreement, National Fiberstok Corporation ("NFC"), Label Art, Inc., InfoSeal
International, Inc., Government Forms and Systems, Inc., A/L Systems, Inc.,
Boharb, Inc., Short Run Labels, Inc., Putnam Graphic Innovations, Inc. and the
Trustee are entering into a certain indenture (as amended from time to time, the
"INDENTURE"), dated as of the date hereof, pursuant to which NFC is issuing its
11-5/8% Senior Notes due 2002, Series A (the "SERIES A NOTES"), in the aggregate
principal amount of $100,000,000. It is contemplated that NFC may, after the
date hereof, issue exchange notes pursuant to the Indenture (the "EXCHANGE
NOTES; together with the Series A Notes, the "NOTES") in exchange for the Series
A Notes.
B. Pledgor is the owner of the Pledged Collateral (as hereinafter
defined).
C. This Agreement is given by Pledgor in favor of the Trustee for
its benefit and the benefit of the Holders of the Notes (collectively, the
"SECURED PARTIES") to secure the payment and performance of the Secured
Obligations (as defined in Section 3).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Trustee hereby agree as follows:
<PAGE>
SECTION I. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings assigned to such terms in the
Indenture. Such definitions shall be applicable equally to the singular and
plural forms of the terms defined.
SECTION II. PLEDGE. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to the Trustee for its benefit and the benefit of
the Secured Parties, a continuing first priority security interest in and to all
of the right, title and interest of Pledgor in, to and under the following
property, whether now existing or hereafter acquired (collectively, the "PLEDGED
COLLATERAL"):
(a) all issued and outstanding shares of Capital Stock of each Person
described in SCHEDULE I hereto (the "PLEDGED SHARES") (which are and shall
remain at all times until this Agreement terminates, certificated shares),
including the certificates representing the Pledged Shares and any interest
of Pledgor in the entries on the books of any financial intermediary
pertaining to the Pledged Shares;
(b) all additional shares of Capital Stock, or options, warrants or
other rights to acquire Capital Stock, of any issuer of the Pledged Shares
from time to time acquired by Pledgor in any manner (which, if
certificated, shall remain at all times until this Agreement terminates,
certificated securities) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
securities and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional securities;
(c) so long as a Default or an Event of Default shall have occurred
and is continuing, all dividends, distributions, returns of capital and
other property from time to time received, receivable or otherwise
distributed to Pledgor in respect of or in exchange for any or all of the
Pledged Shares (collectively, "DISTRIBUTIONS"); and
(d) all Net Cash Proceeds from an Asset Sale of any of the foregoing
until (i) such cash and Cash Equivalents are applied (A) to repay
Indebtedness in accordance with Section 4.17 of the Indenture, (B) to an
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<PAGE>
investment in Replacement Assets or (C) to repurchase Notes pursuant to a
Net Proceeds Offer in accordance with Section 4.17 of the Indenture or
(ii) such Net Cash Proceeds are no longer required to be applied to such
uses pursuant to Section 4.17 of the Indenture.
SECTION III. SECURED OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Law) of (i) all of the obligations, liabilities and indebtedness of
NFC and the Guarantors (collectively, the "OBLIGORS") now existing or hereafter
arising under or in respect of the Indenture, the Notes and the Guarantees
(including, without limitation, the obligation of the Obligors to pay principal
of, premium, if any, and interest on the Notes when due and payable) and all
other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and all other amounts due or to become due under or in connection
with the Indenture, the Notes and the Guarantees and (ii) without duplication of
the amounts described in clause (i), all obligations, indebtedness and
liabilities of Pledgor now existing or hereafter arising under or in respect of
this Agreement, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this Agreement
(the obligations described in clauses (i) and (ii) of this Section 3,
collectively, the "SECURED OBLIGATIONS").
SECTION IV. NO RELEASE. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on the
Trustee or any Secured Party to perform or observe any such term, covenant,
condition or agreement on Pledgor's part to be so performed or observed or shall
impose any liability on the Trustee or any Secured Party for any act or omission
on the part of Pledgor relating thereto or for any breach of any representation
or warranty on the part of Pledgor contained in this Agreement, or under or in
respect of the Pledged Collateral or made in connection
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<PAGE>
herewith or therewith.
SECTION V. DELIVERY OF PLEDGED COLLATERAL.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered
to the Trustee, shall immediately upon receipt thereof by Pledgor be
delivered to and held by or on behalf of the Trustee pursuant hereto. All
Pledged Collateral shall be in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance reasonably satisfactory to the Trustee.
The Trustee shall have the right, at any time upon the occurrence and
during the continuance of an Event of Default, to endorse, assign or
otherwise transfer to or to register in the name of the Trustee or any of
its nominees any or all of the Pledged Collateral. In addition, the
Trustee shall have the right at any time upon the occurrence and during the
continuance of an Event of Default to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or larger
denominations.
(b) If the issuer of Pledged Shares is incorporated in a jurisdiction
which does not permit the use of certificates to evidence equity ownership,
then Pledgor shall, to the extent permitted by applicable law, record such
pledge on the stock register of the issuer, execute any customary stock
pledge forms or other documents necessary or appropriate to complete the
pledge and give the Trustee the right to transfer such Pledged Shares under
the terms hereof and provide to the Trustee an Opinion of Counsel, in form
and substance satisfactory to the Trustee, confirming such pledge.
SECTION VI. SUPPLEMENTS, FURTHER ASSURANCES.
(a) Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and
deliver all further instruments and documents, including, without
limitation, supplemental or additional UCC-1 financing statements, and take
all further action that may be necessary or that the Trustee may reasonably
request, in order to perfect and protect the pledge, security interest and
Lien granted or purported to be granted hereby or to enable the Trustee to
exercise and enforce
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<PAGE>
its rights and remedies hereunder with respect to any Pledged Collateral,
and a copy of any such filing shall be delivered to the Trustee.
(b) Pledgor shall, upon obtaining any Pledged Shares of any Person,
promptly (and in any event within five Business Days) deliver to the
Trustee a pledge amendment, duly executed by Pledgor, in substantially the
form of EXHIBIT A hereto (each, a "PLEDGE AMENDMENT"), in respect of the
additional Pledged Shares which are to be pledged pursuant to this
Agreement, and confirming the attachment of the Lien hereby created on and
in respect of such additional shares. Pledgor hereby authorizes the
Trustee to attach each Pledge Amendment to this Agreement and agrees that
all Pledged Shares listed on any Pledge Amendment delivered to the Trustee
shall for all purposes hereunder be considered Pledged Collateral.
SECTION VII. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor
represents, warrants and covenants as follows:
(a) NO LIENS. Pledgor is, and at the time of any delivery of any
Pledged Collateral to the Trustee pursuant to Section 5 of this Agreement
will be, the sole legal and beneficial owner of the Pledged Collateral.
All Pledged Collateral is on the date hereof, and will be, so owned by
Pledgor free and clear of any Lien, except for the Lien granted to the
Trustee pursuant to this Agreement.
(b) AUTHORIZATION, ENFORCEABILITY. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) NO CONSENTS, ETC. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
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<PAGE>
with, any governmental authority or regulatory body or other Person is
required (x) for the pledge by Pledgor of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor, or (y) for the exercise by the Trustee of the voting
or other rights provided for in this Agreement, or (z) for the exercise by
the Trustee of the remedies in respect of the Pledged Collateral pursuant
to this Agreement and except for consents, authorizations, approvals and
other filings and notices required under the Securities Act or under state
or "Blue Sky" securities laws.
(d) DUE AUTHORIZATION AND ISSUANCE. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
(e) CHIEF EXECUTIVE OFFICE. Pledgor's chief executive office is
located at One Riverside Way, Wilton, New Hampshire 03086. Pledgor shall
not move its chief executive office except to such new location as Pledgor
may establish in accordance with the last sentence of this Section 7(e).
Pledgor shall not establish a new location for its chief executive office
nor shall it change its name until (i) it shall have given the Trustee not
less than twenty (20) days' prior written notice of its intention so to do,
clearly describing such new location or name and providing such other
information in connection therewith as the Trustee may reasonably request,
and (ii) with respect to such new location or name, Pledgor shall have
taken all action reasonably satisfactory to the Trustee to maintain the
perfection and priority of the security interest of the Trustee for the
benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby.
(f) DELIVERY OF PLEDGED COLLATERAL; FILINGS. Pledgor has delivered
to the Trustee all certificates representing the Pledged Shares and has
caused to be filed with the Secretary of State of the States of Delaware
and New Hampshire UCC-1 financing statements evidencing the Lien created by
this Agreement, and such delivery, filing and pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral securing the payment
of the Secured Obligations pursuant to the provisions of the Uniform
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<PAGE>
Commercial Code as in effect in any relevant jurisdiction (the "UCC"),
including, without limitation, the States of Delaware and New Hampshire.
(g) PLEDGED COLLATERAL. All information set forth herein, including
the Schedules annexed hereto, relating to the Pledged Collateral is
accurate and complete in all material respects.
(h) NO VIOLATIONS, ETC. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
(i) OWNERSHIP OF PLEDGED COLLATERAL. Except as otherwise permitted
by the Indenture, Pledgor at all times will be the sole beneficial owner of
the Pledged Collateral.
(j) NO OPTIONS, WARRANTS, ETC. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to issue, deliver or
sell or cause to be issued, delivered or sold, additional Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. There are no voting trusts or other
agreements or understandings to which Pledgor is a party with respect to
the voting of the capital stock of any issuer of the Pledged Shares.
SECTION VIII. VOTING RIGHTS; DISTRIBUTIONS; ETC.
(a) So long as no Event of Default shall have occurred and be
continuing:
i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement and the Indenture; PROVIDED, HOWEVER, that Pledgor shall not in
any event exercise such rights in any manner which may have an adverse
effect on the value of the Pledged Collateral or the security intended to
be provided by this Agreement.
ii) Subject to the terms of the Indenture, Pledgor shall be entitled
to receive and retain, and to utilize free and clear of the Lien of this
Agreement, any and all Distributions, but only if and to the extent made in
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<PAGE>
accordance with the provisions of the Indenture.
iii) The Trustee shall be deemed without further action or formality
to have granted to Pledgor all necessary consents relating to voting rights
and shall, if necessary, upon written request of Pledgor and at Pledgor's
sole cost and expense, from time to time execute and deliver (or cause to
be executed and delivered) to Pledgor all such instruments as Pledgor may
reasonably request in order to permit Pledgor to exercise the voting and
other rights which it is entitled to exercise pursuant to Section 8(a)(i)
hereof and to receive the Distributions which it is authorized to receive
and retain pursuant to Section 8(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
i) All rights of Pledgor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to Section
8(a)(i) hereof without any action or the giving of any notice shall cease,
and all such rights shall thereupon become vested in the Trustee, which
shall thereupon have the sole right to exercise such voting and other
consensual rights.
ii) All rights of Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 8(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in the
Trustee, which shall thereupon have the sole right to receive and hold as
Pledged Collateral such Distributions.
(c) Pledgor shall, at Pledgor's sole cost and expense, from time to
time execute and deliver to the Trustee appropriate instruments as the
Trustee may reasonably request in order to permit the Trustee to exercise
the voting and other rights which it may be entitled to exercise pursuant
to Section 8(b)(i) hereof and to receive all Distributions which it may be
entitled to receive under Section 8(b)(ii) hereof.
(d) All Distributions which are received by Pledgor contrary to the
provisions of Section 8(b)(ii) hereof shall be received in trust for the
benefit of the Trustee, shall be segregated from other funds of Pledgor
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<PAGE>
and shall immediately be paid over to the Trustee as Pledged Collateral in
the same form as so received (with any necessary endorsement).
SECTION IX. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES; PRINCIPAL
OFFICE.
(a) Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the
Pledged Collateral except as permitted by the Indenture, (ii) create or
permit to exist any Lien upon or with respect to any Pledged Collateral
other than the Lien and security interest granted to the Trustee under this
Agreement, or (iii) except as permitted by the Indenture, permit any issuer
of the Pledged Shares to merge, consolidate or change its legal form,
unless all of the outstanding capital stock of the surviving or resulting
corporation or partnership, as the case may be, is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property
is distributed in respect of the outstanding shares of any other
constituent corporation.
(b) Pledgor shall (i) not authorize any issuer of the Pledged Shares
to issue any stock or other securities in addition to or in substitution
for the Pledged Shares issued by such issuer, except to Pledgor, and
(ii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of capital stock of the
issuer of the Pledged Shares which are required to be pledged hereunder.
SECTION X. REASONABLE CARE. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which the Trustee, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Trustee nor any of the Secured Parties shall
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Trustee or any other Secured Party has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.
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<PAGE>
SECTION XI. REMEDIES UPON DEFAULT; DECISIONS RELATING TO EXERCISE OF
REMEDIES.
(a) If any Event of Default shall have occurred and be continuing,
the Trustee shall have the right, but not the obligation, in addition to
other rights and remedies provided for herein or otherwise available to it
to be exercised in accordance with the terms of, and at the times, if any,
specified in the Indenture, (i) to retain and apply the Distributions to
the Secured Obligations as provided in Section 12 hereof, and (ii) to
exercise all the rights and remedies of a secured party on default under
the UCC at that time, and the Trustee may also, in accordance with
applicable law, sell the Pledged Collateral or any part thereof (including,
without limitation, any partial interest in the Pledged Shares) at public
or private sale, at any exchange, broker's board or at any of the Trustee's
offices or elsewhere, for cash, on credit or for future delivery, at
commercially reasonable prices and terms. The Trustee or any other Secured
Party may be the purchaser of any or all of the Pledged Collateral at any
such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of the purchase
price of any Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely free
from any claim or right on the part of Pledgor, and Pledgor hereby waives,
to the fullest extent permitted by law, all rights of redemption and/or
appraisal which it now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted. Pledgor
acknowledges and agrees that, to the extent notice of sale shall be
required by law, ten days notice to Pledgor of the time and place of any
public sale or the time after which any private sale or other intended
disposition is to take place shall constitute reasonable notification of
such matters. The Trustee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by law,
any claims against the Trustee arising
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<PAGE>
by reason of the fact that the price at which any Pledged Collateral may
have been sold at such a private sale was less than the price which might
have been obtained at a public sale, even if the Trustee accepts the first
offer received and does not offer such Pledged Collateral to more than one
offeree; PROVIDED, HOWEVER, that the foregoing shall not release the
Trustee from its obligation to sell the Pledged Collateral (or any part
thereof) at prices and terms which are commercially reasonable.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of
the Pledged Collateral, to limit purchasers to Persons who will agree,
among other things, to acquire the Pledged Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices
and on terms less favorable to the Trustee than those obtainable through a
public sale without such restrictions (including, without limitation, a
public offering made pursuant to a registration statement under the
Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Trustee shall have no obligation to engage
in public sales and no obligation to delay the sale of any Pledged
Collateral for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
(c) If the Trustee determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall from
time to time furnish to the Trustee all such information as the Trustee may
request in order to determine the number of securities included in the
Pledged Collateral which may be sold by the Trustee as exempt transactions
under the Securities Act and the rules of the Commission thereunder, as the
same are from time to time in effect.
(d) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, the
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<PAGE>
Trustee may be compelled, with respect to any sale of all or any part of
the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Pledgor acknowledges
that any such sales may be at prices and on terms less favorable to the
Trustee than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
restricted sale shall not be deemed to have been made in a commercially
unreasonable manner solely for such reason and that, except as may be
required by applicable law, the Trustee shall have no obligation to engage
in public sales.
(e) In addition to any of the other rights and remedies hereunder,
the Trustee shall have the right to institute a proceeding seeking
specific performance in connection with any of the agreements or
obligations hereunder.
SECTION XII. APPLICATION OF PROCEEDS. The proceeds received by the
Trustee in respect of any sale of, collection from or other realization upon all
or any part of the Pledged Collateral pursuant to the exercise by the Trustee of
its remedies as a secured creditor as provided in Section 11 hereof shall be
applied, together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee in the manner set forth in the Indenture.
SECTION XIII. EXPENSES. Pledgor will upon demand pay to the Trustee
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its outside counsel and the fees and expenses of any experts and
agents which the Trustee may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by Pledgor to perform or observe any of the provisions
hereof. All amounts payable by Pledgor under this Section 13 shall be due upon
demand and shall be part of the Secured Obligations. Pledgor's obligations
under this Section 13 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations hereunder.
SECTION XIV. NO WAIVER; CUMULATIVE REMEDIES. (a)
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No failure on the part of the Trustee to exercise, no course of dealing with
respect to, and no delay on the part of the Trustee in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies herein provided are cumulative and are not exclusive of
any remedies provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then and in every such case, Pledgor, the Trustee and each holder of any of the
Secured Obligations shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of the Trustee and the Secured Parties shall continue as if
no such proceeding had been instituted.
SECTION XV. TRUSTEE. The Trustee has been appointed as collateral
agent hereunder pursuant to the Indenture. The Trustee shall take or refrain
from taking actions hereunder at the direction of the Holders in accordance with
the provisions of the Indenture. The Trustee shall have the right hereunder to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in accordance
with this Agreement and the Indenture. The Trustee may resign and a successor
Trustee may be appointed in the manner provided in the Indenture. Upon the
acceptance of any appointment as Trustee by a successor Trustee, that successor
Trustee shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Trustee under this Agreement, and
the retiring Trustee shall thereupon be discharged from its duties and
obligations under this Agreement; PROVIDED, HOWEVER, that the foregoing shall
not operate or be construed as a waiver of claims by Pledgor. After any
retiring Trustee's resignation, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Trustee.
SECTION XVI. TRUSTEE MAY PERFORM; TRUSTEE
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<PAGE>
APPOINTED ATTORNEY-IN-FACT. If Pledgor shall fail to do any act or thing that
it has covenanted to do hereunder or if any warranty on the part of Pledgor
contained herein shall be breached, the Trustee or any Secured Party may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach, and may expend funds for such purpose. Any and all amounts so expended
by the Trustee or such Secured Party shall be paid by Pledgor promptly upon
demand therefor, with interest at the rate per annum equal to two (2) percent in
excess of the rate payable under the Notes during the period from and including
the date on which such funds were so expended to the date of repayment.
Pledgor's obligations under this Section 16 shall survive the termination of
this Agreement and the discharge of Pledgor's other obligations under this
Agreement. Pledgor hereby appoints the Trustee its attorney-in-fact with an
interest, with full authority in the place and stead of Pledgor and in the name
of Pledgor, or otherwise, from time to time in the Trustee's discretion to take
any action and to execute any instrument consistent with the terms of this
Agreement and the Indenture which the Trustee may deem necessary or advisable to
assure, perfect, convey, assign, transfer and confirm unto the Trustee the Lien
on the Pledged Collateral intended to be provided by this Agreement and which
Pledgor fails to do or execute and deliver within five (5) Business Days after
Pledgor's receipt of written notice to do or execute and deliver the same. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement.
SECTION XVII. NOTICES. Any notice or other communication herein
required or permitted to be given shall be given in the manner at the address
set forth in the Indenture, or as to any party at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 17.
SECTION XVIII. CONTINUING SECURITY INTEREST; ASSIGNMENT. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon Pledgor, its successors and assigns, and
(ii) inure, together with the rights and remedies of the Trustee hereunder, to
the benefit of the Trustee and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Person (including,
without limitation, any other creditor of Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality
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<PAGE>
of the foregoing clause (ii), any Secured Party may assign or otherwise transfer
any Note held by it secured by this Agreement to any other Person in accordance
with the terms of the Indenture, the Notes and relevant federal and state
securities laws, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Secured Party, herein or
otherwise, subject however, to the provisions of the Indenture.
SECTION XIX. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION XX. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION XXI. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION XXII. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereto 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 to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION XXIII. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
SECTION XXIV. OBLIGATIONS ABSOLUTE. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or
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<PAGE>
the like of Pledgor;
ii) any lack of validity or enforceability of the Indenture, the
Notes or the Guarantees, or any other agreement or instrument relating
thereto; or the Guarantees
iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
the Notes or the Guarantees, or any other agreement or instrument relating
thereto;
iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
v) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, the Indenture,
the Notes or the Guarantees except as specifically set forth in a waiver
granted pursuant to the provisions of the Indenture; or
vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
SECTION XXV. MODIFICATION IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given.
SECTION XXVI. RELEASE. Upon a request for a release of Pledged
Collateral in accordance with Section 10.05(b) of the Indenture, the Trustee
shall, at the sole cost and expense of Pledgor, forthwith assign, transfer and
deliver to Pledgor, against receipt and without recourse to or warranty by the
Trustee, such Pledged Collateral, on the order of and at the sole cost and
expense of Pledgor, and
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<PAGE>
such proper instruments, and/or instruments (including UCC termination
statements on Form UCC-3) as may be reasonably requested by Pledgor
acknowledging the release of such Pledged Collateral. Upon the payment in full
in cash of all Secured Obligations then due and owing, and the termination of
the Indenture, the Trustee shall, upon the request and at the sole cost and
expense of Pledgor, forthwith assign, transfer and deliver to Pledgor, against
receipt and without recourse to or warranty by the Trustee, such of the Pledged
Collateral of Pledgor as may be in the possession of the Trustee and as shall
not have been sold or otherwise applied pursuant to the terms hereof, on the
order of and at the sole cost and expense of Pledgor, and such proper
instruments and/or agreements (including UCC termination statements on Form
UCC-3) as may be reasonably requested by Pledgor acknowledging the termination
of this Agreement and/or the release of such Pledged Collateral.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed
and delivered by its duly authorized officer as of the date first above written.
LABEL ART, INC.,
as Pledgor
By: /s/ Robert B. Webster
------------------------------
Title: Secretary
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Patricia A. Evans
------------------------------
Title: Financial Services
Officer
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<PAGE>
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS OF CLASS OF
CAPITAL PAR CERTIFICATE NUMBER CAPITAL STOCK
ISSUER STOCK VALUE NO(S). OF SHARES OUTSTANDING
- ------ -------- ----- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Boharb Corp- No par
oration Common value 2 1,000 100%
Short Run
Labels, Inc. Common $.01 3 100 100%
</TABLE>
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<PAGE>
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant to
Section 6 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of [ ], 1996 between the undersigned and Wilmington Trust
Company, as Trustee (the "AGREEMENT"; capitalized terms used herein and not
defined have the meanings ascribed to them in the Agreement), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be and shall
become part of the Pledged Collateral and shall secure all Secured Obligations.
[ ],
as Pledgor
By:
Name:
Title:
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<PAGE>
EXHIBIT 4.9
SECURITIES PLEDGE AGREEMENT
THIS SECURITIES PLEDGE AGREEMENT (the "AGREEMENT"), dated as of June
28, 1996, made by BOHARB CORPORATION, a Delaware corporation having an office at
One Riverside Way, Wilton, New Hampshire 03086 ("PLEDGOR"), in favor of
WILMINGTON TRUST COMPANY, a Delaware banking corporation having an office at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
as trustee (in such capacity and together with any successors in such capacity,
the "TRUSTEE") pursuant to the Indenture (as hereinafter defined).
R E C I T A L S :
A. Contemporaneously with the execution and delivery of this
Agreement, National Fiberstok Corporation ("NFC"), Label Art, Inc., InfoSeal
International, Inc., Government Forms and Systems, Inc., A/L Systems, Inc.,
Boharb, Inc., Short Run Labels, Inc., Putnam Graphic Innovations, Inc. and the
Trustee are entering into a certain indenture (as amended from time to time, the
"INDENTURE"), dated as of the date hereof, pursuant to which NFC is issuing its
11-5/8% Senior Notes due 2002, Series A (the "SERIES A NOTES"), in the aggregate
principal amount of $100,000,000. It is contemplated that NFC may, after the
date hereof, issue exchange notes pursuant to the Indenture (the "EXCHANGE
NOTES; together with the Series A Notes, the "NOTES") in exchange for the Series
A Notes.
B. Pledgor is the owner of the Pledged Collateral (as hereinafter
defined).
C. This Agreement is given by Pledgor in favor of the Trustee for
its benefit and the benefit of the Holders of the Notes (collectively, the
"SECURED PARTIES") to secure the payment and performance of the Secured
Obligations (as defined in Section 3).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Trustee hereby agree as follows:
<PAGE>
SECTION I. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings assigned to such terms in the
Indenture. Such definitions shall be applicable equally to the singular and
plural forms of the terms defined.
SECTION II. PLEDGE. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to the Trustee for its benefit and the benefit of
the Secured Parties, a continuing first priority security interest in and to all
of the right, title and interest of Pledgor in, to and under the following
property, whether now existing or hereafter acquired (collectively, the "PLEDGED
COLLATERAL"):
A. all issued and outstanding shares of Capital Stock of each Person
described in SCHEDULE I hereto (the "PLEDGED SHARES") (which are and shall
remain at all times until this Agreement terminates, certificated shares),
including the certificates representing the Pledged Shares and any interest
of Pledgor in the entries on the books of any financial intermediary
pertaining to the Pledged Shares;
B. all additional shares of Capital Stock, or options, warrants or
other rights to acquire Capital Stock, of any issuer of the Pledged Shares
from time to time acquired by Pledgor in any manner (which, if
certificated, shall remain at all times until this Agreement terminates,
certificated securities) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
securities and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional securities;
C. so long as a Default or an Event of Default shall have occurred
and is continuing, all dividends, distributions, returns of capital and
other property from time to time received, receivable or otherwise
distributed to Pledgor in respect of or in exchange for any or all of the
Pledged Shares (collectively, "DISTRIBUTIONS"); and
D. all Net Cash Proceeds from an Asset Sale of any of the foregoing
until (i) such cash and Cash Equivalents are applied (A) to repay
Indebtedness in accordance with Section 4.17 of the Indenture, (B) to an
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<PAGE>
investment in Replacement Assets or (C) to repurchase Notes pursuant to a Net
Proceeds Offer in accordance with Section 4.17 of the Indenture or (ii) such Net
Cash Proceeds are no longer required to be applied to such uses pursuant to
Section 4.17 of the Indenture.
SECTION III. SECURED OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Law) of (i) all of the obligations, liabilities and indebtedness of
NFC and the Guarantors (collectively, the "OBLIGORS") now existing or hereafter
arising under or in respect of the Indenture, the Notes and the Guarantees
(including, without limitation, the obligation of the Obligors to pay principal
of, premium, if any, and interest on the Notes when due and payable) and all
other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and all other amounts due or to become due under or in connection
with the Indenture, the Notes and the Guarantees and (ii) without duplication of
the amounts described in clause (i), all obligations, indebtedness and
liabilities of Pledgor now existing or hereafter arising under or in respect of
this Agreement, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this Agreement
(the obligations described in clauses (i) and (ii) of this Section 3,
collectively, the "SECURED OBLIGATIONS").
SECTION IV. NO RELEASE. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on the
Trustee or any Secured Party to perform or observe any such term, covenant,
condition or agreement on Pledgor's part to be so performed or observed or shall
impose any liability on the Trustee or any Secured Party for any act or omission
on the part of Pledgor relating thereto or for any breach of any representation
or warranty on the part of Pledgor contained in this Agreement, or under or in
respect of the Pledged Collateral or made in connection herewith or therewith.
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<PAGE>
SECTION V. DELIVERY OF PLEDGED COLLATERAL.
A. All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to the
Trustee, shall immediately upon receipt thereof by Pledgor be delivered to and
held by or on behalf of the Trustee pursuant hereto. All Pledged Collateral
shall be in suitable form for transfer by delivery or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Trustee. The Trustee shall have the
right, at any time upon the occurrence and during the continuance of an Event of
Default, to endorse, assign or otherwise transfer to or to register in the name
of the Trustee or any of its nominees any or all of the Pledged Collateral. In
addition, the Trustee shall have the right at any time upon the occurrence and
during the continuance of an Event of Default to exchange certificates
representing or evidencing Pledged Collateral for certificates of smaller or
larger denominations.
B. If the issuer of Pledged Shares is incorporated in a jurisdiction
which does not permit the use of certificates to evidence equity ownership, then
Pledgor shall, to the extent permitted by applicable law, record such pledge on
the stock register of the issuer, execute any customary stock pledge forms or
other documents necessary or appropriate to complete the pledge and give the
Trustee the right to transfer such Pledged Shares under the terms hereof and
provide to the Trustee an Opinion of Counsel, in form and substance satisfactory
to the Trustee, confirming such pledge.
SECTION VI. SUPPLEMENTS, FURTHER ASSURANCES.
A. Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC-1 financing statements, and take all further action that may
be necessary or that the Trustee may reasonably request, in order to perfect and
protect the pledge, security interest and Lien granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral, and a copy of any
such filing shall be delivered to the Trustee.
B. Pledgor shall, upon obtaining any Pledged
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<PAGE>
Shares of any Person, promptly (and in any event within five Business Days)
deliver to the Trustee a pledge amendment, duly executed by Pledgor, in
substantially the form of EXHIBIT A hereto (each, a "PLEDGE AMENDMENT"), in
respect of the additional Pledged Shares which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien hereby created on and
in respect of such additional shares. Pledgor hereby authorizes the Trustee to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder be considered Pledged Collateral.
SECTION VII. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor
represents, warrants and covenants as follows:
A. NO LIENS. Pledgor is, and at the time of any delivery of any
Pledged Collateral to the Trustee pursuant to Section 5 of this Agreement
will be, the sole legal and beneficial owner of the Pledged Collateral.
All Pledged Collateral is on the date hereof, and will be, so owned by
Pledgor free and clear of any Lien, except for the Lien granted to the
Trustee pursuant to this Agreement.
B. AUTHORIZATION, ENFORCEABILITY. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
C. NO CONSENTS, ETC. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person is
required (x) for the pledge by Pledgor of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor, or (y) for the exercise by the Trustee of the voting
or other rights provided for in
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<PAGE>
this Agreement, or (z) for the exercise by the Trustee of the remedies in
respect of the Pledged Collateral pursuant to this Agreement and except for
consents, authorizations, approvals and other filings and notices required
under the Securities Act or under state or "Blue Sky" securities laws.
D. DUE AUTHORIZATION AND ISSUANCE. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
E. CHIEF EXECUTIVE OFFICE. Pledgor's chief executive office is
located at One Riverside Way, Wilton, New Hampshire 03086. Pledgor shall
not move its chief executive office except to such new location as Pledgor
may establish in accordance with the last sentence of this Section 7(e).
Pledgor shall not establish a new location for its chief executive office
nor shall it change its name until (i) it shall have given the Trustee not
less than twenty (20) days' prior written notice of its intention so to do,
clearly describing such new location or name and providing such other
information in connection therewith as the Trustee may reasonably request,
and (ii) with respect to such new location or name, Pledgor shall have
taken all action reasonably satisfactory to the Trustee to maintain the
perfection and priority of the security interest of the Trustee for the
benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby.
F. DELIVERY OF PLEDGED COLLATERAL; FILINGS. Pledgor has delivered
to the Trustee all certificates representing the Pledged Shares and has
caused to be filed with the Secretary of State of the States of Delaware
and New Hampshire UCC-1 financing statements evidencing the Lien created by
this Agreement, and such delivery, filing and pledge of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral securing the payment
of the Secured Obligations pursuant to the provisions of the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "UCC"),
including, without limitation, the States of Delaware and New Hampshire.
G. PLEDGED COLLATERAL. All information set forth herein, including
the Schedules annexed hereto, relating to the Pledged Collateral is
accurate and complete in
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all material respects.
H. NO VIOLATIONS, ETC. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
I. OWNERSHIP OF PLEDGED COLLATERAL. Except as otherwise permitted
by the Indenture, Pledgor at all times will be the sole beneficial owner of
the Pledged Collateral.
J. NO OPTIONS, WARRANTS, ETC. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to issue, deliver or
sell or cause to be issued, delivered or sold, additional Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. There are no voting trusts or other
agreements or understandings to which Pledgor is a party with respect to
the voting of the capital stock of any issuer of the Pledged Shares.
SECTION VIII. VOTING RIGHTS; DISTRIBUTIONS; ETC.
A. So long as no Event of Default shall have occurred and be
continuing:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement and the Indenture; PROVIDED, HOWEVER, that Pledgor shall not in
any event exercise such rights in any manner which may have an adverse
effect on the value of the Pledged Collateral or the security intended to
be provided by this Agreement.
(b) Subject to the terms of the Indenture, Pledgor shall be entitled
to receive and retain, and to utilize free and clear of the Lien of this
Agreement, any and all Distributions, but only if and to the extent made in
accordance with the provisions of the Indenture.
(c) The Trustee shall be deemed without further action or formality
to have granted to Pledgor all necessary consents relating to voting rights
and shall, if necessary, upon written request of Pledgor and at
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Pledgor's sole cost and expense, from time to time execute and deliver (or
cause to be executed and delivered) to Pledgor all such instruments as
Pledgor may reasonably request in order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 8(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 8(a)(ii) hereof.
B. Upon the occurrence and during the continuance of a Default or an
Event of Default:
(a) All rights of Pledgor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to Section
8(a)(i) hereof without any action or the giving of any notice shall cease,
and all such rights shall thereupon become vested in the Trustee, which
shall thereupon have the sole right to exercise such voting and other
consensual rights.
(b) All rights of Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 8(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in the
Trustee, which shall thereupon have the sole right to receive and hold as
Pledged Collateral such Distributions.
C. Pledgor shall, at Pledgor's sole cost and expense, from time to
time execute and deliver to the Trustee appropriate instruments as the Trustee
may reasonably request in order to permit the Trustee to exercise the voting and
other rights which it may be entitled to exercise pursuant to Section 8(b)(i)
hereof and to receive all Distributions which it may be entitled to receive
under Section 8(b)(ii) hereof.
D. All Distributions which are received by Pledgor contrary to the
provisions of Section 8(b)(ii) hereof shall be received in trust for the benefit
of the Trustee, shall be segregated from other funds of Pledgor and shall
immediately be paid over to the Trustee as Pledged Collateral in the same form
as so received (with any necessary endorsement).
SECTION IX. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES; PRINCIPAL
OFFICE.
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A. Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the Pledged
Collateral except as permitted by the Indenture, (ii) create or permit to exist
any Lien upon or with respect to any Pledged Collateral other than the Lien and
security interest granted to the Trustee under this Agreement, or (iii) except
as permitted by the Indenture, permit any issuer of the Pledged Shares to merge,
consolidate or change its legal form, unless all of the outstanding capital
stock of the surviving or resulting corporation or partnership, as the case may
be, is, upon such merger or consolidation, pledged hereunder and no cash,
securities or other property is distributed in respect of the outstanding shares
of any other constituent corporation.
B. Pledgor shall (i) not authorize any issuer of the Pledged Shares
to issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock of the issuer of the Pledged
Shares which are required to be pledged hereunder.
SECTION X. REASONABLE CARE. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which the Trustee, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Trustee nor any of the Secured Parties shall
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Trustee or any other Secured Party has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.
SECTION XI. REMEDIES UPON DEFAULT; DECISIONS RELATING TO EXERCISE OF
REMEDIES.
A. If any Event of Default shall have occurred and be continuing,
the Trustee shall have the right, but not the obligation, in addition to other
rights and remedies provided for herein or otherwise available to it to be
exercised in accordance with the terms of, and at the times, if any, specified
in the Indenture, (i) to retain and apply
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the Distributions to the Secured Obligations as provided in Section 12 hereof,
and (ii) to exercise all the rights and remedies of a secured party on default
under the UCC at that time, and the Trustee may also, in accordance with
applicable law, sell the Pledged Collateral or any part thereof (including,
without limitation, any partial interest in the Pledged Shares) at public or
private sale, at any exchange, broker's board or at any of the Trustee's offices
or elsewhere, for cash, on credit or for future delivery, at commercially
reasonable prices and terms. The Trustee or any other Secured Party may be the
purchaser of any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at such
sale, to use and apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of any Pledged Collateral payable by
such Person at such sale. Each purchaser at any such sale shall acquire the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives, to the fullest extent permitted by law, all rights of
redemption and/or appraisal which it now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
Pledgor acknowledges and agrees that, to the extent notice of sale shall be
required by law, ten days notice to Pledgor of the time and place of any public
sale or the time after which any private sale or other intended disposition is
to take place shall constitute reasonable notification of such matters. The
Trustee shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Pledgor hereby waives, to the fullest
extent permitted by law, any claims against the Trustee arising by reason of the
fact that the price at which any Pledged Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if the Trustee accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree; PROVIDED, HOWEVER, that the
foregoing shall not release the Trustee from its obligation to sell the Pledged
Collateral (or any part thereof) at prices and terms which are commercially
reasonable.
B. Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable
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state securities laws, the Trustee may be compelled, with respect to any sale
of all or any part of the Pledged Collateral, to limit purchasers to Persons who
will agree, among other things, to acquire the Pledged Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable to the Trustee than those obtainable through a public
sale without such restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales and no obligation to
delay the sale of any Pledged Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.
C. If the Trustee determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall from time to
time furnish to the Trustee all such information as the Trustee may request in
order to determine the number of securities included in the Pledged Collateral
which may be sold by the Trustee as exempt transactions under the Securities Act
and the rules of the Commission thereunder, as the same are from time to time in
effect.
D. Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, the Trustee may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to the Trustee than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
not be deemed to have been made in a commercially unreasonable manner solely for
such reason and that, except as may be required by applicable law, the Trustee
shall have no obligation to engage in public sales.
E. In addition to any of the other rights and remedies hereunder,
the Trustee shall have the right to institute a proceeding seeking specific
performance in
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connection with any of the agreements or obligations hereunder.
SECTION XII. APPLICATION OF PROCEEDS. The proceeds received by the
Trustee in respect of any sale of, collection from or other realization upon all
or any part of the Pledged Collateral pursuant to the exercise by the Trustee of
its remedies as a secured creditor as provided in Section 11 hereof shall be
applied, together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee in the manner set forth in the Indenture.
SECTION XIII. EXPENSES. Pledgor will upon demand pay to the Trustee
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its outside counsel and the fees and expenses of any experts and
agents which the Trustee may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by Pledgor to perform or observe any of the provisions
hereof. All amounts payable by Pledgor under this Section 13 shall be due upon
demand and shall be part of the Secured Obligations. Pledgor's obligations
under this Section 13 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations hereunder.
SECTION XIV. NO WAIVER; CUMULATIVE REMEDIES. A.No failure on the
part of the Trustee to exercise, no course of dealing with respect to, and no
delay on the part of the Trustee in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then and in every such case, Pledgor, the Trustee and each holder of any of the
Secured Obligations shall be
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restored to their respective former positions and rights hereunder with respect
to the Pledged Collateral, and all rights, remedies and powers of the Trustee
and the Secured Parties shall continue as if no such proceeding had been
instituted.
SECTION XV. TRUSTEE. The Trustee has been appointed as collateral
agent hereunder pursuant to the Indenture. The Trustee shall take or refrain
from taking actions hereunder at the direction of the Holders in accordance with
the provisions of the Indenture. The Trustee shall have the right hereunder to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in accordance
with this Agreement and the Indenture. The Trustee may resign and a successor
Trustee may be appointed in the manner provided in the Indenture. Upon the
acceptance of any appointment as Trustee by a successor Trustee, that successor
Trustee shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Trustee under this Agreement, and
the retiring Trustee shall thereupon be discharged from its duties and
obligations under this Agreement; PROVIDED, HOWEVER, that the foregoing shall
not operate or be construed as a waiver of claims by Pledgor. After any
retiring Trustee's resignation, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Trustee.
SECTION XVI. TRUSTEE MAY PERFORM; TRUSTEE APPOINTED ATTORNEY-IN-FACT.
If Pledgor shall fail to do any act or thing that it has covenanted to do
hereunder or if any warranty on the part of Pledgor contained herein shall be
breached, the Trustee or any Secured Party may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach, and may expend
funds for such purpose. Any and all amounts so expended by the Trustee or such
Secured Party shall be paid by Pledgor promptly upon demand therefor, with
interest at the rate per annum equal to two (2) percent in excess of the rate
payable under the Notes during the period from and including the date on which
such funds were so expended to the date of repayment. Pledgor's obligations
under this Section 16 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations under this Agreement. Pledgor hereby
appoints the Trustee its attorney-in-fact with an interest, with full authority
in the place and stead of Pledgor and in the name of Pledgor,
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or otherwise, from time to time in the Trustee's discretion to take any action
and to execute any instrument consistent with the terms of this Agreement and
the Indenture which the Trustee may deem necessary or advisable to assure,
perfect, convey, assign, transfer and confirm unto the Trustee the Lien on the
Pledged Collateral intended to be provided by this Agreement and which Pledgor
fails to do or execute and deliver within five (5) Business Days after Pledgor's
receipt of written notice to do or execute and deliver the same. The foregoing
grant of authority is a power of attorney coupled with an interest and such
appointment shall be irrevocable for the term of this Agreement.
SECTION XVII. NOTICES. Any notice or other communication herein
required or permitted to be given shall be given in the manner at the address
set forth in the Indenture, or as to any party at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 17.
SECTION XVIII. CONTINUING SECURITY INTEREST; ASSIGNMENT. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon Pledgor, its successors and assigns, and (ii)
inure, together with the rights and remedies of the Trustee hereunder, to the
benefit of the Trustee and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Person (including,
without limitation, any other creditor of Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Secured Party may assign or
otherwise transfer any Note held by it secured by this Agreement to any other
Person in accordance with the terms of the Indenture, the Notes and relevant
federal and state securities laws, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Secured Party,
herein or otherwise, subject however, to the provisions of the Indenture.
SECTION XIX. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
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SECTION XX. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION XXI. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION XXII. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereto 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 to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION XXIII. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
SECTION XXIV. OBLIGATIONS ABSOLUTE. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
1. any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
2. any lack of validity or enforceability of the Indenture, the
Notes or the Guarantees, or any other agreement or instrument relating
thereto; or the Guarantees
3. any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
the Notes or the Guarantees, or any other agreement or instrument relating
thereto;
4. any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
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5. any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, the Indenture,
the Notes or the Guarantees except as specifically set forth in a waiver
granted pursuant to the provisions of the Indenture; or
6. any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
SECTION XXV. MODIFICATION IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given.
SECTION XXVI. RELEASE. Upon a request for a release of Pledged
Collateral in accordance with Section 10.05(b) of the Indenture, the Trustee
shall, at the sole cost and expense of Pledgor, forthwith assign, transfer and
deliver to Pledgor, against receipt and without recourse to or warranty by the
Trustee, such Pledged Collateral, on the order of and at the sole cost and
expense of Pledgor, and such proper instruments, and/or instruments (including
UCC termination statements on Form UCC-3) as may be reasonably requested by
Pledgor acknowledging the release of such Pledged Collateral. Upon the payment
in full in cash of all Secured Obligations then due and owing, and the
termination of the Indenture, the Trustee shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by the Trustee,
such of the Pledged Collateral of Pledgor as may be in the possession of the
Trustee and as shall not have been sold or otherwise applied pursuant to the
terms hereof, on the order of and at the sole cost and expense of Pledgor, and
such proper instruments and/or agreements (including UCC termination statements
on Form UCC-3) as may be reasonably requested by Pledgor acknowledging the
termination of this Agreement and/or the release of such Pledged Collateral.
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IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed
and delivered by its duly authorized officer as of the date first above written.
BOHARB CORPORATION,
as Pledgor
By: /s/ Robert B. Webster
-----------------------
Title: Secretary
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Patricia A. Evans
-----------------------
Title: Financial Services
Officer
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SCHEDULE I
PLEDGED SHARES
PERCENTAGE OF
CLASS OF CLASS OF
CAPITAL PAR CERTIFICATE NUMBER CAPITAL STOCK
ISSUER STOCK VALUE NO(S). OF SHARES OUTSTANDING
- -------- --------- ------ ----------- --------- -------------
A/L Systems, No par
Inc. Common value2 1,000 100%
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EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant to
Section 6 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of [ ], 1996 between the undersigned and Wilmington Trust
Company, as Trustee (the "AGREEMENT"; capitalized terms used herein and not
defined have the meanings ascribed to them in the Agreement), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be and shall
become part of the Pledged Collateral and shall secure all Secured Obligations.
[ ],
as Pledgor
By:
Name:
Title:
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT dated as of 12 - 21, 1995, between THE CIT
GROUP/EQUIPMENT FINANCING, INC., a New York corporation ("LESSOR"), having a
place of business at 1211 Avenue of the Americas, New York, New York 10036 and
NATIONAL FIBERSTOK CORPORATION, a Delaware corporation ("LESSEE"), having a
place of business at 5775 Peachtree Dunwoody Road, Suite C-150, Atlanta (Fulton
County), Georgia 30342. All capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in Section 7 of Exhibit A
hereto.
1. EQUIPMENT LEASED AND TERM. Lessor agrees to lease to Lessee and Lessee
agrees to lease from Lessor, subject to the terms and conditions set forth
herein, in EXHIBIT A attached hereto and made a part hereof, and in each
Supplement executed pursuant hereto (collectively, as any of them may be amended
or modified the "LEASE"), the Equipment described in any Supplement executed by
the parties pursuant to this Lease. Each item of Equipment shall be subjected
to this Lease by the execution by the parties hereto of a Supplement, which
shall constitute Lessee's irrevocable acceptance of such item of Equipment for
all purposes of this Lease. Each Supplement shall incorporate therein all of
the terms and conditions of this Lease and shall constitute a part of this
Lease. The term of the lease of each item of Equipment hereunder shall commence
on the Commencement Date specified in the Supplement pertaining thereto (the
"COMMENCEMENT DATE") and shall continue for the term specified in EXHIBIT A.
Lessee shall arrange for delivery and installation of each item of Equipment and
Lessor shall have no responsibility or obligation whatsoever with respect to
such arrangement.
2. RENT; NET LEASE. The aggregate rent payable during the Lease Term with
respect any Equipment shall be in the amount shown with respect to such
Equipment on the Supplement pertaining thereto and shall be determined in the
manner set forth in EXHIBIT A. Such rent shall be payable at the times set
forth in Section 5 of EXHIBIT A and in the amounts shown in the applicable
Supplement, and any payment not made when due shall bear late charges thereon
calculated at the Late Charge Rate. All rent shall be paid at Lessor's place of
business shown above, or such other place as Lessor may designate by written
notice to the Lessee. ALL RENT SHALL BE PAID WITHOUT NOTICE OR DEMAND AND
WITHOUT ABATEMENT, DEDUCTION OR SETOFF OF ANY AMOUNT WHATSOEVER. THE OPERATION
AND USE OF THE EQUIPMENT SHALL BE AT THE RISK OF LESSEE AND NOT OF LESSOR AND
THE OBLIGATION OF LESSEE TO PAY RENT HEREUNDER SHALL BE ABSOLUTE AND
UNCONDITIONAL UNDER ALL CIRCUMSTANCES. This Lease is a net lease and all
operational expenses with respect to the Equipment are to be paid by the Lessee.
This Lease is irrevocable for the full term hereof and for the aggregate rents
therein reserved and the rent shall not abate by reason of termination of
Lessee's right of possession and/or the taking of possession by the Lessor or
for any other reason.
3. CONDITIONS PRECEDENT. (a) Lessor shall not be obligated to accept and
execute the first Supplement or to lease any Equipment to Lessee unless on
the Commencement Date all legal matters with respect to, and all legal
documents executed in connection with, the contemplated transactions are
satisfactory to Lessor and all of the following conditions are met to the
satisfaction of Lessor (except that the terms of clauses (i)(A), (B) and (E)
are required in connection with the initial Supplement only): (i)Lessor shall
have received (A) a satisfactory Secretary's Certificate certified by
Lessee's Secretary or Assistant Secretary and an opinion of counsel in
substance satisfactory to Lessor, (B) a duly executed Supplement covering the
items of Equipment to be leased hereunder; (C) evidence satisfactory to it as
to the proper calculation of the amount of the Advance Amount of such items
of Equipment; (D) such Uniform Commercial Code, tax and judgment lien
searches as Lessor shall deem necessary and desirable, and such releases and
terminations of such Liens as Lessor in its sole discretion shall require;
(E)(1) the duly executed Guaranty from each Guarantor; and (2) a satisfactory
Secretary's Certificate from each Guarantor's Secretary or Assistant
Secretary; and (F) in form and substance satisfactory to it, such other
Documents and information as Lessor shall reasonably request; (ii) all
representations and warranties of Lessee contained herein or in any document
or certificate furnished Lessor in connection herewith shall be true and
correct on and as of the date of such Supplement with the same force and
effect as if made on and as of such date; Lessor shall have a perfected first
and only Lien on such Equipment, and the Equipment shall be satisfactory to
Lessor; (iv) no Event of Default or Default shall be in existence on such
date or shall occur as a result of the lease by Lessee of the Equipment
specified in such Supplement; (v) in the sole judgment of Lessor, there shall
have been no material adverse change in the financial condition or business
of Lessee or DEC International, Inc., from August 31, 1995 and McCown DeLeeuw
and Co., II, L.P. and McCown DeLeeuw Associates, L.P. from June 30, 1995; and
(vi) all legal matters and all proceedings to be taken in connection with
the transactions contemplated by the Lease, such Supplement and all other
Documents shall be satisfactory, or satisfactory in form and substance, as
case may be, to Lessor and its counsel; (vii) the Escrow Account shall have
been established and funded pursuant to the Escrow Agreement, and (viii)
Lessor shall be satisfied that all amounts included in the Advance Amount
have been, or concurrently with Lessor's acceptance of such Supplement will
be, paid in full.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lessor to enter into
this Lease and to execute each Supplement, Lessee represents and warrants to
Lessor that: (a) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction under which it is organized,
and is duly qualified to do business and in good standing in each jurisdiction
in which the Equipment is located or the conduct of its business or the
ownership of its assets requires such qualification; (b) this Lease, each
Supplement, the Escrow Agreement, the Progress Payment Agreement and all other
Documents have been (or will have been, when executed and delivered) duly
authorized, executed and delivered by Lessee and constitute a legal, valid and
binding obligation of Lessee enforceable in accordance with their respective
terms except as such rights may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally; (c) the
execution, delivery and performance of this Lease does not require any
stockholder approval or approval or consent of any trustee or holders of any
indebtedness or obligations of Lessee except for those consents which have been
previously obtained, and does not contravene any law, regulation, judgment, or
order applicable to Lessee, or the certificate of incorporation or bylaws of
Lessee, or contravene
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the provisions of, or constitute a default under, or result in the creation
of any Lien upon any property of Lessee under, any instrument or other
agreement to which Lessee is a party or by which Lessee or its assets may be
bound or affected, and no authorization, approval, license, filing or
registration with any court or governmental agency or instrumentality is
necessary in connection with the execution, delivery, performance, validity
and enforceability of this Lease, the Escrow Agreement, the Progress Payment
Agreement and the other Documents except for those authorizations which have
previously been obtained; (d) Lessee is not in default under any material
mortgage, indenture, contract, agreement, judgement or other undertaking to
which Lessee is a party; (e) on each Commencement Date, Lessor shall have
good and marketable title to the items of Equipment being subjected to this
Lease on such date, free and clear of all Liens, (f) except as disclosed in
writing to Lessor prior to the date of this Lease, there is no material
action, suit, investigation or proceeding by or before any court, arbitrator,
administrative agency or other governmental authority pending or threatened
against or affecting Lessee or any of its assets; (g) the financial
statements of Lessee and each Guarantor heretofore furnished to Lessor are
complete and correct fairly present the financial condition of Lessee and
each Guarantor, respectively, and the results of the operations of Lessee and
each Guarantor, respectively, for the respective periods covered thereby and
have been prepared in accordance with generally accepted accounting
principles, and there has been no material adverse change in any such
financial condition or operations; (h) Lessee's principal place of business
is located at the address set forth in the introductory paragraph of this
Lease; (i) Lessee has not changed its name and has not done business in any
name other than that set forth in the introductory paragraph to this Lease;
(j) Lessee has filed all Federal, state and local income tax returns that are
required to be filed, has paid all taxes as shown on said returns and all
assessments received by it to the extent that such taxes and assessments have
become due, and does not have any knowledge of any actual or proposed
deficiency or additional assessment in connection therewith, and the charges,
accruals and reserves on the books of Lessee in respect of Federal, state and
local taxes for all open years, and for the current fiscal year, make
adequate provision for all unpaid tax liabilities for such periods; and (k)
(i) the operations of Lessee comply in all material respects with all
applicable Environmental Laws; (ii) none of the operations of Lessee is
subject to any judicial or administrative proceeding alleging the violation
of any Environmental Laws; (iii) none of the operations of Lessee is the
subject of federal or state investigation to determine whether any remedial
action is needed to respond to a release of any Hazardous Material into the
environment, and (iv) Lessee has no known material contingent liability in
connection with any release of any Hazardous Material into the environment.
5. COVENANTS. (a) COMPLIANCE WITH LAWS. Lessee shall : (i) use the Equipment in
the conduct of the lawful business of Lessee and in a careful and proper manner,
will comply with and conform with and conform to all governmental laws, rules
and regulations relating thereto, all environmental laws, and will cause the
Equipment to be operated in accordance with the manufacturer's or supplier's
instructions or manuals and only by competent and duly qualified personnel; (ii)
maintain its existence as a legal entity and obtain and keep in full force and
effect all rights, franchises, licenses and permits which are necessary to the
proper conduct of its business, (iii) obtain or cause to be obtained as promptly
as possible any governmental, administrative or agency approval and make any
filing or registration therewith which at the time shall be required with
respect to the performance of its obligations under this Lease and the proper
conduct of its business; (iv) pay all fees, taxes, assessments and governmental
charges or levies imposed upon any item of Equipment; (v) not change its name or
its chief place of business; (vi) qualify to do business, and remain qualified
in good standing, in each jurisdiction in which the Equipment is from time to
time located; and (vii) comply strictly and in all respect with the
requirements of all Environmental Laws and related regulations and with all
similar applicable laws and regulations.
(b) OPERATION AND MAINTENANCE. Lessee shall, at its own expense, keep
and maintain the Equipment in good repair, condition and working order and
furnish all parts, replacements, mechanisms, devices and servicing required
therefor so that the value, condition and operating efficiency thereof will
at all times be maintained and preserved, reasonable wear and tear excepted.
All such repairs, parts, mechanisms, devices and replacements shall
immediately, without further act, become the property of Lessor and part of
the Equipment. The Equipment must be covered by a service/maintenance
agreement with the manufacturer or a person approved by Lessor and a copy
thereof available for inspection by Lessor. All replacement parts must be
purchased from sources approved by the manufacturer and copies of all
purchase orders with respect to replacement parts delivered to Lessor.
(c) NO IMPROVEMENTS. Lessee shall not make or authorize any improvement,
change, addition or alteration to the Equipment without the prior written
approval of Lessor (i) if such improvement, change, addition or alteration would
impair the originally intended function or use of the Equipment or impair the
value of the Equipment as it existed immediately prior to such improvement,
change, addition or alteration, or (ii) if any parts installed in or attached to
or otherwise becoming a part of the Equipment as a result of any such
improvement, change, addition or alteration would not be readily removable
without damage to the Equipment. Any part which is added to the Equipment
without violating the provisions of the immediately preceding sentence and which
is not a replacement or substitution for any property which was a part of the
Equipment, shall remain the property of Lessee and may be removed by Lessee at
any time prior to the expiration or earlier termination of the Lease Term. All
such parts shall be and remain free and clear of any Liens. Any such part which
is not so removed prior to the expiration or earlier termination of the Lease
Term shall, without further act, become the property of Lessor.
(d) FINANCIAL STATEMENTS. (i) Lessee shall, in accordance with generally
accepted accounting principles, keep proper books of record and account in which
entries will be made of all dealings or transactions in relation to its business
and activities; (ii) furnish to Lessor the following financial statements, all
in reasonable detail, prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved, (A) as soon as available, but not later than 120 days after the end of
each fiscal year, a consolidated balance sheet of Lessee and Lessee's Parent
Company as at the end of such fiscal year, and consolidated statements of income
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and consolidated statements of cash flow of Lessee and Lessee's Parent
Company, and all footnotes, of such fiscal year together with comparative
information for the prior fiscal year, audited by certified public
accountants acceptable to Lessor, and (B) as soon as available, but not later
than 90 days after the end of each of the first three quarterly periods of
each fiscal year, a consolidated balance sheet of Lessee and Lessee's Parent
Company as at the end of such quarterly period and consolidated statements of
income and consolidated statements of cash flow of Lessee and Lessee's Parent
Company for such quarterly period and for the portion of the fiscal year then
ended together with comparative information for the prior comparable period,
certified as to their accuracy by the chief financial officer of Lessee or
Lessee's Parent Company; (iii)(A) furnish to Lessor, together with the
financial statements described in clauses 5(d)(i)(A) and 5(d)(i)(B) above, a
statement signed by the chief financial officer of Lessee or Lessee's Parent
Company certifying that Lessee and Lessee's Parent Company are in compliance
with all financial covenants contained in any documents evidencing a
financial obligation to which Lessee or Lessee's Parent Company is a party,
or if Lessee or Lessee's Parent Company is not in compliance, the nature of
such noncompliance or default, and the status thereof (such statement shall
set forth the actual calculations of any financial covenants and the details
of any amendments or modifications of any financial covenants), and (B)
promptly, such additional financial and other information as lessor may from
time to time reasonably request.
(e) INSURANCE. Lessee shall obtain and maintain at all times on the
Equipment, at its expense, all-risk physical damage insurance and comprehensive
general and/or automobile (as appropriate) liability insurance (covering bodily
injury and property damage exposures including, but not limited to, contractual
liability and products liability) in such amounts, against such risks, in such
form and with such insurers as shall be satisfactory to Lessor; PROVIDED, that
the amount of all-risk physical damage insurance shall not on any date by less
than the greater of the full replacement value or a sum equal to all the rent
due thereon, plus all rent to become due. Each physical damage insurance policy
shall name Lessor as loss payee. Each liability insurance policy shall name
Lessor as additional insured. Each insurance policy shall also require that the
insurer give Lessor at least thirty (30) days prior written notice of any
alteration in or cancellation of the terms of such policy and require that
Lessor's interests be continued insured regardless of any breach or violation by
Lessee or others of any warranties, declarations or conditions contained in such
insurance policy. In no event shall Lessor be responsible for premiums,
warranties or representations to any insurer or any agent thereof. Lessee shall
furnish to Lessor a certificate or other evidence satisfactory to Lessor that
such insurance coverage is in effect, but Lessor shall be under no duty to
ascertain the existence or adequacy of such insurance. The insurance maintained
by Lessee shall be primary without any right of contribution from insurance
which may be maintained by Lessor. Lessee shall be liable for all deductible
portions of all required insurance. Lessor may, at its own expense, for its own
benefit, purchase insurance in excess of that required under this Lease.
Physical damage insurance proceeds shall be applied as set forth in Subsection
6(b) hereof.
(f) TITLE; IDENTIFICATION; PERSONAL PROPERTY; INSPECTION. Title to the
equipment shall at all times remain in Lessor. Upon the request of Lessor in
writing, Lessee shall, at its expense, attach to each item of Equipment a notice
satisfactory to Lessor disclosing Lessor's ownership of such item of Equipment.
The Equipment is and shall remain personal property. Lessor shall have the right
from time to time during reasonable business hours to enter upon Lessee's
premises or elsewhere for the purpose of confirming the existence, condition and
proper maintenance of the Equipment and in the event Lessee does not exercise
its purchase option in accordance with the provisions of Subsection 9(b) hereof,
during the last twelve months of the Lease Term of the Equipment, upon prior
written notice to Lessee, Lessor shall also have the right to demonstrate and
show the Equipment to others and to inspect the books and records of Lessee
pertaining to the Equipment. Lessee shall permit Lessor or its authorized
representative, at any reasonable time or times, to inspect the Equipment and,
following the occurrence and during the continuation of an Event of Default, to
inspect the books and record of Lessee. The foregoing rights of entry are
subject to any applicable governmental laws, regulations and rules concerning
industrial security.
(g) LOCATION; ASSIGNMENT OR SUBLEASE; NO LIENS. NO ITEM OF EQUIPMENT SHALL
BE REMOVED FROM ITS LOCATION SHOWN ON THE SUPPLEMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR. LESSEE SHALL NOT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, PART
WITH POSSESSION OR CONTROL OF THE EQUIPMENT OR ATTEMPT OR PURPORT TO SUBLEASE,
SELL, PLEDGE, MORTGAGE OR OTHERWISE ENCUMBER OR SUFFER A LIEN AGAINST ANY
INTEREST IN THIS LEASE OR ANY OF THE EQUIPMENT NOR ASSIGN ITS RIGHTS UNDER THIS
LEASE. LESSEE AGREES THAT IT SHALL PROMPTLY, AT ITS EXPENSE, SATISFY, DISCHARGE
AND OTHERWISE TAKE SUCH ACTION AS MAY BE NECESSARY TO KEEP THE EQUIPMENT FREE
AND CLEAR OF, AND TO DULY DISCHARGE, ANY LIEN.
(h) NOTIFICATION REQUIREMENTS. Lessee will promptly give written notice to
Lessor of: (i) the occurrence of any Default or Event of Default; (ii) the
occurrence of any Event of Loss; (iii) the commencement or threat of any
material litigation or proceedings affecting Lessee or the Equipment; and (iv)
any dispute between Lessee and any governmental regulatory body or other party
that involves any of the Equipment or that might materially interfere with the
normal business operations of Lessee; (v) any Release of Hazardous Materials or
contaminants from any of Lessee's property or the Equipment; and (vi) Lessee's
receipt of any notice that (A) the operations of Lessee are not in material
compliance with the requirements of applicable Environmental Laws, (B) Lessee is
subject to a federal or state investigation to determine whether any remedial
action is needed to respond to the Release of any Hazardous Material into the
environment, or (C) the filing of any Environmental Lien against any properties
or assets of Lessee.
(i) FURTHER ASSURANCES. Lessee shall promptly, at Lessee's expense, execute
and deliver to Lessor such instruments and documents, and take such action, as
Lessor may from time to time reasonably request in order to carry out the intent
and purpose of this Lease and to
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establish and protect the rights, interest and remedies created, or intended to
be created, in favor of Lessor hereby. Lessee hereby authorized Lessor to file
the Lease or any financing statements with respect to the Lease and the
Equipment. Lessee agrees to execute and deliver any statements requested by
Lessor for such purpose.
(j) NEGATIVE COVENANTS. Lessee will not, except as may otherwise be
expressly permitted under Subsection 9(c) hereof, (i) liquidate or dissolve;
(ii) change the form of organization of its business; (iii) without thirty (30)
days prior written notice to Lessor, change its name or its chief place of
business; or (iv) change, in any material manner, the nature of its business as
conducted on the date hereof.
6. LOSS OR DAMAGE. (a) Lessee agrees to bear the entire risk of any partial or
complete loss with respect to the Equipment from any and every cause
whatsoever, whether or not such loss is covered by insurance or caused by any
default or neglect of Lessee. Lessee agrees to give Lessor prompt notice of any
damage to or loss of any Equipment, and Lessee shall promptly cause the affected
part or parts of the Equipment to be replaced or restored to the condition and
repair required to be maintained by Section (b) hereof. Upon the occurrence of
an Event of Loss with respect to any item of Equipment, Lessee (i) may, so long
as no Default or Event of Default has occurred and is continuing hereunder,
replace such Equipment with equipment (which shall thereupon become Equipment)
of a value and utility, as determined by CIT in its reasonable business
judgement, equal to or greater than that of the Equipment suffering the Event of
Loss (the value and utility of the Equipment suffering the Event of Loss being
determined as of immediately prior to the Event of Loss) or (ii) shall pay to
Lessor withing thirty (30) days after said Event of Loss (the "LOSS PAYMENT
DATE") an amount equal to the sum of (i) the Stipulated Loss Value of such item
of Equipment computed as of the Rent Payment Date with respect to such item of
Equipment on or immediately preceding the date of the occurrence of such Event
of Loss, and (ii) all rent and other amounts which would be payable under the
Lease hereunder for such item of Equipment but for such Event of Loss up to and
including the Loss Payment Date. Upon payment of such amount to Lessor, the
lease of such item of Equipment hereunder shall terminate, and Lessor will
transfer to Lessee, Lessor's right, title and interest in and to such item of
Equipment, on an "AS-IS, WHERE-IS" BASIS, WITHOUT RECOURSE AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS OF
THE EQUIPMENT FOR ANY PARTICULAR PURPOSE, OR ANY WARRANTY OF TITLE OTHER THAN A
WARRANTY THAT THE EQUIPMENT IS FREE AND CLEAR OF ANY LESSOR'S LIEN.
(b) Any payments received at any time by Lessor or Lessee from any insurer
with respect to loss or damage to the Equipment shall be applied as follows:
(i) if such payments are received with respect to an Event of Loss they shall be
paid to Lessor, but to the extent received by Lessor, they shall reduce or
discharge, as the case may be, Lessee's obligation to pay the amounts due to
Lessor under Subsection 6(a) hereof with respect to such Event of Loss; or (ii)
if such payments are received with respect to any loss of or damage to the
Equipment other than an Event of Loss, such payments shall, unless a Default or
Event of Default shall have occurred and be continuing, be paid over to Lessee
to reimburse Lessee for its payment of the costs and expenses incurred by Lessee
in replacing or resorting pursuant to Subsection 6(a) hereof the part or parts
of the Equipment which suffered such loss or damage. Lessor shall not be
obligated to undertake by litigation or otherwise the collection of any claim
against any person for loss or damage to the Equipment.
7. NO WARRANTIES BY LESSOR. (a) LESSOR NEITHER MAKES NOR SHALL BE DEEMED TO HAVE
MADE AND LESSEE HEREBY EXPRESSLY WAIVES ANY WARRANTY OR REPRESENTATION, EITHER
EXPRESS OR IMPLIED, AS TO THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OR REPRESENTATION AS TO THE DESIGN, QUALITY OR CONDITION OF THE
EQUIPMENT OR ANY WARRANTY OF MERCHANTABILITY OR FITNESS OF THE EQUIPMENT FOR ANY
PARTICULAR PURPOSE OR AS TO THE TITLE TO OR LESSOR'S OR LESSEE'S INTEREST IN THE
EQUIPMENT OR AS TO ANY OTHER MATTER RELATING TO THE EQUIPMENT OR ANY PART
THEREOF, IT BEING AGREED THAT THE EQUIPMENT IS LEASED BY LESSOR "AS-IS" TO
LESSEE AND THAT ALL SUCH RISKS, AS BETWEEN LESSEE AND LESSOR ARE TO BE BORNE BY
LESSEE AT ITS SOLE RISK AND EXPENSE. LESSEE, ACCORDINGLY, AGREES NOT TO ASSERT
ANY CLAIM WHATSOEVER AGAINST LESSOR BASED THEREON. Lessee further agrees,
regardless of cause, not to assert any claim whatsoever against Lessor for loss
of anticipatory profits or consequential damages. Lessor shall have no
obligation to install, erect, test, adjust or service the Equipment.
LESSEE CONFIRMS THAT IT HAS SELECTED THE EQUIPMENT AND EACH PART THEREOF ON
THE BASIS OF ITS OWN JUDGEMENT AND EXPRESSLY DISCLAIMS RELIANCE UPON ANY
STATEMENTS, REPRESENTATIONS OR WARRANTIES MADE BY LESSOR, AND LESSEE
ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER OR VENDOR OF ANY PART OF THE
EQUIPMENT.
LESSOR NEITHER MAKES NOR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY AS TO THE ACCOUNTING TREATMENT TO BE ACCORDED TO THE TRANSACTIONS
CONTEMPLATED BY THIS LEASE OR AS TO ANY TAX CONSEQUENCES AND/OR TAX TREATMENT
THEREOF.
(b) Lessee is aware of the identity of all manufacturers and/or suppliers
of the Equipment and the terms of the agreements (including any warranties) made
by such entities. Lessor hereby assigns to Lessee such rights as Lessor may have
(to the extent lessor may validly assign such rights) under all manufacturers'
and suppliers' warranties with respect to the Equipment; PROVIDED, HOWEVER, that
the foregoing rights shall
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automatically revert to Lessor upon the occurrence and during the continuance of
any Event of Default hereunder, or upon the return of the Equipment to Lessor.
Lessee agrees to settle all claims with respect to the Equipment directly with
the manufacturers or suppliers thereof, and to give Lessor prompt notice of any
such settlement and the details of such settlement.
8. TAX INDEMNITY. Lessee hereby agrees to pay and to indemnify and hold Lessor
harmless from and against, all fees, taxes (whether sales, use, excise, personal
property or other taxes), imposts, duties, withholdings, assessments and other
governmental charges of whatever kind or character, however designated (together
with any penalties, fines or interest thereon), all of the foregoing being
herein collectively called "IMPOSITIONS", which are at any time levied or
imposed against Lessor, Lessee, this Lease, the Equipment or any part thereof by
any Federal, state or local government or taxing authority in the United States
or by any foreign government or any subdivision or taxing authority thereof
upon, with respect to, as a result of or measured by (a) the Equipment (or any
part thereof), or this Lease or the interest of the Lessor therein; or (b) the
purchase, ownership, delivery, leasing, possession, maintenance, use, operation,
return, sale or other disposition of the Equipment or any part thereof; or (c)
the rentals, receipts or earnings payable under this Lease or otherwise arising
from the Equipment or any part thereof, EXCLUDING, HOWEVER, taxes based on or
measured by the net income of Lessor that are imposed by (i) the United States
of America, or (ii) any State of the United States of America or any political
subdivision of any such State. Lessor shall pay, and, promptly upon receipt of
Lessor's invoice therefor, Lessee shall reimburse Lessor for paying, the
Impositions, UNLESS Lessor and Lessee shall agree in writing that Lessee shall
pay any Impositions directly. Any payments made by Lessee under this Section 8
shall be made on an After-Tax Basis. The obligations of Lessee under this
Section 8 shall survive the expiration or earlier termination of this Lease.
9. RETURN; PURCHASE OPTION; TERMINATION. (a) RETURN PROVISIONS. Unless
Lessee shall elect to purchase the Equipment in accordance with the
provisions of Subsection 9(b) of the Lease, Lessee shall, upon the expiration
or earlier termination in accordance with the provisions hereof of the Lease
Term of each item of Equipment, Lessee, at Lessee's sole expense, shall
return such item of Equipment to Lessor at such places within the continental
United States of America as Lessor shall designate in writing to Lessee free
and clear of all Liens. Until such item of Equipment is returned to Lessor
pursuant to the provisions of this Subsection 9(a), all of the provisions of
the Lease with respect thereto shall continue in full force and effect.
Lessee shall pay all the costs and expenses in connection with or incidental
to the return of the Equipment, including, without limitation, the cost of
removing, dismantling, assembling, packing, insuring and transporting the
Equipment. All dismantling and handling of each item of Equipment is to be
in accordance with the original manufacturer's specifications or normal
industry practices for new machines, and if requested by Lessor, conducted by
a representative of the original manufacturer. Any special transportation
devices such as metal skids, lifting slings, brackets, etc. which were with
the item of Equipment when it was originally shipped by the original
manufacturer or vendor must be used in returning the Equipment. Each item of
Equipment shall be certified by the manufacturer as being in compliance with
its specifications pertaining to such item of Equipment. In addition, at the
time of such return, (i) the Equipment shall be capable of passing
performance tests according to manufacturer's specifications, (ii) all
peripherals and additional systems on all pieces of Equipment must be intact
and correctly operational, (iii) all pneumatic, electrical, hydraulic and
mechanical systems on the Equipment must be operational according to
manufacturer's specifications, and (iv) the Equipment otherwise shall be in
the condition and repair required to be maintained under Subsection 5(b) of
the Lease.
(b) PURCHASE OPTION. So long as no Event of Default shall have occurred
and be continuing, Lessee may, by written notice given to Lessor at least
twenty (20) months but not more than twenty-four (24) months prior to the
expiration date of the Lease Term of the Equipment covered by the initial
Supplement (which notice shall be irrevocable), elect to purchase all, but
not less than all, of the items of Equipment leased hereunder on the
applicable expiration date of each item of Equipment for a cash purchase
price equal to 20.00% of the Advance Amount, plus an amount equal to all
taxes (other than income taxes on any gain on such sale), costs and expenses
(including legal fees and expenses) incurred or paid by Lessor in connection
with such sale. Notwithstanding anything to the contrary contained herein,
Lessee shall at all times have the right, subject to the conditions herein
set forth, to purchase all or any part of the Equipment on the expiration
date of the Lease for the cash purchase price stated in this Subsection 9(b)
prior to any sale of Equipment to any third party. Upon payment by Lessee of
such purchase price, and of all other amounts then due and payable by Lessee
hereunder, Lessor shall transfer title to such Equipment to Lessee on an
"AS-IS, WHERE-IS" BASIS, WITHOUT RECOURSE AND WITHOUT REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS OF THE EQUIPMENT
FOR ANY PARTICULAR PURPOSE, OR ANY WARRANTY OF TITLE OTHER THAN A
REPRESENTATION AND WARRANTY THAT SUCH EQUIPMENT IS FREE AND CLEAR OF ANY
LESSOR'S LIENS.
(c) TERMINATION FOR CHANGE EVENT. (i) Not less than twenty (20) Business
Days prior to the date a proposed Change Event is expected to be consummated,
Lessee shall give Lessor written notice of the proposed Change Event. In the
event the Change Event is consummated over Lessor's objection, Lessor may, at
its sole option, terminate the Lease and require that Lessee elect to either (i)
purchase all items of Equipment on or prior to the later of the date the Change
Event is to be consummated or the Notice Date (as defined below)(the "MANDATORY
TERMINATION DATE") for the Stipulated Loss Value thereof as of the Rent Payment
Date immediately preceding the date Lessor gave Lessee written notice of
Lessor's election to terminate the Lease (the "NOTICE DATE"), or (ii) prior to
the Mandatory Termination Date, find a third party purchaser to purchase all
items of Equipment on or prior to the Mandatory Termination Date and return the
Equipment, at Lessee's expense, to such place within the continental United
States of America as such third party purchaser shall specify in accordance with
the provisions of Subsection 9(a). In the event Lessee fails to elect the
provisions in clause (i) or (ii) of the preceding sentence, Lessor shall make
such election.
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On or prior to the Mandatory Termination Date, Lessee shall pay to Lessor, in
the case of (i), the Stipulated Loss Value or in the case of (2), the
difference, if any, between the purchase price paid by the third party purchaser
and the Stipulated Loss Value of the Equipment as of the Rent Payment Date
immediately preceding the Notice Date, together, in the case of both (i) and
(ii), with all other amounts then due and owing under the Lease, including all
rent and late charges, if any, due on or prior to the Mandatory Termination
Date, and all taxes (other than income taxes on any gain on such sale), and
reasonable costs and expenses (including legal fees and expenses) incurred or
paid by Lessor in connection with such sale. On receipt of the foregoing
amounts, Lessor shall transfer title to the Equipment to Lessee or third party
purchaser, as the case may be, or an "AS-IS, WHERE-IS" BASIS , WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS OF
THE EQUIPMENT FOR ANY PARTICULAR PURPOSE, OR ANY WARRANTY OF TITLE EXCEPT FOR A
WARRANTY THAT THE EQUIPMENT IS FREE AND CLEAR OF ANY LESSOR'S LIEN.
(ii) A "CHANGE EVENT" shall be one in which: (A) Lessee enters into
any transaction of merger or consolidation where (1) it shall not be the
surviving corporation or (2) if it is the surviving corporation, its tangible
net worth, after giving effect to such merger or consolidation, does not equal
or exceed that which existed prior to such merger or consolidation; or (B)
Lessee sells, transfer, or otherwise disposes of all or any substantial part of
its assets, or (C) with respect to the voting stock of Lessee or any Parent
Company, any Person, or group of Persons acting together, becomes or agrees to
become the beneficial owner (directly or indirectly) or 25% or more of Lessee
or any Parent Company's shares of voting stock (excluding current
shareholders as of the date of the Lease owning 25% or more of Lessee's or
any Parent Company's shares of voting stock).
(d) VOLUNTARY TERMINATION. So long as no Default or Event of
Default shall have occurred and be continuing, Lessee may, by written notice
given to Lessor at least 30 days (but not more than 90 days) prior to any
Rent Payment Date occurring after the 30th Rent Payment Date with respect to
the Equipment covered by the last Supplement executed hereunder (which notice
shall be irrevocable), elect to purchase all, but not less than all, items of
Equipment leased hereunder on such Rent Payment Date for a cash purchase
price equal to the Termination Value of such Equipment plus in each case an
amount equal to all taxes (other than income taxes on any gain on such sale),
costs and expenses (including legal fees and expenses) incurred or paid by
Lessor in connection with such sale and any amounts then due and owing
hereunder. Upon payment by Lessee of such purchase price and of all other
amounts then due and payable by Lessee hereunder (including, without
limitation, the monthly installment of rent due on the Rent Payment Date on
which the termination occurs), Lessor shall transfer title to the Equipment
to Lessee on an "AS-IS, WHERE IS" BASIS, WITHOUT REPRESENTATION OR WARRANTY
(OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY) AS TO MERCHANTABILITY OR FITNESS OF THE EQUIPMENT
FOR ANY PARTICULAR PURPOSE, OR ANY WARRANTY OF TITLE OTHER THAN A WARRANTY
THE EQUIPMENT IS FREE AND CLEAR OF ANY LESSOR'S LIEN. Notwithstanding the
foregoing, Lessor agrees that Lessee may make voluntary prepayments in an
aggregate amount up to $400,000 at any time during the term of the Lease.
10. EVENTS OF DEFAULT. An Event of Default shall occur if: (a) Lessee fails to
pay when due any installment of rent or other amount when due and such failure
continues for a period of 10 days; (b) Lessee shall fail to maintain the
insurance required by Subsection 5(c) hereof or Lessee violates the covenants
contained in Subsection 5(g) or 5(j) hereof; (c) Lessee shall fail to observe
any other covenant, condition or agreement to be performed or observed by it
hereunder and such failure shall continue unremedied for 30 days after the
earlier of the date on which Lessee obtains knowledge of such failure or the
date on which notice thereof shall be given by Lessor to Lessee; (d) any
representation or warranty made by Lessee herein, or made by Lessee or any
Guarantor in any Document or financial or other statement now or hereafter
furnished Lessor in connection with the Lease, or made by any Guarantor in any
Guaranty, shall prove at any time to have been untrue or misleading in any
material respect as of the time when made; (e) Lessee, any Guarantor or any
Affiliate thereof shall (i) default in the payment or performance of any
obligation for payment of lease (whether or not capitalized) or any guarantee to
Lessor any Affiliate thereof and such default shall have been continuing for a
period of 10 days, or (ii) default in the payment of any obligation for payment
or lease (whether or not capitalized) or amount guaranteed in the original
principal balance, aggregate rental amount or amount guaranteed greater than
$1,000,000.00 to any other Person for a period of ninety (90) days after the
same becomes due and owing and no cure has been effected which is satisfactory
to the holder or beneficiary of such obligation, (f) Lessee or any Guarantor
ceases doing business as a going concern, makes an assignment for the benefit of
creditors, admits in writing its inability to pay it respective obligations as
they become due, files a voluntary petition in bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
either of them in any such proceeding, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of it or of all or any
substantial part of its assets or properties, or if Lessee or its shareholders
or any Guarantor or the shareholders or partners thereof shall take any action
looking to its dissolution or liquidation; (g) within 60 days after the
commencement of any proceeding against Lessee or any Guarantor seeking
reorganization, arrangement, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such proceedings
shall not have been dismissed, or if, within 60 days after the appointment
without Lessee's or a Guarantor's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its assets and
properties, such appointment shall not be vacated; (h) any Guarantor shall fail
to observe or perform any of the terms or conditions of its respective Guaranty
or any guaranty shall be full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by any
Guarantor, or any Guarantor shall deny that such Guarantor has any further
liability to CIT with respect thereto; (i) a default or breach shall occur with
respect to the Escrow Agreement or the Escrow Account; or (j) Lessee or Lessee's
Parent Company shall, in material
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manner, change the nature of its business as conducted on the date hereof.
11. REMEDIES. (a) If an Event of Default specified in Subsections 10(f) or
10(g) above shall occur, then, and in any such event, this Lease shall, without
any declaration or any other action by Lessor, be in default, and without any
notice or declaration from Lessor and without any action or demand by Lessor,
the Stipulated Loss Value of the Equipment as of the Rent Payment Date
immediately succeeding the date the last installment of rent was received by
Lessor from Lessee plus all unpaid rent and other amounts owing under or with
respect to this Lease shall be immediately due and payable by Lessee to Lessor.
If an Event of Default, other than Event of Default specified in Subsections
10(f) or 10(g) above, shall occur and be continuing Lessor may, by notice of
default given to Lessee, declare this Lease to be in default, whereupon the
Stipulated Loss Value of the Equipment as of the Rent Payment Date immediately
succeeding the date the last installment of rent was received by Lessor from
Lessee together with all unpaid rent and all other amounts payable under or with
respect to this Lease shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. During the continuance of any Event of Default
hereunder, Lessor shall have the right to pursue and enforce any of its rights
and remedies under this Section 11.
(b) If an Event of Default shall occur and be continuing, Lessor may
exercise, in addition to all other rights and remedies granted to it in this
Lease and in any other instrument or agreement securing, evidencing or
relating to the obligations of Lessee hereunder, all rights and remedies of
secured parties under the Code or under any other applicable law. Without
limiting the generality of the foregoing, Lessee agrees that in any such
event, Lessor, without demand or performance or other demand, advertisement
or notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon Lessee or any other person (all and each
of which demands, advertisements and/or notices are hereby expressly waived),
may forthwith collect, receive, appropriate and realize upon the Collateral,
or any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase or otherwise dispose of and deliver the Equipment (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker's board or at any of
Lessor's offices or elsewhere at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk.
Lessee further agrees, at Lessor's request, to make the Equipment available
to Lessor at places which Lessor shall reasonably select, whether at Lessee's
premises or elsewhere. Lessor shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale (after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safekeeping or otherwise of any or all of the
Equipment or in any way relating to the rights or Lessor hereunder, including
attorneys' fees and legal expenses incurred by Lessor in the collection or
enforcement of its rights hereunder or in connection with any bankruptcy
proceeding involving Lessee and/or the Equipment, including relief from stay
motions, cash collateral disputes, assumption/rejection motions and disputes
concerning any proposed disclosure statement and plan proposed during any
such case) to the payment in whole or in part of the obligations of Lessee
hereunder, in such order as Lessor may elect and only after so applying such
net proceeds and after the payment by Lessor of any other amount required by
any provision of law (including Section 9-504(1)(c) of the Code), need Lessor
account for and pay the amount of surplus, if any, to Lessee. To the extent
permitted by applicable law, Lessee waives all claims, damages, and demands
against Lessor arising out of the repossession, retention or sale of the
Equipment. Lessee agrees that Lessor need not give more than 10 days' notice
(which notification shall be deemed given when mailed postage prepaid,
addressed to Lessee at its address set forth in above) of the time and place
of any public sale or of the time after which a private sale may take place
and that such notice is reasonable notification of such matters. In addition,
Lessee shall be liable for any and all unpaid rent and other amounts due
hereunder before or during the exercise of any of the foregoing remedies and
for all legal fees and other costs and expenses incurred by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto, including all costs and expenses incurred in connection with
the placing of the Equipment in the condition required by this Section 11, an
Lessee shall be liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Lessor is entitled.
(c) No remedy referred to in this Section 11 is intended to be exclusive
but each shall be cumulative and in addition to any other remedy referred to
herein or otherwise available to Lessor at law or in equity, and the exercise
or beginning of exercise by Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by Lessor of any or all such
other remedies. Lessor may exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach hereof or to
rescind this Lease. No express or implied waiver by Lessor of an Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.
(d) To the extent permitted by applicable law, Lessee hereby waives
presentment, demand, protest or any notice, except as hereinabove provided in
this Section 11 (to the extent permitted by applicable law) of any kind in
connection with this Lease or any Collateral. No delay or failure on the part of
Lessor to exercise any power or right hereunder shall operate as a waiver
thereof, nor as an acquiescence in any default, nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof,
or the exercise of any other power or right. After the occurrence of any Default
or Event of Default, the acceptance by Lessor of any payment of rent or other
sum owed by Lessee pursuant hereto shall not constitute a waiver by Lessor of
such Default or Event of Default, regardless of Lessor's knowledge or lack of
knowledge thereof at the time of acceptance of any such payment, and shall not
constitute a reinstatement of this Lease if this Lease shall have been declared
in default by Lessor pursuant to this Section 11 hereof or otherwise, unless
Lessor shall have agreed in writing to reinstate the Lease and to waive the
Default or Event of Default any rights now or hereafter conferred by statute or
otherwise which may require Lessor to sell, or lease or otherwise use the
Equipment in mitigation of Lessor's damages or losses or which may otherwise
limit or modify any of Lessor's rights or remedies under this Lease.
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12. INDEMNITY. (a) Whether or not any time of Equipment has been subject to
this Lease, Lessee assumes liability for, and shall indemnify, protect, save
and keep harmless Lessor and its agents, servants, successors and assigns
(each, an "INDEMNITEE") from and against any and all liabilities,
obligations, losses, damages, disbursements, penalties, claims, judgments,
actions, suits, costs and expenses, including legal expenses, of whatsoever
kind and nature (each a "CLAIM"), imposed on, incurred by or asserted against
any Indemnitee, in any way relating to or arising out of the execution,
delivery, enforcement, performance or administration of this Lease. Lessor's
interest in the Equipment or the manufacture, purchase, acceptance,
rejection, ownership, possession, use, selection, delivery, lease, operation,
condition, sale, return or other disposition of the Equipment or any part
thereof (including, without limitation, latent or other defects, whether or
not discoverable by Lessee or any other person, any claim in tort for strict
liability and any claim for patent, trademark or copyright infringement)
including, without limitation, as a direct or indirect result of the
violation or alleged violation by Lessee of any Environmental Law or any law
or regulation relating to Hazardous Material treatment, storage, disposal,
generation and transportation, air, water and noise pollution, soil or ground
water contamination, the handling, storage or Release into the environment of
Hazardous Materials, or with respect to, or as a direct or indirect result of
the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission or Release from, properties utilized by Lessee in the
conduct of its business into or upon any land, the atmosphere, or any
watercourse, body of water or wetland, of any Hazardous Materials; PROVIDED,
HOWEVER, that Lessee shall not be required to indemnify any Indemnitee for
lessor liability arising from acts or events which occur after the Equipment
has been returned to Lessor in accordance with this Lease, or for loss or
liability or for loss or liability resulting solely from the willful
misconduct or gross negligence of such Indemnitee. Any payments made by
Lessee under this Section 12 shall be made on an After-Tax Basis. The
provisions of this Section 12 shall survive the expiration or earlier
termination of this Lease.
(b) Whether or not any of the transactions contemplated hereby shall be
consummated, Lessee agrees to pay (i) all reasonable out-of-pocket expenses
of Lessor in connection with the negotiation, preparation, execution and
delivery of this Lease and related documents, including, without limitation,
the reasonable fees and disbursements of counsel for Lessor, (ii) all fees
and taxes in connection with the recording of this Lease or any other
document or instrument required hereby; and (iii) all costs and expenses of
Lessor in connection with the enforcement of this Lease, including all legal
fees and disbursements arising in connection therewith and (iv) all license,
filing and registration fees and assessments and other charges, if any which
may be payable or determined to be payable in connection with the execution,
delivery and performance of the Lease or any modification hereof.
13. GRANT OF SECURITY INTEREST. As collateral security for the prompt and
complete payment and performance when due of all the obligations of Lessee
hereunder and under the Supplements and any other indebtedness and obligations
of any kind whatsoever of Lessee to Lessor, whether now existing or hereafter
incurred or from time to time reduced and thereafter increased ("OBLIGATIONS"),
and in order to induce Lessor to enter into this Lease, Lessee hereby grants to
Lessor a continuing first priority security interest in and to all of its
present and future right, title and interest in, to and under the Equipment and
all Proceeds thereof. In the event that this Lease is deemed to create a
security interest under the Code, any transfer from Lessor to Lessee of title to
any Equipment deemed to result therefrom shall obligate Lessee to pay to Lessor
the purchase price of such Equipment which shall be computed as follows: (a) at
any time prior to the end of the Lease Term, such purchase price shall equal the
sum of (i) all accrued and unpaid rent for such Equipment, (ii) the Stipulated
Loss Value of such Equipment computed as of the Rent Payment Date on or
immediately preceding the date of such payment and (iii) all other amounts then
due under this Lease; or (b) at the end of the Lease Term, such purchase price
shall equal the sum of (i) all unpaid rent for such Equipment, (ii) the purchase
option price and all other amounts provided for by the applicable Exhibit A and
(iii) all other amounts then due under this Lease. Until Lessee has paid to
Lessor the purchase price of such Equipment as described above, the obligations
of Lessee which are collateralized in this Section 19 shall include, without
limitation, the obligation of Lessee to pay to Lessor the purchase price of such
Equipment as described in this Section 13.
14. MISCELLANEOUS. (a) The Lease shall be binding upon and inure to the
benefit of Lessor and to the extent permitted by Subsection 9(c) hereof,
Lessee's permitted assigns and successors. The captions set forth herein are
for convenience only and shall not define or limit any of the terms hereof.
This Lease may be executed by the parties hereto on any number of separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. All representations and warranties made in this Lease and
any certificates delivered pursuant hereto or thereto shall survive the
execution and delivery of this Lease and the lease of the equipment
hereunder, and the agreements contained in Sections 8 and 12 hereof shall
survive the expiration or earlier termination of this Lease.
(b) Lessee hereby irrevocably authorizes Lessor to correct typographical
and patent errors and to fill in such blanks as serial numbers and dates herein
and in the Supplements and any other Documents, and Lessee agrees that Lessor
may relay upon and act pursuant to this authorization until Lessor receives
written notice to the contrary.
(c) In the event that the Lessee shall fail to make any payment hereunder
or fails to promptly perform any of its obligations hereunder, Lessor may, at
its option, make such payment or perform or comply with such obligation for the
account of Lessee without thereby waiving such Default or Event of Default, and
any amount paid or expense (including reasonable attorneys' fees), penalty or
other liability incurred by Lessor in such payment or performance, together with
interest at the Late Charge Rate (but in no event greater than the higher
rate permitted by applicable law) until paid by Lessee to Lessor, shall be
payable by Lessee upon demand as additional rent for the Equipment. Lessee may
not terminate any Supplement without the written consent of Lessor.
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(d) Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect, and Lessee further waives any rights now or
hereafter conferred by statute or otherwise which limit or modify any of
Lessor's rights under this Lease.
(e) No delay or failure on the part of Lessor to exercise any power or
right hereunder shall operate as a waiver hereof, nor as an acquiescence in any
default, nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof, or the exercise of any other power or
right. After the occurrence of any Default or Event of Default, the acceptance
by Lessor of any payment of rent or other sum owed by Lessee pursuant hereto
shall not constitute a waiver by lessor of such Default or Event of Default,
regardless of Lessor's knowledge or lack of knowledge thereof at the time of
acceptance of any such payment, and shall not constitute a reinstatement of this
Lease if this Lease shall have been declared in default by Lessor pursuant to
Section 11 hereof or otherwise, unless Lessor shall have agreed in writing to
reinstate the Lease and to waive the Default or Event of Default.
(f) THIS LEASE TOGETHER WITH EXHIBIT A, ANY SUPPLEMENTS EXECUTED PURSUANT
HERETO CONTAIN THE COMPLETE, FINAL AND EXCLUSIVE STATEMENT OF THE TERMS OF THE
AGREEMENT BETWEEN LESSEE AND LESSOR AND NEITHER THIS LEASE, NOR ANY TERMS
HEREOF, MAY BE CHANGED, WAIVED, DISCHARGED OR TERMINATED ORALLY, BUT ONLY BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH ENFORCEMENT OF A CHANGE,
WAIVER, DISCHARGE OR TERMINATION IS SOUGHT.
(g) THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE HEREBY
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION IN CONNECTION WITH THIS
LEASE MAY BE INSTITUTED IN THE COURTS OF THE STATE OF NEW YORK, IN THE COUNTY OF
NEW YORK OR THE UNITED STATES COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK, AS
LESSOR MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS LEASE, LESSEE HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. LESSEE AND LESSOR ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL
EXPENSES AND DELAYS NOT OCCASIONED BY NONJURY TRIALS. LESSEE AND LESSOR AGREE
AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY
MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A
SPECIFICALLY NEGOTIATED PROVISION OF THIS LEASE, LESSEE AND LESSOR HEREBY
EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS LEASE, OR THE TRANSACTIONS RELATED HERETO, WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND LESSEE AND LESSOR HEREBY AGREE AND CONSENT THAT LESSEE OR LESSOR
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
THE CIT GROUP/EQUIPMENT NATIONAL FIBERSTOK CORPORATION
FINANCING, INC., a New York corporation a Delaware corporation
By: /s/ By: /s/ RM Miklas
---------------------------------- -----------------------------
Title: VP Title: PRESIDENT & CEO
-------------------------------- --------------------------
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EXHIBIT A TO
MASTER LEASE AGREEMENT
dated as of 12-21, 1995
between THE CIT GROUP/EQUIPMENT FINANCING, INC., as Lessor
and NATIONAL FIBERSTOK CORPORATION, as Lessee
1. MAXIMUM COST OF EQUIPMENT TO BE LEASED HEREUNDER AND PAID FOR BY LESSOR: the
lesser of (a) $2,563,000.00 and (b) the sum of an amount which is equal to
86.95652% of the Orderly Liquidation Value of the Equipment plus the Escrow
Amount (as defined in Schedule B to Escrow Agreement) (such Escrow Amount not to
exceed $400,000.00), such Orderly Liquidation Value to be determined by
agreement of Lessor and Lessee, or, failing such agreement, pursuant to an
appraisal, at Lessee's expense, done by an independent appraiser satisfactory to
Lessor and Lessee as of the Commencement Date of the Lease with respect to such
Equipment.
2. EXPIRATION OF LESSOR'S COMMITMENT TO LEASE HEREUNDER: March 29, 1996
3. MAXIMUM NUMBER OF SUPPLEMENTS LESSOR WILL ACCEPT: ________
4. DETERMINATION OF RENT: (i) Lessee shall pay to Lessor rent for each item of
Equipment in sixty (60) consecutive monthly installments, with the first
installment of rent with respect to such item of Equipment being due thirty (30)
days after the Commencement Date with respect to such item of Equipment and
succeeding installments being due on the same date of each month thereafter.
Each installment of rent with respect to the items of Equipment specified in a
Supplement shall be an amount equal to the product of (i) 1.835806%, adjusted
upward or downward (as the case may be), in order to maintain the Lessor's
economics, for each basis point movement in the Current Treasury Rate from the
Base Treasury Rate and (ii) the Advance Amount applicable to such items of
Equipment, as set forth in the Supplement covering such Equipment. The rent
shall be fixed on the third Business Day prior to the Commencement Date and
shall be fixed throughout the Lease Term as of such date. Each installment of
rent shall be payable at such address as Lessor may designate.
5. LEASE TERM: The term of the lease of each ratable portion of the aggregate
value of Equipment leased hereunder shall commence on the Commencement Date
specified in the Supplement pertaining thereto (the "COMMENCEMENT DATE"), and
unless earlier terminated pursuant to the provisions hereof, shall continue for
a term of sixty (60) months from such Commencement Date.
6. DEFINITIONS. As used in the Master Lease Agreement, the following terms shall
have the following defined meanings (applicable to both singular and plural
forms), unless the context otherwise requires:
"ADVANCE AMOUNT": with respect to any item of Equipment, the amount paid for
such item of Equipment by Lessor pursuant to Section 1 above.
"AFFILIATE": with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. For purposes of this definition, "control" of a Person means the power,
direct or indirectly, to vote 10% or more of the securities having voting power
for the election of directors of such Person, or otherwise to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
"AFTER-TAX BASIS": with respect to any payment received or deemed to have
been received by any Person, the amount of such payment supplemented by a
further payment to that Person so that the sum of the two payments, after
deduction of all Taxes and other charges resulting from the receipt (actual or
constructive) of such two payments imposed under any Federal, state or local law
or of any taxing authority or government subsidiary of any foreign country or by
any governmental authority or any taxing authority of any thereof, shall be
equal to such payment received or deemed to have been received; PROVIDED, that
for purposes of determining the amount of Taxes required to be paid by the
recipient of any payment in respect of the receipt thereof, it shall be assumed
that Federal, state and local taxes are payable by the recipient at the highest
marginal statutory rates in effect for the relevant period.
"BASE TREASURY RATE": 5.70%.
"BUSINESS DAY": a day other than a Saturday, Sunday or legal holiday under
the laws of the State of New York.
<PAGE>
"CODE": the Uniform Commercial Code as from time to time in effect in any
applicable jurisdiction.
"COLLATERAL": the Equipment and the Proceeds thereof.
"CURRENT TREASURY RATE": with respect to each item of Equipment shall mean
the yield to maturity for the U.S. Treasury security having a remaining term to
maturity closest to 3 years as at the close of business three (3) Business Days
prior to the Commencement Date of each item of Equipment as reported on page 5
("U.S. Treasury and Money Markets") of the information ordinarily provided by
Telerate Systems Incorporated as of the close of business on the third Business
Day prior to the Commencement Date.
"DEFAULT": any event which with notice, lapse of time, or both would
constitute an Event of Default.
"DOCUMENTS": the Lease, any Supplement, and any and all documents,
instruments, certificates and agreements executed by Lessee or any other Person
from time to time in connection with the Lease.
"ENVIRONMENTAL LAWS": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, any so-
called "Superfund" or "Superlien" law, the Toxic Substances Control Act, or any
other federal, state or local statute, law ordinance, code rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect.
"EQUIPMENT": any and all items of property which are listed on EXHIBIT A to
any Supplement, together with all now owned or hereafter acquired accessories,
parts, repairs, replacements, substitutions, attachments, modifications,
additions, improvements, upgrades and accessions of, to or upon such items of
property.
"ESCROW ACCOUNT": that certain Escrow Account as such term is defined in
the Escrow Agreement.
"ESCROW AGREEMENT": that certain Escrow Agreement by and among McCown
DeLeeuw and Co., II, L.P., McCown Deleeuw Associates, L.P., Lessor and Norwest
Bank Colorado, National Association.
"EVENT OF LOSS": with respect to any item of Equipment, (i) the actual or
constructive loss or loss of use thereof, due to theft, destruction, damage
beyond repair or to an extent which makes repair uneconomical or rendition
hereof permanently unfit for normal use from any reason who, or (ii) the
condemnation, confiscation or seizure thereof, or requisition of title thereto,
or use thereof, by any Person.
"GUARANTOR": DEC International, Inc., McCown Deleeuw and Co., II, L.P. and
McCown, DeLeeuw Associates, L.P., and any other guarantor of Lessee's
Obligations hereunder.
"GUARANTY": each Guaranty Agreement, in form and substance satisfactory to
Lessor, executed and delivered to Lessor by any Guarantor.
"HAZARDOUS MATERIALS": any pollutant or contaminant defined as such in (or
for the purposes of) any Environmental Laws including, but not limited to,
petroleum, any radioactive material, and asbestos in any form or condition.
"LATE CHARGE RATE": a rate per annum equal to the greater of (i) 2% above
the Prime Rate or (ii) 18%, but in no event to exceed the highest rate permitted
by applicable law.
"LEASE": "hereof", "hereto", "hereunder" and words of similar meaning:
the Master Lease Agreement of even date herewith between Lessee and Lessor,
including this Exhibit A, any Supplement and any other rider, schedule and
exhibit executed by Lessee and Lessor in connection herewith, as from time to
time amended, modified or supplemented.
"LEASE TERM": with respect to any item of Equipment, the term of the lease
of such item of Equipment hereunder specified in Section 6 of the EXHIBIT A.
"LESSOR'S LIEN": any mortgage, pledge, lien, security interest, charge,
encumbrance, financing statement, title retention or any other right or claim of
any Person claiming through or under Lessor, not based upon or relating to
ownership of the Equipment of the lease thereof hereunder.
"LIEN": any mortgage, pledge, lien, security interest charge,
encumbrance, financing statement, title retention or any other right or claim
of any Person, including, without limitation, any Environmental Lien, but
excluding any Lessor's Lien.
"LOSS PAYMENT DATE": with respect to any item of Equipment, the date on
which payment, as described in Subsection 3(a) of the Lease, is made to Lessor
by Lessee as the result of an Event of Loss with respect to such item.
"ORDERLY LIQUIDATION VALUE": the value of an item of Equipment, in terms of
money, when sufficient time is available properly to advertise and sell
piecemeal lots thereof to a buyer who is under no compulsion to buy by a seller
who is compelled to sell over a reasonable period of time.
"PARENT COMPANY": any Person having beneficial ownership of 25% or more of
Lessee's shares of voting stock.
"PERSON": an individual, partnership, corporation, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
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"PRIME RATE": the rate publicly announced from time to time as the prime
rate of Chemical Bank and all successors or assigns thereof ("CB"), the Prime
Rate shall be determined by Lessor at the close of business on the 15th day of
each calendar month (if the 15th day is not a Business Day then on the first
preceding Business Day), and shall become effective as of the first day of the
calendar month succeeding such determination and shall continue in effect to,
and including the last day of said calendar month. The Prime Rate is not
intended to be the lowest rate of interest charged by CB in connection with
extensions of credit to debtors.
"PROGRESS PAYMENT AGREEMENT": the agreement between Lessor and Lessee
pursuant to which Lessor agrees to make progress payments to vendors in respect
of Equipment not yet subject to the Lease but intended to be subject thereto.
"RELEASE": shall mean, as to any Person, any intentional or unintentional
release, abandonment, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, dumping, burning, thermal destruction, leaching
or migration in or into the indoor or outdoor environment or on, onto, into or
out of any property owned or operated by such Person, including the movement of
any Hazardous Materials or any waste, pollutant or other substance regulated or
forming the basis of liability under any Environmental Law, including asbestos-
containing materials, any special waste, pesticides, polychlorinated biphenyls
("PCBs"), petroleum or petroleum-derived substance or waste, or any constituent
of such substance or waste through or in the air, soil, surface water, ground
water or property. "Release" shall in any event include any "release" as
defined in Section 101(22) of CERCLA, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time.
"RENT PAYMENT DATE": each date on which an installment of rent is due and
payable pursuant to Section 5 of this EXHIBIT A.
"STIPULATED LOSS VALUE": with respect to any item of Equipment, the amount
determined by multiplying the aggregated Advance Amounts with respect to such
item of Equipment by the percentage set forth in SCHEDULE 2 to the Supplement
pertaining thereto opposite the applicable Rent Payment Date: PROVIDED that any
determination of Stipulated Loss Value as of the date occurring after the final
Rent Payment Date with respect to such item of Equipment, shall be made as of
such final Rent Payment Date.
"SUPPLEMENT": each supplement executed and delivered by Lessee pursuant the
Lease, satisfactory in form and substance to Lessor.
"TAX" or "TAXES": any and all fees (including, without limitation,
documentation, recording, license and registration fees), taxes (including,
without limitation, income, gross receipts, sales, use, property (personal and
real, tangible and intangible), intangibles, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature whatsoever,
general or special, ordinary or extraordinary, together with any and all
penalties, fines, additions and interest thereon.
"TERMINATION VALUE": with respect to any item of Equipment the amount
determined by multiplying the Advance Amount of such item of Equipment by the
percentage set forth in Schedule 3 to the Supplement pertaining thereto opposite
the applicable Rent Payment Date.
7. NOTICES. All notices, demands and other communications hereunder shall be in
writing, and shall be deemed to have been given or made when sent by facsimile
transmission with telephonic confirmation of receipt, sent by hand or by a
nationally recognized overnight courier against receipt, or deposited in the
United States mail, first class postage prepaid, addressed as follows or to such
other address as any of the following persons may from time to time designate in
writing to the other persons listed below:
THE CIT GROUP/EQUIPMENT NATIONAL FIBERSTOCK CORPORATION
FINANCING, INC., 5775 Peachtree Dunwoody Road
1211 Avenue of the Americas Suite C-150
21st Floor Atlanta, Georgia 30342
New York, New York 10036
Telecopier No. (212) 536-1385 Telecopier No._________________
Attention: Senior Vice President Credit Attention: ____________________
8. COMMITMENT FEE. Lessor acknowledges receipt from Lessee of a commitment
fee in the amount of $28,920.00 (the "COMMITMENT FEE"). Lessee agrees that
$13,000 of the Commitment fee is in all events non-refundable. Lessor agrees
to refund to Lessee after the expiration of the commitment period hereunder
and completion by Lessor of all
3
<PAGE>
follow-up matters related to the transactions contemplated by the Lease, as the
refundable portion of the Commitment Fee, the amount determined in accordance
with the following formula and the following proviso:
Refund = $15,920.00 Aggregate Advance Amounts with respect to all
X Equipment leased hereunder - not to exceed
the amount of Lessor's commitment
---------------------------------------------
Total amount of Lessor's commitment
PROVIDED, however, that such refund shall be net of any out-of-pocket fees,
costs, disbursements and expenses incurred by Lessor in connection with the
transactions contemplated hereby. Lessee agrees that the difference, if any,
between the amount of the Commitment Fee and the amount determined in accordance
with the foregoing formula and proviso shall be retained by Lessor.
THE PROVISIONS SET FORTH IN THIS EXHIBIT A ARE INCORPORATED IN AND MADE A PART
OF THE MASTER LEASE AGREEMENT BETWEEN LESSOR AND LESSEE DATED AS OF 12-4, 1995.
THE CIT GROUP/EQUIPMENT FINANCING, NATIONAL FIBERSTOK CORPORATION
FINANCING, INC., a New York corporation a Delaware corporation
By: By: /s/RM Miklas
----------------------------------- ---------------------------
Title: VP Title: PRESIDENT & CEO
-------------------------------- ------------------------
4
<PAGE>
ASSIGNMENT OF PURCHASE ORDERS
-----------------------------
WHEREAS, NATIONAL FIBERSTOK CORPORATION (the "Company") has executed and
delivered the purchase orders listed in Exhibit I attached hereto, to the
vendors shown in such Exhibit I (the "Purchase Orders"), which Purchase Orders
cover the property described in such Exhibit I (the "Equipment:); and
WHEREAS, the Company desires to assign to THE CIT GROUP/EQUIPMENT
FINANCING, INC. ("CIT") certain of its rights and obligations under the Purchase
Orders so that CIT might purchase and take title to the Equipment in the
Company's stead.
NOW, THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Company (a) represents and warrants that the Purchase Orders
constitute the entire understanding of the parties thereto with respect to the
purchase and sale of the Equipment covered thereby; (b) hereby assigns to CIT
all of its rights under the Purchase Orders; (c) represents and warrants that
neither notice to nor consent from the respective vendor is required in
connection with the execution, delivery and performance of this Assignment or
for the validity or enforceability of this Assignment.
2. Pursuant to this Assignment, CIT shall, at such time as the Equipment is
subjected to a lease between the Company and CIT, become responsible for payment
of the purchase price for the Equipment; provided, however, that the Company
hereby agrees with CIT that the Company shall continue to be responsible for the
actual performance of all other obligations under the Purchase Orders and the
Company agrees to hold harmless and indemnify CIT from all liability, loss,
damage, and expense arising from or directly or indirectly attributable to such
obligations.
3. This Assignment is between the Company and CIT and shall not inure to
the benefit of or be enforceable by any other party.
IN WITNESS WHEREOF, the parties have duly executed this Assignment by their
authorized representatives as of the date opposite their respective signatures.
NATIONAL FIBERSTOK CORPORATION THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ RM Miklas By:
----------------------------- ------------------------------
Title: PRESIDENT & CEO Title: VP
-------------------------- ---------------------------
Date: 12-21-95
----------------------------
<PAGE>
EXHIBIT I
---------
Exhibit I to that certain Assignment of Purchase Orders between THE CIT
GROUP/EQUIPMENT FINANCING, INC. and NATIONAL FIBERSTOK CORPORATION.
Purchase
Vendor Qty. Order No. Model Description
- ------ ---- --------- ----- -----------
<PAGE>
SECRETARY'S CERTIFICATE OF GUARANTOR
I, Scott P. Ebert, DO HEREBY CERTIFY to THE CIT/GROUP/EQUIPMENT
FINANCING, INC. that I am the Secretary of Assistant Secretary of DEC
INTERNATIONAL, INC., a corporation duly organized and existing under the laws
of the State of Delaware (the "Corporation"); that I am the keeper of the
corporate records, including, without limitation, the Charter, By-laws and
the minutes of the meetings of the Board of Directors of the Corporation;
that the following is a true, accurate and compared transcript of the
resolutions contained in the Minute Book of the Corporation, duly adopted by
the Board of Directors on Aug. 1, 1995, by unanimous written consent thereof
or at a meeting of the Board of Directors duly held thereon, at which time a
quorum was present and acted throughout; that the Corporation was authorized
to transact the business hereinafter described, and that said resolutions
have not been amended or rescinded, and are in full force and effect:
"WHEREAS, the Corporation will benefit by one or more loans, now, or
hereafter made by The CIT/Group Equipment Financing, Inc. ("CIT") to National
Fiberstok Corporation (the "Debtor"); and
WHEREAS, the Board of Directors has determined that it is to the benefit
and in the direct interest of the Corporation to guarantee the obligations of
Debtor arising out of the aforesaid loan or loans.
NOW THEREFORE, be it
RESOLVED, that any of the officers of the Corporation or their duly elected
or appointed successors in the office be and they are hereby authorized and
empowered in the name of and on behalf of the Corporation to guarantee to CIT
the obligations of Debtor in connection with said loan or loans; and be it
further
RESOLVED, that any officer of this Corporation be and is hereby authorized
to execute on behalf of the Corporation a guaranty of Debtor's obligations to
CIT and any and all other documents required by CIT and containing such terms
and conditions as such officer deems advisable; and be it further
RESOLVED, that all that any such officer shall have done or may do in
connection with the matters set forth above is hereby ratified, confirmed and
approved; and be it further
RESOLVED, that the foregoing resolutions shall remain in full force and
effect until written notice of their amendment or rescission shall have been
received by CIT and that receipt of such further notice shall not affect any
action taken prior thereto; and be it further
RESOLVED, that the Secretary of Assistant Secretary be and is hereby
authorized and directed to certify to CIT the foregoing resolutions and that the
provisions thereof are in conformity with the Charter an By-laws of the
Corporation."
I DO FURTHER CERTIFY that there are no restrictions imposed by the Charter
or By-laws of the Corporation restricting the power or authority of the Board of
Directors of the Corporation to adopt the foregoing resolutions or upon the
Corporation or its officers to act in accordance therewith.
I DO FURTHER CERTIFY that the following are names and specimen signatures
of officers of the Corporation empowered and authorized by the above
resolutions, each of whom has been duly elected to hold and currently holds the
office of the Corporation set forth opposite such officer's name:
NAME OFFICE SIGNATURE
---- ------ ---------
R.M.Miklas President /s/ RM Miklas
-------------
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of Dec., 1995.
/s/ Scott P. Ebert
-------------------------------
SECRETARY OR ASSISTANT SECRETARY OF
DEC INTERNATIONAL, INC.
"SEAL"
Page 1 OF 1
<PAGE>
EXHIBIT 10.2
LEASE AMENDMENT
This Agreement is made and entered into this 24th day of March, 1995, by
and between Dermody Industrial Group, a Nevada Joint Venture (hereinafter
referred to as "Landlord") and Transkrit Corporation, a New York Corporation
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant, entered into a Lease dated October 4,
1990, for the premises located at 855 Linda Way, Sparks, Nevada; and
WHEREAS, Landlord and Tenant desire to amend the above-mentioned Lease;
NOW, THEREFORE, said Lease is hereby amended so that the lease term shall
be extended for a three-year period, commencing on December 1, 1995, and
ending on November 30, 1998. The base monthly rent pursuant to Article 4.1 of
the lease shall be amended as follows:
December 1, 1995 - May 31, 1997: $12,788.55 per month; and
June 1, 1997 - November 30, 1998: $13,160.00 per month.
All other terms and conditions of the above-mentioned Lease shall remain
unchanged and in full force and effect throughout the term of the Lease.
Dermody Industrial Group, a Nevada Joint Venture
By: Dermody Properties, a Nevada Corporation
Managing Venturer
4/2/95 /s/ Michael C. Dermody
- --------- -------------------------------------------------
Date Michael C. Dermody, President
Transkrit Corporation, a New York Corporation
3/24/95 /s/ (unreadable)
- --------- -------------------------------------------------
Date
<PAGE>
DERMODY
PROPERTIES
INDUSTRIAL LEASE
[NET-NET-NET]
1. PARTIES. This LEASE, dated for reference purposes only, October 4, 1990,
----------------
is made by and between DERMODY PROPERTIES, a Nevada Corporation (herein
----------------------------------------
called "LANDLORD") and TRANSKRIT CORPORATION, A New York Corporation (herein
---------------------------------------------
called "TENANT").
2. PREMISES. LANDLORD hereby leases to TENANT AND TENANT leases from
LANDLORD for the term, at the rental, and upon all of the conditions set
forth herein, that certain real property situated in the City of Sparks,
------
County of Washoe, State of Nevada. commonly known as 855 Linda Way, Sparks,
------ ------ ----------------------
Nevada 89431 and described as 47,365 square feet of office warehouse space 76
- ------------ -----------------------------------------------
parking spaces for automobiles and use of the entire 4.74 acres as depicted
- ---------------------------------------------------------------------------
on Exhibit "A" attached hereto and by this reference made a part hereof.
- ------------------------------------------------------------------------
Known for tax purposes as Parcel 034-341-12
- -------------------------------------------
Said real property, including the land and all improvements thereon, is
herein called "the Premises".
3. TERM.
3.1 Term. The term of this LEASE shall be for five (5) years, commencing
--------------
on December 1, 1990 and ending on November 30, 1995, unless sooner terminated
---------------- -----------------
pursuant to any provision hereof.
3.2
3.3 Early Possession. In the event that LANDLORD shall permit TENANT to
occupy the Premises prior to the commencement date of the term, such
occupancy shall be subject to all of the provisions of this LEASE. Said early
possession shall not advance the termination date of this LEASE.
3.4 Delivery of Possession. TENANT shall be deemed to have taken
possession of the Premises when any of the following occur: (a) LANDLORD
delivers possession of the Premises to TENANT and a Certificate of Occupancy
is granted by the proper governmental agency.
4. RENT.
4.1 TENANT shall pay to LANDLORD as rent for the Premises equal monthly
installments of ELEVEN THOUSAND TWO HUNDRED EIGHTY AND NO/100 --- ($11,280.00)
------------------------------------------------- ------------
dollars, in advance, on the first day of each month of the term hereof,
TENANT shall pay LANDLORD upon the execution hereof the sum of TWENTY TWO
----------
THOUSAND FIVE HUNDRED SIXTY AND NO/100 --- ($22,560.00) dollars as rent for
- ------------------------------------------ ------------
the first and last month of the lease.
- --------------------------------------
Rent for any period during the term hereof which is for less than one (1)
month shall be a pro rata portion of the monthly installment. Rent shall be
payable without notice or demand and without any deduction, offset, or
abatement in lawful money of the United States of America to LANDLORD at the
address stated herein or to such other persons or at such other places as
LANDLORD may designate in writing. LANDLORD will put last month's rent in an
interest bearing account which bears interest at a rate equal to a five-year
Treasury Note. Income on that amount belongs to Transkrit Corporation and
will pay to Transkrit annually.
4.2 Additional Charges. This LEASE is what is commonly called a
"netlease", it being agreed that LANDLORD shall receive the rent set forth in
Article 4.1 free and clear of any and all impositions, taxes, real estate
taxes, liens, charges or expenses of any nature whatsoever in connection with
the ownership and operation of the Premises. In addition to the rent reserved
by Article 4.1, TENANT shall pay to the parties respectively entitled thereto
all impositions, insurance premiums, operating charges, maintenance charges,
construction costs, and any other charges, costs and expenses which arise or
may be contemplated under any provisions of this LEASE during the term
hereof. All such charges, costs and expenses shall constitute additional
charges, and upon the failure of TENANT to pay any of such costs, charges or
expenses, LANDLORD shall have the same rights and remedies as otherwise
provided in this LEASE for the failure of TENANT to pay rent. The TENANT
shall in no event be entitled to any abatement of or reduction in rent
payable hereunder, except as herein expressly provided.
5. USE.
5.1 Use. The Premises shall be used and occupied only for office,
-------
manufacturing of business forms and warehouse. LANDLORD represents that such
- ---------------------------------------------------------------------------
use is in compliance with zoning ordinances.
- --------------------------------------------
5.2 Compliance with Law. TENANT shall, at TENANT'S expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by TENANT of the Premises. TENANT shall not use or permit
the use of the Premises in any manner that will tend to create waste or a
nuisance, or, if there shall be more than one tenant of the building
containing the Premises, which shall tend to unreasonably disturb such other
tenants.
5.3 Condition of Premises. TENANT has had an opportunity to inspect and
hereby accepts the Premises, in their existing condition as of the date of
the possession hereunder, subject to all applicable zoning, municipal, county
and state laws, ordinances and regulations governing and regulating the use
of the Premises, and accepts this LEASE subject thereto and to all matters
disclosed thereby and by any exhibits attached hereto. TENANT acknowledges
that neither LANDLORD nor LANDLORD'S agent has made any representation or
warranty as to the suitability of the Premises for the conduct of the
TENANT'S business. ** See Articles 22 and 23, Addendum to Lease, Page 6.
5.4 Insurance Cancellation. Notwithstanding the provisions of Article 5.1
hereinabove, no use shall be made or permitted to be made of the Premises nor
acts done which will cause the cancellation of any insurance policy covering
said Premises or any building of which the Premises may be a part, and if
TENANT'S use of the Premises causes an increase in said insurance rates
TENANT shall pay any such increases.
(Page 1 * NET-NET-NET)
<PAGE>
6. MAINTENANCE, REPAIRS AND ALTERATIONS.
6.1 Tenant's Obligations. TENANT shall, during the term of this LEASE,
keep in good order, condition and repair, the Premises and every part
thereof, structural, or non-structural, and all adjacent sidewalks,
landscaping, driveways, parking lots, fences and signs located in the areas
which are adjacent to and included with the Premises. LANDLORD shall incur no
expense nor have any obligation of any kind whatsoever in connection with
maintenance of the Premises, and TENANT expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford TENANT the
right to make repairs at LANDLORD'S expense or to terminate this LEASE
because of LANDLORD'S failure to keep the Premises in good order, condition
and repair.
6.2 Surrender. On the last day of the term hereof, or on any sooner
termination. TENANT shall surrender the Premises to LANDLORD in good
condition, broom clean, ordinary wear and tear excepted. TENANT shall repair
any damage to the Premises occasioned by its use thereof, or by the removal
of TENANT'S trade fixtures, furnishings and equipment pursuant to Article
6.4(c), which repair shall include the patching and filling of holes and repair
of structural damage.
6.3 Landlord's Rights. If TENANT fails to perform TENANT'S obligations
under this Article 6, LANDLORD may at its option (but shall not be required
to) enter upon the Premises, after ten (10) days prior written notice to
TENANT, and put same in good order, condition and repair, and the cost
thereof together with interest thereon at the rate of eighteen percent (18%)
per annum shall become due and payable as additional rental to LANDLORD
together with TENANT'S next rental installment.
6.4 Alterations and Additions. LANDLORD has no right to perform work for
the account of TENANT if within the ten (10) day notice period TENANT
commences to have the work done and thereafter proceeds with due diligence to
cause it to be completed.
(a) Except for improvement shown on Exhibit "B" which LANDLORD has
approved, TENANT shall not, without LANDLORD'S prior written consent, make
any alterations, improvements, or additions, in, on or about the Premises,
except for non-structural alterations not exceeding $5,000.00 in cost. As a
condition to giving such consent, LANDLORD may require that TENANT remove any
such alterations, improvements, additions or utility installations at the
expiration of the term, and to restore the Premises to their prior condition.
(b) Before commencing any work relating to alterations, additions
and improvements affecting the Premises, TENANT shall notify LANDLORD in
writing of the expected date of commencement thereof. LANDLORD shall then
have the right at any time and from time to time to post and maintain on the
Premises such notices as LANDLORD reasonably deems necessary to protect the
Premises and LANDLORD from mechanics' liens, materialmen's liens or any other
liens. In any event, TENANT shall pay, when due, all claims for labor or
materials furnished to or for TENANT. TENANT shall not permit any mechanics'
or materialmen's liens attached or levied against the Premises for any labor
or material furnished to TENANT or claimed to have been furnished to TENANT
or to TENANT'S agents or contractors in connection with work of any character
performed or claimed to have been performed on the Premises by or at the
direction of TENANT. If any mechanic's liens are filed by persons engaged by
TENANT (or TENANT'S contractor) then TENANT will, within sixty (60) days of
the date when filed, cause the lien to be discharged by payment, bond or as
otherwise permitted by law.
(c) Unless LANDLORD requires their removal, as set forth in Article
6.4(a), all alterations, improvements or additions which may be made on the
Premises, shall become the property of LANDLORD and remain upon and be
surrendered with the Premises at the expiration of the term. Notwithstanding
the provisions of this Article 6.4(c), TENANT'S machinery, equipment and other
trade fixtures other than that which is affixed to the Premises so that it
cannot be removed without material damage to the Premises, shall remain the
property of TENANT and may be removed by TENANT subject to provisions of
Article 6.2. TENANT without further permission may remove any portions of the
air conditioning or trim systems which TENANT installed, provided TENANT
restores the building without material damage to the premises.
7. INSURANCE: INDEMNITY.
7.1 Insuring Party. As used in this Article 7, the term "insuring party"
shall mean the party who has the obligation to obtain the insurance required
hereunder. The insuring party in this case shall be TENANT. Whether the insuring
-------
party is the LANDLORD or the TENANT, TENANT shall, as additional rent for
Premises, pay the cost of all insurance required hereunder. If LANDLORD is
the insuring party TENANT shall, within ten (10) days following demand by
LANDLORD, reimburse LANDLORD for the annual cost of the insurance so obtained.
7.2 Liability Insurance. The TENANT shall obtain and keep in force
during the term of this LEASE a policy of comprehensive public liability
insurance insuring LANDLORD and TENANT against any liability arising out of
the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in an amount of not less than
$500,000.00 for injury to or death of one person in any one accident or
occurrence and in an amount of not less than $1,000,000.00 for injury to or
death of more than one person in any one accident or occurrence. Such
insurance shall further insure LANDLORD and TENANT against liability for
property damage or at least $500,000.00. The limits of said insurance shall
not, however, limit the liability of TENANT hereunder. In the event that the
Premises constitute a part of a larger property said insurance shall have a
LANDLORD'S Protective Liability endorsement attached thereto. If the TENANT
shall fail to procure and maintain said insurance the LANDLORD may, but shall
not be required to, procure and maintain the same, but at the expense of
TENANT.
7.3. Property Insurance. See Amendment. The insuring party shall obtain
and keep in force during the term of this LEASE a policy or policies of
insurance covering loss or damage to the Premises, in the amount of full
replacement value thereof, providing protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk) and sprinkler leakage. If
TENANT elects LANDLORD to be insuring party (per Article 7.1 hereinabove)
then TENANT shall be responsible for payment of any deductible amount under
LANDLORD'S policy. Said insurance shall provide for payment for loss
thereunder to LANDLORD or to the holder of a first mortgage or deed of trust
on the Premises. If the insuring party shall fail to procure and maintain
said insurance the other party may, but shall not be required to, procure and
maintain the same, but at the expense of TENANT.
7.4 Insurance Policies. See Amendment. Insurance required hereunder
shall be in companies rated A+, AAA or better in "Beal's Insurance Guide".
The insuring party shall deliver prior to possession to the other party
copies of policies of such insurance or certificate evidencing the existence
and amounts of such insurance with loss payable clauses satisfactory to
LANDLORD. No such policy shall be cancellable or subject to reduction of
coverage or other modifications except after ten (10) days prior written
notice to LANDLORD. If TENANT is the insuring party, TENANT shall, within ten
(10) days prior to the expiration of such policies, furnish LANDLORD with
renewals or "binders" thereof, or LANDLORD may order such insurance and
charge the cost thereof to TENANT, which amount shall be payable by TENANT
upon demand. TENANT shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in Article 7.3. TENANT shall
forthwith, upon LANDLORD'S demand, reimburse LANDLORD for any additional
premiums attributable to any act or omission or operation of TENANT causing
such increases in the cost of insurance. If LANDLORD is the insuring party,
and if the insurance policies maintained hereunder cover other improvements
in addition to the Premises, LANDLORD shall deliver to TENANT a written
statement setting forth the amount of any such insurance cost increase and
showing in reasonable detail the manner in which it has been computed.
7.5 Waiver of Subrogation. TENANT and LANDLORD each waives any and all
rights against the other, or against the officers, employees, agents and
representatives of the other, for loss of or damage to such waiving party or
its property of others under its control, where such loss or damage is
insured against under an insurance policy in force at the time of such loss
or damage. TENANT and LANDLORD shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carriers that the
foregoing mutual waiver of subrogation is contained in this LEASE.
7.6 Hold Harmless. TENANT shall indemnify, defend and hold LANDLORD, its
officers, directors and partners harmless from any and all claims arising
from TENANT'S use of the Premises or from the conduct of its business or from
any activity, work or things which may be permitted or suffered by TENANT in
or about the Premises and shall further indemnify, defend and hold LANDLORD,
its officers, directors and partners harmless from and against any and all
claims arising from any breach or default in the performance of any
obligation on TENANT'S part to be performed under the provisions of this
LEASE or arising from any negligence of TENANT or any of its agents,
contractors, employees or invitees and from any and all costs, attorney's
fees, expenses and liabilities incurred in the defense of any such claim or
any action or proceeding brought thereon. TENANT hereby assumes all risk of
damage to property or injury to persons in or about the Premises from any
cause, and TENANT hereby waives all claims in respect thereof against
LANDLORD, excepting where said damage arises out of negligence of LANDLORD,
its officers, directors and partners.
7.7 Exemptions of Landlord From Liability. TENANT hereby agrees that
LANDLORD shall not be liable for injury to TENANT'S business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of TENANT, TENANT'S employees, invitees, customers, or any other
person in or about the Premises; nor, unless through its negligence shall
LANDLORD be liable for injury to the person of TENANT, TENANT'S employees,
agents or contractors and invitees, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether the said damage or injury results from conditions
arising upon (the Premises or upon other portions of the building of which
the Premises are a part, or from other sources or places, and regardless of
whether the cause of such damage or injury or the means of repairing the same
is inaccessible to LANDLORD or TENANT. LANDLORD shall not be liable for any
damages arising from any act or neglect of any other tenant, if any, of the
building in which the Premises are located.
8. DAMAGE OR DESTRUCTION.
8.1 In the event the improvements on the Premises are damaged or
destroyed, partially or totally, from any cause whatsoever, whether or not
such damage or destruction is covered by any insurance required to be
maintained under Article 7, the TENANT shall repair, restore, and rebuild the
Premises to their condition existing immediately prior to such damage or
destruction and this LEASE shall continue in full force and effect. Such
repair, restoration and rebuilding (all of which are herein called "repair")
shall be commenced within a reasonable time after such damage and destruction
and shall be diligently prosecuted to completion. There shall be no
abatement of rent or any other obligation of TENANT hereunder by reason of
such damage or destruction. The proceeds of any insurance maintained under
Article 7.3 shall be made available to TENANT for payment of the cost and
expense of the repair, provided, however, that such pro-
(PAGE 2 * NET-NET-NET)
<PAGE>
ceeds may be made available to TENANT subject to reasonable conditions
including, but not limited to, architect's certificate of costs and retention
of a percentage of such proceeds pending final notice of completion. In the
event that the insurance proceeds are insufficient to cover the cost of
repair, then any amount in excess thereof required to complete the repair
shall be paid by TENANT.
8.2 Damage Near End of Term. If the Premises are partially destroyed or
damaged during the last twelve (12) months of the term of this LEASE,
LANDLORD or TENANT may cancel and terminate this LEASE as of the date of
occurrence of such damage by giving written notice to do so within thirty
(30) days after the date of occurrence of such damage. If LANDLORD or TENANT
elects to terminate, TENANT has right to cancel such notice, provided TENANT
then elects to purchase, or if the damage occurs during the initial term, to
renew.
9. REAL PROPERTY TAXES.
9.1 Payment of Taxes. TENANT shall pay all real property taxes applicable
to the Premises during the term of this LEASE. All such payments shall be made
at least ten (10) days prior to the date due for such payment. TENANT shall
promptly furnish LANDLORD with satisfactory evidence that such taxes have
been paid. If any such taxes paid by TENANT shall cover any period of the
time prior to or after the expiration of the term hereof, TENANT'S share of
such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this LEASE shall be in effect, and,
LANDLORD shall reimburse TENANT to the extent required. If TENANT shall fail
to pay any such taxes, LANDLORD shall have the right to pay the same, in
which case TENANT shall repay such amount to LANDLORD with TENANT'S next rent
installment together with interest at the rate of eighteen (18%) percent per
annum.
9.2 Definition of "Real Property" Taxes. As used herein, the term "real
property tax" shall include any form of assessment, license fee, rent tax,
levy, penalty, or tax (other than inheritance or estate taxes), imposed by
any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement district thereof, as against any legal or
equitable interest of LANDLORD in the Premises or in the real property of
which the Premises are a part, as against LANDLORD'S right to rent or other
income therefrom, or as against LANDLORD'S business of leasing the Premises,
and TENANT shall pay any and all charges and fees which may be imposed by the
EPA or other similar government regulations or authorities.
9.4 Personal Property Taxes.
(a) TENANT shall pay prior to the date due all taxes assessed against
and levied upon leasehold improvements, trade fixtures, furnishings, equipment
and all other personal property of TENANT contained in the Premises or
elsewhere. TENANT shall cause said leasehold improvements, trade fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of LANDLORD.
(b) If any of TENANT'S said personal property shall be assessed with
LANDLORD'S real property, TENANT shall pay LANDLORD the taxes attributable to
TENANT within ten (10) days after receipt of a written statement setting forth
the taxes applicable to TENANT'S property.
10. UTILITIES. TENANT shall pay for all water, gas, heat, light, power,
telephone, sewer, refuse disposal, and other utilities and services suppled to
the Premises, together with any taxes thereon. If any such services are not
separately metered to TENANT, TENANT shall pay a reasonable proportion to be
determined by LANDLORD of all charges jointly metered with other premises.
11. ASSIGNMENTS AND SUBLETTING.
11.1 Landlord's Consent Required. TENANT shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer
or encumber all or any part of TENANT'S interest in this LEASE or in the
Premises without LANDLORD'S prior written consent, which LANDLORD shall not
unreasonably withhold or delay. Any attempted assignment, transfer, mortgage,
encumbrance, or subletting without such consent shall be void and shall
constitute a breach of the LEASE. Any transfer of TENANT'S interest in this
LEASE or in the Premises from TENANT by merger, consolidation, or
liquidation, or by any subsequent change in the ownership of thirty (30%)
percent or more of the capital stock of TENANT shall be deemed a prohibited
assignment within the meaning of this Article 11. TENANT has the right to
assign or sublet on notice to LANDLORD (but without any requirement for
consent) to any subsidiary of Transkrit or any other direct or indirect
subsidiary of Maclean Hunter.
11.2 No Release of Tenant. Regardless of LANDLORD'S consent, no
subletting or assignment shall release TENANT of TENANT'S obligations to pay
the rent and to perform all other obligations to be performed by TENANT
hereunder for the term of this LEASE. The acceptance of rent by LANDLORD from
any other person shall not be deemed to be a waiver by LANDLORD of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting.
12. DEFAULTS; REMEDIES.
12.1 Defaults. The occurrence of any one or more of the following
events shall constitute a default and breach of this LEASE by TENANT:
(b) The failure by TENANT to make any payment of rent or any
other payment required to be made by TENANT hereunder, as and when due, where
such failure shall continue for a period of five (5) days after written
notice thereof from LANDLORD to TENANT.
(c) The failure by TENANT to observe or perform any of the
covenants, conditions or provisions of this LEASE to be observed or performed
by TENANT other than described in Paragraph (b) above, where such failure
shall continue for a period of fifteen (15) days after written notice thereof
from LANDLORD to TENANT provided, however, that if the nature of TENANT'S
default is such that more than fifteen (15) days are reasonably required for
its cure, then TENANT shall not be deemed to be in default if TENANT
commenced such cure within said fifteen (15) day period and thereafter
diligently prosecutes such cure to completion.
(d) (i) The making by TENANT of any general assignment, or
general arrangement for the benefit of creditors; (ii) the filing by or
against TENANT of a petition to have TENANT adjudged a bankrupt or a petition
for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against TENANT, the same is dismissed
within sixty (60) days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of TENANT'S assets located at the
Premises or of TENANT'S interest in this LEASE, whose possession is not
restored to TENANT within thirty (30) days; or (iv) the attachment, execution
or other judicial seizure of substantially all of TENANT'S assets located at
the Premises or of TENANT'S interest in this LEASE, where such seizure is not
discharged within thirty (30) days.
12.2 Remedies in Default. In the event of any such material default
or breach by TENANT, LANDLORD may at any time thereafter, with or without
notice or demand and without limiting LANDLORD in the exercise of any right
or remedy which LANDLORD may have by reason of such default or breach:
(e) Terminate TENANT'S right to possession of the Premises by any
lawful means, in which case this LEASE shall terminate and TENANT shall
immediately surrender possession of Premises to LANDLORD. In such event
LANDLORD shall be entitled to recover from TENANT all damages incurred by
LANDLORD by reason of TENANT'S default including, but not limited to, the
cost of recovering possession of the Premises: expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorney's fees, and any real estate commission actually paid; the worth at
the time of award by the court having jurisdiction thereof of the amount by
which the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that TENANT proves
could be reasonably avoided; and that portion of the leasing commission paid
by LANDLORD applicable to the unexpired terms of this LEASE. Unpaid
installments of rent or other sums shall bear interest from the date due at
the rate of eighteen (18%) percent per annum. In the event TENANT shall have
abandoned the Premises, LANDLORD shall have the option of (i) retaking
possession of the Premises and recovering from TENANT the amount specified in
this Article 12.2(a) or (ii) proceeding under Article 12.2(b).
(b) Maintain TENANT'S right to possession, in which case this
LEASE shall continue in effect whether or not TENANT shall have abandoned the
Premises. In such event, LANDLORD shall be entitled to enforce all of
LANDLORD'S rights and remedies under this LEASE, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
LANDLORD under the laws or judicial decisions of the State in which the
Premises are located.
(d) In the event this LEASE terminates by reason of LANDLORD'S
re-entry under the terms and covenants contained in this LEASE or by the
ejectment of TENANT by summary proceedings or otherwise, or after the
abandonment of the premises by TENANT, or for any other reason, it is hereby
agreed TENANT shall remain liable and shall pay in monthly installments the
rent which accrues subsequent to any such transaction. TENANT expressly
agrees to pay as damages for the breach of the covenants herein contained, the
difference between the rent due hereunder and the rent collected and
received, if any, by LANDLORD during the remainder of the unexpired term of
this LEASE. Such difference or deficiency, if any, shall become due and
payable in monthly payments during the remainder of the unexpired term, as
the amounts of such difference or deficiency shall from time to time be
ascertained and written notice thereof given to TENANT at its last known
address. Unless otherwise specifically acknowledged by LANDLORD, in writing,
no exercise of rights hereunder by LANDLORD shall be deemed an acceptance of
surrender of the premises or a termination of TENANT'S liability for payment
of money due hereunder.
(PAGE 3 - NET-NET-NET)
<PAGE>
12.3 Default by Landlord. LANDLORD shall not be in default unless
LANDLORD fails to perform obligations required of LANDLORD within a reasonable
time, but in no event later than thirty (30) days after written notice by TENANT
to LANDLORD and to the holder of any first mortgage or deed of trust covering
the Premises whose name and address shall have theretofore been furnished to
TENANT in writing, specifying wherein LANDLORD has failed to perform such
obligation; provided, however, that if the nature of LANDLORD'S obligation is
such that more than thirty (30) days are required for performance then LANDLORD
shall not be in default if LANDLORD commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
12.4 Late Charges. TENANT hereby acknowledges that late payment by
TENANT to LANDLORD of rent and other sums due hereunder will cause LANDLORD to
incur costs not contemplated by this LEASE, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
LANDLORD by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from TENANT shall
not be received by LANDLORD or LANDLORD'S designee within twenty (20) days after
written notice that said amount is past due, then TENANT shall pay to LANDLORD a
late charge equal to eighteen (18%) percent per annum from the due date of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the cost LANDLORD will incur by reason of late
payment by TENANT. TENANT shall pay all costs incurred by LANDLORD including
reasonable attorney's fees within fifteen (15 days).
13. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold by LANDLORD under the threat of the exercise of
said power (all of which is herein referred to as "condemnation"), this LEASE
shall terminate as to the part so taken as of the date of condemning authority
takes title or possession, whichever occurs first. If more than twenty-five
(25%) percent of the floor area of any building on the Premises, or more than
fifty (50%) percent of the land area of the Premises not covered with buildings,
is taken by condemnation, either LANDLORD or TENANT may terminate this LEASE as
of the date the condemning authority takes possession by notice in writing of
such election within twenty (20) days after LANDLORD shall have notified TENANT
of the taking or, in the absence of such notice, then within twenty (20) days
after the condemning authority shall have taken possession.**
If this LEASE is not terminated by either LANDLORD or TENANT then it shall
remain in full force and effect as to the portion of the Premises remaining,
provided the rental shall be reduced in proportion to the floor area of the
buildings taken within the Premises as bears to the total floor area of all
buildings located on the Premises. In the event this LEASE is not so terminated
then LANDLORD agrees, at LANDLORD'S sole cost, to as soon as reasonably possible
restore the Premises to a complete unit of like quality and character as existed
prior to the condemnation. All awards for the taking of any part of the Premises
or any payment made under the threat of the exercise of the power of eminent
domain shall be the property of LANDLORD, whether made as compensation for the
diminution of value of the leasehold or for the taking of the fee or as
severance damages; provided, however, that TENANT shall be entitled to any award
for loss or damage to TENANT'S trade fixtures and removable personal property.
In addition the purchase price of the premises upon the exercise of an Option to
Purchase shall be reduced by an amount equal to the condemnation award to
LANDLORD for diminution in value of the Premises. Any other award including but
not limited to any award for loss or damage to TENANT'S trade fixtures and
removable personal property shall NOT be deducted from the purchase price.
14. GENERAL PROVISIONS
14.1 Offset Statement.
(a) TENANT shall at any time upon not less than ten (10) days prior
notice from LANDLORD execute, acknowledge and deliver to LANDLORD a statement in
writing (i) certifying that this LEASE is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this LEASE, as so modified, is in full force and effect) and the date to
which the rent, security deposit, and other charges are paid in advance, if any,
and (ii) acknowledging that there are not, to TENANT'S knowledge, any uncured
defaults on the part of LANDLORD hereunder, or specifying such defaults, if any,
which are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.
(b) TENANT'S failure to deliver such statement within such time
shall be conclusive upon TENANT (i) that this LEASE is in full force and effect,
without modification except as may be represented by LANDLORD, (ii) that there
are no uncured defaults in LANDLORD'S performance, and (iii) that not more than
one (1) month's rent has been paid in advance.
(c) If LANDLORD desires to finance or refinance the Premises, or
any part thereof, TENANT hereby agrees to deliver to any lender designated by
LANDLORD such financial statements of TENANT as may be reasonably required by
such lender. Such statements shall include the past three (3) years' financial
statements of TENANT. All such financial statements shall be received by
LANDLORD in confidence and shall be used only for the purposes herein set forth.
14.2 Landlord's Interests. The term "LANDLORD" as used herein shall mean
only the owner or owners at the time in question of the fee title or a TENANT'S
interest in a ground lease of the Premises. In the event of any transfer of such
title or interest, LANDLORD herein named (and in the case of any subsequent
transfers the then grantor) shall be relieved from and after the date of such
transfer of all liability as respects LANDLORD'S obligations thereafter to be
performed, provided that any funds in the hands of LANDLORD or the then grantor
at the time of such transfer, in which TENANT has an interest, shall be
delivered to the grantee. The obligations contained in this LEASE to be
performed by LANDLORD shall, subject as aforesaid, be binding on LANDLORD'S
successors and assigns, only during their respective periods of ownership.
14.3 Severability. The invalidity of any provision of this LEASE, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
14.4 Interest on Past Due Obligations. Except as expressly herein
provided, any amount due to LANDLORD and not paid when due shall bear interest
at eighteen (18%) percent per annum from the date due. Payment of such interest
shall not excuse or cure any default by TENANT under this LEASE.
14.5 Time of Essence. Time is of the essence.
14.6 Captions. Article and paragraph captions are not a part hereof and
are included solely for reference purposes.
14.7 Incorporation of Prior Agreements. Amendments to this LEASE contain
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This LEASE may be modified in writing only, signed by the parties in
interest at the time of modification.
14.8 Waivers. No waiver by LANDLORD of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
TENANT of the same or any other provision. LANDLORD'S consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of LANDLORD'S
consent to or approval of any subsequent act by TENANT. The acceptance of rent
hereunder by LANDLORD shall not be a waiver of any preceding breach by TENANT of
any provision hereof, other than the failure of TENANT to pay the particular
rent so accepted, regardless of LANDLORD'S knowledge of such preceding breach at
the time of acceptance of such rent.
14.9 Recording. TENANT shall be allowed to record a short form
Memorandum of Lease in recordable form with notarized signatures.
14.10 Holding Over. If TENANT remains in possession of the Premises or
any part thereof after the expiration of the term hereof with the express
written consent of LANDLORD, such occupancy shall be a tenancy from month to
month at a rental in the amount of the last monthly rental plus all other
charges payable hereunder, and upon the terms hereof applicable to month-to-
month tenancy.
14.11 Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive, but shall wherever possible, be cumulative with all other
remedies at law or in equity.
14.12 Covenants and Conditions. Each provision of this LEASE performable
by TENANT shall be deemed both a covenant and a condition.
14.13 Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by TENANT this LEASE shall bind the
parties, their personal representatives, successors, and assigns. This LEASE
shall be governed and enforced according to the laws of the state where the
Premises are located.
14.14 Subordination.
(a) This LEASE, at LANDLORD'S option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
now or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, TENANT'S right to quiet possession of the
Premises shall not be disturbed if TENANT is not in default and so long as
TENANT shall pay the rent and observe and perform all the provisions of this
LEASE, unless this LEASE is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this LEASE prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to TENANT, this LEASE shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this LEASE is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) TENANT agrees to execute any documents required to effectuate
such subordination subject to such non-disturbance or to make this LEASE prior
to the lien of any mortgage, deed of trust or ground lease, as the case may be,
and failing to do so within ten (10) days after written demand, does hereby
make, constitute and irrevocably appoint LANDLORD as TENANT'S attorney in fact
and in TENANT'S name, place and stead, to do so.
14.15 Attorney's Fees. If either party named herein brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled in addition to all costs
and expenses incurred, to his reasonable attorney's fees to be paid by the
losing party as fixed by the court.
(PAGE 4 * NET_NET_NET)
**TENANT shall receive a prorata share of any condemnation award based on the
value of the premises condemned versus the value of TENANT's improvement
condemned in the same proceedings. The schedule of TENANT's improvements is
attached as Exhibit "B".
<PAGE>
14.16 Landlord's Access. LANDLORD and LANDLORD'S agents shall have the
right to enter the Premises at reasonable times for the purpose of inspecting
the same, showing the same to prospective purchasers, or lenders. LANDLORD may
at any time place on or about the Premises any ordinary "For Sale" and/or
identification signs and LANDLORD may at any time during the last one hundred
twenty (120) days of the term hereof place on or about the Premises any ordinary
"For Sale or Lease" signs, all without rebate of rent or liability to TENANT.
Access should be only (except in the case of an emergency) on reasonable prior
notice during normal business hours, and if requested in the company of a
representative of TENANT.
14.17 Auctions. TENANT shall not place any auction sign upon the
Premises or conduct any action thereon without LANDLORD'S prior written consent.
14.18 Merger. The voluntary surrender of this LEASE by TENANT, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of LANDLORD, terminate all or any existing subtenancies or may, at the option of
LANDLORD, operate as an assignment to LANDLORD of any or all of such
subtenancies.
14.19 Corporate Authority. If TENANT is a corporation, each individual
executing this LEASE on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this LEASE on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this LEASE is binding upon said corporation in accordance
with its terms.
14.20 Landlord's Liability. If LANDLORD is a limited partnership,
the liability of the partners of the LANDLORD pursuant to this LEASE shall be
limited to the assets of the partnership; and TENANT, its successors and
assigns hereby waive all rights to proceed against any of the partners, or
the officers, shareholders, or directors or any corporate partner of LANDLORD
except to the extent of their interest in the partnership. The term
"LANDLORD", as used in this Article, shall mean only the owner or owners at
the time in question of the fee title or its Interest in a ground lease of
the Premises, and in the event of any transfer of such title or Interest,
LANDLORD herein named (and in case of any subsequent transfers the then
grantor) shall be relieved from and after the date of such transfer of all
liability as respects LANDLORD'S obligations thereafter to be performed,
provided that any funds in the hands of LANDLORD or the then grantor at the
time of such transfer, in which TENANT has an Interest, shall be delivered to
the grantee. The obligations contained in this LEASE to be performed by
LANDLORD shall, subject as aforesaid, be binding on LANDLORD'S successors and
assigns, only during their respective periods of ownership.
15. BROKERS. The parties hereto acknowledge that ---NONE----
were the real estate brokers that represented the parties herein, and that no
other commissions are due to any brokers whatsoever, other than the abovenamed
brokers.
16. NOTICES. Whenever under this LEASE provision is made for any demand,
notice or declaration of any kind, or where it is deemed desirable or
necessary by either party to give or serve any such notice, demand or
declaration to the other party, it shall be in writing and served either
personally or sent by United States mail, postage prepaid, addressed at the
addresses set forth herein below. Written notice shall be by certified or
registered mail or by air courier, and five (5) days after mailing or
delivery to the courier that such such notice is deemed effective.
17. SIGNS. TENANT'S signs shall be made and installed at TENANT'S sole
cost. TENANT shall be responsible for maintenance of its signs, including its
removal upon termination of this LEASE, all in a manner satisfactory to
LANDLORD. If maintenance is not performed properly and in a timely manner,
LANDLORD may at its option, perform such maintenance and the cost thereof
shall be charged to TENANT.
No advertisement, sign, lettering, notice or device shall be placed in or
upon premises including windows, walls, and exterior doors except such as may
be approved in writing by LANDLORD.
To LANDLORD at P.O. Box 7098
------------------------------------------------------
Reno, Nevada 89510
------------------------------------------------------
ATTN: President
To TENANT at P.O. Box 500
------------------------------------------------------
Brewster, New York 10509-0500
------------------------------------------------------
ADDITIONAL COPY TO: Moses & Singer
The Time and Life Building
1271 Avenue of the Americas
New York, New York 10020
Mr. Steve Mollath
One East Liberty Street, Suite 600
Reno, Nevada 89501
See Addendum to Lease, Page 6, attached hereto and by this reference made a part
hereof.
The parties hereto have executed this LEASE at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Reno, Nevada DERMODY PROPERTIES
---------------------- ----------------------------------
on 10-15-90 By /s/ Michael C. Dermody
------------------------------- -------------------------------
By Michael C. Dermody, President
-------------------------------
"LANDLORD"
Executed at Brewster, New York 10509 TRANSKRIT CORPORATION
---------------------------- ------------------------------
on October 10, 1990 By illegible
----------------------------------- ------------------------------
By
------------------------------
"TENANT"
(PAGE 5 -NET-NET-NET)
<PAGE>
ADDENDUM TO LEASE
This Addendum to Lease is dated September 27, 1990, by and between
DERMODY PROPERTIES (herein referred to as LANDLORD), and TRANSKRIT CORPORATION,
(herein referred to as TENANT).
18. RENT ABATEMENT shall be given prior to December 1, 1990.
19. OPTION TO RENEW. TENANT is hereby given the Option to Renew said LEASE
for an additional three-year period beginning December 1, 1995, and ending
November 30, 1998, provided TENANT gives LANDLORD eight (8) months prior written
notice of its intention to exercise this option or cancel. This Option period
shall be subject to an increase in rent to 28-cents- per square foot, i.e.,
THIRTEEN THOUSAND ONE HUNDRED SIXTY AND NO/100 ($13,160.00) per month.
20. OPTION TO PURCHASE. TENANT is hereby given the Option to Purchase the
premises at the end of the five-year LEASE term provided TENANT is not in
default of said LEASE and TENANT gives LANDLORD eight (8) months prior
written notice of its intention to exercise said Option. The purchase of the
premises shall be $1,700,000 cash. In addition, TENANT is given a second
Option to Purchase the premises at the end of the eight-year period of this
Lease in the event TENANT exercises such option as provided in Article 19
above, provided TENANT is not default of said Lease, and provided TENANT
gives LANDLORD eight (8) months prior written notice of its intention to
exercise said Option. The purchase of the premises shall be $1,825,000 cash.
a) The escrow agent in the event of TENANT'S exercise of its option to
purchase shall be 1st Commercial Title, Inc., in Reno, Nevada, unless designated
otherwise in writing by LANDLORD.
b) Closing shall coincide with the termination of this lease and shall
take place in Reno, Nevada.
c) LANDLORD shall deliver to TENANT the premises "AS IS" at the time of
closing with a warranty deed in return for full payment of the purchase price of
$1,700,000.00 at five years or $1,825,000.00 at eight years.
d) LANDLORD will place no liens or encumbrances upon the premises except
easements for public utilities, those encumbrances shown in the preliminary
title report dated March 21, 1990 from 1st Commercial Title, Inc., or as maybe
satisfied from the sale proceeds, and shall deliver marketable and insurable (at
normal rates) title to the premises subject only to any utilities easements and
the items mentioned in the above preliminary title report. The two parcels
constituting the premises shall be insured as being contigious.
e) Should LANDLORD fail to convey the premises after TENANT has tendered
complete performance, Tenant shall have available to it all claims and actions
under the law including specific performance and claims for damages.
f) Closing costs shall be paid for by the parties in the following way:
1) LANDLORD - the cost of preparing the Grant, Bargain and Sale Deed;
the cost of the CLTA Owner's Title Policy; the real property transfer taxes or
documentation taxes; 1/2 the cost of preparing and recording any releases or
other documents necessary to convey the premises; 1/2 of any escrow or closing
fees charged by Escrow Agent; Seller's Attorney's fees and any other similar
costs of closing customarily paid by a seller of real property.
2) TENANT - the recording fee for the Grant Bargain and Sale Deed;
1/2 of any escrow or closing fees charged by the escrow agent; 1/2 the cost of
preparing and recording any releases or other documents necessary to convey the
premises; TENANT'S attorney fees and any other similar closing costs customarily
paid by a purchase of real property.
21. FOR PURPOSES of Articles 19 and 20 above, default shall mean a default
that remains after the lapse of any notice and grace period and exists at the
time the notice of exercise of the option is given.
22. CONTINGENCY. It is understood and agreed that this Lease is contingent
upon TRANSKRIT CORPORATION successfully securing a Special Use Permit to conduct
its business from the local governmental authority no later than December 1,
1990.
23. LANDLORD warrants that the air-conditioning units shall be in good
working order upon occupancy.
24. TENANT may verify the actual square footage of the facility to the
satisfaction of LANDLORD, and rent will be adjusted accordingly.
LANDLORD: TENANT:
DERMODY PROPERTIES TRANSKRIT CORPORATION
By: /s/ Michael C. Dermody By: illegible
----------------------------- -------------------
Michael C. Dermody, President
(Page 6* Net-Net-Net)
<PAGE>
EXHIBIT "B"
TENANT IMPROVEMENTS
1. Power will be a 1600 amps, 480 volt system.
2. Additional HVAC with humidifiers.
3. Paper trim system.
4. Modify dock door systems.
5. Interior walls installed by Tenant.
(Page Seven * Net-Net-Net)
<PAGE>
EXHIBIT 10.3
[LETTERHEAD]
June 23, 1995
David M. Lajoie, Vice President Finance
LABEL ART
One Riverside Way
Wilton, New Hampshire, 03086
RE: Lease Agreement for 20,000 square feet
5721 South Zero Street
Fort Smith, Arkansas
Dear Mr. Lajoie:
After reviewing your proposal regarding the continued lease of the above
property, we are renewing the above lease, which has an end date (as amended)
of December 31, 1995, with the option to renew for an additional two years
through December 31, 1997. Renewal will be based on renegotiation of the
existing terms. Total square footage leased remains 20,000 and monthly rent
is $2,400.
If this arrangement is acceptable to you, please sign the original of
this letter and return it to us.
If there are any questions, please do not hesitate to give me a call.
Sincerely,
/s/ PAUL W. STIEGLER, JR.
Paul W. Stiegler, Jr.
Vice President & General Manager
Fort Smith
PWSJr/crm
By: /s/ DAVID M. LAJOIE
Label Art
Date: 7/11/95
[FOOTER]
<PAGE>
[LETTERHEAD]
November 14, 1988
Paul W. Stiegler, Jr., President
R. H. Buhrke Co., Inc.
Division of Klein Tools, Inc.
c/o Jimmie Taylor, Realtors
P. O. Box 3409
Fort Smith, Arkansas 72913
Dear Paul:
In connection with our Lease Agreement for property at 5721 South Zero Street
dated September 1, 1988, we understand that the 2,500 square feet (not
currently covered under the lease) have become available for use. We wish to
lease this additional place.
We propose to amend the Lease Agreement, effective November 1, 1988, to
incorporate the additional 2,500 square feet, bringing the total square
footage to 20,000 and the monthly rent to $2,400. All other terms of the
Lease Agreement will remain unchanged.
If this arrangement is acceptable to you, please sign the original of this
letter and return to us, at which time we will send a check covering the
additional rent from November 1, 1988.
Very truly yours,
/s/ DONALD L. CRANE
Donald L. Crane
Vice President of Finance
DLC:ED
R. H. Buhrke Company, Inc.
Division of Klein Tools, Inc.
By /s/
Its President
Date 11/17/88
<PAGE>
LEASE AGREEMENT
THIS AGREEMENT made and entered into in Fort Smith, Arkansas, on this 1st
day of September, 1988, by and between Buhrke Co. - Division of Klein Tools,
hereinafter referred to as "Lessors", and Label Art, Inc., a corporation,
hereinafter referred to as "Lessee".
The Lessors and Lessee, for and in consideration of the mutual covenants,
conditions, agreements, and stipulations hereinafter contained, hereby agree
as follows:
1. Description of the Property: Lessors hereby lease to the Lessee
property located at 5721 South Zero, Fort Smith, Arkansas, more particularly
described as follows: This is the building that is on the East side of
entrance. The Lessee is to get 17,500 sq. ft. and the Lessor is keeping
2,500 sq. ft. in the Southeast corner of said building and Lessor is to
install a wire cage around this area. Access to this 2,500 sq. ft. area will
be limited to its own entry way from outside of the building if the Lessee so
desires at any time during the term of the lease.
The Lessors shall permit the Lessee to use an air compressor located on
the leased premises, and this air compressor shall be considered a fixture to
the building and part of the leased premises. The Lessor has given Lessee
permission to build a dock in front of the sixteen foot door and extend a
turn-around into the ball park. Also at the Southwest Corner the Lessee will
be permitted to install a concrete pad for a compactor.
2. Acceptance of the Property: At the commencement of the lease term,
the Lessee shall accept the building, improvements, equipment, and fixtures
on or in the leased premises, in their existing condition. No
representation, statement, or warranty, expressed or implied, has been made
by or on behalf of the Lessors as to such condition.
3. Term of Lease: The term of this lease shall be for Twenty-five (25)
months commencing September 1, 1988 and shall terminate on October 1, 1990.
<PAGE>
LEASE AGREEMENT Page 2
4. Option: The Lessee shall have the right of first refusal if the
Lessor decides to lease the building after the initial term.
5. Rent: Lessee shall pay to the Lessors the sum of Two Thousand One
Hundred Dollars ($2,100.00) per month, which shall be due and payable on the
first (1st) day of each month, commencing September 1, 1988. Lessee shall
pay to the Lessors the first and last month's rent prior to September 1,
1988. All payments of rent are to be made payable to Jimmie Taylor,
Realtors, P. O. Box 3409, Fort Smith, Arkansas, 72913.
6. Taxes: The real property taxes on the leased premises shall be paid
by the Lessors, but all personal property taxes due on the contents of the
leased premises or the result of any business conducted by the Lessee in the
leased premises shall be paid the Lessee. The Lessee shall not permit any
liens to be filed on the leased premises as a result of any tax liability
arising out of any business conducted by Lessee on the leased premises.
7. Insurance: Lessors shall keep and maintain all-risk property
insurance on the structure of the leased premises in the amount of at least
90% of the replacement cost of the building. Lessee shall obtain and keep in
force during the entire term of the lease, at their expense, a policy of
general public liability insurance, to which the Lessors shall be named as
co-insureds, with minimum limits of $250,000.00-$500,000.00. The Lessee
shall provide the Lessors with proof of insurance within thirty (30) days
after the execution of this lease agreement. The Lessee shall be responsible
for obtaining insurance, if it desires, covering its own equipment or other
personal property which may be stored on the leased premises. The Lessee
shall obtain a policy of workers' compensation insurance issued by a company
authorized to do business in the state of Arkansas, covering its
<PAGE>
LEASE AGREEMENT Page 3
employees on said premises and shall provide the Lessors with a certificate
of said coverage within thirty (30) days after execution of this lease
agreement.
8. Use of the Premises: The Lessee should satisfy itself that the use
of these premises is in conformance with all zoning regulations of the City
of Fort Smith, Arkansas, and the Lessors make no representation as to their
conforming use. The Lessee shall use these premises for the purposes of
printing and packaging products and related warehouse and office use. The
Lessee shall keep the entire leased premises, including walls, floors,
ceilings, and fixtures broom clean. ALL flammable material shall be stored
so as to reasonably avoid the risk of fire or explosion.
9. Damage or Destruction of Leased Premises and Untenantability: In
the event the leased premises are damaged or destroyed, the Lessors shall,
with the proceeds of such insurance as it has on the leased premises,
promptly repair and rebuild the demised premises. If the premises, or any
portion thereof, are made untenantable by fire, the elements, or other
casualty, rent for the leased premises, or affected portion thereof, shall
abate from the date of such casualty to restoration of tenantability. Lessor
shall restore same with all reasonable speed, and if Lessor does not restore
the premises or the affected portion thereof to tenantability within sixty
(60) days thereafter, Lessee may then terminate this lease. If the premises
are more than fifty percent (50%) destroyed by such casualty, either Lessor
or Lessee may terminate this lease unless Lessor is able to rebuild and
restore the Premises within ninety (90) days of such casualty. Rent shall
abate during such period of untenantability. The Lessors hereby agree that
no action shall be maintained by the Lessors or the Lessors' insurance
company against the Lessee in the event of said loss regardless of the cause
thereof, including Lessee's negligence, and that lessor shall cause the
relevant insurance policies to contain a waiver of subrogation clause to
evidence this release.
<PAGE>
LEASE AGREEMENT Page 4
10. Repairs and Maintenance: The Lessors shall be responsible for the
maintenance of the roof on the building and for any major maintenance
required to the outside of the structure or upon the electrical, plumbing,
gas, or air conditioning systems during the lease term, unless caused by the
fault of the Lessee. The Lessee shall give written notice to the Lessors of
the need of repairs specifying such repairs. The Lessee shall be responsible
for any and all minor maintenance necessary within the leased premises,
including the electrical, plumbing, gas, or air conditioning systems, or any
damage caused by the negligence or want of care of it by its employees, or
the public which it serves, and shall further be responsible for all
janitorial work required therein, as well as the maintenance of any glass
which is permanently a part of the leased premises. Lessee shall maintain
the leased premises in good condition, less ordinary wear and tear.
11. Utilities: The Lessee shall bear all utility expenses attributable
to the leased property and shall be responsible for all deposits required
thereby. The Lessee shall not permit any liens to be filed on the
leased property as a result of the nonpayment of any utility charges.
12. Assignment or Subletting: The Lessee shall not assign, mortgage,
or encumber this lease, nor sublet nor permit the lease of the property or any
part thereof to be used by others, without the prior written consent of the
Lessors in each instance, which shall not be unreasonably withheld.
13. Indemnification by Lessee: The Lessee covenants and agrees with
the Lessors that during the entire term of the lease and any extensions or
renewals thereof, the Lessee will indemnify and save harmless the Lessors
against any and all claims, debts, demands, or obligations which may be made
against the Lessors or
<PAGE>
LEASE AGREEMENT Page 5
against the Lessors' title in the premises, arising by reason of or in
connection with, any alleged act or omission of the Lessee or any person
claiming under, by, or through the Lessee; and if it becomes necessary for the
Lessors to defend any action seeking to impose such liability, the Lessee
will pay the Lessors all costs of court and attorneys' fees incurred by the
Lessors in affecting such defense in addition to any other sums which the
Lessors may be called upon to pay by reason of the entry of a judgment
against the Lessors in the litigation of which such claim is asserted.
Except, however, this article shall be subject to the provisions of article 9
concerning the non-liability of Lessee.
14. Default by Lessee: If the leased property shall be deserted or
vacated, or if proceedings are commenced against the Lessee in any Court
under a bankruptcy act or for the appointment of a trustee or receiver of the
Lessee's property either before or after the commencement of the lease term,
or if there shall be a default in the payment of rent or any part thereof for
more than fifteen (15) days after written notice of such default by the
Lessors, or if there shall be default in the performance of any other
covenant, agreement, condition, rule or regulation herein contained or
hereafter established on the part of the Lessee for more than fifteen (15)
days after written notice of such default by the Lessors, this lease (if the
Lessors so elect) shall thereupon become null and void, and the Lessors shall
have the right to reenter or repossess the leased property, either by force,
summary proceedings, surrender, or otherwise, and disposes and removes
therefrom the Lessee, or other occupants thereof, and their effects, without
being liable to any prosecution therefore. In such case, the Lessors may, at
their option, relet the leased
<PAGE>
LEASE AGREEMENT Page 6
property or any part thereof, as the agent of the
Lessee, and the Lessee shall pay the Lessors the difference between the rent
hereby reserved and agreed to be paid by the Lessee for the portion of the
term remaining at the time of reentry or repossession and the amount, if
any, received or to be received under such reletting for such portion of the
term. The Lessees hereby expressly waive the service of notice of intention
to renter or of instituting legal proceedings to that end. "The Lessee
waives and will waive all right to trial by jury in any summary proceeding
hereafter instituted by the Lessor against the Lessee in respect to the
leased property.
15. Corporate Resolution: This Lease shall be executed by Label Art,
Inc., 1 Riverside Way, Wilton, New Hampshire, 03086, by Mr. Thomas J. Cobery,
President. Label Art, Inc. shall provide the Lessors with a copy of a
corporation resolution executed by two (2) officers of the corporation,
authorizing this lease to be entered into and all the terms thereof by Thomas
J. Cobery. This shall be a condition precedent to the execution of the
Lease. A copy of the corporate resolution shall be attached to this lease as
Exhibit "A". Thomas J. Cobery further represents that he has the authority
to enter into this lease on behalf of of Label Art, Inc. and to bind the
corporation to the provisions enumerated herein.
16. Indemnification by Lessors: Lessors shall covenant and agree with
the Lessee that they are the owners of the property described herein and that
they have good right and title to lease and let same unto the Lessee and that
the building and other improvements of Lessors do not encroach on adjacent
property. Lessors covenant and agree that during the term hereof, so long as
Lessee shall not be in default herein, Lessee shall have and
<PAGE>
LEASE AGREEMENT Page 7
enjoy peaceful and quiet possession of the property described herein. In the
event the property described herein is subject to any mortgage at the
commencement of the term hereof, the Lessors shall cause the mortgagee to
deliver to the Lessee a written agreement whereby the said mortgagee agrees
to permit the Lessees to remain in possession during the term hereof so long
as the Lessee is not in default and further agreeing to and acknowledging the
rights of Lessee under this Lease Agreement.
WITNESS: Buhrke Co. - Division of Klein Tools
/s/ By /s/ PAUL W. STIEGLER, JR.
Its President
WITNESS: Label Art, Inc.
A Delaware Corporation
/s/ Evelyn B. Dudley By /s/ THOMAS J. COBERY
Its President
<PAGE>
EXHIBIT 10.4
OCCUPANCY AGREEMENT
OCCUPANCY AGREEMENT ("Agreement") made as of the 11th day of August,
1993, between GAILERD SMITH and EILEEN RUDER with an address of 27240
Altamont Road, Los Altos Hills, California 94002 (hereinafter called
"Landlord") and Short Run Labels, Inc., a Delaware corporation with an
address of 1681 Industrial Road, San Carlos, CA 94070 (hereinafter called
"Tenant").
WITNESSETH:
ARTICLE I
SECTION 1.1. THE PREMISES. The Premises consist of the Building and
Property commonly known and numbered 1681-1687 Industrial Road, San Carlos,
California.
SECTION 1.2. OCCUPANCY OF THE PREMISES. Landlord hereby grants to
Tenant the exclusive right to occupy the Premises, subject to the terms and
provisions of this Agreement.
ARTICLE II
SECTION 2.1. TERM. TO HAVE AND TO HOLD on a month to month basis
commencing as of the date hereof until terminated by Tenant. At time of
termination, Tenant shall either vacate the Premises or shall execute the
Lease contemplated by the Stock for Cash Purchase Agreement dated July 30,
1993 (the "Purchase Agreement") by and among the Landlord, Far West
Marketing, Inc. and Label Art, Inc. Notwithstanding the above, this Agreement
and Tenant's occupancy hereunder shall terminate no later than sixty (60)
days after Tenant's acceptance of the Phase II Study contemplated by Section
8.5 of the Purchase Agreement or, in the event Tenant does not accept such
Phase II Study, no later than one hundred and fifty (150) days after Tenant
declines to so accept such Phase II Study. This Agreement may be terminated
effective the last day of any calendar month upon written notice given by
Tenant to Landlord at the address set forth above (or at such other address
as the Landlord may designate in writing) before the first day of the
calendar month at the end of which the Tenant desires to terminate this
Agreement.
ARTICLE III
SECTION 3.1. MINIMUM RENT. YIELDING AND PAYING therefor Minimum Rent
at the rate Ten Thousand Nine Hundred Seventy-Three and 70/100 Dollars
($10,973.70) per month payable in advance on the first day of each monthly
period.
SECTION 3.2. ADDITIONAL RENT. Tenant shall pay as Additional Rent an
amount equal to the cost of electricity and other utilities consumed at the
Premises as well as an amount each month equal to one-twelfth of the real
estate taxes and cost of fire and casualty insurance attributable to the
Premises. The term "Additional Rent" shall mean all amounts, other than
Minimum Rent, due from Tenant to Landlord.
-1-
<PAGE>
ARTICLE IV
SECTION 4.1. USE. The Premises shall be used and occupied by Tenant
for any lawful purpose.
ARTICLE V
SECTION 5.1. NO WASTE. Tenant shall not overload, damage or deface the
Premises nor shall it suffer or permit the same to be done, nor shall it
commit any waste.
SECTION 5.2. MAINTENANCE; REPAIRS; AND YIELD-UP. Tenant agrees that it
will keep the Premises in the same repair and condition as the Premises are
now in, reasonable wear and tear and fire or other casualty excluded.
Landlord shall be responsible for making any structural or other repairs that
require replacement of any component or system.
SECTION 5.3. WAIVER OF SUBROGATION. Landlord hereby releases Tenant
from any and all liability for any loss or damage caused by fire, earthquake,
any of the extended coverage casualties, or other casualties, even if such
fire or other casualty shall be brought about by the fault or negligence of
the Tenant or its agents. Landlord agrees that its respective fire, extended
coverage, and other insurance policies will include a clause acknowledging
this release and a waiver of any right of subrogation.
SECTION 5.4. NOTICES. All notices shall be in writing and be given by
certified by mail, return receipt requested, postage prepaid, addressed as
set forth in the preamble hereof.
SECTION 5.5. ENVIRONMENTAL. Landlord shall be responsible for the
entire cost of, and shall hold Tenant harmless and indemnify Tenant from, any
remediation of any environmental problem affecting the Premises no matter
when caused or discovered unless such environmental problem is proved to be
the result of Tenant's acts occurring from and after the date of this
agreement.
This Agreement sets forth the entire agreement between the parties
hereto and cannot be modified or amended, except in writing duly executed by
the respective parties.
TENANT: SHORT RUN LABELS, INC.
/s/ Gailerd Smith, PRESIDENT
By: THOMAS J. COBURY, Chairman
---------------------
its
hereunto duly authorized
-2-
<PAGE>
LANDLORD: /S/ Gailerd Smith
---------------------
Gailerd Smith
/S/ Eileen Ruder
---------------------
Eileen Ruder
-3-
<PAGE>
EXHIBIT 10.5
LEASE AGREEMENT
---------------
THIS LEASE is made this 23rd day of May, 1995, by and between FRP
Development Corp., a Maryland corporation hereinafter called "Landlord") and
Short Run Labels, Inc., a Delaware corporation qualified to do business in the
State of Maryland (hereinafter called "Tenant").
WITNESSETH:
-----------
That for and in consideration of the rent hereinafter reserved, and
other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, Landlord hereby leases to Tenant, and Tenant hereby
rents from Landlord the premises described in Section I, upon the following
terms:
1. Premises.
---------
The premises leased hereby (hereinafter called "Premises") are the
14,640 square feet, more or less, of warehouse and office space outlined in
red on the plat attached hereto as Exhibit "A" and made a part hereof, which
is part of the building shown thereon located at 812 Oregon Avenue
(hereinafter called The Building), which building has a street address of 812
Oregon Avenue, Linthicum, Maryland 21090. Tenant, its agents, employees and
invitees shall have the right to use, in common with others entitled thereto,
all of the driveways, walkways, parking areas and other common areas and
facilities of The Building subject to the exclusive control and management
thereof by Landlord.
2. Term.
-----
The term of this Lease shall begin on June 20, 1995, and shall end
at 12 o'clock midnight on June 30, 2000.
3. Construction and Alterations.
-----------------------------
Tenant shall take occupancy of the Premises in as-is condition.
Tenant's Construction: Any work in addition to the work
specifically enumerated herein required for Tenant's use of the Premises
shall be performed by Tenant at its cost and expense after written approval
is obtained from Landlord.
4. Rent.
-----
Tenant shall pay Landlord rents in accordance with the following
schedule:
June 20, 1995 - June 30, 1996 $8,400.00 per month 103,600
July 01, 1996 - June 30, 1997 $8,600.00 per month 103,200
July 01, 1997 - June 30, 1998 $8,850.00 per month 106,200
July 01, 1998 - June 30, 1999 $9,000.00 per month 108,000
July 01, 1999 - June 30, 2000 $9,300.00 per month 111,600
_________
All rent shall be paid in advance on the 1st day of each calendar
month during the term. If the term begins on a day other than the 1st day of
a calendar month, the rent for the period from the beginning date to the 1st
day of the first full calendar month of the term shall be prorated at the
aforesaid monthly rate and shall be payable on the date the term begins.
Rent shall be paid to Landlord at FRP Development Corp., 34 Loveron
Circle, Suite 100, Sparks, Maryland 21152, or to such address as Landlord may
from time to time notify Tenant, without prior demand, and without abatement,
deduction, or setoff except as set forth in this Lease.
1
<PAGE>
Whenever, under the terms of this Lease, any sum of money is
required to be paid by Tenant in addition to the rent herein reserved,
whether or not such sum is designated as "additional rent", it shall,
nevertheless, be deemed to be additional rent and shall be collectible as
rent.
If any installment of rent or an other sum payable hereunder is not
postmarked or received by Landlord within ten (10) days of the due date, the
rent and other sum shall be accompanied by a late charge of ten percent (10%)
of the total due.
5. Security Deposit.
-----------------
A security deposit of Seven Thousand Four Hundred Fourteen Dollars
($7,414.00) was paid to Landlord upon execution of the prior lease dated
January 1, 1990, the receipt of which is hereby acknowledged by Landlord.
The deposit shall be held, without interest, as security for the payment of
rent and other sums payable by Tenant under this Lease, and the faithful
performance of all other terms, covenants and conditions of this Lease. The
deposit shall be repaid to Tenant at the expiration of the term, provided
Tenant shall have made all payments and performed all covenants and
agreements. Upon default by Tenant hereunder, all or part of the deposit
may, at Landlord's option, be applied on account of the default, and
thereafter Tenant shall promptly restore the deposit to the amount stated
above. Landlord may commingle the deposit with other funds of Landlord and
Tenant waives the benefit of any provision of law requiring the deposit to be
held in escrow or in trust, and the deposit shall be deemed to be the
property of Landlord.
6. Use.
----
The Premises shall be used and occupied by Tenant solely for label
manufacturing and other related printing graphic arts process and R&D
equipment repair, and office uses incidental thereto, and for no other use or
purpose unless formally requested by Tenant in written form and approved by
Landlord. Landlord approval of Tenant's intended other uses of Premises
shall not be unreasonably withheld.
7. Utilities.
----------
Landlord shall furnish gas, electricity, water and sewer service to
the Premises. If the Premises are separately metered, Tenant shall arrange
to have service in its name and pay promptly, when due, the utility
companies' charges. If the Premises are not separately metered, Tenant shall
pay Landlord, when billed, its proportionate share of charges for
electricity, gas, gas metering, sprinkler alarms, sprinkler system service
and maintenance agreements, water and sewer service. Tenant shall, at its
expense, obtain telephone, security and other services required in
connection with its use of the Premises.
Landlord reserves the right to install and maintain pipes,
conduits, wires and ducts in and through the Premises to serve other parts of
The Building. Landlord also reserves the exclusive right to use the roof of
the Premises, the air space thereabove, and the rear and side walls for
support and other purposes, provided, Landlord exercises due diligence to
avoid interference with Tenant's use or enjoyment of the Premises whenever
reasonably possible.
8. Repairs and Maintenance.
------------------------
Landlord shall, at its expense, maintain the exterior walls and
roof of the Premises. Tenant shall promptly notify Landlord if any damage to
or the necessity of repairs to the roof or exterior walls. Tenant shall, at
its expense, maintain the interior of the Premises, and all doors, loading
docks and leveling equipment, if any, the windows and glass, and the systems,
machinery and equipment, including plumbing, electrical, heating and
ventilating and air conditioning, and promptly make all necessary repairs and
replacements. At the beginning of the
2
<PAGE>
term, upon completion of product manufacturer warranties, Tenant shall, at
its expense, obtain and keep in full force and effect throughout the term,
maintenance contracts for the heating and air conditioning systems and
equipment with contractors acceptable to Landlord. Copies of the contracts
shall be given to Landlord at the beginning of the term, and copies of
renewals on replacements shall be given to Landlord prior to expiration of
prior maintenance contract terms. Tenant shall provide its own janitorial
services, including window cleaning and light bulb, tube and starter
replacement, and shall keep all trash in closed containers and arrange for
periodic removal thereof. Tenant's trash containers or dumpster shall be
placed at a location designated by Landlord. Tenant shall also keep the
walkways, loading docks and ramps adjacent to the Premises free of litter,
ice and snow. In addition, Tenant shall, at its expense, throughout the
term, maintain a contract with an extermination service, acceptable to
Landlord to provide monthly service to control rodents and other pests in the
Premises. If Tenant fails to maintain the required contracts, Landlord may
arrange for the contracts, at Tenant's expense.
Landlord shall maintain the sprinkler system and the storm water
management facilities for The Building and the parking, walking, driveway and
other common areas and facilities in good condition and repair, reasonably
free of ice, snow and litter. Additionally, Landlord shall provide adequate
lighting and, if necessary, security for these areas. Landlord reserves the
right, from time to time, to change the location, layout and arrangement of
the common areas. Tenant shall pay to Landlord its pro-rata share of
operating costs and expenses incurred in operating and maintaining the
facilities and common areas. Operating cost and expense shall include,
without limitation, gardening and landscaping, premiums for public liability
and property damage insurance, repairs, line painting, lighting, sanitary
control, sprinkler system maintenance and repair, removal of snow, trash,
rubbish, garbage and other refuse, the cost of personnel and 20% of all the
foregoing for administrative and overhead costs. The parties hereby agree
that Tenant's pro-rata share of operating costs and expenses is 18.0%.
Actual operating costs and expenses shall be determined by Landlord
and billed no less often than quarterly for such fiscal year as Landlord may
adopt for such purpose. Payments shall be made promptly by Tenant upon
receipt of remittance request from Landlord.
9. Real Estate Taxes.
------------------
Tenant shall pay to Landlord, promptly upon demand, proportionate
share of any increases in real estate taxes, assessments and other
governmental charges levied against The Building in excess of the taxes,
assessments and other charges payable for the tax year in which the term
begins. Tenant's proportionate share shall be computed by multiplying any
increase by a fraction, the numerator of which shall be the square footage of
the Premises and the denominator of which shall be the square footage of all
buildings in the bill which includes the Premises. Tenant shall pay all real
estate or other taxes attributable to improvements to the Premises made by
Tenant. Tenant's obligation to pay taxes and other charges shall be
apportioned with respect to the tax year in which the term ends,
proportionately as the number of days in the term during such tax year bears
to 365.
10. Alterations.
------------
Tenant shall not make any alterations, additions or modifications
to the Premises, or place any signs thereon, without the prior written
consent of Landlord which will not be unreasonably withheld. Prior to making
any approved alteration, modification or addition Tenant shall, at its
expense, obtain all necessary permits from appropriate governmental
authorities and, upon completion, furnish to Landlord an "as-built" drawing
of the alteration, addition or modification. All additions, alterations and
modifications made by Tenant shall be the property of Landlord. Tenant
shall, however, upon the request of Landlord given to Tenant at least thirty
(30) days prior to the expiration or termination of the term, remove any
alterations, additions or modifications made by it and restore the Premises
to the condition which existed at the beginning of the term.
3
<PAGE>
Tenant shall not permit the Premises or The Building to be
subjected to any mechanics or other liens, and if any lien attaches, Tenant
shall promptly discharge the same by payment, bond or otherwise, and Tenant
shall, at its expense, defend any proceeding for the enforcement of any lien,
discharge any judgement thereon and save Landlord harmless from all costs and
expenses resulting therefrom, including reasonable counsel fees and other
expenses incurred by Landlord, if it elects to defend or participate in the
defense of such proceedings.
11. Compliance with Laws and Regulations.
-------------------------------------
Tenant shall promptly comply with all laws, rules, regulations,
requirements and recommendations of governmental bodies and public
authorities, fire insurance rating organizations and insurers, pertaining to
the Premises and the use and occupancy thereof. Tenant shall not do or
suffer to be done, or keep or suffer to be kept anything in or about the
Premises which will contravene any insurance which Landlord carries with
respect to The Property. No hazardous materials or toxic substances shall be
stored, kept in or about the Premises or discharged from the Premises except
in strict accordance and compliance with federal, state and local regulations
and guidelines for the use, handling treatment and discharge of said
substances. No activity may be carried on in the Premises which would
produce any waste materials that are considered or classified as hazardous or
toxic under any federal, State and local laws, ordinances, rules or
regulations beyond the scope of operations as set forth in Section 6 above
unless permission is formally requested from Landlord by Tenant in writing
and Landlord grants approval to Tenant to commence said activities. Tenant
must adhere to all federal, state and local laws, permitting requirements,
ordinances, rules and regulations pertaining to such activities to ensure
Landlord's approval is not unreasonably withheld or withdrawn.
12. Inspection by Landlord.
-----------------------
Landlord, its agents, authorized representatives and designees,
without prior notice, may enter the Premises during normal business hours to
perform environmental inspections or emergency repairs. All emergency work
shall be performed so that whenever reasonably possible the Tenant's
business activities will not be impeded. Landlord may, upon twenty-four
(24) hours advance written notice, enter the Premises for the purposes of
viewing or inspecting same, showing the Premises to prospective tenants,
showing it to prospective purchasers and mortgagees, post "For Sale" and/or
"For Rent" signs on the Premises, or to perform any routine work therein.
13. Indemnification: Liability Insurance.
--------------------------------------
Tenant shall defend, indemnify and save Landlord harmless from and
against any and all claims, actions, demands, damages, liability and
expenses (including reasonable counsel fees) for damage to property and
injury or death of persons, which is caused by or arises out of or in
connection with the Premises and the use or occupancy thereof, or any act or
omission of Tenant, its agents, employees, invitees or contractors, or out of
a breach by Tenant of any term, covenant or condition of this Lease to be
performed or observed by Tenant, unless caused by Landlord negligence or
caused by Landlord breach of any term, covenant or condition of this Lease.
Tenant shall, at its expense, maintain comprehensive general public
liability insurance covering personal injury and property damage occurring on
the Premises and its appurtenances, which insurance shall list Tenant as the
named insured and shall list Landlord as an additional insured, and shall
include contractual indemnity coverage for Tenant's liability hereunder.
This insurance shall be written with companies acceptable to Landlord and
have liability limits of at least Three Million Dollars ($3,000,000),
combined single limit coverage, on
4
<PAGE>
an occurrence basis. Certificates evidencing the required coverage shall be
issued to Landlord and shall provide that the coverage shall not be modified
or cancelled without at least thirty (30) days' prior written notice to
Landlord. Insurance companies maintaining insurance coverage for tenants
shall be notified by tenant in writing to disclose to Landlord any changes,
revisions or cancellation in insurance occurring during the lease term
specified in this lease.
14. Casualty Insurance; Damage or Destruction.
------------------------------------------
Landlord shall maintain all risks insurance on the Center for the
full replacement cost thereof. Tenant shall pay to Landlord, promptly upon
demand, its proportionate share of increases in the premiums for this
insurance over the premiums for the year in which the term begins,
proportionately as the square footage of the Premise bears to the total
square footage of all buildings covered by the insurance.
Tenant shall, at its expense, maintain at least standard fire and
extended coverage, vandalism, malicious mischief, and sprinkler damage
insurance on its trade fixtures, equipment, and other personal property in
the Premises, existing Landlord-provided improvements to the Premises, on the
leasehold improvements to the Premises and all other improvements provided by
the Tenant or Landlord to the Premises hereafter for their full replacement
value, containing a waiver of subrogation for the benefit of Landlord.
Landlord shall not be liable to Tenant for any damage to any property of
Tenant from any cause, unless it is due to Landlord's negligence and the
damage is caused by an occurrence which is not an insured hazard under
insurance required of Tenant herein. Certificates evidencing the insurance
required hereby, naming Landlord as an additional insured, shall be delivered
to Landlord at the beginning of the term, and at the time of renewal or
replacement.
If the Premises, or any part of The Building, is damaged or
destroyed by fire or other casualty, Tenant shall give notice thereto to
Landlord and Landlord shall, at its option, either (i) repair, restore,
rebuild and replace the damaged or destroyed part, and complete the same
within ninety (90) days, subject to delays beyond its reasonable control, to
the condition they were in prior to the damage or destruction, except for
changes in design or materials as may then be required by law or prudent
under the circumstances; or (ii) if the Premises or the building in which it
is located is damaged or destroyed so as to render it wholly or substantially
untenable, terminate this Lease by written notice to Tenant within thirty
(30) days of the date of the casualty.
If Landlord elects to repair and restore, there shall be an
abatement of rent and additional rent during the restoration term. If
Landlord terminates this Lease as above provided, rent and additional rent
shall be paid through the date of the casualty.
15. Eminent Domain.
---------------
If the Premises, or any part thereof, is condemned under the power
of eminent domain, or sold by Landlord to a condemning authority under threat
of condemnation, this Lease shall terminate as to the part condemning
authority, whichever is first.
If any condemning authority notifies Landlord of a proposed
condemnation of any part of the Premises, Landlord shall give Tenant written
notice of the proposed condemnation together with whatever plans, plats and
data are furnished to Landlord by the condemnor concerning the extent of the
proposed condemnation. Tenant shall have fifteen (15) days after the date of
such notice in which to elect to cancel this Lease effective upon
consummation of the condemnation. If Tenant gives Landlord written notice of
such election within fifteen (15) days, and if the proposed condemnation is
consummated, this Lease shall terminate entirely on the same date that this
Lease terminates as to the condemned portion of the Premises. If the Tenant
does not make a timely election to cancel this Lease, and the condemnation is
consummated, then Tenant shall restore the remaining Premises as a complete
architectural unit; and the rent shall thereafter be reduced proportionately
to the reduction in the area of the Premises.
In the event of a condemnation, the entire award shall belong to
Landlord and
5
<PAGE>
Tenant shall not be entitled to share in any part of the condemnation award
(including consequential damages). Tenant, shall, however, be entitled to
retain any separate award obtained from the condemning authority for moving
and relocation expenses and loss of trade fixtures, equipment and other
personal property, to the extent compensable without diminution of Landlord's
award.
16. Default.
--------
(a) Each of the following shall be deemed a default by Tenant
and a breach of this Lease.
(i) The filing of a petition by or against Tenant for
adjudication as a bankrupt under the Bankruptcy
Code, as now or hereafter amended or supplemented,
or for a reorganization within the meaning of the
Bankruptcy Code, or for an arrangement within the
meaning of the Bankruptcy Code, or the commencement
of any action or proceeding for the dissolution or
liquidation of Tenant, whether instituted by or
against Tenant, or for the appointment of a receiver
or trustee of the property of Tenant;
(ii) The making by Tenant of an assignment for the
benefit of creditors.
(iii) The filing of a tax lien against Tenant's estate in
the Premises.
(iv) Failure of Tenant to pay, within twenty (20) days of
the due date, the rent herein reserved, or any other
sum payable by Tenant; and
(v) A default by Tenant in the performance of any other
term, covenant, agreement or condition of this Lease
on the part of Tenant to be performed for a period
of thirty (30) days after written notice thereof,
unless such performance shall reasonably require a
longer period in which case Tenant shall not be
deemed in default if Tenant commences the required
performance promptly and thereafter pursues and
completes such action diligently and expeditiously.
(b) In the event of a default of the nature set forth above,
Landlord may, at any time thereafter, at its election,
terminate this Lease and Tenant's right to possession of the
Premises, take possession of the Premises, and remove Tenant,
any occupants and any property therefrom, without being
guilty of or liable for trespass and without relinquishing any
rights of Landlord against Tenant.
(c) If this Lease is terminated pursuant to the above, Tenant
shall be liable to Landlord for rent and additional rent to
the date of termination, and for liquidated damages to be
calculated and payable as follows:
the monthly rent and additional rent payable by Tenant
hereunder, which shall be payable when due, less the rent, if
any, received by Landlord from others to whom the Premises may
be rented on such terms and conditions and at such rentals as
Landlord, in its sole discretion, shall deem proper. In no
event shall Tenant be entitled to excess rent, if any, that
Landlord may receive from any substitute tenant.
(d) The failure by Landlord to insist upon the performance of any
term, covenant or condition of this Lease or to exercise any
right or remedy consequent upon an unremedied breach thereof,
or the acceptance of full or partial rent during the
continuance of any unremedied breach, shall not constitute a
waiver of the performance of such term, covenant or condition.
No term, covenant or condition of this Lease to be performed
6
<PAGE>
or complied with by Tenant, and no unremedied breach
thereof, shall be deemed waived, altered or modified except by
a written instrument executed by Landlord. The waiver of any
breach shall not affect or alter this Lease, but each and
every term, covenant and condition shall continue in full
force and effect with respect to any other then existing or
subsequent breach thereof.
(e) In addition to the above, if Tenant defaults in the
performance or observance of any term, covenant or condition
to be performed under this Lease, Landlord may take any
necessary action to rectify the default on Tenant's behalf.
All money advanced and costs and expenses incurred by Landlord
in rectifying default, together with interest thereon at the
rate of twelve percent (12%) per annum, shall be repaid by
Tenant to Landlord promptly upon demand.
(f) Each right and remedy of Landlord provided for in this Lease
shall be cumulative and shall be in addition to every other
right or remedy provided for herein or now or hereafter
existing at law, in equity, or by statute or otherwise, and
the exercise or beginning of the exercise by Landlord of any
one or more of the rights or remedies provided for in this
Lease, or now or hereafter existing at law, in equity, or by
statute or otherwise, shall not be construed as an election of
remedies so as to preclude the simultaneous or later exercise
of any other right or remedy for such breach. If Landlord
obtains a judgement against Tenant arising out of any default
by Tenant under this Lease, then Tenant shall pay Landlord
attorney's fees and other expenses incurred by Landlord in
connection therewith.
17. Quiet Enjoyment Estoppel; Subordination.
----------------------------------------
Landlord covenants and agrees that Tenant, upon paying the rent and
all other charges provided for herein, and observing and keeping the
terms, covenants and conditions of this Lease on its part to be kept and
performed, shall lawfully and quietly hold, occupy and enjoy the
Premises during the term of this Lease, free from any interference by
Landlord or anyone claiming by, through or under Landlord.
Upon request, Tenant shall promptly deliver to Landlord within ten
(10) days a signed and acknowledged statement setting forth:
(i) that this Lease unmodified, in full force and effect, free of
existing defaults and free of defenses against enforceability
(or if there have been modifications or defaults or if it
claims defenses against enforcement, then stating the
modifications, defaults and/or defenses);
(ii) the date to which rent and other charges have been paid, and
the amount of any advance rentals paid;
(iii) the beginning and ending dates of the term;
(iv) that there are no outstanding claims (or if there are any
claims, then stating the nature and amount of the claim); and
(v) the status of any other obligation of either party under or
with respect to this Lease or the Premises.
This Lease shall be subject and subordinate to the lien of any
mortgage or deed of trust now existing hereafter placed upon The
Building and to any extensions, modifications or amendments thereto,
without the necessity of Tenant executing any instrument other than this
Lease. If, however, the holder of any mortgage or deed of trust desires
to confirm the effect of this provision, Tenant shall execute an
attornment or subordination agreement in form satisfactory to the holder
immediately upon request (see Exhibit "B", attached hereto).
7
<PAGE>
18. Assignment.
-----------
Tenant shall not assign this Lease or sublet the Premises in whole or in
part, without the prior written consent of Landlord, which consent may not be
unreasonably withheld. If Landlord consents to an assignment or sublease,
Tenant shall not be released of any of Tenant's obligations hereunder, and in
addition to any other consideration that may pass between the parties in
connection therewith, Tenant and any assignee or sublessee shall be deemed to
have covenanted not to make any further assignment or sublease without
Landlord's prior written consent. In the event of any assignment or
subletting, Landlord shall be entitled, and Tenant hereby assigns unto
Landlord, all sums payable by an assignee or sublessee, either as rent,
additional rent or other charge, in excess of the rent and additional rent
payable by Tenant hereunder less any reasonable commissions and fees arising
from the subletting or assignment of the premises to the extent said
commissions and fees offset excess rents only.
19. Applicable Law.
---------------
This Lease shall be construed under the laws of the State of Maryland.
The parties acknowledge that this Lease has been drafted, negotiated,
delivered and consummated in the State of Maryland. Tenant consents to suit
in the State and Federal Courts of the State of Maryland on or with respect
to the Premises and this Lease. Tenant hereby waives any objection to the
venue of any action filed in any State or Federal Court of Maryland, and
waives any claim of forum non conveniens or for transfer of any action to any
other court. Service of Process may be made upon Tenant in any action on or
with respect to the Premises, or this Lease, by sending such process to
Tenant in the manner and to the address to which notices are sent under
Section 20 hereof. Nothing herein shall be deemed to preclude Landlord from
obtaining Service of Process upon Tenant in any other manner permitted by the
laws and rules of Court of the State and Federal Courts of Maryland.
Landlord and Tenant hereby mutually waive trial by jury in any action,
proceedings or counterclaim brought by either against the other with regard
to any matter arising out of or in any way connected with this Lease, Tenant's
use and occupancy of the Premises, or the relationship of Landlord and
Tenant. Tenant waives any and all rights of redemption granted by or under
any present or future law if Tenant is evicted or dispossessed of the
Premises by order of court for any cause, or if Landlord obtains possession
of the Premises by reason of the violation by Tenant of any of the terms,
covenants or conditions of this Lease.
20. Notices.
--------
All notices, requests, demands or other communications with respect to
this Lease and the Premises, shall be in writing and shall be deemed to have
been duly given when mailed, postage prepaid, United States registered or
certified mail or hand delivered, or sent by Federal Express, or other
courier service, with signed receipt.
(a) If to Landlord, FRP Development Corp., 34 Loveton Circle, Suite 100,
Sparks, Maryland 21152, or at such other address as Landlord may
furnish to Tenant for this purpose.
(b) If to Tenant, Mr. Andrew Farquharson, President, Short Run Labels,
Inc., 1681 Industrial Road, San Carlos, CA, 94070, and Mr. Thomas
Cobery, President, Label Art, Inc. 1 Riverside Way, Wilton, NH 03086
or at such other addresses as Tenant may furnish to Landlord for
this purpose.
21. Tenant Financial Statements.
----------------------------
If requested by Landlord, Tenant shall furnish to Landlord a copy of
Tenant's most recent year-end financial statements including income
statements, balance sheets and statements of cashflows. In addition, upon
Landlord's request, Tenant shall furnish Tenant's interim financial
statements, budgets, income projections and additional proformas where
applicable to Landlord. Landlord is obligated to keep said financial data
confidential and is not permitted to allow third party access to Tenant
financial statements except in the case of requests
8
<PAGE>
from potential mortgagees.
22. Brokerage.
----------
Tenant represents and warrants that there are no claims for brokerage
commissions or finder's fees in connection with the Lease, except for Carey
Winston and hereby indemnifies and holds Landlord harmless from all
liabilities arising out of any claimed brokerage commissions or finder's fees
(including, without limitation, the cost of counsel fees in connection
therewith). Landlord is responsible for the payment of all brokerage fees due
to Carey Winston.
23. Successors and Assigns.
-----------------------
Except as herein otherwise provided, this Lease Agreement and the terms,
covenants and conditions hereof, shall inure to the benefit of, apply to, and
be binding upon the parties and their successors and assigns. If Landlord
transfers its estate in the Premises, or if Landlord further leases the
Premises subject to this Lease, Landlord shall thereafter be relieved of all
obligations of Landlord expressed in this Lease or implied by law.
If the Tenant obtains a money judgement against Landlord or Landlord's
successors or assigns under any provisions of, or with respect to this Lease
or on account of any matter, parties under this Lease, Tenant's occupancy of
the Premises or Landlord's ownership of the Premises, Tenant shall be
entitled to have execution upon such judgement only upon Landlord's estate
and not out of any other assets of Landlord, or its successors or assigns;
and Landlord shall be entitled to have any judgement so qualified to
constitute a lien only on said estate.
24. Surrender of the Premises.
--------------------------
At the expiration of the tenancy hereby created, or upon any re-entry by
Landlord pursuant to this Lease, Tenant shall, without notice to quit which
Tenant hereby waives, surrender the Premises in the same condition as the
Premises were at the beginning of the lease term herein, reasonable wear and
tear excepted, and shall deliver all keys for the Premises to Landlord at the
place then fixed for payment of rent, and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant
shall remove all of its trade fixtures and other personal property, and any
alterations, additions or improvements which Landlord requires to be removed,
before surrendering the Premises, and shall repair any damage caused by
removal. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease.
If Tenant remains in possession of the Premises after the expiration of
the term without execution of a new Lease, or a renewal or extension in
writing, Tenant shall be liable for all damages that Landlord may sustain by
virtue thereof, including but not limited to, any amount for which Landlord
may be liable under, or as the result of, any lease entered into by Landlord
for a term beginning at or after the expiration of the term. If, and while
Tenant is holding over, it shall continue to be subject to and shall perform
all of the conditions, provisions, and obligations of this Lease except that
Tenant shall pay Landlord rent at an amount equal to one hundred twenty-eight
percent (128%) of the rent provided to be paid hereunder immediately prior to
the expiration of the lease term herein, and Tenant shall continue to be a
tenant until its tenancy shall be terminated by Landlord, or until Tenant
shall have given Landlord written notice of at least one (1) full calendar
month of its intention to terminate the tenancy. Nothing contained in this
Lease, however, shall be construed as a consent by Landlord to the occupancy
or possession of the Premises by Tenant after the expiration of the term, and
Landlord, upon termination, shall be entitled to the benefit of all public
general or public local laws or ordinances relating to the recovery of
possession of lands and tenements held over by tenants, that may now be in
force or hereafter enacted.
25. Renewal Option.
---------------
If the Tenant is not in default under this Lease or any of the provisions
hereof, Tenant may extend the term of this Lease for one (1) successive period
of five (5) years by
9
<PAGE>
notifying Landlord of intent to renew Lease at least one hundred twenty (120)
days prior to completion of the original lease term. Such rental shall be
under the same terms and conditions set forth within this Lease except that
the annual rental for the succeeding lease term shall be adjusted by
multiplying the greater of the annual rent in the fifth year of the original
lease term or the average yearly rent over the entire original lease term by
121.67%. Annual rent over the renewal term shall be payable in advance in equal
monthly installments subject to the same penalties and conditions set forth
for rents due during the original Lease period.
This Lease contains the final agreement between the parties. Landlord
shall not have any obligation not expressly set forth herein; and neither
Landlord nor Tenant shall be bound by any problems or representations prior
to the date hereof which are not expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this Lease Agreement as of
the day and year first above written.
WITNESS: LANDLORD: FRP DEVELOPMENT CORP
/s/ ILLEGIBLE SIGNATURE /s/ DAVID H. DEVILLIERS
- ----------------------- ------------------------------------
David H. deVilliers, Jr., President
WITNESS: TENANT: SHORT RUN LABELS, INC.
/s/ ILLEGIBLE SIGNATURE /s/ THOMAS J. COBERY
- ----------------------- ------------------------------------
Short Run Labels, Inc Thomas J. Cobery, Chairman
Evelyn B. Dudley
Notary Public
My commission expires
November 26, 1995
10
<PAGE>
EXHIBIT A
---------
SITE PLAN
---------
<PAGE>
EXHIBIT 10.6
[LETTERHEAD]
REGISTERED MAIL
- ---------------
RETURN RECEIPT REQUESTED
- ------------------------
January 18, 1994
The Prudential Jimmie Taylor, Realtors
P.O. Box 3409
Fort Smith, Arkansas 72913
Re: Lease Agreement between James M. Creager, Jr. and Linda Creager and
Transkrit Corporation - March 28, 1991
-------------------------------------------------------------------
Gentlemen:
In accordance with the Lease Agreement on the property known as 4407 South
16th Street, Fort Smith, Arkansas, this letter provides notice of Transkrit's
extending and renewing the lease for the 3-year period commencing May 15,
1994 under the same terms and conditions as set out within the present lease.
Accordingly the lease now has an expiration date of May 14, 1997.
Very truly yours,
Frank Neubauer, Chairman & CEO
FN/es
cc: Tony Catalano ) Please mark you date file for 12/96 that this
Dave Koval ) lease now expires on May 14, 1997 and a renewal
Dale Hixon ) would be required.
Jack Resnick )
1996 Date File )
P.S. If the owner is interested in selling the building at a price in the
range of $200,000, we would like to discuss this possibility.
[FOOTER]
<PAGE>
LEASE AGREEMENT
THIS AGREEMENT made and entered into in Fort Smith, Arkansas on this 26
day of March, 1987, by and between JAMES M. CREAGER, JR. AND LINDA CREAGER,
hereinafter referred to as "Lessors", and TRANSKRIT CORPORATION, a
corporation, hereinafter referred to as "Lessee".
The Lessors and Lessee, for and in consideration of the mutual covenants,
conditions, agreements, and stipulations hereinafter contained, hereby agree
as follows:
1. Description of Property: Lessors hereby lease to the Lessee property
located at 4407 South 16th Street, Fort Smith, Arkansas, more particularly
described as follows:
Lot Ten (10) and Lot Eleven (11) of Phoenix Industrial Park to
the City of Fort Smith, Sebastian County, Arkansas.
The Lessors shall permit the Lessee to use an air compressor located on the
leased premises, and this air compressor shall be considered a fixture to the
building and part of the leased premises.
2. Acceptance of the Property: At the commencement of the lease term,
the Lessee shall accept the building, improvements, equipment, and fixtures
on or in the leased premises, in their existing condition. No representation,
statement, or warranty, expressed or implied, has been made by or on behalf
of the Lessors as to such condition.
3. Term of Lease: The term of this lease shall be for two (2) years
commencing May 15, 1987, and shall terminate on May 14, 1989.
4. Option: The Lessee shall have an option to extend and renew this
lease for a period of two (2) years commencing on May 15, 1989, under the
same terms and conditions as set out within the present lease. Sixty day
notification of option required.
5. Rent: Lessee shall pay to the Lessors the sum of Two Thousand Five
Hundred Dollars ($2,500.00) per month, which shall
<PAGE>
LEASE AGREEMENT Page 2
be due and payable on the fifteenth (15th) day of each month, commencing
May 15, 1987. Lessee shall pay to the Lessors the first and last month's rent
prior to May 15, 1987. All payments of rent are to be made payable to Jimmie
Taylor Realtors, P.O. Box 3409, Fort Smith, Arkansas, 72913.
6. Taxes: The real property taxes on the leased premises shall be paid
by the Lessors, but all personal property taxes due on the contents of the
leased premises or the result of any business conducted by the Lessee in the
leased premises shall be paid by the Lessee. The Lessee shall not permit any
liens to be filed on the leased premises as a result of any tax liability
arising out of any business conducted by Lessee on the leased premises.
7. Insurance: Lessors shall keep and maintain a policy of insurance on
the structure of the leased premises covering fire and other coverage in the
amount of $150,000.00. If, during the term of the lease or any extensions
thereof, the Lessors' insurance premiums shall increase as a result of the
Lessee's use and occupancy of the premises, then the Lessee shall be
responsible to pay to the Lessors for the payment of this premium increase.
These monies shall be paid on or before the date that the Lessors' insurance
premiums are due. Lessee shall obtain and keep in force during the entire
term of the lease, at their expense, a policy of general public liability
insurance, to which the Lessors shall be named as co-insureds, with minimum
limits of $250,000.00-$500,000.00. The Lessee shall provide the Lessors with
proof of insurance within thirty (30) days after the execution of this lease
agreement. The Lessee shall be responsible for obtaining insurance, if it
desires, covering its own equipment or other personal property which may be
stored on the leased premises. The Lessee shall obtain a policy of workers'
compensation insurance issued by a company authorized to do
<PAGE>
LEASE AGREEMENT Page 3
business in the state of Arkansas, covering its employees on said premises
and shall provide the Lessors with a copy of said policy within thirty (30)
days after execution of this lease agreement.
8. Use of the Premises: The Lessee should satisfy itself that the use of
these premises is in conformance with all zoning regulations of the City of
Fort Smith, Arkansas, and the Lessors make no representation as to their
conforming use. The Lessee shall use these premises for the purpose of
assembling and manufacturing products used in the printing industry. The
Lessee shall keep the entire leased premises, including walls, floors,
ceilings, and fixtures broom clean. ALL flammable material shall be stored so
as to reasonably avoid the risk of fire or explosion.
9. Damage or Destruction of Leased Premises: In the event the leased
premises are damaged or destroyed, the Lessors shall, with the proceeds of
such insurance as it has on the leased premises, promptly repair and rebuild
the demised premises. Damage or the destruction of the building shall not
relieve Lessee from the obligation due during this primary term, so long as
Lessors or their successors or assigns undertake a rebuilding of the damaged
structure, unless the parties hereto or their successors and assigns agree to
some relief in writing. The Lessors hereby agree that no action shall be
maintained by the Lessors or the Lessors' insurance company against the
Lessee in the event of said loss regardless of the cause thereof, including
Lessee's negligence.
10. Repairs and Maintenance: The Lessors shall be responsible for the
maintenance of the roof on the building and for any major maintenance
required to the outside of the structure or upon the electrical, plumbing,
gas, or air conditioning systems during the lease term, unless caused by the
fault of the Lessee. The Lessee shall give written notice to the Lessors of
the need of repairs specifying such repairs. The Lessee shall be responsible
<PAGE>
LEASE AGREEMENT Page 4
for any and all minor maintenance necessary within the leased premises,
including the electrical, plumbing, gas, or air conditioning systems, or any
damage caused by the negligence or want of care of it, its employees, or the
public which it serves, and shall further be responsible for all janitorial
work required therein, as well as the maintenance of any glass which is
permanently a part of the leased premises. Lessee shall maintain the leased
premises in good condition, less ordinary wear and tear.
11. Utilities: The Lessee shall bear all utility expenses attributable
to the leased property and shall be responsible for all deposits required
thereby. The Lessee shall not permit any liens to be filed on the leased
property as a result of the non-payment of any utility charges.
12. Assignment or Subletting: The Lessee shall not assign, mortgage, or
encumber this lease, nor sublet nor permit the lease of the property or any
part thereof to be used by others, without the prior written consent of the
Lessors in each instance, which shall not be unreasonably withheld.
13. Indemnification by Lessee: The Lessee covenants and agrees with the
Lessors that during the entire term of the lease and any extensions or
renewals thereof, the Lessee will indemnify and save harmless the Lessors
against any and all claims, debts, demands, or obligations which may be made
against the Lessors or against the Lessors' title in the premises, arising by
reason of or in connection with, any alleged act or omission of the Lessee or
any person claiming under, by, or through the Lessee; and if it becomes
necessary for the Lessors to defend any action seeking to impose any such
liability, the Lessee will pay the Lessors all costs of court and attorneys'
fees incurred by the Lessors in affecting such defense in addition to any
other sums which the Lessors may be called upon to pay by reason of the entry
of a
<PAGE>
LEASE AGREEMENT Page 5
judgment against the Lessors in the litigation of which such claim is
asserted. Except, however, this article shall be subject to the provisions of
article 11 concerning the non-liability of Lessee.
14. Default by Lessee: If the leased property shall be deserted or
vacated, or if proceedings are commenced against the Lessee in any Court
under a bankruptcy act or for the appointment of a trustee or receiver of the
Lessee's property either before or after the commencement of the lease term,
or if there shall be a default in the payment of rent or any part thereof for
more than fifteen (15) days after written notice of such default by the
Lessors, or if there shall be a default in the performance of any other
covenant, agreement, condition, rule or regulation herein contained or
hereafter established on the part of the Lessee for more than fifteen (15)
days after written notice of such default by the Lessors, this lease (if the
Lessors so elect) shall thereupon become null and void, and the Lessors shall
have the right to reenter or repossess the leased property, either by force,
summary proceedings, surrender, or otherwise, and disposes and removes
therefrom the Lessee, or other occupants thereof, and their effects, without
being liable to any prosecution therefore. In such case, the Lessors may, at
their option, relet the leased property or any part thereof, as the agent of
the Lessee, and the Lessee shall pay the Lessors the difference between the
rent hereby reserved and agreed to be paid by the Lessee for the portion of
the term remaining at the time of reentry or repossession and the amount, if
any, received or to be received under such reletting for such portion of the
term. The Lessees hereby expressly waive the service of notice of intention
to reenter or of instituting legal proceedings to that end. The Lessee waives
and will waive all right to trial by jury in any
<PAGE>
LEASE AGREEMENT Page 6
summary proceeding hereafter instituted by the Lessor against the Lessee in
respect to the leased property.
15. Corporate Resolution: This Lease shall be executed by TRANSKRIT
CORPORATION, P. O. Box 500, Brewster, New York, 10509, by Mr. Frank Neubauer,
President. TRANSKRIT CORPORATION shall provide the Lessors with a copy of a
corporate resolution executed by two (2) officers of the corporation,
authorizing this lease to be entered into and all the terms thereof by Frank
Neubauer. This shall be a condition precedent to the execution of the Lease.
A copy of the corporate resolution shall be attached to this lease as
Exhibit "A". Frank Neubauer further represents that he has the authority to
enter into this lease on behalf of TRANSKRIT CORPORATION and to bind the
corporation to the provisions enumerated herein.
16. Indemnification by Lessors: Lessors shall covenant and agree with
the Lessee that they are the owners of the property described herein and that
they have good right and title to lease and let same unto the Lessee and that
the building and other improvements of Lessors do not encroach on adjacent
property. Lessors covenant and agree that during the term hereof, so long as
Lessee shall not be in default herein, Lessee shall have and enjoy peaceful
and quiet possession of the property described herein. In the event the
property described herein is subject to any mortgage at the commencement of
the term hereof, the Lessors shall cause the mortgagee to deliver to the
Lessee a written agreement whereby the said mortgagee agrees to permit the
Lessees to remain in possession during the term hereof so long as the Lessee
is not in default and further agreeing to and acknowledging the rights of
Lessee under this Lease Agreement.
/s/ JAMES M. CREAGER, JR.
---------------------------------
James M. Creager, Jr.
<PAGE>
LEASE AGREEMENT Page 7
/s/ LINDA CREAGER
---------------------------------
Linda Creager
LESSORS
TRANSKRIT CORPORATION
/s/ FRANK NEUBAUER
---------------------------------
Frank Neubauer, President
LESSEE
<PAGE>
[LETTERHEAD]
April 24, 1987
Mr. James L. Taylor
Jimmie Taylor Realtors
P. O. Box 3409
Fort Smith, AR 72913
Dear Mr. Taylor:
Per our discussion on the property at 4407 South 16th Street, please refer
to the attached sketch. The fire department inspector is requesting Transkrit
to install a 1-hour fire wall in the facility in the position shown. This is
a requirement to separate the production machine area from the open warehouse
area. Also, another outside man-door exit is required as indicated.
When the lease term is complete Transkrit would remove the internal fire
wall if requested, but would prefer to leave the new exit door in place.
If you would please get Mr. Jim Creager, the owner, to accept this
proposal, the lease agreement could be finalized. If you have any questions,
please call me as soon as possible.
Regards,
Dale Hixon
Plant Manager
attachment
[FOOTER]
<PAGE>
[SKETCH]
FLOOR LAYOUT (11,500 sf)
----------------------------------------
4407 SOUTH 16TH STREET, FORT SMITH, ARK.
<PAGE>
Exhibit 10.7
STATE OF SOUTH CAROLINA )
) LEASE
COUNTY OF GREENVILLE )
THIS INDENTURE OF LEASE, made at Greenville, South Carolina, the 19th day
of June, 1992, by and between C. E. Runion, who, together with his heirs,
executors, administrators, successors, and assigns, is hereinafter referred
to as the "Lessor" and DOUBLE ENVELOPE CORPORATION, who, together with its
successors and assigns, is hereinafter referred to as "Lessee",
W I T N E S S E T H:
1. PROPERTY TO BE LEASED. For the terms and conditions as hereinafter set
forth, the Lessor does hereby lease to the Lessee the real property located
on Highway 25, Travelers Rest, Greenville County, South Carolina, and more
particularly described in Exhibit A attached hereto and made a part hereof by
reference with improvements thereon, erected thereon and all of the
appurtenances upon the property, all of which are hereinafter referred to
collectively as the "leased premises".
2. TERM. To have and to hold for a term of five (5) years, commencing
on June 19th, 1992 and ending on June 18, 1997.
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Page 1
<PAGE>
3. AUTHORIZED USE. Lessee shall use the leased premises for purposes
of operating a manufacturing facility and all other lawful purposes.
4. RENT. Lessee hereby covenants to pay to Lessor Four Hundred Forty
One Thousand One Hundred Eighty and No/100 ($441,180.00)
Dollars as rental for the leased premises for the base term of this
Lease, the sum of Eighty Eight Thousand Two Hundred thirty Six and no/100's
($88,236.00) Dollars per annum, payable in equal installments in advance in
the amount of Seven Thousand Three Hundred Fifty Three ($7,353.00) Dollars
each per month, upon the first day of each month during the term of this
Lease.
5. TAXES.
(a) Lessee shall pay, during the term of this Lease, to the public
officers charged with the collection thereof, promptly as the same shall
become due, all current real estate taxes and assessments, both general and
special, beginning with such taxes and assessments which shall become due and
payable upon and after the date of the commencement of this Lease, and that
may hereafter, during the term of this Lease, be levied, assessed, charged,
or imposed upon the leased premises described herein and/or the improvements
which now or hereafter may be located thereon. Any partial year to be
prorated by the parties.
(b) Lessee shall, during the term of this Lease and all extensions or
renewals thereof, pay, as the same become due,
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<PAGE>
all sales tax, personal property tax or use tax, if any, imposed by state law
or by city or county ordinance upon any property or improvement actually
purchased and installed by Lessee to be used in the course of its business,
or inventory stored on the premises by Lessee.
(c) If the real estate taxes and assessments, both general and special,
assessed against the premises for any lease year shall exceed such taxes
assessed against the premises for the first tax year during which the leased
premises shall be assessed as improved property, for the said lease year,
Lessee shall pay to Lessors as rent, in addition to all other rents payable,
the amount of such excess.
6. INSURANCE.
(a) Lessee shall maintain insurance in the minimum amount of $750,000.00
during the term of this Lease, and shall pay the cost of initial and renewal
premiums therefor and present receipted bills therefor to Lessee, which shall
cover Lessors and Lessee, as their interests shall appear, insuring the
leased premises against loss or damage by fire, lightning, and such perils as
are from time to time comprehended within the term "Extended Coverage",
provided, however, that should Lessee change its use, add a fixture or do any
other act or cause any other act to be done which increases the insurance
rate to the Lessor over and above what it would ordinarily have been, then
said increase must be borne by Lessee and shall be payable by Lessee upon ten
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<PAGE>
(10) day notice of said increase and is to be considered as part of the rent
hereunder. Insurance on the contents and trade fixtures installed by Lessee
shall be the responsibility of Lessee.
(b) Lessee shall maintain public liability insurance against claims for
bodily injury or death and for injury to or destruction of property occurring
upon, in or about, or arising from the leased premises, such insurance to
afford protection to a limit of not less than Three Hundred Thousand
($300,000.00) Dollars in respect to bodily injury or death suffered by any
one person, and to the limit of not less than Five Hundred Thousand
($500,000.00) Dollars in respect to any one occurrence, and to the limit of
not less than Fifty Thousand ($50,000.00) Dollars in respect to damage to or
destruction of property arising out of any one accident. Said policy of
insurance shall name both Lessee and Lessor as insureds, as their interest
may appear.
(c) All insurance provided for in this Section 6 shall be effected by
Lessee through insurers satisfactory to Lessor and Lessee under valid and
enforceable policies which may be blanket policies, and certificates of such
policies shall be delivered to Lessor upon request.
7. CONDITION OF THE PREMISES. The property contains 46,400 square feet
of floor space. Lessee agrees not to make any changes, alterations, or
additions about the leased property without first obtaining the written
consent of the Lessors except
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<PAGE>
as permitted in Paragraph 8 below. All plumbing, mechanical and HVAC
equipment and systems will be placed in good working order by the Lessor
prior to the commencement of the Lease term. The Lessor will properly paint
the office area, cafeteria, restrooms and outside trim, gutters and
downspouts prior to the commencement of the Lease. Lessor agrees to install
exhaust fans in the bathrooms and to pay one-half of re-doing and beautifying
of the parking lot and installation of exit emergency lights. Provided,
however, in no event shall Lessor's share exceed $6,000.00.
8. REPAIR AND CARE OF LEASED PREMISES. Lessee will not commit any waste
of the leased premises. Lessee shall not use or permit the use of the leased
premises in violation of any present or future applicable law of the United
States or of the State of South Carolina, or in violation of any present or
future applicable municipal ordinance or regulation. Lessee may, but at
Lessee's own cost and expense and in a good and workmanlike manner, make such
alterations and improvements on the leased premises to include drilling holes
in concrete floor to secure equipment as Lessee may require for the conduct
of Lessee's business and without, however, materially altering the basic
character of the leased premises and the building or improvements thereon or
weakening any structure on the leased premises. Lessor shall be responsible
for the maintenance of the roof of the leased premises and all exterior
repairs except for damages
LEASE
Page 5
<PAGE>
caused by Tenant. Lessee shall be responsible for all interior items,
including plumbing, electrical, carpets, walls and repairs on the heating
system and air conditioning. Lessee shall keep the entrance ways and
parking areas reasonably free from ice and snow and at all times keep the
leased premises in clean and orderly condition.
9. UTILITIES. Lessee shall pay all charges for heat, gas, electricity,
water, and other public utilities used on the leased premises.
10. REMOVAL OF IMPROVEMENTS. If requested by the Lessor at the
termination of this Lease, Lessee shall, at Lessee's sole expense, remove all
installations, alterations, or improvements made by Lessee in or on the
leased premises or make such other disposition thereof as Lessors shall
approve. All alterations, improvements, furnishings, trade fixtures,
equipment, and other personal property installed in or on the leased premises
by Lessee and paid for by Lessee shall remain the property of Lessee and may
be removed by Lessee upon the termination of this Lease, provided that (a)
any of such items as are affixed to the leased premises and require severance
may be removed only if Lessee shall repair any damage caused by such removal
and (b) Lessee shall have fully performed all of the covenants and agreements
to be performed by Lessee under the provisions of this Lease. If the Lessee
fails to remove any items referred to hereinabove from the leased premises
within
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<PAGE>
thirty (30) days following the termination of this Lease, all such
alterations, additions, and improvements shall become the property of the
Lessor unless Lessor elects to require their removal.
11. DAMAGE OR DESTRUCTION.
(a) Except as expressly herein provided, no destruction of or damage to
the leased premises shall entitle Lessee to surrender possession of the
leased premises or to terminate this Lease. Lessor agrees that in the event
of any damage to or destruction of any buildings and improvements, or either
of them situated on the leased premises occasioned by fire or other hazards
insured against under the policies of insurance hereinbefore referred to,
then Lessor shall commence restoration or repair of the leased premises as
promptly as possible after occurrence of such damage or destruction, and
shall substantially complete such restoration or repair with reasonable
diligence.
(b) In the event Lessee is deprived of any of the occupancy of any part
of the leased premises, by reason of or in consequence of any such damage or
destruction, whether or not insured against, provided the same is not
occasioned by the act or acts of Lessee, Lessee's officers, employees, or
agents, then Lessee's obligation to pay rent shall be reduced in proportion
to the time during which and to the area of the building of which the Lessee
shall be so deprived because of such damage or destruction or the repair and
restoration thereof.
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Page 7
<PAGE>
(c) It is, however, expressly understood and agreed, anything
hereinbefore contained which may appear to the contrary notwithstanding, that
if any damage or destruction of the building and improvements at the time
located on said leased premises shall occur during the last six (6) months of
the term of this Lease, both Lessor and Lessee shall have the option, upon
giving written notice of the exercise thereof to the other party, within
thirty (30) days after the happening of such damage or destruction, to
terminate this Lease, in which case any and all obligations of Lessor to
restore said building and improvements shall likewise terminate. Provided,
however, Lessee may elect to renew for additional five year term in which
event the Lessor will restore or repair as hereinabove provided. Provided,
however, such election must be communicated to Lessor within thirty (30) days
after destruction notwithstanding Paragraph 24. In the case of the
termination of this Lease, Lessee shall be required to pay rent only up to
the time of such termination, and the portion of any rent paid in advance,
apportioned as aforesaid, covering the period of time subsequent to such
termination, shall be refunded by Lessor to Lessee.
12. LIABILITY FOR DAMAGE; INDEMNIFICATION. Lessee agrees to indemnify
Lessors against, and to defend and hold Lessor free and harmless from, any
and all claims due to injury of persons (unless caused by the sole negligence
of Lessor or any facilities to be maintained by Lessor) arising out of
Lessee's
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Page 8
<PAGE>
occupancy and/or use of the leased premises, during the term of this Lease or
extension hereof, or any other holdover occupancy.
Except as provided above, Lessee further agrees to indemnify Lessor
against, and to defend and hold Lessor free and harmless from, any and all
claims of any kind or nature arising from Lessee's use of the leased premises
during the term of this Lease or any extension hereof, or any other holdover
occupancy, and Lessee hereby waives all claims against Lessor for damage to
goods, wares, and merchandise and any and all other property, due to any
cause whatsoever, except the sole negligence of Lessor during the term of
this Lease or extension hereof, or any other holdover occupancy.
13. ASSIGNING AND SUBLETTING. Lessee shall not sublet the leased
premises or any part thereof nor assign this Lease, without in each case the
prior written consent of Lessor which consent will not be unreasonably
witheld. Any consent by Lessor to any assignment or subletting shall not
constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. In the event that Lessee shall at any time, during
the term of this Lease or any renewal or extension hereof, or any other
holdover occupancy, sublet all or any part of the leased premises or assign
this Lease, either with the consent of Lessor, then, and in such event, it is
hereby mutually agreed that Lessee shall nevertheless remain primarily liable
under all of the terms, covenants, and conditions of this Lease. If this
Lease be
LEASE
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<PAGE>
assigned, or if the leased premises or any part thereof be subleased or
occupied by anybody other than Lessee, Lessor may, after default by Lessee,
collect from the assignee, sublessee, or occupant all rental or other charges
herein reserved, but such collection by Lessor shall not be deemed an
acceptance of the assignee, sublessee, or occupant as a tenant nor a release
of Lessee from the performance by Lessee of Lessee's obligations under this
Lease.
Notwithstanding the foregoing, the Lessor agrees that this Lease may be
collaterally assigned to First Union National Bank or any other lender
requiring such assignment from the Lessee. The Lessor further agrees to give
notice of any default by Lessee to any such lender provided the lender has
given the Lessor notice of the assignment and an address for delivery of
notice. Any such lender shall have the right, but not the obligation, to
cure any default for and on behalf of the Lessee within the time allowed for
curing default as provided herein. In the event that any lender shall
succeed to the rights of the Lessee pursuant to the terms of its assignment,
the Lessor agrees to acknowledge such lender as Lessee hereunder with all
rights and privileges, so long as such lender performs all of the obligations
to be performed by Lessee under this Lease. The Lessor further acknowledges
that First Union National Bank has a security interest in the personal
property of Lessee on the premises. The Lessor agrees to give First Union
full right of
LEASE
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<PAGE>
access to the premises after any default by Lessee, together with the right
to take possession of and remove such personal property, or to sell the same
on the premises provided that such activity shall be completed and the
personal property removed within thirty (30) days after such default as
hereinabove provided.
14. SURRENDER OF LEASED PREMISES. Lessee agrees to surrender the leased
premises at the expiration or earlier termination of this Lease, or extension
hereof, or any other holdover occupancy, in as good condition as when the
leased premises were delivered to Lessee, ordinary wear, tear and damage or
loss by the elements, fire, casualty, or any of the perils comprehended by
the standard extended coverage insurance clause excepted. All other damages
must be paid for by Lessee.
15. HOLDOVER. Should Lessee hold over the leased premises or any part
thereof after the expiration of the term of this Lease, unless otherwise
agreed in writing, such holding over shall constitute a tenancy from month to
month only, and Lessee shall pay monthly rental equal to the monthly rental
in effect immediately preceding the expiration of the preceding term hereof,
payable in advance, but otherwise on the same terms and conditions as herein
provided.
16. WAIVER OF COVENANTS. It is agreed that the waiving of any of the
covenants of this Lease by either party shall be limited to the particular
instance and shall not be deemed to
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<PAGE>
waive any other breaches of such covenant or any provision contained herein.
17. DEFAULT EXCEPT RENT. If Lessee shall default in the fulfillment of
any of the covenants and conditions hereof, except default in the payment of
rent, Lessor may, at Lessor's option, after thirty (30) days prior written
notice to Lessee, make performance for Lessee and, for that purpose, advance
such amounts as may be necessary. Any amounts so advanced, or any expense
incurred or sum of money paid by Lessor by reason of the failure of Lessee to
comply with any covenant, agreement, obligation, or provisions of this Lease
or in defending any action to which Lessor may be subjected by reason of any
such failure shall be deemed to be additional rental for the leased premises
and shall be due and payable to Lessor on demand. The acceptance by Lessor
of any monthly installment of rental hereunder shall not be a waiver of any
other rental hereunder then due.
If Lessee shall default in fulfillment of any of the covenants or
conditions of this Lease (other than the covenants for the payment of rental
or other amounts) and any such default shall continue for a period of thirty
(30) days after written notice from Lessor to Lessee, the Lessor may, at
Lessor's option, terminate this Lease by giving Lessee notice of such
termination and, thereupon, this Lease shall expire as fully and completely
as if that day were the date definitely fixed for the expiration
LEASE
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<PAGE>
of the term of this Lease, and Lessee shall then quit and surrender the
leased premises, provided, however, if any such default requires more than
thirty (30) days to remedy and Lessee is proceeding to cure such default,
Lessor shall not be entitled to terminate this Lease on account of such
default unless Lessee fails to commence curing such default promptly and/or
fails to prosecute the curing of such default to completion diligently.
18. DEFAULT IN RENT; INSOLVENCY OF LESSEE. If Lessee shall default in
the payment of the rental reserved hereunder, or any part thereof, or in
making any other payment herein provided for, and any such default shall
continue for a period of fifteen (15) days after written notice from Lessor
to Lessee, or if the leased premises or any part thereof shall be abandoned
or vacated without payment of rent, or if Lessee shall be dispossessed by or
under authority other than Lessor, if Lessee shall file a voluntary petition
in bankruptcy, or if Lessee shall file any petition or institute any
proceeding under any insolvency or Bankruptcy Act (or any amendment thereto
hereafter made) seeking to effect a reorganization or a composition with
Lessee's creditors, or if (in the proceedings based on the insolvency of
Lessee or relating to bankruptcy proceedings) a receiver or trustee shall be
appointed for Lessee or the leased premises, or if any proceedings shall be
commenced for the reorganization of Lessee, or if the leasehold estate
created hereby shall be taken on execution or by any process of law, or
LEASE
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<PAGE>
if Lessee shall admit in writing Lessee's inability to pay Lessee's
obligations generally as they become due, then Lessor may, at Lessor's
option, terminate this Lease, without further notice, and Lessor and Lessor's
agents and servants may immediately, or at any time thereafter, re-enter the
leased premises and remove all persons and property therefrom subject to
rights of First Union National Bank or substitute lender of Lessee (by legal
proceedings or by force or otherwise) without being liable to indictment,
prosecution, or damage therefor, or without terminating this Lease to recover
the leased premises as aforesaid and in that event Lessor agrees to use
Lessor's best efforts to relet said premises on behalf of the Lessee at
whatever rent, for a term that may be more or less than the expired portion
of the within Lease, and upon such other terms, provisions and conditions as
Lessor deem advisable, applying any moneys collected first to the payment of
resuming or obtaining possession, and second to the payment of costs of
placing the leased premises in rentable condition, third in the payment of
any real estate commission incurred by Lessor in such reletting and fourth,
for the payment of any rental or other charges due hereunder and any other
charges due to Lessor. Lessee shall remain liable for any deficiency in
rental which shall be paid upon demand therefor to Lessor.
19. CONDEMNATION. If the whole of the leased premises shall be taken or
condemned in any eminent domain, condemnation
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<PAGE>
or like proceeding by any competent authority for any public or quasi-public
use or purpose (including, for the purposes of this Section, any voluntary
conveyance in lieu of such proceeding), or if such portion thereof shall be
taken or condemned as to make it unreasonable to use the remaining portion
for the conduct of Lessee's business, then in any of such events, the term of
this Lease shall cease and terminate as of the date of such taking or
condemnation. Any award of compensation shall be divided as the parties
interest may appear. Notwithstanding the earlier termination, the Lessee
shall continue to pay the rent hereunder and to make all other payments
required hereunder until such time as the Lessee vacates the leased premises
or shall be required to surrender possession of the leased premises as a
consequence of such taking or condemnation, but not thereafter.
If only a part of the leased premises shall be taken or condemned and the
taking or condemnation of such part does not make it unreasonable to use this
remainder for the conduct of Lessee's business, this Lease shall not
terminate. In such event, the entire award shall belong to the Lessor and
out of the award to the Lessor and subject to the prior rights of any
Mortgagee, so much thereof as shall be reasonably necessary to repair any
damage to the building and other improvements on the leased premises or to
alter or modify them so as to render them a complete and satisfactory
architectural unit (including parking facilities) shall be expended by Lessor
for that purpose. During
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<PAGE>
the period of restoration and thereafter the rent hereunder shall be
equitably reduced and abated in proportion to that portion of the leased
premises of which the Lease shall be deprived on account of such taking or
condemnation.
In the event the parties are unable within a period of thirty (30) days
after any controversy arises between them to agree upon (i) whether it is
unreasonable for Lessee to use the remainder of the leased premises for the
conduct of Lessee's business, or (ii) the reduction or abatement of rent to
be made hereunder, then such dispute shall be resolved by arbitration in
accordance with the then prevailing rules of the American Arbitration
Association and the costs thereof shall be borne or apportioned and paid as
determined by such arbitration.
20. FAILURE TO PERFORM COVENANT. Any failure on the part of either
party to this Lease to perform any obligation hereunder, and any delay in
doing any act required hereby shall be excused if such failure or delay is
caused by any strike, lockout, governmental restriction or any other similar
cause beyond the control of the party so failing to perform, to the extent
and for the period that such continues, save and except that the provisions
of this Section shall not excuse a nonpayment of rental or other sums due
hereunder on the due date thereof.
21. QUIET ENJOYMENT. If and so long as Lessee pays the rentals reserved
by this Lease and performs and observes all the covenants and provisions
hereof to be performed and observed by
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<PAGE>
Lessee, Lessee shall quietly enjoy the leased premises, subject, however, to
the terms of this Lease, and Lessors will warrant and defend Lessee in the
enjoyment and peaceful possession of the leased premises throughout the term
of this Lease, including any extension hereof, or other holdover occupancy.
22. ACCESS TO LEASED PREMISES. Lessor or Lessor's agents shall have the
right to enter the leased premises at all reasonable times for the purpose of
inspecting or examining the same and to make such repairs as Lessor shall
deem necessary or as may be required to be made by Lessor.
23. RIGHT OF FIRST REFUSAL. Lessee shall have the right of first
refusal at any time during the initial term or any extended term of the Lease
by matching a BONA FIDE contractual offer to purchase by a party unrelated to
the owner within thirty (30) days of written notice.
24. OPTION TO EXTEND LEASE. The Lessee shall have the option to extend
the within Lease for two (2) additional five year periods. The rent shall be
adjusted at the beginning of each five year period to reflect the change in
the Consumer Price Index. Provided, however, no increase shall be greater
than ten (10%) per cent of the base rent for the previous term. In no event
shall the rent be less than the amount of the base term. Renewal terms shall
be exercised by Lessee by delivery to Lessor of written notice of its
intention to exercise such option no
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<PAGE>
later than ninety (90) days prior to the termination of the term of the Lease
then in effect.
25. RIGHTS OF SUCCESSORS AND ASSIGNS. The covenants and agreements
contained in the within Lease shall apply to, inure to the benefit of, and be
binding upon the parties hereto and upon their respective successors in
interest, except as expressly otherwise herein provided.
26. LEASE DOCUMENTARY STAMPS. Lessee shall pay documentary stamps as
required by South Carolina Law for the execution of this Lease.
27. ENTIRE AGREEMENT. This Lease and the exhibit attached hereto set
forth all the covenants, promises, agreements, conditions and understandings
between Lessor and Lessee concerning the leased premises, and there are no
covenants, promises, agreements, conditions, or understanding, either oral or
written, between them other than as herein set forth. Except as herein
otherwise provided, no subsequent alteration, amendment, change, or addition
to this Lease shall be binding upon Lessor or Lessee unless reduced to
writing and signed by them. Lessee agrees that Lessor and Lessor's agents
have made no representations or promises with respect to the leased premises
or the building or the property which are a part thereof except as herein
expressly set forth.
28. SECTION HEADING. The section headings as to the contents of
particular sections herein are inserted only for
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<PAGE>
convenience and are in no way to be construed as part of such section or as a
limitation on the scope of the particular section to which they refer.
29. GOVERNING LAW. This Lease shall be governed by, construed, and
enforced in accordance with the laws of the State of South Carolina.
30. GRAMMATICAL USAGE. In construing this Lease, feminine or neuter
pronouns shall be substituted for those masculine in form and vice versa, and
plural terms shall be substituted for singular and singular for plural in any
place in which the context so requires.
IN WITNESS THEREOF, the parties hereto have caused these presents to be
executed as of the day and year first above written.
IN THE PRESENCE OF:
/s/ [ILLEGIBLE SIGNATURE] /s/ C. E. Runion (LS)
- ------------------------- ---------------------------
C. E. RUNION
Evelyn S. Parrish
- -------------------------
As to Lessor
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<PAGE>
IN THE PRESENCE OF:
DOUBLE ENVELOPE CORPORATION
/s/ [ILLEGIBLE SIGNATURE] By: /s/ [ILLEGIBLE SIGNATURE] (LS)
- ------------------------- -----------------------------
/s/ Ann P. Wright
- ------------------------
As to Lessee
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF GREENVILLE )
PERSONALLY appeared the undersigned witness and made oath that (s)he
saw the within named Lessor sign, seal and as his act and deed deliver the
within written Lease and that (s)he, with the other witness subscribed above,
witnessed the execution thereof.
SWORN to before me this
4th day of March, 1992.
- --- -----
/s/ Evelyn S. Parrish (LS)
- ------------------------
Notary Public for South Carolina /s/ Eddie Runion
-----------------------
My Commission expires 9-24-1997
LEASE
Page 20
<PAGE>
COMMONWEALTH OF VIRGINIA )
) PROBATE
COUNTY OF ROANOKE )
PERSONALLY appeared before the undersigned witness and made oath
that (s)he saw the within named Lessee sign, seal and as its act and deed
deliver the within written Lease and that (s)he, with the other witness
subscribed above, witnessed the execution thereof.
SWORN to before me this
4th day of March, 1992.
- --- -----
/s/ Ann P. Wright (LS)
- ------------------------
Notary Public for Virginia /s/ [ILLEGIBLE SIGNATURE]
------------------------
My Commission expires 5/11/92
<PAGE>
EXHIBIT A
ALL that certain piece, parcel or tract of land with improvements thereon,
situate, lying and being in the County of Greenville, State of South
Carolina, at the intersection of U.S. Highway #25 and Hawkins Road,
containing 3.46 acres, more or less, and having, according to a plat entitled
"Eddie Runion", dated May 20, 1987, prepared by W.R. Williams, Jr.,
Engineer/Surveyor, the following metes and bounds, to-wit:
BEGINNING at an iron pin located at the intersection of Hawkins Road and U.S.
Highway #25 and running thence with the eastern side of U.S. Highway #25,
N.0-31 E. 77.11 feet to an iron pin, N.5-19 E. 99.99 feet to an iron pin,
N.8-07 E. 99.98 feet to an iron pin, N.11-38 E. 100.08 feet to an iron pin,
N.14-15 E. 91.67 feet to an iron pin; thence turning and running with the
joint line of subject property and property now or formerly of Montgomery, S.
62-51 E. 659.75 feet to an iron pin located on the northern side of Hawkins
Road; thence running with the northern side of the right of way of Hawkins
Road, S.76-08 W. 673.57 feet to the point of beginning.
LEASE
Page 22
<PAGE>
LEASE AGREEMENT
Part One of a Two Part Agreement
THIS AGREEMENT, made the 2nd day of September one thousand
nine hundred and ninety-four (1994), by and between Tornetta
Realty Corp., Agent for Burnside Associates/Fourtees, Co.,
with offices situate 839 East Germantown Pike, Norristown,
PA 19401 (hereinafter called Lessor), of the one part, and
National Fiberstok Corporation, a Delaware corporation, with
offices situate 7990 Second Flag Drive, Suite C, P.O. Box
458, Austell, GA 30001
Federal I. D. #
(hereinafter called Lessee), of the other part.
WITNESSETH THAT: Lessor does hereby demise and let unto
Lessee all that certain space consisting of approximately
2. Premises 7,138+/- s/f, hereinafter referred to as demised premises,
and being a portion of the building on Lot #9 in the Norriton
Business Campus, East Norriton Township, said demised
premises having the mailing address of 2051A Potshop Lane in
the County of Montgomery State of Pennsylvania, to be used
and occupied as sales office and warehouse space and for no
3. Term other purpose, for the term of five (5) years beginning the
1st day of October, one thousand nine hundred and ninety-
four (1994), and ending the 30th day of September, one
thousand nine hundred and ninety nine (1999), for the
4. Minimum Rent minimum total rental of Two Hundred Seven Thousand Twelve
Dollars and no/cents ($207012), lawful money of the United
States of America, payable in monthly installments in advance
during the said term of this lease, or any renewal hereof, in
sums as set forth below on the first day of each month, rent
to begin from the first day of October, 1994, the first
installment to be paid at the time of signing this lease.
The first rental payment to be made during the occupancy of
the premises shall be adjusted to pro-rate a partial month of
occupancy, if any, at the inception of this lease.
5. Place of
Payment All rent shall be payable without prior notice or
demand at the office of Lessor's Agent, Tornetta Realty
Corp., 839 East Germantown Pike, Norristown, PA 19401, or at
such other place as Lessor may from time to time designate
by notice in writing.
6. Agency (b) It is hereby expressly agreed and understood that
the said Tornetta Realty Corp. is acting as agent only and
shall not in any event be held liable to the owner or to
Lessee for the fulfillment (or non-fulfillment of any of the
terms or conditions of this lease, or for any action or
proceedings that may be taken by the owner against Lessee,
or by Lessee against the owner.
7. Termination
of Lease It is hereby mutually agreed that either party hereto
may determine this lease at the end of said term by giving
to the other party written notice thereof at least 120 days
prior thereto, but in default of such notice, this lease
shall continue upon the same terms and conditions in force
immediately prior to the expiration of the term hereof as
are herein contained for a further period of one (1) month
and so on from month to month unless or until terminated by
either party hereto, giving the other 30 days written notice
for removal previous to expiration of the then current term;
PROVIDED, however, that should this lease be continued for a
further period under the terms hereinabove mentioned, any
allowances given Lessee on the rent during the original term
shall not extend beyond such original term, and further
provided, however, that if Lessor shall have given such
written notice prior to the expiration of any term hereby
created, of his intention to change the terms and conditions
of this lease, and Lessee shall not within 15 days from such
notice notify Lessor of Lessee's intention to vacate the
demised premises at the end of the then current term, Lessee
shall be considered as Lessee under the terms and conditions
mentioned in such notice for a further term as above
provided, or for such further term as may be stated in such
notice. In the event that Lessee shall give notice, as
stipulated in this lease, of intention to vacate the demised
premises at the end of the present term, or any renewal or
extension thereof, and shall fail or refuse so to vacate the
same on the date designated by such notice, then it is
expressly agreed that Lessor shall have the option either
(a) to disregard the notice so given as having no effect, in
which case all the terms and conditions of this lease shall
continue thereafter with full force precisely as if such
notice had not been given, or (b) Lessor may, at any time
within thirty days after the present term, or any renewal or
extension thereof, as aforesaid, give the said Lessee ten
days' written notice of his intention to terminate the said
lease: whereupon the Lessee expressly agrees to vacate said
premises at the expiration of the said period of ten days
specified in the said notice. All powers granted to Lessor
by this lease may be exercised and all obligations imposed
upon Lessee by this lease shall be performed by Lessee as
well during any extension of the original term of this lease
as during the original term itself.
8. Security
Deposit Lessee does herewith deposit with Lessor the sum of Six
Thousand Five Hundred Forty Four & no/cents ($6,544.00)
Dollars, to be held as security for the full and faithful
performance by Lessee of Lessee's obligations under this
Lease and for the payment of damages to the demised
premises. If the demised premises is residential property,
said security deposit is to be held by Lessor as an Escrow
Fund pursuant to the terms and provisions of the Penna Act
of Assembly approved December 29, 1972, Act No. 363. Except
for such sum as shall be lawfully applied by Lessor to
satisfy valid claims against Lessee arising from defaults
under this lease or by reason of damages to the demised
premises, the Security Deposit or Escrow Fund shall be
returned to the Lessee at the expiration of the term of this
lease or any renewal or extension thereof but in the case of
residential property only as provided for in the said Act of
9. Special Assembly. It is understood that no part of any security
Clauses deposit or Escrow Fund is to be considered as the last
rental due under the terms of the lease.
It is agreed and understood that the monthly rental
payments as called for above shall be paid as follows:
(a). The sum of Three Thousand Two Hundred Seventy Two
Dollars & no/cents ($3,272.00) per month beginning October
1, 1994 to September 30, 1996;
(b). The sum of Three Thousand Four Hundred Twenty Dollars
& no/cents ($3,420.00) per month beginning October 1, 1996
to September 30, 1997;
(c). The sum of Three Thousand Five Hundred Sixty Nine
Dollars & no/cents ($3,569.00) per month beginning October
1, 1997 to September 30, 1998; and
(d). The sum of Three Thousand Five Hundred Eighteen
Dollars & no/cents ($3,718.00) per month beginning October
1, 1998 to September 30, 1999.
10. Addendum The Lessor and Lessee agree for themselves, their
respective heirs and successors and assigns to the herein
described terms and also to those set forth in the addendum
attached hereto entitled "TERMS AND CONDITIONS," (PART TWO)
all of which are to be regarded as binding and as strict
legal conditions.
INITIALS LESSEE LESSEE LESSEE LESSOR LESSOR AGENT
--- --- --- --- --- ---
<PAGE>
LEASE AGREEMENT
Terms and Conditions
Part Two of a Two Part Agreement
11. Special Addendum to Lease Agreement and Exhibit "A" are
Clauses attached hereto and made a part hereof.
12. Inability
to Given If Lessor is unable to give Lessee possession of the
Possession demised premises, as herein provided, by reason of the
holding over of a previous occupant, or by reason of any
cause beyond the control of the Lessor, the Lessor shall not
be liable in damages to the Lessee therefor, and during the
period that the Lessor is unable to give possession, all
rights and remedies both parties hereing shall be
suspended and if Lessor is unable for any reason to give
possession of the demised premises within 5 days of Lessee's
demand therefor following commencement of the term hereof
Lessee shall have the option, by notice to Lessor, to cancel
this lease agreement and receive return of any prepaid rents
and security deposit in full and final settlement of any and
all claims against Lessor.
13. Additional Rent
(a) Damages for (a) Lessee agrees to pay as rent in addition to the
Default minimum rental herein reserved any and all sums which may
become due by reason of the failure of Lessee to comply with
all of the covenants of this lease and any and all damages,
costs and expenses which the Lessor may suffer or incur by
reason of any default of the Lessee or failure on his part
to comply with the covenants of this lease, and each of
them, and also any and all damages to the demised preemies
caused by any act or neglect of the Lessee.
(b) Taxes (b) Lessee further agrees to pay as rent in addition to
the minimum rental herein reserved all taxes assessed or
imposed upon the demised premises and/or the building of
which the demised premises is a part during the term of this
lease. The amount due hereunder on account of such taxes
shall be apportioned for that part of the first and last
calendar years covered by the term hereof. The same shall
be paid by Lessee to Lessor on or before the first day of
July of each and every year.
(c) Fire (c) Lessee further agrees to pay to Lessor as
Insurance additional rent all increase or increases in fire insurance
Premiums premiums upon the demised premises and/or the building of
which the demised premises is a part, due to an increase in
the rate of fire insurance in excess of the rate on the
demised premises at the time of making this lease, if said
increase is caused by any act or neglect of the Lessee or
the nature of the Lessee's business.
(d) Water Rent (d) Lessee further agrees to pay as additional rent, if
there is a metered water connection to the said premises,
all charges for water consumed upon the demised premises and
all charges for repairs to the said meter or meters on the
premises, whether such repairs are made necessary by
ordinary wear and tear, freezing, hot water, accident or
other causes, immediately when the same become due.
(e) Lessee further agrees to pay as additional rent, if
there is a metered water connection to said premises, all
sewer rental or charges for use of sewers, sewage system,
and sewage treatment works servicing the demised premises
immediately when the same become due.
Lessee covenants and agrees that he will without demand
14. Affirmative (a) Pay the rent and all other charges herein reserved
Covenants of as rent at the times and at the place that the same are
Lessee payable, without fail; and if Lessor shall at any time or
(a) Payment times accept said rent or rent charges after the same shall
of Rent have become delinquent, such acceptance shall not excuse
delay upon subsequent occasions, or constitute or be
construed as a waiver of any of Lessor's rights. Lessee
agrees that any charge or payment herein reserved, included,
or agreed to be treated or collected as rent and/or any
other charges, expenses, or costs herein agreed to be paid
by Lessee may be proceeded for and recovered by Lessor by
legal process in the same manner as rent due and in arrears.
(b) Cleaning, (b) Keep the demised premises clean and free from all
Repairing ashes, dirt and other refuse matter; replace all glass
Etc. windows, doors, etc., broken; keep all waste and drain pipes
open; repair all damage to plumbing and to the premises in
general; keep the same in good order and repair as they
are now, reasonable wear and tear and damage by
accidental fire or other casualty not occurring through
negligence of Lessee or those employed by or acting for
Lessee alone excepted. The Lessee agrees to surrender the
demised premises in the same condition in which Lessee has
herein agreed to keep the same during the continuance of
this lease.
(c) Requirements (c) Comply with any requirements of any of the
Of Public constituted public authorities, and with the terms of any
Authorities State or Federal statute or local ordinance or regulation
applicable of Lessee or his use of the demised premises, and
save Lessor harmless from penalties, fines, costs, or
damages resulting from failure so to do.
(d) Fire (d) Use every reasonable precaution against fire.
(e) Rules and (e) Comply with rules and regulations of Lessor
Regulations promulgated as hereinafter provided.
(f)Surrender of (f) Peaceably deliver up and surrender possession of
Possession the demised premises to the Lessor at the expiration or
sooner termination of this lease, promptly delivering to
Lessor at his office all keys for the demised premises.
(g) Notice of (g) Give to Lessor prompt written notice of any
Fire, etc. accident, fire, or damage occurring on or to the demised
premises.
(h) Condition (h) Lessee shall be responsible for the condition of
Of Pavement the pavement, curb, cellar doors, awnings and other
erections in the pavement during the term of this lease;
shall keep the pavement free from snow and ice; and shall be
and hereby agrees that Lessee is solely liable for any
accidents, due or alleged to be due to their defective
condition, or to any accumulations of snow and ice.
(i) Agency on (i) The Lessee agrees that if, with the permission in
Removal writing of Lessor, Lessee shall vacate or decide at any time
during the term of this lease, or any renewal thereof, to
vacate the herein demised premises prior to the expiration
of this lease, or any renewal hereof, Lessee will not cause
or allow any other agent to represent Lessee in any sub-
letting or reletting of the demised premises other than an
agent approved by the Lessor and that should Lessee do
so, attempt to do so, the Lessor may remove any signs that
may be placed on or about the demised premises by such other
agent without any liability to Lessor or to said agent, the
Lessee assuming all responsibility for such action.
(j) Indemni- (j) Indemnify and save Lessor harmless from any and all
fication loss occasioned by Lessee's breach of any of the covenants,
terms and conditions of this lease, or caused by his family,
guests, visitors, agents and employees.
15. Negative Lessee covenants and agrees that he will do none of
Covenants the following things without first obtaining the consent, in
Of Lessee writing of Lessor, which consent Lessor shall not
unreasonably withhold, and without providing Lessor with
reimbursement for any expenses incurred or incidental to
Lessee's proposed action.
(a) Use of (a) Occupy the demised premises in any other manner or
Premises for any other purpose than as above set forth.
(b) Assignment (b) Assign, mortgage or pledge this lease or under-let
And or sub-lease the demised premises or any part thereof or
Subletting permit any other person, firm or corporation to occupy
demised premsies, or part thereof; nor should any assignee
or sub-lessee assign, mortgage or pledge this lease or such
sub-lease, without an additional written consent by the
Lessor, and without such consent no such assignment,
mortgage or pledge shall be valid. If the Lessee becomes
embarrassed or insolvent, or makes an assignment for the
benefit of creditors, or if a petition in bankruptcy is
filed by or against the Lessee or a bill in equity or other
proceeding for the appointment of a receiver for the Lessee
is filed, or if the real or personal property of the Lessee
shall be sold or levied upon by any Sheriff, Marshal or
Constable, the same shall be a violation of this covenant.
<PAGE>
(c) Signs (c) Place or allow to be placed any stand, booth,
sign or show case upon the doorsteps, vestibules or
outside walls or pavements of said premises, or paint,
place, erect or cause to be painted, placed or erected
any sign, projection or device on or in any part of the
premises. Lessee shall remove any sign, projection or
device painted, placed or erected, if permission has
been granted and restore the walls, etc., to their
former conditions, at or prior to the expiration of
this lease. In case of the breach of this covenant (in
addition to all other remedies given to Lessor in case
of the breach of any conditions or covenants of this
lease) Lessor shall have the privilege of removing said
stand, booth, sign, show case, projection or device,
and restoring said walls, etc., to their former
condition, and Lessee, at Lessor's option, shall be
liable to Lessor for any and all expenses so incurred by
Lessor.
(d) Alterations (d) Make any alterations, improvements, or
Improvements additions to the demised premises. All alterations,
improvements, additions or fixtures, whether installed
before or after the execution of this lease, shall
remain upon the premises at the expiration or sooner
determination of this lease and become the property of
Lessor, unless Lessor shall, prior to the determination
of this lease, have given written notice to Lessee to
remove the same, in which event Lessee will remove such
alterations, improvements and additions and restore the
premises to the same good order and condition in which
they now are. Should Lessee fail so to do, Lessor may
do so, collecting, at Lessor's option, the cost and
expense thereof from Lessee as additional rent.
(e) Machinery (e) Use or operate any machinery that, in Lessor's
opinion, is harmful to the building or disturbing to
other tenants occupying other parts thereof.
(f) Weights (f) Place any weights in any portion of the demised
premises beyond the safe carrying capacity of the
structure.
(g) Fire Insurance (g) Do or suffer to be done, any act, matter or
thing objectionable to the fire insurance companies
whereby the fire insurance or any other insurance now
in force or hereafter to be placed on the demised
premises, or any part thereof, or on the building of
which the demised premises may be a part, shall become
void or suspended, or whereby the same shall be rated
as a more hazardous risk than at the date of execution
of this lease, or employ any person or persons
objectionable to the fire insurance companies or carry
or have any benzine or explosive matter of any kind in
and about the demised premises. In case of a breach of
this covenant (in addition to all other remedies given
to Lessor in case of the breach of any of the
conditions or covenants of this lease) Lessee agrees to
pay to Lessor as additional rent any and all increase
or increases of premiums on insurance carried by Lessor
on the demised premises, or any part thereof, or on the
building of which the demised premises may be a part,
caused in any way by the occupancy of Lessee.
(h) Removal of (h) Remove, attempt to remove or manifest an
Goods intention to remove Lessee's goods or property from or
out of the demised premises otherwise than in the
ordinary and usual course of business, without having
first paid and satisfied Lessor for all rent which may
become due during the entire term of this lease.
(i) Vacate (i) Vacate or desert said premises during the
Premises term of this lease, or permit the same to be empty and
unoccupied.
Lessee covenants and agrees that Lessor shall have
the right to do the following things and matters in and
about the demised premises:
16. Lessor's Rights (a) At all reasonable times by himself or his duly
(a) Inspection of authorized agents to go upon and inspect the demised
Premises premises and every part thereof, and/or at his option
to make repairs, alterations and additions to the
demised premises or the building of which the demised
premises is a part.
(b) Rights and (b) At any time or times and from time to time
Regulations make such reasonable rules and regulations as may be
necessary or desirable for the safety, care, and
cleanliness of the demised premises and/or of the
building of which the demised premises is a part and of
real and personal property contained therein and for
the preservation of good order. Such rules and
regulations shall, when communicated in writing to
Lessee, form a part of this lease.
(c) Sale or Rent (c) To display a "For Sale" sign at any time, and
Sign also, after notice from either party of intention to
Prospective determine this lease, or at any time within three months
Purchasers or prior to the expiration of this lease, a "For Rent"
Tenants sign, or both "For Rent" and "For Sale" signs; and all
of said signs shall be placed upon such part of the
premises as Lessor may elect and may contain such
matter as Lessor shall require. Persons authorized by
Lessor may inspect the premises at reasonable hours
during said periods.
(d) Discontinue (d) Lessor may discontinue at any time, any or all
Facilities facilities furnished and services rendered by Lessor
and Services not expressly covenanted for herein or required to be
furnished or rendered by law; it being understood that
they constitute no part of the consideration for this
lease.
17. Responsibility of (a) Lessee agrees to relieve and hereby relieves
Lessee the Lessor from all liability by reason of any injury
or damage to any person or property in the demised
premises, whether belonging to the Lessee or any other
person caused by any fire, breakage, or leakage in any
part or portion of the building of which the demised
premises is a part or from water, rain or snow that may
leak into, issue or flow from any part of the said
premises, or of the building of which the demised
premises is a part, from the drains, pipes, or plumbing
work of the same, or from any place or quarter, unless
such breakage, leakage, injury or damage be caused by or
result from the negligence of Lessor or its servants or
agents.
(b) Lessee also agrees to relieve and hereby
relieves Lessor from all liability by reason of any
damage or injury to any property or to Lessee or
Lessee's guests, servants or employees which may arise
from or be due to the use, misuse or abuse of all or
any of the elevators, hatches, openings, stairways,
hallways of any kind whatsoever which may exist or
hereafter be erected or constructed on the said
premises or the sidewalks surrounding the building or
which may arise from defective construction, failure of
water supply, light, power, electric wiring, plumbing or
machinery, wind, lightning, storm or any other cause
whatsoever on the said premises or the building of
which the demised premises is a part, unless such
damage, injury, use, misuse or abuse be caused by or
result from the negligence of Lessor, its servants or
agents.
18. Responsibility of (a) In the event the demised premises are totally
Lessor destroyed or so damaged by fire or other casualty that,
(a) Total Destruc- in the opinion of a licensed architect retained by
tion of Lessor, the same cannot be repaired and restored within
Premises ninety days from the happening of such injury this
(b) Partial lease shall absolutely cease and determine, and the
Destruction rent shall abate for the balance of the term.
of Premises (b) If the damage be only partial and such that
the premises can be restored, in the opinion of a
licensed architect retained by Lessor, to approximately
their former condition within ninety days from the date
of the casualty loss Lessor may, at Lessor's option,
restore the same with reasonable promptness, reserving
the right to enter upon the demised premises for that
purpose. Lessor also reserves the right to enter upon
the demised premises whenever necessary to repair
damage caused by fire or other casualty to the building
of which the demised premises is a part, even though
the effect of such entry be to render the demised
premises or a part thereof untenantable. In either
event the rent shall be apportioned and suspended
during the time Lessor is in possession, taking into
account the proportion of the demised premises rendered
untenantable and the duration of Lessor's possession.
If a dispute arises as to the amount of rent due under
this clause, Lessee agrees to pay the full amount
claimed by Lessor, but Lessee shall have the right to
proceed by law to recover the excess payment, if any.
(c) Repairs by (c) Lessor shall make such election to repair the
Lessor premises or terminate this lease by giving notice
thereof to Lessee at the leased premises within thirty
days from the day Lessor received notice that the
demised premises had been destroyed or damaged by fire
or other casualty.
(d) Damage for (d) Except to the extent hereinbefore provided,
Interruption Lessor shall not be liable for any damage,
of Use compensation, or claim by reason of the necessity of
repairing any portion of the building, the interruption
in the use of the premises, any inconvenience or
annoyance arising as a result of such repairs or
interruption, or the termination of this lease by
reason of damage to or destruction of the premises.
(e) Representation (e) Lessor has let the demised premises in their
of Condition present "as is" condition and without any
of Premises representations, other than those specifically endorsed
hereon by Lessor, through its officers, employees,
servants and/or agents. It is understood and agreed
that Lessor is under no duty to make repairs,
alterations, or decorations at the inception of this
lease or at any time thereafter unless such duty of
Lessor shall be set forth in writing endorsed hereon.
(f) Zoning (f) It is understood and agreed that the Lessor
hereof does not warrant or undertake that the Lessee
shall be able to obtain a permit under any Zoning
Ordinance or Regulation for such use as Lessee intends
to make of the said premises, and nothing in this lease
contained shall obligate the Lessor to assist Lessee in
obtaining said permit; the Lessee further agrees that in
the event a permit cannot be obtained by Lessee under
any Zoning Ordinance or Regulation, this lease shall not
terminate without Lessor's consent, and the Lessee
shall use the premises only in a manner permitted under
such Zoning Ordinance or Regulation.
19. Miscellaneous (a) No contract entered into or that may be
Agreements and subsequently entered into by Lessor with Lessee,
Conditions relative to any alterations, additions, improvements or
(a) Effect of Re- repairs, nor the failure of Lessor to make such
pairs on alterations, additions, improvements or repairs as
Rental required by any such contract, nor the making by Lessor
or his agents or contractors of such alterations,
additions, improvements or repairs shall in any way
affect the payment of the rent or said other charges at
the time specified in this lease, except to the extent
and in the manner hereinbefore provided.
(b) Waiver of (b) It is hereby covenanted and agreed, any law,
Custom usage or custom to the contrary notwithstanding, that
Lessor shall have the right at all times to enforce the
covenants and provisions of this lease in strict
accordance with the terms hereof, notwithstanding any
conduct or custom on the part of the Lessor in
refraining from so doing at any time or times; and,
further, that the failure of Lessor at any time or
times to enforce his rights under said covenants and
provisions strictly in accordance with the same shall
not be construed as having created a custom in any way
or manner contrary to the specific terms, provisions
and covenants of this lease or as having in any way or
manner modified the same.
(c) Conduct of (c) This lease is granted upon the express
Lessee condition that Lessee and/or the occupants of the
premises herein leased shall not conduct themselves in
a manner which is improper or objectionable, and if at
any time during the term of this lease or any extension
or continuation thereof Lessee or any occupier of the
said premises shall have conducted himself in a manner
which is improper or objectionable, Lessee shall be
taken to have broken the covenants and conditions of
this lease, and Lessor will be entitled to all of the
rights and remedies granted and reserved herein, for
the Lessee's failure to observe all of the covenants
and conditions of this lease.
(d) Failure of (d) In the event of the failure of Lessee promptly
Lessee to to perform the covenants of Section 14(b) hereof,
Repair Lessor may go upon the demised premises and perform
such covenants, the cost thereof, at the sole option of
Lessor, to be charged to Lessee as additional and
delinquent rent.
(e) Waiver of (e) Lessor and Lessee hereby agree that all
Subrogation insurance policies which each of them shall carry to
insure the demised premises and the contents therein
against casualty loss, and all liability policies which
they shall carry pertaining to the use and occupancy of
the demised premises shall contain waivers of the right
of subrogation against Lessor and Lessee herein, their
heirs, administrators, successors, and assigns.
(f) Security (f) Lessee hereby grants to Lessor a security
Interest interest under the Uniform Commercial Code in all of
Lessee's goods and property in, on, or about the demised
premises. Said security interest shall secure unto
Lessor the payment of all rent (and charges collectible
or reserved as rent) hereunder which shall become due
under the provisions of this lease. Lessee hereby
agrees to execute, upon request of Lessor, such
financing statements as may be required under the
provisions of the said Uniform Commercial Code to
perfect a security interest in Lessee's said goods and
property.
20. Remedies of Lessor If the Lessee:
(a) Does not pay in full when due any and all
installments of rent and/or any other charge or payment
herein reserved, included, or agreed to be treated or
collected as rent and/or any other charge, expense, or
cost herein agreed to be paid by the Lessee; or
(b) Violates or fails to perform or otherwise
breaks any covenant or agreement herein contained; or
(c) Vacates the demised premises or removes or
attempts to remove or manifests an intention to remove
any goods or property therefrom otherwise than in the
ordinary and usual course of business without having
first paid and satisfied the Lessor in full for all
rent and other charges then due or that may
thereafter become due until the expiration of the
then current term, above mentioned; or
(d) Becomes embarrassed or insolvent, or makes an
assignment for the benefit of creditors, or if a
petition in bankruptcy is filed by or against Lessee or
a complaint in equity or other proceedings for the
appointment of a receiver for Lessee is filed, or if
proceedings for reorganization or for composition with
creditors under any State or Federal law be instituted
by or against Lessee, or if the real or personal
property of Lessee shall be levied upon or be sold, or
if for any other reason Lessor shall, in good faith,
believe that Lessee's ability to comply with the
covenants of this lease, including the prompt payment
of rent hereunder, is or may become impaired.
thereupon:
(1) The whole balance of rent and other charges,
payments, costs, and expenses herein agreed to be paid
by Lessee, or any part thereof, and also all costs and
officers' commissions including watchmen's wages shall
be taken to be due and payable and in arrears as if by
the terms and provisions of this lease said balance of
rent and other charges, payment, taxes, costs and
expenses were on that date, payable in advance.
Further, if this lease or any part thereof is assigned,
or if the premises, or any part thereof is sub-let,
Lessee hereby irrevocably constitutes and appoints
Lessor as Lessee's agent to collect the rents due from
such assignee or sub-lessee and apply the same to the
rent due hereunder without in any way affecting Lessee's
obligation to pay any unpaid balance of rent due
hereunder; or
(2) At the option of Lessor, this lease and the
terms hereby created shall determine and become
absolutely void without any right on the part of
Lessee to reinstate this lease by payment of any sum
due or by other performance of any condition, term, or
covenant broken; whereupon, Lessor shall be entitled to
recover damages for such breach in an amount equal to
the amount of rent reserved for the balance of the term
of this lease, less the fair rental value of the said
demised premises for the remainder of the lease term.
21. Further Remedies In the event of any default as above set forth in
of Lessor Section 20, Lessor, or anyone acting on Lessor's
behalf, at Lessor's option:
(a) May let said premises or any part or parts
thereof to such person or persons as may, in Lessor's
discretion, be best; and Lessee shall be liable for any
loss of rent for the balance of the then current term.
Any such re-entry or re-letting by Lessor under the
terms hereof shall be without prejudice to Lessor's
claim for actual damages, and shall under no
circumstances, release Lessee from liability for such
damages arising out of the breach of any of the
covenants, terms, and conditions of this lease.
(b) May proceed as a secured party under the
provisions of the Uniform Commercial Code against the
goods in which Lessor has been granted a security
interest pursuant to Section 19(f) hereof; and
(c) May have and exercise any and all other rights
and/or remedies, granted or allowed landlords by any
existing or future Statute, Act of Assembly, or other
law of this state in cases where a landlord seeks to
enforce rights arising under a lease agreement against
a tenant who has defaulted or otherwise breached the
terms of such lease agreement; subject, however, to all
of the rights granted or created by any such Statute,
Act of Assembly, or other law of this state existing for
the protection and benefit of tenants; and
(d) May have and exercise any and all other rights
and remedies contained in this lease agreement,
including the rights and remedies provided by Sections
22 and 23 hereof.
22. Confession of Lessee covenants and agrees that if the rent
Judgment and/or any charges reserved in this lease as rent
for Money (including all accelerations of rent permissible under
the provisions of this lease) shall remain unpaid five
(5) days after the same is required to be paid, then
and in that event, Lessor may cause Judgment to be
entered against Lessee, and for that purpose Lessee
hereby authorizes and empowers Lessor or any
Prothonotary, Clerk of Court or Attorney of any Court
of Record to appear for and confess judgment against
Lessee and agrees that Lessor may commence all actions
pursuant to Pennsylvania Rules of Civil Procedure No.
2950 et seq. for the recovery from Lessee of all rent
hereunder (including all accelerations of rent
permissible under the provisions of this lease) and/or
for all charges reserved hereunder as rent, as well as
for interest and costs and Attorney's commission, for
which authorization to confess judgment, this lease,
or a true and correct copy thereof, shall be sufficient
warrant. Such Judgment may be confessed against Lessee
for the amount of rent in arrears (including all
accelerations of rent permissible under the provisions
of this lease) and/or for all charges reserved
hereunder as rent, as well as for interest and costs;
together with an attorney's commission of five percent
(5%) of the full amount of Lessor's claim against
Lessee. Neither the right to institute an action
pursuant to Pennsylvania Rules of Civil Procedure No.
2950 et seq. nor the authority to confess judgment
granted herein shall be exhausted by one or more
exercises thereof, but successive complaints may be
filed and successive judgments may be entered for the
aforedescribed sums five days or more after they
become due as well as after the expiration of the
original term and/or during or after expiration of any
extension or renewal of this lease.
23. Confession of Lessee covenants and agrees that if this lease
Judgment for shall be terminated (either because of condition broken
Possession of during the terms of this lease or any renewal or
Real Property extension thereof and/or when the term hereby created
or any extension thereof shall have expired) then, and
in that event, Lessor may cause a judgment in
ejectment to be entered against Lessee for possession
of the demised premises, and for that purpose Lessee
hereby authorizes and empowers any Prothonotary, Clerk
of Court or Attorney of any Court of Record to appear
for Lessee and to confess judgment against Lessee in
Ejectment for possession of the herein demised
premises, and agrees that Lessor may commence an action
pursuant to Pennsylvania Rules of Procedure No. 2970 et
seq. for the entry of an order in Ejectment for the
possession of real property, and Lessee further agrees
that a Writ of Possession pursuant thereto may issue
forthwith, for which authorization to confess judgment
and for the issuance of a writ or writs of possession
pursuant thereto, this lease, or a true and correct
copy thereof, shall be sufficient warrant. Lessee
further covenants and agrees, that if for any reason
whatsoever, after said action shall have commenced the
action shall be terminated and the possession of the
premises demised hereunder shall remain in or be
restored to Lessee, Lessor shall have the right upon
any subsequent default or defaults, or upon the
termination of this lease as above set forth to
commence successive actions for possession of real
property and to cause the entry of successive
judgments by confession in Ejectment for possession of
the premises demised hereunder.
24. Affidavit of In any procedure or action to enter Judgment by
Default Confession for Money pursuant to Section 22 hereof, or
to enter Judgment by Confession in Ejectment for
possession of real property pursuant to Section 23
hereof, if Lessor shall first cause to be filed in such
action an affidavit or averment of the facts
constituting the default or occurrence of the condition
precedent, or event, the happening of which default,
occurrence, or event authorizes and empowers Lessor to
cause the entry of judgment by confession, such
affidavit or averment shall be conclusive evidence of
such facts, defaults, occurrences, conditions precedent,
or events; and if a true copy of this lease (and of the
truth of which such affidavit or averment shall be
sufficient evidence) be filed in such procedure or
action, it shall not be necessary to file the original
as a Warrant of Attorney, and rule of court, custom, or
practice to the contrary notwithstanding.
25. Waivers by Lessee Lessee hereby releases to Lessor and to any and
of Errors, Right all attorneys who may appear for Lessee all errors in
of Appeal, Stay, any procedure or action to enter Judgment by Confession
Exemptions, by virtue of the warrants of attorney contained in this
Inquisition lease, and all liability therefor. Lessee further
authorizes the Prothonotary or any Clerk of any Court of
Record to Issue a Writ of Execution or other process,
and further agrees that real estate may be sold as a
Writ of Execution or other process. If proceedings
shall be commenced to recover possession of the demised
premises either at the end of the term or sooner
termination of this lease, or for non-payment of rent or
for any other reason. Lessee specifically waives the
right to the three (3) months' notice to quit and/or the
fifteen (15) or thirty (30) days' notice to quit
required by the Act of April 6, 1951, P.I. 69, as
amended, and agrees that five (5) days' notice shall be
sufficient in either or any such case.
26. Right of Assignee The right to enter judgment against Lessee by
of Lessor confession and to enforce all of the other provisions of
this lease herein provided for may at the option of any
assignee of this lease, be exercised by any assignee
of the Lessor's right, title and interest in this lease
in his, her, or their own name, any statute, rule of
court, custom, or practice to the contrary
notwithstanding.
27. Remedies All of the remedies hereinbefore given to Lessor
Cumulative and all rights and remedies given to it by law and
equity shall be cumulative and concurrent. No
determination of this lease or the taking or recovering
possession of the premises shall deprive Lessor of any
of its remedies or actions against the Lessee for rent
due at the time or which, under the terms hereof would
in the future become due as if there had been no
determination, nor shall the bringing of any action for
rent or breach of covenant, or the resort to any other
remedy herein provided for the recovery of rent be
construed as a waiver of the right to obtain possession
of the premises.
28. Condemnation In the event that the premises demised herein, or
any part thereof, is taken or condemned for a public or
quasi-public use, this lease shall, as to the part so
taken, terminate as of the date title shall vest in the
condemnor, and rent shall abate in proportion to the
square feet of leased space taken or condemned or shall
cease if the entire premises be so taken. In either
event the Lessee waives all claims against the Lessor
by reason of the complete or partial taking of the
demised premises.
29. Subordination This Agreement of Lease and all its terms,
covenants and provisions are and each of them is
subject and subordinate to any lease or other
arrangement or right to possession, under which the
Lessor is in Control of the demised premises, to the
rights of the owner or owners of the demised premises
and of the land or buildings of which the demised
premises are a part, to all rights of the Lessor's
landlord and to any and all mortgages and other
encumbrances now or hereafter placed upon the demised
premises or upon the land and/or the buildings
containing the same; and Lessee expressly agrees that
if Lessor's tenancy, control, or right to possession
shall terminate either by expiration, forfeiture or
otherwise, then this lease shall thereupon immediately
terminate and the Lessee shall, thereupon, give
immediate possession; and Lessee hereby waives any and
all claims for damages or otherwise by reason of such
termination as aforesaid.
30. Notices All notices must be given by certified mail, return
receipt requested.
31. Lease Contains all It is expressly understood and agreed by and
Agreements between the parties hereto that this lease and the
riders attached hereto and forming a part hereof set
forth all the promises, agreements, conditions and
understandings between Lessor or his Agent and Lessee
relative to the demised premises, and that there are no
promises, agreements, conditions or understandings,
either oral or written, between them other than as
herein set forth. It is further understood and agreed
that, except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this lease
shall be binding upon Lessor or Lessee unless reduced
to writing and signed by them.
32. Heirs and All rights and liabilities herein given to, or
Assignees imposed upon, the respective parties hereto shall
extend to and bind the several and respective heirs,
executors, administrators, successors and assigns of
said parties; and if there shall be more than one
Lessee, they shall all be bound jointly and severally by
the terms, covenants and agreements herein, and the word
"Lessee" shall be deemed and taken to mean each and
every person or party mentioned as a Lessee herein, be
the same one or more; and if there shall be more than
one Lessee, any notice required or permitted by the
terms of this lease may be given by or to any one
thereof, and shall have the same force and effect as if
given by or to all thereof. The words "his" and "him"
wherever stated herein, shall be deemed to refer to the
"Lessor" or "Lessee" whether such Lessor or Lessee be
singular or plural and irrespective of gender. No
rights, however, shall inure to the benefit of any
assignee of Lessee unless the assignment to such
assignee has been approved by Lessor in writing as
aforesaid.
33. Headings no Any headings preceding the text of the several
part of lease paragraphs and sub-paragraphs hereof are inserted
solely for convenience of reference and shall not
constitute a part of this lease nor shall they affect
its meaning, construction or effect.
<PAGE>
In Witness Whereof, the parties hereto have executed these presents the day
and year first above written, and intend to be legally bound thereby.
SEALED AND DELIVERED IN THE Tornetta Realty Corp., Agent
PRESENCE OF:
- ---------------------------- ----------------------------Agent
Burnside Associates/Fourtees
- ---------------------------- ---------------------------------
(Lessee)
- ---------------------------- ---------------------------------
National Fiberstok Corporation
BY:
- ---------------------------- ---------------------------------
(Lessee)
- ---------------------------- ATTEST:
---------------------------------
(Lessee)
<PAGE>
ADDENDUM to Lease Agreement dated September 2nd, 1994, by and between
Tornetta Realty Corp., Agent for Burnside Associates/Fourtees, Co. (hereinafter
referred to as Lessor), and National Fiberstok Corporation, a Delaware
corporation (hereinafter referred to as Lessee), for all that certain space
consisting of approximately 7,138 +/- square feet hereinafter referred to as the
demised premises, and being a portion of the building on Lot #9 in the Norriton
Business Campus, East Norriton Township, Montgomery County, Pennsylvania, said
demised premises having the mailing address of 2051A Potshop Lane, Norristown,
PA 19403.
In the event of any conflict between the provisions of this Addendum and
the preprinted provisions of this Lease, the provisions of this Addendum shall
control and shall be given full force and effect without regard to any
conflicting or contrary preprinted provisions.
34.) Lessee agrees to pay immediately to Lessor a late charge of six (6%)
percent of the gross monthly rental for rents not received by Lessor on time.
All rents are due on the first of each month. A charge of $50.00 is applicable
for any checks returned from the bank, for whatever reason.
Further, no payment by Lessee or receipt by Lessor, or Lessor's Agent, of a
lesser amount than any installment or payment of rent or additional rent due
shall be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or payment shall be deemed an accord and
satisfaction. Lessor, or Lessor's Agent, may accept such check or payment
without prejudice to Lessor's right to recover the balance of such installment
or payment due, or pursue any other remedies available to Lessor.
35.) It is agreed and understood by all parties made a part hereto, that
Tornetta Realty Corp. is the sole and exclusive agent for Lessor on said
property. Accordingly, Tornetta Realty Corp. shall be paid by Lessor at the
rate of commission as outlined in a separate "Agency Agreement" between
Lessor and Tornetta Realty Corp. Further it is understood and agreed that the
officers of Tornetta Realty Corp., Agents herein, have an interest in the
ownership of the herein described property. Lessee is not responsible for any
commission payable to Tornetta Realty Corp.
36.) Lessee agrees to pay as additional rent, in addition to the minimum rental
hereon reserved, their proportionate share of all taxes (including assessments)
assessed or imposed upon the property of which the demised premises is a part
based upon the percentage by which Lessee's square footage bears to the entire
square footage of the building during the term of this Lease, renewals or
extensions thereof. Lessee shall pay to Lessor such taxes based on the fiscal
year or years of the taxing authorities, or portions thereof during the term
hereof (appropriately apportioned for any partial year at the beginning or end
of the term hereof).
Lessor shall submit to Lessee a copy of any tax bills authorized and
prepared by the tax authorities, as well as a bill prepared by Lessor as to
Lessee's share of taxes due. Lessee shall at all times be responsible for and
shall pay before delinquency Lessee's proportionate share of all county,
township, and school real estate taxes assessed against the property, as well as
all municipal, county, state or federal taxes assessed against any leasehold
interest or any personal property of any kind owned, installed or used by
Lessee, as well as all rent, occupancy, transportation, utility, use, amusement
or vending machine taxes, now or hereafter imposed. Said taxes shall be paid by
Lessee to Lessor at least one (1) month before the expiration of the net payment
period of said taxes and before penalties are assessed.
In the event lessee desires to take advantage of any early payment
discount, then said tax payment shall be paid by Lessee to Lessor at least
thirty (30) days before the expiration of any discount period. A bill submitted
by Lessor to Lessee shall be conclusive evidence of the amount of taxes assessed
or levied, as well as the items taxed.
(1)
<PAGE>
37.) Further to Paragraph 13(c) of this Lease Agreement, Lessee agrees that it
will not keep, use, or offer for sale in or upon the demised premises any
article which may be prohibited by the standard form of fire insurance policy.
Lessee shall follow the recommendation of the Lessor, or its Agents, on
conditions which will help to lower the premium rate of insurance.
Lessor agrees to carry policies insuring the improvements on Lessor's
property against fire and such other perils as are normally covered by Lessor in
an amount of at least ninety (90%) percent of the replacement value of such
improvements, together with insurance against such other risks (including loss
of rent) including Fire, Extended Coverage, Vandalism and Malicious Mischief,
Sprinkler, Rent, Sign, Boiler, Casualty and Liability Insurance, and in such
amounts as Lessor deems appropriate. Lessee agrees to reimburse to Lessor their
proportionate share of said insurance upon the property of which the demised
premises is a part, based upon the percentage by which Lessee's square footage
bears to the entire square footage of the building during the term of this
Lease, renewals or extensions thereof. Such cost of said insurance, as stated
above, shall be paid by the Lessee to Lessor as additional rent, in addition to
the minimum rental hereon reserved within thirty (30) days of proof of payment
of such insurance. Such insurance shall not include Lessee's furniture,
fixtures, equipment or improvements. The amount due hereunder on account of said
insurance shall be apportioned for that part of the first and last calendar
years covered by the term hereof.
38.) During the term of this lease and any extensions thereof, Lessee shall
keep in full force and effect a policy of Commercial General Liability Insurance
in which the limits of Bodily Injury shall not be less than $1,000,000.00 per
occurrence, and on which the Property Damage Limit shall not be less than
$1,000,000.00 per occurrence. The insurance carrier and the form and substance
of the policy shall be to the satisfaction of Lessor and a copy of the policy or
a Certificate of Insurance shall be delivered to the Lessor's Agent. The
insurance carrier shall be a responsible insurance carrier authorized to do
business in the State of Pennsylvania. It shall have a policy holders rating of
no less than "A" in the most current edition of Best's Insurance Report. Said
policy shall name Lessor, Agent, and any persons, firms or corporations
designated by Lessor, and Lessee, as insured, and shall contain a clause that
the insurer will not cancel or change the insurance without first giving the
Lessor thirty (30) days prior written notice.
39. In compliance with Paragraph 15(c) of this Lease Agreement, and any other
applicable provisions contained herein, it is understood and agreed that the
Lessee will not install any signs without having first received written
permission from Lessor, and will be solely responsible for any cost and effort
as may be required for the installation of signs on the building or within the
demised premises. This responsibility includes the purchase, installation,
maintenance, upkeep, and removal if requested by Lessor (and repair after
removal of any damage caused by signs), of any such sign(s). Further, Lessee is
responsible to obtain and pay for any governmental licenses and/or permits, as
may be required for any such sign(s). All signs of Lessee shall be maintained by
Lessee, and kept in proper order including lighting, repairs and/or repainting.
Lessor makes no representation as to whether or not signage, or the type or size
of signage is permitted by governmental authorities at the demised premises or
the building.
40.) Lessee, at the Lessee's expense, shall comply with all laws, rules,
orders, ordinances, directions, regulations, and requirements of federal, state,
county and municipal authorities, now in force or which may hereafter be in
force, which shall impose any duty upon Lessor or Lessee with respect to the
use, occupation or alteration of the demised premises. This shall include, but
will not be limited to, obtaining whatever permits and/or licenses which may be
required by Lessee to operate from this location, any permits and/or licenses
which may be required for the installation of signs, and compliance with the
Americans with Disabilities Act relating to Lessee's use and occupancy of the
demised premises. Lessee's responsibility and compliance with this paragraph
shall also include any present and future governmental or quasi-governmental
directives (including without limitation those requirements of the Occupational
Safety and Health Administration that relate to the premises) including but not
limited to the indoor air quality of the demised premises and the maintenance of
any heating, ventilating, and air-conditioning equipment or system for which the
Lessee is responsible pursuant to this Lease. Lessee's failure to comply with
any such law, order, ordinance, rule, regulation or directive above mentioned
may be considered an Event of Default under this Lease.
(2)
<PAGE>
41.) Lessor's responsibility under this Lease shall be limited to its interest
in the demised premises and in the building of which the demised premises forms
a part, and no members of Lessor's partnership shall be personally liable
hereunder. Lessee agrees to look solely to Lessor's interest in the demised
premises and in the building for the collection of any judgment, and, in
entering any such judgment, the person entering same shall request the
prothonotary to mark the judgment index accordingly. If the demised premises or
the building is transferred or conveyed, Lessor shall be relieved of all
covenants and obligations under this Lease thereafter, provided that notice of
said transfer or conveyance is given to Lessee by Lessor.
42.) Lessor represents and warrants to Lessee that to the best of their
knowledge that no hazardous waste or hazardous substances, or other
substances contrary to the Department of Environmental Resources (DER), the
Environmental Protection Agency (EPA), or any other federal, state, or local
authority having jurisdiction having regulations, have been previously buried
or dumped on the demised premises. Furthermore, Lessee represents and
warrants that they will not dump, bury, or contaminate the property with any
hazardous waste or hazardous substances, or other substances contrary to the
Department of Environmental Resources (DER), Environmental Protection Agency
(EPA), or any other federal, state, or local authority regulations. Lessee
also agrees and understands that should they be in violation of any laws
concerning the handling of materials known to be hazardous or have toxic
characteristics and should any such materials be dumped, buried, or spilled
into the air, soil, surface water, or ground water of the subject premise,
then it shall be the sole responsibility of the Lessee to correct said
condition to the satisfaction of the Lessor and the Department of
Environmental Resources (DER), the Environmental Protection Agency (EPA), and
any other authority having jurisdiction, and the Lessor may cancel this
Lease. The provisions of this paragraph shall survive expiration or
termination of this Lease.
43.) Lessee agrees to prohibit any odors, smoke, noise, or other pollutant
resulting from Lessee's use of the demised premises, to the extent that any such
pollution, in Lessor's opinion, is disturbing and adversely affects any other
tenant, or is contrary to any governmental regulations. Should any such
pollution occur, in Lessor's sole opinion, Lessee shall be responsible for the
installation of necessary sound and odor controlling devises as is necessary so
as not to unreasonably disturb the adjoining tenants.
44.) During the term of this Lease Agreement, and any extensions or renewals
thereof, Lessor is responsible for any structural repairs to the roof and
exterior walls of the leased building. Lessor's obligation to make such
repairs, or replacements if necessary, shall not extend to any damage caused by
the Lessee, it's agents, employees, and/or invitees. In this event, any such
repairs or replacements, if necessary, shall be borne exclusively by Lessee.
Lessee moreover has no rights whatsoever to said roof area and shall not, in any
way, cause to have any appurtenances attached thereto. If Lessee should disturb
the roof in any manner which would affect the Lessor's roof guarantee, the
Lessee shall be responsible to satisfy said guarantee.
45.) It is understood and agreed between all parties made a part hereto that
this Lease Agreement shall be deemed a net/net/net Lease. Lessor shall provide,
as needed in the opinion of the Lessor, certain services to the common areas of
the property of which the demised premises is a part as well as the common areas
of the entire campus. Said Services shall include, but may not be limited to,
the cutting of grass, maintenance of landscaping, snow and ice removal,
maintenance of sanitary sewer systems, maintenance of retention basins, general
periodic clean-up, replacement of exterior lights and bulbs and/or fixtures,
common area lighting, repairs to the parking area and access roads, including
the main access roads, and seven (7%) percent of all the foregoing costs to
cover the Lessor's administrative and overhead costs. Coincidental with these
services, Lessor shall bill Lessee quarterly (every three [3] months) for
Lessee's proportionate share of said common area charges based on the percentage
by which the square footage of the demised premises bears to the total leased
square footage of the building of which the demised premises is a part. Any
such billings shall be treated as additional rent, and shall be as same in
accord with the provisions of this Lease Agreement, including Paragraph 34 of
this Lease.
(3)
<PAGE>
46.) Inasmuch as the demised premises contains a wet sprinkler system and to
the extent that the demised premises is sprinklered, Lessor agrees to provide
any periodic maintenance of said sprinkler system as required from time to time,
unless damage thereto is caused by Lessee, its agents, servants, employees,
and/or invitees. Further, any damages resulting from the activation of the
sprinkler system within the demised premises shall be at the absolute risk of
the Lessee, with no obligation to the Lessor resulting thereof. In addition,
Lessor shall be held harmless from any claim by Lessee due to the failure of the
sprinkler system to adequately function. Lessee shall pay for all maintenance,
including any fire service charge, water company charge, and any monitoring for
the sprinkler system. Also, Lessee shall maintain heat in the demised premises
so as to prevent the sprinkler system from freezing.
It is further agreed and understood that said sprinkler system is designed
for a Class 2 type of building use, and should Lessee desire or should Lessee
need other than the class 2 system, then (a) Lessee must receive permission from
Lessor and (b) said sprinkler system will be changed and maintained at Lessee's
sole cost and expense to satisfy the Lessor and all governmental and local Fire
Marshall regulations concerning same.
47.) Lessee shall be solely responsible for, agrees to contract with, and
promptly pay all charges for heat, water, gas, sewer, electricity, trash,
telephone, or any other utility or other service rendered, used or consumed in
the demised premises, and service inspections made thereof, whether call charge,
tax, assessment, fee or otherwise. Lessee shall also pay any "fire company
charge" imposed with respect to the premises.
Should Lessor elect to supply the water, gas, heat, electricity, trash,
sewer or any other utility used or consumed in the demised premises, Lessee
agrees to purchase and pay for the same as additional rent at rates which will
not exceed those rates filed by the proper regulatory authorities. In no event
shall Lessor be liable for an interruption or failure in the supply of any such
utilities to the demised premises. Should the Lessee fail to make these
payments when due, Lessor shall have the right to settle therefore such sums to
be considered additional rent and collectible from Lessee as such by distress or
other process, and to have all the priorities given by law to claims for rent.
Lessee further covenants and agrees throughout the term of this Lease
Agreement, any extensions or renewals thereof, that it will be responsible to
maintain the demised premises in good repair, order and condition, at its
sole cost and expense, excluding any normal maintenance as may be required to
the structural members, exterior walls, or roof of the demised premises,
provided Lessee is not negligent, but including all floors, interior walls,
ceilings, doors of all types, locks, closures, and hinges, all lighting
(including the replacement of light bulbs), all glass including windows, all
electrical, heat, ventilating, and air conditioning systems, as well as all
utilities and plumbing systems servicing the demised premises, making all
repairs and/or replacements thereto as may be required or necessary, with
materials of like quality.
In addition, Lessee herein shall be responsible to have the heating
system serviced a minimum of once a year, along with having the air
conditioning system/units serviced at least four (4) times per year. Said
servicing shall be at the sole cost and expenses of Lessee, shall be
performed by a reputable heating and/or air conditioning
contractor, and copies of said contract shall be submitted to Lessor by
Lessee annually. Should the Lessee fail to service said systems, then this
work may be done by the Lessor, and immediate payment as well as a service
charge of ten (10%) percent shall be due from the Lessee for such work and/or
repairs.
Further, Lessee shall be responsible for the cleanliness of the demised
premises and shall be responsible, at Lessee's sole cost and expense, for the
separation, recylcing, and removal of Lessee's waste materials to conform with
any and all governmental rules and regulations thereto. It is further agreed
that the Lessor may request Lessee to emty trash daily, and if necessary, in
Lessor's opinion, to temporarily store within the demised premises any trash or
garbage refuse until disposed of by Lessee's trash collector. Lessor may
request special disposal exclusive for Lessee's use in order to prevent odors
and unhealthy conditions. If so requested, such special disposal will be at the
Lessee's full cost and expense. Lessor shall have the right to designate the
location of all dumpsters, and Lessee agrees to comply with all Board of Health
rules and regulations.
(4)
<PAGE>
Also, should Lessor so deem, there may be installed a common area dumpster
for the removal of garbage refuse matter, and should said dumpster be installed,
the Lessee shall pay its appropriate share based upon Lessee's usage, and shall
be billed in accordance with Paragraph 45 herein.
48.) Lessee shall have the nonexclusive use in common with the Lessor, other
tenants, their guests and invitees, of the automobile parking areas, driveways
and footways, subject to reasonable rules and regulations for the use thereof as
prescribed from time to time by Lessor. Lessor shall have the right to
designate parking areas for the use of the building tenants and their employees,
and the Lessee and their employees shall not park in parking areas not so
designated specifically including driveways, fire lanes, loading/unloading
areas, walkways and building entrances. Lessee agrees that upon written notice
from Lessor, it will furnish to Lessor, within five (5) days from receipt of
such notice, the state automobile license numbers assigned to the automobiles of
the Lessee and its employees. Lessor nor its Agent shall be liable for any
vehicles of the Lessee or its employees that the Lessor or Lessor's Agent shall
have towed from the premises when illegally parked. Lessor nor Lessor's Agent
will be liable for damage to vehicles in the parking areas or for theft of
vehicles, personal property from vehicles, or equipment of vehicles.
49.) Outside storage, excluding truck trailers withon the property of which the
demised premises is a part, is not permitted without advance approval in writing
from Lessor. Long term trailer storage on any portion of the property is not
permitted.
50.) Lessee agrees that should it be required in the Lessee's facility, or in
adjacent facilities, that the Lessee shall contract with a pest exterminating
contractor to exterminate as may be necessary and as may be directed by the
Lessor. The sole cost and expense of this service shall be the responsibility
and obligation of the Lessee, and a copy of said contract shall be delivered to
Lessor annually without demand.
51.) Any improvements which the Lessee may require within the demised premises
may not be accomplished without the advanced written permission of the Lessor.
Lessor's approval/permission of any improvements, alterations, plans and/or
working drawings shall create no responsibility or liability on the part of the
Lessor for the completeness, design sufficiency, or compliance with laws, rules
or regulations now in force, or which may hereafter be in force of governmental
agencies or authorities. This includes any installation of any electronic
devices (security systems, fire or intercommunications systems) as well as any
decorative furnishings.
Should the Lessee install or should there presently be a security system of
any type in Lessee's demised premises, then said security system shall remain a
part of the real estate and be turned over to Lessor at the termination of this
Lease, including any keys and/or combinations, without any cost to Lessor, for
his use or for use by subsequent tenants. Should the Lessee be requested to
remove said security system, or be given permission to remove said security
system by the Lessor, then it shall be the Lessee's obligation at their sole
cost and expenses to replace any and all mouldings on windows, doors and walls
which have been penetrated by the installation of the security system to their
original condition.
At the termination of the Lease Agreement, any such improvements or
additions installed at the sole cost and expense of the Lessee may, at the
option of the Lessor, be removed from the demised premises leaving said demised
premises in its original conditions, less normal wear and tear, or said
improvements and/or additions may be left within the demised premises for the
beneficial use of the following occupant, at no cost or expense to the Lessor or
to the following occupant. Lessee, its agents, employees and/or invitees, shall
not cut or drill holes through the aluminum doors, window frames, mouldings or
canopies at any time.
52.) Either party shall, at any time and from time to time, within twenty (20)
days following the written request from the other, execute, acknowledge, and
deliver to the requesting party a written statement certifying that this lease
is in full force and effect and unmodified (or, if modified, stating that nature
of such modification), certifying the date to which the rent reserved hereunder
has been paid, and certifying that there are not, to the certifying party's
knowledge, any uncured defaults or unpaid charges on the part of the other
party, or specifying such defaults or unpaid charges if any are claimed. Any
such statement may be
(5)
<PAGE>
relied upon by any lending institution or by any prospective purchaser or
mortgagee on all or any part of the building or land on which the building is
situated. The failure to deliver such statement within said twenty (20) day
period shall be conclusive that this Lease is in full force and effect and
unmodified, and that there are no uncured defaults in requesting party's
performance hereunder.
53.) Lessee hereby certifies that Lessee is not a non-resident alien, or
foreign corporation, a foreign partnership, a foreign trust, or a foreign estate
(as these terms are defined in the Internal Revenue Code and Income Tax
Regulations); that Lessee's Social Security number or Federal Income Tax number
and Lessee's home or office address are as shown in Part I of this Lease
Agreement. Lessee acknowledges that this certification may be disclosed to the
Internal Revenue Service pursuant to federal law.
54.) It is further agreed and understood between the parties made a part hereto
that the Lessor herein shall perform the following, at their sole cost and
expense, prior to Lessee's occupancy, if possible:
(a). Construct a demising wall along the column line for approximately
one-half of the building (being Lessee's demised premises);
(b). Replace all carpet in all offices with builder's grade carpeting;
(c). Carpet the open office area with builder's grade carpeting;
(d). Repaint all interior office space including bathrooms, offices and
open office area;
(e). Broom-sweep clean the warehouse floor;
(f). Repair the damage to the interior of the exterior rear wall
(warehouse area);
(g). All plumbing, electrical, heating and air conditioning units to be
functioning properly; and
(h). Front door to be repaired to work properly, and re-weather stripped.
In Witness Whereof, the parties hereto have executed these presents
this ______ day of __________ , 1994, and intend to be legally bound thereby.
TORNETTA REALTY CORP.
By: __________________________________
WITNESS:
BURNSIDE ASSOCIATES/FOURTEES, CO.
___________________________________ ______________________________________
(LESSOR)
NATIONAL FIBERSTOK CORPORATION
ATTEST:
___________________________________ BY: __________________________________
(LESSEE)
(6)
<PAGE>
[MAP]
LOCATION MAP [MAP]
SITE PLAN
[MAP]
FLOOR PLAN
EXHIBIT A
This Exhibit / Floor Plan is for the sole purpose to
identify the approximate location of the demised premises in
the building. Lessor makes no representation or warranty by
this Exhibit as to the usable or rentable square footage of
the demised premises or in the building, or to the accuracy
of dimensions as may be herein stated.
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT made this 5th day of April, 1995, between TORNETTA REALTY
CORP., Agent for Burnside Associates / Fourtees Co., (hereinafter referred to as
Lessor), and National Fiberstok Corporation, (hereinafter referred to as
Lessee).
WITNESSETH:
WHEREAS, by Lease Agreement dated September 2, 1994, as amended, TORNETTA
REALTY CORP., Agent for Lessor, did lease to Lessee all that certain space
consisting of approximately 7,138 +/- square feet, being a portion of the
building on Lot #9 in the Norriton Business Campus, in the Township of East
Norriton, County of Montgomery, Commonwealth of Pennsylvania.
WHEREAS, Lessee desires to lease additional space and to occupy the entire
building situate on Lot #9, in addition to an extension of the current term of
said Lease.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter recited, the parties hereto, intending to be legally
bound, hereby agree as follows:
1.) It is agreed and understood that the Lessee herein shall occupy
the entire building situate on Lot #9 in the Norriton Business Campus, which
building consists of a total square footage deemed to be 14,978 +/- square feet,
as shown on Exhibit A-1, attached hereto and made a part hereof. The effective
date for Lessee to occupy the additional 7,840+/- square footage shall be May 1,
1995.
2.) The term of the above mentioned Lease Agreement is hereby
extended and continued for an additional nineteen (19) months, ending April 30,
2001.
3.) The new base minimum rent, which shall become due for the term of
this Amendment for the entire 14,978+/- square foot building, shall be due on
the first day of each month, and paid as follows:
Commencement Annual Monthly
Date Ending Date Rental Rental
- ------------ -------------- --------- --------
May 1, 1995 April 30, 1996 $51,264.00 $4,272.00
May 1, 1996 April 30, 1997 $82,379.00 $6,864.92
May 1, 1997 April 30, 1998 $86,123.50 $7,176.96
May 1, 1998 April 30, 1999 $89,868.00 $7,489.00
May 1, 1999 April 30, 2000 $93,612.50 $7,801.00
May 1, 2000 April 30, 2001 $97,357.00 $8,113.08
1
<PAGE>
4.) It is further agreed and understood that all sections of said
Lease Agreement shall be amended to reflect the additional space being leased,
and all calculations set forth in said Lease, including additional rent, and
encompassing but not limited to taxes, insurance, utilities, common area
maintenance and maintenance fees, shall also be amended to include said
additional square footage.
5.) It is agreed and understood that the Lessee is leasing the
additional 7,840+/- square feet, as called for herein, it its "As Is" condition.
Lessee assumes the costs and expense of any and all renovations Lessee desires
in said premises, in accordance with Paragraph 51 of said Lease. Lessor herein,
prior to May 1, 1995, shall clean the warehouse floor of the 7,840+/- additional
square footage being leased; in addition to having all plumbing, electrical,
heating and air conditioning units functioning properly in said additional
space.
6.) It is agreed and understood that should the Lessee wish to occupy
the 7,840+/- additional square footage prior to the May 1, 1995, all terms and
conditions of the Lease will then be in full force and effect from the date of
said early occupancy with the exception of the payment of the base minimum rent,
per the Lease. Lessee will be fully responsible for the payment of any and all
utilities used or consumed in the entire premises from the date Lessee is
granted said early occupancy. Early occupancy will not be granted until the
Lessee complies and/or delivers to the Lessor or Lessor's Agent the following:
(1) a fully executed Amendment to Lease Agreement; (2) a Certificate of
Insurance for the entire building shall be deliver to Lessor's Agent; and (3)
all utilities servicing the demised premises shall be transferred into the name
of the Lessee. The per diem rental during said early occupancy period for the
7,840+/- square footage shall be Seventy Four Dollars and fifty/cent ($74.50),
in addition to the then current rental due for the original 7,138+/- square
footage presently leased.
7.) It is agreed and understood that Paragraph 55 of the Second
Addendum to the Lease Agreement, being Lessee's right to renew this Lease for
one (1) renewal term of five (5) years, shall remain in effect with the
exception of the calculation of the rental due during said renewal term. As
herein agreed, Section C of Paragraph 55 shall be amended to read as follows:
(C). The rental during each year of the renewal period provided for
the above shall be the product obtained by multiplying Eight Thousand One
Hundred Thirteen Dollars and Eight/Cents ($8,113.08) per month by a fraction the
numerator of which the "Revised Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United Stats Department of
Labor for Philadelphia-Wilmington-Trenton, PA-DE-NJ-MD Area, All Items, (1982 /
1984 = 100)" ("CPI-U") for that twelve (12) calendar month period ending four
(4) months prior to the first calendar month of each such Lease Year and the
denominator of which is the average CPI-U for that period which is twelve (12)
calendar months ending four (4) months prior to May 1, 2000.
2
<PAGE>
8) Except as herein provided, all other terms, covenants, conditions and
stipulations contained in the aforementioned Lease Agreement, as amended,
modified, and extended, are to be continued with like effect and to all legal
intents and purposes as if included in a new and formal Indenture of Lease
containing identical terms, covenants, conditions and stipulations as in the
original Lease Agreement above mentioned except as herein modified, until such
time as the expiration of the term is hereby extended, and the same is hereby
ratified and confirmed.
This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment this 19
day of April, 1995.
TORNETTA REALTY CORP., AGENT BURNSIDE ASSOCIATES /
FOURTEES CO.
BY: /s/______________________ BY: /s/______________________
(LESSOR)
NATIONAL FIBERSTOK
CORPORATION
BY: /s/______________________
(LESSOR)
3
<PAGE>
[LOCATION MAP]
[FLOOR PLAN]
Total deemed square footage of building 14,978 PLUS OR MINUS
EXHIBIT A-1
This Exhibit/Floor Plan is for the sole purpose to identify the approximate
location of the demised premises in the building. Lessor makes no representation
or warranty by this Exhibit as to the usable or rentable square footage of the
demised premises or in the building, or to the accuracy of dimensions as may be
herein stated.
<PAGE>
STANDARD COMMERCIAL LEASE AGREEMENT
(EXISTING BUILDING)
1/73 54,000 SQUARE FEET
-------------------------
7707 National Turnpike
-------------------------
Louisville, KY 40214
-------------------------
LEASE AGREEMENT
STATE OF KENTUCKY
- ----------------------------
COUNTY OF JEFFERSON
- ----------------------------
This Lease Agreement, made and entered into by and between
C-S-K Louisville, a Texas general Partnership, d/b/a Louisville
Industrial Center
hereinafter referred to as "Landlord," and
Double Envelope Corporation, a Virginia Corporation
hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES AND TERM. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and leases to
Tenant, and Tenant hereby takes from Landlord certain premises situated
within the County of Jefferson, State of Kentucky, more particularly described
--------- --------
as follows:
Approximately 54,000 S.F. of office and warehouse space located in the
northern portion of Building #5 containing approximately 172,800 S.F. located
within the former Louisville Army Depot in Jefferson County, Kentucky, and
more commonly known as 7707 National Turnpike, Louisville, Kentucky, 40214.
See attached Exhibit "A".
together with all rights, privileges, easements, appurtenances and immunities
belonging to or in any way pertaining to the said premises and together with
the buildings and other improvements erected upon said premises (the said
real property and the buildings and improvements thereon being hereinafter
referred to as the "premises").
To Have and to Hold the same for a term commencing on April 1, 1980 and
-------------
ending One hundred twenty (120) months thereafter (subject, however, to the
------------------------
renewal option granted Tenant as hereinafter provided for). Tenant
acknowledges that it has inspected the premises and accepts the premises, and
the buildings and improvements thereon, in their present condition as
suitable for the purpose for which the premises are leased and further
acknowledges that no representations as to the repair of the premises nor
promises to alter, remodel or improve the premises have been made by
Landlord, unless such are expressly set forth in this lease. If this lease
is executed before the premises become vacant or otherwise available and
ready for occupancy, or if any present tenant or occupant of the premises
holds over, and Landlord cannot acquire possession of the premises prior to
the date above recited as the commencement date of this lease, Landlord shall
not be deemed to be in default hereunder, and Tenant agrees to accept
possession of the premises at such time as Landlord is able to tender the
same; and Landlord hereby waives payment of rent covering any period prior to
the tendering of possession to Tenant hereunder. *See Items 1 & 5 of Addendum.
2. RENT. Tenant agrees to pay to Landlord rent, without deduction or
set off, for the entire term hereof for said premises at the rate of See Item
---------
1 (A) of Addendum
- -------------------------------------------------- Dollars ($ ---------------)
per month. One such monthly installment shall be due and payable on the
commencement date recited above, and a like monthly installment shall be due
and payable without demand on or before the same day of each succeeding month
during the hereby demised term; provided that if the said commencement date
should be a date other than the first day of a calendar month, there shall be
due and payable on the said commencement date as rent for the balance of the
calendar month during which the said commencement date shall fall a sum equal
to that proportion of the rent for a full month as herein provided which the
number of days from the said commencement date to the end of the calendar
month during which the said commencement date shall fall bears to the total
number of days in such month, and all succeeding installments of rent shall
be payable on or before the first day of each succeeding calendar month
during the hereby demised term as first above provided. In
addition, Tenant agrees to deposit with Landlord on the date hereof the sum
of NONE
--------------------------------------- Dollars ($ ----------- ), which
-------------
sum shall be held by Landlord, without obligation for interest, as
security for the performance of Tenant's covenants and obligations under this
lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of
Tenant's default. Upon the occurrence of any event of default by Tenant,
Landlord may, from time to time, without prejudice to any other remedy
provided herein or provided by law, use such fund to the extent necessary to
make good any arrears of rent and any other damage, injury, expense or
liability caused by such event of default; and Tenant shall pay to Landlord
on demand the amount so applied in order to restore the security deposit to
its original amount. If Tenant is not then in default hereunder, any
remaining balance of such deposit shall be returned by Landlord to Tenant
upon termination of this lease.
3. USE. The demised premises shall be used only for the purpose of
receiving, storing, shipping and selling (other than retail) products,
materials and merchandise made and/or distributed by Tenant and for such
other lawful purposes as may be incidental thereto. Tenant shall at its own
cost and expense obtain any and all licenses and permits necessary for any
such use. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the premises, and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon, or connected with the premises, all at
Tenant's sole expense. Without Landlord's prior written consent, Tenant
shall not receive, store or otherwise handle any product, material or
merchandise which is explosive or highly inflammable. Tenant will not permit
the premises to be used for any purpose which would render the insurance
thereon void or the insurance risk more hazardous. See Item 2 of Addendum.
-----------------------
4. TAXES.
A. Subject to the provisions of subparagraph B below, Landlord agrees
to pay before they become delinquent all taxes (both general and special),
assessments or governmental charges (hereinafter collectively referred to as
"taxes") lawfully levied or assessed against the premises or any part
thereof; provided, however, Landlord may, at its sole cost and expense (in
its own name or in the name of both, as it may deem appropriate) dispute and
contest the same, and in such case, such disputed item need not be paid until
finally adjudged to be valid. At the conclusion of such contest, Landlord
shall pay the items contested to the extent that they are held valid,
together with all items, court costs, interest and penalties relating thereto.
B. The maximum amount of taxes levied or assessed against the premises
during any one real estate tax year to be paid by Landlord shall be those
--------
taxes assessed in calendar year 1974.
- -------------------------------------------------------------------------------
- --------------------------------------- . If in any real estate tax year
during the term hereof or any renewal or extension the taxes levied or
assessed against the premises for such tax year shall exceed the sum as
calculated in the preceding sentence, Tenant shall pay to Landlord upon
demand the amount of such excess. In the event the premises constitute a
portion of a multiple occupancy building, Tenant agrees to pay to Landlord
upon demand the amount of Tenant's proportionate share of such excess (with
respect to taxes lawfully levied or assessed against the building and the
grounds, parking areas, driveways and alleys around the said building), such
share to be calculated on the basis of space occupied by Tenant as compared
to the entire space contained in the building. The failure to pay such excess
or pro-may be, upon demand shall be treated hereunder in the same
manner as a default in the
<PAGE>
payment of rent hereunder when due. Any payment to be made pursuant to this
subparagraph B with respect to the real estate tax year in which this lease
commences or terminates shall bear the same ratio to the payment which would be
required to be made for the full tax year, as that part of such tax year
covered by the term of this lease bears to a full tax year. Tenant shall have
the right, at its option, to contest any taxes, assessments, or governmental
charges levied or assessed against the premises.
C. If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments, levies or charges levied, assessed or imposed on real
estate and the improvements thereon there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rents for the present or
any future building or buildings on the premises, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based,
shall be deemed to be included within the term "taxes" for the purposes
hereof.
5. LANDLORD'S REPAIRS. Landlord shall at his own cost and expense
maintain in good condition the roof, foundation and the structural soundness
of the exterior walls and interior fire walls of the building in good repair,
reasonable wear and tear excepted. Tenant shall repair and pay for damages
to premises caused by negligence of Tenant, or Tenant's employees, agents or
invitees. The term "walls" as used herein shall not include windows, glass
or plate glass, doors. Tenant shall immediately give Landlord written notice
of defect or need for repairs, after which Landlord shall have reasonable
opportunity to repair same or cure such defect. Landlord's liability
hereunder shall be limited to the cost of such repairs or curing such defect.
*See Item 3 of Addendum.
6. TENANT'S REPAIRS. Tenant shall at its own cost and expense keep all
other parts of the premises, including but not limited to, windows, glass and
plate glass, doors, (any special store front), interior walls and finish
work, floors and floor covering, gutters, heating and office air-conditioning
systems, dock boards, plumbing work and fixtures, and shall take good care of
the premises and its fixtures and suffer no waste. Tenant shall keep the
parking areas, driveways and alleys and the whole of the premises in a clean
and sanitary condition. Tenant shall not be obligated to repair any damage
caused by fire, tornado or other casualty covered by items set forth under the
extended coverage provisions of Landlord's fire insurance policy.
7. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the premises without the prior written consent of the
Landlord which consent shall not be unreasonably withheld. Tenant may,
without the consent of the landlord, but at its own cost and expense and in a
good workmanlike manner make such minor alterations, additions or
improvements or erect, remove or alter such partitions, or erect such
shelves, bins, machinery and trade fixtures as it may deem advisable, without
altering the basic character of the building or improvements and without
overloading or damaging such building or improvements, and in each
case complying with all applicable governmental laws, ordinances,
regulations, and other requirements. *See Item 4 of Addendum.
8. SIGNS. Tenant shall have the right to install additional signs upon
the exterior of said buildings only when first approved in writing by
Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all such signs at
the termination of this lease. Such installations and removals shall be made
in such manner as to avoid injury or defacement of the building and other
improvements.
9. INSPECTION. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any time during
reasonable business hours, for the purpose of ascertaining the condition of
the premises or in order to make such repairs as may be required to be made by
Landlord under the terms of this lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any time
during reasonable business hours for the purpose of showing the premises and
shall have the right to erect on the premises a suitable sign indicating the
premises are available.
10. UTILITIES. Landlord agrees to provide at its cost water,
electricity and telephone service connections into the premises; but Tenant
shall pay all charges incurred for any utility services used on or from the
premises and any maintenance charges for utilities and shall furnish all
electric light bulbs and tubes. Landlord shall in no event be liable for any
interruption or failure of utility services on the premises.
11. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to
assign this lease or to sublet the whole or any part of the premises without
the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Notwithstanding any permitted assignment or
subletting, Tenant shall at all times remain fully responsible and liable for
the payment of the rent herein specified and for compliance with all its
other obligations under the terms, provisions and covenants of this lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided, or provided by law, may at
its option collect directly from such assignee or subtenant all rents
becoming due to Tenant under such assignment or sublease and apply such rent
against any sums due to it by Tenant hereunder, and no such collection
shall be construed to constitute a novation or a release of Tenant from the
further performance of its obligations hereunder. Landlord shall have the
right to assign any of its rights under this lease.
12. FIRE AND CASUALTY DAMAGE.
A. If the buildings situated on the premises should be damaged or
destroyed by fire, tornado, or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
B. If the buildings situated on the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
that rebuilding or repairs cannot be completed within one hundred twenty
(120) days after the date upon which Landlord is notified by Tenant of such
damage, this lease shall terminate and the rent shall be abated during the
unexpired portion of this lease, effective upon the date of the occurrence of
such damage.
C. If the buildings situated on the premises should be damaged by
fire, tornado or other casualty, but only to such extent that rebuilding or
repairs can be completed within one hundred twenty (120) days after the date
upon which Landlord is notified by Tenant of such damage, this lease shall
not terminate, but Landlord shall at its sole cost and expense proceed with
reasonable diligence to rebuild and repair such buildings, to substantially
the condition in which they existed prior to such damage, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures and other improvements which may have been placed on the
premises by Tenant. If the premises are untenantable in whole or in part
following such damage, the rent payable hereunder during the period in which
they are untenantable shall be reduced to such extent as may be fair and
reasonable under all of the circumstances. In the event that Landlord should
fail to complete such repairs and rebuilding within one hundred twenty (120)
days after the date upon which Landlord is notified by Tenant of such damage,
Tenant may at its option terminate this lease by delivering written notice of
termination to Landlord as Tenant's exclusive remedy, whereupon all rights
and obligations hereunder shall cease and determine.
D. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering
the premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this lease by
delivering written notice of termination to Tenant, whereupon all rights and
obligations hereunder shall cease and determine.
E. Any insurance which may be carried by Landlord or Tenant against
loss or damage to the buildings and other improvements situated on the
premises shall be for the sole benefit of the party carrying such insurance
and under its sole control.
F. Each of Landlord and Tenant hereby releases the other from any and
all liability or responsibility to the other or anyone claiming through or
under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any of the extended coverage casualties covered by
the insurance maintained hereunder, even if such fire or other casualty shall
have been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible. Each of landlord and Tenant agrees that
it will request its insurance carriers to include in its policies such a
clause or endorsement. If extra cost shall be charged therefor, each party
shall advise the other thereof, and of the amount of the extra cost, and the
other party, at its election, may pay the same, but shall not be obligated to
do so.
<PAGE>
on the premises in an amount not more than eighty per cent (80%) of the
replacement cost thereof.
13. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, caused by
the negligence or misconduct of Tenant, its agents, servants or employees, or of
any other person entering upon the premises under express or implied invitation
of Tenant, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant agrees to indemnify Landlord and hold it harmless from any loss, expense
or claims, including attorneys' fees, arising out of any such damage or injury;
except that any injury to person or damage to property caused by the negligence
of Landlord or by the failure of Landlord to repair and maintain that part of
the premises which Landlord is obligated to repair and maintain after the
receipt of written notice from Tenant of needed repairs or of defects shall be
the liability of Landlord and not of Tenant, and Landlord agrees to indemnify
Tenant and hold it harmless from any and all loss, expense or claims, including
attorneys' fees, arising out of such damage or injury. Tenant shall procure and
maintain throughout the term of this lease a policy or policies of insurance, at
its sole cost and expense, insuring both Landlord and Tenant against all claims,
demands or actions arising out of or in connection with Tenant's use or
occupancy of the premises, or by the condition of the premises, the limits of
such policy or policies to be in an amount not less than $100,000 in respect of
injuries to or death of any one person, and in an amount not less than $300,000
in respect of any one accident or disaster, and in an amount not less than
$50,000 in respect of property damaged or destroyed, and to be written by
insurance companies qualified to do business in the state in which the premises
are located. Such policies or duly executed certificates of insurance shall be
promptly delivered to Landlord and renewals thereof as required shall be
delivered to Landlord at least ten (10) days prior to the expiration of the
respective policy terms.
14. CONDEMNATION.
A. If the whole or any substantial part of the premises should be taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, this lease shall terminate and the rent shall be abated during the
unexpired portion of this lease, effective when the physical taking of said
premises shall occur.
B. If less than a substantial part of the premises shall be taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain, or by private purchase in lieu thereof, this
lease shall not terminate, but the rent payable hereunder during the unexpired
portion of this lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings.
15. HOLDING OVER. Should Tenant, or any of its successors in interest,
hold over the premises, or any part thereof, after the expiration of the term of
this lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy from month to month only, at a rental
equal to the rental payable for the last month of the term of this lease plus
twenty per cent (20%) of such amount. The inclusion of the preceding sentence
shall not be construed as Landlord's permission for Tenant to hold over.
16. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the premises subject to the provisions of
the prior leases. Landlord represents and warrants that it has full right and
authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold and enjoy the premises for the
term hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this lease.
17. EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent hereby
reserved when due, and such failure shall continue for a period of Thirty
(30) days from the date such installment was due.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of
creditors.
(c) Tenant shall file a petition under any section or chapter of
the National Bankruptcy Act, as amended, or under any similar law or
statute of the United States or any State thereof; or Tenant shall be
adjudged bankrupt or insolvent in proceedings filed against Tenant
thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
premises.
(f) Tenant shall fail to comply with any term, provision or
covenant of this lease (other than the foregoing in this Paragraph 17), and
shall not cure such failure with Thirty (30) days after written notice
thereof to Tenant.
18. REMEDIES. Upon the occurrence of any such events of default described
in Paragraph 17 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails to do so, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearages in rent, enter upon and take possession of the premises and
expel or remove Tenant and any other person who may be occupying such
premises or any part thereof, and Tenant agrees to pay to Landlord on
demand the amount of all loss and damage which Landlord may suffer by
reason of such termination, whether through inability to relet the premises
on satisfactory terms or otherwise.
(b) Enter upon and take possession of the premises and expel or
remove Tenant and any other person who may be occupying such premises or
any part thereof, and relet the premises and receive the rent therefor; and
Tenant agrees to pay to the Landlord on demand any deficiency that may
arise by reason of such reletting.
(c) Enter upon the premises and do whatever Tenant is obligated to
do under the terms of this lease: and Tenant agrees to reimburse Landlord
on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this lease, and Tenant further
agrees that Landlord shall not be liable for any damages resulting to the
Tenant from such action, whether caused by the negligence of Landlord or
otherwise.
In the event Tenant fails to pay any installment of rent hereunder as and when
such installment is due, Tenant shall pay to Landlord on demand a late charge in
an amount equal to five per cent (5%) of such installment; and the failure to
pay such amount within ten (10) days after demand therefor shall be an event of
default hereunder. The provision for such late charge shall be in addition to
all of Landlord's other rights and remedies hereunder or at law and shall not
be construed as liquidated damages or as limiting Landlord's remedies in any
manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by
law, nor shall pursuit of any remedy herein provided constitute a forfeiture
or waiver of any rent due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violation of any of the terms, provisions and
covenants herein contained. No waiver by Landlord of any violation or breach
of any of the terms, provisions and covenants herein contained shall be
deemed or construed to constitute a waiver of any other violation or breach
of any of the terms, provisions and covenants herein contained. Landlord's
acceptance of the payment of rental or other payments hereunder after the
occurrence of an event of default shall not be construed as a waiver of such
default, unless Landlord so notifies Tenant in writing. Forbearance by
Landlord to enforce one or more of the remedies herein provided upon an event
of default shall not be deemed or construed to constitute a waiver of such
default. If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this lease, it shall become
necessary or appropriate for Landlord to employ or consult with an attorney
concerning or to enforce or defend any of Landlord's rights or remedies
hereunder, Tenant agrees to pay any reasonable attorney's fees. No act or
thing done by the Landlord or its agents during the term hereby granted shall
be deemed an acceptance of the surrender of the premises and no agreement to
accept a surrender of said premises shall be valid unless in writing signed
by Landlord. The receipt by Landlord of rent with knowledge of the breach of
any covenant or other provision contained in this lease shall not be deemed
or construed to constitute a waiver of any other violation or breach of any
of the terms, provisions and covenants contained herein.
19. LANDORD'S LIEN. Landlord's lien shall be limited to any statutory
lien for rent in Landlord's favor.
<PAGE>
20. MORTGAGES. Tenant accepts this lease subject and subordinate to any
Landord's\mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the premises or the improvements situated
thereon. Tenant shall at any time hereafter on demand execute any instruments,
releases or other documents which may be required by any mortgagee for the
purpose of subjecting and subordinating this lease to the lien of any such
mortgage. With respect to any mortgage(s) and/or deed(s) of trust at any time
hereafter created which constitute a lien or charge upon the leased premises or
the improvements situated thereon, Landlord at its sole option shall have the
right to waive the applicability of this paragraph so that this lease would not
be subject and subordinate to such mortgage(s) or the deed(s) of trust.
21. LANDLORD'S DEFAULT. In the event Landlord should become in default in
any payments due on any such mortgage described in Paragraph 20 hereof or in the
payment of taxes or any other items which might become a lien upon the premises
and which Tenant is not obligated to pay under the terms and provisions of this
lease, Tenant is authorized and empowered after giving Landlord five (5) days'
prior written notice of such default and Landlord fails to cure such default, to
pay any such items for and on behalf of Landlord, and the amount of any item so
paid by Tenant for or on behalf of Landlord, together with any interest or
penalty required to be paid in connection therewith, shall be payable on demand
by Landlord to Tenant; provided, however, that Tenant shall not be authorized
and empowered to make any payment under the terms of this Paragraph 21, unless
the item paid shall be superior to Tenant's interest hereunder. In the event
Tenant pays any mortgage debt in full, in accordance with this paragraph, it
shall, at its election, be entitled to the mortgage security by assignment of
subrogation.
22. MECHANIC'S LIENS. Tenant shall have no authority, express or implied,
to create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs, and each such claim shall affect and each such
lien shall attach to, if at all, only the leasehold interest granted to Tenant
by this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the rights, titles and interest of the Landlord in the premises or under the
terms of this lease.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow
set forth or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith.
B. All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set
forth, or at such other address within the continental United States as
Tenant may specify from time to time by written notice delivered in
accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective
addresses set out opposite their names below, or at such other address as
they have theretofore specified by written notice delivered in accordance
herewith:
LANDLORD TENANT
C-S-K Louisville, a Partnership Double Envelope Corporation
---------------------------------- -----------------------------------
% Trammell Crow Company P.O. Box 6
---------------------------------- -----------------------------------
2001 Bryan Street Fairdale, Kentucky 40118
---------------------------------- -----------------------------------
Dallas, Texas 75201
---------------------------------- -----------------------------------
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
24. MISCELLANEOUS
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided.
C. The captions are inserted in this lease for convenience only and in no
way define, limit, or describe the scope or intent of this lease, or any
provision hereof, nor in any way affect the interpretation of this lease.
D. Tenant agrees, within ten (10) days after request of Landlord, to
deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this lease is in full force and effect, the date to which rent has been
paid, the unexpired term of this lease and such other matters pertaining to
this lease as may be reasonably requested by Landlord.
E. This lease may not be altered, changed or amended except by an
instrument in writing signed by Landlord and Tenant.
25. SPECIAL PROVISIONS.
See attached Item 25A and Addendum
EXECUTED the day of ,
----------- ------------ --------
Attest/Witness C-S-K Louisville, a Texas general Partnership
---------------------------------------------
By:
- ----------------------------- ------------------------------------------
Title: Title Robert E Kresko, Partner
----------------------- -----------------------------------
LANDLORD
Attest/Witness Double Envelope Corporation
---------------- ---------------------------------------------
By: /s/ Robert L. Mertz
------------------------------------------
Title Title General Manager
TENANT
<PAGE>
25.A While this lease is in full force and effect, provided that Tenant is not
in default of any of the terms, covenants and conditions thereof, Tenant shall
have the right or option to extend the original term of this lease for one
further term of sixty (60) months. Such extension or renewal of the original
terms shall be on the same terms, covenants and conditions as provided for in
the original term except that the rental during the extended term shall be at
the fair market rental then in effect on equivalent properties, of equivalent
size, in equivalent areas. Notice of Tenant's intention to exercise the option
must be given to Landlord in writing not less than 120 days nor more than 180
days prior to the expiration of the original term of this lease.
<PAGE>
ADDENDUM TO LEASE DATED APRIL 1, 1980
BETWEEN C-S-K LOUISVILLE d/b/a LOUISVILLE
INDUSTRIAL CENTER AND DOUBLE ENVELOPE CORPORATION
1. The term "premises" referred to in paragraph 1 shall also include that
portion of the private rail spur serving the leased area, parking areas,
driveways, transformer vault, solvent storage vault, air compressor room,
loading docks and dock levelers located on said premises as shown on
Exhibit A attached hereto.
1A. Tenant agrees to pay to Landlord rent, without deduction or setoff, for
the entire term hereof for said premises as follows:
For the Sixty (60) month period commencing on April 1, 1980, and
ending Sixty (60) months thereafter the monthly rent shall be
Four Thousand Three Hundred Twenty and no/100ths ($4,320.00)
Dollars per month. For the period beginning April 1, 1985, and
ending Sixty (60) months thereafter the monthly rental shall be
Four Thousand Eight Hundred Sixty and no/100ths ($4,860.00)
Dollars per month.
2. With reference to paragraph 3 of this lease, Landlord hereby acknowledges
that Tenant receives, stores and handles printing inks and solvents and
Landlord hereby consents to the handling of such material by Tenant.
Landlord hereby acknowledges that the Tenant's present purposes and uses of
the premises do not render the insurance thereon void or the insurance risk
more hazardous. Tenant agrees to utilize the storage vault for bulk storage
of said printing inks and solvents and shall have the right to utilize the
said printing inks and solvents in the conduct of its business.
3. With reference to paragraph 5 of this lease, Landlord shall at its own cost
and expense maintain in good condition and repair the private rail spur
serving the leased area, driveways, lawn and landscape, water (fire)
sprinkler system, foundations, exterior walls, roof, floor and structural
parts appurtenant to the foregoing (both interior and exterior). Tenant
shall at its own expense maintain in good operating condition the two 5 ton
air conditioning units which Tenant installed in the present office area
located on premises. Landlord also agrees to continue the existing 24 hour
electronic fire watch monitoring of the leased premises and 24 hour
entrance gate security. In addition, Landlord will provide night watch
security at the Louisville Industrial Center (of which the leased premises
are a part) during hours determined by Landlord. Tenant shall have the
right to use the private rail siding serving the leased premises subject to
the customary switching practices of the L & N Railroad and subject to the
right of other tenants in the building to use the siding and Landlord will
cooperate with Tenant to see that Tenant's use of the railroad siding is
not interrupted.
4. With regard to paragraph 7, Tenant has installed and shall have the right
to install such fixtures and equipment in, upon, and about the leased
premises as Tenant may deem desirable. All fixtures and equipment which
have been placed and which will be
<PAGE>
placed in, upon, or about the leased premises by the Tenant shall always
remain the property of the Tenant, irrespective of the manner in which the
same may be affixed or attached to the leased premises and the Tenant shall
have the right to remove same when vacating the premises or at any time and
from time to time during the term of this lease. Tenant agrees to repair
any damage caused to the leased premises by reason of the removal of such
fixtures and equipment. Landlord acknowledges that Tenant installed the air
conditioning equipment and system and central vacuum system and plastic
piping (including (2) 30 HP motors) on the leased premises and said air
conditioning equipment and system and central vacuum system and piping
shall always remain the property of Tenant (except the two 5 ton air
conditioning units located in Tenant's office area), irrespective of the
manner in which said air conditioning units are affixed or attached to the
leased premises, and the Tenant shall have the right to remove any or all
of the air conditioning equipment and system and vacuum system (except for
the two 5 ton units in the office area) when vacating the premises or at
any time and from time to time during the term of this lease. Tenant agrees
to pay any damage caused to the leased premises by reason of the removal of
such air conditioning equipment and vacuum system. If the Tenant elects not
to remove said air conditioning equipment and system, Landlord acknowledges
that it is bound and obligated by the agreement previously in effect
between Tenant and Louisville Space Center, Inc. whereby Louisville Space
Center, Inc. agreed to pay to Tenant the undepreciated value of said air
conditioning equipment and system as shown on Tenant's books and records in
the event Tenant elects to move from the premises or cease operations. The
undepreciated value of said air conditioning equipment and system as of
March 15, 1980, is $4,585.90 and the undepreciated value of the air
conditioning equipment and system on March 15, 1981, will be zero. The two 5
ton air conditioning units which Tenant installed in Tenant's office area
shall become an improvement to the leased premises and the property of
Landlord, provided however, Tenant shall have the exclusive use of the two
5 ton air conditioning units during the term of this lease and any
extension hereof.
5. With regard to paragraph 1 of this lease, Landlord agrees that if at any
time during the term of this lease any governmental authority having
jurisdiction over the leased premises lawfully requires any addition,
change or alteration in, the structural parts of the premises (roofs,
walls, and foundations), Landlord shall pay the first $5,000.00 of such
cost and if the cost exceeds that sum, Tenant shall pay the next $5,000.00
of such cost. In the event such cost exceeds $10,000.00, Landlord may elect
to: 1) move Tenant at the sole cost of Tenant to a comparable space in the
Louisville Industrial Center at a comparable rental rate charged other
occupants for comparable space or, 2) cancel this lease upon 120 days
written notice to Tenant. In the event the cost of such addition, change or
alteration exceeds $10,000.00, Tenant may elect to terminate this lease
upon 120 days notice to Landlord in the event Landlord does not make such
addition, change or alteration or Landlord elects to move Tenant to
comparable space. However, any addition, change or alteration required as a
result of the Tenant's use of the premises shall be the sole responsibility
of Tenant.
<PAGE>
6. The Landlord represents to the Tenant that it may incur additional costs
(meaning costs in excess of the total expenditures made during the 12 month
period immediately preceding the date of this lease) during the term of
this lease in providing 24 hour entrance gate security, snow removal, night
watch security and lawn and landscape services to the Tenant. In
consideration of the Landlord's agreement to continue to provide these
services during the term of this lease, the Tenant agrees to pay its
proportionate share (which shall mean a fraction, the numerator of which is
the space contained in the leased premises and the denominator of which is
the entire space contained in the former Louisville Army Depot and any
additions thereto known as 7707 National Turnpike, Louisville, Kentucky) of
additional expenses actually incurred by Landlord in an amount not to
exceed $1,000 in each 12 month period following the execution date (April
1st) of this lease, payable at the end of said 12 month periods upon
receipt from Landlord of adequate proof of additional expenditures during
said 12 month period.
C-S-K LOUISVILLE, A TEXAS DOUBLE ENVELOPE CORPORATION
GENERAL PARTNERSHIP, d/b/a
LOUISVILLE INDUSTRIAL CENTER
By_____________________________ By /s/ Robert L. Metz
-------------------
General Manager
<PAGE>
[graphics]
LOUISVILLE INDUSTRIAL CENTER
Trammell Crow Company
INVESTOR BUILDERS
7601 National Turnpike
Louisville, Kentucky 40214
Telephone 502/361-0101
Approximately 54,000 S.F. of office and warehouse space located in the northern
portion of Building #5 containing approximately 172,800 S.F. located within the
former Louisville Army Depot in Jefferson County, Kentucky, and more commonly
known as 7707 National Turnpike, Louisville, Kentucky, 40214. Said space is
outlined in red.
<PAGE>
AMENDMENT I
AMENDMENT I, to be attached to and form a part of Lease Agreement (which
together with any amendments, modifications and extensions thereof is
hereinafter called the "Lease"), dated 1 April 1980,
BETWEEN:
C-S-K Louisville, A Texas Limited Partnership,
d/b/a Louisville Industrial Center,
hereinafter referred to as "LANDLORD", and
Double Envelope Corporation, a Virginia Corporation,
hereinafter referred to as "TENANT"
concerning the premises described as follows:
Approximately 54,000 square feet of office/warehouse space located in
Building #5 of the Louisville Industrial Center and more commonly known as
7707 National Turnpike, Louisville, Kentucky 40214.
WHEREAS, Tenant wishes to amend said Lease Agreement to expand as follows:
1. Tenant now wishes to expand the premises of 54,000 square feet taking an
additional 14,400 square feet located contiguous to the original 54,000
square feet, for a total of 68,400 square feet. The total premises shall
herein be as displayed in Exhibit "C".
2. The additional 14,400 square feet of space will become a part of the
original 54,000 square feet of space on 1 April 1990.
Witnesseth that the Lease, along with this Amendment I and any other amendments,
and modifications is hereby renewed and extended for a further term of sixty
(60) months to commence on 1 April 1990 and to expire on 31 March 1995, on
condition that Landlord and Tenant comply with all the provisions of the
covenants and agreements contained in the Lease, except:
1. The monthly rent shall be Seven Thousand One Hundred Twenty-Five and
00/100th dollars ($7,125.00) for the entire term.
<PAGE>
2. All other terms and conditions of the original Lease dated 1 April 1980,
shall remain the same, except for "Special Provision 25A", which is hereby
replaced by the following:
OPTION TO RENEW
While this Lease is in full force and effect, provided that Tenant has never
been in substantial default of any of the terms, covenants, and conditions
thereof, Tenant shall have the option or right to extend the term of this Lease
for a further term of sixty (60) months, such term to commence on 1 April 1995
and to expire on 31 March 2000. Notice of Tenant's intention to exercise the
option must be given to Landlord in writing not less than 120 days nor more than
180 days prior to March 31, 1995. Such extension or renewal of the term shall be
on the same terms, covenants, and conditions as provided for in the original
term except for the following:
1. The monthly rent for the entire term shall be Eight Thousand Nine Hundred
Forty-Nine and 00/100th dollars ($8,949.00).
2. "Paragraph 6" in the Addendum to Lease dated April 1, 1980 between C-S-K
Louisville d/b/a Louisville Industrial Center and Double Envelope
Corporation shall be modified to read as follows:
The Landlord represents to the Tenant that it may incur additional costs
during the renewal term of this Lease in providing 24 hour entrance gate
security, snow removal, night watch security, and lawn and landscape
services to the Tenant. In consideration of the Landlord's agreement to
continue to provide these services during the renewal term of the Lease,
the Tenant agrees to pay its proportionate share (which shall mean a
fraction, the numerator of which is the space contained in the leased
premises and the denominator of which is the entire space contained in the
former Louisville Army Depot and any additions thereto known as 7707
National Turnpike, Louisville Kentucky) of additional expenses actually
incurred by Landlord in an amount not to exceed $4,000.00 in each 12-month
period following the effective date April 1, 1995 of the option to renew
pursuant to the Amendment I to the Lease Agreement, payable at the end of
said 12-month period upon receipt from Landlord of adequate proof of
additional expenditures during said
-2-
<PAGE>
12-month period, provided, however, that said $4,000.00 limit in each 12-
month period shall be allowed to escalate given the following conditions:
a) In the event that the Consumer Price Index for the Base Year (the term
"Base Year" herein means the 1995 calendar year) shall be less than the
Consumer Price Index for any Comparison Year (the term "Comparison Year"
means each calendar year after the Base Year through and including the year
in which the term of this lease expires), the $4,000.00 limit shall be
increased to a new limit by multiplying $4,000.00 by the percentage of
increase by which the Consumer Price Index in such Comparison Year exceeds
the Consumer Price Index in the Base Year.
b) For the purposes of this lease, the term "Consumer Price Index" means the
Consumer Price Index - United States All Items For All Urban Consumers
published by the Bureau of Labor Statistics of the Department of Labor
(Base Year = 1967). The Consumer Price Index for the Base Year or any
Comparison Year shall be determined by averaging the monthly indices for
that year.
Landlord may deliver to Tenant its estimate (or revised estimate) of such
additional amounts payable under this Paragraph for the then current calendar
year. On or before the first day of the next month following the computation
hereafter, Tenant shall pay to Landlord as additional rent on the next month's
rent such amount, as Landlord shall reasonably determine, as is necessary to
bring and keep Tenant current.
In the manner in which such Consumer Price Index as determined by the Bureau of
Labor Statistics shall be substantially revised, an adjustment shall be made in
such revised index, which would produce results equivalent, as nearly as
possible, to those which would have been obtained if the Consumer Price Index
had not been so revised. If the Consumer Price Index shall become unavailable to
the public because publication is discontinued, or otherwise, Landlord will
substitute therefor a comparable index based upon changes in the cost of living
or purchasing power of the consumer dollar published by any other governmental
agency or, if no such index shall be available, then a comparable index
published by a major bank or other financial institution or by a university or a
recognized financial publication.
-3-
<PAGE>
WITNESS WHEREOF, the parties hereto have signed this Amendment I this 7th day of
Nov., 1989.
DOUBLE ENVELOPE CORPORATION C-S-K LOUISVILLE,
a Virginia Corporation A Texas Limited Partnership
By: /s/ illegible By: /s/ Donald E. Dennis, Jr.
---------------------- -------------------------------------------
Title: General Manager Title: Donald E. Dennis, Jr., Authorized Agent
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AMENDMENT II
AMENDMENT II, to be attached to and form a part of Lease Agreement dated 1 April
1980 and Amendment I dated 7 November 1989 (which together with any amendments,
modifications and extensions thereof is hereinafter referred to as "Lease
Agreement"),
BETWEEN:
C-S-K Louisville, a Texas limited partnership,
hereinafter referred to as "LESSOR", and
NATIONAL FIBERSTOK CORPORATION, A DELAWARE CORPORATION, dba Double Envelope
Company
hereinafter referred to as "LESSEE",
concerning the premises described as follows:
Approximately 68,400 S.F. of office/warehouse space, which shall herein be
deemed to be as displayed in Exhibit A-2, within Building Five of the
Louisville Industrial Center located at 7603 National Turnpike, Louisville,
Kentucky 40214, situated on real property described on Exhibit B-2.
WHEREAS, Lessor and Lessee desire to extend the term of said Lease Agreement;
Now, THEREFORE, in consideration of the mutual covenants herein set forth and
other good and valuable consideration, Lessor and Lessee hereby amend said Lease
Agreement to read as follows:
1. REFERENCE PARAGRAPH 1, PREMISES AND TERM: The term of the Lease is hereby
renewed and extended for a term of sixty (60) months to commence on April
1, 1995 ("Commencement Date") and March 31, 2000.
2. REFERENCE PARAGRAPH 2A, BASE RENT: During the extended term, commencing on
the Commencement Date, Tenant agrees to pay Landlord for the leased
premises, in advance, without demand $8,949.00 per month for base rent.
The amount of the monthly rental and initial monthly escrow payments are as
follows:
(1) Base rent as set forth in Paragraph 2 $8,949.00
(2) Tax Escrow Payment $ 285.00
(3) Insurance Escrow Payment $ 114.00
(4) Utility Charge $ ----
(5) Common Area Charge $ 333.33*
(6) Security Services $ ----
(7) Other $ 142.50
Monthly Payment Total $9,823.83
* This amount represents the $4,000.00 annual cap on common area charges as
per Option to Renew Provision contained in Amendment I dated 7 November
1989.
3. The Tenant shall accept the premises for the renewal term on an "as is"
basis.
4. REFERENCE ARTICLE 5, "LESSEE'S REPAIRS". The Lessee at the Lessee's
expense, shall comply with all laws and ordinances, and all rules and
regulations of all governmental authorities and of all insurance bodies at
any time in force, applicable to the Premises or to the Lessee's specific
use thereof, except that the Lessee shall not hereby be under any
obligation to comply with any law, ordinance, rule or regulation requiring
any structural alteration of or in connection with the Premises, unless
such
<PAGE>
AMENDMENT II
alteration is required by reason of a condition which has been created by,
or at the instance of, the Lessee, or is required by reason of a breach of
any of the Lessee's covenant's and agreements hereunder.
5. HAZARDOUS SUBSTANCES. Lessee shall not bring or permit to remain on the
Premises any asbestos, petroleum or petroleum products, explosives, toxic
materials, or substances defined as hazardous wastes, hazardous materials,
or hazardous substances under any federal, state, or local law or
regulation ("Hazardous Materials"), except ordinary office products used on
the Premises and stored in the usual and customary manner and quantities.
Lessee shall not install or operate any underground storage tanks on or
under the Premises. Lessee's violation of the foregoing prohibitions shall
constitute a material breach and default hereunder and Lessee shall
indemnify, hold harmless and defend (by counsel acceptable to Lessor)
Lessor, and its partners, directors, officers, employees, shareholders,
lenders, agents, contractors and each of their respective successors and
assigns, from and against any claims, damages, penalties, liabilities, and
costs (including reasonable attorney fees and court costs) caused by or
arising out of (i) a violation of the foregoing prohibition or (ii) the
presence of any Hazardous Materials on, under, or about the Premises or
other properties resulting from Lessee's introduction of hazardous
materials onto the Premises. Lessee, at its sole cost and expense, shall
clean up, remove, remediate and repair any soil or groundwater
contamination and damage resulting from Lessee's introduction of hazardous
materials onto the Premises during the term of the Lease in conformance
with the requirements of applicable law. Neither the written consent of
Lessor to the presence of the Hazardous Materials nor Lessee's compliance
with all laws applicable to such Hazardous Materials shall relieve Lessee
of its indemnification obligation under this Lease. Lessee shall
immediately give Lessor written notice (i) of any suspected breach of this
paragraph, (ii) upon learning of the presence of any release of any
Hazardous Materials, or (iii) upon receiving any notices from governmental
agencies pertaining to Hazardous Materials which may affect the Premises,
Lessor shall have the right from time to time, but not the obligation, to
enter upon the Premises to conduct such inspections and undertake such
sampling and testing activities as Lessor deems necessary or desirable to
determine whether Lessee is in compliance with this provision. Lessor
agrees to pay all costs and expenses for pre-existing conditions or
conditions caused by Lessor. The obligations of Lessee hereunder shall
survive the expiration of earlier termination, for any reason, of this
Lease.
6. ENTIRE AGREEMENT: This Lease contains the entire agreement between the
parties, and no agreement shall be effective to change, modify or terminate
this Lease in whole or in part unless such agreement is in writing and duly
signed by both parties. Landlord and Tenant acknowledge that there are no
representations, either oral or written, between them other than those in
this Lease.
All other terms of the original Lease Agreement dated 1 April 1980 and Amendment
I dated 7 November 1989 shall remain the same.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment II this ____
day of ____________, 1994.
LESSEE: LESSOR:
National Fiberstok Corporation, Trammell Crow Asset Services, Inc.
a Delaware corporation a Delaware corporation,
dba Double Envelope Company Agent for C-S-K Louisville,
a Texas limited partnership
By: By:
-------------------------------- --------------------------------------
Title: Title: Jon T. Seiz, Vice President
------------------------------ -----------------------------------
Witness: Witness:
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Exhibit A-2
LOUISVILLE INDUSTRIAL CENTER
Approximately 68,400 S.F. of office/warehouse space within Building Five of the
Louisville Industrial Center located at 7603 National Turnpike, Louisville,
Kentucky 40214, situated on real property described on Exhibit B-2.
<PAGE>
EXHIBIT B-2
BEGINNING at a point in the center line of Old National Turnpike, said point
begin the most westerly point of the land herein described and southward 132.00
feet from the center of the bridge over North Ditch; thence leaving the center
line of said turnpike and with the boundary of 162.70 acres declared excess to
War Assets Administration, February, 1947, said boundary being 2.0 feet outside
of and parallel to the security fence N 28 degrees 02' 18" E 760.28 feet,
passing a stake at 32.78 feet; thence 2.0 feet north of and parallel to the
security fence N 77 degrees 59' 20" E 2351.06 feet, N 26 degrees 07' 15" E
255.68 feet, paralleling the security fence and being 2.0 feet northward or
westward therefrom, to a point which is 270.1 feet from and normal to the
centerline of the Louisville and Nashville Railroad northbound main track and on
a line established by the prolongation of a fence line N 12 degrees 01' 18" W
1894.50 feet to the centerline of said ditch, N 67 degrees 58' 42" E 266.04 feet
to a point on the west right of way line of the Louisville and Nashville
Railroad, said point being 38.0 feet from normal to the centerline of the
northbound main track; thence with the said right of way, S 12 degrees 01' 18" E
829.60 feet, passing a stake at 190.60 feet, N 42 degrees 01' 18" W 13.0 feet to
a point 44.5 feet from and normal to the centerline of the northbound main
track; thence continuing with the said right of way 44.5 feet from and parallel
to the centerline, S 12 degrees 01' 18" E 4117.80 feet; thence S 77 degrees 58'
42" W 3.50 feet to a point 43.0 feet from and normal to the centerline of the
northbound main track; thence continuing with the said right of way 48.0 feet
from and parallel to the centerline, S 12 degrees 01' 18" E 1697.60 feet to a
point in the boundary of the 142.0 acres declared excess to General Service
Administration, 10 October, 1961; thence with said boundary, S 79 degrees 01' w
725.60 feet to a point being 40.00 feet south of the south edge of "D" Street
and 40.00 feet east of the east edge of Fifth Street; thence 40.00 feet East of
and parallel to said east edge, S 12 degrees 01' 18" E 180.00 feet to a point;
thence with a line 87.5 feet North of and parallel to the North end of Warehouse
No. 10, S 78 degrees 01' W 180.00 feet, to a point 40.00 feet South of the south
edge of "D" Street; thence 40.00 feet South of and parallel to said south edge,
S 78 degrees 01' W 605.15 feet, to a point 60 feet West of the west edge of
Second Street; thence 60 feet West of and parallel to said West edge, N 12
degrees 01' 12" W 2282.66 feet, to a point; thence S 78 degrees 01' W 161.50
feet, N 12 degrees 01' 13" W 188.85 feet, to a point 8.00 feet South of the
existing fence South of the entrance road; thence 8.00 feet South of and
parallel to the said existing fence, S 78 degrees 01' W 726.78 feet to a point
in the centerline of Old National Turnpike Road; thence with the centerline of
said turnpike, N 17 degrees 14' 30" W 929.68 feet, N 38 degrees 11' 18" W 569.25
feet to the point of beginning, containing 256.17 acres, more or less.
EXCEPTING THEREFROM so much of said property as was conveyed to THE LOUISVILLE
AND NASHVILLE RAILROAD COMPANY by Deed dated August 16, 1972, and recorded
December 13, 1972, in Deed Book 4580, Page 171, in the Office of the Clerk of
the County Court of Jefferson County, Kentucky.
Being the remainder of the same property acquired by LOUISVILLE SPACE CENTER,
INC. under Deed from THE UNITED STATES OF AMERICA by and through the
Administrator of General Services dated October 1, 1964, and recorded October
14, 1964, in Deed Book 3924, Page 540, in the Office of the Clerk of the County
Court of Jefferson County, Kentucky.
<PAGE>
THIS AGREEMENT OF LEASE, made as of this 10 day of May, 1994, between JADOW
REALTY COMPANY, L.P., a New York limited partnership having an office at 152
West 57th Street, New York, New York 10019 (hereinafter called the "Landlord"),
and NATIONAL FIBERSTOK CORPORATION, a Delaware corporation having an office at
1371 Angelina Drive, Austell, Georgia 30001 (hereinafter called the "Tenant").
ARTICLE ONE
TERM
SECTION 1.01. Landlord, for and in consideration of the terms, covenants
and conditions herein contained, does hereby demise, lease and let to Tenant,
and Tenant does hereby hire and take from Landlord, upon and subject to the
terms, covenants and conditions herein contained, those certain premises
(hereinafter called the "Demised Premises") constituting a portion of the
building (hereinafter sometimes called the "Building") known as 7990 Second Flag
Drive in the Cobb West Business Park, Cobb County, Georgia, consisting of
approximately 39,110 square feet of floor space as shown outlined in red on
Exhibit A, attached hereto and made a part hereof, together with the non-
exclusive right of Tenant, its agents, employees, and invitees to the use of the
common areas appurtenant to the Building for their intended purposes;
SUBJECT to all zoning and municipal ordinances affecting the Demised
Premises as now or hereafter in effect; to any state of facts an accurate survey
may show; and to mortgages, restrictive covenants, easements and other
encumbrances of record;
TO HAVE AND TO HOLD the Demised Premises for a term commencing on the date
of substantial completion of Landlord's Work (as defined in Article Eleven) and
expiring on the day which is seven (7) years and four (4) months thereafter,
except that, if the latter date is a day other than the last day of a calendar
month, the expiration date shall be the last day of the calendar month in which
the expiration date would otherwise fall (sometimes hereinafter called the
"Demised Term").
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Anything in this Lease to the contrary notwithstanding, if Landlord's Work shall
not be substantially completed within ninety (90) days from the date hereof,
except for reasons of unavoidable delay as provided for in Section 24.05 hereof,
Tenant may terminate this Lease by notice given to Landlord at any time prior to
the substantial completion of Landlord's Work and neither party shall have any
further obligations to the other.
SECTION 1.02. Tenant, its agents, employees, and contractors may enter
upon the Demised Premises prior to the substantial completion of Landlord's Work
in order to prepare the Demised Premises for Tenant's occupancy; provided that
there shall be no interference with the completion of Landlord's Work, Tenant
shall indemnify and hold Landlord, its agents, employees, and contractors
harmless from and against any liability, damage, cost or expense, including
reasonable attorneys' fees, arising out of or in connection with any such entry
or work performed by or on behalf of Tenant, neither Landlord nor its agents,
employees or contractors shall be liable for any damage caused to Tenant, its
agents, employees, or contractors or any of its or their property for any reason
whatsoever, including negligence, arising out of any such entry or the presence
of any of the foregoing or their property in, on or about the Demised Premises
prior to the substantial completion of Landlord's Work, and that Tenant shall
have procured and furnished to Landlord evidence of the insurance required to be
carried by Tenant pursuant to Section 6.05 of this Lease.
ARTICLE TWO
RENTAL
SECTION 2.01. Tenant covenants and agrees to pay to Landlord, promptly
when due, without notice or demand and without deduction or set-off of any
amount for any reason whatsoever, except as expressly provided, fixed rent as
follows:
(a) for the period from the commencement date through the date which
is sixteen (16) months from the commencement date, at the rate of ninety-
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seven thousand seven hundred seventy-five dollars ($97,775.00) per annum,
payable at the rate of $8,147.90 per month;
(b) for the next year of the Demised Term, at the rate of one hundred
eight thousand seven hundred twenty-six dollars ($108,726.00) per annum, payable
at the rate of $9,060.50 per month;
(c) for the next year of the Demised Term, at the rate of one hundred
eleven thousand eight hundred fifty-five dollars ($111,855.00) per annum,
payable at the rate of $9,321.25 per month;
(d) for the next year of the Demised Term, at the rate of one hundred
fifteen thousand three hundred seventy-five dollars ($115,375.00) per annum,
payable at the rate of $9,614.58 per month;
(e) for the next year of the Demised Term, at the rate of one hundred
eighteen thousand eight hundred ninety-four dollars ($118,894.00) per annum,
payable at the rate of $9,907.83 per month;
(f) for the next year of the Demised Term, at the rate of one hundred
twenty-two thousand four hundred fourteen dollars ($122,414.00) per annum,
payable at the rate of $10,201.17 per month; and
(g) for the balance of Demised Term, at the rate of one hundred
twenty-five thousand nine hundred thirty-four dollars ($125,934.00) per annum,
payable at the rate of $10,494.50 per month.
Notwithstanding the foregoing, no fixed rent shall be payable for the first
four (4) months of the Demised Term.
The fixed rent provided for above shall be payable in lawful money of the
United States in equal monthly installments in advance on the first day of each
month, except that the sum of $8,147.90 shall be paid on the execution and
delivery of this Lease which shall be applied against the first fixed rent due
hereunder. If the last month of the Demised Term shall be less than a full
month, fixed rent for such month shall be adjusted on a PER DIEM basis.
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ARTICLE THREE
SUBORDINATION: RESTRICTIVE COVENANTS
SECTION 3.01. This Lease is and shall be subject and subordinate to any
and all mortgages which now or hereafter affect the Demised Premises and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instrument of subordination
shall be required from Tenant by any mortgagee. Tenant, within ten (10) days
after written request from Landlord, shall execute a certificate confirming such
subordination. Landlord represents that there is no mortgage presently covering
the Demised Premises or the Building. Landlord agrees that it will request any
future mortgagee to provide Tenant with an agreement of non-disturbance and
attornment in the mortgagee's standard form.
SECTION 3.02. Tenant has been advised that the Demised Premises are part
of Cobb West Business Park and that this Lease is subject to that certain
Declaration of Protective Covenants for Six Flags Road Industrial Park (now
known as Cobb West Business Park), dated February 9, 1983, recorded February 23,
1983 in Deed Book 2691, page 398 in the office of the Clerk of the Superior
Court of Cobb County, Georgia, as amended by instrument dated July 26, 1983,
recorded in Deed Book 2829, page 265 in the office of the Clerk of the Superior
Court of Cobb County, Georgia, as further amended by instrument dated December
27, 1984, recorded in Deed Book 3358, page 231 in the office of the Clerk of the
Superior Court of Cobb County, Georgia, and as further amended by instrument
dated April 25, 1986, recorded in Deed Book 3908, page 547 in the office of the
Clerk of the Superior Court of Cobb County, Georgia. Tenant agrees that it
will, at all times during the Demised Term, comply with said Declaration of
Protective Covenants, as it may be further amended, insofar as it affects the
Demised Premises, provided that no further amendment shall materially and
adversely affect Tenant's use and occupancy of the Demised Premises.
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ARTICLE FOUR
TAX INCREASE PAYMENTS
SECTION 4.01. A. Tenant agrees to pay as additional rent Tenant's
Percentage (as hereinafter defined) of any and all increases in Real Estate
Taxes (as hereinafter defined) above the Real Estate Taxes for the calendar
year 1994 (the "Base Taxes") imposed on all land and buildings included in
the real estate tax parcel which includes the Building with respect to every
Tax Year (as hereinafter defined) or part thereof during the Demised Term,
whether any such increase results from a higher tax rate, an increase in the
assessed valuation of the property or a decrease in any exemption allowed in
respect of the assessed valuation or any combination of the foregoing.
B. "Tenant's Percentage" shall mean the percentage obtained by
dividing the square foot floor area of the Demised Premises (which shall be
deemed to be 39,110 square feet) by the square foot floor area of all of the
buildings included in the aforesaid real estate tax parcel. At the present, the
square foot area of the Building is approximately 108,000.
C. "Real Estate Taxes" shall mean the real estate taxes and
assessments and special assessments imposed upon all land and buildings included
in the aforesaid real estate tax parcel and any rights or interests appurtenant
to either. If at any time during the Demised Term the methods of taxation
prevailing at the commencement of the term hereof shall be altered so that in
lieu of or as an addition to or as a substitute for the whole or any part of the
taxes, assessments, levies, impositions or charges now levied, assessed or
imposed on real estate and the improvements thereon, there shall be levied,
assessed or imposed on real estate and the improvements thereon, there shall be
levied, assessed or imposed (i) a tax, assessment, levy, imposition or charge
wholly or partially as a capital levy or otherwise on the rents received
therefrom, or (ii) a tax, assessment, levy, imposition or charge measured by or
based in whole or in part upon the Demised
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Premises and imposed upon Landlord, or (iii) a license fee or charge measured by
the rents payable by Tenant to Landlord, then all such taxes, assessments,
levies, impositions or charges, or the part thereof so measured or based, shall
be deemed to be included within the term "Real Estate Taxes" for the purposes
hereof. A copy of the applicable tax bill shall be sufficient evidence of the
amount of Real Estate Taxes.
D. The term "Tax Year" shall mean each twelve (12) month fiscal
period commencing January 1 and ending December 31, any portion of which occurs
during the Demised Term.
E. If the Real Estate Taxes for any Tax Year shall be more than the
Base Taxes, Tenant shall pay as additional rent for such Tax Year an amount
equal to Tenant's Percentage of the amount by which the Real Estate Taxes for
such Tax Year are greater than the Base Taxes. The amount payable by Tenant is
hereinafter called the "Tax Payment." The Tax Payment shall be prorated, if
necessary, to correspond with that portion of a Tax Year occurring within the
Demised Term. The Tax Payment shall be payable by Tenant within ten (10) days
after receipt of a demand from Landlord therefor, accompanied by a copy of the
tax bill.
SECTION 4.02. Only Landlord shall be eligible to institute tax reduction
or other proceedings to reduce the assessed valuation of the real estate tax
parcel. Landlord agrees to take such steps, if any, as in Landlord's business
judgment are in the best interests of Cobb West Business Park with respect to
real estate tax assessments. Should Landlord be successful in any such
reduction proceeding and obtain a rebate for any Tax Year for which Tenant has
made a Tax Payment, Landlord shall, after deducting its expenses, including
without limitation, attorneys' fees and disbursements in connection therewith,
offset against the additional rent payable hereunder, Tenant's pro-rata share of
such rebate.
SECTION 4.03. Landlord's failure during the Demised Term to prepare and
deliver any tax bills or computations, or Landlord's failure to make a demand
under this Article or under any other provision of this Lease shall not in any
way be deemed to be a waiver of, or cause Landlord to forfeit or surrender, its
rights to collect any items of additional rent which may have become due
pursuant to this
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Article during the term of this Lease. Tenant's liability for the additional
rent due under this Article shall survive the expiration or sooner termination
of this Lease.
In no event shall any adjustment of Tax Payments hereunder result in a
decrease in fixed rent or additional rent payable pursuant to any other
provision of this Lease, it being agreed that the payment of additional rent
under this Article is an obligation supplemental to Tenant's obligation to pay
fixed rent.
ARTICLE FIVE
USE OF PREMISES
SECTION 5.01. Tenant shall use and occupy the Demised Premises as a
warehouse and distribution center for envelopes and other paper products and
for the cutting of the same, and for general office purposes, and for no
other purpose. In no event shall any manufacturing, assembly or fabricating
work be performed in or about any part of the Demised Premises. Landlord
represents that the aforesaid use conforms to the requirements of local
zoning laws. In no event shall Tenant use the Demised Premises or fail to
maintain the Demised Premises (other than portions of the Demised Premises to
be repaired by Landlord) in any manner constituting a violation of any
ordinance, statute, rule, regulation or order of any governmental authority,
including, but not limited to, those governing zoning, health, safety,
occupational hazards, pollution and environmental control, nor shall Tenant
maintain or permit any nuisance to occur on the Demised Premises.
SECTION 5.02. Tenant shall, throughout the Demised Term, and at no cost to
Landlord, promptly comply with all laws and ordinances and the orders, rules,
regulations and requirements of all federal, state, county, and municipal
governments, and appropriate departments, commissions, boards and officers
thereof, which may be applicable to those portions of the Demised Premises which
Tenant is obligated to repair pursuant to the provisions of Article Nine of this
Lease or which may arise by reason of Tenant's use or manner of use of the
Demised Premises, whether foreseen or unforeseen, ordinary or extraordinary, and
whether or not the same shall presently be within the contemplation of the
parties hereto or
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shall involve any change of governmental policy, and irrespective of the cost
thereof.
ARTICLE SIX
COMMON AREA EXPENSES; INSURANCE COSTS
SECTION 6.01. For the purposes of this Article, the term "common area
expenses" shall mean all expenses paid or incurred by Landlord or in
Landlord's behalf in respect of the operation, maintenance and repair of the
common areas of Cobb West Business Park including but not limited to the cost
of maintenance and repair of all drives and parking areas, the cost of
replacing 1 light bulb, the cost of premiums for commercial liability
insurance covering the common areas, the cost of landscaping, the cost of
electricity for the common areas, the cost of repairing electrical fixtures
and equipment, and the cost of guard and security services, if any, plus an
amount equal to fifteen percent (15%) of all such costs and expenses to cover
Landlord's overhead. The term "common area expenses" shall not include
capital improvements made to Cobb West Business Park but shall include
depreciation (on a straight-line basis over its useful life) of equipment
used in the operation, maintenance or repair of the common areas of Cobb West
Business Park. The term "Tenant's share" shall mean that fraction of the
common area expenses of which the numerator shall be the square foot floor
area of the Demised Premises (which the parties agree shall be deemed to be
39,110 square feet) and the denominator of which shall be the floor area of
the completed buildings in Cobb West Business Park as constituted from time
to time during the term of this Lease which are maintained by Landlord. With
respect to each year during the Demised Term, Tenant shall pay to Landlord an
amount (hereinafter sometimes called the "operating payment") equal to
Tenant's share of the common area expenses of Cobb West Business Park.
Landlord agrees to operate and maintain the common areas of Cobb West
Business Park in good repair and in a clean and orderly condition.
SECTION 6.02. Landlord shall furnish to Tenant within thirty (30) days
from the date hereof and thereafter prior to the commencement of each calendar
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year a written statement setting forth in reasonable detail Landlord's
reasonable estimate of the common area expenses for the balance of the first
calendar year and thereafter for such calendar year. Tenant shall pay to
Landlord on the first day of each month during the first calendar year and
thereafter during each calendar year an amount equal to one-twelfth (1/12th) of
Landlord's reasonable estimate of Tenant's share of the common area expenses for
such year. If, however, Landlord shall furnish any such estimate for any
calendar year (other than the first calendar year) subsequent to the
commencement thereof, then (i) until the first day of the month following the
month in which such estimate is furnished to Tenant, Tenant shall pay to
Landlord on the first day of each month an amount equal to the monthly sum
payable by Tenant to Landlord under this Section in respect of the last month of
the immediately preceding calendar year, (ii) promptly after such estimate is
furnished to Tenant, Landlord shall give notice to Tenant stating whether the
installments of the operating payment previously made for such year were greater
or less than the installments of the operating payment to be made for the
calendar year in accordance with such estimate and (a) if there shall be a
deficiency, Tenant shall pay the amount thereof within ten (10) days after
demand thereof or (b) if there shall have been an overpayment, Landlord shall
promptly either refund to Tenant the amount thereof or permit Tenant to credit
the amount thereof against subsequent payments under this Article and (iii) on
the first day of the month following the month in which such estimate is
furnished to Tenant and monthly thereafter throughout the remainder of such
year, Tenant shall pay Landlord an amount equal to one-twelfth (1/12th) of the
operating cost shown in such estimate.
Within one hundred twenty (120) days after the end of each calendar year,
Landlord shall furnish to Tenant a statement of common area expenses for such
year in a form showing general categories of expenses and the calculation of
Tenant's share. If the statement shall show that the sums paid by Tenant
exceeded the operating payment to be paid by Tenant for such year, Landlord
shall promptly either refund to Tenant the amount of such excess or permit
Tenant to credit the amount of such excess against subsequent payments of
additional rent under this
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authorized to do business in the State of Georgia having a rating by A.M. Best
(or any successor organization) of A-10 or better and otherwise reasonably
satisfactory to Landlord and Landlord's mortgagee, if any, commercial general
public liability insurance covering personal injury, including death, and
property damage occurring in, on or about the Demised Premises with so called
single-limit protection of not less than three million dollars ($3,000,000).
All such policies shall name Landlord and Landlord's mortgagee, if any, as named
or additional insureds.
All policies shall contain a provision that the insurance provided thereby
may not be reduced or modified by the carrier except by notice in writing to
Landlord given not less than twenty (20) days prior to any such change. Tenant
shall furnish to Landlord, on or prior to the commencement date of this Lease, a
certificate of insurance evidencing the coverage required pursuant to this
Section and shall furnish to Landlord, not less than twenty (20) days prior to
the expiration date of any such policy, evidence satisfactory to Landlord of the
continuation or replacement of such insurance.
SECTION 6.06. Landlord intends to carry fire insurance with extended
coverage, including vandalism and civil commotion, with sprinkler endorsement,
covering the Building in an amount equal to the full replacement value thereof.
Tenant shall pay to Landlord, as additional rent, Tenant's proportionate share
(based upon the floor area for the Demised Premises of 39,110 square feet) of
the cost of Landlord's premiums for such insurance in excess of the cost of
Landlord's premiums for such insurance for the calendar year 1994. If such
insurance shall cover buildings in Cobb West Business Park in addition to the
Building and the premium attributable to the Building is not separately stated
or ascertainable, the cost of such premium shall be apportioned based upon the
floor area of the Building as compared to the total floor area of all buildings
covered by such insurance. Landlord agrees that it will carry for its own
benefit commercial general public liability insurance covering Cobb West
Business Park in such amounts and with such carriers as Landlord shall in the
exercise of its business judgment determine.
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ARTICLE SEVEN
UTILITY CHARGES
SECTION 7.01. Tenant agrees to pay or cause to be paid all charges for
gas, water, sewer, electricity, light, heat, power, telephone or other
communication service or other utility or service used, rendered or supplied to,
upon or in connection with the Demised Premises throughout the Demised Term, and
to indemnify Landlord and save it harmless against any liability, damage or
expense, including reasonable attorneys' fees, on such account. Landlord
represents that the Building is served by gas, water, sewer, electricity, and
telephone. If any utility or service, other than electricity, shall not be
separately metered for the Demised Premises, Tenant shall pay to Landlord, upon
demand, that part of the charge therefor determined by multiplying such charge
by a fraction, the numerator of which shall be 39,110 and the denominator of
which shall be the floor area in square feet of all of the premises served by
such utility or service. Tenant may, at its option, in such instance arrange,
at its own expense, for any such utility or service to be separately metered,
provided separate metering is feasible and does not interfere with the operation
of the Building or with any other tenant or occupant. Tenant shall also at its
sole cost and expense procure or cause to be procured any and all necessary
permits, licenses or other authorizations required for the lawful and proper
use, occupation, operation and management of the Demised Premises and for the
lawful and proper installation and maintenance upon the Demised Premises of
wires, pipes, conduits, tubes and other equipment and appliances for use in
supplying any such service to or upon the Demised Premises, except that
Landlord, at its expense, shall pay the cost of installing a separate electrical
meter for the Demised Premises, if required. Landlord, at its option, may
install separate meters for other utilities serving the Demised Premises.
Tenant expressly agrees that, except as expressly provided, Landlord is not, nor
shall it be, required to furnish to Tenant or any other occupant of the Demised
Premises, during the Demised Term, any water, sewer, gas, heat, electricity,
light, power or any other facilities, equipment, labor, materials or services of
any kind whatsoever.
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ARTICLE EIGHT
INDEMNIFICATION
SECTION 8.01. Tenant covenants and agrees, at Tenant's sole cost and
expense, to indemnify and save harmless Landlord against and from any and all
claims by or on behalf of any person, firm or corporation arising from the use,
conduct or management of the Demised Premises or from any work or thing
whatsoever done in or about the Demised Premises by Tenant or by anyone claiming
through Tenant or by any agent, contractor, servant, employee or licensee of
Tenant or of anyone claiming through Tenant, and further to indemnify and save
Landlord harmless against and from any and all claims arising from any condition
of the Demised Premises, or arising from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Lease, or arising from any act or
negligence of Tenant, or any of its agents, contractors, servants, employees or
licensees, and from and against all costs and expenses, including reasonable
attorneys' fees, damages and liabilities incurred in or with respect to any such
claim, action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord covenants to resist or defend such action or proceeding by
attorneys reasonably satisfactory to Landlord.
Tenant covenants and agrees to pay, and to indemnify Landlord against, all
damages, costs and expenses incurred or suffered by Landlord in obtaining
possession of the Demised Premises after default of Tenant or upon expiration or
earlier termination of the Demised Term, or by reason of Tenant's failure to
surrender the Demised Premises upon expiration or earlier termination of the
Demised Term, or in enforcing any covenant or agreement of Tenant herein
contained. In the event of any litigation between the parties arising out of or
in connection with this Lease, the prevailing party shall be entitled to
reasonable attorney's fees and the costs and expenses of litigation.
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SECTION 8.02. Landlord covenants and agrees, at Landlord's sole cost and
expense, to indemnify and save harmless Tenant against and from any and all
claims by or on behalf of any person, firm or corporation arising from any work
or thing whatsoever done in or about the Demised Premises by Landlord or by any
agent, contractor, servant or employee of Landlord, and further to indemnify and
save harmless against and from any and all claims arising from any covenant or
agreement on the part of Landlord to be performed pursuant to the terms of this
Lease, or arising from any act or negligence of Landlord, or any of its agents,
contractors, servants or employees, and from and against all costs and expenses,
including reasonable attorneys' fees, damages and liabilities incurred in or
with respect to any such claim, action or proceeding brought thereon; and in
case any action or proceeding be brought against Tenant by reason of any such
claim Landlord upon notice from Tenant covenants to resist or defend such action
or proceedings by attorneys reasonably satisfactory to Tenant.
SECTION 8.03. Landlord and Tenant shall each endeavor to procure a waiver
of subrogation against the other from its casualty insurer. If such a waiver of
subrogation can be secured only through payment of an additional premium, the
party requesting such waiver of subrogation from its carrier shall notify the
party to be benefitted thereby, and the party to be benefitted thereby may offer
to pay such additional premium, failing which such waiver of subrogation need
not be procured.
ARTICLE NINE
MAINTENANCE AND REPAIRS
SECTION 9.01. Landlord agrees to keep in good repair the roof, foundations
and other structural elements of the Demised Premises, and underground utility
and sewer pipes outside of the Demised Premises, or under the slab of the
Building, except repairs rendered necessary by the acts or omissions of Tenant,
its agents, employees and contractors; provided that in no event shall Landlord
be required to maintain or repair windows and doors of the Demised Premises,
including but not limited to truck dock doors, deck levellers, guard rails,
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bollards, and other appurtenances. Tenant shall, throughout the Demised Term,
and at no expense whatsoever to Landlord, take good care of the Demised Premises
and make all repairs necessary to keep the interior and exterior of the Demised
Premises, including but not limited to windows and doors of the Demised
Premises, truck dock doors, dock levellers, guard rails, bollards, and other
appurtenances, in good and lawful order and condition, normal wear and tear and
damage by fire or other casualty excepted, other than those repairs expressly
required herein to be made by Landlord. When used in this Article, the term
"repairs" as applied to the building equipment shall include all alterations and
improvements, replacements, restoration and/or renewals, when necessary. The
provisions and conditions of Article Eleven applicable to changes or alterations
shall similarly apply to repairs required to be made by Tenant under this
Article.
SECTION 9.02. Tenant shall permit Landlord and Landlord's authorized
representatives to enter the Demised Premises at all reasonable times upon
reasonable notice to Tenant, except in the case of an emergency in which case
entry may be made without notice at any time, for the purpose of exhibiting
or inspecting the same and for making any necessary repairs to the Demised
Premises which are the responsibility of Landlord or which tenant has failed
to perform or to perform any work therein that may be necessary to comply
with any laws, ordinances, rules, regulations or requirements of any public
authority, or that may be necessary to prevent waste or deterioration in
connection with the Demised Premises, which Tenant is obligated, but has
failed, to make, perform or prevent, as the case may be, or which Landlord is
required to make or perform under the express provisions of this Lease.
Nothing in this Section 9.02, however, shall be deemed to impose upon
Landlord any obligation not otherwise imposed upon Landlord by other
provisions of this Lease. Landlord shall not be liable for inconvenience,
annoyance, disturbance, loss of business or other damage of Tenant or any
other occupant of the Demised Premises by reason of making repairs or
performing any work on the Demised Premises or on account of bringing
materials, supplies and equipment into or through the Demised Premises during
the course thereof, and the obligations of
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Tenant under this Lease shall not thereby be affected in any manner whatsoever,
provided that Landlord shall use reasonable efforts, which need not include the
use of overtime, weekend or holiday labor, to minimize interference with
Tenant's operations in the Demised Premises. Landlord shall have the right to
post "for rent" signs on the Demised Premises at any time but not earlier than
six (6) months prior to the expiration date of the Demised Term.
ARTICLE TEN
REMOVAL OF LIENS
SECTION 10.01. Tenant shall not suffer or permit any liens to be filed
against the Demised Premises or any part thereof or against any other portion
of Cobb West Business Park by reason of any work, labor, services or
materials done for, or supplied, or claimed to have been done for, or
supplied to, Tenant or anyone holding the Demised Premises or any part
thereof through or under Tenant. If any such lien shall at any time be filed
against the Demised Premises or any other portion of Cobb West Business Park,
Tenant shall cause the same to be discharged of record within ten (10) days
after the date of filing the same, by either payment, deposit or bond. If
Tenant shall fail to discharge any such lien within such period, then, in
addition to any other right or remedy of Landlord, Landlord may, but shall
not be obligated to, procure the discharge of the same either by paying the
amount claimed to be due by deposit in a court having jurisdiction or by
bonding, and/or Landlord shall be entitled, if Landlord so elects, to compel
the prosecution of an action for the foreclosure of such lien by the lienor
and to pay the amount of the judgment, if any, in favor of the lienor with
interest, costs and allowances. Any amount paid or deposited by Landlord for
any of the aforesaid purposes, and all legal and other expenses of Landlord,
including counsel fees, in defending any such action or in procuring the
discharge of such lien, with all necessary disbursements in connection
therewith, together with interest thereon at the lower of the prime rate then
announced as in effect by Citibank, N.A. plus four percent (4%) per annum or
the maximum rate allowed by law, from the date of payment or deposit, shall
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become due and payable forthwith by Tenant to Landlord, or, at the option of
Landlord, shall be payable by Tenant to Landlord as additional rent.
Nothing in this Lease shall be deemed to be, or construed in any way as
constituting, the consent or request of Landlord, expressed or implied, by
inference or otherwise, to any person, firm or corporation for the performance
of any labor or the furnishing of any materials for any construction,
rebuilding, alteration or repair of or to the Demised Premises or any part
thereof, nor as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials which
might in any way give rise to the right to file any lien against Landlord's
interest in the Demised Premises. Landlord shall have the right to post and
keep posted at all times on the Demised Premises any notices which Landlord
shall be required so to post for the protection of Landlord and the Demised
Premises from any such lien.
ARTICLE ELEVEN
ALTERATIONS
SECTION 11.01. Tenant agrees that, without the prior written consent of
Landlord, Tenant will make no changes, alterations or improvements (hereinafter
collectively called "alterations") to the Demised Premises. Notwithstanding the
foregoing, Landlord agrees that it will not withhold its consent to interior
cosmetic changes or to other interior, nonstructural alterations of the Demised
Premises which do not cost in excess of twenty thousand dollars ($20,000.00).
Any alterations in and to the Demised Premises shall be made subject to the
following provisions:
(a) The same shall be performed in a first class, workmanlike manner;
(b) Tenant shall cause plans and specifications for all alterations
to be furnished to Landlord prior to the commencement of
alterations. Such plans and specifications shall be subject to
Landlord's written approval, which approval shall not be
unreasonably withheld with respect to interior cosmetic changes
or to other interior, nonstructural alterations not exceeding
twenty thousand dollars ($20,000.00) in cost. Tenant further
agrees that before the commencement of any alterations, Tenant
will file such plans and specifications with, and obtain the
approval thereof by, all municipal or other governmental
departments or authorities having jurisdiction thereof. The
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filing of such plans and specifications and the approval or
consent of Landlord shall not operate for the purpose of filing
any lien or making any charge of any kind whatsoever against
either Landlord or the Demised Premises;
(c) All alterations shall be done subject to, and in accordance with,
all applicable laws, rules, regulations, and other requirements
of all governmental authorities having jurisdiction thereof and
of the local Board of Fire Underwriters or of any similar body;
and,
(d) Tenant shall promptly pay and discharge all costs, expenses,
damages and other liabilities which may arise in connection with
or by reason of any alterations.
SECTION 11.02. Unless otherwise agreed by the parties, all alterations
made by Tenant shall remain upon and be surrendered with the Demised Premises at
the expiration or other termination of this Lease.
SECTION 11.03. All salvage material in connection with any demolition or
alteration which Tenant is permitted to make hereunder shall belong to Tenant.
SECTION 11.04. Tenant acknowledges that it has inspected and is familiar
with the Demised Premises and accepts the same "as is" the date hereof, subject
to the provisions of the following sentence. Landlord shall have no obligation
to alter, improve, decorate or otherwise prepare the Demised Premises for
Tenant's occupancy, except that Landlord, at its sole cost and expense, shall
perform or cause to be performed with due diligence the work shown on Exhibit B
("Landlord's Work"), attached hereto and made a part hereof, which shall include
the installation of four (4) dock-high loading doors with seals and the
installation of eighteen (18) tons of air conditioning to the warehouse portion
of the Demised Premises. Landlord's Work shall be performed and completed in a
good and workmanlike manner and in compliance with all applicable laws, it being
contemplated that Landlord's Work will be completed within sixty (60) days from
the date hereof.
SECTION 11.05. Upon the substantial completion of Landlord's Work, the
parties shall inspect Landlord's Work and prepare a punchlist of incomplete
minor or unsubstantial details of construction, necessary mechanical adjustments
and needed finishing touches, and Landlord shall complete such punchlist items
within thirty (30) days after agreement on the punchlist. Landlord shall
diligently correct
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any patent defects in Landlord's Work, provided that Tenant shall notify
Landlord of such defects within thirty (30) days after the completion of
Landlord's Work. Landlord shall diligently correct any latent defects in
Landlord's Work, provided that Tenant shall notify Landlord of such defects not
later than the earlier of (i) thirty (30) days after Tenant shall have first
become aware of any such defect or (ii) one (1) year after the completion of
Landlord's Work.
ARTICLE TWELVE
CASUALTY AND RESTORATION
SECTION 12.01. A. If the Demised Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Landlord and this Lease shall continue in full force and effect except as
hereinafter set forth.
B. If the Demised Premises are damaged or rendered partially or
totally unusable by fire or other casualty and if the damage can, with due
diligence, be repaired within one hundred twenty (120) days from the date of the
casualty, the damage thereto shall be repaired by and at the expense of Landlord
but, unless Landlord otherwise elects, only to the extent of the net insurance
proceeds received by Landlord, and the fixed rent and other charges payable by
Tenant under this Lease shall be abated from the day following the casualty in
proportion to the portion of the Demised Premises which is unusable until the
Demised Premises have been restored. If the net insurance proceeds received by
Landlord shall be insufficient to restore the Demised Premises and Landlord
shall not elect to contribute additional funds for such purpose, Landlord shall
promptly notify Tenant and Tenant shall have the right, by notice given to
Landlord within thirty (30) days after the giving of Landlord's notice, to
terminate this Lease and, in such event, fixed rent and other charges shall be
paid (in proportion to the portion of the Demised Premises which is usable) to a
date which is thirty (30) days after the giving of Tenant's notice.
C. If the Demised Premises are totally damaged or rendered wholly
unusable by fire or other casualty, or if the Demised Premises or the Building
are
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partially damaged or rendered partly unusable by a casualty not covered by the
fire and extended coverage insurance policy carried by Landlord, or if the
damage thereto cannot, with due diligence, be repaired within one hundred twenty
(120) days from the date of the casualty, then, subject to Landlord's right to
elect not to restore the same as hereinafter provided, the damage thereto shall
be repaired with due diligence by and at the expense of Landlord, and the fixed
rent and other charges payable by Tenant under this Lease shall be fully abated
from the day following the casualty until the Demised Premises have been
repaired and restored. If the net insurance proceeds received by Landlord shall
be insufficient to restore the Demised Premises and Landlord shall not elect to
contribute additional funds for such purpose, Landlord shall promptly notify
Tenant and Tenant shall have the same option granted to Tenant pursuant to
subsection B of this Section 12.01 as in the case of partial damage.
D. If the Demised Premises are rendered wholly unusable or (whether
or not the Demised Premises are damaged in whole or in part) if the Building
shall be so damaged that Landlord shall decide to demolish it or to rebuild it,
or if the Demised Premises or the Building are partially damaged or rendered
partly unusable by a casualty not covered by the fire and extended coverage
insurance policy carried by Landlord, or if the damage thereto cannot, with due
diligence, be repaired within one hundred twenty (120) days from the date of the
casualty, then, in any such event, Landlord may elect to terminate this Lease by
notice to Tenant given within thirty (30) days after such fire or casualty
specifying a date for the expiration of this Lease, which date shall not be more
than sixty (60) days after the giving of such notice, and upon the date
specified in such notice the Demised Term shall expire as fully and completely
as if such date were the date set forth in this Lease for the expiration of the
Demised Term and Tenant shall forthwith quit, surrender and vacate the Demised
Premises without prejudice however, to Landlord's rights and remedies against
Tenant under the Lease provisions in effect prior to such termination, and any
rent owing shall be paid up to such date (or to the date of casualty if Tenant
shall have been unable to use the
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Demised Premises) and any payments of fixed rent and other charges made by
Tenant which were on account of any period subsequent to such date shall be
returned to Tenant.
E. Anything in this Lease to the contrary notwithstanding, (i) if
Landlord shall not be required to restore the Demised Premises by reason of any
fire or other casualty, Landlord shall notify Tenant within thirty (30) days
from the date of the fire or other casualty whether or not Landlord elects to
restore the Demised Premises, and if Landlord shall notify Tenant that Landlord
does not intend to restore the same, Tenant, by notice given to Landlord within
thirty (30) days after the giving of Landlord's notice, may elect to terminate
this Lease effective as of thirty (30) days after the giving of Tenant's notice,
and (ii) if the Demised Premises are not substantially restored within one
hundred eighty (180) days from the date of the fire or other casualty, Tenant
may elect to terminate this Lease by notice given to Landlord at any time after
the expiration of such one hundred eighty (180) day period but prior to the
substantial restoration of the Demised Premises, in which event this Lease
shall terminate effective as of thirty (30) days after the giving of Tenant's
notice. If this Lease shall be terminated as provided in this subsection E, the
provisions of subsection D of this Section 12.01 with respect to expiration of
the Demised Term, surrender of the Demised Premises, and payment of rent and
other charges shall apply to termination under this subsection E.
ARTICLE THIRTEEN
CONDEMNATION
SECTION 13.01. In the event that the Demised Premises or any part thereof
shall be taken or condemned for public use and Tenant shall have duly and fully
kept, performed and observed each and every covenant on its part to be kept,
performed and observed, then in the event of such taking or condemnation of the
Demised Premises, or any part thereof, for public use, the fixed rent and other
charges shall be paid up to the date title is vested in the condemning
authority, and for the balance of the Demised Term a just proportion of the
fixed rent and other
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charges herein reserved shall be abated according to the nature and extent of
the injuries to the Demised Premises. If the entire Demised Premises or more
than fifty (50%) thereof is taken or condemned, the Demised Term shall expire
and come to an end on the date title is vested in the condemning authority.
SECTION 13.02. The entire condemnation award shall belong to Landlord and
Tenant hereby assigns to Landlord any rights it may have in and to any
condemnation award, including any award for the value of its leasehold interest.
Notwithstanding the foregoing, Tenant may apply to the condemning authority and
be entitled to any award for the value of Tenant's stock, trade fixtures and
furnishings, for the unamortized value of leasehold improvements made and paid
for by Tenant (based upon straight line depreciation over the initial Demised
Term), and for Tenant's moving and relocation expenses.
ARTICLE FOURTEEN
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
SECTION 14.01. Tenant covenants and agrees that if Tenant shall at any time
fail to make any payment or perform any other act which Tenant is obligated to
perform under this Lease, then Landlord may, but shall not be obligated to do
so, after (10) days' notice to and demand upon Tenant and without waiving, or
releasing Tenant from, any obligations of Tenant in this Lease contained, make
any such payment or perform any such act (unless tenant has commenced
performance which cannot reasonably be completed within such time) which Tenant
is obligated to perform under this Lease, in such manner and to such extent as
shall be necessary, and, in exercising any such rights, pay all necessary and
incidental costs and expenses. All sums reasonably paid by Landlord and all
necessary and incidental costs and expenses in connection with the performance
of any such act by Landlord, including reasonable attorneys' fees, together with
interest thereon at the lower of (i) the prime rate then announced as in effect
by Citibank, N.A. plus four percent (4%) per annum or (ii) the maximum interest
rate allowed by law from the date of the making of such expenditure by Landlord,
shall be deemed additional rent
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thereunder and, except as otherwise in this Lease expressly provided, shall be
payable to Landlord on demand or at the option of Landlord may be added to any
rent then due or thereafter becoming due under this Lease.
ARTICLE FIFTEEN
ESTOPPEL CERTIFICATES
SECTION 15.01. Each party agrees at any time and from time to time, upon
not less than ten (10) days' prior request by the other, to execute, acknowledge
and deliver to the requesting party, or to any entity designated by such party,
a statement in writing certifying that this Lease is unmodified and in full
force and effect (or, if there have been any modifications, that the same is in
full force and effect as modified and stating the modifications), that neither
party is in default hereunder (or, if either party is in default, specifying the
default), the dates to which fixed rent and other charges have been paid, and
such other information relating to this Lease as may reasonably be requested by
the requesting party or such designee, it being intended that any such statement
may be relied upon by any prospective purchaser of the fee or by any mortgagee
or assignee of any mortgage on the Demised Premises or by any assignee,
subtenant or lender of Tenant.
ARTICLE SIXTEEN
DEFAULT PROVISIONS
SECTION 16.01. This Lease and the Demised Term are subject to the
limitation that if, at any time during the Demised Term any one or more of the
following events (herein called an "event of default") shall occur, that is to
say:
(a) if Tenant shall make an assignment for the benefit of its
creditors; or
(b) if Tenant files any petition or institutes any proceedings under
the Bankruptcy Act as it now exists or is hereafter amended, or
under any other act or acts, either as a bankrupt or an insolvent
seeking to be adjudicated a bankrupt, or to be discharged from
any or all of its debts, or to effect a plan of reorganization,
or for any other similar relief, or if any such petition or
proceedings are filed or taken against Tenant, or if any receiver
or trustee for all or a substantial part of Tenant's interest in
the Demised Premises
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or of the assets of Tenant shall be appointed by any court, and
any such petition or proceedings shall not be set aside or
dismissed or the appointment of said receiver revoked within
sixty (60) days; or
(c) if Tenant shall fail to pay any installment of the fixed rent or
additional rent provided for in this Lease, or any part thereof,
when the same shall become due and payable and such failure shall
continue for five (5) days after notice thereof from Landlord to
Tenant; provided, however that if Landlord shall have given two
(2) such notices to Tenant within a period of twenty-four
(24) consecutive months, no notice shall thereafter be required to
be given by Landlord and failure thereafter to pay any
installment of the fixed rent or additional rent, or any part
thereof, when the same shall become due and payable shall
constitute an event of default; or
(d) if Tenant shall fail to pay any other charge required to be paid
by Tenant hereunder (other than the payment of fixed rent and
additional rent) and such failure shall continue for ten (10)
days after notice thereof from Landlord to Tenant; or
(e) if Tenant shall fail to perform or observe any other requirement
of this Lease on the part of Tenant to be performed or observed,
and such failure shall continue for thirty (30) days after notice
thereof from Landlord to Tenant, provided that if such failure to
perform or to observe any requirement of this Lease cannot be
performed with due diligence within such thirty (30) day period,
Tenant shall have failed promptly to commence and diligently to
prosecute to completion the cure thereof,
then upon the happening of any one or more of the aforementioned events of
default, Landlord may give to Tenant a notice (hereinafter called "notice of
termination") of intention to end the Demised Term and at the expiration of five
(5) days from the date of service of such notice of termination, this Lease and
the Demised Term, as well as all of the right, title and interest of Tenant
hereunder, shall wholly cease and expire in the same manner and with the same
force and effect as if the date of expiration of such five (5) day period were
the date originally specified herein for the expiration of this Lease and the
Demised Term, and Tenant shall then quit and surrender the Demised Premises to
Landlord, but Tenant shall remain liable as hereinafter provided.
SECTION 16.02. If this Lease shall be terminated as in Section 16.01
hereof provided, Landlord, or Landlord's agents or servants, may immediately or
at any time thereafter reenter the Demised Premises and remove therefrom Tenant,
its agents, employees, servants, licensees, and any subtenants and any other
occupants
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thereof and all or any of its or their property therefrom, either by summary
dispossess proceedings or by any suitable action or proceeding at law and
repossess and enjoy and relet the Demised Premises, together with all additions,
alterations and improvements thereto.
SECTION 16.03. In case of any such termination, reentry or dispossess by
summary proceedings or otherwise, (a) the fixed rent reserved hereunder and
all other charges required to be paid by Tenant hereunder shall thereupon
become due and be paid up to the time of such termination, reentry or
dispossess, together with such expenses as Landlord may reasonably incur for
attorneys' fees and disbursements, brokerage and for putting the Demised
Promises in order and for preparing the same for rerental, (b) Landlord may
relet the Demised Premises or any part thereof for a term or terms which may
be less than or exceed the period which would otherwise have constituted the
balance of the Demised Term and may grant concessions or free rent, and (c)
Tenant shall pay to Landlord any deficiency between the fixed rent and
additional rent to be paid hereunder and the net amount, if any, of the rents
collected on account of the Demised Premises for each month of the period
which would otherwise have constituted the balance of the Demised Term. The
failure of Landlord to relet the Demised Premises shall not affect Tenant's
liability for damages. Any such damages shall be paid in monthly
installments on the rent day specified in this Lease and any suit brought to
collect the amount of the deficiency for any month shall not prejudice the
right of Landlord to collect the deficiency for any subsequent month by a
similar proceeding. Landlord shall not be required to relet the Demised
Premises and shall not be liable for failure to collect rent in the event of
any reletting and in no event shall Tenant be entitled to receive the excess,
if any, of net rents collected over the sums payable by Tenant to Landlord
hereunder. Nothing in this Article shall preclude Landlord from electing any
other right or remedy available to Landlord at law or in equity.
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ARTICLE SEVENTEEN
ENVIRONMENTAL OBLIGATIONS
SECTION 17.01. Tenant covenants and agrees with Landlord as follows:
(a) Tenant will not use the Demised Premises for the generation,
handling, storage, or disposal of hazardous substances or waste as defined in
the environmental protection laws of the State of Georgia and the rules and
regulation of the Environmental Protection Division of the Georgia Department of
National Resources promulgated thereunder (collectively the "State Laws").
(b) Tenant will not utilize the Demised Premises for or conduct any
activity upon or about the Demised Premises which is in violation of the State
Laws, The Clean Waters Act, 33 U.S.C.A. Section 1251 et seq. ("CWA"), or the
Clean Air Act, 42 U.S.C.A. Section 7401 et seq. ("CAA").
(c) Tenant will perform all acts required by and shall refrain from
conducting any activities prohibited by the State Laws, CWA, CAA or any other
environmental laws, regulations or requirements of federal, state or local
municipalities (collectively, "Environmental Laws") applicable to the Demised
Premises.
SECTION 17.02. Tenant agrees that it shall indemnify, defend and hold
Landlord harmless with respect to any cost, action, expense, including
reasonable attorneys' fees, or proceeding which Landlord may incur, including
but not limited to the cost of a cleanup, as a result of a violation by Tenant
of any of the requirements of Environmental Laws.
SECTION 17.03. Tenant agrees that if Landlord is required, due to a
violation by Tenant of its covenants hereunder, under the provisions of any
Environmental Law to provide a surety bond or other financial security which
would guarantee the implementation of any plan to clean up the land or the
Building pursuant to the provisions of an Environmental Law, that Tenant will
furnish such bond or financial security. Tenant further agrees to provide all
information to and comply with all requirements of federal, state and local
agencies responsible for implementing and enforcing Environmental Laws.
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SECTION 17.04. Upon reasonable notice to Tenant, Landlord shall have the
right, although not the obligation, to have such inspections of the Demised
Premises performed as Landlord deems necessary in order to determine whether
Tenant has violated its obligations under this Article. If any such
inspection shall disclose that Tenant shall be in violation of its
obligations under this Article Seventeen, Tenant shall pay to Landlord the
reasonable cost of such inspection and report.
SECTION 17.05. Landlord agrees that it shall indemnify, defend and hold
Tenant harmless with respect to any cost, action, expense, including
reasonable attorneys' fees, or proceeding which Tenant may incur, including
but not limited to the cost of a cleanup, as a result of a violation by
Landlord of any of the requirements of Environmental Laws.
ARTICLE EIGHTEEN
QUIET ENJOYMENT
SECTION 18.01. Landlord covenants and agrees that Tenant, upon paying
the rent herein reserved, and performing and observing the covenants,
conditions and agreements hereof upon the part of Tenant to be performed and
observed, shall and may peaceably hold and enjoy the Demised Premises during
the Demised Term, without any interruption or disturbance from Landlord,
subject, however, to the terms of this Lease. This covenant shall be
construed as running with the land to and against Landlord's successors in
interest, and is not, nor shall it operate or be construed as, a personal
covenant of Landlord, except to the extent of Landlord's interest in the
Demised Premises and only so long as such interest shall continue, and
thereafter this covenant shall be binding only upon such successors in
interest in the Demised Premises to the extent of their respective interests
in the Demised Premises, as and when they shall acquire the same, and only so
long as they shall retain such interest.
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ARTICLE NINETEEN
SURRENDER OF PREMISES
SECTION 19.01. Upon the expiration or termination of the Demised Term,
Tenant shall peacefully and quietly surrender the Demised Premises to Landlord,
together with all improvements and alterations thereto, in good order, condition
and repair, reasonable wear and tear and damage by fire or other casualty
excepted. Title to all of Tenant's trade fixtures, furniture and equipment
(other than building equipment) installed in the Demised Premises shall remain
in Tenant, and, upon expiration or other termination of this Lease, the same
may, and upon the demand of Landlord shall, be removed, and any resultant damage
to the Demised Premises shall be repaired by and at the expense of Tenant. If
any of such trade fixtures, furniture and equipment is not removed upon the
expiration or earlier termination of this Lease, all such trade fixtures,
furniture and equipment, shall, at Landlord's option, be and become the absolute
property of Landlord or Landlord may, at the cost and expense of Tenant, remove
and store all or any of such fixtures, furniture and equipment.
ARTICLE TWENTY
ASSIGNMENT: SUBLETTING
SECTION 20.01. (a) Tenant shall not assign, mortgage or encumber this
Lease nor sublet or suffer or permit the Demised Premises or any part thereof
to be used by others without the prior written consent of Landlord in each
instance, provided, however, that upon notice given to Landlord not less than
ten (10) days prior to the effective date of the proposed assignment or
subletting, accompanied by a true copy of the assignment and assumption
agreement or sublease, as the case may be, Tenant may assign this Lease or
sublet the Demised Premises to an entity which controls, is controlled by, or
is under common control with, Tenant.
(b) If Tenant shall, at any time or times with respect to the Demised
Term, desire to assign this Lease or to sublet all or any part of the Demised
Premises, Tenant shall give notice thereof to Landlord, which notice shall be
accompanied by a
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true copy of the proposed assignment or sublease, the effective or commencement
date of which shall be not less than thirty (30) nor more than one hundred
twenty (120) days after the giving of such notice, together with a statement
setting forth in reasonable detail the identity of the proposed assignee or
subtenant, the nature of its business, its proposed use of the Demised Premises
and current financial information with respect to the proposed assignee or
subtenant, including its most recent financial statement. Such notice shall be
deemed an offer from Tenant to Landlord whereby Landlord, or Landlord's
designee, may, at its option, (i) sublease such space from Tenant upon the terms
and conditions hereinafter set forth, if the proposed transaction is a sublease,
(ii) terminate this Lease, if the proposed transaction is an assignment of this
Lease or a sublease of all or substantially all of the Demised Premises or (iii)
terminate this Lease with respect to the space proposed to be sublet, if less
than all of the Demised Premises are to be sublet. Said options may be
exercised by Landlord by notice to Tenant given at any time within thirty (30)
days after such notice has been given by Tenant to Landlord. If Landlord shall
exercise its option to terminate this Lease in a case where Tenant desires
either to assign this Lease or to sublet all or substantially all of the Demised
Premises, then this Lease shall expire on the date that such assignment or
sublet was to be effective or commence, as the case may be, and fixed rent and
additional rent shall be paid to such date. If Landlord shall exercise its
option to terminate this Lease in part in any case where Tenant desires to
sublet part of the Demised Premises, then this Lease shall expire with respect
to such part of the Demised Premises on the date that the proposed sublease was
to commence and from and after such date the fixed rent and additional rent
shall be adjusted based upon the proportion that the floor area of the Demised
Premises remaining under this Lease bears to the total floor area of the Demised
Premises and Tenant shall pay to Landlord, upon demand, the reasonable costs
incurred by Landlord in physically separating such part of the Demised Premises
from the remainder of the Demised Premises and in complying with any applicable
laws and requirements of any public authorities relating to such separation. If
Landlord shall exercise its option to sublet all or a portion of the Demised
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Premises, such sublease to Landlord, or its designee, shall be at the lower of
(i) the rate per rentable square foot of fixed rent and additional rent then
payable under this Lease or (ii) the rental set forth in the proposed sublease.
Such sublease shall be expressly subject to all of the covenants, provisions and
conditions of this Lease, except such as are inapplicable thereto, and such
sublease shall give Landlord, as subtenant, the unrestricted right to assign
such sublease or any interest therein and to sublet the space covered by such
sublease or any part thereof on any terms and conditions which Landlord may, in
its sole discretion, deem appropriate.
In the event Landlord shall fail to exercise any of said options, Landlord
agrees that it will not unreasonably withhold its consent to the proposed
assignment or subletting, and to a change in the use of the Demised Premises,
provided that such use shall be consistent with other then existing users in
Cobb West Business Park and shall comply with all zoning and other legal
requirements, and further provided that the proposed assignee or subtenant shall
not then be a tenant or occupant of Cobb West Business Park or a person, firm or
corporation with whom Landlord is then negotiating for space in Cobb West
Business Park. If Landlord shall give its consent to an assignment of this
Lease or to any subletting, Tenant in consideration thereof, shall pay to
Landlord, as additional rent, (a) in case of an assignment, an amount equal to
all moneys paid to and other consideration received by Tenant from the assignee
for or by reason of such assignment, including but not limited to, sums in
excess of the depreciated value (as shown on Tenant's federal income tax
returns) paid for the sale or rental of Tenant's fixtures, equipment, leasehold
improvements and personal property and (b) in the case of a sublease, any rents,
additional charges or other consideration payable under the sublease to Tenant
by the subtenant which is in excess of the fixed rent and additional rental
accruing during the term of the sublease in respect of the subleased space (at
the rate per square foot payable by Tenant hereunder) pursuant to the terms of
this Lease, including, but not limited to, sums in excess of the depreciated
value (as shown on Tenant's federal income tax returns) paid for the sale or
rental of Tenant's fixtures, equipment, leasehold improvements and personal
property. The
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sums payable under this paragraph shall be paid to Landlord as and when paid by
the subtenant to Tenant. The provisions of this paragraph shall apply to a
transfer (by one or more transfers) of a majority of the stock of Tenant as if
such transfer of a majority of the stock of Tenant were an assignment of this
Lease.
Any assignment or transfer by Tenant shall be made only if, and shall not
be effective until, the assignee shall execute, acknowledge and deliver to
Landlord an agreement, in form and substance satisfactory to Landlord, whereby
the assignee shall assume all of the obligations of this Lease on the part of
Tenant to be performed. Anything to the contrary notwithstanding, the original
named Tenant herein shall remain fully liable for the payment of fixed rent and
additional rent and for the performance of all other obligations on the part of
Tenant to be performed hereunder.
ARTICLE TWENTY-ONE
TENANT'S OPTION TO EXTEND
DEMISED TERM: FIRST REFUSAL RIGHT
SECTION 21.01. Provided that Tenant shall not be in default of any of
the terms or conditions of this Lease at the time such option is exercised or at
the time of the commencement of the extended term, Tenant is hereby given one
(1) option, exercisable by notice given to Landlord not later than one (1) year
prior to the expiration of the initial Demised Term, to extend the Demised Term
for one (1) single period of five (5) years commencing upon the expiration of
the initial Demised Term upon all of the same terms and conditions as shall
apply to the initial Demised Term, except as otherwise provided in this Lease
and except that there shall be no abatement of fixed rent and no "Landlord's
Work", and that the fixed rent for the extended term shall be at the then
current market rent for a term of five (5) years but in no event less than the
rate of fixed rent payable in the last month of the initial Demised Term. If
the parties are unable to agree upon the then current market rent for the
extended term at least ninety (90) days prior to the commencement of the
extended term, the issue shall be determined by arbitration in the City of
Atlanta, Georgia in accordance with the Commercial Arbitration Rules
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of the American Arbitration Association. In their determination of current
market rent, the arbitrators may consider evidence of the then current market
rent payable for comparable premises in the vicinity of Cobb West Business Park
for a term of five (5) years. The award of the arbitrators shall be binding
upon the parties and may be enforced in any court having jurisdiction.
SECTION 21.02. Provided that Tenant shall not be in default of any of
the terms or conditions of this Lease, if the premises immediately adjacent
to the Demised Premises on either side of the Demised Premises shall become
vacant and Landlord shall have received a BONA FIDE offer to lease said
premises on terms and conditions acceptable to Landlord, Landlord shall
promptly notify Tenant of the material terms and conditions of such BONA FIDE
offer. Tenant shall thereupon have the right, which Tenant must exercise, if
at all, by notice given to Landlord not later than ten (10) days after
Landlord shall have notified Tenant of the material terms and conditions of
such BONA FIDE offer, to require Landlord to enter into a lease with Tenant
for such premises on the terms and conditions set forth in the BONA FIDE
offer rather than with the person, firm, or corporation making such BONA FIDE
offer. If Tenant shall fail to notify Landlord of its exercise of such right
within said ten (10) day period, time being of the essence, Tenant shall be
deemed to have irrevocably waived its right to require Landlord to enter into
a lease with it for said premises. In such event, Landlord shall have the
right to enter into a lease for said premises with the person, firm or
corporation making such BONA FIDE offer. If Landlord shall fail to enter
into a lease for said premises with the person, firm or corporation making
such BONA FIDE offer on substantially the terms and conditions set forth in
such BONA FIDE offer within one hundred eighty (180) days following the
expiration of said ten (10) day period, Tenant's rights under this Section
with respect to said premises shall once again apply. Anything in this Lease
to the contrary notwithstanding, the provisions of this Section shall not
apply to either of the premises adjacent to the Demised Premises so long as
said premises shall be leased or occupied by the present tenant thereof or
any person, firm or corporation claiming through or under said present
tenant.
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ARTICLE TWENTY-TWO
NOTICES
SECTION 22.01. All notices, demands and requests by either party to
the other shall be in writing, and shall be sent by registered or certified
mail, postage prepaid, or by Federal Express, or by another nationally-
recognized courier service, charges prepaid, addressed as follows: if to
Landlord, to 152 West 57th Street, 24th floor, New York, NY 10019, att: Mr.
Julian A. Jadow, with a copy similarly sent to Hall, Dickler, Lawler, Kent, &
Friedman, 909 Third Avenue, New York, NY 10022, att: Kenneth S. Oltarsh, Esq.,
and if to Tenant, to 1371 Angelina Drive, Austell, Georgia 30001, att: Mr.
Robert D. Oliver, Vice President/Operations, with a copy similarly sent to
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, 233 East Redwood Street,
Baltimore, MD 21202, att: Zelig Robinson, Esq. Either party by like notice to
the other may designate another or additional address to which notices, demands
and requests shall thereafter be sent. Any notice, demand or request which
shall be served upon Landlord or Tenant in the manner aforesaid shall be deemed
to have been served or given for all purposes hereunder at the time such notice,
demand or request shall be mailed by United States registered or certified mail
as aforesaid, in any post office or branch post office regularly maintained by
the United States Postal Service or at the time of delivery if sent by Federal
Express or another nationally-recognized courier service.
ARTICLE TWENTY-THREE
INVALIDITY OF PARTICULAR PROVISIONS
SECTION 23.01. If any term or provision of this Lease or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those as to which it is
invalid or
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unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
ARTICLE TWENTY-FOUR
CUMULATIVE REMEDIES: WAIVER OR CHANGE
SECTION 24.01. Every term, condition, agreement or provision contained in
this Lease shall be deemed to be also a covenant and every covenant a condition.
SECTION 24.02. The specified remedies to which either party may resort
under the terms of this Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which such party may be
lawfully entitled in case of any breach or threatened breach by the other party
of any provision of this Lease.
SECTION 24.03. The failure of either party to insist in any one or more
instances upon the strict performance of any of the terms, covenants,
conditions, provisions or agreements of this Lease or to exercise any option
herein contained shall not be construed as a waiver or a relinquishment for the
future of any such term, covenant, condition, provision, agreement or option. A
receipt and acceptance by Landlord of rent or any other payment, or the payment
of rent or any other payment by Tenant, or the acceptance of performance of
anything required by this Lease to be performed, with knowledge of the breach of
any term, covenant, condition, provision or agreement of this Lease, shall not
be deemed a waiver of such breach, nor shall any such acceptance or payment of
rent in an amount other than is herein provided for (regardless of any
endorsement on any check or any statement in any letter accompanying any payment
of rent) operate or be construed either as an accord and satisfaction or in any
manner other than as a payment on account of the earliest rent then unpaid by
Tenant, and no waiver by either party of any term, covenant, condition,
provision or agreement of this Lease shall be deemed to have been made unless
expressed in writing and signed by such party.
SECTION 24.04. In addition to the other remedies in this Lease provided,
each party shall be entitled to restraint by injunction of any violation or
attempted
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or threatened violation of any of the terms, covenants, provisions or agreements
of this Lease.
SECTION 24.05. Each party shall be excused from performing any
obligation under this Lease and any delay in the performance of any
obligation under this Lease shall be excused if and so long as the
performance of the obligation is prevented, delayed or otherwise hindered by
Acts of God, fire, earthquake, floods, explosion, actions of the elements,
war, riots, inability to procure or a general shortage of labor, equipment,
facilities, materials or supplies in the open market, strikes, lockouts,
laws, regulations, orders, actions or inaction of governmental authorities or
any other cause, whether similar or dissimilar to the foregoing and not
within the control of such party, other than lack of or inability to procure
funds or financing.
SECTION 24.06. This Lease may not be changed orally, but only by
agreement in writing signed by the party against whom enforcement of the
change, modification or discharge is sought.
ARTICLE TWENTY-FIVE
SECURITY DEPOSIT
SECTION 25.01. Upon the execution of this Lease, Tenant shall deposit
with Landlord the sum of eight thousand one hundred forty-seven and 90/100
dollars ($8,147.90) as security for the full and faithful performance and
observance by Tenant of Tenant's covenants and obligation, under this Lease.
Landlord shall deposit said sum in an interest bearing account and the interest
earned thereon, less one percent (1%) of said sum per annum which shall be paid
over to Landlord as an administrative fee, shall be paid over annually to Tenant
at Tenant's request, provided that Tenant is not in default of its obligations
under this Lease. If Tenant shall be in default of its obligations under this
Lease, retained interest shall be added to the security deposit and shall be
deemed to be part of the security for all purposes. If Tenant defaults in
prompt payment and performance of any of Tenant's covenants and obligations
under this Lease, including, but not limited to, the payment of rent and
additional rent, Landlord may use, apply or retain the whole or
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any part of the security so deposited to the extent required for the payment of
any rent and additional rent or any other sum to which Tenant is in default or
for any sum which Landlord may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, covenants and conditions of
this Lease, including but not limited to, any damages or deficiency in the
reletting of the Demised Premises, whether such damages or deficiency accrue
before or after summary proceedings or other reentry by Landlord. If Landlord
shall so use, apply or retain the whole or any part of the security, Tenant
shall upon demand immediately deposit with Landlord a sum equal to the amount so
used, applied or retained, as security as aforesaid. The security deposited
hereunder shall be refunded to Tenant, without interest, promptly after the
expiration or termination of this Lease and after delivery to Landlord of the
entire possession of the Demised Premises. Tenant further covenants that it
will not assign or encumber or attempt to assign or encumber the monies
deposited herein as security and that neither Landlord nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance.
ARTICLE TWENTY-SIX
MISCELLANEOUS
SECTION 26.01. The terms, conditions, covenants, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
Landlord, its successors and assigns, and shall be binding upon and inure to the
benefit of Tenant, its successors and permitted assigns.
SECTION 26.02. Tenant warrants and represents to Landlord that it has
dealt with no brokers other than The Galbreath Company and King Industrial
Realty, Inc. of Atlanta, Georgia, in connection with this Lease, and Tenant does
hereby agree to indemnify and save Landlord harmless of and from any damage,
loss, liability or expense, including reasonable attorneys' fees, arising from
any claim for brokerage commissions by any other party purporting to have dealt
with Tenant in connection with this transaction. Landlord warrants and
represents to Tenant it
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has dealt with no other brokers in connection with this Lease. In reliance
upon Tenant's warranty, Landlord agrees to pay a commission to said brokers
pursuant to a separate agreement.
SECTION 26.03. If requested by a prospective first mortgagee of
Landlord's interest in the Demised Premises, Tenant agrees to make such
changes in the Lease as such prospective mortgagee shall request, provided
that no such change shall materially and adversely increase the obligations
of Tenant hereunder or materially and adversely limit or restrict the rights
or remedies of Tenant hereunder. A change in the rent or in the Demised Term
shall be deemed to materially and adversely increase the obligations of
Tenant hereunder.
SECTION 26.04. This Lease shall be construed and enforced in accordance
with the laws of the State of Georgia.
SECTION 26.05. This Lease sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof. Any
and all prior discussions, negotiations, understandings and agreements are
hereby merged herein.
SECTION 26.06. The captions and headings throughout this Lease are for
convenience and reference only, and the words contained therein shall in no way
be held or deemed to define, limit, describe, explain, modify, amplify or add to
the interpretation, construction or meaning of any provisions of or the scope or
intent of this Lease nor in any way affect this Lease.
SECTION 26.07. Anything in this Lease to the contrary notwithstanding,
if Landlord shall be in breach of any term, covenant, provision or agreement
of this Lease on Landlord's part to be performed and if, as a consequence of
such breach, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds of sale received on the
execution of such judgment levied against the right, title and interest of
Landlord in Cobb West Business Park and out of the rents or other income from
Cobb West Business Park receivable by Landlord and Landlord shall not
otherwise be personally liable for such judgment
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and no other assets of Landlord shall be levied upon or attachable by reason of
any such judgment.
SECTION 26.08. Anything in this Lease to the contrary notwithstanding,
Tenant may not place, affix or attach any sign to the exterior of the Building
or place, affix or attach any sign outside of the Building or install any sign
in the interior of the Building which shall be visible from the exterior of the
Building except such signs as shall strictly comply with the provisions of
Exhibit C, attached hereto and made a part hereof.
SECTION 26.09. Each party warrants and represents to the other that
the execution, delivery and performance of this Lease has been duly authorized
and approved and constitutes the legal, valid and binding obligation of such
party enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Lease
as of the day and year first above written.
JADOW REALTY COMPANY, L.P.
By: JADOW PROPERTIES, INC.
By: /s/ JULIAN A. JADOW
----------------------------
Landlord
NATIONAL FIBERSTOK CORPORATION
By: /s/ ROBERT D. OLIVER
----------------------------
Tenant
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GUARANTY
In order to induce Jadow Realty Company, L.P. ("Landlord") to enter
into the foregoing Lease, dated , 1994 (the "Lease"), with National
Fiberstok Corporation ("Tenant"), the undersigned DEC International, Inc., a
corporation, hereby unconditionally guarantees to Landlord, its successors
and assigns, the full performance by Tenant of all of the covenants, terms,
agreements, conditions, and undertakings to be performed and observed by
Tenant in the Lease (including, without limitation, the timely payment by
Tenant of the rent and other charges due thereunder), during the Demised Term
and any renewal thereof, the undersigned expressly waiving any notice to the
undersigned of nonperformance and expressly agreeing that the validity of
this Guaranty and the obligations of the undersigned shall in no way be
terminated, affected or impaired by reason of the assertion or nonassertion
by Landlord against Tenant of any of the rights or remedies available to or
reserved by Landlord or by reason of any indulgences granted to Tenant by
Landlord. The undersigned further agrees that this Guaranty shall remain in
full force and effect as to any modification or amendment of the Lease. The
validity of this Guaranty and the liability of the undersigned hereunder
shall in no way be terminated, affected or impaired by the release or
discharge of Tenant in any bankruptcy or other proceeding, the rejection or
disaffirmance of the Lease in any such proceeding or any disability of
Tenant, or any other relief of Tenant from any of Tenant's obligations under
the Lease by operation of law; the undersigned hereby waiving all suretyship
defenses.
The undersigned further agrees that its liability under this
Guaranty shall be primary and that in any right of action which shall accrue
to Landlord under said Lease, Landlord may, at its option, proceed against
the undersigned and Tenant, jointly or severally, and may proceed against the
undersigned without having commenced any action against or having obtained
any judgment against Tenant. The undersigned further represents to Landlord,
as an inducement for it to
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enter into the Lease, that the undersigned is the owner of all of the
outstanding capital stock of Tenant, that the execution and delivery of this
Guaranty is not in contravention of its certificate of incorporation or by-laws
or of applicable state laws, and has been duly authorized by its Board of
Directors.
It is agreed that the failure of Landlord to insist in any one or more
instances upon the strict performance or observance of any of the terms,
provisions or covenants of the Lease or to exercise any right therein contained
shall not be construed or deemed to be a waiver or relinquishment for the future
of such term, provision, covenant or right, but the same shall continue and
remain in full force and effect. Receipt by Landlord of rent with knowledge of
the breach of any provision of the Lease shall not be deemed a waiver of such
breach.
No subletting, assignment or other transfer of the Lease, or any
interest therein, shall operate to extinguish or diminish the liability of the
undersigned under this Guaranty.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of Landlord, its successors and assigns, and shall be
binding upon the undersigned, its successors and assigns.
IN WITNESS WHEREOF, the undersigned guarantor has caused this Guaranty
to be executed in its corporate name by its duly authorized representative, and
its corporate seal to be affixed hereto this 10 day of May, 1994.
ATTEST: DEC INTERNATIONAL, INC., a
corporation
By:
/s/ /s/
-------------------- ----------------------
Its: ASST. SECRETARY Its: PRESIDENT
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Exhibit 10.11
OFFICE BUILDING LEASE
THIS LEASE, made this 20th day of June 1995, by and between Peachtree
Dunwoody Partners, L.P., a Georgia Partnership (hereinafter called "Landlord"),
and DEC International, Inc., a Delaware Corporation (hereinafter called
"Tenant").
FOR AND IN CONSIDERATION of the mutual covenants and conditions contained
herein, the parties hereto do hereby agree as follows:
1. PREMISES
Tenant desires to lease from Landlord approximately 4,346 rentable square
feet in Suite 150 as outlined by the floor plan, Exhibit "A", (hereinafter
referred to as the "Premises") in the Building known as Building C, 5775
Peachtree Dunwoody Road, Atlanta, GA 30342 as such Building is more fully and
particularly described in Exhibit "B"; such exhibits attached hereto are
incorporated herein by reference.
2. TERM
The term of this Lease (hereinafter called "Term") shall be five (5) years
and no (0) months commencing on August 1, 1995 (hereinafter called "Commencement
Date"), and expiring at 11:59 p.m. on July 31, 2000, except as otherwise
provided herein.
3. BASE RENTAL
Tenant agrees to pay Landlord a Base Rental as follows:
Monthly Annually
------- --------
August 1, 1995 to July 31, 1996 $5,523.04 $66,276.48
August 1, 1996 to July 31, 1997 $5,688.73 $68,264.76
August 1, 1997 to July 31, 1998 $5,859.39 $70,312.68
August 1, 1998 to July 31, 1999 $6,035.17 $72,422.04
August 1, 1999 to July 31, 2000 $6,216.23 $74,594.76
Each monthly installment shall be due and payable promptly on the first day
of each month, in advance and without offset, deduction or prior demand, during
the Term of this Lease. Monthly installments of Base Rent shall be payable to
Peachtree Dunwoody Partners, L.P., c/o TMW Real Estate Management Inc., 5775
Peachtree Dunwoody Road, Suite 470-C, Atlanta, GA 30342.
In the event Tenant shall fail to pay monthly installments within five (5)
days of the due date, a late charge of five percent (5%) of the monthly Base
Rental, with a minimum of twenty dollars ($20.00) per month, shall be added to
the Base Rental and paid to Landlord for each such late payment and the same
shall be treated as additional rent. Should Tenant present a check to Landlord
that is returned from Tenant's bank for any reason, Landlord reserves the right
to ask for payment in the form of certified funds. Tenant agrees to pay Landlord
interest at a rate of twelve percent (12%) per annum (or the maximum rate
permitted by applicable law, whichever is less) on all Base Rental, additional
rental or other sums due hereunder that are not paid when such amounts are due
and payable.
1
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[text struck out]
2
<PAGE>
[text struck out]
4. SECURITY DEPOSIT
Prior to occupancy, Tenant shall pay to Landlord, as a security deposit,
the amount of Five Thousand Five Hundred Twenty Three and 04/100 Dollars
($5,523.04) (the "Security Deposit"). The Security Deposit is refundable to
Tenant within thirty (30) days following satisfactory completion of all of the
terms of the Lease and provided that no defective conditions, other than normal
wear and tear, are left not repaired by Tenant, and the Tenant is not otherwise
in default under this Lease. Landlord may, but shall not be required to, apply
all or a portion of the Security Deposit toward sums due to Landlord by Tenant
hereunder and/or in order to make any repairs to the Premises required to be
made by Tenant hereunder, and any portion of this Security Deposit used by
Landlord for such purposes shall be restored by Tenant within fifteen (15) days
after written demand therefor from Landlord. Any portion of the Security
Deposit not required to reimburse Landlord for Landlord's expense in repairing
defective conditions caused by Tenant or for paying amounts owed by Tenant to
Landlord, shall be refunded to the Tenant as provided above. Tenant shall not be
entitled to any interest that may accrue on Security Deposit during the Term of
this Lease.
5. DELIVERY OF PREMISES TO TENANT BY LANDLORD
Landlord agrees to cause the Premises to be completed in accordance with
the plans, specifications and agreement approved by both parties and attached
hereto as Exhibit "A" and made a part of this Lease ("Landlord's Work").
Landlord's Work required hereunder shall be completed at the cost and expense
of Landlord unless otherwise specified herein. Landlord's Work shall be done
with such minor variations as Landlord may deem advisable, so long as such
variations do not materially interfere with Tenant's intended use of the
Premises. "Substantial Completion" of the Premises, as used herein, shall
occur when Landlord certifies in writing to Tenant that Landlord's Work
required hereunder has been completed and the Premises are ready for
occupancy, except for minor "punch list" or similar corrective work to be
completed within a reasonable period of time by Landlord, and except for any
work to be performed by Tenant. Other than for Landlord's Work, Landlord
shall have no obligation for the completion of the Premises.
Neither Landlord nor Landlord's agents have made any representations,
warranties or promises with respect to the physical condition of the Building,
the land upon which it is erected or the Premises, or any matter or thing
affecting or related to the Premises except as herein expressly set forth.
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The "Commencement Date" of this Lease shall be the later of Substantial
Completion (as that term is defined herein) of the Premises or the Scheduled
Commencement Date (as that term is defined in Section 2). Promptly following
the Commencement Date, Landlord and Tenant shall execute an agreement (the
"Agreement") acknowledging that Tenant has accepted possession and reciting
the exact Commencement Date and Termination Date of the Lease. The Tenant,
by taking possession of the Premises, shall be deemed to have agreed that the
Premises are then in a satisfactory order, repair and condition, except as
set forth on a list prepared by Landlord and Tenant prior to occupancy, and
Tenant shall provide Landlord, upon request, a written acknowledgment of
acceptance. If Tenant, for whatever reason, occupies the Premises prior to
the Commencement Date, then all terms and conditions of this Lease shall
apply to such occupancy, with the exception of Tenant's obligation to pay
rental, which unless otherwise agreed to in writing by Landlord and Tenant,
shall not commence until the Commencement Date. If Landlord, for any reason
whatsoever, fails to deliver possession of Premises to Tenant on or before
the Scheduled Commencement Date, this Lease shall not be void or voidable nor
shall Landlord be liable to Tenant for any loss or damage resulting
therefrom. Should the actual Commencement Date be later than the Scheduled
Commencement Date, the Termination Date shall be extended by the same period
as the Commencement Date is extended past the Scheduled Commencement Date,
provided however, that if the Commencement Date shall occur on a date other
than the first day of a month, rent for such month shall be prorated and the
Termination Date shall occur on the last day of the calendar month in which
the fifth anniversary of the Commencement Date occurs. The failure by either
party, or both parties, to execute the Agreement shall not affect the rights
or obligations of either party hereunder. Such Agreement, when so executed
and delivered, shall be deemed to be apart of this Lease. "Substantial
Completion" shall mean that date after which Landlord has completed
Landlord's work at the Premises. Substantial Completion shall be deemed to
have occurred notwithstanding a requirement to complete "punch list" or
similar corrective work and notwithstanding that any work that is the
responsibility of the Tenant may not be completed or operable.
6. USE OF PREMISES
Tenant shall use the Premises only for business or professional office
purposes and shall not use the Premises for any illegal purpose, or violate any
statute, regulation, rule, or order of any governmental body, or create or allow
to exist any nuisance, or trespass, or do any act in or about the Premises, or
bring anything onto or in the Premises or the building containing same which
will in any way increase the rate of insurance on the Premises or said building,
deface or injure the Premises or such building, or overload the floor of the
Premises. Tenant shall fully comply, at Tenant's sole expense, with the
provisions of any and all local, state and Federal statutes, regulations, rules
or orders, including any provisions of the Americans with Disabilities Act.
In the event that local, state or Federal government by legislative,
administrative or judicial action shall in any legally enforceable manner by
ordinance, act, statute, order, mandate, rule, regulation or otherwise require
during the Term, any alteration of or improvement to any portion of the
Premises, the Tenant shall comply fully with any such action and all such
alterations shall be at the sole expense of the Tenant, and all such alterations
shall become the property of Landlord and be surrendered with the Premises upon
expiration of this Lease.
7. REPAIRS BY TENANT
Tenant, during the Term of this Lease or any extension or renewal of this
Lease, shall, at its sole cost and expense, make all repairs as shall be
reasonably necessary to keep the Premises in good condition and repair, normal
wear excepted. Tenant further agrees that all damage or injury of whatever
nature done to the Premises by the Tenant or by any person in or upon the
Premises except the Landlord, Landlord's agents, servants and employees, shall
be repaired by Tenant at its sole cost and expense.
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8. IMPROVEMENTS, REPAIRS BY LANDLORD
Landlord shall maintain the structural portions of the building,
including the basic plumbing, air conditioning, heating and electrical
systems installed in accordance with similar buildings in Atlanta, Georgia,
but taking into consideration the age of the building, unless the condition
requiring such maintenance is caused in part or in whole by the act, neglect,
fault or omission of any duty by Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay Landlord the reasonable cost of such
maintenance or repairs.
Except as provided herein, throughout the Term of this Lease or any renewal
thereof, Landlord shall not otherwise be required to make any repairs or
improvements to Premises, except repairs necessary for safety and tenantability
and customary office building maintenance.
9. LANDLORD'S RIGHT TO ENTER PREMISES
Landlord shall retain duplicate keys to all doors of the Premises. Tenant
shall not change the locks on any entrance to the Premises. Upon Tenant's
written request to Landlord, Landlord shall make a reasonable change of locks on
behalf of Tenant at Tenant's sole cost and expense. Landlord and its agents,
employees and independent contractors shall have the right to enter the premises
at reasonable hours to make repairs, additions, alterations and improvements
that are required by this Lease or are otherwise performed with Tenant's prior
written consent, to exhibit the Premises to prospective purchasers, lenders or
tenants but Landlord may enter to exhibit the Premises to prospective tenants
only during the last twelve (12) months of the Term or following any event of
default for as long as such event of default remains uncured, and to inspect the
Premises to ascertain that Tenant is complying with all of its covenants and
obligations hereunder. Landlord shall also have the right to enter the Premises
at reasonable hours to install, maintain, repair and replace pipes, wires,
cables, duct work, conduit and utility lines through hung ceiling space and
column space within the Premises. Landlord agrees to use reasonable efforts to
minimize any interference with Tenant's business caused by such entry. Landlord
shall, except in case of emergency, afford Tenant such prior notification of an
entry into the Premises as shall be reasonably practicable under the
circumstances, for the purpose of exhibiting the Premises to a prospective
purchaser or tenant. During such time as such work is being carried on in or
about the Premises, payments provided herein shall not abate and Tenant waives
any claim or cause of action against Landlord for damages by reason of
interruption of Tenant's business or loss of profits therefrom because of the
prosecution of any such work or any party hereof.
10. ALTERATIONS
Tenant shall make no alterations or other improvements to the Premises
without Landlord's prior written consent. Unless otherwise agreed, all such
approved alterations and other improvements shall be made by Landlord at
Tenant's sole expense and shall become the property of Landlord and be
surrendered with the Premises upon the expiration of this Lease.
Landlord may, at Landlord's option, require Tenant to remove any or all
such alterations, improvements, decorations and furnishings and repair any
damage to the Premises resulting from such alterations.
In the event that local, state or Federal government by legislative,
administrative or judicial action shall in any legally enforceable manner by
ordinance, act, statute, order, mandate, rule, regulation or otherwise, require
during the Term, any alteration of, or improvement to any portion of the
building in which the Premises are located, excluding the Premises, determined
by Landlord's Independent Accountants to be capital in nature based upon the
application of generally accepted accounting principles ("Mandated
Alterations"), then the annual rent per square foot shall be increased as
follows:
(a) Landlord's Independent Accountants shall amortize the cost of the
Mandated Alterations over a period of not less than five (5) years in
accordance with generally accepted accounting standards and allocate
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the annual amortization of the cost to the net rentable area of the
building in terms of annual cost per square foot of rentable area (the
"Amortized Annual Cost").
(b) A portion of the Amortized Annual Cost shall be allocated to the
Tenant based upon the proportion that the number of square feet of
rentable area of the Premises bears to the number of square feet of
rentable area of the building.
(c) Effective on the first day of the month following notice from Landlord
of the computation of the Amortized Annual Cost of the Mandated
Alterations, the Base Rental above shall be increased by the Amortized
Annual Cost, but not to exceed thirty cents ($0.30) per square foot
multiplied by the rentable area of the Premises. The base monthly rent
shall be increased by one-twelfth of such amount.
Notwithstanding the foregoing, Tenant shall not be obligated to contribute
to the cost of any Mandated Alteration unless such Mandated Alteration is the
result of the adoption of a new or changed ordinance, act,statute, order,
mandate, rule or regulation or interpretation thereof not existing on the
commencement date of this lease.
11. RELOCATION
Upon ninety (90) days' written notice to Tenant, Landlord may substitute
for the leased Premises other Premises in the building (the "New Premises") in
which event the New Premise shall be deemed to be the leased Premises for all
purposes hereunder, provided:
(a) The New Premises shall be similar in area and appropriateness for
Tenant's purposes.
(b) Landlord shall, at Landlord's sole expense, conform the leasehold
improvements in the New Premises as closely as practicable to the improvements
then existing in the Premises.
(c) Landlord shall reimburse Tenant for all out-of-pocket expenses
directly resulting from such relocation, including reasonable moving expenses,
but in no event shall Landlord be responsible for any interruption in Tenant's
business caused by such relocation.
(d) Within thirty (30) days of Landlord's request, Tenant shall execute an
amendment to this Lease documenting the substitution of the New Premises under
this Lease.
12. SERVICES TO TENANT
Landlord reasonably agrees to provide Tenant, as Landlord reasonably deems
necessary, subject to limitations contained in any governmental controls now or
hereafter imposed or matters beyond Landlord's control and subject to cessation
for reasonable necessity, the following services:
(a) Heating and air-conditioning service daily on Monday through Friday,
inclusive, except for holidays observed by national banks as legal holidays,
from 8:00 a.m. to 6:00 p.m., and on Saturdays, if not a holiday, from 8:00 a.m.
to 1:00 p.m.
(b) Electric current for building, standard tenant lighting and small
business machinery only from electric circuits designated by Landlord for
Tenant's use. Tenant will not use any electrical equipment which in Landlord's
opinion will overload the wiring installations or interfere with the reasonable
use thereof by other users in the building. Tenant will not, without Landlord's
prior written consent in each instance, connect any items such as non-building
standard tenant lighting, vending equipment, printing or duplicating machines,
computers (other than desktop work processors, personal computers and photocopy
equipment not requiring dedicated or special
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circuitry), auxiliary air conditioners, and other computer-related equipment
to the electrical system of the Premises, or make any alteration or addition
to the system. If any additional circuitry or wiring is required by Tenant,
and Landlord approves the installation of the same in writing, such work
shall be performed at Tenant's expense by Landlord's electrician or under
Landlord's control and supervision, and Tenant shall pay Landlord for such
additional work as billed. In the event the Tenant utilizes electric current
or other utilities in excess of the amount which would be typically utilized
by normal business office use of the Premises, then Landlord shall have the
right to charge Tenant as additional rent a reasonable sum as reimbursement
for the direct cost of such additional use or services. In the event of a
disagreement as to the reasonableness of the amount of such additional rent,
the opinion of a qualified, local and independent professional engineer
selected by Landlord in good faith shall be binding upon Landlord and Tenant.
Payments for such additional electrical power shall be deemed additional rent
due from Tenant.
(c) General cleaning and janitorial service five times per week.
(d) Reasonable quantities of water to lavatories, toilets and water
fountains in or appurtenant to the Premises.
13. LIABILITY OF LANDLORD
Excepting for the willful misconduct or gross negligence of Landlord, its
agents and employees, Landlord shall not be liable to Tenant in any manner
whatsoever for failure or delay in furnishing any service provided for in this
Lease, and no such failure or delay to furnish any service or services by
Landlord shall be an actual or constructive eviction of Tenant nor shall any
such event operate to relieve Tenant from the prompt and punctual performance of
each and all the covenants to be performed herein by Tenant; nor shall Landlord
be liable to Tenant for damage to person or property caused by defects in the
cooling, heating, electric, water, elevator or other apparatus or systems or by
water discharged from sprinkler systems, if any, in the Building; nor shall
Landlord be liable to Tenant for the theft, or loss of any property of Tenant
whether from the Premises or any part of the Building or property adjoining the
Building containing the Premises. Landlord agrees to make reasonable efforts to
protect Tenant from interference or disturbance of third persons including other
tenants, however, Landlord shall not be liable for any such interference or
disturbance whether caused by another tenant or tenants or Landlord or other
person, nor shall Tenant be relieved from any obligation herein because of such
interference, disturbance or breach.
14. DEFAULT
The occurrence of any of the following shall constitute an event of
default hereunder by Tenant:
(a) The Base Rent payable under this Lease (including any Additional Rent)
or any sum of money due hereunder is not paid when due, and such failure to pay
continues for more than five (5) days after Tenant's receipt of notice thereof
from Landlord. Provided, however, that Landlord shall not be required to provide
Tenant with the notice and five-day period set forth in this subparagraph more
than three (3) times during the Term of this Lease, and the fourth and each
subsequent failure to timely pay such sums shall immediately constitute an event
of default hereunder.
(b) The Premises are deserted, vacated or not used as regularly or
consistently as would normally be expected for similar premises put to the same
or similar purposes as set forth herein, even though the Tenant continues to pay
the stipulated Base Rent, and such condition is not corrected within ten (10)
days of Tenant's receipt of notice thereof from Landlord to Tenant. Provided,
however, that Landlord shall not be required to provide Tenant with the notice
and ten-day period set forth in this subparagraph more than once during the Term
of this Lease, and the second, and each subsequent, occurrence of such condition
shall immediately constitute an event of default hereunder.
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(c) Tenant or any guarantor of this Lease files any petition for debt
relief under any section or chapter of the national or federal bankruptcy code
or any other applicable federal or state bankruptcy, insolvency or other similar
act.
(d) Any petition is filed against Tenant under any section or chapter of
the national or federal bankruptcy code or any other applicable federal or state
bankruptcy, insolvency or other similar act,and such petition is not dismissed
within sixty (60) days after the date of such filing.
(e) Tenant or any guarantor of this Lease shall become insolvent or
transfer property to defraud creditors or there shall be a material adverse
change in the net worth or credit rating of Tenant or such guarantor.
(f) Tenant makes material misrepresentations to Landlord prior to or
contemporaneously with the execution of this Lease.
(g) Tenant or any guarantor of this Lease shall make an assignment for the
benefit of creditors.
(h) A receiver is appointed for any of the assets of Tenant or any
guarantor of the Lease, and such receiver is not removed within sixty (60) days
of Tenant's receipt of notice from Landlord to obtain such removal.
(i) A lien is filed against the Premises or Landlord's estate therein by
reason of any work, labor, services or materials performed or furnished, or
alleged to have been performed or furnished, to Tenant or anyone holding the
Premises by, through or under Tenant, and Tenant fails to cause the same to be
vacated and canceled of record, or bonded off in accord with the provisions of
this Lease, within twenty (20) days after the filing date thereof.
(j) Tenant fails to observe, perform and keep each and every of the
covenants, agreements, provisions, stipulations and conditions contained in
this Lease to be observed, performed and kept by Tenant, including without
limitation the "Rules and Regulations" for the project of which the Premises
is a part, and unless otherwise specified herein, Tenant persists in such
failure for twenty (20) days after receipt of notice by Landlord requiring
that Tenant correct such failure; provided, that in the event any such
failure is not reasonably susceptible of cure within such thirty (30)-day
period, Tenant shall have a reasonable time to cure such failure provided
Tenant commences cure as soon as is reasonably possible and prosecutes such
cure diligently to completion.
15. REMEDIES
Upon the occurrence of any material default by Tenant, Landlord shall have
the option to do and perform any one or more of the following:
(a) TERMINATION OF LEASE - Terminate this Lease, in which event Tenant
shall immediately surrender the Premises to Landlord. If Tenant shall fail to do
so, Landlord may, without notice and prejudice to any other remedy available,
enter and take possession of the Premises and remove Tenant or anyone occupying
the Premises and its effects without being liable to prosecution or any claim
for damages. In the event of termination of this Lease, Tenant shall be
responsible to Landlord for (i) all payments due under this Lease prior to the
date of termination, (ii) all costs incurred by Landlord in connection with such
termination, and (iii) the entire amount of Base Rent, Additional Rent and other
charges due hereunder for the remainder of the Term less the then fair market
rental value of the Premises for the remainder of the Term, with such difference
discounted to its present value by using a discount factor of 6%. Such amount
shall be paid by Tenant to Landlord immediately upon demand by Landlord and
shall constitute liquidated damages and not a penalty or forfeiture (Tenant and
Landlord agree that the actual damages are impossible to ascertain and that the
amount described above is a reasonable estimate thereof). If Landlord elects to
terminate this Lease, Tenant's liability to Landlord for damages shall survive
such termination.
(b) Landlord may correct such default and Tenant shall reimburse Landlord
upon demand for the cost incurred by Tenant in curing such default.
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(c) RELETTING OF PREMISES. Enter upon and take possession of the Premises
as agent of Tenant without terminating (termination shall only occur by written
notice of termination from Landlord to Tenant) this Lease and without being
liable to prosecution or any claim for damages. Landlord may relet the Premises
and in that connection may make any suitable alterations or refurbish the
Premises, or both, or change the character or use of the Premises, but Landlord
shall not be required to relet for any use or purpose other than that specified
in this Lease or which Landlord may reasonably consider injurious to the
Premises, or to any Tenant which Landlord may consider objectionable. Landlord
may relet all or any portion of the Premises, alone or in conjunction with other
portions of the Building, for a term longer or shorter than the Term of this
Lease, at a rental rate provided in this Lease, and upon such other terms
(including the granting of concessions) as Landlord solely determines to be
acceptable. If Landlord elects to reenter and relet all or any portion of the
Premises, Landlord shall apply the rent so collected as follows:
(1) first, to any amount due hereunder other than Base Rent and Additional
Rent;
(2) second, to the payment of costs and expenses of such reletting;
(3) third, to the payment of Rent and Additional Rent;
(4) fourth, the residue shall be held and applied to future Base Rent and
Additional Rent due hereunder and if any such excess exists at the
termination of this Lease it shall be paid over to Tenant.
No such reentry or taking possession of the Premises shall be construed as
an election on Landlord's part to terminate this Lease unless a written notice
of such intention be given to Tenant. Landlord, however, shall have no duty to
relet the Premises and Landlord's failure to do so shall not release Tenant's
liability for rent or damages. Landlord shall have the right to rent any other
available space in the building before reletting or attempting to relet the
Premises.
(d) Upon such event of default, and notwithstanding any provision to the
contrary, Tenant acknowledges that it shall become liable for any costs incurred
by Landlord under this lease for the completion of any improvements to the
Premises, and any real estate commissions paid by Landlord under this lease.
16. CUMULATIVE REMEDIES
The above-stated remedies of Landlord shall be deemed to be in addition to,
and not in lieu of, any other rights and remedies provided Landlord either at
law or in equity. No delay in enforcing the provisions of the Lease shall be
deemed to constitute a waiver of such default by Landlord, and the pursuit by
Landlord of one or more remedies shall not be deemed to constitute an election
against other remedies.
17. EFFECT OF TERMINATION OF LEASE
No termination of this Lease prior to the normal ending thereof by lapse of
time or otherwise shall affect Landlord's right to collect sums due hereunder
for the period prior to termination thereof.
18. ASSIGNMENT AND SUBLETTING
Tenant may not, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, assign this Lease or any interest
hereunder, or sublet Premises or any part thereof, or permit the use of Premises
by any party other than Tenant or an entity which owns, its owned by, or is
under common ownership with Tenant. In the event Tenant wishes to sublease the
Premises or assign the Lease, Landlord has the right, but not the
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obligation, to terminate the Lease effective as of the date Tenant vacates the
Premises. Should Landlord elect to terminate the Lease, Tenant shall be relieved
of any liability or obligation to pay rent beyond the date of termination.
Consent to one assignment or sublease shall not destroy or waive this provision,
and all later assignments and subleases shall likewise be made only upon prior
written consent of Landlord. Subtenants or assignees shall become liable
directly to Landlord for all obligations of Tenant hereunder, without relieving
Tenant's liability.
In making Landlord's determination to approve or disapprove a proposed
assignment or sublease hereunder, Landlord and Tenant agree that Landlord may
withhold its consent to any proposed assignment or sublease, and such
withholding of consent by Landlord will not be deemed to be unreasonable, (1)
if the proposed assignee or subtenant is not a reputable party or is a party
who would (or whose use would) detract from the character of the building,
such as, without limitation, a dental, medical or chiropractic office or a
governmental office, or (2) if the proposed assignee or subtenant shall be
engaged in a business in the Premises which is not consistent with the then
standards of the building or is not permitted by or would contravene the
provisions of this Lease, or (3) if the lease or use of the Premises or any
portion thereof by such subtenant or assignee will cause Landlord to be in
violation of any restrictive use covenants granted by Landlord to any other
tenant in the building in such tenant's lease, or (4) if, in the case of a
proposed assignment or sublease the proposed assignee is not of sufficient
financial worth to perform its obligations under this Lease as such
obligations become due; provided, however, it is understood and agreed that
the reasons outlined above in this sentence are not intended, and shall not
be construed, to be an exclusive list of reasonable basis upon which Landlord
may withhold its consent and Landlord reserves the right to disapprove of a
proposed assignment or sublease by virtue of such other reasonable bases.
Upon execution of any sublease or assignment approved by Landlord under
this article, a fully-executed counterpart of the sublease or assignment shall
be promptly delivered to Landlord by Tenant.
A change, whether voluntary, involuntary or by operation of law, or a
merger, consolidation or other reorganization of more than a 49% ownership in
Tenant shall be deemed a voluntary assignment of this Lease and subject to
the provisions of this article.
19. DESTRUCTION OR DAMAGE TO PREMISES
If the Premises are totally destroyed (or so substantially damaged as to be
untenantable) by storm, fire, earthquake or other casualty not caused by the act
or failure to act of Tenant, and the Premises cannot in the judgment of Landlord
be restored by the Landlord within 120 days, this Lease shall terminate as of
that date. If the Premises are damaged but not rendered wholly untenantable by
any such casualty, rental shall abate in proportion as the Premises have been
damaged and Landlord shall at Landlord's option (i) restore the Premises as
speedily as practicable to substantially the same condition as existed
immediately preceding such casualty, whereupon full rent shall recommence, or
(ii) notify Tenant within thirty (30) days that this Lease is terminated.
20. REMOVAL OF FIXTURES
Tenant may (if not in default hereunder) prior to the expiration of this
Lease, or any extension thereof, remove all unattached and movable personal
property and equipment which Tenant has placed in the Premises, provided Tenant
repairs all damages to Premises caused by such removal. All personal property of
Tenant remaining on the Premises after the end of the Term shall be deemed
conclusively abandoned, notwithstanding that title to or a security interest in
such personal property may be held by an individual or entity other than Tenant,
and Landlord may dispose of such personal property in any manner it deems
proper, in its sole discretion. Tenant hereby waives and releases any claim
against Landlord arising out of the removal or disposition of such personal
property. Tenant shall reimburse Landlord for the cost of removing such personal
property.
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[text struck out]
22. AGENCY DISCLOSURE AND LEASING BROKER/AGENT'S COMMISSION
TMW Realty, Inc. represented the Landlord (TMW Realty, Inc. is herein
referred to as "Broker") in this transaction and will be compensated by the
Landlord by separate agreement.
Landlord and Tenant each represent to the other that they have dealt with
no broker, agent or finder (hereinafter referred to as a "Broker") in
connection with this Lease other than the Broker as set forth hereinabove.
Landlord and Tenant each hereby indemnify the other and agree to hold each
other harmless from and against any and all claims, causes, demands, losses,
liabilities, fees, commissions, settlements, judgments, damages, expenses and
fees (including attorney's fees and court costs) in connection with any claim
for commission, fees, compensation or other charges relating in nay way to
this Lease, or to the consummations of the transactions contemplated
hereunder, which may be made by any person, firm or entity (other than Broker
which shall be the responsibility of Landlord) based upon any agreement or
agreements made or alleged to have been made by such party or its
representatives. The provisions of this paragraph shall survive termination
or expiration of this Lease.
23. ATTORNEY'S FEES
If any rent owing under this Lease is collected by or through an
attorney at law, Tenant agrees to pay Landlord's reasonable attorney's fees
and other reasonable attorney's fees and other reasonable costs of collection.
24. ENTIRE AGREEMENT
This Lease, including any attachments made a part hereof, contains the
entire agreement of the parties and no representations, inducements, promises or
agreements, oral or otherwise, between the parties not embodied herein shall be
of any force or effect. No failure of Landlord to exercise any power given
Landlord hereunder or to insist upon strict compliance by Tenant of any
obligation hereunder, and no customer practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof.
25. SUBORDINATION AND ATTORNMENT
Tenant agrees that this Lease shall be subject and subordinate to any
mortgage, security deed, loan deed or similar instruments now on said
Premises and to all advances already made, or which may be hereafter made, on
account of said instruments to the full extent of all debts and charges
secured thereby and to any renewals or extensions of all or any part thereof
and to any such instruments which any owner of said Premises may hereafter at
any time elect to place on said Premises, and Tenant agrees upon request to
hereafter attorn to the holder of such mortgage, security deed or other
instrument as the Landlord under this Lease and execute any paper or papers
which the counsel for Landlord may deem necessary to accomplish that end and,
in default of Tenant so doing, that Landlord is hereby empowered to execute
such paper or papers in the name of Tenant, and as the act and deed of
Tenant, and this authority is hereby declared to be coupled with an interest
and not revocable.
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<PAGE>
26. ESTOPPEL CERTIFICATE
Upon Landlord's request the Tenant shall execute, acknowledge and deliver
to the Landlord, within ten (10) days from date of said request: (a) a
"mortgagee's acceptance letter" and/or a statement in writing certifying that
this Lease is in full force and effect and continuing the dates to which the
rent and any other charges have been paid, and the statement so delivered to
the Landlord may be relied upon by any prospective purchaser of, or by any
mortgagee upon, the Building of which the Premises are a part; and (b) the
most recent financial statements of Tenant and any guarantor of this Lease;
and (c) an estoppel certificate from any guarantor of this Lease certifying
that said guaranty is in full force and effect. Tenant's failure to deliver
such statement within such time shall be conclusive upon Tenant that this
Lease is in full force and effect, without modification, except as may be
represented by Landlord, that there are no defaults in Landlord's
performance, and that not more than one (1) month rental has been paid in
advance.
27. NO ESTATE IN LAND
This Lease shall create the relationship of landlord and tenant between
Landlord and Tenant; no estate shall pass out of Landlord, Tenant has only a
usufrOOt, not subject to levy and sale and not assignable by Tenant except by
Landlord's consent.
28. RIGHTS CUMULATIVE
All rights, powers and privileges conferred hereunder upon parties hereto
shall be cumulative but not restrictive to those given by law.
29. HOLDING OVER
If Tenant remains in possession after expiration of the Term hereof,
without Landlord's acquiescence and without any distinct written agreement of
the parties, Tenant shall be a tenant at sufferance, and there shall be no
renewal of this Lease by operation of law. During any such holdover period,
Tenant shall pay holdover rent equal to 150% of the last Base Rental amount due
from Tenant prior to such holdover.
30. SURRENDER OF PREMISES
At termination of this Lease, Tenant shall surrender Premises and keys
thereof to Landlord in same condition as at commencement of Term, normal wear
and tear only excepted.
31. SERVICE
All notices under this Lease shall be sent to Tenant:
Prior to Commencement:
DEC International, Inc.
7990 Second Flag Drive
Austell, GA 30001
Attn: Executive Vice President
12
<PAGE>
Upon Commencement:
DEC International, Inc.
5775 Peachtree Dunwoody Road
Suite C-150
Atlanta, GA 30342
Attn: Executive Vice President
and to Landlord:
Peachtree Dunwoody Partners, L.P.
c/o TMW Real Estate Management, Inc.
5775 Peachtree Dunwoody Road
Suite 470-C
Atlanta, GA 30342
32. DAMAGE OR THEFT OF PERSONAL PROPERTY
Tenant agrees that all personal property brought into the Premises shall
be at the risk of the Tenant only and that the Landlord shall not be liable
for these thereof or any damages thereto occasioned from any act of any
co-tenant or other occupants of said Building or any other person.
33. RULES AND REGULATIONS
The rules and regulations with regard to the Building of which the Premises
are a part, annexed hereto, and all rules and regulations which Landlord may
hereafter, from time to time, adopt and promulgate for the government and
management of said Building, are hereby made a part of this Lease as Exhibit "C"
and shall, during the Term of this Lease, be in all things observed and
performed by Tenant and by Tenant's employees, servants and agents.
34. EMINENT DOMAIN CLAUSE
It is mutually agreed that if the whole or any part of the Premises shall
be taken by Federal, State, County or City authority for public use, or under
any statute, or by right of eminent domain, then when possession shall be taken
thereunder of said Premises, or any part thereof, the Term hereby granted and
all rights of the Tenant hereunder shall immediately cease and terminate. It is
expressly agreed that the Tenant shall not have any right or claim of any award
made to or received by the Landlord for such taking.
35. DEFINITIONS
"Landlord" as used in this Lease shall include first party, his heirs,
representatives, assigns and successors in title to Premises. "Tenant" shall
include second party, his heirs and representatives, and if this Lease shall be
validly assigned or sublet, shall include also Tenant's assignees or subtenants,
as to Premises covered by such assignment or sublease. "Agent" shall include
third party, his successor, assigns, heirs and representatives. "Landlord,"
"Tenant" and "Agent" include male and female, singular and plural, corporation,
partnership or individual, as may fit the particular parties.
13
<PAGE>
36. INDEMNIFICATION
Subject to the other provisions of this Lease, Tenant hereby indemnifies
Landlord from and agrees to hold Landlord harmless against, any and all
liability, loss, cost, damage or expense, including, without limitation, court
costs and reasonable attorneys' fees, imposed on Landlord by any person
whomsoever, caused by the negligence or willful misconduct of Tenant, or any of
its partners, employees, contractors, servants, agents, subtenants, or legal
representatives. Subject to the provisions of this Lease, Landlord hereby
indemnifies Tenant from, and agrees to hold Tenant harmless against, any and all
liability, loss, cost, damage or expense, including without limitation, court
costs and reasonable attorneys' fees, imposed on Tenant by any person
whomsoever, caused by the negligence or willful misconduct of Landlord or any of
its partners, employees, contractors, servants, agents or legal representatives.
The provisions of this article shall survive the expiration or any termination
of this Lease.
37. INSURANCE
During the Term of this Lease, and any extension and renewal thereof,
Tenant, at its sole cost and expense, shall carry and maintain, and shall
deliver to Landlord a certificate of insurance evidencing such coverage both
prior to taking possession of the Premises and annually thereafter, the
following types of insurance with insurance companies rated no less than A,
Class VI as in the current edition of Best's Guide:
(a) Property Insurance on the Special or All-Risk Form, in amounts
sufficient to replace Tenant's personal property and all improvements to the
Premises on a replacement cost new basis.
(b) Commercial General Liability Insurance with limits of no less than
$1,000,000 per occurrence, $2,000,000 General Aggregate and $2,000,000 Completed
Operations Aggregate.
(c) Workers' Compensation Insurance with liability limits required by the
laws of the state in which the Premises are located.
Such insurance shall, to the extent permitted by law, name Landlord as an
additional insured and provide for thirty (30) days prior written notice to
Landlord before any modification or termination of said insurances.
Landlord and Tenant shall each have included (so long as commercially
reasonable and obtainable) in all policies of all risks, fire, extended
coverage, business interruption and other insurance respectively obtained by
them covering the Premises, the building and contents therein, a waiver by
the insurer of all right of subrogation against the other in connection with
any loss or damage thereby insured against. Any additional premium for such
waiver shall be paid by the primary insured. To the full extent permitted by
law, Landlord and Tenant each waives all right of recovery against the other
(and any officers, directors, partners, employees, agents and representatives
of the other) for, and agrees to release the other from liability for, loss
or damage to the extent such loss or damage is covered by valid and
collectible insurance in effect covering the party seeking recovery at the
time of such loss or damage or would be covered by the insurance required to
be maintained under this Lease by the party seeking recovery. If the release
of either party, as set forth in the immediately preceding sentence, should
contravene any law with respect to exculpatory agreements, the liability of
the party in question shall be deemed not released but shall be secondary to
the liability of the other's insurer.
38. HAZARDOUS WASTE
The term "Hazardous Substances," as used in this Lease shall mean
pollutants, contaminants, toxic or hazardous wastes, or any other substances,
the removal of which is required or the use of which is restricted, prohibited
or penalized by any "Environmental Law," which term shall mean any federal,
state or local law or ordinance relating to pollution or protection of the
environment. Tenant hereby agrees that (i) no activity will be conducted on the
Premises that will produce any Hazardous Substance, except for such activities
that are part of the
14
<PAGE>
ordinary course of Tenant's business (the "Permitted Activities"), provided such
Permitted Activities are conducted in accordance with all Environmental Laws and
have been approved in advance, in writing, by Landlord; (ii) the Premises will
not be used in any manner for the storage of any Hazardous Substances except for
the temporary storage of such materials that are used in the ordinary course of
Tenant's business (the "Permitted Materials"), provided such Permitted Materials
are properly stored in a manner and location meeting all Environmental Laws and
approved in advance, in writing, by Landlord; (iii) Tenant will not permit any
Hazardous Substances to be brought onto the Premises, except for the Permitted
Materials described above, and if so brought or found located thereon, the same
shall be immediately removed, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
If, at any time during or after the Term of the Lease, the Premises are found to
be so contaminated or subject to said conditions, Tenant agrees to indemnify and
hold Landlord harmless from all claims, demands, actions, liabilities, costs,
expenses, damages and obligations of any nature arising from, or as a result of,
the use of the Premises by Tenant. The foregoing indemnification shall survive
the termination or expiration of this Lease.
39. EXCULPATION OF LANDLORD
Landlord's obligations and liability to Tenant with respect to this Lease
shall be limited solely to Landlord's interest in the Building, and neither
Landlord nor any joint ventures (if any), partners, officers, directors,
employees or shareholders of or in Landlord shall have any personal liability
whatsoever with respect to this Lease.
40. TELEPHONE SERVICE
Tenant acknowledges and agrees that securing and arranging for telephone
service to the Premises is the sole responsibility of tenant and that Landlord
has no responsibility or obligation to provide or arrange such telephone
service, nor to permit installation of any facilities or equipment in the
Building outside the Premises in connection with providing telephone service to
the Premises.
41. SIGNAGE
Landlord agrees that Tenant shall be listed on the Building directory at no
cost or expense to Tenant. Tenant shall not place any signs, decals or other
materials upon the windows or suite doors of the Premises nor on the exterior
walls of the Premises. Landlord agrees to provide Tenant, at Landlord's expense,
one building standard suite door tenant identification sign. Any additional
signage desired by Tenant shall be approved, in writing, by Landlord and the
management company of the Building, which shall be granted in their sole
discretion.
42. FORCE MAJEURE
In the event of strike, lockout, labor trouble, civil commotion, act
of God or any other cause (collectively hereinafter called "Force Majeure")
outside and beyond Landlord's control, resulting in the impairment of
Landlord's ability to perform any obligation or provide any service
hereunder, this Lease shall not terminate except at Landlord's election, and
Tenant's obligation to pay Base Monthly Rental, Additional Rental and all
other charges and sums due payable by Tenant shall not be altered or excused
and Landlord shall not be considered to be in default under this Lease or
liable in damages to Tenant in any manner.
43. LIENS
Tenant shall pay or cause to be paid all costs for work done by or on
behalf of Tenant or caused to be done by or on behalf of Tenant on the Premises
of a character which will or may result in liens against Landlord's interest
15
<PAGE>
in the Premises or the Project, or any part thereof and Tenant will keep the
same free and clear of all mechanic's liens and other liens on account of
work done for or on behalf of Tenant or persons claiming under Tenant. Tenant
hereby agrees to indemnify, defend and save Landlord harmless of and from all
liability, loss, damages, costs or expenses, including reasonable attorneys'
fees, incurred in connection with any claim of any nature whatsoever for work
performed for, or materials or supplies furnished to Tenant, including lien
claims of laborers, materialmen or other. Should any such liens be filed or
recorded against the Premises or the project with respect to work done for or
materials supplied to or on behalf of Tenant or should any action affecting
the title thereto be commenced, Tenant shall cause such liens to be released
of record within twenty (20) days after notice thereof. If Tenant desires to
contest any such claim of lien, Tenant shall nonetheless cause such lien to
be released of record by the posting of adequate security with a court of
competent jurisdiction as may be provided by Georgia's mechanic's lien
statutes. If Tenant shall be delinquent in paying any charge for which such a
mechanic's lien or suit to foreclose such a lien has been recorded or filed
and shall not have caused the lien to be released as aforesaid, Landlord may
(but without being required to do so) pay such lien or claim and costs
associated therewith, and the amount so paid, together with interest thereon
at the interest rate and reasonable attorneys' fees incurred in connection
therewith, shall be immediately due from Tenant to Landlord as Additional
Rent.
44. AUTHORITY
If Tenant is a corporation, each individual executing this Lease on
behalf of said corporation represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said corporation, in
accordance with the bylaws and resolutions of said corporation, and that this
Lease is binding upon said corporation. If Tenant is a partnership, each
individual executing this Lease on behalf of such partnership represents and
warrants that he is duly authorized to execute and deliver this Lease on
behalf of the partnership and that this Lease is binding on the partnership.
The submission or delivery of this document for examination and review does
not constitute an option, an offer to lease space in the Building or an
agreement to lease. This document shall have no binding effect on the parties
unless and until executed by both Landlord and Tenant.
45. SPECIAL STIPULATIONS
Insofar as the following stipulations conflict with any of the foregoing
provisions, the following shall control: See Addendum of Special Stipulations
attached hereto and by reference incorporated herein.
16
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, in
quadruplicate, the day and year first above-written.
TENANT:
DEC INTERNATIONAL, INC.
By: /s/Robert B. Webster
----------------------------
Title:
----------------------------
Robert B. Webster
Executive Vice President
Attest:
----------------------------
Title:
----------------------------
[CORPORATE SEAL]
LANDLORD:
PEACHTREE DUNWOODY PARTNERS, L.P.
By: /s/
----------------------------
Title: Agent
----------------------------
17
<PAGE>
ADDENDUM OF SPECIAL STIPULATIONS
1. TENANT IMPROVEMENTS. Notwithstanding anything contained herein to the
contrary in Section 5 of this Lease, Landlord will provide up to $5.00 per
rentable square foot or a total of $21,730.00 as an improvement allowance for
completion of Landlord's Work within the premises. The improvement allowance
will be inclusive of an 8% construction management fee and the cost of any
and all construction documents and necessary permits. Tenant, at Tenant's
option, may request that Landlord complete work above and beyond the
improvement allowance, provided, however, that any work above the improvement
allowance shall be at the sole cost and expense of Tenant and Tenant shall
reimburse Landlord for any costs herein upon completion of any additional
work.
2. CONTINGENCY. This Lease is contingent upon Landlord executing a Lease
Termination Agreement for the existing Lease for the Premises with Compucom
Systems, Inc. within five (5) business days following the execution of this
Lease by both parties.
18
<PAGE>
EXHIBIT A
[GRAPHIC]
<PAGE>
EXHIBIT B
DESCRIPTION OF PROPERTY
All that tract or parcel of land lying and being in Land Lot 17 of the
District of Fulton County, Georgia and being more particularly described as
follows:
BEGINNING at an iron pin located at the corner formed by the southeasterly
line of the right of way of Peachtree Dunwoody Road (a road having a 70 foot
right of way at this point) with the south line of the right of way of Lake
Hearn Drive (a road having a 60 foot right of way); running thence north 89
degrees 39 minutes 45 seconds east along the south line of the right of way
of Lake Hearn Drive 1,421.85 feet to an iron pin located at the point where
the south line of Lake Hearn Drive is intersected by the east line of said
Land Lot 17 (said line also being the west line of Land Lot 329 of the 18th
District of Dekalb County, Georgia and Fulton County, Georgia); running
thence south 00 degrees 25 minutes 25 seconds west along the east line of
said Land Lot 17 a distance of 590.30 feet to an iron pin located at the
southeast corner of said Land Lot 17 (said iron pin also being located at the
northeast corner of Land Lot 16 of the 17th District of Fulton County,
Georgia); running thence north 89 degrees 37 minutes 25 seconds west along
the south line of said Land Lot 17 and the north line of said Land Lot 16 a
distance of 1,488.92 feet to an iron pin located at the point where said Land
Lot line intersects the easterly line of Peachtree Dunwoody Road; running
thence in a generally northwesterly direction along the easterly side of the
right of way of Peachtree Dunwoody Road and along the arc of a curve having a
radius of 1,469.80 feet a distance of 68.53 feet (the chord of said curve
having a magnetic bearing of north 13 degrees 48 minutes 40 seconds west and
a length of 68.52 feet); continuing thence in a generally northwesterly
direction along the northeasterly line of the right of way of Peachtree
Dunwoody Road north 12 degrees 28 minutes 30 seconds west 116.25 feet to a
point; continuing thence in a generally northerly direction along the arc of
a curve having a radius of 273.903 feet a distance of 168.37 feet (the chord
of said curve having a magnetic bearing of north 05 degrees 08 minutes 05
seconds east and a length of 165.73 feet);continuing thence in a generally
northeasterly direction along the southeasterly line of the right of way of
Peachtree Dunwoody Road north 22 degrees 44 minutes 40 seconds east and a
length of 233.87 feet; thence along the arc of a curve having a radius of 35
feet a distance of 13.75 feet (the chord of said curve having a magnetic
bearing of north 33 degrees 59 minutes 45 seconds east and a length of 13.66
feet) to an iron pin located at the southeast corner of the intersection of
Peachtree Dunwoody Road and Lake Hearn Drive and the POINT OF BEGINNING, said
property containing 20.03 acres as shown on Plat of Survey for Minneapolis
Investment Associates L.P. and Chicago Title Insurance Company, by Watts &
Browning Engineers, dated December 5, 1985, last revised October 8, 1992.
Together with all right, title and interest in and to that Easement from
Commodore Carson Going, Jr., to Hodgkins & Associates, Inc., recorded in Deed
Book 1759, Page 250, DeKalb County, Georgia, and such prescriptive rights as
may arise therefrom or otherwise with respect to the sewer line installed
pursuant thereto.
20
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entry passages, corridors, halls, elevators and stairways
shall not be obstructed by Tenant, or used by them for any purpose other
than those of ingress and egress. The floors, skylights and windows that
reflect or admit light into any place in the building in which the Premises
are located, shall not be covered or obstructed by Tenant. The water
closets and other water apparatus shall not be used for any other purpose
than those for which they were constructed and no sweepings, rubbish, or
other obstructing substances, shall be thrown therein. Any damage
resulting to them or to associated system from misuse shall be borne by
Tenant who, or whose clerks, agents, or servants, shall cause it.
2. No advertisement or other notice shall be inscribed, painted or affixed on
any part of the outside or inside of said building, except upon the doors,
and of such order, size and style, and at such places as shall be
designated by Landlord. Interior signs or doors will be supplied for
Tenant by Landlord, the cost of the signs to be charged to and paid for by
Tenant.
3. No Tenant shall do or permit to be done in the Premises, or bring or keep
anything therein, which shall in any way increase the rate of fire
insurance on said building, or on property kept therein, (only artificial
and fire resistant Christmas trees and/or decorations are permitted), or
obstruct or interfere with the rights of other Tenants, or in any way
injure or annoy them, or conflict with any of the rules and ordinances of
the Board of Health. Tenant, their clerks and servants, shall maintain
order in the building, shall not make or permit any improper noise in the
building or interfere in any way with other tenants or those having
business with them. Nothing shall be thrown by Tenant, their clerks or
servants, out of the windows or doors, or down the passages or skylights of
the building. No rooms shall be occupied or used as sleeping lodging
apartments at any time. No part of the building shall be used or in any
way appropriated for gambling, immoral or other unlawful practices, and no
intoxicating liquors shall be sold in said building.
4. Tenant shall not employ any persons other than the janitors of Landlord
(who will be provided with passkeys into the offices) for the purpose of
cleaning or taking charge of the Premises.
5. Tenant shall strictly comply with any and all regulations set forth by
Landlord for the operation, maintenance and management of the parking areas
adjacent to the building or buildings in which the Premises are contained.
6. No animals, birds, bicycles or other vehicles, or other obstructions, shall
be allowed in the offices, halls, corridors, elevators or elsewhere in the
building.
7. All Tenants and occupants shall observe strict care not to leave their
windows open when it rains or snows and, for any fault or carelessness in
any of these respects, shall make good any injury sustained by other
Tenants and to Landlord for damage to paint, plastering or other parts of
the building, resulting from such default or carelessness. No painting
shall be done, nor shall any alterations be made, to any part of the
building by putting up or changing any partitions, doors or windows, nor
shall there be any nailing, boring or screwing into the woodwork or
plastering nor shall any connection be made to the electric wires or gas or
electric fixtures, without the consent in writing on each occasion of
Landlord or its agent. Landlord requires Tenants to monitor all
installation of communications and other non-electrical wiring to ensure
that all installed wiring is of a plenum-rated type and that all relevant
building and fire codes concerning plenum-rated wiring are maintained by
the installer. All glass, locks and trimmings in or upon the doors and
windows of the building shall be kept whole and, when any part thereof
shall be broken, the same shall be immediately replaced or repaired and put
in order under the direction and to the satisfaction of Landlord, or its
agents, and shall be left whole and in good repair. Tenant shall not
injure, overload or deface the building, the woodwork or the walls of the
Premises, nor carry on upon the Premises any noisome, noxious, noisy or
offensive business.
21
<PAGE>
8. Not more than two keys for each office will be furnished without charge.
No additional locks or latches shall be put upon any door without the
written consent of Landlord. Tenant, at termination of their Lease of the
Premises, shall return to Landlord all keys to doors in the building.
9. Landlord in all cases retains the power to prescribe the weight and
position of iron safes or other heavy articles.
10. The use of burning fluid, camphor, alcohol, benzene, kerosene or anything
except gas or electricity for lighting the Premises, is prohibited. No
offensive gases or liquids will be permitted.
11. If Tenant desires blinds or window covering of any kind over the windows,
they must be of such shape, color and material as may be prescribed by
Landlord, and shall be erected with Landlord's consent and at the expense
of said Tenant. No awning shall be placed on said building.
22
<PAGE>
COMMENCEMENT DATE OF TERM OF LEASE
OFFICE LEASE DATED JUNE 20,1995
BETWEEN PEACHTREE DUNWOODY PARTNERS, L.P. (LANDLORD)
AND DEC INTERNATIONAL, INC. (TENANT)
This Commencement Date Agreement is made this ___ day of August, 1995, by
and between Peachtree Dunwoody Partners, L.P. (hereinafter referred to as the
"Landlord") and DEC International, Inc. (hereinafter referred to as the
"Tenant") pertaining to certain space (the "Premises") in the Peachtree Dunwoody
Pavilion, 5775 Peachtree Dunwoody Road, Atlanta, GA 30342 (the "Building").
WITNESSETH:
WHEREAS, by Lease executed the 20th day of June, 1995, the Landlord leased
unto the Tenant the Premises known as Suite C-150 located in the Building for a
term commencing on the 1st day of August, 1995, and ending on the 31st day of
July, 2000, unless sooner terminated or extended as provided therein; and
WHEREAS, the Landlord and the Tenant now desire to amend the Lease to
establish different commencement and expiration dates.
NOW, THEREFORE, the Landlord and the Tenant hereby agree that the Lease
shall be amended as follows:
1. The term of the Lease shall be deemed to have commenced on August 15,
1995, and shall expire on August 31, 2000, unless sooner terminated or
extended as provided herein.
2. By execution hereof, the Tenant hereby acknowledges that all
improvements required of the Landlord have been satisfactorily
performed and the Tenant does hereby accept the Premises delivered by
the Landlord as being in full compliance with the terms of the Lease.
3. Except as hereby amended, the Lease shall continue in full force and
effect.
4. This Agreement shall be binding upon the parties hereto, their heirs,
executors, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above-written.
TENANT:
DEC INTERNATIONAL, INC.
By: /s/
----------------------------------
Title: EXECUTIVE V.P. & C F O
----------------------------------
Attest: /s/
----------------------------------
Title: V P / Controller
----------------------------------
[CORPORATE SEAL]
LANDLORD:
PEACHTREE DUNWOODY PARTNERS, L.P.
By:
----------------------------------
By:
---------------------------
Title:
---------------------------
<PAGE>
FIRST LEASE AMENDMENT
---------------------
This First Amendment to Lease, agreed to this 13th day of July, 1995 is
attached to and made a part of that certain Lease Agreement ("Lease") dated the
20th day of June, 1995 by and between Peachtree Dunwoody Partners, L.P. as
"Landlord," and DEC International, Inc. as "Tenant".
WHEREAS, Landlord and Tenant are desirous of amending aforesaid Lease by
execution of this Amendment;
NOW, THEREFORE, for and in consideration of the Premises and mutual
covenants contained herein and contained in the Lease, Landlord and Tenant
hereby covenant and agree as follows:
1. EXCESS TENANT IMPROVEMENT COST. The total cost of Tenant's improvements to
the Premises is $35,170.10. The Landlord's allowance as stated in the
Lease is $21,730.00. The balance of the tenant improvements are the
Tenant's sole financial responsibility and shall be paid as Additional
Rent due under the Lease as follows: Upon the execution of this First
Lease Amendment, Tenant shall pay to the Landlord, in certified funds or
other manner of payment acceptable to Landlord, the sum of $3,440.10. The
balance of the amount due from Tenant shall be amortized into the first
twelve months of rental payments and the new monthly base rent due under
this Lease for the first twelve months shall be adjusted to $6,356.37.
Except as herein expressly modified, the terms and provisions of the Lease
shall remain in full force and effect and Landlord and Tenant hereby ratify and
affirm the terms and provisions of the Lease as herein expressly modified.
IN WITNESS WHEREOF, the parties have caused this First Amendment to Lease
to be executed on the date first above-written, hereby binding their respective
successors, assigns, heirs, executors and administrators.
TENANT:
DEC INTERNATIONAL, INC.
By: /s/ Robert B. Webster
----------------------------
Title: Executive Vice President
----------------------------
Attest:
----------------------------
Title:
----------------------------
<PAGE>
LANDLORD:
PEACHTREE DUNWOODY PARTNERS, L.P.
By: /s/
----------------------------
By: Agent
---------------------
Title:
---------------------
<PAGE>
EXHIBIT 10.12
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
RESTATED AS OF JANUARY 1, 1989
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
TABLE OF CONTENTS
PAGE
----
Article 1. DEFINITIONS 1
Article 2. MEMBERSHIP
2.01 Membership Requirements 9
2.02 Determination of Service 9
2.03 Events Affecting Membership 9
2.04 Membership upon Reemployment 10
Article 3. SERVICE
3.01 Period of Service 11
3.02 Benefit Service 13
3.03 Restoration of Retired Member or Other
Former Employee to Service 14
Article 4. ELIGIBILITY FOR AND AMOUNT OF BENEFITS
4.01 Normal Retirement 17
4.02 Late Retirement 18
4.03 Early Retirement 19
4.04 Vesting 19
4.05 Spouse's Pension 20
4.06 Maximum Benefit Limitation 21
4.07 Transfers and Employment with an
Affiliated Employer 22
4.08 Special Provisions for Benefits
Accrued to January 1, 1994 23
Article 5. PAYMENT OF PENSIONS
5.01 Automatic Forms of Payment 24
5.02 Optional Forms of Payment 25
5.03 Election of Options 26
5.04 Commencement of Payments 27
5.05 Distribution Limitation 27
5.06 Direct Rollover of Certain Distributions 28
Article 6. CONTRIBUTIONS
6.01 Employer's Contributions 30
6.02 Return of Contributions 30
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
TABLE OF CONTENTS
(Continued)
PAGE
----
Article 7. ADMINISTRATION PLAN
7.01 Named Fiduciary and Administrator 32
7.02 Responsibility 32
7.03 Meetings 32
7.04 Action of Majority 33
7.05 Compensation and Bonding 33
7.06 Establishment of Rules 33
7.07 Prudent Conduct 33
7.08 Actuary 33
7.09 Maintenance of Accounts 34
7.10 Service in More then One Fiduciary Capacity 34
7.11 Limitation of Liability 34
7.12 Indemnification 34
Article 8. MANAGEMENT OF FUNDS
8.01 Funding Agent 36
8.02 Exclusive Benefit Rule 36
8.03 Appointment of Investment Manager 36
Article 9. GENERAL PROVISIONS
9.01 Nonalienation 37
9.02 Conditions of Employment Not Affected by Plan 37
9.03 Facility of Payment 38
9.04 Information 38
9.05 Top-Heavy Provisions 38
9.06 Construction 42
Article 10. AMENDMENT, MERGER AND TERMINATION
10.01 Amendment of Plan 43
10.02 Merger or Consolidation 43
10.03 Additional Participating Employers 44
10.04 Termination of Plan 44
10.05 Limitation Concerning 25 Highest Paid Employees 45
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
THE MASCULINE GENDER IS USED FOR SIMPLICITY THROUGHOUT THE PLAN DOCUMENT AND
IS INTENDED TO INCLUDE THE FEMININE GENDER.
ARTICLE 1. DEFINITIONS
1.01 "Accrued Benefit" means the normal retirement Pension computed under
Section 4.01(b) on the basis of the Member's Average Final
Compensation and Benefit Service as of the date of determination.
1.02 "Affiliated Employer" means any company not participating in the Plan
which is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) which also includes as a member the
Employer; any trade or business under common control (as defined in
Section 414(c) of the Code) with the Employer; any organization (whether
or not incorporated) which is a member of an affiliated service group
(as defined in Section 414(m) of the Code) which includes the Employer;
and any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
Notwithstanding the foregoing sentence, for purposes of Section 4.07,
the definitions in Sections 414(b) and (c) of the Code shall be modified
as provided in Section 415(h) of the Code.
1.03 "Annuity Starting Date" means the first day of the first period for
which an amount is paid as an annuity or any other form.
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1.04 "Average Final Compensation" means the average annual Compensation of
an Employee during the five consecutive calendar years in the last 10 or
less calendar years of his Service with the Employer affording the
highest such average, or during all of the years of Service if the
Member's Service is less than five years. Any calendar year in which an
Employee earned compensation for less than six months or, if due to
disability, for less than nine months, will be excluded if such
exclusion results in a higher Average Final Compensation.
1.05 "Beneficiary" means the person or persons named by a Member by written
designation filed with the Committee to receive payments after the
Member's death.
1.06 "Benefit Service" means service recognized for purposes of computing
the amount of any benefit, determined as provided in Section 3.02.
1.07 "Board of Directors" means the Board of Directors of Transkrit
Corporation.
1.08 "Break in Service" means a period which constitutes a break in an
Employee's Period of Service, as provided in Section 3.01(a).
1.09 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.10 "Committee" or "Pension Committee" means the group of at least one
person chosen to administer the plan as provided in Article 7.
1.11 "Compensation" means the amount paid to an Employee for services
rendered to the Employer as base salary, overtime, and commissions, as
these forms are reported on his Earnings and Wage statement, determined
prior to any pre-tax contributions under a "qualified cash or deferred
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arrangement" (as defined under Section 401(k) of the Code and its
applicable regulations) or under a "cafeteria plan" (as defined under
Section 125 of the Code and its applicable regulations). Bonuses and
incentive pay shall be excluded from an employee's Compensation for
benefit computation purposes. Compensation taken into account for any
purpose under the Plan shall not exceed $200,000 per year ($150,000 for
Plan years beginning after December 31, 1993). As of January 1 of each
calendar year on and after January 1, 1990, the applicable limitation as
determined by the Commissioner of Internal Revenue for that calendar
year shall become effective as the maximum Compensation to be taken into
account for Plan purposes for that calendar year in lieu of the $200,000
(or $150,000) limitation set forth in the preceding sentence. If
compensation is determined for a period of less than 12 months, the
$200,000 limit (or $150,000) (as adjusted) will be prorated accordingly.
In determining the compensation of a participant for purposes of this
limitation, the rules of section 414(g)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the participant and any lineal descendants of the participant
who have not attained age 19 before the close of the year. If, as a
result of the application of such rules the adjusted $200,000 (or
$150,000) limitation is exceeded, then the limitation shall be prorated
among the affected individuals in proportion to each such individual's
compensation as determined under this section prior to the application
of this limitation.
1.12 "Effective Date" means July 15, 1963.
1.13 "Effective Date of Restatement" means January 1, 1989, or such earlier
date, for any Plan provision, as is required by applicable statute or
regulation.
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1.14 "Eligibility Service" means service recognized in determining
eligibility for membership in the Plan, as provided in Section 3.01.
1.15 "Employee" means any person employed by the Employer who receives
compensation other than a pension, severance pay, retainer or fee under
contract, but excluding any Leased Employee.
1.16 "Employer" means Transkrit Corporation or any successor by merger,
purchase or otherwise, with respect to its employees; or any other
company participating in the Plan as provided in Section 10.03 with
respect to its employees. Effective January 1, 1994, "Employee" shall
include Short Run Labels, Inc.
1.17 "Equivalent Actuarial Value" means (except as otherwise specified in
the Plan) the equivalent value when computed on the basis of the Unisex
Pension 1984 Mortality Table and an interest rate of 8%. The Pension
Benefit Guaranty Corporation (PBGC) annuity interest rates in effect on
the first day of the calendar year of determination shall be used in
determining the Lump Sum Value of a benefit, as follows:
(a) for lump sum amounts no more than $25,000, all the PBGC rates;
(b) for lump sum amounts over $25,000, 120% of the PBGC rates;
(c) if the result in (a) is greater than $25,000 and the result in
(b) is $25,000 or less, the lump sum shall be $25,000.
(d) if the lump sum value using the immediate annuity PBGC rate
results in a greater value than that otherwise determined under
this Section 1.17, that value shall be used.
(e) lump sum values shall be determined as payable at the Member's
Normal Retirement Age. If, however, the Member is eligible for
Early Retirement under Section 4.03, the
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lump sum will be calculated as payable on the Member's Early
Retirement Date if that results in a larger value.
1.18 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.19 "Funding Agent" means the trustee or trustees or the legal reserve life
insurance company by whom the funds of the Plan are held, as provided
in Article 8.
1.20 "Hour of Service" means, with respect to any applicable computation
period,
(a) each hour for which the employee is paid or entitled to payment
for the performance of duties for the Employer or an Affiliated
Employer,
(b) each hour for which an employee is paid or entitled to payment
by the Employer or an Affiliated Employer on account of a period
during which no duties are performed, whether or not the
employment relationship has terminated, due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence, but not more than 501 hours
for any single continuous period,
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or an
Affiliated Employer, excluding any hour credited under (a) or
(b), which shall be credited to the computation period or
periods to which the award, agreement or payment pertains,
rather than to the computation period in which the award,
agreement or payment is made.
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No hours shall be credited on account of any period during which the
Employee performs no duties and receives payment solely for the purpose
of complying with unemployment compensation, workers' compensation or
disability insurance laws. The Hours of Service credited shall be
determined as required by Title 29 of the Code of Federal Regulations,
Section 2530.200b-2(b) and (c).
1.21 "Leased employee" means any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially
full-time basis for a period of at least one year, and such services are
of a type historically performed by the employees in the business field
of the recipient employer. Contributions or benefits provided a leased
employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
1.22 "Limitation Year" means the Plan Year.
1.23 "Member" means any person included in the membership of the Plan, as
provided in Article 2.
1.24 "Normal Retirement Age" means an Employee's 65th birthday.
1.25 "Normal Retirement Date" means the first day of the calendar month
immediately following an Employee's Normal Retirement Age.
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1.26 "Parental Leave" means a period in which the Employee is absent from
work immediately following his or her active employment because of the
Employee's pregnancy, the birth of the Employee's child or the placement
of a child with the Employee in connection with the adoption of that
child by the Employee, or for purposes of caring for that child for a
period beginning immediately following birth or placement.
1.27 "Pension" means annual payments under the Plan as provided in Article 5.
1.28 "Period of Service" means the service used to determine an Employee's
vested status and benefit, as defined in Article 3.
1.29 "Plan" means the Transkrit Corporation Employees' Pension Plan as set
forth in this document or as amended from time to time.
1.30 "Plan Year" means the calendar year.
1.31 "Prior Plan" means the Transkrit Corporation Hourly Employees' Pension
Plan or the Transkrit Corporation Salaried Employees' Pension Plan,
whichever is applicable.
1.32 "Qualified Joint and Survivor Annuity" means an annuity described in
Section 5.01(b).
1.33 "Severance Date" means the earlier of (a) the date an Employee quits,
retires, is discharged or dies, or (b) the first anniversary of the date
on which an Employee is first absent from service,
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Page 8
with or without pay, for any other reason such as vacation, sickness,
disability, layoff or leave of absence.
1.34 "Spousal Consent" means written consent given by a Member's spouse to
an election made by the Member which specifies the form of Pension and
Beneficiary or Beneficiaries designated by the Member. The specified
form or specified Beneficiary shall not be changed unless further Spousal
Consent is given, unless the spouse expressly waives the right to
consent to any future changes. Spousal Consent shall be duly witnessed by
a Plan representative or notary public and shall acknowledge the effect
on the spouse of the Member's election. The requirement for Spousal
Consent may be waived by the Committee in accordance with applicable
law. Spousal Consent shall be applicable only to the particular spouse
who provides such consent.
1.35 "Suspendible Month" means a month in which the Member completes at
least 40 Hours of Service with the Employer or an Affiliated Employer.
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ARTICLE 2. MEMBERSHIP
2.01 Membership Requirements
Every person in the employ of the Employer shall become a Member of the
Plan as of the first day of the calendar month, beginning with the
Effective Date, but not before January 1, 1994 for employees of Short
Run Labels, Inc., coinciding with or immediately following the date he
completes one year of Eligibility Service, provided he is then an
Employee.
2.02 Determination of Service
Solely for purposes of this Article, an Employee shall be credited with
one year of Eligibility Service for the 12-month period beginning on the
date he first completes an Hour of Service, or any anniversary thereof,
if he completes at least 1,000 Hours of Service during that period.
Employees of Short Run Labels, Inc. who were such as of August 10, 1993
will be given Eligibility Service for periods of employment prior to
August 10, 1993 as if their service with Short Run Labels, Inc. were
service with the Employer.
2.03 Events Affecting Membership
An Employee's membership in the Plan shall end when he is no longer
employed by the Employer if he is not entitled to either an immediate
or a deferred Pension under the Plan. Membership shall continue while
on approved leave of absence from service or during a period while he is
not an Employee but is in the employ of the Employer or an Affiliated
Employer, but no Benefit Service shall be counted for that period,
except as specifically provided in Article 3 and Section 4.08.
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2.04 Membership upon Reemployment
If an Employee's membership in the Plan ends and he again becomes an
Employee, he shall be considered a new Employee for all purposes of the
Plan, except as provided in Section 3.03.
<PAGE>
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ARTICLE 3. SERVICE
3.01 Period of Service
(a) An Employee's Period of Service shall begin on the date the Employee
first completes an Hour of Service and end on the Employee's Severance
Date. If an Employee's employment is terminated and he is later
reemployed within one year, the period between his Severance Date and
the date of his reemployment shall be included in his Period of Service.
However, if his employment is terminated during a period of absence from
service for reasons such as vacation, sickness, disability, layoff or
leave of absence approved by the Employer, the period from his Severance
Date to the date of his reemployment shall be included in his Period of
Service only if he is reemployed within one year of the first day of
that absence. A Break in Service shall occur if an Employee is not
reemployed within one year after a Severance Date, provided, however,
that if an Employee's employment is terminated or if the Employee is
otherwise absent from work because of Parental Leave, a Break in Service
shall occur only if the Employee is not reemployed or does not return to
active service within two years of his Severance Date; and provided
further that the first year of such absence for Parental Leave, measured
from his Severance Date, shall not be considered in determining the
Employee's "period of Break in Service" for purposes of Section 3.03(d).
If the Employee has a Break in Service, any period before the Break in
Service shall be excluded from his Period of Service, except as provided
in Section 3.03.
(b) If an Employee shall have been absent from the service of the Employer
because of service in the Armed Forces of the United States and if he
shall have returned to the service of the Employer
<PAGE>
Page 12
having applied to return while his reemployment rights were protected
by law, that absence shall not count as a Break in Service, but instead
shall be included in his Period of Service.
(c) A period during which an Employee is on a leave of absence approved by
the Employer shall not be considered as a Break in Service. Under rules
uniformly applicable to all Employees similarly situated, the Committee
may authorize that a Period of Service be included for any portion of a
period of leave that is not counted as a Period of Service under
paragraph (a) of this Section.
(d) For purposes of determining eligibility for membership and vesting,
each of the following periods of service shall be counted in a person's
Period of Service to the extent that it would be recognized under
paragraph (a) through (c) above with respect to Employees:
(i) a period of service as an employee, but not an Employee, of the
Employer,
(ii) a period of service as an employee of an Affiliated Employer, and
(iii) in the case of a person who is a Leased Employee before or after
a period of service as an Employee or a period of service
described in (i) or (ii) above, a period during which he has
performed services for the Employer or an Affiliated Employer as a
Leased Employee.
(iv) a period during which a Member is disabled and eligible to
receive payments under the Employer's or an Affiliated Employer's
long term disability benefits program or is entitled to receive
disability benefits under the Social Security Act provided he
provides evidence as required by the Committee of continuing
eligibility for such benefit.
(v) a period of service with Short Run Labels, Inc., provided the
person was an employee of Short Run Labels, Inc. on August 10,
1993.
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The Break in Service rules of Section 3.03 shall be applied as though
all such periods of service were service as an Employee.
3.02 Benefit Service
(a) Except as provided below, all Periods of Service as an Employee after
becoming a Member shall be Benefit Service under the Plan. Any period
between a Severance Date and a reemployment date which is counted as a
Period of Service as provided in Section 3.01(a) shall not be counted as
Benefit Service.
(b) Benefit Service shall include any period of absence from service with
the Employer due to service in the Armed Forces of the United States
which is counted in a Member's Period of Service as provided in Section
3.01(b). Under rules uniformly applicable to all Employees similarly
situated, the Committee may count as Benefit Service any period, not
more than two years, during which an Employee is on an approved leave of
absence which is counted as a Period of Service as provided in Section
3.01(c).
(c) Benefit Service shall not be credited for any period in which a Member
is not an Employee but is in the employ of the Employer, or in the
employ of an Affiliated Employer, or performing services for the
Employer or an Affiliated Employer as a Leased Employee.
(d) In no event shall Benefit Service be less than that credited through
December 31, 1988 based on the Plan provisions in effect on that date.
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(e) No Benefit Service shall be credited to Short Run Labels, Inc.
employees for periods prior to August 10, 1993, and the maximum amount
of Benefit Service earned for the period August 10, 1993 through
December 31, 1993 shall be 4.5 months.
(f) Other than the situation discussed in (e) above, a Member will earn a
full month of Benefit Service if he completes 16 days of service in
that month, and no Benefit Service otherwise.
3.03 Restoration of Retired Member or Other Former Employee to Service
(a) If a Member in receipt of a Pension is restored to service with the
Employer or an Affiliated Employer as an Employee, the following shall
apply:
(i) If his restoration to service occurs prior to his Normal
Retirement Date his Pension shall cease and any election of an
optional benefit in effect shall be void. If his restoration to
service occurs after his Normal Retirement Date (i) his Pension
shall be suspended during each Suspendible Month (unless the
provisions of Sections 4.02(c) and 5.04(b) are applicable), and
(ii) any optional benefit shall remain in effect, unless the
Member shall elect otherwise; if the Member had commenced
payment prior to his Normal Retirement Date, however, any
additional Pension he accrues after his restoration to service
shall be paid to his surviving spouse in accordance with the
provisions of Section 4.06 if he should die in active service.
(ii) Any Period of Service and Benefit Service to which he was
entitled when he retired or terminated service shall be restored
to him.
(iii) Upon later retirement or termination his Pension shall be based
on the benefit formula then in effect and his Compensation and
Benefit Service before and after the period when he was not in the
service of the Employer, reduced by an amount of Equivalent
Actuarial
<PAGE>
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Value to the benefits, if any, he received before the earlier of
the date of his restoration to service or his Normal Retirement
Date.
(iv) The part of the Member's Pension upon later retirement payable
with respect to Benefit Service rendered before his previous
retirement or termination of service shall never be less than the
amount of his previous Pension modified to reflect any option in
effect on his later retirement.
(v) Upon later retirement of a Member in service after his Normal
Retirement Date, payment of the Member's Pension shall resume no
later than the third month after the latest Suspendible Month
during the period of restoration, and shall be adjusted, if
necessary, in compliance with Title 29 of the Code of Federal
Regulations, Section 2530.203-3 in a consistent and
nondiscriminatory manner.
(b) If a Member entitled to but not in receipt of a Pension is restored to
service, his Period of Service and Benefit Service shall be determined
as provided in Sections 3.01 and 3.02.
(c) If a Member entitled to but not in receipt of a Pension is restored to
service with the Employer after having had a Break in Service or if a
former Member who received a lump sum settlement in lieu of a Pension is
restored to service with the Employer, the following shall apply:
(i) Upon completion of one year of a Period of Service following the
Break in Period of Service the Service to which he was previously
entitled shall be restored to him, and, if applicable, he shall
again become a Member as of his date of restoration to service as
an Employee.
(ii) Any Benefit Service to which the Member was entitled at the time
of his termination of service shall be restored to him.
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(iii) Upon later termination or retirement of a Member whose previous
Benefit Service has been restored under this paragraph (c), his
Pension shall be based on the benefit formula then in effect and
his Compensation and Benefit Service before and after the period
when he was not in the service of the Employer.
(d) If a former Member who is not entitled to a Pension is restored to
service after having had a Break in Service, the following shall apply:
(i) Upon completion of a one year Period of Service following the
Break in Service, he shall again become a Member as of his date
of restoration to service as an Employee.
(ii) Upon his restoration to membership, the Period of Service to
which he was previously entitled shall be restored to him if his
period of Break in Service does not equal or exceed the greater
of (A) five years, or (B) his Period of Service before his Break
in Service, determined at the time of the Break in Service,
excluding any Period of Service disregarded under this paragraph
(d) by reason of any earlier Break in Service.
(iii) Any Benefit Service to which the Member was entitled at the time
of his termination of service which is included in the Period of
Service so restored shall be restored to him.
(iv) Upon later termination or retirement of a Member whose previous
Benefit Service has been restored under this paragraph (d), his
Pension, if any, shall be based on the benefit formula then in
effect and his Compensation and Benefit Service before and after
the period when he was not an Employee.
(e) An Employee who has received a lump sum payment equal to the value of
his vested benefit at the time of his termination and is rehired will,
upon subsequent retirement, have his Accrued Benefit reduced by the
vested benefit for which he received a lump sum payment.
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ARTICLE 4. ELIGIBILITY FOR AND AMOUNT OF BENEFITS
4.01 Normal Retirement
(a) The right of a Member to his normal retirement Pension shall be
nonforfeitable as of his Normal Retirement Age. A Member may retire
from service on a normal retirement Pension beginning on his Normal
Retirement Date or he may postpone his retirement and remain in service
after his Normal Retirement Date, in which event the provisions of
Section 4.02 shall be applicable.
(b) Subject to the provisions of Section 5.01 and effective January 1, 1989,
the annual normal retirement Pension payable upon retirement on a
Member's Normal Retirement Date shall be equal to the sum of:
(i) .4% of the Member's Average Final Compensation multiplied by his
Benefit Service completed before July 15, 1971,
(ii) .7% of the Member's Average Final Compensation multiplied by his
Benefit Service earned after July 15, 1971, and
(iii) an additional 0.3% of the Member's Average Final Compensation
multiplied by his Benefit Service earned while an employee of
Short Run Labels, Inc.
(c) Former Prior Plan Participants shall receive the benefit described in
(b) for service after December 31, 1988 plus the benefit accrued through
December 31, 1988 under the Prior Plan formula multiplied by Average
Final Compensation as of the determination date and divided by Average
Final Compensation as of December 31, 1988, if this provides a greater
benefit than that calculated under Section 4.01(b). If the PIA offset
to the accrued benefit calculated as of
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December 31, 1988 is greater than 50% of the accrued benefit calculated
before such offset, it will be reduced so that it is no more than 50%
of such benefit.
4.02 Late Retirement
(a) If a Member postpones his retirement as provided in Section 4.01(a), he
shall be retired from service on a late retirement Pension on the first
day of the calendar month after the Committee receives his written
application to retire.
(b) A Member who remains in service after his Normal Retirement Date shall
be entitled to a monthly retirement Pension for each month during the
postponement period which does not constitute a Suspendible Month. Upon
later retirement, the Member shall be entitled to an immediate late
retirement Pension beginning on the Member's late retirement date and,
subject to the provisions of Section 5.01, shall be equal to the amount
determined in accordance with Section 4.01 based on the Member's Benefit
and Average Final Compensation as of his late retirement date.
(c) In the event a Member's Pension is required to begin under Section 5.05
while the Member is in active service, such required beginning date
shall be the Member's Annuity Starting Date for purposes of Article 5
and the Member shall receive a late retirement Pension commencing on or
before such required beginning date in an amount determined as if he had
retired on such date. As of each succeeding January 1 prior to the
Member's actual late retirement date (and as of his actual late
retirement date), the Member's Pension shall be recomputed to reflect
additional accruals. The Member's recomputed Pension shall then be
reduced by the Equivalent Actuarial Value of the total payments of his
late retirement Pension made with respect to Suspendible
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Months of continued employment which were paid prior to each such
recomputation to arrive at the Member's late retirement Pension;
provided that no such reduction shall reduce the Member's late retirement
Pension below the amount of late retirement Pension payable to the
Member prior to the recomputation of such Pension.
4.03 Early Retirement
(a) A Member who has not reached his Normal Retirement Date but who has
reached his 60th birthday and whose Period of Service is not less than
15 years shall be retired from service on an early retirement Pension on
the first day of the calendar month after the Committee receives his
written application to retire.
(b) The early retirement Pension shall be a deferred Pension beginning on
the Member's Normal Retirement Date and, subject to the provisions of
Section 5.01, shall be equal to his Accrued Benefit. Nevertheless, the
Member may elect to receive an early retirement Pension beginning on the
first day of any calendar month after satisfying the Early Retirement
eligibility requirements before his Normal Retirement Date. In that
case, the Member's Pension shall be equal to the deferred Pension
reduced by 1/180 for each month that the date of commencement of such
early retirement pension precedes the Member's Normal Retirement Date.
4.04 Vesting
(a) A Member shall be 100 percent vested in, and have a nonforfeitable right
to, his Accrued Benefit upon completion of a five year Period of
Service. In addition, any Member who terminates prior to January 1,
1994 but after the Effective Date of Restatement shall be 100 percent
vested in his Accrued Benefit if he has completed five Plan Years during
each of which he has earned 1,000
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Hours of Service. If the Member's employment with the Employer is
subsequently terminated for reasons other than retirement or death, he
shall be eligible for a vested Pension after the Committee receives
his written application for the Pension.
(b) The vested Pension shall begin on the Member's Normal Retirement Date
and, subject to the provisions of Section 5.01, shall be equal to his
Accrued Benefit. Nevertheless, the Participant may elect to have his
vested Pension begin on the first day of any calendar month before his
Normal Retirement Date, in which case the Member's Pension shall be
equal to the Equivalent Actuarial Value of his Accrued Benefit.
4.05 Spouse's Pension
(a) If a married Member:
(i) dies in active service and prior to his Annuity Starting Date
having met the requirements for any Pension, or
(ii) dies after retiring on any Pension, or after terminating service
with entitlement to a vested Pension, but in either case before his
Annuity Starting Date,
a spouse's Pension shall be payable to his surviving spouse for life
provided that he and his spouse have been married throughout the
one-year period ending on the date of his death.
(b) The spouse's Pension shall commence on what would have the Member's
Normal Retirement Date (or the first day of the month following his date
of death, if later). However, the spouse may elect to begin receiving
payments as of the first day of any month following the Member's date of
death and prior to what would have been his Normal Retirement Date.
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(c) The spouse's Pension shall be equal to the amount of benefit the spouse
would have received if the Pension to which the Member was entitled at
his date of death had commenced on his Normal Retirement Date (or the
first day of the month following his date of death, if later) in the
form of a Qualified Joint and Survivor Annuity and the Member had died
immediately thereafter. However, if within the 90 day period prior to
his Annuity Starting Date a Member has elected an optional form of
Pension which provides for monthly payments to his spouse for life in an
amount equal to at least 50% but not more than 100% of the monthly
amount payable under the option for the life of the Member and such
option is of Equivalent Actuarial Value to the Qualified Joint and
Survivor Annuity, such optional form of Pension shall be used for
computing the spouse's Pension instead of the Qualified Joint and
Survivor Annuity. If the spouse elects early commencement in accordance
with paragraph (b) above, the amount of the Pension payable to the
spouse will be based on the amount of early retirement Pension to which
the Member would have been entitled if he had requested benefit
commencement at that earlier date, reduced in accordance with Section
4.03(b). The spouse may elect to receive the Spouse's Pension as a Lump
Sum of Equivalent Actuarial Value.
4.06 Maximum Benefit Limitation
The maximum annual Pension payable to a Member under the Plan shall be
subject to the limitations set forth in Section 415 of the Code and any
regulations issued thereunder. If a Member is a participant in any
qualified defined contribution plan required to be taken into account
for purposes of applying the combined plan limitations contained in
Section 415(e) of the Code, then for any year the sum of the defined
benefit plan fraction and the defined contribution
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plan fraction, as such terms are defined in said Section 415(e), shall
not exceed 1.0. If for any year the foregoing combined plan limitation
would be exceeded, the benefit provided under this Plan shall be reduced
to the extent necessary to meet that limitation.
4.07 Transfers and Employment with an Affiliated Employer
(a) If an Employee (i) becomes employed by the Employer in any capacity
other than as an Employee as defined in Article 1, or (ii) becomes
employed by an Affiliated Employer, or (iii) becomes a Leased Employee,
he shall retain any Benefit Service he has under this Plan. Upon his
later retirement or termination of employment with the Employer or
Affiliated Employer (or upon benefit commencement in the case of a
Leased Employee), any benefits to which the Employee is entitled under
the Plan shall be determined under the Plan provisions in effect on the
date he ceases to be an Employee, and only on the basis of his Benefit
Service accrued while he was an Employee, but including his Compensation
until such retirement or termination of employment.
(b) Subject to the Break in Service provisions of Article 3, in the case of
a person who (i) was originally employed by the Employer in any capacity
other than as an Employee as defined in Article 1, or (ii) was
originally employed by an Affiliated Employer, or (iii) was originally
providing services to the Employer as a Leased Employee, and thereafter
becomes an Employee, upon his later retirement or termination of
employment, the benefits payable under the Plan shall be computed under
the Plan provisions in effect at that time, and only on the basis of the
Benefit Service accrued while he is an Employee.
4.08 Special Provisions for Benefits Accrued Prior to January 1, 1994
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Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the
accrued benefit determined for the employee under (a) or (b) below:
(a) the employee's accrued benefit determined with respect to the benefit
formula applicable for the plan year beginning on or after January 1,
1994, as applied to the employee's total years of service taken into
account under the plan for the purposes of benefit accruals, or
(b) the sum of:
(i) the employee's accrued benefit as of the last day of the last plan
year beginning before January 1, 1994, frozen in accordance with
Section 1.401(a)(4)-13 of the regulations, and
(ii) the employee's accrued benefit determined under the benefit
formula applicable for the plan year beginning on or after January
1, 1994, as applied to the employee's years of service credited to
the employee for plan years beginning on or after January 1, 1994,
for purposes of benefit accruals.
A section 401(a)(17) employee means an employee whose current accrued
benefit as of a date on or after the first day of the first plan year
beginning on or after January 1, 1994, is based on compensation for a
year beginning prior to the first day of the first plan year beginning
on or after January 1, 1994, that exceeded $150,000.
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ARTICLE 5. PAYMENT OF PENSIONS
5.01 Automatic Form of Payment
(a) If the Member is not married on his Annuity Starting Date and has not
elected an optional benefit as provided in Section 5.02, his Pension
shall be payable in monthly installments ending with the last monthly
payment before death.
(b) If the Member is married on his Annuity Starting Date, and if he has not
elected an optional form of benefit as provided in Section 5.02, the
Pension payable shall be in the form of a Qualified Joint and Survivor
Annuity of Equivalent Actuarial Value to the Pension otherwise payable,
providing for a reduced Pension payable to the Member during his life,
and after his death providing that one-half of that reduced Pension will
continue to be paid during the life of, and to, the spouse to whom he was
married at his Annuity Starting Date. Notwithstanding the preceding, if
an option described in Section 5.02 provides for payments continuing
after the Member's death for the life of a Beneficiary at a rate of at
least 50% but not more than 100% of the Pension payable for the life of
the Member and if such option, with the spouse to whom the Member is
married on his Annuity Starting Date named as Beneficiary, would be of
greater actuarial value than the joint and survivor annuity described
above, such option with such spouse as Beneficiary shall be the Qualified
Joint and Survivor Annuity.
(c) In any case, a lump sum payment of Equivalent Actuarial Value shall be
made in lieu of all benefits if the present value of the Pension payable
to or on the behalf of the Member determined as of the Member's Normal
Retirement Date or actual termination of service, if later, amounts to
$3,500 or less. In determining the amount of a lump sum payment payable
under this paragraph, the interest rate to be used shall be equal to
that which would be used by the Pension
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Benefit Guaranty Corporation for valuing immediate or deferred
annuities, whichever is applicable, for single employer plans that
terminate on the first day of the Plan Year in which the Annuity
Starting Date occurs. The lump sum payment shall be made as soon as
administratively practicable following the Member's termination of
service or death, but in any event prior to the date his Pension
payments would have otherwise commenced. In the event a Member is not
entitled to any Pension upon his termination of employment, he shall be
deemed cashed-out under the provisions of this paragraph (d) as of the
date he terminated service.
5.02 Optional Forms of Payment
Any Member may, subject to the provisions of Section 5.03, elect to
convert the Pension otherwise payable to him into an optional benefit of
Equivalent Actuarial Value, as provided in one of the options named
below.
OPTION 1. A Pension payable for the Member's life, with no Pension
payable after his death.
OPTION 2. A modified Pension payable during the Member's life, and
after his death payable during the life of, and to, the
spouse to whom he was married at the time of his benefit
commencement.
OPTION 3. A modified Pension payable during the Member's life; if the
Member dies within 10 years of his Annuity Starting Date,
the balance of those monthly payments shall be paid to the
Beneficiary named by him when he elected the option;
provided that if the Beneficiary does not survive the 10
year period, a lump sum payment of Equivalent Actuarial
Value to the remaining payments shall be paid to the estate
of the last to survive of the Member and the Beneficiary.
OPTION 4. A single lump sum.
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If a Member dies after Pension payments have commenced, any payments
continuing on to his spouse or Beneficiary shall be distributed at least
as rapidly as under the method of distribution being used as of the
Member's date of death.
5.03 Election of Options
(a) A married Member's election of any option shall only be effective if
Spousal Consent to the election is received by the Committee, unless:
(i) the option provides for monthly payments to his spouse for life
after the Member's death, in an amount equal to at least 50% but not
more than 100% of the monthly amount payable under the option to the
Member, and
(ii) the option is of Equivalent Actuarial Value to the Qualified
Joint and Survivor Annuity.
(b) The Employer shall furnish to each Member, no less than 30 days and no
more than 90 days, before his Annuity Starting Date a written
explanation in nontechnical language of the terms and conditions of the
Pension payable to the Member in the normal and optional forms described
in Sections 5.01 and 5.02. Such explanation shall include a general
description of the eligibility conditions for, and the material features
and relative values of, the optional forms of Pensions under the Plan,
any rights the Member may have to defer commencement of his Pension, the
requirement for Spousal Consent as provided in paragraph (a) above, and
the right of the Member to make, and to revoke, elections under Section
5.02. An election under Section 5.02 shall be made on a form provided by
the Committee and may be made during the 90-day period ending on the
Member's Annuity Starting Date, but not prior to the date the Member
receives the written explanation described in this paragraph (b).
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(c) An election of an option under Section 5.02 may be revoked on a form
provided by the Committee, and subsequent elections and revocations may
be made at any time and from time to time during the 90-day election
period. An election of an optional benefit shall be effective on the
Member's Annuity Starting Date. A revocation of any election shall be
effective when the completed form is filed with the Committee. If a
Member who has elected an optional benefit dies before the date the
election of the option becomes effective, the election shall be revoked
except as provided in Section 4.06(c). If the Beneficiary designated
under an option dies before the date the election of the option becomes
effective, the election shall be revoked.
5.04 Commencement of Payments
(a) Except as otherwise provided in Article 4 or this Article 5, payment of a
Member's Pension shall begin as soon as administratively practicable
following the latest of (i) the Member's 65th birthday, (ii) the fifth
anniversary of the date on which he became a Member, or (iii) the date
he terminates service with the Employer, (but not more than 60 days
after the close of the Plan Year in which the latest of (i), (ii) or
(iii) occurs).
5.05 Distribution Limitations
Notwithstanding any other provision of this Article 5, all distributions
from this Plan shall conform to the regulations issued under Section
401(a)(9) of the Code, including the minimum distribution incidental
benefit requirement of Sec. 1.402(a)(9)-2 of the proposed regulations.
Further, such regulations shall override any plan provision that is
inconsistent with Section 401(a)(9) of the Code.
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5.06 Direct Rollover of Certain Distributions
(a) This Subsection applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Subsection, a
distributee may elect, at the time and in the manner prescribed by the
Retirement Board, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) The following definitions apply to the terms used in this Subsection:
(i) An "eligible rollover distribution" is any distribution of all or
any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income.
(ii) An "eligible retirement plan" is an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
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(iii) A "distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
(iv) A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
(c) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under section 1.411(a)-11(c) of
the Income Tax Regulations is given, provided that:
(i) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular
distribution option), and
(ii) the participant, after receiving the notice, affirmatively elects
a distribution.
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ARTICLE 6. CONTRIBUTIONS
6.01 Employer's Contributions
It is the intention of the Employer to continue the Plan and make the
contributions that are necessary to maintain the Plan on a sound
actuarial basis and to meet the minimum funding standards prescribed by
law. However, subject to the provisions of Article 10, the Employer may
discontinue its contributions for any reason at any time. Any
forfeitures shall be used to reduce the Employer's contributions
otherwise payable.
6.02 Return of Contributions
(a) If a contribution is conditioned on initial qualification of the Plan
under Section 401(a) of the Code, and if the Commissioner of Internal
Revenue, on timely application made after the establishment of the Plan,
determines that the Plan is not initially so qualified, or refuses, in
writing, to issue a determination as to whether the Plan is so
qualified, said contribution shall be returned to the Employer without
interest. The return shall be made within one year after the date of the
final determination of the denial of qualification. The provisions of
this paragraph (a) shall apply only if the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted, or
such later date as the Secretary of the Treasury may prescribe.
(b) The Employer's contributions to the Plan are conditioned upon their
deductibility under Section 404 of the Code. If all or part of the
Employer's deductions for contributions to the Plan are disallowed by
the Internal Revenue Service, the portion of the contributions to which
that disallowance applies shall be returned to the Employer without
interest, but reduced by any
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investment loss attributable to those contributions. The return shall be
made within one year after the date of the disallowance of deduction.
(c) The Employer may recover without interest the amount of its
contributions to the Plan made on account of a mistake in fact, reduced
by any investment loss attributable to those contributions, if recovery
is made within one year after the date of those contributions.
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ARTICLE 7. ADMINISTRATION OF PLAN
7.01 Named Fiduciary and Administrator
The Employer shall be the "named fiduciary" within the meaning of Section
402(a) of ERISA, and shall carry out the duties of the "administrator"
of the Plan as imposed under ERISA.
7.02 Responsibility
The Employer shall appoint a Pension Committee or "Committee" of not
less than one person which shall be responsible for providing for the
general administration of the Plan and for carrying out the provisions
of the Plan. Subject to the limitations of the Plan, the Committee from
time to time shall establish rules for the administration of the Plan.
The Committee shall have discretionary authority to interpret the Plan
(including but not limited to, determination of an individual's
eligibility for Plan participation, the right and amount of any benefit
payable under the Plan and the date on which any individual ceases to be
a Member). The determination of the Committee as to the interpretation
of the Plan or any disputed question shall be conclusive and final to
the extent permitted by applicable law. In providing for the
administration of the Plan, the Committee may delegate responsibilities
for the operation and administration of the Plan by written document
filed with the Plan records.
7.03 Meetings
The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time determine.
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7.04 Action of Majority
Any act which the Plan authorizes or requires the Committee to do may be
done by a majority of its members. The action of that majority
expressed from time to time by a vote at a meeting or in writing without
a meeting shall constitute the action of the Committee and shall have
the same effect for all purposes as if assented to by all members of the
Committee at the time in office.
7.05 Compensation and Bonding
No member of the Committee shall receive any compensation from the Plan
for his services as such and no bond or other security need be required
of him in that capacity in any jurisdiction.
7.06 Establishment of Rules
Subject to the limitations of the Plan, the Committee from time to time
shall establish rules for the administration of the Plan and the
transaction of its business.
7.07 Prudent Conduct
The members of the Committee shall use that degree of care, skill,
prudence and diligence that a prudent man acting in a like capacity and
familiar with such matters would use in a similar situation.
7.08 Actuary
As an aid to the Committee in fixing the rate of contributions payable
to the Plan, the actuary designated by the Committee shall make annual
actuarial valuations of the contingent assets and
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Page 34
liabilities of the Plan, and shall submit to the Committee the rates of
contribution which he recommends for use.
7.09 Maintenance of Accounts
The Committee shall maintain accounts showing the fiscal transactions of
the Plan and shall keep in convenient form such data as may be necessary
for actuarial valuations of the Plan.
7.10 Service in More than One Fiduciary Capacity
Any individual, entity or group of persons may serve in more than one
fiduciary capacity with respect to the Plan and/or the funds of the Plan.
7.11 Limitation of Liability
The Employer, the Directors of the Employer, the members of the
Committee, and any officer, employee or agent of the Employer shall not
incur any liability individually or on behalf of any other individuals
or on behalf of the Employer for any act, or failure to act, made in
good faith in relation to the Plan or the funds of the Plan. However,
this limitation shall not act to relieve any such individual or the
Employer from a responsibility or liability for any fiduciary
responsibility, obligation or duty under Part 4, Title I of ERISA.
7.12 Indemnification
The members of the Committee, Directors, officers, employees and agents
of the Employer shall be indemnified against any and all liabilities
arising by reason of any act, or failure to act, in relation to the Plan
or the funds of the Plan, including, without limitation, expenses
reasonably incurred in the defense of any claim relating to the Plan or
the funds of the Plan, and amounts
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paid in any compromise or settlement relating to the Plan or the funds
of the Plan, except for actions or failures to act made in bad faith.
The foregoing indemnification shall be from the funds of the Plan to the
extent of those funds and to the extent permitted under applicable law;
otherwise from the assets of the Employer.
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ARTICLE 8. MANAGEMENT OF FUNDS
8.01 Funding Agent
All the funds of the Plan shall be held by a Funding Agent appointed
from time to time by the Board of Directors under a trust instrument
or an insurance or annuity contract adopted, or as amended, by the
Employer for use in providing the benefits of the Plan and paying its
expenses not paid directly by the Employer. The Employer shall have no
liability for the payment of benefits under the Plan nor for the
administration of the funds paid over to the Funding Agent.
8.02 Exclusive Benefit Rule
Except as otherwise provided in the Plan, no part of the corpus or
income of the funds of the Plan shall be used for, or diverted to,
purposes other than for the exclusive benefit of Members and other
persons entitled to benefits under the Plan, before the satisfaction
of all liabilities with respect to them. No person shall have any
interest in or right to any part of the earnings of the funds of the
Plan, or any right in, or to, any part of the assets held under the
Plan, except as and to the extent expressly provided in the Plan.
However, expenses of the Plan may be paid from the Plan's assets to
the extent not paid by the Employer.
8.03 Appointment of Investment Manager
The Employer may, in its discretion, appoint one or more investment
managers (within the meaning of Section 3(38) of ERISA) to manage
(including the power to acquire and dispose of) all or part of the
assets of the Plan, as the Employer shall designate. In that event,
authority over and responsibility for the management of the assets so
designated shall be the sole responsibility of that investment manager.
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ARTICLE 9. GENERAL PROVISIONS
9.01 Nonalienation
Except as required by any applicable law, no benefit under the Plan
shall in any manner be anticipated, assigned or alienated, and any
attempt to do so shall be void. However, payment shall be made in
accordance with the provisions of any judgment, decree, or order which:
(a) creates for, or assigns to, a spouse, former spouse, child or other
dependent of a Member the right to receive all or a portion of the
Member's benefits under the Plan for the purpose of providing child
support, alimony payments or marital property rights to that spouse,
child or dependent,
(b) is made pursuant to a State domestic relations law,
(c) does not require the Plan to provide any type of benefit, or any option,
not otherwise provided under the Plan, and
(d) otherwise meets the requirements of Section 206(d) of ERISA, as amended,
as a "qualified domestic relations order", as determined by the
Committee.
If the present value of any series of payments meeting the criteria set
forth in clauses (a) through (d) above amounts to $3,500 or less, a lump
sum payment of Equivalent Actuarial Value, determined in the manner
described in Section 5.01(d), shall be made in lieu of the series of
payments.
9.02 Conditions of Employment Not Affected by Plan
The establishment of the Plan shall not confer any legal rights upon any
Employee or other person for a continuation of employment, nor shall it
interfere with the rights of the Employer
<PAGE>
Page 38
to discharge any Employee and to treat him without regard to the
effect which that treatment might have upon him as a Member or potential
Member of the Plan.
9.03 Facility of Payment
If the Committee shall find that a Member or other person entitled to
a benefit is unable to care for his affairs because of illness or
accident or because he is a minor, the Committee may direct that any
benefit due him, unless claim shall have been made for the benefit by
a duly appointed legal representative, be paid to his spouse, a child,
a parent or other blood relative, or to a person with whom he resides.
Any payment so made shall be a complete discharge of the liabilities
of the Plan for that benefit.
9.4 Information
Each Member or other person entitled to a benefit, before any benefit
shall be payable to him or on his account under the Plan, shall file
with the Committee the information that it shall require to establish
his rights and benefits under the Plan.
9.05 Top-Heavy Provisions
(a) The following definitions apply to the terms used in this Section:
(i) "applicable determination date" means the last day of the later of
the first Plan Year or the preceding Plan Year;
(ii) "top-heavy ratio" means the ratio of (A) the present value of the
cumulative Accrued Benefits under the Plan for key employees to
(B) the present value of the cumulative Accrued Benefits under
the Plan for all key employees and non-key employees; provided,
however, that if an individual has performed services for the
Employer at any time during
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the 5-year period ending on the applicable determination date,
regardless of whether such employee earned compensation during
such period, any accrued benefit for such individual (and the
account of such individual) shall be taken into account;
(iii) "applicable valuation date" means the date within the preceding
Plan Year as of which annual Plan costs are or would be computed
for minimum funding purposes;
(iv) "key employee" means an employee who is in a category of employees
determined in accordance with the provisions of Section 416(i)(1)
and (5) of the Code and any regulations thereunder, and, where
applicable, on the basis of the Employee's remuneration from the
Employer or an Affiliated Employer;
(v) "non-key employee" means any employee who is not a key employee;
(vi) "average remuneration" means the average annual remuneration of a
Member for the five consecutive years of his Eligibility Service
after December 31, 1983 during which he received the greatest
aggregate remuneration from the Employer or an Affiliated Employer,
excluding any remuneration for service after the last Plan Year
with respect to which the Plan is top-heavy;
(vii) "required aggregation group" means each other qualified plan of
the Employer or an Affiliated Employer (including plans that
terminated within the five-year period ending on the determination
date) in which there are members who are key employees or which
enables the Plan to meet the requirements of Section 401(a)(4) or
410 of the Code; and
(viii) "permissive aggregation group" means each plan in the required
aggregation group and any other qualified plan(s) of the Employer
or an Affiliated Employer in which all members are non-key
employees, if the resulting aggregation group continues to meet
the requirements of Sections 401(a)(4) and 410 of the Code.
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(b) For purposes of this Section, the Plan shall be "top-heavy" with respect
to any Plan Year if as of the applicable determination date the
top-heavy ratio exceeds 60 percent. The top-heavy ratio shall be
determined as of the applicable valuation date in accordance with
Section 416(g)(3) and (4)(B) of the Code on the basis of the Unisex
Pension 1984 Mortality Table and an interest rate of 5 percent per
year compounded annually. For purposes of determining whether the Plan
is top-heavy, the present value of Accrued Benefits under the Plan
will be combined with the present value of accrued benefits or account
balances under each other plan in the required aggregation group, and,
in the Employer's discretion, may be combined with the present value
of accrued benefits or account balances under any other qualified
plan(s) in the permissive aggregation group. The accrued benefit of a
non-key employee under the Plan or any other defined benefit plan in the
aggregation group shall be (i) determined under the method, if any,
that uniformly applies for accrual purposes under all plans maintained
by the Employer or an Affiliated Employer, or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule described in Section
411(b)(1)(C) of the Code.
(c) The following provisions shall be applicable to Members for any Plan
Year with respect to which the Plan is top-heavy:
(i) In lieu of the vesting requirements specified in Section 4.04, a
Member shall be vested in, and have a nonforfeitable right to,
a percentage of his Accrued Benefit determined in accordance
with the provisions of Section 1.01 and subparagraph (ii)
below, as set forth in the following vesting schedule:
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Years of Eligibility Service Percentage Vested
---------------------------- -----------------
Less than 2 years 0%
2 years 20
3 years 40
4 years 60
5 or more years 100
(ii) The Accrued Benefit of a Member who is a non-key employee shall
not be less than two percent of his average remuneration
multiplied by the number of years of his Eligibility Service, not
in excess of 10, during the Plan Years for which the Plan is top-
heavy. That minimum benefit shall be payable at a Member's Normal
Retirement Date.
If payments commence at a time other than the Member's Normal
Retirement Date, the minimum Accrued Benefit shall be of
Equivalent Actuarial Value to that minimum benefit.
(iii) With respect to benefits accruing during any Plan Year beginning
before 1989 for which the Plan is top-heavy, Compensation taken
into account under the Plan may not exceed the first $200,000 of
annual remuneration paid to an Employee for services rendered to
the Employer, as reported on Form W-2.
(iv) The multiplier "1.25" in Sections 415(e)(2)(B)(i) and (3)(B)(i) of
the Code shall be reduced to "1.0", and the dollar amount "$51,875"
in Section 415(e)(6)(B)(i)(I) of the Code shall be reduced to
$41,500".
(d) If the Plan is top-heavy with respect to a Plan Year and ceases to be
top-heavy for a subsequent Plan Year, the following provisions shall be
applicable:
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(i) The Accrued Benefit in any such subsequent Plan Year shall not be
less than the minimum Accrued Benefit provided in paragraph
(c)(ii) above, computed as of the end of the most recent Plan
Year for which the Plan was top-heavy.
(ii) If a Member has completed three years of Eligibility Service on or
before the last day of the most recent Plan Year for which the
Plan was top-heavy, the vesting schedule set forth in paragraph
(c)(i) above shall continue to be applicable.
(iii) If a Member has completed at least two, but less than three,
years of Eligibility Service on or before the last day of the
most recent Plan Year for which the Plan was top-heavy, the
vesting provisions of Section 4.04 shall again be applicable;
provided, however, that in no event shall the vested percentage
of a Member's Accrued Benefit be less than the percentage
determined under paragraph (c)(i) above as of the last day of
the most recent Plan Year for which the Plan was top-heavy.
9.06 Construction
(a) The Plan shall be construed, regulated and administered under ERISA as
in effect from time to time, and the laws of New York, except
where ERISA controls.
(b) The masculine pronoun shall mean the feminine where appropriate, and
vice versa.
(c) The titles and headings of the Articles and Sections in this Plan are
for convenience only. In case of ambiguity or inconsistency, the text
rather than the titles or headings shall control.
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ARTICLE 10. AMENDMENT, MERGER AND TERMINATION
10.1 Amendment of Plan
The Board of Directors reserves the right at any time and from time to
time, and retroactively if deemed necessary or appropriate, to amend in
whole or in part any or all of the provisions of the Plan. However, no
amendment shall make it possible for any part of the funds of the Plan
to be used for, or diverted to, purposes other than for the exclusive
benefit of persons entitled to benefits under the Plan, before the
satisfaction of all liabilities with respect to them. No amendment
shall be made which has the effect of decreasing the Accrued Benefit of
any Member or of reducing the nonforfeitable percentage of the Accrued
Benefit of a Member below the nonforfeitable percentage computed under
the Plan as in effect on the date on which the amendment is adopted or,
if later, the date on which the amendment becomes effective.
Additionally, any Employee with three years of service may elect to have
his nonforfeitable percentage continue to be calculated on the basis of
the Plan's provisions before the amendment.
10.2 Merger or Consolidation
The Plan may not be merged or consolidated with, and its assets or
liabilities may not be transferred to, any other plan unless each person
entitled to benefits under the Plan would, if the resulting plan were
then terminated, receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.
<PAGE>
Page 44
10.03 Additional Participating Employers
(a) If any company is now or becomes a subsidiary or associated company of
an Employer, the Board of Directors may include the employees of that
company in the membership of the Plan upon appropriate action by that
company necessary to adopt the Plan. In that event, or if any persons
become Employees of an Employer as the result of merger or
consolidation or as the result of acquisition of all or part of the
assets or business of another company, the Board of Directors shall
determine to what extent, if any, credit and benefits shall be granted
for previous service with the subsidiary, associated or other
company, but subject to the continued qualification of the trust for
the Plan as tax-exempt under the Code.
(b) Any subsidiary or associated company may terminate its participation
in the Plan upon appropriate action by it, in which event the funds of
the Plan held on account of Members in the employ of that company
shall be determined by the Committee and shall be applied as provided
in Section 10.04 if the Plan should be terminated, or shall be
segregated by the Funding Agent as a separate trust, pursuant to
certification to the Funding Agent by the Committee, continuing the
Plan as a separate plan for the employees of that company under which
the board of directors of that company shall succeed to all the powers
and duties of the Board of Directors, including the appointment of the
members of the Committee.
10.04 Termination of Plan
The Board of Directors may terminate the Plan for any reason at any
time. In case of termination of the Plan, the rights of Members to
the benefits accrued under the Plan to the date of the termination, to
the extent then funded or protected by law, if greater, shall be
nonforfeitable. The funds of the Plan shall be used for the exclusive
benefit of persons entitled
<PAGE>
Page 45
to benefits under the Plan as of the date of termination, except as
provided in Section 6.02. However, any funds not required to satisfy
all liabilities of the Plan for benefits because of erroneous
actuarial computation shall be returned to the Employer. The
Committee shall determine on the basis of acturial valuation the share
of the funds of the Plan allocable to each person entitled to benefits
under the Plan in accordance with Section 4044 of ERISA, or
corresponding provision of any applicable law in effect at the time.
In the event of a partial termination of the Plan, the provisions of
this Section shall be applicable to the Members affected by that
partial termination.
10.05 Limitations Concerning Highly Compensated Employees
(a) In the event of plan termination, the benefit of any highly
compensated employee (and any highly compensated former employee) is
limited to a benefit that is nondiscriminatory under section 401(a)(4).
(b)(i) Annual payments to an employee described in paragraph (ii) below are
restricted to an amount equal in each year to the payments that would
be made on behalf of the employee under-
(A) A straight life annuity that is the actuarial equivalent of the
accrued benefit and other benefits to which the employee is
entitled under the plan (other than a social security
supplement), and
(B) The amount of the payments that the employee is entitled to
receive under a social security supplement. The restrictions
in this paragraph (b) do not apply, however, if any one of the
following requirements is satisfied-
<PAGE>
Page 46
(1) After payment to an employee described in paragraph (ii)
below of all benefits payable to the employee under the
plan, the value of plan assets equals or exceeds 110 percent
of the value of current liabilities, as defined in Code
Section 412(l)(7).
(2) The value of the benefits payable to the employee under the
plan for an employee described in paragraph (ii) below is
less than 1 percent of the value of current liabilities
before distribution, or
(3) The value of the benefits payable to the employee under
the plan for an employee described in paragraph (ii)
below does not exceed the amount described in Code
Section 411(a)(11)(A) (restrictions on certain mandatory
distributions).
(ii) The employees whose benefits are restricted on distribution include
all highly compensated employees and highly compensated former
employees. In any one year, the total number of employees whose
benefits are subject to restriction under this section can be
limited by the plan to a group of not less than 25 highly
compensated employees and highly compensated former employees. If
the group of affected employees is so limited by the plan, the group
must consist of those highly compensated employees and highly
compensated former employees with the greatest compensation in
the current or any prior year. Plan provisions defining or
altering the group of employees whose benefits are restricted under
this Section 10.05 may be amended at any time without violating Code
Section 411(d)(6).
(iii) "Benefit" defined. For purposes of this Section 10.05, the term
"benefit" includes, among other benefits, loans in excess of the
amounts set forth in section 72(p)(2)(A), any periodic income, any
withdrawal values payable to a living employee, and any death
benefits not provided for by insurance on the employee's life.
<PAGE>
Page 47
(iv) Determination of current liabilities. For purposes of this
Section 10.05, the value of current liabilities is reported on
Schedule B of the employer's most recent, timely filed Form 5500
or Form 5500 C/R.
(v) The value of plan assets and the value of current liabilities
will be determined as of the same date.
(c) If it should subsequently be determined by statute, court decision
acquiesced in by the Commissioner of Internal Revenue, or ruling by the
Commissioner of Internal Revenue, that the provisions of this Section are
no longer necessary to qualify the Plan under the Code, this Section
shall be ineffective without the necessity of further amendment to the
Plan.
<PAGE>
Exhibit 10.13
DOUBLE ENVELOPE CORPORATION
MANAGEMENT SUPPLEMENTAL RETIREMENT AGREEMENT
THIS AGREEMENT, dated for identification on the 1st day of January,
1990, by and between DOUBLE ENVELOPE CORPORATION ("Employer") and WILLIAM C.
BRITTS ("Employee");
WITNESSETH THAT:
WHEREAS, employer sponsors the "Employees' Retirement Plan of Double
Envelope Corporation" (the "Pension Plan"); and
WHEREAS, Employee is a participant in the Pension Plan; and
WHEREAS, as of January 1, 1989, the Pension Plan was amended and
restated; and
WHEREAS, some of the amendments incorporated in the amended and restated
Pension Plan resulted in a diminution of benefits to Employee; and
WHEREAS, in consideration of Employee's past and future service to
Employer, Employer desires to provide Employee with supplemental benefits to
ameliorate the effect of the aforesaid diminution of benefits;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged by both parties, IT IS AGREED:
1. Commencing upon the date that retirement or death benefits under
the Pension Plan are first paid for Employee's
<PAGE>
account at the Employee's normal retirement, early retirement, disability
retirement or death (hereinafter inclusively referred to as "Benefit
Commencement Date") as those terms are defined in the 1989 Plan (as
hereinafter defined), as amended from time to time, and continuing for so
long as benefits are payable for Employee's account under the Pension Plan,
the Employer will supplement the Employee's retirement and death benefits
from the Pension Plan with an amount equal to the amount by which (1) the
payments which Employee would have received from the Pension Plan had the
Pension Plan in effect as of December 31, 1988, ("1988 Plan") remained in
effect until Employee's Benefit Commencement Date, exceeds (2) the greater
of (i) the payments which the Employee, in fact, is entitled to from the
Pension Plan, as it may be amended from time to time, or (ii) the payments
which the Employee is or would have been entitled to as of his Benefit
Commencement Date from the Pension Plan, as amended and restated as of
January 1, 1989 ("1989 Plan").
To this end, benefits payable under this Agreement shall be determined
in accordance with the 1988 plan, reduced by any benefits payable from the
1989 Plan, unless such 1989 Plan produces a larger benefit. All benefits
payable hereunder shall be the Acturarial Equivalent of the normal form of
payment specified in the 1988 Plan. Any factors used to determine an
Actuarial Equivalent benefit shall also be determined by the 1988 Plan.
The Employee's Board of Directors will select the method of payment,
which may be lump-sum, single-life annuity, joint and
- 2 -
<PAGE>
survivor annuity with spouse, or any other method. In the event the Board of
Directors fails to select a method of payment before the Employee's Benefit
Commencement Date, it shall be deemed to have selected the same method,
payment duration and form as Employee elects to receive under the Pension
Plan.
The Employer shall have the right to prepay the commuted value,
determined on an Actuarially Equivalent basis, of benefits in part or in full
at any time. Benefits not paid in the normal form, as provided in the 1989
Plan will be the Actuarial Equivalent of the normal form.
2. Payments may be made to the person entitled to benefits
hereunder, to his legal representative, to an adult residing in the same
household, to a trustee for the benefit of such person, or to such person's
benefit, and the receipt of any of the foregoing shall constitute a full
acquittance of Employer for such payment.
3. Nothing herein shall constitute an implied or express agreement
of employment of Employee by Employer.
4. Employee's rights and benefits hereunder may not be assigned.
Any purported assignment shall be void AB INITIO.
5. This Agreement shall terminate and Employee shall have no further
rights hereunder nor shall Employer have any obligations hereunder (i) in the
event Employee voluntarily terminates his employment with Employer except
upon early, normal or disability retirement under the Pension Plan, as
amended, or (ii) in
- 3 -
<PAGE>
the event Employee is discharged by Employer for theft, embezzlement or fraud
against Employer.
6. Employer may discontinue this Agreement at any time and for any
reason. Unless this Agreement shall be cancelled pursuant to the provisions
of Section 5, above, any cancellation by Employer shall be prospective only,
to the end that upon Employee's Benefit Commencement Date, Employee shall be
entitled to begin receiving benefits hereunder, if any are due, based upon
the amount, if any, by which accrued benefits under the 1988 Pension Plan
would exceed the accrued benefits under the 1989 Pension Plan, both computed
as of the date of cancellation of this Agreement.
7. Notwithstanding any provision herein to the contrary, if Employee
is or becomes entitled to "Cash Benefits" from Employer upon retirement
pursuant to an employment agreement, Cash Benefits will, for purposes of this
Agreement and for so long as they are paid, be deemed to be payments to which
Employee is in fact entitled under the Pension Plan as well as payment to
which Employee would be entitled, as of the Benefit Commencement Date, from
the 1989 Plan.
8. Employee acknowledges that Employer is under no obligation to set
aside or fund its obligations hereunder in advance of the date actual
payments are required to be made. Employee further acknowledges that
Employer's obligation hereunder constitutes an unsecured promise to pay
Employee on the terms and conditions herein.
- 4 -
<PAGE>
9. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia. It constitutes the entire
agreement of the parties as to the subject matter herein and may not be
amended except in writing. No waiver of any breach or default shall
constitute a waiver of any other or subsequent breach of default.
WITNESS our signatures:
EMPLOYER:
Double Envelope Corporation
By /s/
--------------------------
Its President
EMPLOYEE:
/s/
--------------------------[SEAL]
- 5 -
<PAGE>
THE NATIONAL FIBERSTOK CORPORATION
401 (K) SAVINGS PLAN
(January 1, 1996 Restatement)
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . 20
2.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Participation. . . . . . . . . . . . . . . . . . . . . . . . 20
2.3 Beneficiary Designation. . . . . . . . . . . . . . . . . . . 21
2.4 Notification of Individual Account Balance . . . . . . . . . 22
ARTICLE III CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 23
3.1 Employee Pre-Tax and Post-Tax Contributions. . . . . . . . . 23
3.2 Employer Matching Contributions. . . . . . . . . . . . . . . 28
3.3 Employer Discretionary Contributions . . . . . . . . . . . . 28
3.4 Rollover Contributions . . . . . . . . . . . . . . . . . . . 28
3.5 Maximum Deductible Contribution. . . . . . . . . . . . . . . 29
3.6 Actual Deferral Percentage Test. . . . . . . . . . . . . . . 29
3.7 Payment of Contributions to Trustee. . . . . . . . . . . . . 33
3.8 Participant Investment Direction . . . . . . . . . . . . . . 33
3.9 Matching Contribution Percentage Test. . . . . . . . . . . . 34
3.10 Multiple Use Restrictions. . . . . . . . . . . . . . . . . . 36
ARTICLE IV ALLOCATIONS TO INDIVIDUAL ACCOUNTS. . . . . . . . . . . . 37
4.1 Individual Accounts. . . . . . . . . . . . . . . . . . . . . 37
4.2 Allocation of Employee Pre-Tax and Post-Tax Contributions. . 37
4.3 Allocation of Employer Matching Contributions. . . . . . . . 38
4.4 Allocation of Employer Discretionary Contributions . . . . . 38
4.5 Allocation of Adjustment . . . . . . . . . . . . . . . . . . 38
4.6 (RESERVED) . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7 Equitable Allocations. . . . . . . . . . . . . . . . . . . . 40
4.8 Maximum Additions. . . . . . . . . . . . . . . . . . . . . . 40
4.9 Multiple Plan Participation. . . . . . . . . . . . . . . . . 42
ARTICLE V DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 44
5.1 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.2 Death Before Retirement or Termination of Employment . . . . 44
5.3 Termination of Employment. . . . . . . . . . . . . . . . . . 45
5.4 Method of Payment. . . . . . . . . . . . . . . . . . . . . . 49
5.5 Benefits to Minors and Incompetents. . . . . . . . . . . . . 49
5.6 Payment of Benefits. . . . . . . . . . . . . . . . . . . . . 50
5.7 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI LOANS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . 54
6.1 Loans to Participants. . . . . . . . . . . . . . . . . . . . 54
6.2 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . 57
- i -
<PAGE>
Page
----
ARTICLE VII FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.1 Contributions. . . . . . . . . . . . . . . . . . . . . . . . 62
7.2 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VIII FIDUCIARIES . . . . . . . . . . . . . . . . . . . . . . . 64
8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.2 Corporation. . . . . . . . . . . . . . . . . . . . . . . . . 65
8.3 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.4 Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.5 Claims for Benefits. . . . . . . . . . . . . . . . . . . . . 69
8.6 Denial of Benefits - Review Procedure. . . . . . . . . . . . 70
8.7 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.8 Missing Persons. . . . . . . . . . . . . . . . . . . . . . . 72
8.9 Qualified Domestic Relations Orders. . . . . . . . . . . . . 72
ARTICLE IX AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . 75
9.1 Amendment of the Plan. . . . . . . . . . . . . . . . . . . . 75
9.2 Termination of the Plan. . . . . . . . . . . . . . . . . . . 75
ARTICLE X PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN . . . . 77
10.1 Method of Participation. . . . . . . . . . . . . . . . . . . 77
10.2 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XI TOP-HEAVY PROVISIONS. . . . . . . . . . . . . . . . . . . 79
11.1 Determination of Top-Heavy . . . . . . . . . . . . . . . . . 79
11.2 Top-Heavy Definitions. . . . . . . . . . . . . . . . . . . . 81
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 83
12.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 83
12.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . 83
12.3 Administration Expenses. . . . . . . . . . . . . . . . . . . 83
12.4 Participant's's Rights; Acquittance. . . . . . . . . . . . . 83
12.5 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . 84
12.6 Merger, Consolidation or Transfer. . . . . . . . . . . . . . 84
12.7 Mistake of Fact. . . . . . . . . . . . . . . . . . . . . . . 84
12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE XIII ADOPTION OF THE PLAN. . . . . . . . . . . . . . . . . . . 86
- ii -
<PAGE>
INTRODUCTION
Effective January 1, 1992, National Fiberstok Corporation adopted The
National Fiberstok Corporation 401(k) Savings Plan and Trust Agreement (the
"Plan") to provide a system of pre-tax savings and profit sharing with its
employees thru a plan qualified under the Internal Revenue Code. The Plan was
amended several times, most recently by the Third Amendment which was
effective January 1, 1995. Effective January 1, 1996, the Plan is hereby
restated to consolidate the amendments made since its adoption.
It is intended that this Plan and its associated Trust Agreement meet
all the requirements of the Employee Retirement Income Security Act of 1974
and all requirements of Code Sections 401(a) and 401(k), and the Plan shall
be interpreted to comply with those statutes.
Notwithstanding any provision of this Plan, a person whose employment
terminated before January 1, 1996, shall have his rights determined under
this Plan as it read prior to this January 1, 1996 Restatement.
- 1 -
<PAGE>
ARTICLE I
DEFINITIONS
1.1. As used herein, unless otherwise required by the context, the
following words and phrases shall have the meanings indicated:
ACTUAL DEFERRAL PERCENTAGE - (a) (1) For each Plan Year, the average of
the ratios, calculated separately for each Eligible Employee in a specified
group, of (A) the amount of Employee Pre-Tax Contributions under Section
3.1(a) (which are attributable to Deferral Compensation that would have been
received by the Employee during such Plan Year but for his salary reduction
agreement) which are allocated to the Individual Account of an Eligible
Employee as of a date within such Plan year to (B) the Testing Compensation
of such Eligible Employee while an Eligible Employee for such Plan Year.
(2) Except as provided in regulations issued by the Secretary of
the Treasury, Actual Deferral Percentage shall be determined without regard
to whether any Pre-Tax Contributions are distributed under Section 3.1(c) (2)
(A). When calculating Actual Deferral Percentage for a Highly Compensated
Employee, all cash or deferred arrangements maintained by the Employer or an
Affiliate in which such Employee participates (other than those that may not
be permissively aggregated) shall be treated as one arrangement. All
elective contributions that are made under two or more plans that are
aggregated for purposes
- 2 -
<PAGE>
of Code Section 401(a)(4) or 410(b) (other than 410(b)(2)(A)(ii)) are to be
treated as made under a single plan.
(b) (1) In the case of a Highly Compensated Employee who is either
a 5% owner or one of the ten most highly compensated Employees and is thereby
subject to the family aggregation rules of Code Section 414(q) (6), the
Actual Deferral Percentage for the family group (which consists of a highly
Compensated Employee described in this sentence and his HC Family Members and
is treated as one Highly Compensated Employee) is determined by combining the
Employee Pre-Tax Contributions and Testing Compensation of all eligible HC
Family Members with those of the Highly Compensated Employee. Except to the
extent taken into account in the preceding sentence, the Employee Pre-Tax
Contributions and Testing Compensation of all HC Family Members are
disregarded in determining the Actual Deferral Percentages for the groups of
Highly Compensated Employees and non-highly compensated employees.
(2) For purposes of applying the dollar limit on Testing
Compensation, the family group described in paragraph (1) will be treated as
a single Highly Compensated Employee with a single Testing Compensation, and
the dollar limit will be allocated among the members of the family group in
proportion to each member's individual Testing Compensation. Solely for
purposes of the Testing Compensation rule in this paragraph (2), the term "HC
Family Member" shall include only the spouse of the employee and any lineal
descendants of the employee
- 3 -
<PAGE>
who have not attained age 19 before the close of the Plan Year in question.
(c) This definition shall be interpreted in accordance with
Treasury Regulations at Section 1.401(k)-1(b) and Code Section 401(k)(3), the
provisions of which are incorporated herein by reference.
ADJUSTMENT - The net increases and decreases in the value of an
Investment Option within the Fund during a Plan Year or other specified
period. Such increases and decreases shall include such items as realized or
unrealized investment gains or losses, investment income, and may include
expenses of administering the Fund and the Plan.
AFFILIATE - An organization which is not an Employer, but which must be
considered together with an Employer under Code Sections 414(b), (c), (m) or
(o).
ALLOCATION COMPENSATION - The Section 415 Compensation paid by an
Employer to a Participant during a Plan Year. Subject to the OBRA '93 annual
compensation limit under the definition of Section 415 Compensation,
Allocation Compensation shall also include all compensation which was not
included in a Participant's Section 415 Compensation during the Plan Year
because it was an Employee Pre-Tax Contribution under this Plan or because it
was a pre-tax salary reduction contribution to a Code Section 125 cafeteria
plan.
- 4 -
<PAGE>
BENEFICIARY - Any person designated by a Participant under Section 2.3
to receive such benefits as may become payable hereunder after the death of
such Participant.
BOARD - The Board of Directors of the Corporation.
CODE - The Internal Revenue Code of 1986, as amended.
COMMITTEE - The administrative committee provided for in Section 8.4.
CONTRIBUTIONS - Payments as provided herein by the Employer or
Participant to the Trustee for the purpose of providing the benefits under
this Plan.
CORPORATION - National Fiberstok Corporation, or any successor thereto.
The Corporation is the sponsor, named Fiduciary, and plan administrator of
the Plan for purposes of ERISA as it relates to the employees of each
Employer.
CURRENT BALANCE - In regard to a Participant's Individual Account or any
sub-Account thereof, as of any date, the Account balance as of the
immediately preceding Valuation Date, plus any Employee Pre-Tax, Employee
Post-Tax and Rollover Contributions made to the Fund since such Valuation
Date on behalf of such Participant, reduced by any distributions made to such
Participant since such Valuation Date.
DEFERRAL COMPENSATION - The basic compensation paid to an Employee by
the Employer for his services before any reduction for Employee Pre-Tax or
Post-Tax Contributions or contributions to a Code Section 125 cafeteria plan,
including overtime, bonuses and commissions, and excluding tips and taxable
or non-taxable
- 5 -
<PAGE>
fringe benefits including, but not limited to, employee loans, life
insurance, relocation expenses or personal use of company vehicles.
DISABLED - A Participant is considered Disabled when he is determined by
the Committee to have a physical or mental condition which is expected to be
permanent and which renders the Participant incapable of continuing as an
Employee.
EFFECTIVE DATE - The effective date of the Plan is January 1, 1992. The
effective date of this Restatement is January 1, 1996, except as otherwise
set forth herein.
ELIGIBLE EMPLOYEE - An Employee who satisfied the participation
requirements of Section 2.1.
EMPLOYEE - Any person employed by the Employer, excluding (1)
independent contractors, (2) any person who is covered by a collective
bargaining agreement where such agreement provides for a different retirement
plan, or where no provision is made for any retirement plan after good faith
bargaining between the Employer and employee representatives and (3) any
person who is excluded from participation hereunder by the terms of his
Employer's adoption of this Plan. No person who is a leased employee of an
employer within the meaning of Code Section 414(n), or who receives
compensation solely for service as a member of the Board, shall be eligible
to participate in this Plan.
EMPLOYEE PRE-TAX ACCOUNT - That portion of a Participant's Individual
Account attributable to the Employee
- 6 -
<PAGE>
Pre-Tax Contributions allocated to such Participant under Section 4.2(a) and
the Participant's proportionate share of any Adjustment attributable to his
Employee Pre-Tax Account.
EMPLOYEE PRE-TAX CONTRIBUTIONS - Contributions made to the Plan by the
Employer under Section 3.1(a) pursuant to a salary reduction agreement
entered into between the Employer and the Participant.
EMPLOYEE POST-TAX ACCOUNT - That portion of a Participant's Individual
Account attributable to the Employee Post-Tax Contributions allocated to such
Participant under Section 4.2(b) and the Participant's proportionate share of
any Adjustment attributable to his Employee Post-Tax Account.
EMPLOYEE POST-TAX CONTRIBUTIONS - Contributions made to the Plan by the
Participant under Section 3.1(d) pursuant to a voluntary contribution
agreement entered into between the Employer and the Participant.
EMPLOYER - Collectively or individually as the context may indicate, the
Corporation and any other entity which (1) must be considered together with
the Corporation under Code Section 414(b), (c) or (m), (2) the Board shall
have authorized to adopt the Plan and (3) by action of its own board of
directors shall have adopted the Plan and become signatory to the Trust
Agreement, or any successor to one or more of such entities.
EMPLOYER DISCRETIONARY ACCOUNT - That portion of a Participant's
Individual Account attributable to the Employer Discretionary Contributions
allocated to such Participant under
- 7 -
<PAGE>
Section 4.4 and the Participant's proportionate share of any Adjustment
attributable to his Employer Discretionary Account.
EMPLOYER DISCRETIONARY CONTRIBUTIONS - Contributions made to the Plan by
the Employer under Section 3.3.
EMPLOYER MATCHING ACCOUNT - That portion of a Participant's Individual
Account attributable to the Employer Matching Contributions allocated to such
Participant under Section 4.3 and the Participant's proportionate share of
any Adjustment attributable to his Employer Matching Account.
EMPLOYER MATCHING CONTRIBUTIONS - Contributions made to the Plan by the
Employer under Section 3.2.
FIDUCIARY - The Corporation, the Employer, the Trustee, the Committee
and any individual, corporation, firm or other entity which assumes, in
accordance with Article VIII, responsibilities of the Corporation, the
Employer, the Trustee or the Committee respecting management of the Plan or
the disposition of its assets.
HIGHLY COMPENSATED EMPLOYEE - (a) an Employee is a Highly Compensated
Employee with respect to a Plan Year if during that Plan Year the Employee
performs services for an Employer and
(1) is a 5-percent owner of the Employer,
(2) receives compensation from the Employer for the Plan Year in
excess of the Code Section 414(q)(1)(B) amount for the Plan Year,
(3) receives compensation from the Employer for the Plan Year in
excess of the Code Section 414 (q)(1)(C) amount
- 8 -
<PAGE>
for the Plan Year and is a member of the top paid group of employees of the
Employer within the meaning of Code Section 414(q)(4), or
(4) is an officer and receives compensation from the Employer for
the Plan Year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A). If no officer satisfies the
compensation requirement for the Plan Year, the highest paid officer for such
Year shall be treated as a Highly Compensated Employee.
(b) For purposes of subsection (a), an Employee's compensation shall be
his Section 415 Compensation for a Plan Year, increased by the amount of his
Employee Pre-Tax Contributions during the Plan Year plus any pre-tax salary
reduction contributions he makes during the Plan Year to any Code Section 125
cafeteria plan sponsored by the Employer.
(c) If an Employee is a family member of either a 5-percent owner
(whether active or former) or a Highly Compensated Employee who is one of the
10 most highly paid employees of the Employer ranked on the basis of
compensation paid by the Employer during the Plan Year, then the family
member and the 5-percent owner or top-ten highly paid employee shall be
aggregated. In such case, the family member and the 5-percent owner or
top-ten highly paid Employee shall be treated as a single Employee receiving
compensation and Plan contributions or benefits equal to the sum of the
compensation and contributions or benefits of the family member and the
5-percent owner or top-ten highly paid
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Employee. For purposes of this subsection, family member includes the spouse,
lineal ascendants and descendants of the Employee or former Employee, and the
spouses of such lineal ascendants and descendants.
(d) The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of employees in the top-paid
group, the number of employees treated as officers and the compensation taken
into account, shall be made in accordance with Code Section 414(q) and T.Reg.
Section 1.414(q)-1T to the extent they are not inconsistent with the method
established in this definition.
HC FAMILY MEMBER - With respect to a Highly Compensated Employee who is
either a 5% owner or one of the ten most highly compensated Employees, the
spouse and the lineal ascendants and descendants (and spouses of such
ascendants and descendants) of any such Highly Compensated Employee.
HOURS OF SERVICE - The sum of:
(a) (1) Each hour of which an employee is paid, or entitled to
payment for the performance of duties for the Employer during the applicable
computation period.
(2) For employees for whom the Employer is not required by law
to maintain records of hours worked, paragraph (1) shall be applied as
follows:
(A) in the case of employees who are paid weekly or
bi-weekly, Hours of Service shall be determined on the basis of 45 hours per
week;
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(B) in the case of employees who are paid semi-monthly, Hours
of Service shall be determined on the basis of 95 hours per semi-monthly
period; and
(C) in the case of employees who are paid monthly, Hours of
Service shall be determined on the basis of 190 hours per month.
(b) Each hour for which an employee is paid or entitled to payment
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty or leave of absence. However, the
determination of hours under this subsection (b) shall be subject to the
following restrictions:
(1) No more than 501 hours shall be credited to an employee
during any single period during which the employee performs no duties
(whether or not such period occurs in a single computation period).
(2) No such hours shall be credited to an employee if payment
is made or due under a plan maintained solely for the purpose of complying
with applicable workers' compensation or unemployment or disability insurance
laws.
(3) Hours shall not be credited for a payment which solely
reimburses an employee for medical or medically related expenses incurred by
the employee.
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(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer provided, however,
that the same hours shall not be credited both under subsection (a) or (b)
above, as the case may be, and under this subsection (c).
(d) (1) Hours of Service shall not include any period during
which the Employee was employed by a predecessor of the Employer, unless the
predecessor's organization maintained the Plan or a predecessor plan. Hours
of Service shall be credited for service in the armed forces of the United
States to the extent required by federal law.
(2) Hours of Service under subsections (a) and (c) above shall
be determined in accordance with Department of Labor Regulations at 29 CFR
Section 2530.200b-2. Hours of Service hereunder shall be credited to the
appropriate computation period in accordance with Department of Labor
Regulations at 29 CFR Section 2530.200b-2(c).
INDIVIDUAL ACCOUNT - The aggregate of a Participant's Employee Pre-Tax
Account, Employee Post-Tax Account, Employer Matching Account, Employer
Discretionary Account and Rollover Account.
INVESTMENT OPTION - Any investment vehicle identified by the
Corporation. The Corporation may change the Investment Options at any time.
Loans to a Participant under Section 6.1 shall constitute a separate
Investment Option for that Participant.
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MATCHING CONTRIBUTION PERCENTAGE - (a) (1) For each Plan Year,
the average of the ratios, calculated separately for each Eligible Employee
in a specified group, of (A) the amount of Employer Matching Contributions
under Section 3.2 and Employee Post-Tax Contributions under Section 3.1(d)
which are allocated to the Employer Matching Account and Employee Post-Tax
Account of an Eligible Employee as of a date within such Plan Year to (B) the
Testing Compensation of such Eligible Employee while an Eligible Employee for
such Plan Year. To the extent permitted by Treasury Regulations at
Section 1.401(m)-1(b), the Corporation may elect to take Employee Pre-Tax
Contributions into account when determining Matching Contribution Percentage.
(2) When calculating Matching Contribution Percentage for a
Highly Compensated Employee, all arrangements subject to Code Section 401(m)
maintained by the Employer or an Affiliate in which such Employee
participates (other than those that may not be permissively aggregated) shall
be treated as one arrangement. All contributions that are made under two or
more plans that are aggregated for purposes of Code Sections 401(a)(4) or
410(b) (other than 410(b)(2)(A)(ii)) are to be treated as made under a single
plan.
(b) the special HC Family Member rules set forth in subsection (b)
of the definition of Actual Deferral Percentage shall also apply in
determining Matching Contribution Percentage.
(c) This definition shall be interpreted in accordance with
Treasury Regulations at Section 1.401(m)-1(a) and Code
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Section 401(m)(2), the provisions of which are incorporated herein by reference.
NORMAL RETIREMENT AGE - Age 65
ONE YEAR BREAK IN SERVICE - (a) A Plan Year during which an Employee
does not complete at least 501 Hours of Service.
(b) Solely to determine whether a One Year Break in Service has
occurred, an Employee who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which would otherwise
have been credited to such Employee but for such absence, or in any case in
which Hours of Service cannot be determined, eight Hours of Service per day
of such absence. In no event shall the number of Hours of Service credited
to an Employee under the preceding sentence exceed 501. For purposes of this
definition, an absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the Employee, (2) by reason of the
birth of a child of the Employee, (3) by reason of the placement of a child
with the Employee in connection with the adoption of such child by the
Employee, or (4) for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service credited
under this subsection (b) shall be credited in the Plan Year in which the
absence begins if the crediting is necessary to prevent a One Year Break in
Service in that Year, or in all other cases in the next following Plan Year.
The Committee may request the Employee to provide satisfactory
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evidence that the absence was caused by one of the purposes listed above. If
in the judgment of the Committee such evidence is not supplied, no Hours of
Service shall be credited under this subsection (b).
(c) Solely to determine whether a One Year Break in Service has
occurred, a Participant on a leave protected under the Family and Medical
Leave Act of 1993 shall receive credit for the Hours of Service which would
otherwise have been credited to such Employee but for such leave.
PARTICIPANT - Any Employee or former Employee who has an Individual
Account balance, and any Employee who has met the participation requirements
of Section 2.1 A Participant shall cease to be a Participant in accordance
with Section 2.2.
PLAN - The National Fiberstok Corporation 401(k) Savings Plan, as
contained herein or as duly amended.
PLAN YEAR - January 1 - December 31.
ROLLOVER ACCOUNT - That portion of a Participant's Individual Account
attributable to his rollover contributions under Section 3.4 and the
Participant's proportionate share of any Adjustment attributable to his
Rollover Account.
SECTION 415 COMPENSATION - (a) An Employee's wages as defined in Code
Section 3401(a) and all other payments of compensation to an Employee by the
Employer or an Affiliate (in the course of their trade or business) for which
the Employer or Affiliate is required to furnish the Employee a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052. Section 415
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Compensation shall be determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)). Section 415 Compensation does not include
Employee Pre-Tax Contributions to this Plan and salary reduction
contributions to a Code Section 125 cafeteria plan.
(b) In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary,
the Section 415 Compensation of each Employee taken into account under the
Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which
is the number of months in the determination period, and the denominator of
which is 12.
Any reference in this plan to the limitation under Code Section
401(a)(17) shall mean the OBRA '93 annual compensation limit set forth in this
definition.
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If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan
Year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before January
1, 1994, the OBRA '93 annual compensation limit is $150,000.
TESTING COMPENSATION - The Section 415 Compensation paid by an
Employer to an Employee for a Plan Year. Subject to the OBRA '93 annual
compensation limit under the definition of Section 415 Compensation, Testing
Compensation may at the election of the Corporation also include all
compensation not otherwise included in a Participant's Section 415
Compensation during the Plan Year because it was an Employee Pre-Tax
Contribution under this Plan or because it was a pre-tax salary reduction
contribution to a Code Section 125 cafeteria plan.
TRUST AGREEMENT - The Trust Agreement for The National Fiberstok
Corporation 401(k) Savings Plan, as entered into between the Employer and the
Trustee under Article VII.
TRUST FUND OR FUND - All funds received by the Trustee together
with all income, profits and increments thereon, and less any expenses or
payments made out of the Trust Fund.
TRUSTEE - Such individual, individuals, financial institution, or
a combination of them as shall be designated in the Trust Agreement to hold
in trust any assets of the Plan for
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the purpose of providing benefits under the Plan, and shall include any
successor trustee to the Trustee initially designated thereunder.
VALUATION DATE - Each March 31, June 30, September 30 and December
31, or such other date as the Committee may determine from time to time. For
all Plan purposes, the Valuation Date for Plan distributions shall be the
Valuation Date immediately preceding the date of such distribution.
YEAR OF SERVICE - (a) For any Employee, a 12 month period
determined under subsection (c) during which the Employee completes 1,000 or
more Hours of Service.
(b) For purposes of eligibility to participate and vesting
periods of employment with an Affiliate which would have constituted a Year
of Service had the Employee been employed by the Employer, and periods of
employment with the Employer or an Affiliate other than as an Employee,
including employment as a leased employee within the meaning of Code Section
414(n), which would have constituted a Year of Service had the Participant
been employed as an Employee, shall be included as if such periods had been
performed for the Employer or as an Employee. Service of an Employee with the
former Double Envelope Corporation or with Diversified Assembly shall be
deemed service with an Affiliate for purposes of this definition.
(c) (1) For purposes of eligibility to participate under
Section 2.1, the 12 month period referenced in subsection (a) shall begin on
the date the Employee first
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completes an Hour of Service. If the Employee fails to earn a Year of Service
during such initial 12 month period, the 12 month period for determining the
Year of Service shall be based on Plan Years starting with the Plan Year in
which occurs the first anniversary of the date he completed his first Hour of
Service.
(2) For all other purposes of this Plan, the 12 month period
referenced in subsection (a) shall be the Plan Year.
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ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY
(a) Any person who was a Participant in this Plan on
December 31, 1995, shall, subject to the provisions of this Plan, remain a
Participant in this Plan on January 1, 1996.
(b) Any Employee not described in subsection (a) shall
become a Participant on the January 1, April 1, July 1 or October 1
coincident with or next following the date he completes a Year of Service and
attains age 21.
2.2 PARTICIPATION
Each Participant may enter into a salary reduction agreement and a
voluntary contribution agreement in accordance with Section 3.1. Each person
who becomes a Participant shall remain a Participant so long as he remains an
Employee or maintains an Individual Account balance. If a Participant
terminates employment with no balance in his Individual Account, he shall
cease being a Participant upon his termination of employment. In the event a
Participant ceases to be an Employee and is later reemployed as an Employee,
he shall once again become a Participant upon his reemployment date, and may
enter into a salary reduction agreement or voluntary contribution agreement
in accordance with Section 3.1.
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2.3 BENEFICIARY DESIGNATION
(a) Upon commencing participation, each Participant shall designate
a Beneficiary and a Contingent Beneficiary on forms furnished by the
Committee. In the absence of any valid designation of Beneficiary or
Contingent Beneficiary the Participant shall be deemed to have designated a
Beneficiary or Beneficiaries determined from the following order of
precedence: (1) spouse; (2) children, in equal shares; (3) his estate. The
meaning of the term "Beneficiary" shall include the meaning of "Contingent
Beneficiary" unless the context clearly indicates otherwise.
(b) The Beneficiary of a married Participant shall be his spouse
unless the Participant designates someone other than his spouse as his
Beneficiary and he files with the Committee his spouse's written consent to
such designation. Such spousal consent shall be on a form approved by the
Committee, shall be irrevocable by the spouse, shall acknowledge the effect
of such designation and be witnessed by a Committee member (or a duly
appointed delegate) or a notary public. The spouse may alternatively execute
an irrevocable general consent that does not identify the designated
Beneficiary and which allows the Participant to make future changes in the
Beneficiary designation without spousal consent. Any such general consent
shall satisfy the requirements of T. Reg. Section 1.401(a)-20 Q&A-31(c).
(c) If an unmarried Participant later marries, or if a married
Participant later remarries, any prior designation
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by such Participant of a Beneficiary other than the spouse he is married to
on his date of death shall be null and void unless consented to by such
spouse in the manner provided in subsection (b).
(d) The interpretation of the Committee which respect to any
Beneficiary designation, subject to applicable law, shall be binding and
conclusive upon all parties, and no person who claims to be a Beneficiary, or
any other person, shall have the right to question any action of the
Committee.
(e) The rights of any spouse or Beneficiary hereunder shall be
subject to the provisions of any qualified domestic relations order within
the meaning of ERISA Section 206(d)(3).
2.4 NOTIFICATION OF INDIVIDUAL ACCOUNT BALANCE
As of each Valuation Date the Committee shall notify each Participant of
the amount of his share in the Adjustments and Contributions for the period
just completed and the balance of his Individual Account.
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ARTICLE III
CONTRIBUTIONS
3.1 EMPLOYEE PRE-TAX AND POST-TAX CONTRIBUTIONS
(a) Pre-Tax Contributions. A Participant may have Employee Pre-Tax
Contributions made to the Plan on his behalf as follows. All such
Contributions shall be made by payroll withholding. A Participant may enter
into a salary reduction agreement with his Employer in which it is agreed
that the Employer will reduce the Participant's Deferral Compensation during
each pay period by a designated percentage and contribute that amount so
determined to the Plan on behalf of the Participant. The Employer may modify
the salary reduction agreement to the extent necessary to insure that (1) the
Actual Deferral Percentage Test of Code Section 401(k) as set forth in
Section 3.6 is met, (2) the excess deferral rules of subsection (c) are met,
or (3) the limitations set forth in Sections 3.5 or 4.8 are not exceeded.
Such Employee Pre-Tax Contributions may be any whole percentage between 1%
and 10% of the Deferral Compensation otherwise payable to the Participant.
The salary reduction agreement of an Employee who becomes eligible to
participate in the Plan shall be effective for the Employee's first pay date
coincident with or next following the January 1, April 1, July 1 or October 1
following his satisfying the eligibility requirements of Section 2.1 and his
proper completion and filing of a salary reduction agreement. Salary
reduction
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agreements must be filed at least 15 days before the pay date as of which
they are to be effective (or upon such shorter notice as may be acceptable to
the Committee).
(b) (1) Each Participant, by written notice filed with the
Committee at least 15 days in advance of the effective date of such notice
(or upon such shorter notice as may be acceptable to the Committee), may
elect to prospectively suspend his salary reduction agreement. Such election
shall become effective for the first pay date coincident with or next
following the expiration of the notice period and shall not have retroactive
effect. If Contributions are suspended hereunder, a Participant may again
sign a salary reduction agreement effective for the first pay date following
any subsequent January 1, April 1, July 1 or October 1, provided he gives 15
days written notice (or such shorter notice as may be acceptable to the
Committee) prior to such pay date.
(2) A Participant may change his salary reduction agreement as of
the first pay date coincident with or next following any January 1, April 1,
July 1 or October 1 by written notice filed with the Committee at least 15
days (or upon such shorter notice as may be acceptable to the Committee)
prior to such pay date.
(3) Amounts contributed by salary reduction shall be remitted to
the Trustee in accordance with Section 3.7. Contributions once elected to be
deferred by a Participant shall be credited to his Employee Pre-Tax Account
under Section 4.2(a).
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(c) Excess deferrals
(1) No participant may have Employee Pre-Tax Contributions made
on his behalf under this Plan in any calendar year which exceed the dollar
limit amount specified by the Secretary of the Treasury for purposes of Code
Section 402(g)(1). For purposes of the preceding sentence, Pre-Tax
Contributions are deemed made as of the pay date for which the salary is
deferred, regardless of when the contributions are actually made to the Trust
Fund.
(2) If in any calendar year the aggregate of a Participant's
Employee Pre-Tax Contributions made on his behalf under this Plan, plus his
other elective deferrals under any other qualified cash or deferred
arrangement (as defined in Code Section 401(k)) maintained by any sponsor,
under any simplified employee pension (as defined in Code Section 408(k)), or
to purchase an annuity contract under Code Section 403(b), exceed the
limitations of paragraph (1), then no later than the March 1 following such
calendar year the Participant may notify the Committee that he has exceeded
the limitation and of the amount of his Pre-Tax Contributions under this Plan
(and earnings thereon) which he wants distributed to him notwithstanding his
salary reduction agreement so that he will not exceed the limitation. The
Committee may require the Participant to provide reasonable proof that he has
exceeded the limitation of paragraph (1). No later than the next April 15,
the Committee may (but shall not be obligated to) make the distribution
requested by the
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Participant under this subparagraph. Such distribution may be made
notwithstanding any other provision of law or this Plan. Such distribution
shall not reduce the amount of Employee Pre-Tax Contributions used in
computing Actual Deferral Percentage, but shall reduce the amount of Employee
Pre-Tax Contributions considered as Annual Additions under Section 4.8. Any
amounts not distributed under this subparagraph shall continue to be held in
accordance with the terms of this Plan.
(d) Post-Tax Contributions. (1) A Participant may make Employee
Post-Tax Contributions to the Plan as follows. All such Contributions shall
be made by payroll withholding. A Participant may enter into a voluntary
contribution agreement with his Employer in which it is agreed that the
Employer will withhold from and contribute to this Plan on a post-tax basis a
designated percentage of the Participant's Deferral Compensation during each
pay period. The Employer may modify the voluntary contribution agreement to
the extent necessary to insure that (1) the Matching Contribution Percentage
Test of Code Section 401(m) as set forth in Section 3.9 is met or (2) the
limitations set forth in Section 4.8 are not exceeded. Such Employee
Post-Tax Contributions may be any whole percentage between 1% and 10% of the
Deferral Compensation otherwise payable to the Participant. The voluntary
contribution agreement of an Employee who becomes eligible to participate in
the Plan shall be effective for the Employee's first pay date coincident with
or next following the January 1, April 1, July 1 or October 1 following his
satisfying
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the eligibility requirements of Section 2.1 and his proper completion and
filing of a voluntary contribution agreement. Voluntary contribution
agreements must be filed at least 15 days before the pay date as of which
they are to be effective (or upon such shorter notice as may be acceptable to
the Committee).
(2) Each Participant, by written notice filed with the Committee
at least 15 days in advance of the effective date of such notice (or upon such
shorter notice as may be acceptable to the Committee), may elect to
prospectively suspend his voluntary contribution agreement. Such election
shall become effective for the first pay date coincident with or next
following the expiration of the notice period and shall not have retroactive
effect. If Contributions are suspended hereunder, a Participant may again
sign a voluntary contribution agreement effective for the first pay date
following any subsequent January 1, April 1, July 1 or October 1, provided he
gives 15 days written notice (or such shorter notice as may be acceptable to
the Committee) prior to such pay date.
(3) A Participant may change his voluntary contribution agreement
as of the first pay date coincident with or next following any January 1,
April 1, July 1 or October 1 by written notice filed with the Committee at
least 15 days (or upon such shorter notice as may be acceptable to the
Committee) prior to such pay date.
(4) Amounts contributed by voluntary contribution shall be
remitted to the Trustee in accordance with
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Section 3.7. Contributions once made by a Participant shall be credited to
his Employee Post-Tax Account under Section 4.2(b).
3.2 EMPLOYER MATCHING CONTRIBUTIONS
Subject to Sections 3.5, 3.9, 3.10 and 4.8, for each Plan Year the
Employer shall make Employer Matching Contributions equal to the aggregate of
60% of each Participant's Employee Pre-Tax Contributions made during the
Year, taking into account for each Participant only so much of his Pre-Tax
Contributions for each pay period as are made at a rate which does not exceed
6% of his Deferral Compensation. The Employer's Matching Contribution
requirement shall be offset by the amount of available forfeitures under
Section 5.3(b)(2)(B).
3.3 EMPLOYER DISCRETIONARY CONTRIBUTIONS
The Employer, by action of its board of directors, may in its
discretion elect for any Plan Year to make an Employer Discretionary
Contribution. The Employer shall in any event contribute such Employer
Discretionary Contributions as may be required by Sections 5.3(b)(3) or 11.1(b).
3.4 ROLLOVER CONTRIBUTIONS
With Committee approval, an Eligible Employee (whether
or not he has yet satisfied the participation requirements of Section 2.1)
may make a rollover contribution of an amount which qualifies for tax-free
rollover treatment under Code Section 402(c). Rollover contributions shall be
held in the Employee's Rollover Account, and shall always be 100% vested.
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3.5 MAXIMUM DEDUCTIBLE CONTRIBUTION
In no event shall the Employer be obligated to make a Contribution for a
Plan Year in excess of the maximum amount deductible by it under Code Section
404(a)(3).
3.6 ACTUAL DEFERRAL PERCENTAGE TEST
(a) The Employer may distribute Employee Pre-Tax Contributions in
accordance with subsection (b) for any Plan Year in which the Actual Deferral
Percentage for the group of eligible Highly Compensated Employees exceeds the
greater of:
(1) 1.25 times the Actual Deferral Percentage of all other
Eligible Employees, or
(2) the lesser of (A) 2% plus the Actual Deferral Percentage of
all other Eligible Employees, or (B) 2.0 times the Actual Deferral Percentage
of all other Eligible Employees.
(b) (1) If for any Plan Year the Actual Deferral Percentage test of
subsection (a) is not met, then the requisite amount of Employee Pre-Tax
Contributions and income thereon as determined below made on behalf of
affected Highly Compensated Employees shall be distributed in accordance with
paragraph (2)(A). The amount of any Employee Pre-Tax Contributions to be
distributed under paragraph (2)(A) shall be reduced by any excess deferrals
previously distributed under Section 3.1(c)(2) for the calendar year ending
with or in the same Plan Year. Similarly, any excess deferrals to be
distributed under Section 3.1(c)(2) shall be reduced by any excess Employee
Pre-Tax Contributions
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previously distributed under this Section for the Plan Year beginning with or
in such calendar year. The amount to be distributed to any such Employee is
calculated as follows:
(A) An "Actual Deferral Percentage" is calculated
separately for each Highly Compensated Employee;
(B) The separate Actual Deferral Percentages of all
Highly Compensated Employees are added together;
(C) The maximum average Actual Deferral Percentage
which all Highly Compensated Employees taken together could have and still
meet the requirements of subsection (a) is determined;
(D) The value in (C) is multiplied by the number of
Highly Compensated Employees;
(E) The product in (D) is subtracted from the sum in
(B) (this remainder represents the total individual percentages which must be
distributed, and is referred to as the "Aggregate Distribution Percentage");
(F) All Highly Compensated Employees are ranked by
order of individual Actual Deferral Percentages, starting with the highest
percentage;
(G) The Highly Compensated Employee (or Employees)
whose Actual Deferral Percentage(s) is (are) the highest shall have his
(their) Actual Deferral Percentage(s) reduced to the level of the next Highly
Compensated Employee (or Employees) on the scale established in subparagraph
(F), and the
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total number of Percentage points by which such Employee's (or
Employees') Actual Deferral Percentage(s) is (are) reduced is subtracted from
the Aggregate Distribution Percentage;
(H) The procedure in subparagraph (G) is repeated (if
necessary) until the Aggregate Distribution Percentage is reduced to zero
(but not below zero);
(I) To prevent the Aggregate Distribution Percentage from
going below zero in this calculation, the Actual Deferral Percentage for any
given Highly Compensated Employee (or Employees) need not be reduced all the
way to the level of the next highest Highly Compensated Employee's Actual
Deferral Percentage.
(J) The amount of excess Employee Pre-Tax Contributions to
be distributed under paragraph (2) for each Highly Compensated Employee
affected by subparagraph (G) is the number of percentage points (and
fractions thereof) by which his Actual Deferral Percentage was reduced under
subparagraph (G), multiplied by his Testing Compensation.
(K) The amount of income (if any) to be distributed on the
excess Employee Pre-Tax Contributions determined under subparagraph (J) is
determined by multiplying the total income earned on the Highly Compensated
Employee's Employee Pre-Tax Account for the Plan Year by a fraction, the
numerator of which is the amount of excess Employee Pre-Tax Contributions
determined under subparagraph (J) and the denominator of which is the
Participant's Employee Pre-Tax
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Account balance at the end of the Plan Year, reduced by any gains and
increased by any losses allocated to the Account during the Plan Year.
(L) In the case of a Highly Compensated Employee whose
Actual Deferral Percentage is determined under the family aggregation rules,
the Actual Deferral Percentage is reduced as set forth in this subsection
(b)(1), and the excess Pre-Tax Contributions for the family group are
allocated among all members of the family group in proportion to their
Pre-Tax Contributions taken into account in determining the Actual Deferral
Percentage.
(2) (A) The amount to be distributed as determined under
paragraph (1) to each affected Highly Compensated Employee (or HC Family
Member) shall be distributed to him no later than the end of the next
following Plan Year. The Plan may make the distribution within two and
one-half months after the end of the Plan Year for which the excess
Contributions are made so as to avoid the 10% tax imposed on the Employer by
Code Section 4979. Such distribution may be made notwithstanding any other
provision of law or this Plan.
(B) In connection with a distribution of excess Employee
Pre-Tax Contributions (if any) for Highly Compensated Employees (or HC Family
Members) under subparagraph (A), Employer Matching Contributions made with
respect to distributed Employee Pre-Tax Contributions (if any) shall be
withdrawn (with earnings thereon) from such Participant's
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Employer Matching Account, and forfeited and applied against the Employer's
Matching Contribution obligation under Section 3.2.
3.7 PAYMENT OF CONTRIBUTIONS TO TRUSTEE
Unless an earlier time for contribution is specified elsewhere in this
Plan, in all events the Employer shall pay to the Trustee its Contributions
for each Plan Year within the time prescribed by law, including extensions of
time for the filing of its federal income tax return for the Employer's
taxable year during which such Plan Year ended. Employee Pre-Tax and Post-Tax
Contributions shall be transferred to the Trustee as soon as reasonably
possible, but in no event more than 90 days after the pay date on which they
would otherwise have been paid to the Employee, or such earlier date as may
be required under regulations issued by the Department of Labor.
3.8 PARTICIPANT INVESTMENT DIRECTION
(a) Participants may direct the investment of their Individual
Accounts among the Investment Options in accordance with this Section, and
subject to such rules and procedures as may be adopted by the Committee
and/or prescribed by any entity which provides or manages any funding vehicle
underlying an Investment Option. Participant investment direction hereunder
is intended to satisfy the requirements of ERISA Section 404(c) and the
regulations issued thereunder, and shall be interpreted accordingly.
(b) Each Participant's salary reduction or voluntary contribution
agreement completed for purposes of
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Section 3.1 shall also specify which Investment Option the Participant wishes
his Individual Account to be invested in. Investment Option specifications
shall be in increments as determined by the Committee. Upon 15 days advance
written notice to the Committee (or upon such shorter notice as may be
acceptable to the Committee), a Participant may change his Investment Option
specification for contributions to be made in the future, for amounts already
in his Account, or both, effective as of the Valuation Date coincident with
or next following expiration of the notice period. In the absence of any
valid Investment Option specification, a Participant's Account shall be
invested as determined by the Committee.
3.9 MATCHING CONTRIBUTION PERCENTAGE TEST
(a) (1) The Employee Post-Tax Contributions under Section 3.1(d)
and the Employer Matching Contributions under Section 3.2 made with respect
to Highly Compensated Employees shall be reduced as provided in subsection
(b) to the extent necessary to meet the requirements of paragraph (2).
(2) Subject to Section 3.10, the Matching Contribution
Percentage for the group of Highly Compensated Employees shall not exceed the
greater of:
(A) 1.25 times the Matching Contribution Percentage of all
other Eligible Employees; or
(B) the lesser of (i) 2% plus the Matching Contribution
Percentage of all other Eligible Employees,
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or (ii) 2.0 times the Matching Contribution Percentage of all other Eligible
Employees.
(b) (1) If the Employee Post-Tax Contributions and Employer
Matching Contributions for a Plan Year exceed the limits of subsection (a),
then the amount of Employee Post-Tax Contributions and Employer Matching
Contributions allocated to a Highly Compensated Employee's Employee Post-Tax
Account and Employer Matching Account shall be reduced to the extent
necessary to satisfy subsection (a) and distributed to the affected Employee
(or forfeited under paragraph (2)) in accordance with rules similar to those
used to determine the amount of Employee Pre-Tax Contributions to be
distributed under Section 3.6(b). Such distribution may be made
notwithstanding any other provision of law or this Plan. All Employee
Post-Tax Contributions of each Highly Compensated Employee who is subject to
reduction shall be distributed towards satisfying subsection (a) before any
Employer Matching Contributions of such Employee are distributed (or
forfeited).
(2) With respect to any Highly Compensated Employee whose
Employer Matching Contributions are reduced under paragraph (1), the portion
of such reduced Contributions to be distributed to him shall equal the total
reduced Contributions multiplied by his vesting percentage under Section 5.3
as of the end of the Plan Year for which the reduction is made. The remaining
non-vested percentage of such reduced Contributions shall be permanently
forfeited and applied in accordance with
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Section 5.3(b)(2)(B) as of the end of the Plan Year for which the reduction
is made.
3.10 MULTIPLE USE RESTRICTIONS
The application of the Actual Deferral Percentage Test in Section 3.6
and the Matching Contribution Percentage Test in Section 3.9 shall be
coordinated in accordance with Treasury Regulations at Section 1.401(m)-2 so
as to prohibit the multiple use of the alternative limitations set forth in
Sections 3.6(a)(2) and 3.9(a)(2)(B). Corrections required by the multiple use
restriction shall be effected by a reduction for any Highly Compensated
Employee participating in this Plan of the otherwise permissible Employee
Pre-Tax Contributions under Section 3.1(a), Employee Post-Tax Contributions
under Section 3.1(d) or Employer Matching Contributions under Section 3.2, as
shall be designated by the Corporation.
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ARTICLE IV
ALLOCATIONS TO INDIVIDUAL ACCOUNTS
4.1 INDIVIDUAL ACCOUNTS
(a) The Committee shall establish and maintain an Individual
Account in the name of each Participant, comprised of an Employee Pre-Tax
Account, an Employee Post-Tax Account, an Employer Matching Account, an
Employer Discretionary Account and a Rollover Account, to which the Committee
shall credit all amounts allocated to each such Participant under this
Article IV.
(b) The maintenance of separate accounts shall not require a
segregation of the Trust assets and no Participant shall acquire any right to
or interest in any specific asset of the Trust as a result of the allocations
provided for in this Section. All allocations shall be made as of the
applicable Valuation Date.
4.2 ALLOCATION OF EMPLOYEE PRE-TAX AND POST-TAX CONTRIBUTIONS
(a) A Participant's Employee Pre-Tax Contributions under Section
3.1(a) shall be allocated to his Employee Pre-Tax Account and invested in
accordance with his then outstanding Investment Option election.
(b) A Participant's Employee Post-Tax Contributions under Section
3.1(d) shall be allocated to his Employee Post-Tax Account and invested in
accordance with his then outstanding Investment Option election.
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4.3 ALLOCATION OF EMPLOYER MATCHING CONTRIBUTIONS
A Participant's share of the Employer Matching Contributions under
Section 3.2 shall be allocated to his Employer Matching Account and invested
in accordance with his then outstanding Investment Option election.
4.4 ALLOCATION OF EMPLOYER DISCRETIONARY CONTRIBUTIONS
As of the last day of the Plan Year, each Participant who completed a
Year of Service during the Plan Year and who is an Employee on the last day
of the Plan Year (an "eligible Participant"), shall receive an allocation
of any Employer Discretionary Contribution under Section 3.3 for that Plan
Year. Each eligible Participant's allocable share shall equal the product of
multiplying the Discretionary Contribution by a fraction, the numerator of
which is the eligible Participant's total Allocation Compensation received
while a Participant during the Plan Year and the denominator of which is the
total Allocation Compensation of all such eligible Participants received
while Participants during the Plan Year.
4.5 ALLOCATION OF ADJUSTMENT
(a) Subject to subsection (b), as of each Valuation Date, the Committee
shall determine the Adjustment for the period elapsed since the last
preceding Valuation Date of each Investment Option of the Fund. The
Adjustment for each Investment Option shall be allocated as of the Valuation
Date to all Individual Accounts invested in that Investment Option, in the
proportion that each Individual Account's "Credit Balance"
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with respect to that Investment Option on the Valuation Date bears to the
"Credit Balance" of all Individual Accounts with respect to that Investment
Option on the Valuation Date. The Credit Balance of each Individual Account
invested in an Investment Option shall be calculated by determining the
Current Balance of the Account invested in that Investment Option as of the
immediately preceding Valuation Date, from which shall be subtracted any
distributions or loans from the Account with respect to that Investment
Option since the Valuation Date, and to which shall be added (1) one-half
(1/2) of all Employee Pre-Tax, Employee Post-Tax and Employer Matching
Contributions to such Account with respect to that Investment Option made
under Sections 3.1 and 3.2 since that Valuation Date (even if subject to
later distribution or withdrawal under Sections 3.1(c)(2), 3.6(b)(2) or 3.9)
and (2) one-half (1/2) of all loan repayments to such Account with
respect to that Investment Option which are credited as of the current
Valuation Date under Section 6.1(f). An Individual Account's share of the
Adjustment with respect to any Investment Option shall be allocated pro rata
among the Employee Pre-Tax Account, Employee Post-Tax Account, Employer
Matching Account, Employer Discretionary Account and Rollover Account which
comprise the Individual Account.
(b) Earnings and losses attributable to Rollover Contributions received
since the preceding Valuation Date shall be determined and allocated by the
Committee on a pro rata basis
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reflecting the period of time such Contributions were held by the Trust Fund.
4.6 [RESERVED]
4.7 EQUITABLE ALLOCATIONS
The Committee shall establish accounting procedures for the purpose of
making the allocations, valuations and adjustments to the Participants'
Individual Accounts provided for in this Article IV. Should the Committee
determine that the strict application of its accounting procedures will not
result in an equitable and non-discriminatory allocation among the Individual
Accounts of Participants, it may modify its procedures for the purpose of
achieving an equitable and non-discriminatory allocation in accordance with
the general concepts of the Plan and the provisions of this Article.
4.8 MAXIMUM ADDITIONS
(a) Notwithstanding anything herein to the contrary, the sum of the
Employee Pre-Tax Contributions, Employee Post-Tax Contributions, Employer
Matching Contributions and Employer Discretionary Contributions allocated to
a Participant's Individual Account for any Limitation Year (the "Annual
Additions"), when combined with any annual additions credited to the
Participant for the same period under another qualified defined contribution
plan maintained by the Employer or an Affiliate, shall not exceed the lesser
of the following:
(1) $30,000 or such larger amount as may be determined under
Code Section 415(c)(1)(A); or
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(2) 25% of the Participant's total Section 415 Compensation
received from the Employer for such Limitation Year.
"Limitation Year" shall mean the Plan Year.
(b) In the event a Participant is covered by more than one defined
contribution plan maintained by the Employer (or an Affiliate), the maximum
Annual Additions to this Plan shall be decreased as determined necessary by
the Committee to insure that the limitations of Code Section 415(c) are not
exceeded.
In the event that as of any Valuation Date, corrective adjustments in
the Annual Additions to any individual Accounts are required by this Section
4.8(b) due to estimated compensation, the allocation of forfeitures, or the
making of Employee Pre-Tax or Post-Tax Contributions, or as otherwise
permitted by the Internal Revenue Service under T.Reg. Section 1.415-6(b)(6),
the adjustment shall first be made by reducing the Employee Post-Tax
Contributions, next the Employee Pre-Tax Contributions, next the Employer
Matching Contributions and finally the Employer Discretionary Contributions.
Any amounts withheld or taken from a Participant's Individual Account
pursuant to the above shall be segregated in the Fund in a separate account
and applied toward the Contribution of the Employer for the next Limitation
Year, except that Employee Pre-Tax and Post-Tax Contributions shall be
distributed to the Participant who made them.
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4.9 MULTIPLE PLAN PARTICIPATION
(a) If a Participant is a participant in a defined benefit plan
maintained by the Employer, the sum of his defined benefit plan fraction
(determined in subsection (c)) and his defined contribution plan fraction
(determined in subsection (b)) for any Limitation Year shall not exceed 1.0.
(b) The term "defined contribution plan fraction" shall mean a
fraction, the numerator of which is the sum of all of the Annual Additions to
the Participant's Individual Account under this Plan as of the close of the
Limitation Year and the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and for each prior
Limitation Year of employment with the Employer:
(1) the product of 1.25 multiplied by the dollar limitation
in effect under Section 4.8(a)(1) for such Year; or
(2) the product of 1.4 multiplied by an amount determined
under Section 4.8(a)(2) for such Year.
(c) The term "defined benefit plan fraction" shall mean a fraction
the numerator of which is the Participant's projected annual benefit
determined as of the close of the Limitation Year and the denominator of
which is the lesser of:
(1) the product of 1.25 multiplied by the dollar limitation
in effect under Code Section 415(b)(1)(A) for such Limitation Year; or
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(2) the product of 1.4 multiplied by the amount which may be
taken into account under Code Section 415(b)(1)(B) with respect to each
individual under the Plan for such Limitation Year.
For purposes of this limitation, all defined benefit plans maintained
by an Employer (or any Affiliate), whether or not terminated, are to be
treated as one defined benefit plan and all defined contribution plans
maintained by an Employer (or any Affiliate), whether or not terminated, are
to be treated as one defined contribution plan. Any benefit reduction
required to comply with this Section 4.9 shall be effected in the defined
benefit plan in such a manner so as to maximize the aggregate benefits
payable to such Participant.
(d) The above limitations in Section 4.8 and this Section are
intended to comply with the provisions of Code Section 415 so that the
maximum benefits able to be provided by plans of the Employer shall be
exactly equal to the maximum amounts allowed under Code Section 415. If there
is any discrepancy between the provisions of Section 4.8 or this Section 4.9
and the provisions of Code Section 415, such discrepancy shall be resolved in
such a way as to give full effect to the provisions of Code Section 415,
which provisions are hereby incorporated by reference.
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ARTICLE V
DISTRIBUTIONS
5.1 RETIREMENT
Upon the retirement of a Participant after reaching his Normal
Retirement Age, the Current Balance of his Individual Account shall become
payable as of the Valuation Date coincident with or next following his
retirement. The Committee shall thereupon direct the Trustee to distribute to
such Participant such amount in accordance with Section 5.4. If the amount
to be distributed exceeds $3,500, then no distribution shall be made before
the Participant attains age 65 unless he consents in writing to the
distribution in accordance with the notice and election requirements of
Section 5.3(c).
5.2 DEATH BEFORE RETIREMENT OR TERMINATION OF EMPLOYMENT
Upon the death of a Participant before retirement or
termination of employment, the Current Balance of his Individual Account
shall be payable to his Beneficiary as soon practicable after the Valuation
Date coincident with or next following his death. Distribution to such
Participant's Beneficiary shall be made in accordance with a method of
payment available under Section 5.4 and elected by the Beneficiary. If the
Beneficiary is the Participant's spouse and the Participant's Individual
Account has a Current Balance greater than $3,500, then no distribution shall
be made before the Participant would
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have attained age 65 unless the spouse consents in writing to the
distribution in accordance with the notice and election requirements of
Section 5.3(c).
5.3 TERMINATION OF EMPLOYMENT
(a) Upon termination of employment for any reason other than
retirement under Section 5.1 or death, a Participant shall be entitled to
the vested Current Balance of his Individual Account, payable at the time set
forth in subsection (c).
(b) (1) A Participant shall at all times be 100% vested in the
Current Balance of his Employee Pre-Tax Account, Employee Post-Tax Account
and Rollover Account.
(2) (A) (i) Subject to Section 9.2, a Participant who
terminates employment before January 1, 1995, shall be vested in the Current
Balance of his Employer Matching Account and Employer Discretionary Account
in accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
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(ii) Subject to Section 9.2, a Participant who
terminates employment on or after January 1, 1995, shall be vested in the
Current Balance of his Employer Matching Account and Employer Discretionary
Account in accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
(iii) A Participant shall become 100% vested upon
reaching age 65 or becoming Disabled while an employee of an Employer or an
Affiliate.
(B) If a Participant terminates employment before
becoming 100% vested, the unvested portion of his Employer Matching Account
and Employer Discretionary Account shall be conditionally forfeited, subject
to restoration under paragraph (3), upon distribution to him of his vested
Account balances or the first anniversary of his termination of employment,
whichever comes first. A terminated Participant with a 0% vested interest in
his Employer Matching and Discretionary Accounts shall be deemed to receive a
distribution of his vested
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Account balances upon distribution to him of all his otherwise vested
interests in his Individual Account. Forfeited amounts shall be applied first
to restore any forfeitures under paragraph (3) for the Plan Year in which the
conditional forfeitures under this paragraph (2) arise. Any conditionally
forfeited amounts which remain shall be used to reduce the Employer Matching
Contribution under Section 3.2 for that Plan Year.
(3) If a Participant who suffered a conditional
forfeiture under paragraph (2) is reemployed by the Employer (or an
Affiliate) before incurring five consecutive One Year Breaks in Service, then
any amounts which were conditionally forfeited under paragraph (2) shall
be restored to his Employer Matching and Employer Discretionary Accounts as
of the Valuation Date coincident with or next following (A) the date he is
reemployed, if he is not required to repay his previous distribution, or (B)
the date on which he repays the full amount previously distributed to him
from both such Accounts, if he is required to repay his previous
distribution. A Participant is required to repay the previous distribution if
it was made not later than the end of the second Plan Year following the Plan
Year in which he terminated employment. Any required repayment must be made
before the earlier of (A) when the Participant incurs five consecutive One
Year Breaks in Service of (B) five years after the date on which he is
reemployed. Restoration shall be funded out of forfeitures arising under
paragraph (2), and if such forfeitures are insufficient for that purpose,
out of
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the Employer's Discretionary Contribution under Section 3.3. Unless and until
a reemployed Participant (who is required to make repayment) timely repays
the full amount previously distributed to him from his Employer Matching and
Employer Discretionary Accounts, there shall be no restoration of his
conditional forfeiture.
(4) If a Participant who suffered a conditional
forfeiture under paragraph (2)(B) incurs five consecutive One Year Breaks in
Service, any amounts conditionally forfeited shall become permanently
forfeited. If the Participant had no vested interest at his prior termination
of employment, or if he did not repay his prior distribution in accordance
with paragraph (3) (if required), his Years of Service earned before the
Breaks in Service shall be permanently disregarded.
(c) As of the Valuation Date coincident with or next
following a Participant's termination of employment and submission of a
properly completed application, the Trustee shall distribute to such
Participant the vested Current Balance of his Individual Account determined
as of such Valuation Date. If the amount to be distributed exceeds $3,500,
then no distribution shall be made before the Participant attains age 65
unless he consents in writing to the distribution. A Participant shall be
provided with notice of his right to withhold consent and such other
information as is required by T.Reg. Section 1.411(a)-11(c) at least 30 but
not more than 90 days before distribution is made. Distribution may be
made less than 30 days after such notice is
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given if the Participant is clearly informed that he has a right to a period
of at least 30 days after receiving the notice to consider the decision of
whether or not to elect a distribution and the particular method of
distribution, and if after receiving the notice the Participant affirmatively
elects a distribution.
(d) In the event a Participant who terminated his employment
with an Employer is reemployed as an Employee prior to receiving a
distribution of his Individual Account, he shall not be entitled to a
distribution as provided in this Section 5.3 due to such termination, but
shall be entitled to a distribution as determined herein upon a subsequent
termination of employment.
5.4 METHOD OF PAYMENT
Except as provided in Section 5.6(b), each Participant or
Beneficiary shall have his Individual Account paid in a lump sum. In order to
receive a distribution, a Participant or Beneficiary must make written
application therefor on forms provided by the Committee. The Committee may
require that there be furnished to it in connection with such application all
information pertinent to any question of eligibility and the amount of any
benefit.
5.5 BENEFITS TO MINORS AND INCOMPETENTS
(a) In case any person entitled to receive payment under the
Plan shall be a minor, the Committee, in its discretion, may distribute such
payment in any one or more of the following ways:
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(1) By payment thereof directly to such minor;
(2) By application thereof for the benefit of such minor;
(3) By payment thereof to either parent of such minor or
to any person who shall be legally qualified and shall be acting as guardian
of the person or the property of such minor, provided the parent or adult
person to whom any amount shall be paid shall have advised the Committee in
writing that he will hold or use such amount for the benefit of such minor.
(b) In the event a person entitled to receive payment under
the Plan is physically or mentally incapable of personally receiving and
giving a valid receipt for any payment due (unless prior claim therefor shall
have been made by a duly qualified legal representative of such person), such
payment in the discretion of the Committee may be made to the spouse, son,
daughter, parent, brother or sister of the recipient, or to any other person
who is responsible for the welfare of such recipient.
(c) Any payments made under subsections (a) or (b) shall, to
the extent of the payments, fully discharge the obligations of the Committee
and the Plan to any other person making a claim hereunder with respect to
such payments.
5.6 PAYMENT OF BENEFITS
(a) Subject to subsection (b), in the event a Participant's
Individual Account shall be due and payable under
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this Article V and the Participant has not elected otherwise in accordance
with the Plan, any payment of benefits to the Participant shall begin not
later than 60 days after the close of the Plan Year in which occurs the
latest of:
(1) the Participant's having attained age 65; and
(2) termination of employment of the Participant with the
Employer or an Affiliate (except an Affiliate which is such solely by reason
of Code Section 414(m)).
(b) (1) Notwithstanding subsection (a) above, distribution of
a Participant's Individual Account shall be made no later than April 1 of the
calendar year following the calendar year during which such Participant
attains age 70 1/2, regardless of whether or not he has terminated
employment with the Employer. If and so long as the Participant is still an
Employee, then at the Participant's election the amount to be distributed by
such April 1 and by each following December 31 shall equal the minimum
installment payment amount required to comply with Code Section 401(a)(9),
determined using the Participant's (and Beneficiary's) life expectancy when
payments begin, without subsequent recalculation of life expectancy.
(2) Distributions under this subsection (b) shall be made
in accordance with regulations issued by the Secretary of the Treasury under
Code Section 401(a)(9), including Section 1.401(a)(9)-2, which regulations shall
override any distribution options in this Plan inconsistent with Section
401(a)(9).
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5.7 DIRECT ROLLOVERS
(a) Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section, a
distributee may elect at the time and in the manner prescribed by the
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) For purposes of this Section, the following terms have the
following meanings:
ELIGIBLE ROLLOVER DISTRIBUTION - An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include any distribution to the extent such distribution is required under
Code Section 401(a)(9), and the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
ELIGIBLE RETIREMENT PLAN - An eligible retirement plan is an individual
retirement account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the
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surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
DISTRIBUTEE - A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard to the interest of the
spouse or former spouse.
DIRECT ROLLOVER - A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
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ARTICLE VI
LOANS AND WITHDRAWALS
6.1 LOANS TO PARTICIPANTS
Upon the request of a Participant, the Committee in its
discretion and upon consideration of the creditworthiness of the Participant,
may make loans from the Fund to Participants who are "parties in interest" as
defined in ERISA Section 3(14). The following rules shall apply:
(a) A Participant may only have one loan outstanding at any
time. Any loan made to a Participant must be repaid in full before another
loan will be made to such Participant. The minimum new loan amount shall be
$1,000. If a Participant's Individual Account balance is insufficient to
support a $1,000 loan because of the maximum loan restrictions set forth
below, no loan shall be made. The maximum amount of any loan, when added to
the outstanding balance of any existing loan from this Plan or any other plan
maintained by an Employer or an Affiliate, shall be the lesser of (1) and (2):
(1) $50,000 reduced by the excess of the highest
outstanding balance of loans from the Plan during the one year period ending
on the day before the date the loan is made over the outstanding balance of
loans from the Plan on the date the loan is made.
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(2) One-half of the Participant's vested Current Balance
in his Individual Account on the date the loan is made.
(b) All loans shall be repayable over a period of not more
than five years, but, as determined by the Committee this limitation shall
instead be 10 years for any loan used by the Participant to acquire any
dwelling unit which within a reasonable time is to be used (determined at the
time the loan is made) as a principal residence of the Participant.
(c) Each loan shall be secured by the Participant's entire
Individual Account balance and such additional collateral as the Committee in
its discretion may require; bear a reasonable rate of interest as determined
by the Committee based on the prevailing rates for similar loans; be repaid
by payroll deduction each pay period in accordance with a reasonable
repayment schedule requiring substantially level payments of principal and
interest, and shall be evidenced by a written promissory note setting forth
the terms of the loan. To the extent a Participant's pay from the Employer is
insufficient to make the payments due under a loan, but such Participant is
not covered by the provisions of subsection (e), such Participant shall make
his loan payments out of his own personal funds. If a Participant fails to
make an installment payment when due under the repayment schedule, the
Committee in its sole discretion may allow a grace period in which to make
the payment before the loan will be considered in default. The grace period
with respect to
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any overdue payment shall not continue beyond the last day of the calendar
quarter following the calendar quarter in which the payment was due under the
repayment schedule.
(d) In the event of the death or termination of employment of
a Participant, the unpaid balance of any outstanding loan to such
Participant, together with accrued interest, shall be deducted from the
amount otherwise due him or his Beneficiary, notwithstanding the provisions
of Section 12.5. Alternatively, a Participant may at his option repay the
entire outstanding balance of his loan upon termination of employment in lieu
of having it deducted from the amount otherwise due him.
(e) The Committee shall apply the provisions of this Section
in a uniform and nondiscriminatory manner which is not inconsistent with
Department of Labor regulations at 29 C.F.R. Section 2550.408b-1.
(f) Each loan shall be considered a separate Investment Option
of the Individual Account of the Participant. Notwithstanding Section 4.1(b),
when a loan is made, the amount of the loan shall be withdrawn from the
Participant's Individual Account and transferred to a segregated loan account
maintained in his name. The loan amount shall be withdrawn from the
sub-Accounts and the Investment Options within the Participant's Individual
Account in the order determined by the Committee. As of each Valuation Date,
payments of principal and interest against a loan since the preceding
Valuation Date shall be credited to the Participant's Individual Account and
allocated
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pro rata to the sub-Accounts from which the loan was withdrawn and invested
in accordance with the Participant's then current Investment Option election.
(g) There may be an administrative fee imposed on each new
loan in an amount determined by the Committee. The fee shall be charged to
the Participant's Individual Account, or to the Participant directly, as
directed by the Committee.
(h) In the event a Participant defaults on a loan from this
Plan, the Plan shall foreclose on so much of the Participant's Individual
Account as is given as collateral for the loan as follows: First, the Plan
shall foreclose on the Participant's Employee Post-Tax Account; then his
Employer Matching Account; then his Employer Discretionary Account; then his
Rollover Account; then when otherwise available for distribution under the
terms of this Plan, his Employee Pre-Tax Account.
6.2 HARDSHIP WITHDRAWALS
(a) Upon request of the Participant but no more often than once
each Plan Year, and with the approval of the Committee, a Participant who is
still employed by the Employer and who has attained age 59 1/2 or who
satisfies subsection (b) shall be allowed to withdraw all or part of the
vested Current Balance of his Individual Account which is available under
subsection (d). The minimum withdrawal amount shall be $500. If a
Participant's financial need under subsection (c) is less than $500 he may
not make a withdrawal. Withdrawn amounts may
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not be repaid to the Fund. Withdrawals shall be charged first against the
Participant's Employee Post-Tax Account, then his Employee Pre-Tax Account,
then his Employer Matching Account, then his Employer Discretionary Account,
then his Rollover Account.
(b) A Participant who has not attained age 59 1/2 may only
make a withdrawal under this Section 6.2 if the withdrawal is necessary in
light of immediate and heavy financial needs of the Participant as set forth
in subsection (c)(1). Such withdrawal shall not exceed the amount required to
meet the immediate financial need created by the hardship, and the amount to
be withdrawn must not be reasonably available from other resources of the
Participant. The determination of the existence of financial hardship and the
amount needed to be withdrawn to meet the need created by the hardship shall
be made by the Committee in a uniform and non-discriminatory manner, in
accordance with the standards and restrictions set forth in subsection (c)
below.
(c) (1) Immediate and heavy financial need. A withdrawal will
be considered to be made on account of an immediate and heavy financial need
of the Participant for purposes of subsection (b) only if it is on account of:
(A) Medical expenses described in Code Section
213(d) incurred by the Participant, the Participant's spouse, or any
dependents of the Participant (as defined in Code Section 152);
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(B) Purchase (excluding mortgage payments) of a principal
residence for the Participant;
(C) Payment of tuition, related educational fees, room or
board for the next 12 months of post-secondary education for the Participant,
his spouse, children, or dependents;
(D) The need to prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of the
Participant's principal residence; or
(E) For any other reason which the Commissioner of
Internal Revenue deems to constitute such an immediate and heavy financial
need in accordance with Treasury Regulations at Section
1.401(k)-1(d)(2)(iii)(B).
(2) Amount necessary to satisfy the need. A withdrawal will
be considered to be in an amount necessary to satisfy a Participant's need
under paragraph (1) for purposes of subsection (b) only if:
(A) It does not exceed the amount of the need under
paragraph (1), taking into account taxes that must be paid on the withdrawal;
(B) The Participant has obtained all non-hardship
distributions and non-taxable loans he is eligible for and is able to provide
collateral for under any plan the Employer may sponsor (including this Plan);
(C) The Participant may not make any Employee Pre-Tax or
Post-Tax Contributions under Section 3.1 for
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a period of 12 months after the date he receives his hardship withdrawal, nor
may he make any other elective contributions to any Employer plan as
described in Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4) (but
shall still be otherwise considered an Eligible Employee during such
suspension); and
(D) The Participant's maximum annual Employee Pre-Tax
Contributions under Section 3.1(c) for the calendar year following the calendar
year in which he receives his withdrawal are reduced by the amount of Employee
Pre-Tax Contributions he made in the calendar year in which he receives his
withdrawal.
Notwithstanding subparagraphs (A) thru (D), a Participant's
withdrawal may be considered to be in an amount necessary to satisfy a need
under paragraph (1) if it satisfies a method prescribed by the Commissioner
of Internal Revenue under Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B).
(d) A Participant's hardship withdrawal under this Section 6.2
shall be limited to the aggregate of all his Employee Pre-Tax Contributions
made prior to the withdrawal, excluding earnings thereon and reduced by the
amount of any prior withdrawal of such Contributions, plus the vested Current
Balance of his Employee Post-Tax Account and Employer Matching Account,
reduced by the outstanding balance of any loans under Section 6.1 at the time
of application for the hardship withdrawal. Upon attaining age 59 1/2, a
Participant's Employer Discretionary
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Account and his Rollover Account shall also be available for withdrawal.
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ARTICLE VII
FUNDING
7.1 CONTRIBUTIONS
Contributions by the Employer and Participants as provided for in
Article III shall be paid over to the Trustee. All contributions by the
Employer shall be irrevocable, except as otherwise provided in this Plan and
may be used only for the exclusive benefit of the Participants and their
Beneficiaries.
7.2 TRUSTEE
The Corporation will maintain an agreement with the Trustee
whereunder the Trustee will receive, invest and administer as a trust fund
Contributions made under this Plan in accordance with the Trust Agreement.
Such Trust Agreement is incorporated by reference as a part of the
Plan, and the rights of all persons entitled to benefits hereunder are
subject to the terms of the Trust Agreement. The Trust Agreement specifically
provides, among other things, for the investment and reinvestment of the Fund
and the income thereof, the management of the Fund, the responsibilities and
obligations of the Trustee, removal of the Trustee and appointment of a
successor, accounting by the Trustee and the disbursement of the Fund.
Subject to a Participant's Investment Option election, the Trustee
shall, in accordance with the terms of such
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Trust Agreement, accept and receive all sums of money paid to it from time to
time by the Employer, and shall hold and invest such moneys and the earnings
thereof as a trust fund for the exclusive benefit of the Participants and
their Beneficiaries and for the payment of reasonable expenses of
administering the Plan.
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ARTICLE VIII
FIDUCIARIES
8.1 GENERAL
Each Fiduciary who is allocated specific duties or responsibilities
under the Plan or any Fiduciary who assumes such a position with the Plan
shall discharge his duties solely in the interest of the Participants and
Beneficiaries and for the exclusive purpose of providing such benefits as
stipulated herein to such Participants and Beneficiaries, or of defraying
reasonable expenses of administering the Plan. Each Fiduciary in carrying out
such duties and responsibilities shall act with the care, skill, prudence,
and diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would use in
exercising such authority or duties.
A Fiduciary may serve in more than one Fiduciary capacity and may
employ one or more persons to render advice with regard to his Fiduciary
responsibilities. If the Fiduciary is serving as such without compensation,
all expenses reasonably incurred by such Fiduciary shall be reimbursed by the
Employer or, at the Corporation's direction, from the assets of the Trust.
A Fiduciary may allocate any of his responsibilities for the
operation and administration of the Plan. In limitation of this right, a
Fiduciary may not allocate any responsibilities as contained herein relating
to the
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management or control of the Fund, except (1) through the employment of an
investment manager as provided in Section 8.3 and in the Trust Agreement
relating to the Fund, or (2) to the extent Participants elect their own
Investment Options.
8.2 CORPORATION
The Corporation established and maintains the Plan for the benefit
of its Employees and those of participating Employers and of necessity
retains control of the operation and administration of the Plan. The
Corporation is the Plan administrator within the meaning of ERISA Section
3(16)(A). The Corporation in accordance with specific provisions of the Plan
has, as herein indicated, delegated certain of these rights and obligations
to the Employer, the Trustee and the Committee and these parties shall be
solely responsible for these, and only these, delegated rights and
obligations.
The Employer shall indemnify each member of the Committee and any
of its employees to whom any fiduciary responsibility with respect to the
Plan is allocated or delegated, from and against any and all liabilities,
costs and expenses incurred by such persons as a result of any act or
omission to act in connection with the performance of their fiduciary duties,
responsibilities and obligations under the Plan and under ERISA, except for
liabilities and claims arising from such fiduciary's willful misconduct or
gross negligence. For such purpose, the Employer may obtain, pay for and keep
current a policy or policies of insurance. Where such policy or policies
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of insurance are purchased, there shall be no right to indemnification under
this Section 8.2, except to the extent of any deductible amount under the
policy or policies or with regard to covered claims in excess of the insured
amount. No Plan assets may be used for any indemnification.
The Employer shall supply such full and timely information for all
matters relating to the Plan as (a) the Committee, (b) the Trustee, and (c)
the accountant engaged on behalf of the Plan by the Corporation may require
for the effective discharge of their respective duties.
8.3 TRUSTEE
The Trustee, in accordance with the Trust Agreement, shall have
authority to manage the Fund, except that the Committee may in its discretion
employ at any time and from time to time an investment manager (as defined in
Section 3(38) of ERISA) to direct the Trustee with respect to all or a
designated portion of the assets comprising the Fund, and except that the
Trustee shall give effect to Participant Investment Option elections to the
extent permitted by ERISA Section 404.
8.4 COMMITTEE
The Corporation shall appoint a Committee of not less than three
persons to hold office during the pleasure of the Corporation. In the absence
of an appointed Committee, the Corporation shall serve as the Committee. No
compensation shall be paid members of the Committee from the Fund for service
on such Committee.
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The Committee shall choose from among its members a chairman and a
secretary. Any action of the Committee shall be determined by the vote of a
majority of its members. Either the chairman or the secretary may execute any
certificate or other written direction on behalf of the Committee.
The Committee shall hold meetings upon such notice, at such place
or places and at such time or times as the Committee may from time to time
determine. Meetings may be called by the chairman or any two members. A
majority of the members of the Committee at the time in office shall
constitute a quorum for the transaction of business. The Committee may also
act by written consent in lieu of a meeting.
A Committee member may resign at any time by giving notice of his
resignation to the Corporation at least thirty days in advance, unless the
Corporation shall accept shorter notice. The Corporation shall appoint
replacement Committee members. Any Committee member who was employed by the
Employer when appointed to the Committee shall automatically be deemed to
have resigned from the Committee effective as of the date he ceases to be
employed by the Employer, unless the Corporation shall affirmatively act to
keep said member on the Committee.
Nothing herein shall prevent a Committee member from being a
Participant, or from acting on Plan matters which affect himself by virtue of
affecting all Participants generally. However, a Committee member shall not
act on any matter which
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affects himself specially. If application of the preceding sentence results
in there not being a quorum to act on any matter, the Corporation shall
appoint the necessary number of temporary Committee members to take the
action.
In accordance with the provisions hereof, the Committee has been
delegated certain administrative functions relating to the Plan with all
powers necessary to enable it properly to carry out such duties.
The Committee shall have discretionary authority to interpret and
construe the Plan, and to determine, consistent with the terms of the Plan,
all questions of interpretation, construction and fact that may arise
thereunder relating to the eligibility of individuals to participate in the
Plan, the amount of benefits to which any Participant or Beneficiary may
become entitled hereunder, and any situation not specifically covered by the
provisions of the Plan. The determination of the Committee shall be final and
binding on all interested parties. All disbursements by the Trustee, except
for the ordinary expenses of administration of the Fund or the reimbursement
of reasonable expenses at the direction of the Corporation as provided
herein, shall be made upon, and in accordance with, the written directions of
the Committee. When the Committee is required in the performance of its
duties hereunder to administer or construe, or to reach a determination under
any of the provisions of the Plan, it shall do so on a uniform, equitable and
nondiscriminatory basis.
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8.5 CLAIMS FOR BENEFITS
All claims for benefits under the Plan shall be submitted to the
Committee which shall have the responsibility for determining the eligibility
of any Participant or Beneficiary for benefits. All claims for benefits shall
be made in writing and shall set forth the facts which such Participant or
Beneficiary believes to be sufficient to entitle him to the benefit claimed.
The Committee may adopt forms for the submission of claims for benefits in
which case all claims for benefits shall be filed on such forms.
Upon receipt by the Committee of a claim for benefits, it shall
determine all facts which are necessary to establish the right of an
applicant to benefits under the provisions of the Plan and the amount
thereof. The applicant shall be notified in writing by the Committee of its
decision with respect to such applicant's claim within 90 days after the
receipt of the written claim for benefits.
If any claim for benefits is denied, the notice shall be written in
a manner calculated to be understood by the applicant and shall include:
(a) The specific reason or reasons for the denial;
(b) Specific references to the pertinent Plan provisions
on which the denial is based;
(c) A description of any additional material or
information necessary for the applicant to perfect the claim
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and an explanation why such material or information is necessary; and
(d) An explanation of the Plan's claim review procedures.
If special circumstances require an extension of time for processing the
initial claim, a written notice of the extension and the reason therefor
shall be furnished to the claimant by the Committee before the end of the
initial 90 day period. In no event shall such extension exceed 180 days after
the receipt of the initial claim for benefits.
8.6 DENIAL OF BENEFITS - REVIEW PROCEDURE
In the event a claim for benefits is denied or if the applicant has
had no response to such claim within 90 days of its submission (in which case
the claim for benefits shall be deemed to have been denied), the applicant of
his duly authorized representative, at the applicant's sole expense, may
appeal the denial by filing a written request for review with the Committee
within 60 days of the receipt of written notice of denial or 60 days from the
date such claim is deemed to be denied. In pursuing such appeal the applicant
or his duly authorized representative may review pertinent Plan documents,
and may submit issues and comments in writing.
The decision on review shall be made by the Committee within 60
days of receipt of the request for review, unless special circumstances
require an extension of time for processing, in which case a decision shall
be rendered as soon as
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possible, but not later than 120 days after receipt of a request for review.
If such an extension of time is required, written notice of the extension
shall be furnished to the claimant before the end of the original 60 day
period. The decision on review shall be in writing, shall be written in a
manner calculated to be understood by the claimant, and shall include
specific references to the provisions of the Plan on which such denial is
based. If the decision on review is not furnished within the time specified
above, the claim shall be deemed denied on review. The decision of the
Committee upon review will be final and binding on all parties.
8.7 RECORDS
All acts and determinations of the Committee shall be duly recorded
by the secretary thereof and all such records, together with such other
documents as may be necessary in exercising its duties under the Plan shall
be preserved in the custody of such secretary. Such records and documents
shall at all times be open for inspection and for the purpose of making
copies by any person designated by the Corporation. The Committee shall
provide such timely information, resulting from the application of its
responsibilities under the Plan, as needed by the Trustee and the accountant
engaged on behalf of the Plan by the Corporation, for the effective discharge
of their respective duties.
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8.8 MISSING PERSONS
The Committee shall make a reasonable effort to locate all persons
entitled to benefits under the Plan. If such a person cannot be located, the
amount to which such a person otherwise would be entitled shall be retained
by the Trustee and treated in all respects as assets of the Trust, pending
disposition of such amount in accordance with regulations promulgated by the
Secretary of Labor or the Secretary of the Treasury. The Trustee may deposit
any such amounts in an "escheat fund" maintained by such Trustee but not
within the Trust.
8.9 QUALIFIED DOMESTIC RELATIONS ORDERS
(a) The provisions of Section 12.5 shall not prohibit the creation,
recognition of or assignment to an alternate payee of the right to receive
all or a portion of the benefits payable to a Participant, if such creation,
recognition or assignment is made pursuant to a qualified domestic relations
order within the meaning of ERISA Section 206(d).
(b) Upon receipt of a domestic relations order, the Committee shall
notify the Participant and any alternate payee(s) specified in such order of
receipt thereof, and of the Plan's procedures for determining whether such
order is qualified. Within a reasonable period of time after receipt of the
domestic relations order, the Committee shall determine whether the order is
qualified and shall notify the Participant and any alternate payee(s)
specified in the order of the
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determination. Such notification shall be sent by first class mail, postage
prepaid, to the addresses specified in the order, or if no addresses are
there specified, to the last known addresses of the Participant and alternate
payee(s).
(c) The Committee shall determine whether any domestic relations
order received is qualified and shall administer distributions thereunder. An
alternate payee may designate a representative who shall be sent copies of
any notices required to be sent to such alternate payee under this Section.
(d) While the Committee, a court of competent jurisdiction, or any
other duly involved forum, is determining whether a domestic relations order
is qualified, the Trustee shall place in a segregated account any amounts
that would have been payable to an alternate payee specified under such order
if the order had been determined to be qualified. If the Committee determines
that a domestic relations order is not qualified, or if no determination is
made within eighteen months after receipt of such order, the amounts placed
in the segregated account, plus earnings thereon, shall be paid to the
Participant to the extent the Participant would have received such amounts
but for the existence of the domestic relations order. Otherwise, they shall
be returned to the Participant's Account. If within such eighteen month
period the Committee determines that a domestic relations order is qualified,
the amounts placed in the segregated account, plus earnings thereon, shall be
paid to the
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alternate payee(s). Any determination that a domestic relations order is
qualified which is made more than eighteen months after the Committee
receives such order shall be given prospective effect only.
(e) The Committee and all other Plan fiduciaries shall act in
accordance with the fiduciary responsibility provisions of this Article VIII
in determining whether a domestic relations order is qualified or in taking
any other actions under this Section with respect to such order. The
presumptions and powers afforded to any Committee or other fiduciary decision
under this Article shall apply to all matters involving domestic relations
orders.
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ARTICLE IX
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENT OF THE PLAN
The Corporation shall have the right at any time by action of the
Board to amend the Plan in whole or in part, including retroactively to the
extent necessary. The duties, powers and liability of the Trustee hereunder
shall not be increased without its written consent. The amount of benefits
which at the later of the adoption or effective date of such amendment shall
have accrued for any Participant or Beneficiary hereunder shall not be
adversely affected thereby. No such amendment shall have the effect of
revesting in the Employer any part of the principal or income of the Fund. No
amendment may eliminate or reduce any early retirement benefit or subsidy
that continues after retirement or optional form of benefit. Unless expressly
provided for in an amendment, it shall not affect the rights and obligations
of any Participant who terminated employment prior to the effective date of
the amendment.
9.2 TERMINATION OF THE PLAN
The Corporation expects to continue the Plan indefinitely, but
continuance is not assumed as a contractual obligation and each Employer
reserves the right at any time by action of its board of directors to
terminate the Plan as applicable to itself. If an Employer terminates or
partially terminates the Plan or permanently discontinues its Contributions
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at any time, each Participant affected thereby shall be then fully vested in
his Individual Account.
In the event of termination of the Plan by an Employer, the
Committee shall value the Fund as of the date of termination. That portion of
the Fund applicable to any Employer for which the Plan has not been
terminated shall be unaffected. The Individual Accounts of the Participants
and Beneficiaries affected by the termination, as determined by the
Committee, shall continue to be administered as part of the Fund or
distributed to such Participants or Beneficiaries under Section 5.4 as the
Committee, in its discretion, shall determine. Any distributions upon plan
termination of amounts attributable to Employee Pre-Tax Contributions shall
only be made to the extent permissible by Code Section 401(k)(10).
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ARTICLE X
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN
10.1 METHOD OF PARTICIPATION
Any organization which must be considered together with the
Corporation under Code Sections 414(b), (c) or (m), may with the consent of
the Board adopt the Plan. In order to adopt the Plan, appropriate action is
required by the board of directors of the adopting organization and by the
Board. Any organization which becomes a party to the Plan shall thereafter
promptly deliver to the Trustee a certified copy of the resolutions or other
documents evidencing its adoption of the Plan and also a written instrument
showing the Board's approval of such organization's becoming a party to the
Plan. The Plan shall be maintained as a single Plan for all participating
Employers.
10.2 WITHDRAWAL
Any one or more of the Employers included in the Plan may withdraw
from the Plan at any time by giving six months advance notice in writing to
the Board and the Committee (unless a shorter notice shall be agreed to by
the Board) of its or their intention to withdraw. Upon receipt of notice of
any such withdrawal, the Committee shall certify to the Trustee the equitable
share of such withdrawing Employer in the Fund (to be determined by the
Committee).
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The Trustee shall thereupon set aside from the Fund then held by it
such securities and other property as it shall, in its sole discretion, deem
to be equal in value to such equitable share. If the Plan is to be terminated
with respect to such Employer, the amount set aside shall be dealt with in
accordance with the provisions of Section 9.2. If the Plan is not to be
terminated with respect to such Employer, the Trustee shall pay such amount
to such trustee as may be designated by such withdrawing Employer, and such
securities and other property shall thereafter be held and invested as a
separate trust of the Employer which has so withdrawn, and shall be used and
applied according to the terms of a new agreement and declaration of trust
between the Employer so withdrawing and the trustee so designated.
Neither the segregation of the Fund assets upon the withdrawal of
an Employer, nor the execution of any new agreement and declaration of trust
under this Section 10.2, shall operate to permit any part of the corpus or
income of the Fund to be used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries or to defray reasonable
costs of administering the Plan and Trust.
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ARTICLE XI
TOP-HEAVY PROVISIONS
11.1 DETERMINATION OF TOP-HEAVY: (a)(1) The Plan will be considered a
Top-Heavy Plan for any Plan Year if as of the Determination Date (A) the sum
of the Individual Accounts of Participants who are Key Employees determined
as of the Valuation Date coincident with or preceding the Determination Date
(this value shall not include any allocations to be made as of or after such
Valuation Date except contributions actually made and allocated on or before
the Determination Date) exceeds 60% of the sum of the Individual Accounts of
all Participants determined as of such Valuation Date (this value shall not
include any allocations to be made as of or after such Valuation Date except
contributions actually made and allocated on or before the Determination
Date), excluding former Key Employees (the "60% Test") or (B) the Plan is
part of a Required Aggregation Group which is Top-Heavy. Notwithstanding the
results of the 60% Test, the Plan shall not be considered a Top-Heavy Plan
for any Plan Year in which the Plan is a part of a Required or Permissive
Aggregation Group which is not Top-Heavy.
(2) For purposes of the 60% Test,
(A) all distributions made from Individual Accounts within the
five year period ending on the Determination Date shall be taken into account;
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(B) if any Participant is a non-Key Employee with respect to
the Plan for any Plan Year, but such Participant was a Key Employee with
respect to the Plan for any prior Plan Year, the Individual Account of such
Participant shall not be considered.
(C) If a Participant has not performed any service for an
Employer or any Affiliate at any time during the five year period ending on
the Determination Date, the Account of such Participant shall not be
considered.
(b) MINIMUM ALLOCATIONS: Notwithstanding Section 4.4, for any Plan
Year during which the Plan is a Top-Heavy Plan, the rate of Employer
Discretionary Contributions for such Plan Year allocated to the Individual
Accounts of Participants who are non-Key Employees and who remain employed by
the Employer (or any Affiliate) at the end of the Plan Year (regardless of
any such Participant's hours of service or level of compensation during the
Plan Year) shall not be less than the lesser of:
(1) three percent (3%) of such non-Key Employee Participant's
Section 415 Compensation; or
(2) the highest aggregate percentage of Section 415
Compensation at which Employer Matching Contributions, Employer Discretionary
Contributions and Employee Pre-Tax Contributions are made (or required to be
made) and allocated under Article IV for any Key Employee for the Plan Year.
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If a Participant is covered by more than one defined contribution plan
on account of his employment with the Employer and/or any Affiliate, the
minimum allocation required by this Section shall be determined by
aggregating the allocations under all such plans.
11.2 TOP-HEAVY DEFINITIONS
DETERMINATION DATE - With respect to any Plan Year, the last day
of the preceding Plan Year, or in the case of the first Plan Year, the last
day of that Plan Year.
KEY EMPLOYEE - Any Employee or former Employee who at any time
during the Plan Year containing the Determination Date, or the four preceding
Plan Years, is or was (1) an officer of the Employer having annual Section
415 Compensation for such Plan Year which is in excess of 50 percent of the
dollar limit in effect under Code Section 415(b)(1)(A) for the calendar year
in which such Plan Year ends (but in no event shall the number of officers
taken into account as Key Employees exceed the lesser of (i) 50 or (ii) the
greater of 3 or 10% of all employees); (2) an owner of (or considered as
owning within the meaning of Code Section 318) both more than a 1/2
percent interest as well as one of the ten largest interests in the Employer
and having annual Section 415 Compensation greater than the dollar limit in
effect under Code Section 415(c)(1)(A) for such Year; (3) a five percent
owner of the Employer; or (4) a one percent owner of the Employer who has
annual Section 415 Compensation of more than $150,000. For purposes of
determining five percent and one percent owners,
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neither the aggregation rules nor the rules of subsections (b), (c) and (m)
of the Code Section 414 apply. Beneficiaries of an Employee acquire the
character of the Employee who performed services for the Employer. Also,
inherited benefits will retain the character of the benefits of the Employee
who performed services for the Employer. A non-Key Employee is any Employee
who is not a Key Employee, or who is a former Key Employee.
PERMISSIVE AGGREGATION GROUP - Each employee pension benefit plan
maintained by the Employer (or any Affiliate) which is considered part of the
Required Aggregation Group, plus one or more other employee pension benefit
plans maintained by the Employer (or any Affiliate) that are not part of the
Required Aggregation Group but that satisfy the requirements of Code Sections
401(a)(4) and 410 when considered together with the Required Aggregation
Group.
REQUIRED AGGREGATION GROUP - Each employee pension benefit plan
maintained by the Employer (or any Affiliate), whether or not terminated, in
which a Key Employee participates in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and each other
employee pension benefit plan maintained by the Employer (or any Affiliate),
whether or not terminated, in which no Key Employee participates but which
during the same period enables any employee pension benefit plan in which a
Key Employee participates to meet the requirements of Code Sections 401(a)(4)
or 410.
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ARTICLE XII
MISCELLANEOUS
12.1 GOVERNING LAW
The Plan shall be construed, regulated and administered according
to the laws of Virginia except in those areas preempted by the laws of the
United States of America.
12.2 CONSTRUCTION
The headings and subheadings in the Plan have been inserted for
convenience of reference only and shall not affect the construction of the
provisions hereof. In any necessary construction the masculine shall include
the feminine and the singular the plural, and vice versa.
12.3 ADMINISTRATION EXPENSES
The expenses of administering the Fund and the Plan may be paid by
either by the Employer or from the Fund, as directed by the Corporation.
12.4 PARTICIPANT'S RIGHTS; ACQUITTANCE
No Participant in the Plan shall acquire any right to be retained
in the Employer's employ by virtue of the Plan, nor, upon his dismissal, or
upon his voluntary termination of employment, shall he have any right or
interest in and to the Fund other than as specifically provided herein. The
Employer shall not be be liable for the payment of any benefit provided for
herein. All benefits hereunder shall be payable only from the Fund.
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12.5 SPENDTHRIFT CLAUSE
Except as provided by a qualified domestic relations order within
the meaning of ERISA Section 206(d)(3), none of the benefits, payments,
proceeds, or distributions under this Plan shall be subject to the claim of
any creditor, of a Participant or a Beneficiary hereunder or to any legal
process by any creditor of a Participant or Beneficiary. Neither a
Participant or Beneficiary shall have any right to alienate, commute,
anticipate, or assign any of the benefits, payments, proceeds or
distributions under this Plan.
12.6 MERGER, CONSOLIDATION OR TRANSFER
(a) In the event of the merger or consolidation of the Plan with
another plan or transfer of assets or liabilities from the Plan to another
plan, each then Participant or Beneficiary shall be entitled on the day
following such merger, consolidation or transfer to at least the benefit he
was entitled to on the day prior to the merger, consolidation or transfer,
determined as if the Plan had then terminated.
(b) The Plan shall not accept a transfer of assets from any other
plan which would cause this Plan to be subject to Code Section 401(a)(11)
with respect to any Participant.
12.7 MISTAKE OF FACT
Notwithstanding anything herein to the contrary, upon the
Employer's request, a Contribution which was made by a mistake of fact, or
conditioned upon initial qualification of the
- 84 -
<PAGE>
Plan or upon the deductibility of the Contribution under Code Section 404,
may be returned to the Employer by the Trustee within one year after the
payment of the Contribution, the denial of the qualification or the
disallowance of the deduction (to the extent disallowed), whichever is later.
For purposes of the preceding sentence, all contributions to the Plan made
before receipt of a favorable determination letter on qualification from the
Internal Revenue Service shall be conditioned on the Plan's initial
qualification, and all contributions, whenever made, shall be conditioned on
their deductibility under Code Section 404. A return of Contributions on
account of the Plan's failure to initially qualify shall only be permitted if
the Plan sponsor timely filed an application for determination of tax
qualified status with the Internal Revenue Service prior to the end of the
remedial amendment period determined under Treasury Regulation Section
1.401(b).
12.8 COUNTERPARTS
The Plan and the Trust Agreement may be executed in any number of
counterparts, each of which shall constitute but one and the same instrument
and may be sufficiently evidenced by any one counterpart.
- 85 -
<PAGE>
ARTICLE XIII
ADOPTION OF THE PLAN
Anything herein to the contrary notwithstanding, this Plan is adopted
and maintained under the condition that it is approved and qualified by the
Internal Revenue Service under Code Section 401(a) and that the Trust
hereunder is exempt under Code Section 501(a). In the event that it should be
found by the Internal Revenue Service that the Plan as amended and restated
hereby is not qualified, the Corporation may modify the Plan to meet Internal
Revenue Service requirements.
As evidence of its adoption of the Plan, National Fiberstok Corporation
has caused this instrument to be signed by its authorized officer this
_______ day of ___________________, 1996, effective as of January 1, 1996,
except as otherwise set forth herein.
WITNESS: NATIONAL FIBERSTOK CORPORATION
_____________________________ By:___________________________
Robert M. Miklas, President
- 86 -
<PAGE>
EXHIBIT 10.15
-------------
AMENDED AND RESTATED ADVISORY SERVICES AGREEMENT
------------------------------------------------
THIS AMENDED AND RESTATED ADVISORY SERVICES AGREEMENT (the
"Agreement") is entered into as of the 28th day of June, 1996, by and between
National Fiberstok Corporation, a Delaware corporation (the "Company"), MDC
Management Company II, L.P., a California limited partnership, and MDC
Management Company, a California general partnership (collectively, "MDC").
WHEREAS, the Company and MDC entered into a Management Services
Agreement as of the 16th day of October, 1992 (the "1992 Agreement"); and
WHEREAS, the Company and MDC desire to amend and restate the 1992
Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereinafter set forth, MDC and the Company hereto agree as follows:
1. RETENTION AS MANAGEMENT ADVISOR.
Subject to each of the terms, conditions and provisions of
this Agreement, the Company hereby retains MDC and MDC hereby agrees to be
retained by the Company to perform those consulting, financial and managerial
functions set forth in Section 4 of this Agreement.
2. TERM.
2.1 Subject to the provisions for termination set forth
herein, this Agreement shall be from the date hereof through December 31, 2000,
and renewable annually thereafter unless terminated by the Company for
"justifiable cause," as defined in Section 2.2.
2.2 The Company, by written notice to MDC, authorized by a
majority of the directors other than those who are partners, principals or
employees of MDC (or an affiliate of MDC), may terminate this Agreement for
"justifiable cause," which shall mean any of the following events: material
breach by MDC of any of its obligations hereunder, misappropriation by MDC of
funds or property of the Company or other willful breach in the course of the
consultancy; any attempt by MDC to secure personal profit related to the
business of the Company and not fairly disclosed to and approved by the Board of
Directors; or gross neglect by MDC in the fulfillment of its obligations
hereunder.
2.3 MDC, by thirty (30) days' prior written notice to the
Company, may terminate this Agreement at any time.
<PAGE>
3. COMPENSATION.
3.1 As compensation to MDC for its management and advisory
services to the Company under this Agreement, the Company agrees to pay to MDC a
fee in the amount of $350,000 per fiscal year of the Company, which amount may
be increased to an amount not to exceed $500,000 in any such fiscal year with
the approval of the members of the Board of Directors of the Company who do not
have a direct financial interest in any person receiving such payments
hereunder. Subject to Section 3.2 below, such fee shall be payable in equal
quarterly installments, in arrears, on the first day of each April, July,
October and January, commencing on the first such day following the date hereof.
3.2 MDC acknowledges that its right to receive fees pursuant
to this Agreement shall be subordinated to the extent described in the letter
agreement attached hereto as Exhibit A.
3.3 MDC shall also be entitled to be reimbursed by the
Company for all reasonable out-of-pocket costs and expenses incurred by MDC and
any of its partners, employees or affiliates in connection with (a) providing
the Services under this Agreement, or (b) serving as a member of the Board of
Directors or as an officer of the Company, including, without limitation, all
travel expenses. Reimbursement shall be provided upon receipt by the Company of
invoices from MDC with respect to such costs and expenses.
4. DUTIES AS MANAGEMENT ADVISOR.
4.1 MDC's duties as a financial and management consultant to the
Company under the provisions of this Agreement shall include providing services
in obtaining equity, debt, lease and acquisition financing, as well as providing
other financial and consulting services to assist management in developing and
implementing strategies for improving the operating, marketing, and financial
performance of the Company (the "Services"). Such Services shall be rendered
upon the reasonable request of the Company. MDC shall devote as much time as is
reasonably necessary to the affairs of the Company.
5. DECISIONS.
The Company reserves the right to make all decisions with
regard to any matter upon which MDC has rendered its advice and consultation,
and there shall be no liability to MDC for any such advice accepted by the
Company pursuant to the provisions of this Agreement.
- 2 -
<PAGE>
6. AUTHORITY OF MANAGEMENT ADVISOR.
MDC shall have authority only to act as a consultant and
advisor to the Company. MDC shall have no authority to enter into any agreement
or to make any representation, commitment or warranty binding upon the Company
or to obtain or incur any right, obligation or liability on behalf of the
Company.
7. INDEPENDENT CONTRACTOR
Except as may be provided elsewhere in this Agreement, MDC
shall act as an independent contractor and shall have complete charge of its
personnel engaged in the performance of the Services.
8. BOOKS AND RECORDS
MDC's books and records with respect to the Services and any
reimbursable costs ("Books and Records") shall be kept at MDC's office located
at 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park, California 94025.
The Books and Records shall be kept in accordance with recognized accounting
principles and practices, consistently applied, and shall be made available for
the Company or the Company's representatives' inspection and copying at all
times during regular office hours. MDC shall not be required to maintain the
Books and Records for more than three years after termination of this Agreement.
9. CONFIDENTIAL INFORMATION
9.1 The parties acknowledge that during the course of
provision of the Services, the Company may disclose information to MDC or its
affiliated companies. MDC shall treat such information as the Company's
confidential property and safeguard and keep secret all such information about
the Company, including reports and records, customer lists, trade lists, trade
practices, and prices pertaining to the Company's business coming to the
attention or knowledge of MDC because of any activities conducted by MDC under
or pursuant to this Agreement.
9.2 MDC shall exercise its best efforts and shall cause any
of its affiliated companies to exercise their best efforts to prevent any
confidential information from being disclosed to third parties, except as
necessarily required in the performance of the Services and except under terms
of confidentiality satisfactory to the Company. This obligation shall remain in
effect until the Company shall release MDC or its affiliated companies from
their obligations under this paragraph 9, but in no event later than three years
after the completion of the Services. MDC shall not use any of the Company's
confidential information in any way that is detrimental to the interests of the
Company, directly or indirectly, either during the term of this Agreement or at
any time thereafter.
- 3 -
<PAGE>
10. INDEMNIFICATION. The Company agrees to indemnify and hold
MDC and its partners, officers, directors and agents harmless from damages,
losses or expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred or paid directly or indirectly, by MDC as a result or
arising out of any actions taken by MDC in connection with the performance of
the Services under this Agreement, except to the extent that such actions result
solely from the gross negligence or willful misconduct of MDC. The Company
hereby further agrees to reimburse MDC for all reasonable fees and expenses
(including attorneys fees) incurred in connection with defending any such claim
to which MDC is a party, as such fees and expenses are incurred by MDC.
11. NOTICES AND COMMUNICATIONS
11.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and MDC, who will be designated by the parties
promptly upon commencement of the services.
11.2 All other notices, demands, and communications required
or permitted hereunder shall be in writing and shall be delivered personally or
by fax to the respective representatives of the Company and MDC set forth below
or shall be mailed by registered mail, postage prepaid, return receipt
requested. Notices, demands and communications hereunder shall be effective:
(i) if delivered personally or by fax, on delivery; or (ii) if mailed, 48 hours
after deposit thereof in the United States mail addressed to the party to whom
such notice, demand, or communication is given. Until changed by written
notice, all such notices, demands and communications shall be addressed as
follows:
If to the Company: Robert M. Miklas, President
and Chief Executive Officer
National Fiberstok Corporation
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
Fax: (404) ______________
If to MDC: McCown De Leeuw & Co.
900 Third Avenue, 28th Floor
New York, New York 10022
Attn: Mr. Tyler Zachem
Fax: (212) 355-6283 or (212) 355-6945
- 4 -
<PAGE>
With copies to: McCown De Leeuw & Co.
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
Attn: Mr. Steven A. Zuckerman
Tel: (415) 854-6000
Fax: (415) 854-0843
12. ASSIGNMENTS
MDC shall not assign this Agreement in whole or in part without the
prior written consent of the Company; provided, however, that such consent shall
not be unreasonably withheld with respect to assignments to MDC's affiliates or
wholly-owned subsidiaries; and provided, further, that any such assignment shall
not relieve MDC of any of its obligations under this Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
13. APPLICABLE LAW AND SEVERABILITY
This document shall, in all respects, be governed by the laws of the
State of Delaware applicable to agreements executed and to by wholly performed
within the State of Delaware. Nothing contained herein shall be construed so as
to require the commission of any act contrary to law, and wherever there is any
conflict between any provisions contained herein and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.
13. FURTHER ASSURANCES
Each of the parties hereto shall execute and deliver any and all
additional papers, documents and other assurances, and shall do any and all acts
and things reasonably necessary in connection with the performance of their
obligations hereunder and to carry out the intent of the parties hereto.
14. ATTORNEYS' FEES
- 5 -
<PAGE>
In the event any action is instituted by a party to enforce any of
the terms and provisions contained herein, the prevailing party in such action
shall be entitled to such reasonable attorneys' fees, costs and expenses as may
be fixed by the court.
15. TIME OF THE ESSENCE
Time is of the essence of this Agreement and all the terms,
provisions, covenants and conditions hereof.
16. CAPTIONS
The captions appearing at the commencement of the paragraphs hereof
are descriptive only and for convenience and reference. Should there be any
conflicts between any such caption and the paragraph at the head of which it
appears, the paragraph and not such caption shall control and govern in the
construction of this document.
17. MODIFICATIONS OR AMENDMENTS
No amendment, change or modification of this document shall be valid
unless it is in writing and signed by all the parties hereto, and expressly
states that it is an amendment, change or modification of this Agreement is
intended.
18. SEPARATE COUNTERPARTS
This document may be executed in one or more separate counterparts,
each of which, when so executed, shall be deemed to be an original. Such
counterparts shall, together, constitute and be one and the same.
19. ENTIRE AGREEMENT
This Agreement shall constitute the entire understanding and
agreement between the parties hereto and shall supersede any and all letters of
intent, whether written or oral, pertaining to the subject matter of this
Agreement.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers on the date first appearing above.
NATIONAL FIBERSTOK CORPORATION
By: /S/ ROBERT M. MIKAS
--------------------
Title: President
MDC MANAGEMENT COMPANY,
a California general partnership
By: /S/ DAVID E. DE LEEUW
----------------------
Title: General Partner
MDC MANAGEMENT COMPANY II, L.P.,
a California limited partnership
By: /S/ DAVID E. DE LEEUW
----------------------
Title: General Partner
- 7 -
<PAGE>
Exhibit 10.16
[LETTERHEAD]
June 28, 1996
Mr. Robert M. Miklas
4982 Carol Lane NW
Atlanta, Georgia 30327
Dear Rob:
I am delighted to be able to confirm the continuing offer of employment as
President & CEO of NFC/DEC as provided for in the attached document. Over the
past fifteen months I have developed a significant appreciation of your
leadership and operating skills, and I personally am delighted to be a part of
the DEC team.
I'd like to take this opportunity to formally acknowledge your skillful
leadership and the personal contributions you have made to DEC over the past
years as well as relative to the recent acquisition of Transkrit. In my
judgement, your knowledge of the business and superior communication skills
were the principal reasons why we were able to obtain a favorable rate on the
Senior Notes and complete the transaction without a significant hitch.
In a relatively short period of time, and despite some foreboding impediments,
you have guided DEC from the bottom of the pile to a position where the top
of the heap is within our sights, and I am envious of the new and exciting
challenges you face. I want you to know that I will be there beside you and
behind you to provide leadership and assistance in whatever way possible to help
ensure the future growth and prosperity of the organization.
Cordially,
/s/John D. Weil
John D. Weil
cc: David King
Sandy Kaynor
<PAGE>
[LETTERHEAD]
June 28, 1996
Mr. Robert M. Miklas
4982 Carol Lane NW
Atlanta, Georgia 30327
Dear Rob:
Confirming the various discussions you have had with David King and myself,
effective as of the date of this letter, you will continue your employment with
National Fiberstok Corporation ("NFC") as President & Chief Executive Officer.
You will also carry the identical titles for DEC International, Inc. ("DEC").
RESPONSIBILITIES
In your capacity as President & CEO, you will report directly to the Board of
Directors of NFC/DEC, and maintain your principal physical office at the
Corporate Offices located in Atlanta, Georgia. As President & CEO, you shall
have the ultimate responsibility for providing the necessary planning and
leadership skills to ensure the future success of the Corporation. Your
principal responsibilities shall include:
- Continuing oversight, responsibility and management of all aspects
of the business of NFC/DEC and their subsidiaries;
- Development and implementation of the plan to integrate Transkrit
Corporation and its affiliates into NFC/DEC;
- Assistance in the development of corporate strategies to maximize
shareholder value of NFC/DEC and its subsidiaries;
- Assistance in the identification and analysis of suitable
acquisition targets and other prospective business combinations;
- Determine an optimal organization structure and ensure that all
key management positions are staffed with superior talent;
<PAGE>
- Define responsibilities and reporting relationships for key
Corporate and Division personnel. Set goals and develop
performance measurements for Corporate and Division direct
reports. Follow up on performance and hold subordinates
accountable for measurable results;
- Develop key manager profiles for direct reports and evaluate
candidates against the profiles and make changes as warranted;
- Communicate periodically with all levels of the organization and
provide the necessary leadership to ensure the organization meets
its goals and objectives;
- Provide for the delegation of authority to the lowest necessary
levels in the organization;
- Provide direction and ensure compliance with the Corporation's
safety programs;
- Other responsibilities as assigned by the Board of Directors of
NFC/DEC, from time to time.
CASH COMPENSATION
As it has been since March 1, 1996, your base compensation will continue to be
$200,000 (two-hundred thousand dollars) per year, paid on a bi-weekly basis in
accordance with the normal payroll policies of the Corporation.
An appraisal of your performance pursuant to an agreed upon annual plan will
form the basis for any future increase in this base cash compensation. Any such
increase(s) will be subject to approval by the Compensation Committee of the
Board of Directors of NFC and DEC (the "Compensation Committee") currently
comprised of David King, Glenn McKenzie and John Weil, and whose membership
shall be subject to change at the sole discretion of the Corporation's Board of
Directors.
INCENTIVE COMPENSATION
You will be eligible to earn incentive compensation as determined by the Board
of Directors of NFC/DEC.
<PAGE>
INSURANCE AND RETIREMENT BENEFITS
You will be eligible to participate in all insurance, retirement and other
benefit plans which are generally available to other executive employees of NFC
at the then current contribution and/or co-payment levels.
You are eligible for FOUR WEEKS of company paid vacation per year.
SEVERANCE
This offer of continued employment is at the will of the parties. Should NFC
choose to terminate your employment for any reason other than an illegal act,
you shall be entitled to continuation of your then current base cash
compensation for a period of one year from the effective date of termination.
BOARD OF DIRECTORS
You will be a member of the Board of Directors of NFC and DEC.
I believe this constitutes an accurate summary of the discussions regarding your
employment with NFC that you have had with various Board members. If you are in
agreement with the provisions of the offer, please indicate by countersigning
this letter. A copy of the countersigned letter will be provided for your
files.
Rob, we are extremely pleased to know that you will continue as the President &
CEO of NFC and DEC. The acquisition of Transkrit will substantially expand the
scale and scope of the organization that you have successfully developed to
date. We are confident that your prospective efforts will continue to have a
positive impact on the future growth and prosperity of the Corporation.
Cordially,
NATIONAL FIBERSTOK CORPORATION
/s/John D. Weil
John D. Weil
Chairman of the Board of Directors
Accepted By:
/s/Robert M. Miklas
- -------------------
Robert M. Miklas
- -------------------
Date
<PAGE>
Exhibit 10.18
NATIONAL FIBERSTOK CORPORATION
SUITE C-150
5775 PEACHTREE DUNWOODY ROAD
ATLANTA, GEORGIA 33342
June 28, 1996
Mr. Jack Resnick
5300 Fox Ridge Road
Roanoke, VA 24014
Dear Jack:
Confirming our various discussions, effective with the date of this letter, you
will be Senior Vice President of National Fiberstok Corporation ("NFC") and DEC
International, Inc. ("DEC"). In addition, you will be President and Chief
Executive Officer - Transkrit Division ("Transkrit").
RESPONSIBILITIES
In your new capacity, you will report directly to me and maintain your primary
physical office at the Transkrit corporate office in Roanoke, Virginia. Your
responsibilities will include:
o continuing oversight and management of all activities of Transkrit and
Label Art, Inc. (including Short Run Labels, Inc.);
o assistance in the development of corporate strategies to maximize
shareholder value of DEC, NFC and its subsidiaries;
o assistance in the identification, analysis and purchase of suitable
acquisition targets, other business combinations and/or outsourcing
candidates; and
o other responsibilities as assigned by me or the Board of Directors of
DEC or NFC.
<PAGE>
Mr. Jack Resnick
Page 2
CASH COMPENSATION
Your base compensation expressed in annual terms will be $225,000, paid weekly.
An appraisal of your performance pursuant to an agreed upon annual plan will
form the basis for any increase in this base compensation. Such an increase
will be subject to approval by the Compensation Committee of the Board of
Directors of DEC or NFC ("Compensation Committee").
You will be eligible to earn incentive cash compensation on an annual basis of
up to a maximum of 40% of your base compensation. Such incentive cash
compensation will be determined on a pro rated basis for the remainder of fiscal
year 1996 and annually thereafter. The payout under this plan will be
determined by your performance against a mutually agreed upon incentive
performance plan. This plan, a sample form of which is attached, will include
EBITDA (excluding any extraordinary gains and losses for unplanned acquisitions
that would affect planned EBITDA) of Transkrit (including Label Art, Inc. and
Short Run Labels, Inc.) and other performance targets, with a significant
emphasis on the former measure. Payout will begin upon achievement of a minimum
of 70% of target, with maximum payout of 40% of base compensation for
performance equal to or exceeding target. All payments under this plan are
normally made in the first quarter of each fiscal year after the close and audit
of the prior fiscal year's operating performance, and are subject to approval by
the Compensation Committee.
INSURANCE, RETIREMENT AND OTHER BENEFITS
You will continue to participate in all insurance, retirement and other benefit
plans including the use of a company automobile as provided by Transkrit prior
to the acquisition by NFC and which were not terminated at the closing of the
acquisition, in each case at the same contribution and/or co-pay levels as
existed prior to the acquisition.
You will be eligible for four weeks of company-paid vacation per year.
STOCK OPTION AND STOCK OWNERSHIP
You will also be granted 58,485 shares of DEC Class A Common Stock, par value
.0001 per share ("Shares"), pursuant to the provisions of the DEC 1996 Stock
Incentive Plan (the "Plan") and award agreements issued under the Plan (the
"Award
<PAGE>
Mr. Jack Resnick
Page 3
Agreements"). Vesting will be in accordance with the terms of the Award
Agreements and Plan. A copy of the Plan and the Award Agreements are enclosed
herewith.
In addition, in the event that DEC is able to repurchase existing Shares from
retired or other stockholders, you will be offered the opportunity to purchase
for cash up to 10,000 Shares at a price equal to the price paid by DEC for the
repurchase of those shares.
Any ownership of Shares will be subject to all terms and conditions of the Award
Agreements and the DEC Stockholders Agreement, a copy of which is enclosed
herewith.
SEVERANCE; NONCOMPETITION
This offer of employment is at the will of the parties. Should NFC choose to
terminate your employment for any reason other than an illegal act or willful
refusal to follow instructions, you would be entitled to continuation of your
then current base compensation for a period of one (1) year from the date of
termination.
You agree to devote your entire business time and attention to the business of
the DEC and NFC and, during the term of your employment with NFC, not to be
engaged in any other business activity other than passive investments in
businesses or enterprises that are not competitive with any business then
engaged in by the DEC or NFC. At no time, whether during the term, or after the
termination, of your employment by NFC shall you disclose to others or use
(other than for the benefit of the DEC and NFC) any information concerning the
DEC or NFC or its finances, its products, procedures or business practices,
except to the extent required in the course of performing duties to NFC during
the term of your employment.
In the event of termination of your employment for whatever reason, you shall
not, for a period of 18 months after termination, directly or indirectly, in any
capacity work for, or otherwise have a financial interest or be engaged in, any
business that prints business forms or direct mail promotional material.
<PAGE>
Mr. Jack Resnick
Page 4
PARTICIPATION AT BOARD OF DIRECTORS MEETINGS
You will the have opportunity to attend all Board of Directors meetings as a
non-voting participant, unless specifically restricted from doing so by the
order of the Chairman of the Board of Directors.
I believe this constitutes a complete summary of our discussions regarding your
employment with NFC. If you are in agreement with the provisions of this offer,
please indicate by countersigning this letter. A copy of the countersigned
letter will be provided for your files.
Jack, I am extremely pleased that you have agreed to remain with Transkrit and
to join the key management team at NFC. I am looking forward to working with
you and am confident that your efforts will have a major positive impact on the
continued development of the value of the DEC and NFC.
Sincerely,
NATIONAL FIBERSTOK CORPORATION
Robert M. Miklas
President & CEO
/s/ Jack Resnick
- ----------------
Jack Resnick
Date:
<PAGE>
DEC INTERNATIONAL, INC.
1996 INCENTIVE COMPENSATION PLAN
EXECUTIVE: JACK RESNICK
PRESIDENT & CEO - TRANSKRIT INCENTIVE MAXIMUM: 40%
CATEGORY COMPONENT 1995 THRESHOLD TARGET INTERIM PROJECTED
WEIGHT ACTUAL (MINIMUM) MAXIMUM) YTD EST AWARD
- -------------------------------------------------------------------------------
EBITDA
(TRANSKRIT/
LABEL ART) 70.0% .70*TARGET
ALL OTHER 30.0%
SAFETY
ACQUISITIONS
DISCRETIONARY
--------------
TOTAL 0.0%
NOTE: NO AWARD CAN BE EARNED ON "ALL OTHER" GOAL COMPONENTS UNLESS DIVISION
THRESHOLD EBITDA IS ATTAINED.
<PAGE>
AGREEMENT
THIS AGREEMENT, made this 5th day of April, 1983 by and between DOUBLE
ENVELOPE CORPORATION, 7702 Plantation Road, Roanoke, Virginia (hereinafter
referred to as the "Employer") and William C. Britts (hereinafter referred to as
the "Employee"),
WITNESSETH:
WHEREAS, the Employee is presently employed by the Employer as Vice
President; and
WHEREAS, the Employer acknowledges and recognizes the value of the
Employee's services; and
WHEREAS, the Employer desires to continue to employ and retain the
experience, abilities, and services of the Employee; and
WHEREAS, the Employee expresses his desire to continue to service the
Employer in the capacity above set forth; and
WHEREAS, both parties desire to embody the terms and conditions of
employment of the Employee into a written agreement (hereinafter referred to as
"Agreement").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
(1) TERM OF AGREEMENT. The Employer hereby agrees to continue to employ
the Employee on the day, month and year first written above (hereinafter
referred to as "Effective Date") and
<PAGE>
continuing thereafter for a period ending with the Employee's retirement
(whether early, normal, delayed or disability) under the applicable provision of
the Company's tax-qualified defined benefit pension plan (such period
hereinafter referred to as the "Employment Period"), unless this Agreement is
earlier terminated as provided for herein.
(2) EMPLOYEE'S DUTIES AND TITLE. During the Employment Period, the
Employer agrees to continue to employ the Employee in the capacity hereinabove
set forth at his current office location, or in such other capacity and/or at
such other location as may be mutually agreed to by the Employee and the
Employer. The Employee agrees to continue to serve the Employer in such
capacity with such duties, authority and responsibilities as have in the past
been assigned and as may, from time to time, reasonably be assigned to the
Employee by the Employer during the Employment Period.
(3) EMPLOYEE'S EXERTION OF BEST EFFORT. During the Employment Period, the
Employee agrees that he will continue to devote all of his working time,
attention, skill and efforts to the business affairs of the Employer and will
exert his best efforts to the promotion and development of the best interests of
the Employer. During the Employment Period the Employee will not, without the
written consent of the Board of Directors of the Employer, directly or
indirectly, for his own benefit or the benefit of any other person, individually
or with any person, firm or corporation wherever located, other than the
Employer, engage in any activities or services similar to or competitive
-2-
<PAGE>
with those services provided, developed or marketed by the Employer.
(4) EMPLOYEE COMPENSATION. During the Employment Period, the Employee
shall be entitled to receive from the Employer for the performance of
services a "base compensation," subject to all federal and state withholding
and taxes, payable no less frequently than monthly. Such base compensation
(hereinafter Base Compensation) shall be equal to the greater of: (a) the
annual sum of $86,000.00, or (b) such annual sum indicated in 4(a) plus any
increases in the Employee's Base Compensation as may be granted subsequent to
the effective date by the Board of Directors of the Employer. The Employer
may award the Employees bonuses from time to time, but the term Base
Compensation shall not include any bonus payment. Notwithstanding the
foregoing, Base Compensation in any year may be reduced without Employee's
consent by an amount not to exceed ten percent (10%) of the prior year's Base
Compensation, but only upon action of the Board of Directors reducing by the
same or greater percentage the Base Compensation of all management employees
who are then parties to written employment agreements with the Employer.
During the Employment Period, the Employer shall also be eligible to
participate in any plan or annual incentive compensation which shall be deemed
appropriate by the Board of Directors of the Employer.
(5) EMPLOYEE'S EMPLOYEE BENEFITS. The Employer agrees that nothing
contained herein is intended or shall be deemed to be granted to the Employee in
lieu of any rights and privileges
-3-
<PAGE>
which the Employee may be entitled to as an employee of the Employer (unless as
otherwise provided for) under but not limited to any retirement, life insurance,
hospital and medical, disability, vacation or other plan or plans, whether
formal or informal, which may now be in effect or which may hereafter be
adopted. It is the express intention of the parties that during the Employment
Period, the Employee shall have the same rights and privileges to participate
in such plan or plans as any other similarly situated employee of the Employer:
provided, however, that during the Employment Period (and thereafter where
applicable), the Employer shall in no event provide the Employee with less than
the benefits identified with this Section (including payment of the cost of such
benefits by the Employer) provided as of the Effective Date, or their
substantial equivalent; regardless of the manner in which such benefits may be
subsequently funded. The terms of such current benefits, which are identified
specifically under the attached Addendum to this Agreement, are hereby
incorporated within this Agreement by specific reference thereto.
(a) Hospital, medical and surgical benefits provided by the Employer
(including the Employee's spouse) identified by reference to item (a) of the
attached Addendum.
(b) Basic group term life insurance coverage, in accordance with item (b)
of the attached Addendum. The beneficiary designation shall, in all events, be
controlled by the Employee for purposes of such benefits.
-4-
<PAGE>
(c) Sickness and/or disability benefits payable from the first day of each
such sickness or disability for its duration. Such benefits shall be determined
on the basis of the Employee's Base Compensation, determined in accordance with
Section 4 above, as of the date of each such sickness or disability, shall be
subject to federal and state withholding and taxes, if required, and shall be
payable no less frequently than monthly on the following scheduled basis:
(1) 100% of Base Compensation for the first twenty-four (24) months of
each such sickness or disability; thereafter,
(2) 90% of Base Compensation for the next twelve (12) months of such
sickness or disability; thereafter,
(3) 85% of Base Compensation during each such sickness or disability until
the attainment of age 65; and, thereafter,
(4) 75% of Base Compensation payable until the earlier of (i) the
cessation of each such sickness or disability, or, (ii) the date of
the Employee's death.
The total amount of sickness and disability benefits payable described
above shall be in lieu of Base Compensation and shall include those benefits
provided pursuant to the Employer's short-term disability plan (item (c) of the
attached Addendum), group long-term disability insurance plan (item (d) of the
attached Addendum), the Employer's tax qualified defined benefit pension plan
(item (e) of the attached Addendum), primary and family Social Security, Workers
Compensation, and any other disability benefits provided the Employee as a
result of his employment. In no event, however, shall benefits payable, as a
result of the
-5-
<PAGE>
Employee's sickness or disability, from the Employer's tax qualified profit
sharing plan (item (f) of the attached Addendum) be considered for purposes of
this Section.
For purposes of this Section, sickness or disability shall be defined to
mean a physical or mental condition which prevents the Employee from performing
each of his customary managerial duties or any similar duties for the Employer.
The determination of sickness or disability shall be made from time to time as
necessary by the Employer's Board of Directors, whose determination shall be
binding, upon advice of a physician or physicians of the Employer's choosing.
(d) Pension benefits as provided the Employee under the Employer's tax-
qualified defined benefit pension plan (item (e) of the attached Addendum).
(e) Profit-sharing benefits as provided the Employee under the Employer's
tax-qualified profit sharing plan (item (f) of the attached Addendum).
(f) Survivor income benefits, payable to the Employee's spouse in the event
of the Employee's death during the Employment Period, equal to fifty percent
(50%) of the Employee's Base Compensation, as determined in accordance with
section 4 above, in effect at the date of his death, for a period of one (1)
year following his death. Such survivor income benefits shall be payable no
less frequently than monthly and shall be deemed to be in addition to any other
survivor benefits enumerated under this Section 5.
-6-
<PAGE>
(g) No less than five weeks of paid vacation annually.
(h) All perquisites afforded the Employee by the Employer not
otherwise enumerated above, specifically to include (but not be limited to)
the right to purchase any automobile provided to the Employee during his
Employment Period by the Employer for the Employer's book value of such
automobile at the time of the Employee's exercise of such right of
purchase.
(6) TERMINATION OF EMPLOYMENT BY EMPLOYER. The Employer shall not
terminate the employment of the Employee without cause. If the Employer
terminates the Employee's employment for any reason except termination without
cause, its obligations under this Agreement shall thereupon immediately cease
and this Agreement shall be deemed terminated; provided, however, in the case of
termination under circumstances described in (d) of this section 6, benefits and
rights under the Incentive Supplemental Retirement Plan as specified in this
Agreement shall not be terminated, and provided further, that termination
hereunder shall have no effect upon any right, title or interest which the
Employee may have under any benefit plan or program of the Employer existing
independent of this Agreement. As used herein, the term "termination without
cause" shall mean termination of employment by the Employer for any reason
except (a) misappropriating any funds or property due the Employer or,
(b) attempting to obtain any personal profit from any transactions in which the
Employee has an interest which is adverse to the
-7-
<PAGE>
interest of the Employer unless the Employee shall have first obtained the
consent of the Board of Directors of the Employer, (c) unreasonable and willful
neglect or refusal to perform the duties assigned to the Employee as of the
Effective Date and any other duties that may be thereafter assigned with the
mutual consent of the parties to this Agreement from time to time, or (d) the
disposition of all or substantially all of the assets of the Employer to one or
more persons or entities and the failure of such persons or entities to assume
or succeed to the Employer's obligations hereunder expressly or by operation of
law.
(7) TERMINATION OF EMPLOYMENT BY EMPLOYEE. If the Employee terminates his
employment during the Employment Period, all of the Employer's obligations and
the Employee's rights arising hereunder, including specifically and without
limitation rights to benefits under the Incentive Supplemental Retirement Plan,
shall terminate. Notwithstanding the foregoing, if the Employee terminates his
employment by reason of sickness or disability as determined under Section 5(c),
Employee shall be entitled to sickness or disability benefits as provided in
Section 5(c). The Employee shall give the Employer's Board of Directors 180
days advance written notice of his termination of employment.
(8) EMPLOYER'S TRADE SECRETS. The Employee covenants that during the
Employment Period and thereafter, the Employee will not, other than as required
in the regular discharge of his duties, disclose to any person, firm,
corporation, association, or other entity any business or confidential
information concerning or related to the Employer or its business including
without limitation customer lists,
-8-
<PAGE>
contracts, financial cost, or sales data, formulas, processes, or devices,
supply sources, plans, models, or business opportunities.
(9) INCENTIVE SUPPLEMENTAL RETIREMENT PLAN. The Employee has been
designated by the Employer's Board of Directors as a Participant in the
Employer's Incentive Supplemental Retirement Plan (the "Plan") in force as of
the date hereof, a copy of which is attached hereto as Exhibit 1. All of the
terms, covenants and conditions of the Plan are hereby incorporated into this
Agreement as if set out herein in their entirety, and the Employer and the
Employee agree to be bound by all such terms, covenants and conditions
notwithstanding the termination of the Employer's obligations under this
Agreement. Benefits under the Plan shall be as follows:
(a) CASH BENEFITS: The percentage factor to be applied to the
Employee's Base Compensation, as defined in the Plan, for purposes of
determining the cash benefits payable to the Employee under Article V of
the Plan is 50%, if the Employee's Date of Eligibility, as defined in the
Plan, occurs before the date the Employee attains the age of sixty (60)
years, and shall be 65% if the Employee's Date of Eligibility occurs on or
after the date the Employee attains the age of sixty (60) years. Cash
benefits shall be payable until the soonest to occur of (i) Employee's
death, (ii) Employee reaching age 75, or (iii) the date 10 years from
Employee's Date of Eligibility.
-9-
<PAGE>
(b) IN-KIND BENEFITS. The in-kind benefits payable to the Employee
under Article VI of the Plan are set out in Exhibit 2 to this Agreement.
(10) DEFAULT. The Employer and the Employee acknowledge that a default
under this Agreement would cause irreparable injury to the non-defaulting party
for which injunctive relief is an appropriate remedy, although neither party
shall be prohibited from pursuing any and all remedies available at law or in
equity. Waiver of any default shall not be deemed to be waiver of any
subsequent or other default.
(11) NON-ALIENATION. It is agreed that neither the Employee nor any
beneficiary shall have any right to commute, sell, assign, transfer, or
otherwise convey the right to receive any payment hereunder, which payments and
the right thereto are expressly declared to be non-assignable and non-
transferable, and in the event of any attempted assignment or transfer the
Employer shall have no further liability hereunder.
(12) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto, their heirs, executors, administrators, successors and assigns.
(13) EMPLOYER ASSIGNMENT. This Agreement shall not be assignable by the
Employer, except upon the merger, consolidation or sale of substantially all of
the Employer's assets, and in such event only if the surviving, resulting, or
transferee entity assumes or succeeds to the Employer's obligations hereunder
expressly or by operation of law, whereupon Employer shall be discharged of all
liability hereunder.
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<PAGE>
(14) ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Roanoke, State of Virginia, in accordance with the rules then obtaining
of the American Arbitration Association. The decision of the arbitrator shall
be final and binding and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The expense of arbitration shall be shared
equally by both parties.
(15) ENTIRE AGREEMENT AND AMENDMENT. This Agreement expresses the entire
agreement of the parties, and all promises, representations, understandings,
arrangements and prior agreements are merged herein and made a part hereof as
modified hereby. This Agreement may not be amended orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
(16) GOVERNING LAW, SEVERABILITY. This Agreement having been executed and
delivered in the Commonwealth of Virginia, its validity, interpretation,
performance and enforcement shall be governed by the laws of that state. If any
provision herein shall be determined to be invalid or unenforceable by any court
of competent jurisdiction, such determination shall not affect the validity or
enforceability of the other provisions herein.
IN WITNESS WHEREOF, the Employee has affixed his signature, and the
Employer has caused this Agreement to be executed and its
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<PAGE>
seal to be affixed by its duly authorized officers thereunto as of the day and
year first written above.
DOUBLE ENVELOPE CORPORATION
By: /s/ Fred G Tucker, Jr.
-----------------------------
Its: /s/ President
-------------------------
(SEAL)
ATTEST:
By: /s/ M Caldwell Butler
----------------------------
/s/ its secretary
EMPLOYEE
/s/ Walter C. Britts
--------------------------------
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<PAGE>
ADDENDUM
--------
Pursuant to the applicable provisions of Section 5 of the Agreement between the
Employer and the Employee, the following serves to identify the employee benefit
plans in effect as of the Effective Date of this Agreement to which references
have been made.
<TABLE>
<CAPTION>
Current Current
Employee Current Contract Contract/PL
Benefit Plan Underwriter Number Effective Date
------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
a. Double Envelope Corporation Blue Cross/Blue Shield January 1, 1976
Hospital Expense Plan of Southwestern Virginia 04126 Effective Date
Executive Medical
Reimbursement Plan Health Service, Inc. EMR-00033 January 1, 1980
b. Double Envelope Corporation Transamerica Occidental
Group Life Insurance Plan Insurance Company 23027 March 1, 1982
Retired Lives Reserve G-0661
Program First Colony Life (Master
Trust) March 15, 1982
c. Employees' Income Protection January 1, 1976
Plan of Double Envelope Restated
Corporation Self-Financed N/A January 1, 1979
d. Double Envelope Corporation
Salary Continuation Plan Mutual Benefit G-23468 March 1, 1979
e. Employees' Retirement Plan of January 1, 1966
Double Envelope Corporation Self-funded N/A Restated
January 1, 1978
f. Employees' Profit Sharing January 1, 1953
Plan of Double Envelope Restated
Corporation Self-funded N/A January 1, 1978
</TABLE>
<PAGE>
EXHIBIT I
DOUBLE ENVELOPE CORPORATION
INCENTIVE SUPPLEMENTAL RETIREMENT PLAN
Dated February 16, 1983
Restated April 5, 1983
I. PURPOSES AND OBJECTIVES. The purposes and objectives of the Double
Envelope Corporation Incentive Supplemental Retirement Plan (the Plan) are as
follows:
a. To provide a means for the Company to reward certain selected key
management employees for the past contributions they have made to the
development, growth and profitability of the Company;
b. To induce qualified management employees to remain in the Company's
employ and thereby continue to contribute to the Company's future
development and growth;
c. To ensure that the Company continues to benefit from the management
expertise of retired key management employees through consultative and
advisory services to the Company;
d. To protect the company's business from competition by key management
employees who leave the company's employ; and
e. To supplement the retirement income available to key management
employees under the Company's tax-qualified retirement plans.
II. DEFINITIONS. As used herein:
a. "Base Compensation" means salary and wages, exclusive of bonus.
<PAGE>
b. "Company" means Double Envelope Corporation.
c. "Date of Eligibility" means the date on which a Participant becomes
eligible for benefits pursuant to Section IV herein.
d. "Delayed Retirement" means retirement from the employment of the
Company at a Delayed Retirement Date, as defined in the Pension Plan
from time to time.
e. "Early Retirement" means retirement from the employment of the Company
at an Early Retirement Date, as defined in the Pension Plan from time
to time.
f. "Eligible Participant" means a Participant who is eligible for
benefits as provided in Article IV of this Plan.
g. "Normal Retirement" means retirement from the employment of the
Company at the Normal Retirement Date, as defined in the Pension Plan
from time to time.
h. "Participant" means a person described in Article III of the Plan.
i. "Pension Plan" means the Employees' Retirement Plan of Double Envelope
Corporation, as amended from time to time.
j. "Profit Sharing Plan" means the Employees' Profit Sharing Plan of
Double Envelope Corporation, as amended from time to time.
k. "Termination Without Cause" means termination of employment by the
Company for any reason except (i) misappropriation of funds or
property due the Company, (ii) attempting to obtain any personal
profit from any transactions in which the Participant has an interest
which
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<PAGE>
is adverse to the interest of the Company unless the Participant shall
have first received the consent of the Company's Board of Directors,
or (iii) unreasonable and willful neglect or refusal to perform the
duties assigned by the Company to the Participant as of the date of
becoming a Participant, and any other duties that may be thereafter
reasonably assigned by the Board of Directors of the Company or its
designee from time to time.
III. PARTICIPANTS. Participants under this plan shall include and be
limited to those management or highly compensated employees selected by the
Company's Board of Directors from time to time as deserving and who execute an
agreement with the Company incorporating the terms of this Plan.
IV. ELIGIBILITY FOR BENEFITS. A Participant will become eligible for
benefits under the Plan upon completion of twenty (20) years of Credited
Service, as that term is defined in the Pension Plan, but only under
and upon the following circumstances:
a. Normal Retirement or Delayed Retirement
b. Early Retirement or Termination Without Cause.
V. CASH BENEFITS
A. AMOUNT OF BENEFITS. The cash benefits to be paid to Eligible
Participants shall be an annual amount, paid in equal monthly installments,
equal to (1) the Eligible Participant's highest annual Base
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<PAGE>
Compensation multiplied by (2) a percentage factor, to be fixed by the Company's
Board of Directors in its discretion for each Participant upon becoming a
Participant, which amount shall be reduced by (i) nine percent (9%) of the sum
of the Eligible Participant's account balance in the Profit-Sharing Plan as of
the Date of Eligibility and the aggregate amount of the Eligible Participant's
distributions from the Profit-Sharing Plan through the Date of Eligibility, (ii)
sickness and/or disability benefits paid by or made available by the Company,
including under the Pension Plan and Workmen's Compensation, but excluding
payments under the Profit-Sharing Plan, (iii) Social Security payments to which
the Eligible Participant is entitled, and reduced further by:
(1) In the case of Normal Retirement or Delayed Retirement, the amount to
which the Eligible Participant is entitled annually from the Pension
Plan (or, if greater, the amount that would have been payable if the
Eligible Participant had elected to receive Pension Plan payments
computed on the single life annuity method);
(2) In the case of Early Retirement or Termination Without Cause, the
amount to which the Eligible Participant would be entitled annually
from the Pension Plan at the earliest date that he is entitled to
begin receiving annuity benefits thereunder if the Eligible
Participant did not elect to defer the receipt of such amounts and
elected to receive Pension Plan benefits computed on the single life
annunity method.
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<PAGE>
If substantially all the assets of the Company shall be transferred to one
or more persons who do not expressly or by operation of law assume or succeed to
the Company's obligations hereunder (the "Transferee") and the Transferee adopts
an amendment to the Pension Plan the effect of which is to reduce the amount to
which the Eligible Participant is entitled from the Pension Plan under (1) or
(2) above then for purposes of determining such amount, those provisions of the
amendment which effect such reduction shall not be taken into account. If the
Transferee shall terminate the Pension Plan, then for the purpose of determining
the amount to which the Eligible Participant is entitled from the Pension Plan
under (1) or (2) above, it shall be assumed that the Pension Plan continued in
effect for so long as the Eligible Participant receives cash benefits under this
section, containing the same provisions as immediately prior to its termination,
subject to the provisions of the preceding sentence.
If the Company shall terminate the Pension Plan, then for purpose of
determining the annual amount to which the Eligible Participant is entitled from
the Pension Plan under (1) or (2) above, the Eligible Participant shall be
deemed to be entitled, in addition to any annual benefits to which he is
actually entitled under the Pension Plan, to an annual benefit under the Pension
Plan, payable in the form of a single-life annuity, which is the actuarial
equivalent (as reasonably determined by the Company) of any lump sum
distributions received by him on account of such termination.
-5-
<PAGE>
b. TERM OF BENEFITS. Cash benefit payments shall commence for Eligible
Participants who elect Normal Retirement or Delayed Retirement as of the date
Pension Plan payments begin. Cash benefit payments shall commence for all other
Eligible Participants upon the later of (i) the earliest date at which Early
Retirement or Normal Retirement may be taken, (ii) the date Early Retirement is
actually taken, and (iii) the date of Termination Without Cause. The term for
which cash benefits shall be paid to an Eligible Participant shall be as
determined by the Board of Directors, in its discretion, for each Participant
upon becoming a Participant, and may be for as long as the life of the
Participant, if the Board of Directors so determines. Additionally, the Board
of Directors may, in its discretion, provide for benefits for the spouse of a
deceased Eligible Participant.
VI. IN-KIND BENEFITS. It is the Company's intent under the Plan to endeavor
to provide to Eligible Participants certain in-kind benefits identical with or
similar to certain of the fringe benefits provided by the Company to full-time
employees. However, it is recognized that the terms of insurance policies and
other contracts for benefits to which the Company is a party may not permit
coverage of Eligible Participants, and it is also recognized that the Company
must reserve the flexibility to alter its fringe benefit programs from time to
time as competitive and financial considerations dictate. In light of these
considerations, the Company intends to provide the following in-kind benefits to
Eligible Participants coincidentally with the term during which cash benefits
are payable under the Plan, except
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<PAGE>
that in-kind benefits for Participants Terminated Without Cause shall commence
on the date of termination of employment by the Company, and except further that
the Company may terminate any in-kind benefits which are substantially similar
to those provided to the Participant by any subsequent employer.
a. HOSPITAL/MEDICAL/SURGICAL BENEFITS. The Company will continue the
same group benefits (excluding any Executive Medical Reimbursement Plan
benefits) to which the Eligible Participant was entitled as of the day prior to
the cessation of full-time employment by the Company, or will provide
substantially similar individual benefits, or, at its election, will substitute
for such benefits annual cash payments equal to the annual cost to the Company
of purchasing such benefits for the Participant as of the date of cessation of
full-time employment, as reasonably determined by the Company.
b. LIFE INSURANCE BENEFITS. The Company will provide group term life
insurance in the same face amount as prior to the Eligible Participant's
cessation of full-time employment, or an individual life insurance policy in the
same amount, or, at its election, will substitute annual cash payments equal to
the annual premiums payable on an unrated ordinary life insurance policy in the
same amount.
c. ADDITIONAL BENEFITS. The Company may, at the direction of the
Board of Directors and in its sole discretion, grant such additional in-kind
benefits to an Eligible Participant as the circumstances warrant.
VII. OBLIGATIONS OF PARTICIPANTS
a. ADVICE AND CONSULTATION. Each Participant shall agree
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<PAGE>
to be available to render advisory and consultative services at reasonable
times to the Company on an "as-needed" basis upon the Company's request.
b. NON-COMPETITION AGREEMENT. Each Participant shall agree not to
participate as an employee, consultant, director, or principal (except as a
stockholder of a publicly-traded corporation) in any other business in
direct competition with the Company within any part of the United States
where Double Envelope presently does business or has plans to do so for a
period of five (5) years after becoming an Eligible Participant.
c. RELEASE. By accepting any cash or in-kind benefits under this
Plan, a Participant shall, without the necessity of executing any further
instruments, be deemed to release the Company and its directors and
officers, and each of them, from any and all claims and causes of action,
known or unknown, fixed or contingent, then existing or assertable or
arising from the Participant's termination of active employment with the
Company, excluding claims and causes of action as a stockholder or as a
participant in the Pension Plan or Profit-Sharing Plan. The Participant
shall, if requested by the Company, execute a formal instrument of release,
although the failure to execute a formal instrument shall not affect the
validity or enforceability of the release effected by the acceptance of
benefit under the Plan. Upon the bringing of any suit or proceeding to
enforce any claim or cause of action inconsistent with the foregoing, the
Company, at its option, may terminate any or all benefits to Participant
under this Plan.
-8-
<PAGE>
VIII. AGREEMENT. The company shall execute a written agreement incorporating
the terms of the Plan, and any additional terms not expressly prohibited hereby
as are approved by the Board of Directors of the Company, with each Participant.
Such agreement may be incorporated into an employment agreement.
IX. MISCELLANEOUS.
a. AMENDMENTS. No amendment to this Plan will be effective as to any
person who is a Participant at the time of the amendment without the
Participant's consent.
b. ASSIGNMENT. No Participant or beneficiary shall have any right to
sell, assign, pledge, transfer or otherwise convey the right to receive any
payment under this Plan, and in the event of any attempted sale, assignment,
pledge, transfer or conveyance the Company shall have no further liability with
respect to such payment.
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<PAGE>
EXHIBIT 2
IN-KIND BENEFITS
INCENTIVE SUPPLEMENTAL RETIREMENT PLAN (the Plan)
1. Hospital/Medical/Surgical Benefits: as described in Section VI a. of
the Plan, for Employee and Employee's spouse until the expiration of eligibility
for cash benefits under Section 9(a) of this Agreement, regardless of whether
cash benefits are actually paid. If benefits are in force at Employee's death,
benefits to continue for Employee's spouse for six months following Employee's
death.
2. Life Insurance Benefits: as provided in Section VI b. of the Plan
until the expiration of eligibility for cash benefits under Section 9(a) of this
Agreement, regardless of whether cah benefits are actually paid.
<PAGE>
[LETTERHEAD]
February 15, 1984
Mr. William C. Britts
Vice President
Double Envelope Corporation
Post Office Box 7000
Roanoke, Virginia 24019
In re: Amendment to Double Envelope Corporation's Incentive
Supplemental Retirement Plan
--------------------------------------------------------------
Dear Bill:
The Board of Directors of Double Envelope Corporation, at a meeting
held on January 3, 1984, adopted the following amendment to Section V.a. of the
Incentive Supplemental Retirement Plan dated February 16, 1983, as restated
April 5, 1983:
"Section V.a. is amended by deleting
subsection (i) in its entirety and by
renumbering subsections (ii) and (iii)
to (i) and (ii), respectively. This
amendment shall be of no effect with
respect to persons who are as of the
date hereof Eligible Participants, as
defined in the Plan, but shall apply
only to persons who become Eligible
Participants hereafter."
Please indicate your acknowledgement of and consent to there amendment
by signing the enclosed copy of this letter where indicated and returning the
signed copy to Clinton for insertion in the permanent file of the Corporation.
<PAGE>
Mr. William C. Britts
February 15, 1984
Page Two
I suggest that this letter be retained with your copy of your
Agreement with the Corporation dated April 5, 1983.
With kindest regards, I am
Very truly yours,
/s/Caldwell
M. Caldwell Butler
MCB/djg
Acknowledged and accepted this 16 day of February, 1984
/s/William C. Britts
----------------------------
William C. Britts
<PAGE>
Exhibit 10.22
DEC INTERNATIONAL INC.
1996 STOCK OPTION PLAN
1. PURPOSES. The purposes of the DEC International Inc. 1996 Stock
Option Plan are:
(a) To further the growth, development and success of the Company and its
Subsidiaries by enabling the executive and other key salaried employees of, and
consultants to, the Company and its Subsidiaries to acquire a continuing equity
interest in the Company, thereby increasing their personal interests in such
growth, development and success and motivating such employees and consultants to
exert their best efforts on behalf of the Company and its Subsidiaries; and
(b) To maintain the ability of the Company and its Subsidiaries to attract
and retain employees and consultants of outstanding ability by offering them an
opportunity to acquire a continuing equity interest in the Company and its
Subsidiaries which will reflect the growth, development and success of the
Company and its Subsidiaries.
Toward these objectives, the Committee may grant Options to such employees and
consultants, all pursuant to the terms and conditions of the Plan.
2. DEFINITIONS. As used in the Plan, the following capitalized terms
shall have the meanings set forth below:
(a) "AGREEMENT" - an option agreement evidencing an Option.
(b) "BOARD" - the Board of Directors of the Company.
(c) "CODE" - the Internal Revenue Code of 1986, as it may be amended from
time to time, including regulations and rules thereunder and successor
provisions and regulations and rules thereto.
(d) "COMMITTEE" - the Compensation Committee of the Board, or such other
Board committee as may be designated by the Board to administer the Plan.
<PAGE>
(e) "COMPANY" - DEC International Inc., a Delaware corporation, or any
successor entity.
(f) "FAIR MARKET VALUE" of a share of Stock as of a given date shall be (i)
the average of the closing representative bid and asked prices for the Stock on
such date as reported by NASDAQ or, if no such prices are reported for such
date, the most recent day for which such prices are available shall be used;
PROVIDED, HOWEVER, that if NASDAQ is not then in existence, its successor
quotation system shall be used or (ii) if the Stock is not then publicly traded,
the fair market value determined by such other reasonable valuation method as
the Committee shall, in its discretion, select and apply in good faith as of the
given date; PROVIDED, HOWEVER, that for purposes of paragraphs (a) and (g) of
Section 6, such fair market value shall be determined subject to Section
422(c)(7) of the Code.
(g) "ISO" or "INCENTIVE STOCK OPTION" - an option to purchase Stock granted
to a Participant under the Plan in accordance with the terms and conditions set
forth in Section 6 and which conforms to the applicable provisions of Section
422 of the Code.
(h) "NASDAQ" - the National Association of Securities Dealers Automated
Quotation System.
(i) "NOTICE" - written notice actually received by the Company at its
offices on the day of such receipt, if received on or before 1:30 p.m., on a day
when the Company's offices are open for business, or, if received after such
time, such notice shall be deemed received on the next such day, which notice
may be delivered in person to the Company's Chief Financial Officer or sent by
facsimile to the Company, or sent by certified or registered mail or overnight
courier, prepaid, addressed to the Company at DEC International Inc., 5775
Peachtree Dunwoody Rd., Suite C-150, Atlanta, Georgia 30342, Attention: Chief
Financial Officer.
(j) "OPTION" - an option to purchase Stock granted to a Participant under
the Plan in accordance with the terms and conditions set forth in Section 6.
Options may be either ISOs or stock options other than ISOs.
(k) "OPTIONEE" - a Participant who has been granted an Option under the
Plan in accordance with the terms and conditions set forth in Section 6.
(l) "PARTICIPANT" - an individual eligible, pursuant to Section 5, to
participate in the Plan who is selected to participate in the Plan pursuant to
Section 3.
(m) "PLAN" - this DEC International Inc. 1996 Stock Option Plan.
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(n) "SECURITIES ACT" - the Securities Act of 1933, as it may be amended
from time to time, including regulations and rules thereunder and successor
provisions and regulations and rules thereto.
(o) "STOCK" - the $0.0001 par value common stock of the Company.
(p) "SUBSIDIARY" shall mean (i) any present or future corporation which is
or would be a "subsidiary corporation" of the Company as the term is defined in
Section 424(f) of the Code and (ii) any unincorporated entity in which the
Company and/or one or more of its "subsidiary corporations" (as defined in
Section 424(f) of the Code) presently or in the future own an aggregate profits
interest of fifty percent (50%) or more, which the Committee in its discretion
determines will be a "Subsidiary" for purposes of the Plan.
3. ADMINISTRATION OF THE PLAN. (a) The Committee shall have exclusive
authority to operate, manage and administer the Plan in accordance with its
terms and conditions. Notwithstanding the foregoing, in its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights, duties and responsibilities of the Committee under the Plan, including,
but not limited to, establishing procedures to be followed by the Committee.
(b) The Committee shall be appointed from time to time by the Board,
and the Committee shall consist of not less than three (3) members of the Board.
Appointment of Committee members shall be effective upon their acceptance of
such appointment. Committee members may be removed by the Board at any time
either with or without cause, and such members may resign at any time by
delivering notice thereof to the Board. Any vacancy on the Committee, whether
due to action of the Board or any other reason, shall be filled by the Board.
(c) The Committee shall have all authority that may be necessary or
helpful to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the foregoing sentence or paragraph (a) of
this Section 3, the Committee shall have the exclusive right and discretionary
authority to: (i) interpret the Plan and the Agreements; (ii) construe any
ambiguous provision of the Plan and/or the Agreements; (iii) determine
eligibility for participation in the Plan; (iv) decide all questions concerning
eligibility for and the amount of Options granted under the Plan; (v) select,
from time to time, from amongst those eligible, the employees and consultants to
whom Options shall be granted under the Plan, which selection may be based upon
information furnished to the Committee by the Company's management; (vi)
determine whether an Option shall take the form of an ISO or Option other than
an ISO; (vii) determine the number of shares of Stock to be included in any
Option or
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to which any Option shall otherwise relate and the periods for which Options
will be outstanding; (viii) establish, amend, waive and/or rescind rules and
regulations and administrative guidelines for carrying out the Plan; (ix) to the
extent permitted under the Plan and the applicable Agreement, grant waivers of
Plan terms, conditions, restrictions and limitations; (x) to the extent
permitted under the Plan and the applicable Agreement, permit the transfer of an
Option or the exercise of an Option by one other than the Participant who
received the grant of such Option; (xi) correct any errors, supply any omissions
or reconcile any inconsistencies in the Plan and/or any Agreement or any other
instrument relating to any Option; (xii) to the extent permitted by the Plan,
amend or adjust the terms and conditions of any outstanding Option and/or adjust
the number and/or class of shares of Stock subject to any outstanding Option;
(xiii) in accordance with the Plan, establish and administer any performance
goals in connection with any Options; (xiv) at any time and from time to time
after the granting of an Option, specify such additional terms, conditions and
restrictions with respect to any such Option as may be deemed necessary or
appropriate to ensure compliance with any and all applicable laws, including,
but not limited to, (A) terms, restrictions and conditions for compliance with
Federal and state securities laws, (B) methods of withholding or providing for
the payment of required taxes and (C) restrictions regarding a Participant's
ability to exercise Options under a "cashless exercise" program established by
the Committee; and (xv) take any and all such other action it deems necessary or
advisable for the proper operation and/or administration of the Plan. The
Committee shall have full discretionary authority in all matters related to the
discharge of its responsibilities and the exercise of its authority under the
Plan. Decisions and actions by the Committee with respect to the Plan and any
Agreement shall be final, conclusive and binding on all persons having or
claiming to have any right or interest in or under the Plan and/or any
Agreement. Options need not be uniform as to all grants and recipients thereof.
(d) Each Option shall be evidenced by an Agreement, which shall be
executed by the Company and the Participant to whom such Option has been
granted, unless the Agreement provides otherwise; HOWEVER, two or more Options
to a single Participant may be combined in a single Agreement. An Agreement
shall not be a precondition to the granting of an Option; HOWEVER, no person
shall have any rights under any Option unless and until the Participant to whom
the Option shall have been granted (i) shall have executed and delivered to the
Company an Agreement or other instrument evidencing the Option, unless such
Agreement provides otherwise, and (ii) has otherwise complied with the
applicable terms and conditions of the Option. The Committee shall prescribe
the form of all Agreements, and, subject to the terms and conditions of the
Plan, shall determine the content of all Agreements. Any Agreement may be
supplemented or amended in writing from time to time as approved by the
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Committee; PROVIDED that the terms and conditions of any such Agreement as
supplemented or amended are not inconsistent with the provisions of the Plan.
(e) A majority of the members of the entire Committee shall constitute
a quorum and the actions of a majority of the members of the Committee in
attendance at a meeting at which a quorum is present, or actions by a written
instrument signed by all members of the Committee, shall be the actions of the
Committee.
(f) The Committee may consult with counsel who may be counsel to the
Company. The Committee may, with the approval of the Board, employ such other
attorneys or consultants, accountants, appraisers, brokers or other persons as
it deems necessary or appropriate. In accordance with Section 12, the Committee
shall not incur any liability for any action taken in good faith in reliance
upon the advice of such counsel or such other persons.
(g) In serving on the Committee, the members thereof shall be entitled
to indemnification as directors of the Company, and to any limitation of
liability and reimbursement as directors with respect to their services as
members of the Committee.
(h) The Committee may, in its discretion, delegate to appropriate
officers of the Company the "administration" of the Plan under this Section 3;
PROVIDED, HOWEVER, that no such delegation by the Committee shall be made (i) if
such delegation would not be permitted under applicable law or (ii) with respect
to the administration of the Plan as it affects executive officers and directors
of the Company, and, PROVIDED FURTHER, HOWEVER, the Committee may not delegate
its authority to correct errors, omissions or inconsistencies in the Plan. All
authority delegated by the Committee under this paragraph (h) of Section 3 shall
be exercised in accordance with the terms and conditions of the Plan and any
rules, regulations or administrative guidelines that may from time to time be
established by the Committee.
4. SHARES OF STOCK SUBJECT TO THE PLAN. (a) The shares of stock subject
to Options granted under the Plan shall be shares of Stock. Such shares of
Stock subject to the Plan may be either authorized and unissued shares (which
will not be subject to preemptive rights) or previously issued shares acquired
by the Company or any Subsidiary. The total number of shares of Stock that may
be delivered pursuant to Options granted under the Plan is 248,857.
(b) Notwithstanding any of the foregoing limitations set forth in this
Section 4, the numbers of shares of Stock specified in this Section 4 shall be
adjusted as provided in Section 10.
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(c) Any shares of Stock subject to an Option which for any reason
expires or is terminated without having been fully exercised may again be
granted pursuant to an Option under the Plan, subject to the limitations of this
Section 4; PROVIDED, HOWEVER, that forfeited shares of Stock shall not be
available for further Options if the recipient thereof has realized any benefits
of ownership from such shares.
5. ELIGIBILITY. Executive and other key salaried employees, including
officers, of the Company and its Subsidiaries (but excluding members of the
Committee as well as non-employee directors) and consultants shall be eligible
to become Participants and receive Options under the Plan.
6. TERMS AND CONDITIONS OF STOCK OPTIONS. All Options to purchase Stock
granted under the Plan shall be either ISOs or Options other than ISOs. Each
Option shall be subject to all the applicable provisions of the Plan, including
the following terms and conditions, and to such other terms and conditions not
inconsistent therewith as the Committee shall determine and which are set forth
in the applicable Agreement.
(a) The option exercise price per share of shares of Stock subject to
each Option shall be determined by the Committee and stated in the
Agreement; PROVIDED, HOWEVER, that, with respect to ISOs, subject to
paragraph (g)(C) of this Section 6, such price shall not be less than 100%
of the Fair Market Value of a share of Stock at the time that the Option is
granted.
(b) Each Option shall be exercisable in whole or in such
installments, at such times and under such conditions as may be determined
by the Committee in its discretion and stated in the Agreement, and, in any
event, over a period of time ending not later than ten (10) years from the
date such Option was granted, subject to paragraph (g)(C) of this Section
6.
(c) An Option shall not be exercisable with respect to a fractional
share of Stock or the lesser of fifty (50) shares or the full number of
shares of Stock then subject to the Option. No fractional shares of Stock
shall be issued upon the exercise of an Option.
(d) Each Option may be exercised by giving Notice to the Company
specifying the number of shares of Stock to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any, in
accordance with Section 9. Payment shall be in any manner permitted by
applicable law and prescribed by the Committee, in its discretion, and set
forth in the Agreement, including, in the Committee's discretion, payment
in accordance with a "cashless exercise" program established by the
Committee.
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(e) No Optionee or other person shall become the beneficial owner of
any shares of Stock subject to an Option, nor have any rights to dividends
or other rights of a shareholder with respect to any such shares until he
or she has exercised his or her Option in accordance with the provisions of
the Plan and the applicable Agreement.
(f) An Option may be exercised only if at all times during the period
beginning with the date of the granting of the Option and ending on the
date of such exercise, the Optionee was an employee or consultant of either
the Company or of a Subsidiary or of another corporation referred to in
Section 421(a)(2) of the Code. Notwithstanding the preceding sentence, the
Committee may determine in its discretion that an Option may be exercised
following termination of such continuous employment or consultancy, whether
or not exercisable at such time, to the extent provided in the applicable
Agreement.
(g)(A) Each Agreement relating to an Option shall state whether such
Option will or will not be treated as an ISO. No ISO shall be granted
unless such Option, when granted, qualifies as an "incentive stock option"
under Section 422 of the Code. Any ISO granted under the Plan shall
contain such terms and conditions, consistent with the Plan, as the
Committee may determine to be necessary to qualify such Option as an
"incentive stock option" under Section 422 of the Code. Any ISO granted
under the Plan may be modified by the Committee to disqualify such Option
from treatment as an "incentive stock option" under Section 422 of the
Code.
(B) Notwithstanding any intent to grant ISOs, an Option granted
under the Plan will not be considered an ISO to the extent that it,
together with any other "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to subsection (d) of such
Section) under the Plan or any other "incentive stock option" plans of the
Company and any Subsidiary, are exercisable for the first time by any
Optionee during any calendar year with respect to Stock having an aggregate
Fair Market Value in excess of $100,000 (or such other limit as may be
required by the Code) as of the time the Option with respect to such Stock
is granted. The rule set forth in the preceding sentence shall be applied
by taking Options into account in the order in which they were granted.
(C) No ISO shall be granted to a Participant who owns (within the
meaning of Section 424(d) of the Code), at the time the Option is granted,
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or a Subsidiary. This restriction does not
apply if at
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the time such ISO is granted the Option exercise price per share of
Stock subject to the Option is at least 110% of the Fair Market Value
of a share of Stock on the date such ISO is granted, and the ISO by
its terms is not exercisable after the expiration of five (5) years
from such date of grant.
(h) An Option and any shares of Stock received upon the exercise of an
Option shall be subject to such other transfer and/or ownership
restrictions and/or legending requirements as the Committee may establish
in its discretion and which are specified in the Agreement and may be
referred to on the certificates evidencing such shares. The Committee may
require an Optionee to give prompt Notice to the Company concerning any
disposition of shares of Stock received upon the exercise of an ISO within:
(i) two (2) years from the date of granting such ISO to such Optionee or
(ii) one (1) year from the transfer of such shares to such Optionee or
(iii) such other period as the Committee may from time to time determine.
The Committee may direct that an Optionee with respect to an ISO undertake
in the applicable Agreement to give such notice described in the preceding
sentence, at such time and containing such information as the Committee may
prescribe, and/or that the certificates evidencing shares acquired by
exercise of an ISO refer to such requirement to give such notice.
7. TRANSFER, LEAVE OF ABSENCE. For purposes of the Plan, a transfer of
an employee from the Company to a Subsidiary or an affiliate of the Company,
whether or not incorporated, or vice versa, or from one Subsidiary or affiliate
of the Company to another, and a leave of absence, duly authorized in writing by
the Company or a Subsidiary or affiliate of the Company, shall not be deemed a
termination of employment of the employee.
8. RIGHTS OF EMPLOYEES AND OTHER PERSONS. (a) No person shall have any
rights or claims under the Plan except in accordance with the provisions of the
Plan and the applicable Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be deemed
to (i) give any employee the right to be retained in the service of the Company
or its Subsidiaries nor restrict in any way the right of the Company or any
Subsidiary to terminate any employee's employment at any time with or without
cause or (ii) confer on any consultant any right of continued relationship with
the Company or its Subsidiaries, or alter any relationship between them,
including any right of the Company or a Subsidiary to terminate its relationship
with such consultant.
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(c) The adoption of the Plan shall not be deemed to give any employee
of the Company or any Subsidiary or any other person any right to be selected as
a Participant or to be granted an Option.
(d) Nothing contained in the Plan or in any Agreement shall be deemed
to give any employee the right to receive any bonus, whether payable in cash or
in Stock, or in any combination thereof, from the Company or any Subsidiary, nor
be construed as limiting in any way the right of the Company or any Subsidiary
to determine, in its sole discretion, whether or not it shall pay any employee
bonuses, and, if so paid, the amount thereof and the manner of such payment.
9. TAX WITHHOLDING OBLIGATIONS. (a) The Company and/or any Subsidiary
are authorized to take whatever actions are necessary and proper to satisfy all
obligations of Participants for the payment of all Federal, state, local and
foreign taxes in connection with any Options (including, but not limited to,
actions pursuant to the following paragraph (b) of this Section 9).
(b) Each Participant shall (and in no event shall Stock be delivered
to such Participant with respect to an Option until), no later than the date as
of which the value of the Option first becomes includible in the gross income of
the Participant for income tax purposes, pay to the Company in cash, or make
arrangements satisfactory to the Company, as determined in the Committee's
discretion, regarding payment to the Company of, any taxes of any kind required
by law to be withheld with respect to the Stock subject to such Option, and the
Company and any Subsidiary shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to such
Participant. Notwithstanding the above, the Committee may, in its discretion
and pursuant to procedures approved by the Committee, permit the Participant to
(i) elect withholding by the Company of Stock otherwise deliverable to such
Participant pursuant to such Option (PROVIDED, HOWEVER, that the amount of any
Stock so withheld shall not exceed the minimum required withholding obligation
taking into account the Participant's effective tax rate and all applicable
Federal, state, local and foreign taxes) and/or (ii) tender to the Company Stock
owned by such Participant (or by such Participant and his or her spouse jointly)
and acquired more than six (6) months prior to such tender in full or partial
satisfaction of such tax obligations.
10. CHANGES IN CAPITAL. (a) Upon changes in the outstanding Stock by
reason of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and class of
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shares available under the Plan as to which Options may be granted, the number
and class of shares under each Option and the option price per share shall, in
each case, be correspondingly adjusted by the Committee. Such adjustments shall
be made without change in the total price applicable to such Options.
(b) In the event of (i) a merger, consolidation, combination,
reorganization or other transaction resulting in less than fifty percent (50%)
of the combined voting power of the surviving or resulting entity being owned by
the former shareholders of the Company, (ii) the liquidation or dissolution of
the Company or the sale or other disposition of all or substantially all of the
assets or business of the Company (other than, in the case of either clause (i)
or (ii) above, in connection with any employee benefit plan of the Company or a
Subsidiary), or (iii) an initial public offering of common stock of the Company
pursuant to a registration statement declared effective under the Securities
Act:
(1) In the case of events set forth in clause (i) and (ii) above, on
such terms and conditions as it deems appropriate, the Committee shall
provide, either by the terms of the Agreement applicable to any Option or
by a resolution adopted prior to the occurrence of such event that, for a
specified period of time prior to such event, such Option shall be
accelerated and become immediately exercisable as to all shares of Stock
covered thereby if the exercisability is based upon the achievement of
annual performance targets established by management and approved by the
Board, or if the exercisability is simply dependent upon the passage of
time but not if the exercisability is based upon achieving certain targets
upon a liquidation event, notwithstanding anything to the contrary in the
Plan or the Agreement.
(2) In the case of the event set forth in clause (iii) above, in its
discretion and on such terms and conditions as it deems appropriate, the
Committee may provide, either by the terms of the Agreement applicable to
any Option or by a resolution adopted prior to the occurrence of such event
that, for a specified period of time prior to such event, such Option shall
be accelerated and become immediately exercisable as to all shares of Stock
covered thereby, notwithstanding anything to the contrary in the Plan or
the Agreement.
(3) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the
Agreement applicable to any Option or by resolution adopted prior to the
occurrence of such event, that such Option shall be adjusted by
substituting for Stock subject to such Option stock or other securities of
any successor corporation to the Company, or a parent or subsidiary
thereof, or that may be issuable by another corporation that is a party to
the transaction whether or not such stock or other
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securities are publicly traded, in which event the aggregate exercise
price (as applicable) shall remain the same and the amount of shares
or other securities subject to option or other rights under an Option
shall be the amount of shares or other securities which could have
been purchased on the closing date or expiration date of such
transaction with the proceeds which would have been received by the
Participant if the Option had been exercised in full prior to such
transaction or expiration date and the Participant exchanged all of
such shares in the transaction.
(4) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the
Agreement applicable to any Option or by resolution adopted prior to the
occurrence of such event, any outstanding Option shall, in each case, be
converted into a right to receive in cash, as soon as practicable following
the closing date or expiration date of the transaction, an amount equal to
value of the consideration to be received in connection with such
transaction for one share of Stock, less the per share exercise price of
such Option, multiplied by the number of shares of Stock subject to such
Option.
(5) At the discretion of the Committee, the Agreement applicable to
any Option may provide that such an Option cannot be exercised after such
an event, to the extent that such Option becomes subject to any
acceleration, adjustment or conversion in accordance with the foregoing
paragraphs (1), (2), (3) or (4) of this subsection 10(b).
No Participant shall have any right to prevent the consummation of any
of the foregoing acts affecting the number of shares available to such
Participant. Any actions or determinations of the Committee under this
Subsection 10(b) need not be uniform as to all outstanding Options, nor treat
all Participants identically. Notwithstanding the foregoing adjustments, in no
event may any Option be exercised after ten (10) years from the date it was
originally granted and any changes to ISOs shall, unless the Committee
determines otherwise, only be effective to the extent such adjustments or
changes do not cause a "modification" (within the meaning of Section 424(h)(3)
of the Code) of such ISOs or adversely affect the tax status of such ISOs.
11. MISCELLANEOUS PROVISIONS. (a) The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the issuance of shares or the
payment of cash upon exercise or payment of any Option. Proceeds from the sale
of shares of Stock pursuant to Options granted under the Plan shall constitute
general funds of the Company. The expenses of the Plan shall be borne by the
Company.
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(b) Except as otherwise provided in this paragraph (b) of Section 11,
an Option by its terms shall be personal and may not be sold, transferred,
pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise
than by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of a Participant only by him or her. The foregoing to the
contrary notwithstanding, at the Committee's discretion, an Agreement may permit
(i) the receipt or exercise of a Participant's Option (or any portion thereof)
after his or her death by the beneficiary most recently named by such
Participant in a written designation thereof filed with the Company, or, in lieu
of any such surviving beneficiary, by the legatee of the Participant under the
Participant's last will or by the legal representatives of such Participant's
estate and/or (ii) an Option other than an ISO to be transferred by a
Participant during his or her lifetime to such Participant's alternate payee
pursuant to a "qualified domestic relations order," as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations thereunder. In the event any Option is exercised by
the executors, administrators, heirs or distributees of the estate of a deceased
Participant, or such a Participant's beneficiary, pursuant to the terms and
conditions of the Plan and the applicable Agreement, the Company shall be under
no obligation to issue Stock thereunder unless and until the Company is
satisfied, as determined in the discretion of the Committee, that the person or
persons exercising such Option are the duly appointed legal representative of
the deceased Participant's estate or the proper legatees or distributees thereof
or the named beneficiary of such Participant. Further notwithstanding the
foregoing to the contrary, at the Committee's discretion, an Agreement may
permit the transfer of an Option other than an ISO by the recipient thereof,
subject to such terms, conditions and limitations prescribed by the Committee,
and the applicable transferee of such Option shall be treated under the Plan and
the applicable Agreement as the Participant for purposes of any exercise of such
Option.
(c) If at any time the Committee shall determine, in its discretion,
that the listing, registration and/or qualification of shares of Stock upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares of Stock
hereunder, no Option may be exercised in whole or in part unless and until such
listing, registration, qualification, consent and/or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Committee.
(d) The Committee may require each person receiving Stock in
connection with any Option under the Plan to represent and agree with the
Company in writing that such person is acquiring the shares for investment
without a view to the distribution thereof. The Committee, in its absolute
discretion, may impose such
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restrictions on the ownership and transferability of the shares of Stock
purchasable or otherwise receivable by any person under any Option as it deems
appropriate. Any such restrictions shall be set forth in the applicable
Agreement, and the certificates evidencing such shares may include any legend
that the Committee deems appropriate to reflect any such restrictions.
(e) The Committee may, in its discretion, extend one or more loans to
Participants who are key employees of the Company or a Subsidiary in connection
with the exercise or receipt of an Option granted to any such employees. The
terms and conditions of any such loan shall be set by the Committee.
(f) By accepting any benefit under the Plan, each Participant and each
person claiming under or through such Participant shall be conclusively deemed
to have indicated their acceptance and ratification of, and consent to, all of
the terms and conditions of the Plan and any action taken under the Plan by the
Committee, the Company or the Board.
(g) Neither the adoption of the Plan nor anything contained herein
shall affect any other compensation or incentive plans or arrangements of the
Company or any Subsidiary, or prevent or limit the right of the Company or any
Subsidiary to establish any other forms of incentives or compensation for their
employees or consultants or directors, or grant or assume options or other
rights otherwise than under the Plan.
(h) The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware, except as superseded by applicable Federal law.
12. LIMITS OF LIABILITY. (a) Any liability of the Company or a Subsidiary
to any Participant with respect to any Option shall be based solely upon
contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the
Committee or the Board, nor any other person participating in any determination
of any question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad faith,
to any party for any action taken or not taken in connection with the Plan,
except as may expressly be provided by statute.
13. AMENDMENTS AND TERMINATION. The Board may, at any time and with or
without prior notice, amend, alter, suspend, or terminate the Plan; PROVIDED,
HOWEVER, no amendment, alteration, suspension, or termination shall be made
which would impair
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the previously accrued rights of any holder of an Option theretofore granted
without his or her written consent or which, without first obtaining approval of
the stockholders of the Company (where such approval is necessary to satisfy (i)
any requirements under the Code relating to ISOs or (ii) applicable state law),
would:
(a) except as is provided in Section 10, increase the maximum number
of shares of Stock which may be sold or awarded under the Plan;
(b) except as is provided in Section 10, decrease the minimum option
exercise price requirements of Section 6(a);
(c) change the class of persons eligible to receive Options under the
Plan; or
(d) extend the duration of the Plan or the period during which
Options may be exercised under Section 6(b).
The Committee may amend the terms of any Option theretofore granted,
including any Agreement, retroactively or prospectively, but no such amendment
shall impair the previously accrued rights of any Participant without his or her
written consent.
14. DURATION. Following the adoption of the Plan by the Board, the Plan
shall become effective as of the date on which it is approved by the holders of
a majority of the Company's outstanding Stock which is present and voted at a
meeting, or by written consent in lieu of a meeting, which approval must occur
within the period ending twelve (12) months after the date the Plan is adopted
by the Board. The Plan shall terminate upon the earliest to occur of:
(a) the effective date of a resolution adopted by the Board terminating the
Plan;
(b) the date all shares of Stock subject to the Plan are delivered pursuant
to the Plan's provisions; or
(c) ten (10) years from the date the Plan is approved by the Company's
shareholders.
No Option may be granted under the Plan after the earliest to occur of the
events or dates described in the foregoing paragraphs (a) through (c) of this
Section 14; HOWEVER, Options theretofore granted may extend beyond such date.
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No such termination of the Plan shall affect the previously accrued
rights of any Participant hereunder and all Options previously granted hereunder
shall continue in force and in operation after the termination of the Plan,
except as they may be otherwise terminated in accordance with the terms of the
Plan or the Agreement.
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EXHIBIT 10.23
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CREDIT AGREEMENT
Dated as of June 28, 1996
Among
NATIONAL FIBERSTOK CORPORATION,
LABEL ART, INC.,
INFOSEAL INTERNATIONAL INC.,
GOVERNMENT FORMS AND SYSTEMS, INC.,
PUTNAM GRAPHIC INNOVATIONS, INC.,
SHORT RUN LABELS, INC.,
BOHARB CORPORATION and
A/L SYSTEMS INC.,
as Borrowers;
and
HELLER FINANCIAL, INC.
as Agent and as a Lender,
and
such other persons executing
this Agreement as Lenders.
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TABLE OF CONTENTS
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SECTION 1 AMOUNTS AND TERMS OF REVOLVING LOANS. . . . . . . . . . . . 2
1.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 2
(A) Revolving Loans. . . . . . . . . . . . . . . . . . . 2
(B) Letters of Credit and Risk
Participation Agreements. . . . . . . . . . . . . . 6
1.2 Interest and Related Fees . . . . . . . . . . . . . . . . . 8
(A) Interest . . . . . . . . . . . . . . . . . . . . . . 9
(B) Commitment Fee . . . . . . . . . . . . . . . . . . . 11
(C) Risk Participation Fee . . . . . . . . . . . . . . . 12
(D) Computation of Interest and Related Fees . . . . . . 12
(E) Default Rate of Interest . . . . . . . . . . . . . . 13
(F) Excess Interest. . . . . . . . . . . . . . . . . . . 13
(G) LIBOR Rate Election. . . . . . . . . . . . . . . . . 13
1.3 Other Fees and Expenses . . . . . . . . . . . . . . . . . . 13
(A) Certain Fees . . . . . . . . . . . . . . . . . . . . 14
(B) LIBOR Breakage Fee . . . . . . . . . . . . . . . . . 14
(C) Expenses and Attorneys Fees. . . . . . . . . . . . . 14
1.4 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5 Term of the Agreement . . . . . . . . . . . . . . . . . . . 16
1.6 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . 16
1.7 Capital Adequacy and Other Adjustments. . . . . . . . . . . 17
1.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(A) No Deductions. . . . . . . . . . . . . . . . . . . . 17
(B) Changes in Laws. . . . . . . . . . . . . . . . . . . 18
(C) Foreign Lenders. . . . . . . . . . . . . . . . . . . 20
(D) Tax Benefits . . . . . . . . . . . . . . . . . . . . 21
1.9 Replacement of Lender in Respect of Increased Costs . . . . 21
SECTION 2 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 23
2.1 Compliance With Laws. . . . . . . . . . . . . . . . . . . . 23
2.2 Maintenance of Properties; Insurance. . . . . . . . . . . . 24
2.3 Inspection; Lender Meeting. . . . . . . . . . . . . . . . . 25
2.4 Corporate Existence, Etc. . . . . . . . . . . . . . . . . . 25
2.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . 25
SECTION 3 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 26
3.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 26
3.2 Liens and Related Matters . . . . . . . . . . . . . . . . . 28
(A) No Liens. . . . . . . . . . . . . . . . . . . . . . . 28
(i)
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(B) No Negative Pledges . . . . . . . . . . . . . . . . . 30
(C) No Restrictions on Subsidiary
Distributions to Borrowers . . . . . . . . . . . . 30
3.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . 31
3.4 Contingent Obligations. . . . . . . . . . . . . . . . . . . 33
3.5 Restricted Junior Payments. . . . . . . . . . . . . . . . . 35
3.6 Restriction on Fundamental Changes. . . . . . . . . . . . . 37
3.7 Disposal of Assets or Subsidiary Stock. . . . . . . . . . . 38
3.8 Transactions with Affiliates. . . . . . . . . . . . . . . . 38
3.9 Management Fees and Compensation. . . . . . . . . . . . . . 39
3.10 Conduct of Business . . . . . . . . . . . . . . . . . . . . 39
3.11 Changes Relating to Subordinated
Indebtedness. . . . . . . . . . . . . . . . . . . . . 39
3.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 40
3.13 Press Release; Public Offering Materials. . . . . . . . . . 40
3.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 40
3.15 Changes Relating to Senior Notes and
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4 FINANCIAL COVENANTS/REPORTING . . . . . . . . . . . . . . . 41
4.1 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . 41
4.2 Total Indebtedness to Operating Cash Flow Ratio . . . . . . 42
4.3 Financial Statements and Other Reports. . . . . . . . . . . 42
(A) Interim Financials. . . . . . . . . . . . . . . . . . 43
(B) Year-End Financials . . . . . . . . . . . . . . . . . 43
(C) Borrower Compliance Certificate . . . . . . . . . . . 44
(D) Accountants' Reports. . . . . . . . . . . . . . . . . 44
(E) Borrowing Base Certificate and
Agings; Schedule of Inventory . . . . . . . . . . . . 44
(F) Management Report . . . . . . . . . . . . . . . . . . 45
(G) Collateral Value Report . . . . . . . . . . . . . . . 45
(H) Appraisals. . . . . . . . . . . . . . . . . . . . . . 46
(I) Projections . . . . . . . . . . . . . . . . . . . . . 46
(J) SEC Filings and Press Releases. . . . . . . . . . . . 46
(K) Events of Default, Etc. . . . . . . . . . . . . . . . 47
(L) Other Notices . . . . . . . . . . . . . . . . . . . . 47
(M) Litigation. . . . . . . . . . . . . . . . . . . . . . 47
(N) Supplemented Schedules; Notice of Corporate Changes . 48
(O) Other Information . . . . . . . . . . . . . . . . . . 48
4.4 Accounting Terms; Utilization of GAAP for
Purposes of Calculations Under Agreement. . . . . . . . . . 48
(ii)
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SECTION 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 49
5.1 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 50
5.2 No Material Adverse Effect. . . . . . . . . . . . . . . . . 50
5.3 No Default. . . . . . . . . . . . . . . . . . . . . . . . . 50
5.4 Organization, Powers, Capitalization
and Good Standing . . . . . . . . . . . . . . . . . . . . 51
(A) Organization and Powers . . . . . . . . . . . . . . . 51
(B) Capitalization. . . . . . . . . . . . . . . . . . . . 51
(C) Binding Obligation. . . . . . . . . . . . . . . . . . 52
(D) Qualification . . . . . . . . . . . . . . . . . . . . 52
5.5 Financial Statements. . . . . . . . . . . . . . . . . . . . 52
5.6 Intellectual Property . . . . . . . . . . . . . . . . . . . 53
5.7 Investigations, Audits, Etc.. . . . . . . . . . . . . . . . 54
5.8 Employee Matters. . . . . . . . . . . . . . . . . . . . . . 54
5.9 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6 DEFAULT, RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . 55
6.1 Event of Default. . . . . . . . . . . . . . . . . . . . . . 56
(A) Payment . . . . . . . . . . . . . . . . . . . . . . . 56
(B) Default in Other Agreements . . . . . . . . . . . . . 56
(C) Breach of Certain Provisions. . . . . . . . . . . . . 56
(D) Breach of Warranty. . . . . . . . . . . . . . . . . . 57
(E) Other Defaults Under Loan Documents . . . . . . . . . 57
(F) Involuntary Bankruptcy; Appointment
of Receiver, Etc. . . . . . . . . . . . . . . . . . . 57
(G) Voluntary Bankruptcy; Appointment of
Receiver, Etc.. . . . . . . . . . . . . . . . . . . . 58
(H) Governmental Liens. . . . . . . . . . . . . . . . . . 58
(J) Dissolution . . . . . . . . . . . . . . . . . . . . . 59
(K) Solvency. . . . . . . . . . . . . . . . . . . . . . . 59
(L) Injunction. . . . . . . . . . . . . . . . . . . . . . 59
(M) ERISA; Pension Plans. . . . . . . . . . . . . . . . . 60
(N) Environmental Matters . . . . . . . . . . . . . . . . 60
(O) Invalidity of Loan Documents. . . . . . . . . . . . . 60
(P) Damage; Strike; Casualty. . . . . . . . . . . . . . . 61
(Q) Licenses and Permits. . . . . . . . . . . . . . . . . 61
(R) Failure of Security . . . . . . . . . . . . . . . . . 61
(S) Change in Control . . . . . . . . . . . . . . . . . . 61
6.2 Suspension of Commitments . . . . . . . . . . . . . . . . . 62
6.3 Acceleration. . . . . . . . . . . . . . . . . . . . . . . . 62
6.4 Performance by Agent. . . . . . . . . . . . . . . . . . . . 63
SECTION 7 CONDITIONS TO REVOLVING LOANS . . . . . . . . . . . . . . . 64
7.1 Conditions to Initial Revolving Loans . . . . . . . . . . . 64
7.2 Conditions to All Revolving Loans . . . . . . . . . . . . . 64
(iii)
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SECTION 8 ASSIGNMENT AND PARTICIPATION. . . . . . . . . . . . . . . . 66
8.1 Assignments and Participations in
Revolving Loans and Revolving Notes . . . . . . . . . . . 66
8.2 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(A) Appointment . . . . . . . . . . . . . . . . . . . . . 69
(B) Nature of Duties. . . . . . . . . . . . . . . . . . . 69
(C) Rights, Exculpation, Etc. . . . . . . . . . . . . . . 70
(D) Reliance. . . . . . . . . . . . . . . . . . . . . . . 71
(E) Indemnification . . . . . . . . . . . . . . . . . . . 71
(F) Heller Individually . . . . . . . . . . . . . . . . . 72
(G) Successor Agent . . . . . . . . . . . . . . . . . . . 73
(H) Collateral Matters. . . . . . . . . . . . . . . . . . 74
(I) Agency for Perfection . . . . . . . . . . . . . . . . 76
(J) Dissemination of Information. . . . . . . . . . . . . 76
8.3 Amendments, Consents and Waivers for Certain Actions. . . . 77
8.4 Set Off and Sharing of Payments . . . . . . . . . . . . . . 78
8.5 Disbursement of Funds . . . . . . . . . . . . . . . . . . . 79
8.6 Disbursements of Advances; Payment. . . . . . . . . . . . . 80
(A) Revolving Loan Advances, Payments
and Settlements; Related Fee Payments . . . . . . . 80
(B) Availability of Lender's Pro Rata Share . . . . . . . 83
(C) Return of Payments. . . . . . . . . . . . . . . . . . 83
SECTION 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 84
9.1 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . 84
9.2 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 85
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.4 Failure or Indulgence Not Waiver; Remedies Cumulative . . . 88
9.5 Marshalling; Payments Set Aside . . . . . . . . . . . . . . 88
9.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . 89
9.7 Lenders' Obligations Several;
Independent Nature of Lenders' Rights . . . . . . . . . . 89
9.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.9 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 89
9.10 Successors and Assigns. . . . . . . . . . . . . . . . . . . 90
9.11 No Fiduciary Relationship . . . . . . . . . . . . . . . . . 90
9.12 Construction. . . . . . . . . . . . . . . . . . . . . . . . 90
9.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 90
9.14 Consent to Jurisdiction and Service of Process. . . . . . . 90
9.15 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 91
(iv)
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9.16 Survival of Warranties and Certain Agreements . . . . . . . 92
9.17 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 93
9.18 Counterparts; Effectiveness . . . . . . . . . . . . . . . . 93
9.19 Limitation on Liability . . . . . . . . . . . . . . . . . . 93
SECTION 10 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 94
10.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . 94
10.2 Other Definitional Provisions . . . . . . . . . . . . . . . 112
(v)
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 1.2(G) - LIBOR Loan Request
Exhibit 4.3(C) - Compliance Certificate
Exhibit 4.3(E) - Borrowing Base Certificate
Exhibit 10.1(A) - Revolving Note
SCHEDULES
Schedule 3.1(F) - Existing Indebtedness
Schedule 3.2(A)(10) - Liens
Schedule 3.4 - Contingent Obligations
Schedule 3.8 - Affiliate Transactions
Schedule 3.9 - Management Fees and Compensation
Schedule 3.10 - Business Description
Schedule 5.3 - Violations, Conflicts, Breaches and Defaults
Schedule 5.4(A) - Jurisdictions of Organization
Schedule 5.4(B) - Capitalization
Schedule 5.4(D) - Foreign Qualifications
Schedule 5.5 - Financial Statements
Schedule 5.6 - Intellectual Property
Schedule 5.7 - Investigations and Audits
Schedule 5.8 - Employee Matters
Schedule 5.10 - ERISA
Schedule 7.1 - List of Closing Documents
Schedule 10.1(A) - Pro Forma
(vi)
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CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of June 28, 1996 and entered into by
and among NATIONAL FIBERSTOK CORPORATION, a Delaware corporation ("NFC"), LABEL
ART, INC., a Delaware corporation ("Label Art"), INFOSEAL INTERNATIONAL INC., a
Delaware corporation ("InfoSeal"), GOVERNMENT FORMS AND SYSTEMS, INC., a
Delaware corporation ("Government Forms and Systems"), PUTNAM GRAPHIC
INNOVATIONS, INC., a Delaware corporation ("Putnam Graphic Innovations"), SHORT
RUN LABELS, INC., a Delaware corporation ("Short Run Labels"), BOHARB
CORPORATION, a Delaware corporation ("Boharb") and A/L SYSTEMS INC., a Delaware
corporation ("A/L Systems"), each individually as a Borrower and collectively as
Borrowers (as hereinafter defined in Section 10), HELLER FINANCIAL, INC., a
Delaware corporation (in its individual capacity, "Heller"), as a Lender (as
hereinafter defined in Section 10), and as Agent (as hereinafter defined in
Section 10), and such other persons executing this Agreement as Lenders.
R E C I T A L S :
WHEREAS, pursuant to that certain Stock Purchase Agreement dated June
19, 1996 among Rogers Communications, Inc., Frank Neubauer, Jack Resnick and NFC
(the "Purchase Agreement"), NFC has agreed to purchase (the "Acquisition") all
of the outstanding shares of capital stock of Transkrit Corporation, a Delaware
corporation ("Transkrit") and immediately upon the consummation of the
Acquisition, Transkrit will be merged with and into NFC (the "Merger"); and
WHEREAS, concurrently with the consummation of the Acquisition, (i)
NFC is offering for sale Senior Notes (as hereinafter defined in Section 10)
pursuant to Rule 144A and other exemptions under the Securities Act of 1933, as
amended (the "Securities Act") in an aggregate amount of up to $100,000,000, and
(ii) NFC's parent, DEC International, Inc. ("DEC") is issuing $10,000,000 of
preferred stock of DEC (the "Preferred Stock"), of which approximately
$7,400,000 of such proceeds will be used to make a capital contribution to NFC
(the "Capital
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Contribution") and the remainder of such proceeds will be used to pay (a) the
Heller Warrant (as hereinafter defined in Section 10), (b) the Rice Warrant (as
hereinafter defined in Section 10) and (c) a transaction fee to an affiliate of
McCown De Leeuw & Co. in connection with the placement of the Preferred Stock ;
and
WHEREAS, Borrowers desire that Lenders extend a revolving credit
facility to provide working capital financing for Borrowers and their
Subsidiaries (as hereinafter defined in Section 10) and to provide funds for
other general corporate purposes of Borrowers and their Subsidiaries (including,
without limitation, for future acquisitions, subject to the satisfaction of
certain conditions set forth herein); and
WHEREAS, Borrowers desire to secure all of their respective
Obligations (as hereinafter defined in Section 10) under the Loan Documents (as
hereinafter defined in Section 10) by granting to Agent, for the benefit of
Agent and Lenders, a security interest in and lien upon all of their respective
accounts receivable, inventory and intellectual property; and
WHEREAS, DEC is willing to guaranty all of the Obligations of
Borrowers under the Loan Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1
AMOUNTS AND TERMS OF REVOLVING LOANS
1.1 REVOLVING LOANS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrowers
contained herein:
(A) REVOLVING LOANS. (1) Subject to the satisfaction of the terms
and conditions set forth herein and in reliance upon the representations
and warran-
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ties set forth herein, each Lender agrees, severally and not jointly, to lend
to Borrowers from the Closing Date to the Expiry Date its Pro Rata Share of
the revolving loans requested by Borrowers to be made by Lenders under this
subsection 1.1(A), up to an aggregate maximum amount for all Lenders of
$20,000,000 (as the same may be reduced from time to time hereunder, the
"Revolving Loan Commitment"); PROVIDED, HOWEVER, that no such Revolving Loans
may be used to prepay the Senior Notes. Advances or amounts outstanding
under the Revolving Loan Commitment will be called "Revolving Loans".
Revolving Loans may be repaid and reborrowed. The "Maximum Revolving Loan
Balance" will be the lesser of (a) the "Borrowing Base" (as calculated on
Exhibit 4.3(E), the "Borrowing Base Certificate") less outstanding Risk
Participation Liability or (b) the Revolving Loan Commitment less outstanding
Risk Participation Liability. If at any time the outstanding Revolving Loans
exceed the Maximum Revolving Loan Balance (as it may be deemed increased
pursuant to subsection 1.1(A)(3)), Lenders shall not be obligated to make
Revolving Loans or issue Lender Letters of Credit or Risk Participation
Agreements, and Revolving Loans must be repaid immediately, in an amount
sufficient to eliminate any such excess. Revolving Loans may be requested by
Borrowers' Representative in any amount with one (1) Business Day prior
notice required for amounts greater than $2,000,000. For amounts less than
$2,000,000, written or telephonic notice must be provided by Borrowers'
Representative by 12:00 noon (New York City time) on the day on which the
Revolving Loan is to be made. All LIBOR Loans require three (3) Business
Days notice. All Revolving Loans requested telephonically must be confirmed
in writing by Borrowers' Representative within twenty-four (24) hours.
Neither Agent nor any Lender shall incur any liability to any Borrower for
acting upon any telephonic notice that Agent believes in good faith to have
been given by a duly authorized officer or other person authorized to borrow
on behalf of such Borrower.
(2) Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties herein set forth, the Revolving Loan
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Commitment may be utilized, upon the request of any Borrower, for Permitted
Acquisitions, all in compliance with the terms and with the procedures described
in this subsection 1.1(A)(2).
Revolving Loans for Permitted Acquisitions shall be made, upon the request
of Borrowers' Representative, without Lenders' approval of the terms of the
underlying transaction if Borrowers' Representative shall have delivered to
Agent not later than 1:00 p.m. (New York City time) on or prior to the fifth
(5th) Business Day prior to the date that the Revolving Loan is requested to be
made hereunder, (i) a certificate executed by the chief financial officer of
Borrowers' Representative (a) demonstrating compliance with the financial
covenants contained in Section 4 hereof on a projected basis for the next four
quarterly periods, after giving effect to such acquisition, (b) demonstrating
that the sum of Borrowers' cash and Cash Equivalents and the availability under
the Revolving Loan Commitment, after giving effect to the acquisition and the
making of the Revolving Loans hereunder, is at least $3,000,000 and (c) to the
effect that no Event of Default or Default has occurred and is continuing, or
would result from the making of the requested Revolving Loan, (ii) a copy of the
executed acquisition agreement and executed copies of the related agreements (or
if not available, the latest drafts of the acquisition agreement and any related
agreements) and such other documents reasonably requested by Agent, (iii) a
detailed description of the entity to be acquired with the proceeds of the
requested Revolving Loan, which entity shall be engaged in the business
described in Schedule 3.10 and/or lines of business and services that are
directly related thereto or complementary therewith, and (iv) the total cost,
the sources of funds other than the requested Revolving Loan, if any, that will
be used to pay the costs of such acquisition and the type of transaction by
which the acquisition will be effectuated. A final business plan and
projections for the entity to be acquired and for all other Loan Parties (taken
as a whole) after giving effect to such acquisition shall be provided not later
than the tenth
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(10th) Business Day prior to the date of the proposed acquisition.
In connection with each Permitted Acquisition and simultaneously with any
advances under the Revolving Loan for each such Permitted Acquisition, Borrowers
will or will cause each Person (and each Subsidiary of each such Person)
acquired with the proceeds of any Revolving Loan promptly to become a Borrower
under this Agreement or to guaranty the Obligations and to grant to Agent, for
the benefit of Agent and Lenders, a security interest in the accounts
receivable, inventory and intellectual property of each such Person (and each
such Subsidiary thereof) to secure the Obligations. The documentation for such
undertaking, guaranty or security shall be at the expense of Borrowers and shall
be substantially similar to the Loan Documents executed concurrently herewith
with such modifications as are reasonably requested by Agent. The acquisition
by any Borrower of any Person with the proceeds of any Revolving Loan in
accordance with this subsection 1.1(A)(2) will be deemed a "Permitted
Acquisition."
(3) If Borrowers' Representative requests that Lenders make, or permit to
remain outstanding, Revolving Loans in an aggregate amount in excess of the
Maximum Revolving Loan Balance calculated with reference to the Borrowing Base,
Requisite Lenders may in their discretion elect to cause all Lenders to make, or
permit to remain outstanding, such excess Revolving Loans (such Revolving Loans
in excess of the Maximum Revolving Loan Balance calculated with reference to the
Borrowing Base being referred to as "Excess Revolving Loans"), provided that,
after giving effect thereto, the aggregate Revolving Loans then outstanding do
not exceed the Maximum Revolving Loan Balance calculated with reference to the
Revolving Loan Commitment; and PROVIDED FURTHER, that at no time shall the
Excess Revolving Loans outstanding at any time exceed $2,000,000. If Excess
Revolving Loans are made, or permitted to remain outstanding, pursuant to the
preceding sentence, then (a) the Maximum Revolving Loan Balance shall be deemed
increased by the amount of such Excess Revolving Loans, but only for so long
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as Requisite Lenders in their sole discretion allow such Excess Revolving Loans
to be outstanding and (b) all Lenders that have committed to make Revolving
Loans shall be bound to make, or permit to remain outstanding, such Excess
Revolving Loans based upon their Pro Rata Shares in accordance with the terms of
this Agreement. If Excess Revolving Loans remain outstanding for more than
ninety (90) days during any 180-day period, Revolving Loans must be repaid
immediately, in an amount sufficient to eliminate all of such Excess Revolving
Loans.
(B) LETTERS OF CREDIT AND RISK PARTICIPATION AGREEMENTS. The Revolving
Loan Commitment may, in addition to advances under the Revolving Loan, be
utilized, upon the request of any Borrower, for (i) the issuance of letters of
credit for the benefit of such Borrower or any of its Subsidiaries by Agent
(each such letter of credit, a "Lender Letter of Credit") or (ii) the issuance
by Agent of risk participation agreements (each such agreement, a "Risk
Participation Agreement") to confirm payment to banks which issue letters of
credit for the account of such Borrower or any of its Subsidiaries.
(1) MAXIMUM AMOUNT. The aggregate amount of Risk Participation Liability
with respect to all Lender Letters of Credit and Risk Participation Agreements
outstanding for the account of Borrowers and their Subsidiaries at any time
shall not exceed $3,000,000.
(2) REIMBURSEMENT. Borrowers shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other formalities of
any kind, to reimburse Agent for any amounts paid by Agent with respect to a
Lender Letter of Credit or a Risk Participation Agreement issued for the account
of any Borrower or any of its Subsidiaries, including all fees, costs and
expenses paid by Agent to any bank that issues letters of credit. Borrowers
hereby authorize and direct Agent, at Agent's option, to make a Revolving Loan
in the amount of any payment made by Agent with respect to any Lender Letter of
Credit or any Risk Participation Agreement. All amounts paid by
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Agent with respect to any Lender Letter of Credit or Risk Participation
Agreement that are not immediately repaid by Borrowers with the proceeds of a
Revolving Loan or otherwise shall bear interest at the interest rate applicable
to Revolving Loans calculated using the Base Rate. Each Lender agrees to fund
its Pro Rata Share of any Revolving Loan made pursuant to this subsection
1.1(B)(2). If no such Revolving Loan is made, each Lender agrees to purchase,
and shall be deemed to have purchased, a participation in such Lender Letter of
Credit or Risk Participation Agreement, as the case may be, in an amount equal
to its Pro Rata Share of the Risk Participation Liability of such Lender Letter
of Credit or Risk Participation Agreement, as the case may be, and each Lender
agrees to pay to Agent such Lender's Pro Rata Share of any payments made by
Agent under such Lender Letter of Credit and Risk Participation Agreement. The
obligation of each Lender to deliver to Agent an amount equal to its respective
Pro Rata Share pursuant to the preceding two (2) sentences shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuation of an Event of Default or the failure to satisfy any condition
set forth in subsection 7.2. If any Lender fails to make available to Agent the
amount of such Lender's Pro Rata Share of any payments made by Agent in respect
of such Lender Letter of Credit or Risk Participation Agreement as provided in
this subsection 1.1(B)(2), Agent shall be entitled to recover such amount on
demand from such Lender together with interest at the Base Rate.
(3) CONDITIONS OF ISSUANCE OF LETTERS OF CREDIT OR RISK PARTICIPATION
AGREEMENTS. In addition to all other terms and conditions set forth in this
Agreement, the issuance by Agent of any Lender Letter of Credit or Risk
Participation Agreement shall be subject to the conditions precedent that the
Lender Letter of Credit, the Risk Participation Agreement or the letter of
credit for which any Borrower requests a Risk Participation Agreement, shall
support a transaction entered into in the ordinary course of such Borrower's or
any of its Subsidiary's business and shall be in such form, be for such amount,
and contain
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such terms and conditions as are reasonably satisfactory to Agent. The
expiration date of each Lender Letter of Credit and each letter of credit to be
issued under a Risk Participation Agreement shall be on a date which is the
earlier of (a) one (1) year from its date of issuance, or (b) the thirtieth
(30th) day before the date set forth in clause (c) of the definition of the term
Expiry Date. Each Risk Participation Agreement shall provide that the agreement
terminates and all demands or claims for payment must be presented by a date
certain, which date will be at least thirty (30) days before the date set forth
in clause (c) of the definition of the term Expiry Date.
(4) REQUEST FOR LENDER LETTERS OF CREDIT OR RISK PARTICIPATION AGREEMENTS.
Borrowers' Representative shall give Agent at least three (3) Business Days
prior notice specifying the date a Lender Letter of Credit is requested to be
issued, identifying the beneficiary and describing the nature of the
transactions proposed to be supported thereby. After the issuance of a Risk
Participation Agreement in favor of a bank that will issue letters of credit on
behalf of any Borrower or any of its Subsidiaries, Borrowers' Representative
shall give Agent at least two (2) Business Days prior written notice specifying
the date a letter of credit is to be issued under a Risk Participation Agreement
(five (5) Business Days in the case of the first letter of credit to be issued
under a particular Risk Participation Agreement), identifying the beneficiary
and describing the nature of the transactions purposed to be supported hereby.
Any notice described in this paragraph shall be accompanied by the form of the
Lender Letter of Credit or the letter of credit to which such Risk Participation
Agreement relates.
(C) REVOLVING NOTES. Borrowers shall execute and deliver to each Lender a
Revolving Note to evidence the Revolving Loans, such Revolving Note to be in the
principal amount of such Lender's Pro Rata Share of the Revolving Loan
Commitment.
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1.2 INTEREST AND RELATED FEES.
(A) INTEREST. From the date the Revolving Loans are made and the
date the other Obligations become due, the Revolving Loans and the other
Obligations shall bear interest (depending upon Borrowers' election from time to
time, as permitted herein, to have portions of the Loans accrue interest based
upon the LIBOR) at the rates set forth in paragraphs (1) and (2) below:
(1) the Revolving Loans and all other Obligations shall bear interest
at the sum of the Base Rate plus one percent (1.00%) per annum. "Base
Rate" means a variable rate of interest per annum equal to the Prime Rate.
"Prime Rate" means a variable rate of interest per annum equal to the rate
of interest from time to time published by the Board of Governors of the
Federal Reserve System in Federal Reserve statistical release H.15 (519)
entitled "Selected Interest Rates" as the Bank prime loan rate. Prime Rate
also includes rates published in any successor publications of the Federal
Reserve System reporting the Bank prime loan rate or its equivalent. The
statistical release generally sets forth a Bank prime loan rate for each
business day. The applicable Bank prime loan rate for any date not set
forth shall be the rate set forth for the last preceding date. In the
event the Board of Governors of the Federal Reserve System ceases to
publish a Bank prime loan rate or equivalent, the term "Base Rate" shall
mean a variable rate of interest per annum equal to the highest of the
"prime rate," "reference rate," "base rate" or other similar rate as
determined by Agent, announced from time to time by any of Bankers Trust
Company or The Chase Manhattan Bank, National Association (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any
customer by such bank). "Base Rate Loans" means Loans bearing interest at
rates determined by reference to the Base Rate.
(2) the Revolving Loans shall bear interest at the sum of the LIBOR
plus two and one-quarter percent (2.25%) per annum. "LIBOR" means, for
each Interest Period, a rate equal to: (a) the rate of interest
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determined by Agent, at which deposits in U.S. dollars for the relevant Interest
Period are offered based on information presented on the Reuters Screen LIBO
Page as of 11:00 a.m. (London time) on the day which is two (2) Business Days
prior to the first day of such Interest Period, provided that if at least two
such offered rates appear on the Reuters Screen LIBO Page in respect of such
Interest Period, the arithmetic mean of all such rates will be the rate used,
PROVIDED FURTHER, that if fewer than two offered rates appear or if Reuters
ceases to provide LIBOR quotations, such rate shall be the rate of interest at
which deposits in U.S. dollars are offered for the relevant Interest Period by
any of Bankers Trust Company or The Chase Manhattan Bank, National Association
to prime banks in the London interbank market, divided by (b) a number equal to
1.0 minus the aggregate (but without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on the day which is two (2)
Business Days prior to the beginning of such Interest Period (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) which are required to
be maintained by a member bank of the Federal Reserve System; such rate to be
rounded upward to the next whole multiple of one-sixteenth of one percent
(.0625%). "LIBOR Loans" means Loans bearing interest at rates determined by
reference to the LIBOR.
Each LIBOR Loan may be obtained for a thirty (30), sixty (60), ninety
(90), or one hundred eighty (180) day period (each being an "Interest Period").
With respect to all LIBOR Loans: (a) the Interest Period will commence on the
date that the LIBOR Loan is made or the date on which a Base Rate Loan is
converted into a LIBOR Loan, as applicable, or in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the day on which the immediately preceding Interest Period expires, (b) if the
Interest Period expires on a day that is not a Business Day, then it will expire
on
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the next succeeding Business Day, or if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day and
(c) no Interest Period shall extend beyond the date set forth in clause (c) of
the definition of the term "Expiry Date."
If the introduction of or the interpretation of any law, rule, or
regulation subsequent to the date of this Agreement would increase the reserve
requirement or otherwise increase the cost to any Lender of making or
maintaining a LIBOR Loan, then Agent, on behalf of all affected Lenders, shall
submit a certificate to Borrowers' Representative demonstrating the calculation
of the increased cost and requiring payment thereof to Agent, for the benefit of
the affected Lenders within ten (10) days after the date of the certificate.
There are no limitations on the number of times such certificate may be
submitted.
Notwithstanding any other provision in this Agreement, in the event
that it becomes unlawful for any Lender or its applicable lending office to:
(i) honor its obligation to make LIBOR Loans hereunder, or (ii) maintain LIBOR
Loans hereunder, then such Lender shall promptly notify Borrowers'
Representative thereof (with a copy to Agent), describing such illegality in
reasonable detail (and shall thereafter promptly notify Borrowers'
Representative and Agent of the cessation, if any, of such illegality), and such
Lender's obligation to make LIBOR Loans and to convert other types of Loans into
LIBOR Loans hereunder shall, upon written notice given by such Lender to
Borrowers' Representative, be suspended until such time as such Lender may again
make and maintain LIBOR Loans and such Lender's outstanding LIBOR Loans shall be
converted into Base Rate Loans (as shall be designated in a notice from
Borrowers' Representative to Agent.).
(B) COMMITMENT FEE. From the Closing Date, Borrowers shall pay,
jointly and severally, to Agent, for the benefit of all Lenders committed to
make Revolving Loans (based upon their respective Pro Rata Shares), a fee in an
amount equal to (a)(i) the Revolving Loan Commitment less (ii) the sum of the
average daily balance of (A) the Revolving Loans plus (B) the average daily
aggregate amount of outstanding Risk Participation Liability during the
preceding quarter, (b) multiplied by one-half percent (0.50%)
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per annum. Such fee is to be paid quarterly in arrears on the first day of each
calendar quarter, at final maturity, whether by acceleration or otherwise, and
thereafter on demand.
(C) RISK PARTICIPATION FEE. From the Closing Date, Borrowers shall
pay, jointly and severally, to Agent, for the benefit of all Lenders committed
to make Revolving Loans (based upon their respective Pro Rata Shares), a fee for
each Lender Letter of Credit and each Risk Participation Agreement from the date
of issuance to the date of termination equal to the average daily outstanding
amount of the Risk Participation multiplied by two and three-quarters percent
(2.75%) per annum. Such fee is to be paid quarterly in arrears on the first day
of each calendar quarter, at final maturity, whether by acceleration or
otherwise, and thereafter on demand. Borrowers shall also, jointly and
severally, reimburse Agent for any and all fees and expenses paid to the issuer
of any letter of credit that is in any way related to a Risk Participation
Agreement.
(D) COMPUTATION OF INTEREST AND RELATED FEES. Interest on all Loans
and all other Obligations and any fees set forth in this subsection 1.2 shall be
calculated daily on the basis of a three hundred sixty (360) day year for the
actual number of days elapsed in the period during which it accrues. The date
of funding of a Base Rate Loan and the first day of an Interest Period with
respect to a LIBOR Loan shall be included in the calculation of interest. The
date of payment of a Base Rate Loan and the last day of an Interest Period with
respect to a LIBOR Loan shall be excluded from the calculation of interest. If
a Loan is repaid on the same day that it is made, one (1) day's interest shall
be charged. Interest on all Base Rate Loans is payable in arrears on the first
day of each quarter, at final maturity, whether by acceleration or otherwise,
and thereafter on demand. Interest on LIBOR Loans shall be payable on the last
day of the applicable Inter-est Period, unless the Interest Period is greater
than three (3) months, in which case interest will be payable on the last day of
each three (3) month interval. In addition, interest on LIBOR Loans is due on
the Expiry Date, whether by acceleration or otherwise.
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(E) DEFAULT RATE OF INTEREST. Upon the occurrence of an Event of
Default under subsection 6.1(A), and at the election of Agent or Requisite
Lenders after the occurrence of any other Event of Default, and for so long as
such Event of Default continues, the Revolving Loans and other Obligations shall
bear interest at a rate that is two percent (2.00%) in excess of the rates
otherwise payable under this Agreement ("Default Rate"). Furthermore, during
any period in which any Event of Default is continuing, as the Interest Periods
for LIBOR Loans then in effect expire, such LIBOR Loans shall be converted at
the discretion of Agent into Base Rate Loans and the LIBOR election will not be
available to Borrower until all Events of Default are cured or waived.
(F) EXCESS INTEREST. Under no circumstances will the rate of
interest chargeable be in excess of the maximum amount permitted by law. If
excess interest is charged and paid in error, then the excess amount will be
promptly refunded.
(G) LIBOR RATE ELECTION. All Revolving Loans made on the Closing
Date shall be Base Rate Loans and remain so for ten (10) days. Thereafter,
Borrowers' Representative may request that Revolving Loans to be made be LIBOR
Loans and that outstanding portions of the Revolving Loans be converted to LIBOR
Loans. Any such request, which will be made by submitting a LIBOR Loan request,
in the form of Exhibit 1.2(G), shall pertain to Revolving Loans in an aggregate
minimum amount of $500,000 and integral multiples of $10,000 in excess thereof.
Once given, a LIBOR Loan request shall be irrevocable and Borrower shall be
bound thereby. Upon the expiration of an Interest Period, in the absence of a
new LIBOR Loan request submitted to Agent not less than three (3) days prior to
the end of such Interest Period, the LIBOR Loan then maturing shall be
automatically converted to a Base Rate Loan. There may be no more than six (6)
LIBOR Loans outstanding at any one time. Revolving Loans which are not the
subject of a LIBOR Loan request shall be Base Rate Loans.
1.3 OTHER FEES AND EXPENSES.
(A) CERTAIN FEES. Borrowers shall pay, jointly and severally, to
Heller, individually, on the Closing
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Date, the fees specified in that certain letter agreement dated the date of this
Agreement among Borrowers and Heller.
(B) LIBOR BREAKAGE FEE. Upon any payment of a LIBOR Loan on any day
that is not the last day of the Interest Period applicable thereto (regardless
of the source of such prepayment and whether voluntary, by acceleration or
otherwise), Borrowers shall, jointly and severally, pay to Agent, for the
benefit of all affected Lenders, an amount (the "LIBOR Breakage Fee") equal to
the amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) sustained by each such affected
Lender in connection with the re-employment of such funds) that any such
affected Lender may sustain as a result of the payment of such LIBOR Loan on a
day that is not the last day of the Interest Period applicable thereto.
(C) EXPENSES AND ATTORNEYS FEES. Borrowers agree, jointly and
severally, to promptly pay all reasonable fees, costs and expenses (including
those of attorneys) incurred by Agent in connection with any matters
contemplated by or arising out of the Loan Documents, in connection with the
examination, review, due diligence investigation, documentation, negotiation and
closing of the transactions contemplated herein and in connection with the
continued administration of the Loan Documents including any amendments,
modifications, waivers and any other reasonable administrative functions deemed
necessary by Agent. Borrowers agree, jointly and severally, to promptly pay all
fees, costs and expenses incurred by Agent and Lenders in connection with any
action to enforce any Loan Document or to collect any payments due from any
Borrower or any other Loan Party. All fees, costs and expenses for which
Borrowers are responsible under this subsection 1.3(C) shall be deemed part of
the Obligations when incurred, payable in accordance with subsection 1.4 and
secured by the Collateral.
1.4 PAYMENTS. All payments by Borrowers of the Obligations shall be
made in same day funds and delivered to Agent, for the benefit of Agent and
Lenders, as applicable, by wire transfer to the following account or such other
place as Agent, may from time to time designate.
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ABA No. 071 000 013
Account Number 55-00540
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Reference: DEC
Borrowers shall receive credit on the day of receipt for funds
received by Agent, by 2:00 p.m. (New York City time). In the absence of timely
receipt, such funds shall be deemed to have been paid on the next Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest and fees due hereunder.
Each Borrower hereby authorizes Lenders to make Revolving Loans, on
the basis of their Pro Rata Shares, for the payment of interest, commitment
fees, Risk Participation Liability fees, LIBOR Breakage Fees and payments in
respect of Risk Participation Liability payments. Prior to an Event of Default,
other fees, costs and expenses (including those of attorneys) reimbursable to
Agent pursuant to subsections 1.3(A) and (C) or elsewhere in any Loan Document
may (in the absence of any good faith dispute by any Borrower of any such fee,
cost or expense) be debited to the Revolving Loan after fifteen (15) days
notice. After the occurrence of an Event of Default, no notice will be
required.
Borrowers may elect to terminate the Revolving Loan Commitment in
full, upon at least one (1) Business Day prior notice to Agent, but no partial
reductions shall be permitted. After notice of such termination is given, any
Revolving Loans outstanding shall become immediately due and payable and the
Revolving Loan Commitment shall terminate.
1.5 TERM OF THE AGREEMENT. All of the Obligations shall become due
and payable as otherwise set forth herein, but in any event, all of the
remaining Obligations shall become due and payable on the date set forth in
clause (c) of the definition of the term "Expiry Date." Upon such date and
following repayment in full of
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the Obligations, this Agreement will terminate. Notwithstanding any such
termination, until all Obligations have been fully paid and satisfied, Agent,
for the benefit of Agent and Lenders, shall be entitled to retain the security
interests in the Collateral granted under the Security Documents and the ability
to exercise all rights and remedies available to Agent and Lenders under the
Loan Documents and applicable laws.
1.6 LOAN ACCOUNTS. Agent will maintain loan account records for
(a) all Revolving Loans, interest charges and payments thereof, (b) all Risk
Participation Liabilities, (c) the charging and payment of all fees, costs and
expenses and (d) all other debits and credits pursuant to this Agreement. The
balance in the loan accounts shall be presumptive evidence of the amounts due
and owing to Lenders, provided that any failure by Agent to so record shall not
limit or affect the Borrowers' obligation to pay. Within five (5) days after
the first of each month, Agent shall provide a statement for each loan account
setting forth the principal of each account and interest due thereon. Borrowers
must deliver a written objection within sixty (60) days after receipt of the
statement or the statement will be presumptive evidence of the Obligations
absent error. During the continuance of an Event of Default, each Borrower
irrevocably waives the right to direct the application of any and all payments
and Borrowers hereby irrevocably agree that Agent shall have the continuing
exclusive right to apply and reapply payments in any manner it deems
appropriate.
1.7 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS. In the event that the
adoption after the date hereof of any law, treaty, governmental (or quasi-
governmental) rule, regulation, guideline or order regarding capital adequacy,
reserve requirements or similar requirements or compliance by any Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) from any central bank or governmental agency or body having
jurisdiction does or shall have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender or any
corporation controlling such Lender and
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thereby reducing the rate of return on such Lender's or such corporation's
capital as a consequence of its obligations hereunder, then Borrowers shall from
time to time within fifteen (15) days after notice and demand from such Lender
(which demand shall be made as promptly as practicable after such Lender obtains
knowledge that such law, treaty, governmental rule, regulation, order or
requirement exists and such Lender determines to make such demand and shall be
accompanied by the certificate referred to in the next sentence and with a copy
to Agent) pay, jointly and severally, to Agent, for the account of such Lender,
additional amounts sufficient to compensate such Lender for such reduction. A
certificate as to the amount of such cost and showing the basis of the
computation of such cost submitted by such Lender to Borrowers' Representative
and Agent, shall, absent manifest error, be final, conclusive and binding for
all purposes. Such Lender shall not be entitled to compensation under this
subsection for any amounts incurred or accrued prior to the one hundred
eightieth (180th) day prior to the giving of such notice.
1.8 TAXES.
(A) NO DEDUCTIONS. Any and all payments or reimbursements made
hereunder or under the Revolving Notes shall be made free and clear of and
without deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (all such taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto excluding, however, taxes imposed on or measured by the net income of a
Lender or Agent ("Tax Liabilities")). If any Borrower shall be required by law
to deduct any such Tax Liabilities from or in respect of any sum payable
hereunder to any Lender or Agent, then the sum payable hereunder shall be
increased as may be necessary so that, after making all required deductions of
Tax Liabilities, such Lender or Agent receives an amount equal to the sum it
would have received had no such deductions been made. Borrowers will, jointly
and severally, to the fullest extent permitted by law, indemnify each Lender and
Agent for the full amount of any Tax Liabilities imposed on or paid by them and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Tax Liabilities were correctly
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or legally asserted. Indemnification payments pursuant to this paragraph shall
be made within 30 days after receipt by Borrowers' Representative of written
demand therefor by such Lender or Agent (which demand shall be made as promptly
as practicable after Agent or such Lender receives a written claim of any
proposed Tax Liability entitling Agent or such Lender to make such demand
pursuant to this subsection). To the extent that the demand for indemnification
made of the Borrowers by Agent or such Lender with respect to such Tax
Liabilities is not made in conformity with the previous sentence, Agent or such
Lender shall not be entitled to be indemnified under this subsection for any
such Tax Liability to the extent any Borrower is actually prejudiced thereby.
(B) CHANGES IN LAWS. In the event that, subsequent to the Closing
Date (or in the case of a Lender that is an assignee or transferee of an
interest under this Agreement pursuant to subsection 8.1, subsequent to the date
of such assignment or transfer to such Lender), (1) any changes in any existing
law, regulation, treaty or directive or in the official interpretation or
application thereof, (2) any new law, regulation, treaty, interpretation or
directive enacted, or (3) compliance by Agent or any Lender with any request or
directive (whether or not having the force of law) from any governmental
authority, agency or instrumentality:
(a) does or shall change the basis of taxation of payments to Agent
or any Lender of principal, fees, interest or any other amount payable
hereunder (except for net income taxes, or franchise taxes imposed in lieu
of net income taxes, imposed generally by federal, state or local taxing
authorities with respect to interest or commitment or other fees payable
hereunder or changes in the rate of tax in the overall net income of Agent
or such Lender); or
(b) does or shall impose on Agent or any Lender any other condition
or increased cost in connection with the transactions contemplated hereby
or participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any
such Lender of issuing any Lender
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Letter of Credit or Risk Participation Agreement or making or continuing any
Revolving Loan hereunder, as the case may be, or to reduce any amount receivable
hereunder, then, in any such case, Borrowers shall, jointly and severally,
promptly pay to Agent or such Lender, upon Agent or such Lender's demand (which
demand shall be made as promptly as practicable after Agent or such Lender
obtains knowledge that an event entitling Agent or such Lender to claim any
additional amounts pursuant to this subsection has occurred and Agent or such
Lender determines to make such demand and shall be accompanied by the
certificate referred to below), any additional amounts necessary to compensate
Agent or such Lender, on an after-tax basis, for such additional cost or reduced
amount receivable, as determined by Agent or such Lender with respect to this
Agreement or the other Loan Documents. If Agent or such Lender becomes entitled
to claim any additional amounts pursuant to this subsection, it shall promptly
notify Borrowers' Representative of the event by reason of which Agent or such
Lender has become so entitled to such additional amounts. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
Agent or such Lender to Borrowers' Representative and Agent shall, absent
manifest error, be final, conclusive and binding for all purposes. Agent or
such Lender shall not be entitled to compensation under this subsection for any
amount incurred or accrued prior to the first day of such one hundred eightieth
(180th) day prior to the giving of such notice.
(C) FOREIGN LENDERS. Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") shall, to the extent
it is entitled to do so, provide to Borrowers' Representative and Agent (1) a
properly completed and executed Internal Revenue Service Form 4224 or Form 1001
or other applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States certifying as to such Foreign Lender's
entitlement to a complete exemption or reduced rate of withholding with respect
to payments to be made to such Foreign Lender under this Agreement and under the
Revolving Notes (a "Certificate of Exemption") or (2) a letter from any such
Foreign Lender stating that it is not entitled to any such exemption or reduced
rate of withholding (a "Letter of Non-Exemption"). Prior to becoming a Lender
under this Agreement and within fifteen (15) days after a
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reasonable written request of Borrowers' Representative or Agent from time to
time thereafter, each Foreign Lender that becomes a Lender under this Agreement
shall, to the extent it is entitled to do so, provide a Certificate of Exemption
or a Letter of Non-Exemption to Borrowers' Representative and Agent. In
addition, each Foreign Lender agrees that from time to time after the Closing
Date, when a lapse in time or a change in circumstances renders the previous
Certificate of Exemption or Letter of Non-Exemption obsolete or inaccurate in
any material respect, it will deliver to Borrowers' Representative and Agent a
new accurate and complete original signed copy of the Certificate of Exemption
or Letter of Non-Exemption.
Notwithstanding anything to the contrary contained in this subsection
1.8, (1) Borrowers shall be entitled, to the extent they are required to do so
by law, to deduct or withhold income and similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Foreign Lender to the extent that such Foreign Lender has not provided to
Borrowers' Representative a Certificate of Exemption that establishes a complete
exemption from such deduction or withholding, and (2) if and to the extent any
Foreign Lender does not provide a Certificate of Exemption that establishes
complete exemption from such deduction or withholding on the Closing Date (or on
the effective date of an assignment or transfer pursuant to subsection 8.1), the
Borrower shall not be obligated to gross-up payments to be made to or indemnify
such Foreign Lender in respect of income or similar taxes imposed by the United
States or any political subdivision or taxing authority thereof or therein that
Borrower is required by law to deduct or withhold.
(D) TAX BENEFITS. If any Borrower determines in good faith that a
reasonable basis exists for contesting any Tax Liability, the relevant Lender
shall cooperate with such Borrower in challenging such Tax Liability if so
requested by Borrowers' Representative. If any Lender receives a refund of a
Tax Liability for which a payment has been made by the Borrowers pursuant to
this Agreement or receives any credit, relief or other tax benefit in connection
therewith, which refund or benefit is attributable
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to such payment made by Borrowers, then the Lender shall reimburse the Borrowers
for the amount of such refund or benefit. A Lender shall claim any refund or
benefit that it determines is available to it, unless it determines in its
reasonable discretion that it would be adversely affected by making such a
claim.
1.9 REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS. Within
fifteen (15) days after receipt by Borrowers' Representative of written notice
and demand from any Lender (an "Affected Lender") for payment of additional
costs as provided in subsection 1.8, Borrowers may, at their option, notify
Agent and such Affected Lender of their intention to do one of the following:
(A) Borrowers may obtain, at Borrowers' expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender
shall be reasonably satisfactory to Agent. In the event Borrowers obtain a
Replacement Lender within ninety (90) days following notice of their
intention to do so, the Affected Lender shall sell and assign its Revolving
Loans and its obligations under the Revolving Loan Commitment to such
Replacement Lender, provided that Borrowers have reimbursed such Affected
Lender for its increased costs for which it is entitled to reimbursement
under this Agreement through the date of such sale and assignment; or
(B) Borrowers may prepay in full all outstanding Obligations owed to
such Affected Lender and terminate such Affected Lender's Pro Rata Share of
the Revolving Loan Commitment, in which case the Revolving Loan Commitment
will be reduced by the amount of such Affected Lender's Pro Rata Share.
Borrowers shall, within ninety (90) days following notice of their
intention to do so, prepay in full all outstanding Obligations owed to such
Affected Lender (including such Affected Lender's increased costs for which
it is entitled to reimbursement under this Agreement through the date of
such prepayment), and terminate such Affected Lender's obligations under
the Revolving Loan Commitment.
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SECTION 2
AFFIRMATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that so
long as the Revolving Loan Commitment is in effect and until payment in full of
all Obligations and termination of all Lender Letters of Credit and Risk
Participation Agreements, unless Requisite Lenders shall otherwise give their
prior written consent, each Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and comply with, all covenants
in this Section 2 applicable to such Person.
2.1 COMPLIANCE WITH LAWS. Each Borrower will (a) comply with and
will cause each of its Subsidiaries to comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority
(including, without limitation, any laws, rules, regulations and orders relating
to operation of such Borrower's and its Subsidiaries' business, taxes, employer
and employee contributions, securities, employee retirement and welfare
benefits, environmental protection matters and employee health and safety) as
now in effect and which may be imposed in the future in all jurisdictions in
which such Borrower or its Subsidiaries are now doing business or may hereafter
be doing business, other than those laws, rules, regulations and orders the
noncompliance with which could not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect, and (b) maintain or
obtain and will cause each of its Subsidiaries to maintain or obtain, all
licenses, qualifications and permits now held or hereafter required to be held
by such Borrower and its Subsidiaries, for which the loss, suspension,
revocation or failure to obtain or renew, could have a Material Adverse Effect.
This subsection 2.1 shall not preclude any Borrower or any Subsidiary from
contesting any taxes or other payments, if they are being diligently contested
in good faith and if appropriate expense provisions have been recorded in
conformity with GAAP. Each Borrower represents and warrants that as of the date
hereof, it (i) is in compliance and each of its Subsidiaries is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority as now in effect, and (ii) maintains and each of its
Sub-
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Page 23
sidiaries maintains all licenses, qualifications and permits referred to above,
in each case except where the failure to be in compliance or to maintain such
licenses, qualifications or permits could not be reasonably expected to have a
Material Adverse Effect.
2.2 MAINTENANCE OF PROPERTIES; INSURANCE. Each Borrower will
maintain or cause to be maintained in good repair, working order and condition
all material properties used in the business of such Borrower and its
Subsidiaries and will make or cause to be made all appropriate repairs, renewals
and replacements thereof. Borrowers will maintain or cause to be maintained,
with financially sound and reputable insurers, public liability and property
damage insurance with respect to that business and properties and the business
and properties of their respective Subsidiaries against loss or damage of the
kinds customarily carried or maintained by corporations of established
reputation engaged in similar businesses and in amounts reasonably acceptable to
Agent and will deliver evidence thereof to Agent. Borrowers will maintain
business interruption insurance in an amount not less than $80,000,000. Each
Borrower shall cause, pursuant to endorsements and assignments and assignments
in form and substance reasonably satisfactory to Agent, for the benefit of Agent
and Lenders, to be named as (a) lender's loss payee in the case of casualty
insurance relating to the Collateral, (b) additional insured in the case of all
liability insurance, and (c) assignee in the case of all business interruption
insurance; PROVIDED, HOWEVER, that unless an Event of Default has occurred and
is then continuing, the proceeds of such insurance shall be made available to
Borrowers. Each Borrower represents and warrants that it and each of its
Subsidiaries currently maintains all material properties as set forth above and
maintains all insurance described above.
2.3 INSPECTION; LENDER MEETING. Each Borrower shall permit Agent
and/or any authorized representatives of Agent to visit and inspect any of the
properties of such Borrower or any of its Subsidiaries, including its and their
financial and accounting records, collateral records, financial and other
management systems and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and business with its and their officers
<PAGE>
Page 24
and certified public accountants, upon prior notice at such reasonable times
during normal business hours and as often as may be reasonably requested.
Representatives of each Lender will be permitted to accompany representatives of
Agent during each visit, inspection and discussion referred to in the
immediately preceding sentence. Without in any way limiting the foregoing, each
Borrower will participate and will cause its key management personnel to
participate in a meeting with Agent and Lenders at least once during each year,
which meeting shall be held at such time and such place as may be reasonably
requested by Agent.
2.4 CORPORATE EXISTENCE, ETC. Except as otherwise permitted by
subsection 3.6, each Borrower will, and will cause each of its Subsidiaries to,
at all times preserve and keep in full force and effect its corporate existence
and all rights and franchises material to its business.
2.5 FURTHER ASSURANCES.
(A) Borrowers shall and shall cause each Loan Party to, from time to
time, execute such amendments to this Agreement and the Revolving Notes and such
guaranties, financing statements, documents, security agreements and reports as
Agent or Requisite Lenders at any time may reasonably request to evidence,
perfect or otherwise implement the undertakings, guaranties and security for
repayment of the Obligations contemplated by the Loan Documents.
(B) At the request of Agent or the Requisite Lenders, Borrowers shall
cause any of their Subsidiaries promptly to become a Borrower under this
Agreement or to guaranty the Obligations and to grant to Agent, for the benefit
of Agent and Lenders, a security interest in the accounts receivable, inventory
and intellectual property of such Subsidiary to secure the Obligations. The
documentation for such undertaking, guaranty or security shall be at the expense
of Borrowers and shall be substantially similar to the Loan Documents executed
concurrently herewith with such modifications as are reasonably requested by
Agent.
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SECTION 3
NEGATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that so
long as the Revolving Loan Commitment is in effect and until payment in full of
all Obligations and termination of all Lender Letters of Credit and Risk
Participation Agreements, unless Requisite Lenders shall otherwise give their
prior written consent, each Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and comply with, all covenants
in this Section 3 applicable to such Person.
3.1 INDEBTEDNESS. No Borrower shall, nor shall any Borrower permit
any of its Subsidiaries directly or indirectly to, create, incur, assume,
guaranty, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness except:
(A) the Obligations;
(B) unsecured intercompany Indebtedness among Borrowers and their
Subsidiaries; provided that the obligations of each obligor of such
Indebtedness shall: (1) be subordinated (on such terms and conditions
reasonably satisfactory to Agent) in right of payment to the Obligations
from and after such time as any portion of the Obligations shall become due
and payable (whether at stated maturity, by acceleration or otherwise); and
(2) be evidenced by promissory notes, which shall have been pledged to
Agent, for the benefit of Agent and Lenders, as security for the
Obligations.
(C) Indebtedness of Borrowers evidenced by the Senior Notes and the
Senior Notes Guarantees;
(D) Contingent Obligations permitted under subsection 3.4 and any
Indebtedness arising as a result of such Contingent Obligations;
(E) Indebtedness secured by purchase money Liens or incurred with
respect to capital leases, provided that after giving effect to the
incurrence of any such
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Page 26
Indebtedness, the aggregate outstanding amount of all such Indebtedness of
Borrowers and their Subsidiaries, does not exceed an amount equal to
$7,500,000, less the Existing Indebtedness secured by purchase money Liens
or incurred with respect to capital leases;
(F) Indebtedness existing on the Closing Date and listed on Schedule
3.1 (F) (the "Existing Indebtedness"); and
(G) additional Indebtedness if all of the following conditions have
been complied with: (1) no Default or Event of Default shall have occurred
and then be continuing or would be created by the incurrence of such
Indebtedness (determined on a pro forma basis after giving effect to the
incurrence of such Indebtedness); (2) the sum of the following amounts,
each amount to be determined on the date of the incurrence of the
additional Indebtedness (a) Borrower's cash and Cash Equivalents and
(b) the Maximum Revolving Loan Balance, minus the outstanding principal
balance of the Revolving Loans is at least $3,000,000; and (3) the
incurrence of such Indebtedness is permitted under the Senior Notes and the
Indenture.
3.2 LIENS AND RELATED MATTERS.
(A) NO LIENS. Borrowers shall not, nor shall any Borrower permit any
of its Subsidiaries directly or indirectly to, create, incur, assume or permit
to exist any Lien on or with respect to any property or asset (including any
document or instrument with respect to goods or accounts receivable) of Borrower
or any of its Subsidiaries, whether now owned or hereafter acquired, or any
income or profits therefrom, except Permitted Encumbrances. "Permitted
Encumbrances" means the following:
(1) Liens for taxes, assessments or other governmental charges not
yet due and payable;
(2) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred in
the
<PAGE>
ordinary course of business for sums not more than thirty (30) days
delinquent or which are being contested in good faith; provided that a
reserve or other appropriate provision shall have been made therefor;
(3) Liens (other than any Lien imposed by the Employee Retirement
Income Security Act of 1974, as amended, or any rule or regulation
promulgated thereunder) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeal bonds,
bids, leases, government contracts, trade contracts, performance and return
of money bonds and other similar obligations (exclusive of obligations for
the payment of borrowed money);
(4) deposits, in an aggregate amount not to exceed $2,000,000, made
in the ordinary course of business and that are not obligations for the
payment of borrowed money and do not interfere in any material respect with
the ordinary course of business of any Loan Party and do not in any way
impair the value of the Collateral;
(5) Liens for purchase money obligations and capitalized lease
obligations; provided that: (a) the Indebtedness secured by any such Lien
is permitted under subsection 3.1; and (b) any such Lien encumbers only the
asset so purchased;
(6) any attachment or judgment Lien not constituting an Event of
Default under subsection 6.1(I);
(7) easements, rights of way, restrictions, and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of any Borrower or any of its Subsidiaries;
(8) any interest or title of a lessor or sublessor under any lease;
<PAGE>
Page 28
(9) Liens in favor of Agent, for the benefit of Agent and Lenders;
and
(10) Liens existing on the date hereof and renewals and extensions
thereof, which Liens are set forth on Schedule 3.2(A)(10) hereto.
(B) NO NEGATIVE PLEDGES. No Borrower shall, nor shall any Borrower
permit any of its Subsidiaries directly or indirectly to, enter into or assume
any agreement (other than pursuant to the Indenture or the Loan Documents)
prohibiting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired.
(C) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWERS. Except
as provided herein or in the Indenture, no Borrower shall, nor shall any
Borrower permit any of its Subsidiaries directly or indirectly to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to:
(1) pay dividends or make any other distribution on any of such Subsidiary's
capital stock owned by any Borrower or any of its Subsidiaries; (2) subject to
subordination provisions for the benefit of Agent and Lenders, pay any
Indebtedness owed to any Borrower or any of its Subsidiaries; (3) make loans or
advances to any Borrower or any of its Subsidiaries; or (4) transfer any of its
property or assets to any Borrower or any of its Subsidiaries.
3.3 INVESTMENTS; JOINT VENTURES. No Borrower shall, nor shall any
Borrower permit any of its Subsidiaries, directly or indirectly to, make or own
any Investment in any Person except:
(A) Borrowers and such Subsidiaries may make and own Investments in
Cash Equivalents; provided that such Cash Equivalents are not subject to setoff
rights;
(B) Borrowers and such Subsidiaries may make intercompany loans to
the extent permitted under subsection 3.1 and Borrowers and such Subsidiaries
may make Investments in other Borrowers and their Subsidiaries;
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Page 29
(C) Borrowers and their Subsidiaries may make loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business not to exceed $500,000 in the aggregate at any time
outstanding; and
(D) additional Investments in any Person if all of the following
conditions have been complied with: (1) no Default of Event of Default shall
have occurred and then be continuing or would be created by the making of such
Investment (determined on a pro forma basis after giving effect to the making of
such Investment); (2) the sum of the following amounts, each amount to be
determined on the date of the making of such additional Investment
(a) Borrowers' cash and Cash Equivalents and (b) the Maximum Revolving Loan
Balance, minus the outstanding principal balance of the Revolving Loans is at
least $3,000,000; (3) the making of such Investment is permitted under the
Senior Notes and the Indenture; and (4) Borrowers satisfy the conditions set
forth in subsection 1.1(A)(2) with respect to such Investment regardless of
whether or not any Revolving Loan will be used to fund such Investment.
"Investment" means (i) any direct or indirect purchase or other
acquisition by any Borrower or any of its Subsidiaries of any beneficial
interest in, including stock, partnership interest or other equity securities
of, any other Person; and (ii) any direct or indirect loan, advance or capital
contribution by any Borrower or any of its Subsidiaries to any other Person,
including all indebtedness and accounts receivable from that other Person that
are not current assets or did not arise from sales to that other Person in the
ordinary course of business. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Cash Equivalents" means: (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the
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Page 30
date of acquisition thereof; (ii) commercial paper maturing no more than one (1)
year from the date issued and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (iii) certificates of deposit or bankers' acceptances
maturing within one (1) year from the date of issuance thereof issued by, or
overnight reverse repurchase agreements from, any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia having combined capital and surplus of not less than
$500,000,000; (iv) time deposits maturing no more than thirty (30) days from the
date of creation thereof with commercial banks having membership in the Federal
Deposit Insurance Corporation in amounts not exceeding the lesser of $100,000 or
the maximum amount of insurance applicable to the aggregate amount of any
Borrower's deposits at such institution; and (v) deposits or investments in
mutual or similar funds offered or sponsored by brokerage or other companies
having membership in the Securities Investor Protection Corporation in amounts
not exceeding the lesser of $100,000 or the maximum amount of insurance
applicable to the aggregate amount of such Borrower's deposits at such
institution.
3.4 CONTINGENT OBLIGATIONS. No Borrower shall, nor shall any
Borrower permit any of its Subsidiaries directly or indirectly to, create or
become or be liable with respect to any Contingent Obligation except those:
(A) resulting from endorsement of negotiable instruments for
collection in the ordinary course of business;
(B) existing on the Closing Date and described in Schedule 3.4
annexed hereto;
(C) arising with respect to customary indemnification obligations
reasonably acceptable to Agent and incurred in connection with Asset
Dispositions;
(D) incurred in the ordinary course of business with respect to
surety and appeal bonds, performance and return-of-money bonds and other
similar
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obligations not exceeding at any time outstanding $500,000 in aggregate
liability;
(E) incurred with respect to Indebtedness permitted by subsection
3.1;
(F) incurred with respect to the Loan Documents;
(G) existing under the Senior Notes Guarantees; and
(H) not permitted by clauses (A) through (G) above, so long as any
such Contingent Obligations, in the aggregate at any time outstanding, do
not exceed $1,000,000.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability of that Person: (i) with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; or (iii) under any foreign
exchange contract, currency swap agreement, interest rate swap agreement or
other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates.
Contingent Obligations shall also include (a) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, and (c) any liability of such Person for the
obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds
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Page 32
for the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
3.5 RESTRICTED JUNIOR PAYMENTS. No Borrower shall, nor shall any
Borrower permit any of its Subsidiaries directly or indirectly to, declare,
order, pay, make or set apart any sum for any Restricted Junior Payment, except
that:
(A) wholly-owned Subsidiaries of any Borrower may make Restricted
Junior Payments to such Borrowers;
(B) NFC may make payments to DEC in an amount not in excess of the
federal, state and local income tax liability that NFC and its Subsidiaries
would have been liable for if NFC, together with its Subsidiaries, had
filed its consolidated tax return on a stand-alone basis provided that such
payments shall be made by NFC no earlier than five (5) days prior to the
date on which DEC is required to make its payments to the Internal Revenue
Service or state or local taxing authorities, as the case may be;
(C) NFC may make payments to DEC to pay operating expenses, not to
exceed $500,000 in any fiscal year;
(D) NFC may make payments to DEC to purchase capital stock of DEC
beneficially owned by directors, officers and employees of NFC or any of
its Subsidiaries pursuant to the terms of employment contracts or employee
benefit plans of NFC or any of its Subsidiaries not to exceed $250,000 in
any fiscal year, provided no Default or Event of Default shall have
occurred and then be continuing or would be created by the making of such
payment (determined on a pro forma basis after giving effect to the making
of such payment);
<PAGE>
Page 33
(E) NFC may make distributions to DEC with respect to the Preferred
Stock, if no Default or Event of Default shall have occurred and then be
continuing or would be created by the making of such Restricted Junior
Payment (determined on a pro forma basis after giving effect to the making
of such Restricted Junior Payment); and
(F) Borrowers may make other Restricted Junior Payments, if all of
the following conditions have been complied with: (1) no Default or Event
of Default shall have occurred and then be continuing or would be created
by the making of such Restricted Junior Payment (determined on a pro forma
basis after giving effect to the making of such Restricted Junior Payment);
(2) the sum of the following amounts, each amount to be determined on the
date of the making of the additional Restricted Junior Payment
(a) Borrower's cash and Cash Equivalents and (b) the Maximum Revolving Loan
Balance, minus the outstanding principal balance of the Revolving Loans is
at least $3,000,000; and (3) the making of such distribution is permitted
under the Senior Notes and the Indenture.
"Restricted Junior Payment" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of any Borrower or any of its Subsidiaries now or hereafter outstanding, except
a dividend payable solely in shares of that class of stock to the holders of
that class; (ii) any redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock of any Borrower or any of its Subsidiaries
now or hereafter outstanding; (iii) any payment or prepayment of interest on,
principal of, premium, if any, redemption, conversion, exchange, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Subordinated Indebtedness; and (iv) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of any Borrower or any of its Subsidiaries now or
hereafter outstanding.
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Page 34
3.6 RESTRICTION ON FUNDAMENTAL CHANGES. No Borrower shall, nor shall
any Borrower permit any of its Subsidiaries directly or indirectly to:
(a) amend, modify or waive any term or provision of its articles of
incorporation, certificates of designations pertaining to preferred stock or
by-laws in any manner which adversely affects the interests of the Lenders;
(b) enter into any transaction of merger or consolidation with respect to all or
substantially all of its business or assets; or (c) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); PROVIDED, HOWEVER,
that Subsidiaries which are not Significant Subsidiaries may enter into the
transactions described in clause (b) or clause (c) above if all of the following
conditions have been met: (1) in the case of a transaction described in clause
(b) above, the surviving entity shall continue to be a Borrower or a Subsidiary
of a Borrower; and (2) in the case of transactions described in clauses (b) and
(c) above, (A) all of the assets of the entity being merged into or consolidated
with a Borrower or a Subsidiary of a Borrower or being liquidated or dissolved
shall be transferred to one or more Borrowers or their Subsidiaries; (B) no
Default or Event of Default shall have occurred and then be continuing or would
result from such transaction (determined on a pro forma basis after giving
effect to such transaction); and (C) such transaction could not reasonably be
expected to result in a Material Adverse Effect.
3.7 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK. No Borrower shall, nor
shall any Borrower permit any of its Subsidiaries directly or indirectly to:
convey, sell, lease, sublease, transfer or otherwise dispose of, or grant any
Person an option to acquire, in one transaction or a series of transactions, any
of its property, business or assets, or the capital stock of or other equity
interests in any of its Subsidiaries, whether now owned or hereafter acquired,
except for (a) bona fide sales of inventory to customers for fair value in the
ordinary course of business and dispositions of obsolete equipment not used or
useful in the business and (b) Asset Dispositions if all of the following
conditions are met: (i) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not exceed
$350,000; (ii) the consideration received is
<PAGE>
Page 35
pursuant to an arm's length transaction with an unaffiliated third party;
(iii) after giving effect to the sale or other disposition of the assets
included within the Asset Disposition, Borrowers are in compliance on a pro
forma basis with the covenants set forth in Section 4 recomputed for the most
recently ended month for which information is available and is in compliance
with all other terms and conditions contained in this Agreement; and (iv) no
Default or Event of Default then exists or shall result from such sale or other
disposition.
3.8 TRANSACTIONS WITH AFFILIATES. No Borrower shall, nor shall any
Borrower permit any of its Subsidiaries directly or indirectly to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate or with any
director, officer or employee of any Loan Party, except (a) as set forth on
Schedule 3.8, or (b) transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrowers or any of their
Subsidiaries and upon terms which are fully disclosed to Agent and are no less
favorable to Borrowers or such Subsidiary than would be obtained in a comparable
arm's length transaction with a Person that is not an Affiliate.
3.9 MANAGEMENT FEES AND COMPENSATION. Except as permitted by
subsection 3.8, no Borrower shall, nor shall any Borrower permit any of its
Subsidiaries directly or indirectly to, pay any management, consulting or
similar fees to any Affiliate or to any director, officer or employee of any
Loan Party.
3.10 CONDUCT OF BUSINESS. No Borrower shall, nor shall any Borrower
permit any of its Subsidiaries directly or indirectly to, engage in any business
other than businesses of the type described on Schedule 3.10.
3.11 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS. No Borrower
shall, nor shall any Borrower permit any of its Subsidiaries directly or
indirectly to, change or amend the terms of any Subordinated Indebtedness if the
effect of such amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of principal or interest
are due on such Indebted-
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ness; (c) change any event of default or add or change any covenant with respect
to such Indebtedness; (d) change the prepayment provisions of such Indebtedness;
(e) change the subordination provisions thereof (or the subordination terms of
any guaranty thereof); or (f) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to any Borrower, any of its Subsidiaries or Lenders. In the event that
any Subordinated Indebtedness of any Borrower contains provisions on changes or
amendments that are more restrictive than the foregoing, such provisions shall
supersede this paragraph.
3.12 FISCAL YEAR. No Borrower nor any Subsidiary of any Borrower
shall change its fiscal year, except that any Subsidiary may change its fiscal
year to the Fiscal Year.
3.13 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Other than as
disclosed in the Offering Memorandum dated June 21, 1996 relating to the Senior
Notes and unless otherwise required by law, rule or regulation, no Borrower
shall, nor shall any Borrower permit any of its Subsidiaries to, disclose the
name of Agent or any Lender in any formal press release or in any prospectus,
proxy statement or other materials filed with any governmental entity relating
to a public offering of the capital stock of any Loan Party. Nothing contained
herein is intended to limit the ability of McCown De Leeuw & Co. to provide
information concerning this transaction to investors in, and other interested
parties in funds managed by it.
3.14 SUBSIDIARIES. No Borrower shall, nor shall any Borrower permit
any of its Subsidiaries directly or indirectly to establish, create or acquire
any new Subsidiary, unless such Subsidiary becomes a Borrower under this
Agreement or guarantees the Obligations as contemplated by subsection 2.5.
3.15 CHANGES RELATING TO SENIOR NOTES AND INDENTURE. No Borrower
shall, nor shall any Borrower permit any of its Subsidiaries to prepay the
Senior Notes unless and until the Revolving Loans are paid in full and
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the Revolving Loan Commitment is terminated or, change or amend the terms of the
Senior Notes or the Indenture, if the effect of such amendment is to:
(a) increase the interest rate on such Indebtedness; (b) change the dates upon
which payments of principal or interest are due on such Indebtedness; (c) change
any event or default or add any covenant with respect to such Indebtedness in a
manner adverse to Borrower; (d) change the redemption or prepayment provisions
of such Indebtedness; (e) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to any Borrower; PROVIDED, HOWEVER, that NFC may prepay the Senior Notes
prior to the payment in full of the Revolving Loans and the termination of the
Revolving Loan Commitment, so long as no Default or Event of Default shall have
occurred and then be continuing or would result from the making of such
prepayment, as determined on a projected basis for the next four quarterly
periods.
SECTION 4
FINANCIAL COVENANTS/REPORTING
Each Borrower, jointly and severally, covenants and agrees that so
long as the Revolving Loan Commitment is in effect and until payment in full of
all Obligations and termination of all Lender Letters of Credit and Risk
Participation Agreements, unless Requisite Lenders shall otherwise give their
prior written consent, each Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and comply with, all covenants
in this Section 4 applicable to such Person.
4.1 FIXED CHARGE COVERAGE. Borrowers shall not permit Fixed Charge
Coverage (a) for each of the periods from the Closing Date through September 30,
1996, December 31, 1996, March 31, 1997 and June 30, 1997 to be less than 1.1 to
1 and (b) for the twelve (12) month period ending on the last day of any
calendar quarter thereafter to be less than 1.20 to 1.
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"Fixed Charge Coverage" will be calculated as illustrated on Exhibit
4.3(C).
4.2 TOTAL INDEBTEDNESS TO OPERATING CASH FLOW RATIO. Borrowers shall
not permit (a) the ratio of Total Indebtedness for the period from the Closing
Date through September 30, 1996 to the sum of (i) annualized Operating Cash Flow
for such period (calculated by multiplying Operating Cash Flow for such period
by a factor of 4) PLUS (ii) the Severance Cost to be greater than 7.25 to 1, (b)
the ratio of Total Indebtedness for the period from the Closing Date through
December 31, 1996 to the sum of (i) annualized Operating Cash Flow for such
period (calculated by multiplying Operating Cash Flow for such period by a
factor of 2) PLUS (ii) the Severance Cost to be greater than 7.25 to 1, (c) the
ratio of Total Indebtedness for the period from the Closing Date through March
31, 1997 to the sum of (i) annualized Operating Cash Flow for such period
(calculated by multiplying Operating Cash Flow for such period by a factor of
4/3) PLUS (ii) the Severance Cost to be greater than 7.0 to 1, (d) the ratio of
Total Indebtedness from the Closing Date through June 30, 1997 to the sum of (i)
Operating Cash Flow for such period PLUS (ii) the Severance Cost to be greater
than 7.0 to 1, and (e) the ratio of Total Indebtedness from September 30, 1996
through September 30, 1997 to Operating Cash Flow for such period to be greater
than 6.75 to 1, (f) the ratio of Total Indebtedness from December 31, 1996
through December 31, 1997 to Operating Cash Flow for such period to be greater
than 6.5 to 1, and (g) thereafter, the ratio of Total Indebtedness calculated as
of the last day of any calendar quarter to Operating Cash Flow for the twelve
(12) month period ending on such day to be greater than 6.0 to 1.
"Total Indebtedness" and "Operating Cash Flow" will be calculated as
illustrated on Exhibit 4.3(C).
4.3 FINANCIAL STATEMENTS AND OTHER REPORTS. Each Borrower will
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly and quarterly financial statements are not required to
have footnote disclosures). Borrowers will
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deliver each of the financial statements and other reports described below to
each Lender.
(A) INTERIM FINANCIALS. As soon as available and in any event within
thirty (30) days after the end of each month (including, without limitation, the
last month of each fiscal year), Borrowers will deliver, or cause Borrowers'
Representative to deliver (1) the consolidated and consolidating (with respect
to Label Art and any other Significant Subsidiaries) balance sheets of Borrowers
and their Subsidiaries, as at the end of such month, and the related
consolidated and consolidating (with respect to Label Art and any other
Significant Subsidiaries) statements of income, stockholders' equity and cash
flow for such month and for the period from the beginning of the then current
fiscal year of Borrower to the end of such month and (2) a schedule of the
outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan.
(B) YEAR-END FINANCIALS. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Borrower, Borrowers
will deliver, or cause Borrowers' Representative to deliver (1) the consolidated
and consolidating (with respect to Label Art and any other Significant
Subsidiaries) balance sheets of Borrowers and their Subsidiaries, as at the end
of such year, and the related consolidated and consolidating (with respect to
Label Art and any other Significant Subsidiaries) statements of income,
stockholders' equity and cash flow for such Fiscal Year, (2) a schedule of the
outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan and (3) a report with respect to the financial
statements referred to in clause (1) from a firm or firms of Certified Public
Accountants selected by Borrowers, and reasonably acceptable to Agent, which
report shall be prepared in accordance with Statement of Auditing Standards No.
58 (the "Statement") entitled "Reports on Audited Financial
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Statements" and such report shall be "Unqualified" (as such term is defined in
such Statement).
(C) BORROWER COMPLIANCE CERTIFICATE. Together with each delivery of
financial statements of Borrowers and their Subsidiaries pursuant to subsections
4.3(A) and 4.3(B) above, Borrowers' Representative will deliver a fully and
properly completed Compliance Certificate (in substantially the same form as
Exhibit 4.3(C)) signed by the chief executive officer or chief financial officer
of Borrowers' Representative.
(D) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, Borrowers
will deliver copies of all significant reports submitted by Borrowers' firm of
certified public accountants in connection with each annual, interim or special
audit or review of any type of the financial statements or related internal
control systems of Borrowers made by such accountants, including any comment
letter submitted by such accountants to management in connection with their
services.
(E) BORROWING BASE CERTIFICATE AND AGINGS; SCHEDULE OF INVENTORY.
Within fifteen (15) days after the end of each fiscal month, and from time to
time upon the request of Agent, Borrowers will deliver to, or cause Borrowers'
Representative to deliver: (1) a Borrowing Base Certificate as at the last day
of such period; (2) a summary aging of all then existing Accounts and a summary
aging of all then existing accounts payable; and (3) a detailed schedule of all
Inventory, each such report in form and substance satisfactory to Agent.
(F) MANAGEMENT REPORT. Together with each delivery of financial
statements of Borrowers and their Subsidiaries pursuant to subsections 4.3(A)
and 4.3(B), Borrowers will deliver, or cause Borrowers' Representative to
deliver, a management report (1) describing the operations and financial
condition of Borrowers and their Subsidiaries for the month then ended and the
portion of the current Fiscal Year then elapsed (or for the Fiscal Year then
ended in the case of year-end financials), (2) setting forth in comparative form
the corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the most
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recent Projections for the current Fiscal Year delivered pursuant to subsection
4.3(I) and (3) discussing the reasons for any significant variations. The
information above shall be presented in reasonable detail and shall be certified
by the chief financial officer of Borrowers' Representative to the effect that
such information fairly presents the results of operations and financial
condition of Borrowers and their Subsidiaries as at the dates and for the
periods indicated.
(G) COLLATERAL VALUE REPORT. At the expense of Borrowers and not
more than once each year prior to an Event of Default and at any time upon
Agent's reasonable request while and so long as an Event of Default shall have
occurred and be continuing, Borrowers will obtain and deliver to Agent a report
of an independent collateral auditor satisfactory to Agent (which may be, or be
affiliated with, a Lender) with respect to the Accounts and Inventory components
included in the Borrowing Base, which report shall indicate whether or not the
information set forth in the Borrowing Base Certificate most recently delivered
is accurate and complete in all material respects based upon a review by such
auditors of the Accounts (including verification with respect to the amount,
aging, identity and credit of the respective account debtors and the billing
practices of each Borrower) and Inventory (including verification as to the
value, location and respective types).
(H) APPRAISALS. From time to time after the occurrence and during
the continuance of a Default or Event of Default, Agent may require Borrower to
obtain and deliver to Agent appraisal reports in form and substance and from
appraisers satisfactory to Agent stating the then current market values of all
or any portion of the Collateral owned by Borrowers or any of their
Subsidiaries.
(I) PROJECTIONS. As soon as available and in any event no later than
the last day of each of Borrowers' Fiscal Years, Borrowers will deliver, or
cause Borrowers' Representative to deliver, Projections of Borrowers and their
Subsidiaries for the forthcoming three Fiscal Years, year by year, and for the
forthcoming fiscal year, month by month.
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(J) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming
available, Borrowers will deliver, or cause Borrowers' Representative to
deliver, copies of (1) all financial statements, reports, notices and proxy
statements sent or made available by Borrowers or any of their respective
Subsidiaries to their security holders, (2) all regular and periodic reports and
all registration statements and prospectuses, if any, filed by Borrowers or any
of their respective Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private regulatory
authority, and (3) all press releases and other statements made available by
Borrowers or any of their respective Subsidiaries to the public concerning
developments in the business of any such Person.
(K) EVENTS OF DEFAULT, ETC. Promptly upon any officer of any
Borrowers obtaining knowledge of any of the following events or conditions,
Borrowers shall deliver, or cause Borrowers' Representative to deliver, copies
of all notices given or received by Borrowers with respect to any such event or
condition and a certificate of Borrowers' Representative chief executive officer
or chief financial officer specifying the nature and period of existence of such
event or condition and what action Borrowers have taken, is taking and proposes
to take with respect thereto: (1) any condition or event that constitutes an
Event of Default or Default; (2) any notice that any Person has given to
Borrowers or any of their Subsidiaries or any other action taken with respect to
a claimed default or event or condition of the type referred to in subsection
6.1(B); or (3) any event or condition that could reasonably be expected to
result in any Material Adverse Effect.
(L) OTHER NOTICES. Each Borrower (1) shall promptly deliver, or
cause Borrowers' Representative to deliver, copies of all notices given or
received by such Borrower with respect to the Preferred Stock or noncompliance
with any term or condition related to the Preferred Stock or the indebtedness
evidenced by the Senior Notes or any Subordinated Indebtedness, and (2) shall
notify Agent within three (3) Business Days of any potential or actual event of
default with respect to the Preferred Stock or the indebtedness evidenced by the
Senior Notes or any Subordinated Indebtedness.
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(M) LITIGATION. Promptly upon any officer of any Borrower obtaining
knowledge of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Loan Party or any property
of any Loan Party not previously disclosed by Borrowers to Agent or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting any Loan Party or any
property of any Loan Party which, in each case, could reasonably be expected to
have a Material Adverse Effect, Borrowers will promptly give notice, or cause
Borrowers' Representative to promptly give notice, thereof to Agent and provide
such other information as may be reasonably available to them to enable Agent
and their counsel to evaluate such matter.
(N) SUPPLEMENTED SCHEDULES; NOTICE OF CORPORATE CHANGES. Annually,
concurrently with Borrowers' delivery of the Projections required by subsection
4.3(I), Borrowers shall supplement in writing and deliver revisions of the
Schedules annexed to this Agreement to the extent necessary to disclose new or
changed facts or circumstances after the Closing Date; provided that subsequent
disclosures shall not constitute a cure or waiver of any Default or Event of
Default resulting from the matters disclosed. Borrowers shall provide prompt
written notice, or cause Borrowers' Representative to provide prompt written
notice, of (1) all jurisdictions in which a Loan Party becomes qualified after
the Closing Date to transact business, (2) any material change after the Closing
Date in the authorized and issued capital stock or other equity interests of any
Loan Party or any of their respective Subsidiaries or any other material
amendment to their charter, by-laws or other organization documents and (3) any
Subsidiary created or acquired by any Loan Party after the Closing Date, such
notice, in each case, to identify the applicable jurisdictions, capital
structures or Subsidiaries, as applicable.
(O) OTHER INFORMATION. With reasonable promptness, Borrowers will
deliver, or cause Borrowers' Representative to deliver, such other information
and data with respect to any Loan Party or any Subsidiary of any Loan Party as
from time to time may be reasonably requested by Agent.
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4.4 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF
CALCULATIONS UNDER AGREEMENT. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 4.3 shall be prepared in
accordance with GAAP as in effect at the time of such preparation. No
"Accounting Changes" (as defined below) shall affect financial covenants,
standards or terms in this Agreement; provided that Borrowers shall prepare
footnotes to each Compliance Certificate and the financial statements required
to be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "Accounting Changes" means: (a) changes in accounting principles
required by GAAP and implemented by Borrowers; (b) changes in accounting
principles recommended by Borrowers' certified public accountants and
implemented by Borrowers; and (c) changes in carrying value of Borrowers' or any
of their Subsidiaries' assets, liabilities or equity accounts resulting from (i)
the application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF
88-16 and FASB 109) to the Related Transactions or (ii) as the result of any
other adjustments that, in each case, were applicable to, but not included in,
the Pro Forma. All such adjustments resulting from expenditures made subsequent
to the Closing Date (including, but not limited to, capitalization of costs and
expenses or payment of pre-Closing Date liabilities) shall be treated as
expenses in the period the expenditures are made; PROVIDED, HOWEVER, that such
expenses shall exceed $250,000 in the aggregate before any such adjustments
shall be recorded as expenses in the period the expenditures are made.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce Agent and Lenders to enter into this Agreement, to
make Revolving Loans and to issue Lender Letters of Credit and Risk
Participation Agreements, Borrowers, jointly and severally, represent and
warrant to
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Agent and each Lender that the following statements are and, after giving effect
to the Related Transactions, will be true, correct and complete:
5.1 DISCLOSURE. No representation or warranty of any Company or any
Loan Party contained in this Agreement, the financial statements referred to in
subsection 5.5, the Offering Memorandum used in connection with the offering of
the Senior Notes, the other Related Transactions Documents or any other
document, certificate or written statement furnished to Agent or any Lender by
or on behalf of any such Person for use in connection with the Loan Documents or
the Related Transactions Documents when taken as a whole contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made (whether
with respect to periods of time before, during or after the consummation of the
Related Transactions).
5.2 NO MATERIAL ADVERSE EFFECT. Since December 31, 1995 there have
been no events or changes in facts or circumstances affecting the Companies or
any Loan Party which individually or in the aggregate have had or could
reasonably be expected to have a Material Adverse Effect and that have not been
disclosed herein or in the attached Schedules.
5.3 NO DEFAULT. The consummation of the Related Transactions does
not and will not violate, conflict with, result in a breach of, or constitute a
default (with due notice or lapse of time or both) under any contract of any
Company or any Loan Party except if such violations, conflicts, breaches or
defaults have either been waived on or before the Closing Date and are disclosed
on Schedule 5.3 or could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.
5.4 ORGANIZATION, POWERS, CAPITALIZATION AND GOOD STANDING.
(A) ORGANIZATION AND POWERS. Each of the Loan Parties is and,
immediately prior to the consummation of
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the Related Transactions, each Company was, a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation (which jurisdiction is set forth on Schedule 5.4(A)). Each of the
Loan Parties has and, immediately prior to the consummation of the Related
Transactions, each Company had, all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Related Transactions Document to
which it is a party and to carry out the Related Transactions.
(B) CAPITALIZATION. The authorized capital stock of each of the Loan
Parties is as set forth on Schedule 5.4(B). All issued and outstanding shares
of capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens other than Liens
on the capital stock of Borrowers' Subsidiaries in favor of the Wilmington Trust
Company, as Trustee under the Indenture, for the benefit of the holders of the
Senior Notes, and such shares were issued in compliance with all applicable
state and federal laws concerning the issuance of securities. The capital stock
of each of the Loan Parties is owned by the stockholders and in the amounts set
forth on Schedule 5.4(B). No shares of the capital stock of any Loan Party,
other than those described above, are issued and outstanding. There are no
preemptive or other outstanding rights, options, warrants, conversion rights or
similar agreements or understandings for the purchase or acquisition from any
Loan Party (other than DEC) of any shares of capital stock or other securities
of any such entity. As of the Closing Date with respect to DEC, except as set
forth on Schedule 5.4(B), there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from DEC of any shares of capital stock or other
securities of DEC.
(C) BINDING OBLIGATION. This Agreement is, and the other Related
Transactions Documents when executed and delivered will be, the legally valid
and binding obligations of the applicable Loan Parties party thereto, each
enforceable against each of such parties, as applicable, in accordance with
their respective terms.
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(D) QUALIFICATION. Each of the Loan Parties is and, immediately
prior to the consummation of the Related Transactions, each Company was, duly
qualified and in good standing wherever necessary to carry on its business and
operations, except in jurisdictions in which the failure to be qualified and in
good standing could not reasonably be expected to have a Material Adverse
Effect. All jurisdictions in which each Loan Party is qualified to do business
are set forth on Schedule 5.4(D).
5.5 FINANCIAL STATEMENTS. Other than as set forth in Schedule 5.5
hereto, all financial statements concerning each Company, Borrowers and their
Subsidiaries which have been or will hereafter be furnished to Agent and the
Lenders pursuant to this Agreement, including those listed below, have been or
will be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do or will present fairly the financial condition, in all
material respects, of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended.
(A) For NFC:
(1) audited balance sheet as at December 31, 1995 and the related
statements of income, stockholder's equity and cash flow for the year then
ended, certified by Arthur Andersen LLP.
(2) unaudited balance sheet as at March 31, 1996 and the related
statements of income, stockholder's equity and cash flow for the three-
month period then ended.
(B) For the Companies:
(1) audited balance sheet as at December 31, 1995 and the related
statements of income, stockholders' equity and cash flow for the year then
ended, certified by KPMG Peat Marwick LLP.
(2) unaudited balance sheet as at March 31, 1996 and the related
statements of income, stockholders' equity and cash flow for the three-
month period then ended.
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5.6 INTELLECTUAL PROPERTY. Each Borrower and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use, and
immediately prior to the consummation of the Related Transactions, each of the
Companies owned, was licensed to use or otherwise had the right to use, all
patents, trademarks, trade names, copyrights, technology, know-how and processes
used in or necessary for the conduct of its business as currently conducted that
are material to the condition (financial or other), business or operations of
such Borrower or its Subsidiaries (collectively called "Intellectual Property")
and all such Intellectual Property is fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions for such
registrations, filings or issuances. Except as disclosed in Schedule 5.6, the
use of such Intellectual Property by each Borrower and its Subsidiaries and,
immediately prior to the consummation of the Related Transactions, each Company,
did not, does not and has not been alleged by any Person to infringe on the
rights of any Person.
5.7 INVESTIGATIONS, AUDITS, ETC. Except as set forth on Schedule
5.7, none of Borrowers or any of their respective Subsidiaries, is, and
immediately prior to the consummation of the Related Transactions, none of the
Companies was, the subject of any review or audit by the Internal Revenue
Service or any governmental investigation concerning the violation or possible
violation of any law.
5.8 EMPLOYEE MATTERS. Except as set forth on Schedule 5.8, (a) no
Loan Party nor any of their respective employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Borrowers after due inquiry, threatened between any Loan Party and its
respective employees, other than employee grievances arising in the ordinary
course of business which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set
forth on Schedule 5.8, none of
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Borrowers or any of their respective Subsidiaries is party to an employment
contract.
5.9 SOLVENCY. Each Borrower: (a) owns and will own assets the fair
saleable value of which are (i) greater than the total amount of liabilities
(including contingent liabilities) of such Borrower and (ii) greater than the
amount that will be required to pay the probable liabilities of such Borrower's
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to such
Borrowers; (b) has capital that is not unreasonably small in relation to its
business as presently conducted or after giving effect to any contemplated
transaction; and (c) does not intend to incur and does not believe that it will
incur debts beyond its ability to pay such debts as they become due.
5.10 ERISA. Except as disclosed in Schedule 5.10, as of the Closing
Date, none of Borrowers or any of their respective ERISA Affiliates has any
obligation to contribute to any employee benefit plan which is a pension plan
subject to the provisions of Title IV of ERISA or Section 412 of the IRC. For
purposes of this representation, "ERISA Affiliate" is defined as any person who,
together with any Borrower, is under common control within the meaning of
Section 414(b), (c), (m) or (o) of the IRC.
SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 EVENT OF DEFAULT. "Event of Default" shall mean the occurrence
or existence of any one or more of the following:
(A) PAYMENT. Failure to pay any Revolving Loan when due, or to repay
Revolving Loans to reduce their balance to the Maximum Revolving Loan
Balance or to reimburse Agent for any payment made by Agent under or in
respect of any Lender Letters of Credit or Risk Participation Agreements
when due or failure to pay, within five (5) days after the due date, any
interest
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on any Revolving Loan or any other amount due under this Agreement or any
of the other Loan Documents; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of any Borrower or any
of its Subsidiaries to pay when due or within any applicable grace period
any principal or interest on Indebtedness (other than the Revolving Loans)
or any Contingent Obligations having an individual principal amount in
excess of $3,000,000 or having an aggregate principal amount in excess of
$5,000,000 or (2) breach or default of any Borrower or any of its
Subsidiaries with respect to any Indebtedness (other than the Revolving
Loans) or any Contingent Obligations, if the effect of such breach or
default is to cause or to permit the holder or holders then to cause,
Indebtedness and/or Contingent Obligations having an individual principal
amount in excess of $3,000,000 or having an aggregate principal amount in
excess of $5,000,000 to become or be declared due prior to their stated
maturity; or
(C) BREACH OF CERTAIN PROVISIONS. Failure of any Borrower to perform
or comply with any term or condition contained in that portion of
subsection 2.2 relating to any Borrower's obligation to maintain insurance,
subsection 2.3, Section 3 (other than subsection 3.13), subsection 4.1 or
subsection 4.2; or
(D) BREACH OF WARRANTY. Any representation, warranty, certification
or other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false in any material
respect on the date made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Borrower or any other
Loan Party defaults in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is
not remedied or waived within fifteen (15) days (five (5) days in the case
of a failure to perform or comply with the terms of subsections 4.3(A),
(B), (C), (E), (I) or (K)) after receipt by such Borrower of notice from
Agent or Requisite Lenders of such default (other than occurrences
described in
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other provisions of this subsection 6.1 for which a different grace or cure
period is specified or which constitute immediate Events of Default); or
(F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) A
court enters a decree or order for relief with respect to any Borrower or
any of its Subsidiaries in an involuntary case under the Bankruptcy Code,
which decree or order is not stayed or other similar relief is not granted
under any applicable federal or state law; or (2) the continuance of any of
the following events for forty-five (45) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against any Borrower or
any of its Subsidiaries, under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect; or (b) a decree or order of a
court for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over any Borrower or any
of its Subsidiaries, or over all or a substantial part of its property, is
entered; or (c) an interim receiver, trustee or other custodian is
appointed without the consent of any Borrower or any of its Subsidiaries,
for all or a substantial part of the property of Holdings, Borrower or any
such Subsidiary; PROVIDED, HOWEVER, that the occurrence of any of the
events described in this subsection 6.1(F) with respect to any Subsidiaries
which are not Significant Subsidiaries shall not constitute an Event of
Default if the occurrence of such event could not reasonably be expected to
have a Material Adverse Effect; or
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) An order
for relief is entered with respect to any Borrower or any of its
Subsidiaries or any Borrower or any of its Subsidiaries commences a
voluntary case under the Bankruptcy Code, or consents to the entry of an
order for relief in an involuntary case or to the conversion of an
involuntary case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or (2) any
Borrower or any of its Subsidiaries makes any assignment for
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the benefit of creditors; or (3) the Board of Directors of any Borrower or
any of its Subsidiaries adopts any resolution or otherwise authorizes
action to approve any of the actions referred to in this subsection 6.1(G);
PROVIDED, HOWEVER, that the occurrence of any of the events described in
this subsection 6.1(G) with respect to any Subsidiaries which are not
Significant Subsidiaries shall not constitute an Event of Default if the
occurrence of such event could not reasonably be expected to have a
Material Adverse Effect; or
(H) GOVERNMENTAL LIENS. Any lien, levy or assessment is filed or
recorded with respect to or otherwise imposed upon all or any part of the
Collateral or the assets (with an aggregate fair market value in excess of
$250,000) of any Borrower or any of its Subsidiaries by the United States
or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted
Encumbrances); or
(I) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process (other than those described in subsection
6.1(H)) involving (1) an amount in any individual case in excess of
$500,000 or (2) an amount in the aggregate at any time in excess of
$1,000,000 (in either case not adequately covered by insurance as to which
the insurance company has acknowledged coverage) is entered or filed
against any Borrower or any of its Subsidiaries or any of their respective
assets and remains undischarged, unvacated, unbonded or unstayed for a
period of thirty (30) days or in any event later than five (5) Business
Days prior to the date of any proposed sale thereunder; or
(J) DISSOLUTION. Except to the extent permitted under subsection
3.6, any order, judgment or decree is entered against any Borrower or any
of its Subsidiaries decreeing the dissolution or split up of that Borrower
or that Subsidiary and such order remains undischarged or unstayed for a
period in excess of fifteen (15) days; or
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(K) SOLVENCY. Except to the extent permitted under subsection 3.6,
any Borrower ceases to be solvent (as represented by such Borrower in
subsection 5.9) or admits in writing its present or prospective inability
to pay its debts as they become due; or
(L) INJUNCTION. Any Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material
part of its business and such order continues for more than fifteen (15)
days; or
(M) ERISA; PENSION PLANS. (1) Any Borrower or any of its ERISA
Affiliates fails to make full payment when due of all amounts which, under the
provisions of any employee benefit plans or any applicable provisions of the
IRC, any such Person is required to pay as contributions thereto and such
failure could reasonably be expected to have a Material Adverse Effect; or (2)
an accumulated funding deficiency as defined in IRC Section 412(a) occurs or
exists for more than thirty (30) days after any Borrower has knowledge thereof,
whether or not waived, with respect to any such employee benefit plans; or (3)
any employee benefit plan loses its status as a qualified plan under the IRC and
such loss could reasonably be expected to have a Material Adverse Effect; or (4)
any liability arises in connection with any employee benefit plan which could
reasonably be expected to have a Material Adverse Effect, or (5) any contingent
liability arises in connection with any employee benefit plan which if
triggered, could reasonably be expected to have a Material Adverse Effect; or
(N) ENVIRONMENTAL MATTERS. Any Borrower or any of its Subsidiaries
fails to: obtain or maintain any operating licenses or permits required by
environmental authorities; begin, continue or complete any remediation
activities as required by any environmental authorities; store or dispose of any
hazardous materials in accordance with applicable environmental laws and
regulations; or comply with any other environmental laws; if such failure could
reasonably be expected to have a Material Adverse Effect; or
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(O) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(P) DAMAGE; STRIKE; CASUALTY. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of any Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect; or
(Q) LICENSES AND PERMITS. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by any
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or
(R) FAILURE OF SECURITY. Agent, for the benefit of Agent and
Lenders, does not have or ceases to have a valid and perfected first priority
security interest in the Collateral (subject to Permitted Encumbrances) or any
substantial portion thereof, in each case, for any reason other than the failure
of Agent to take any action within its control; or
(S) CHANGE IN CONTROL. Either (1) prior to a DEC IPO, McCown De
Leeuw & Co. II, L.P., McCown De Leeuw Associates, L.P. and MDC/JAFCO Ventures,
L.P. (collectively, the "MDC Funds") cease to own (or have the exclusive power
to vote with respect to), directly or indirectly, Voting Securities representing
a majority (more than 50%) of the aggregate Voting Power of the outstanding
Voting Securities of DEC, (2) prior to a DEC IPO, the MDC Funds cease to own
Equity Interests of DEC representing at least 40% of the aggregate economic
interest of all outstanding Equity Interests of DEC, (3) after a DEC IPO, the
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MDC Funds cease to own (or have the exclusive power to vote with respect to),
directly or indirectly, Voting Securities representing at least 30% of the
aggregate Voting Power of the outstanding Voting Securities of DEC, (4) after a
DEC IPO, the MDC Funds cease to own Equity Interests of DEC representing at
least 30% of the aggregate economic interest of all outstanding Equity Interests
of DEC, (5) DEC ceases to own (or have the exclusive power to vote with respect
to), directly or indirectly, 100% of the Capital Stock of NFC or (6) the
majority of the board of directors of NFC are not MDC Directors. For the
purposes of this paragraph (S), the term "MDC Director" shall mean any person
who becomes a member of the board of directors subsequent to the Closing Date
and whose nomination for election or election to the board of directors was
recommended and approved by the MDC Funds.
6.2 SUSPENSION OF COMMITMENTS. Upon the occurrence of any Default or
Event of Default, Agent and each Lender without notice or demand, may
immediately cease making additional Loans and issuing Lender Letters of Credit
and Risk Participation Agreements and cause its obligation to lend its Pro Rata
Share of the Revolving Loan Commitment to be suspended; provided that, in the
case of a Default, if the subject condition or event is waived, cured or removed
by Requisite Lenders within any applicable grace or cure period, any suspended
portion of the Revolving Loan Commitment shall be reinstated. Each Lender may
alternatively suspend only a portion of their obligations to lend its Pro Rata
Share of the Revolving Loan Commitment.
6.3 ACCELERATION. Upon the occurrence of any Event of Default
described in the foregoing subsections 6.1(F) or 6.1(G), the unpaid principal
amount of and accrued interest and fees on the Revolving Loans, payments under
the Lender Letters of Credit and Risk Participation Agreements and all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other requirements of any kind, all of which are hereby
expressly waived by each Borrower, and the obligations of Agent and Lenders to
make Revolving Loans and issue Lender Letters of Credit and Risk Participation
Agreements shall thereupon terminate. Upon the occurrence and during the
continuance of any other Event of Default,
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Agent may, and upon written demand by Requisite Lenders shall, by written notice
to Borrowers' Representative (a) declare all or any portion of the Revolving
Loans and all or some of the other Obligations to be, and the same shall
forthwith become, immediately due and payable together with accrued interest
thereon, and the obligations of Agent and Lenders to make Revolving Loans and
issue Lender Letters of Credit and Risk Participation Agreements shall thereupon
terminate and (b) demand that Borrowers immediately deposit with Agent, an
amount equal to the aggregate outstanding Risk Participation Liability to enable
Agent to make payments under the Lender Letters of Credit and Risk Participation
Agreements when required and such amount shall become immediately due and
payable.
6.4 PERFORMANCE BY AGENT. If any Borrower shall fail to perform any
covenant, duty or agreement contained in any of the Loan Documents, Agent may
perform or attempt to perform such covenant, duty or agreement on behalf of such
Borrower after the expiration of any cure or grace periods set forth herein. In
such event, such Borrower shall, at the request of Agent, promptly pay any
amount reasonably expended by Agent in such performance or attempted performance
to Agent, together with interest thereon at the highest rate of interest in
effect upon the occurrence of an Event of Default as specified in subsection
1.2(E) from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that Agent shall not have any liability or
responsibility for the performance of any obligation of any Borrower under this
Agreement or any other Loan Document.
SECTION 7
CONDITIONS TO REVOLVING LOANS
The obligations of Lenders to make Revolving Loans and of Agent to
issue Lender Letters of Credit and Risk Participation Agreements are subject to
satisfaction of all of the applicable conditions set forth below.
7.1 CONDITIONS TO INITIAL REVOLVING LOANS. The obligations of
Lenders to make the initial Loans and of Agent to issue any Lender Letters of
Credit and Risk
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Participation Agreements on the Closing Date are, in addition to the conditions
precedent specified in subsection 7.2, subject to the delivery of all documents
listed on Schedule 7.1, all in form and substance reasonably satisfactory to
Agent.
7.2 CONDITIONS TO ALL REVOLVING LOANS. The obligations of Lenders to
make Revolving Loans and of Agent to issue Lender Letters of Credit and Risk
Participation Agreements on any date ("Funding Date") are subject to the further
conditions precedent set forth below.
(A) Agent, shall have received, in accordance with the provisions of
subsection 1.1, a notice requesting an advance of a Revolving Loan or the
issuance of a Lender Letter of Credit or Risk Participation Agreement.
(B) The representations and warranties contained in Section 5 of this
Agreement and elsewhere herein and in the Loan Documents shall be (and each
request by any Borrower for a Revolving Loan or a Lender Letter of Credit or
Risk Participation Agreement shall constitute a representation and warranty by
such Borrower that such representations and warranties are) true, correct and
complete in all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Schedules or Exhibits as a result of any disclosures made in
writing by any Borrower to Agent after the Closing Date and approved by Agent in
writing.
(C) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated (or notice requesting
issuance of a Lender Letter of Credit or Risk Participation Agreement) that
would constitute an Event of Default or a Default.
(D) No order, judgment or decree of any court, arbitrator or
governmental authority shall enjoin or restrain any Lender from making any
Revolving Loan or Agent from issuing any Lender Letter of Credit or Risk
Participation Agreement.
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SECTION 8
ASSIGNMENT AND PARTICIPATION
8.1 ASSIGNMENTS AND PARTICIPATIONS IN REVOLVING LOANS AND REVOLVING
NOTES. Each Lender (including Heller) may assign, subject to the terms of a
Lender Addition Agreement, its rights and delegate its obligations under this
Agreement to another Person, provided that (a) such Lender (excluding Heller)
shall first obtain the written consent of Agent, which consent shall not be
unreasonably withheld; (b) if to an entity that is not a Lender immediately
prior to such transfer, the amount of the Revolving Loan Commitment being
assigned shall in no event be less than the lesser of (i) $3,000,000 and (ii)
the entire amount of the Revolving Loan Commitment; (c) upon the consummation of
each such assignment the assigning or assignee Lender (excluding Heller) shall
pay Agent an administrative fee of $5,000; and (d) each such Person, and each
subsequent assignee, represents that such assignment will not result in a
non-exempt prohibited transaction under the IRC and/or ERISA. The
administrative fee referred to in clause (c) of the preceding sentence shall not
apply to an assignment from a Lender to an affiliate of such Lender. In the
case of an assignment authorized under this subsection 8.1, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were an initial Lender hereunder. The assigning
Lender shall be relieved of its obligations hereunder with respect to its Pro
Rata Share of the Revolving Loan Commitment or assigned portion thereof.
Borrowers hereby acknowledge and agree that any assignment will give rise to a
direct obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender".
Each Lender (including Heller) may sell participations in all or any
part of its Pro Rata Share of the Revolving Loan Commitment to another Person,
provided that (a) such Lender (excluding Heller) shall first obtain the prior
written consent of Agent, which consent shall not be unreasonably withheld; and
(b) any such participation shall be in a minimum amount of $3,000,000, and
PROVIDED FURTHER, that all amounts payable by Borrowers hereunder shall be
determined as if that Lender had not sold such participation and the holder of
any such participation shall not be
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entitled to require such Lender to take or omit to take any action hereunder
except action directly effecting (i) any reduction in the principal amount,
interest rate or fees payable with respect to any Revolving Loan in which such
holder participates; (ii) any extension of the Expiry Date or any change of any
date fixed for any payment of interest or fees payable with respect to any
Revolving Loan in which such holder participates; (iii) any change of the
aggregate unpaid principal amount of the Revolving Loans; (iv) any change of the
percentage of Lenders which shall be required for Lenders or any of them to take
any action hereunder; (v) any release of Collateral (except if the sale or
disposition of such Collateral is permitted under subsection 8.2 or any other
Loan Document); (vi) any amendment or waiver of this subsection 8.1 or the
definitions of the terms used in this subsection 8.1 insofar as the definitions
affect the substance of this subsection 8.1; (vii) any consent to the
assignment, delegation or other transfer by any Loan Party of any of its rights
and obligations under any Loan Document; (viii) any change in the form in which
interest is required to be paid; and (ix) any change of any advance rate set
forth in the Borrowing Base Certificate. Borrowers hereby acknowledge and agree
that any participation will give rise to a direct obligation of Borrowers to the
participant, and the participant shall for purposes of subsections 1.7, 1.8, 8.4
and 9.1 be considered to be a "Lender".
Except as otherwise provided in this subsection 8.1 no Lender shall,
as between Borrowers and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of a participation in, all or any part of the Revolving Loans, the
Revolving Notes or other Obligations owed to such Lender. Each Lender may
furnish any information concerning Borrowers and their Subsidiaries in the
possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants), subject to the provisions of
subsection 9.13.
Each Borrower agrees that it will use its best efforts to assist and
cooperate with Agent and any Lender in any manner reasonably requested by Agent
or such Lender to effect the sale of a participation or an assignment
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described above, including without limitation assistance in the preparation of
appropriate disclosure documents or placement memoranda.
Agent shall provide Borrowers' Representative with written notice of
the name and address of any new Lender after the date hereof.
Notwithstanding anything contained in this Agreement to the contrary,
so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no
Person shall become a "Lender" hereunder unless such Person shall also be
capable of making LIBOR Loans.
8.2 AGENT.
(A) APPOINTMENT. Each Lender hereby designates and appoints Heller
as its Agent under this Agreement and the other Loan Documents, and each Lender
hereby irrevocably authorizes Agent to take such action or to refrain from
taking such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
Agent is authorized and empowered to amend, modify, or waive any provisions of
this Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsections 8.3 and 9.2. Agent agrees to act as such on the express
conditions contained in this subsection 8.2. The provisions of this subsection
8.2 are solely for the benefit of Agent and Lenders and neither any Borrower nor
any Loan Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Borrower or any other Loan Party. Agent may perform any of its
duties hereunder, or under the Loan Documents, by or through its agents or
employees.
(B) NATURE OF DUTIES. The duties of Agent shall be mechanical and
administrative in nature. Agent shall
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not have by reason of this Agreement a fiduciary relationship in respect of any
Lender. Nothing in this Agreement or any of the Loan Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrowers in
connection with the extension of credit hereunder and shall make its own
appraisal of the creditworthiness of Borrowers, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto (other than as
expressly required herein). If Agent seeks the consent or approval of any
Lenders to the taking or refraining from taking any action hereunder, then Agent
shall send notice thereof to each Lender. Agent shall promptly notify each
Lender any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
(C) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be liable with respect
to its own gross negligence or willful misconduct. Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith and
if any such apportionment or distribution is subsequently determined to have
been made in error the sole recourse of any Lender to whom payment was due but
not made, shall be to recover from other Lenders any payment in excess of the
amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them). In performing its functions and duties hereunder, Agent shall exercise
the same care which it would in dealing with loans for its own account, but
Agent shall not be responsible to any Lender for any recitals, statements,
representations or warranties herein or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, or sufficiency of this
Agreement or any of the Loan Documents or the transactions contemplated thereby,
or for the financial condition of any Loan Party.
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Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents or the financial condition of any Loan
Party, or the existence or possible existence of any Default or Event of
Default. Agent may at any time request instructions from Lenders with respect
to any actions or approvals which by the terms of this Agreement or of any of
the Loan Documents Agent is permitted or required to take or to grant, and if
such instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders or all of the Lenders, as
applicable. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting under this Agreement, the Revolving Notes, or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders.
(D) RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, telecopy or telegram) believed by
it in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or thereunder,
upon advice of counsel selected by it. Agent shall be entitled to rely upon the
advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.
(E) INDEMNIFICATION. Lenders will reimburse and indemnify Agent for
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses), advances or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in
any way relating to or arising out of this Agreement or any of
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the Loan Documents or any action taken or omitted by Agent under this Agreement
or any of the Loan Documents, in proportion to each Lender's Pro Rata Share;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, advances or disbursements resulting from Agent's gross
negligence or willful misconduct. If any indemnity furnished to Agent for any
purpose shall, in the opinion of Agent, be insufficient or become impaired,
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
obligations of Lenders under this subsection 8.2(E) shall survive the payment in
full of the Obligations and the termination of this Agreement.
(F) HELLER INDIVIDUALLY. With respect to its obligations under the
Revolving Loan Commitment, the Revolving Loans made by it, and the Revolving
Notes issued to it, Heller shall have and may exercise the same rights and
powers hereunder and are subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender. The terms "Lenders" or
"Requisite Lenders" or any similar terms shall, unless the context clearly
otherwise indicates, include Heller in its individual capacity as a Lender or
one of the Requisite Lenders. Heller may lend money to, and generally engage in
any kind of banking, trust or other business with any Loan Party as if it were
not acting as Agent pursuant hereto.
(G) SUCCESSOR AGENT.
(1) RESIGNATION. Agent may resign from the performance of all its
agency functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrowers' Representative and the
Lenders. Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to clause (2) below or as otherwise provided
below.
(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of resignation
which pursuant to clause (1) above requires appointment of a successor Agent,
Requisite Lenders shall, upon receipt of Borrowers' prior consent
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which shall not be unreasonably withheld, appoint a successor Agent. If a
successor Agent shall not have been so appointed within the thirty (30) Business
Day period, referred to in clause (1) above, the retiring Agent, upon notice to
Borrowers' Representative, shall then appoint a successor Agent who shall serve
as Agent until such time, if any, as Requisite Lenders, upon receipt of
Borrowers' prior written consent which shall not be unreasonably withheld,
appoint a successor Agent as provided above.
(3) SUCCESSOR AGENT. Upon the acceptance of any appointment as Agent
under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. Accordingly, all
references to Heller, as Agent, shall be deemed to be references to their
respective successors appointed as provided herein. After any retiring Agent's
resignation as Agent under the Loan Documents, the provisions of this subsection
8.2 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under the Loan Documents.
(H) COLLATERAL MATTERS.
(1) RELEASE OF COLLATERAL. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to or
held by Agent, upon any property covered by the Security Documents (i) upon
termination of the Revolving Loan Commitment and payment and satisfaction of all
Obligations (other than contingent indemnification Obligations not then due and
payable); (ii) constituting property being sold or disposed of if the applicable
Borrower certifies to Agent that the sale or disposition is made in compliance
with the provisions of this Agreement (and Agent may rely in good faith
conclusively on any such certificate, without further inquiry); (iii)
constituting property leased to any Borrower under a lease which has expired or
been terminated in a transaction permitted under this Agreement or is about to
expire and which has not been, and is not intended by such Borrower to be,
renewed or extended; or (iv) in accordance with the provisions of the succeeding
sentence.
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Agent may release or compromise any Collateral and the proceeds thereof having a
value not greater than ten percent (10%) of the total book value of all
Collateral, either in a single transaction or in a series of related
transactions, with the consent of Lenders owning an aggregate of at least eighty
percent (80%) of the Revolving Loan Commitment, provided that in no event will
Agent, acting under the authority granted pursuant to this sentence, release or
compromise Collateral or the proceeds thereof having a total book value in
excess of twenty percent (20%) of the book value of all Collateral, as
determined by Agent, during any calendar year.
(2) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES. Without in any
manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders (as set forth in subsection 8.2(H)(1)), each
Lender agrees to confirm in writing, upon request by as Agent or any Borrower,
the authority to release any property covered by the Security Documents
conferred upon Agent under clauses (i) through (iii) of subsection 8.2(H)(1).
Upon receipt by Agent of confirmation from the requisite percentage of Lenders
required by subsection 8.2(H)(1), if any, of its authority to release or
compromise any particular item or types of property covered by the Security
Documents, and upon at least ten (10) Business Days prior written request by any
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release or compromise
of the Liens granted to Agent, for the benefit of Agent and Lenders, upon such
Collateral, provided that (i) Agent shall not be required to execute any such
document on terms which, in Agent's opinion, would expose Agent to liability or
create any obligation or entail any consequence other than the release or
compromise of such Liens without recourse or warranty, and (ii) such release or
compromise shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of any Loan Party, in respect of), all
interests retained by any Loan Party, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
property covered by the Security Documents.
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(3) ABSENCE OF DUTY. Agent shall have no obligation whatsoever to
any Lender or any other Person to assure that the property covered by the
Security Documents exists or is owned by Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent, have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent, in this subsection 8.2(H) or in any of the Loan Documents,
it being understood and agreed that in respect of the property covered by the
Security Documents or any act, omission or event related thereto, Agent may act
in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by the Security Documents as one of the Lenders and
that Agent shall have no duty or liability whatsoever to any of the other
Lenders, provided that Agent shall exercise the same care which it would in
dealing with loans for its own account.
(I) AGENCY FOR PERFECTION. Agent and each Lender hereby appoint each
other Lender as agent for the purpose of perfecting Agent's security interest in
assets which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such Lender shall
notify each Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent, or in accordance with such Agent's
instructions. Each Lender agrees that it will not have any right individually
to enforce or seek to enforce any Security Document or to realize upon any
collateral security for the Loans, it being understood and agreed that such
rights and remedies may be exercised only by Agent.
(J) DISSEMINATION OF INFORMATION. Agent will use its best efforts to
provide Lenders with any information received from any Borrower or any other
Loan Party which is required to be provided to a Lender hereunder, provided that
Agent shall not be liable to Lenders for any failure to do so, except to the
extent that
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such failure is attributable to Agent's gross negligence or willful misconduct.
8.3 AMENDMENTS, CONSENTS AND WAIVERS FOR CERTAIN ACTIONS.
(A) Except as otherwise provided in this subsection 8.3, in
subsection 9.2 or in any Lender Addition Agreement and except as to matters set
forth in other subsections hereof or in any other Loan Document as requiring
only Agent's consent, the consent of Requisite Lenders and Borrowers will be
required to amend, modify, terminate, or waive any provision of this Agreement
or any of the other Loan Documents.
(B) In the event Agent requests the consent of a Lender and does not
receive a written consent or denial thereof within ten (10) Business Days after
such Lender's receipt of such request, then such Lender will be deemed to have
denied the giving of such consent, provided that Agent, in its sole discretion,
may extend such time period for the giving of such consent or denial.
(C) In the event Agent requests the consent of a Lender and such
consent is denied, then Heller or the Lender which assigned its interest in the
Revolving Loans to such Lender (the "Assigning Lender") may, at its option,
require such Lender to reassign its interest in the Revolving Loans to Heller or
the Assigning Lender, as applicable, for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
Lender, which interest and fees will be paid when collected from Borrower. In
the event that Heller or the Assigning Lender elects to require any Lender to
reassign its interest to Heller or the Assigning Lender, Heller or the Assigning
Lender, as applicable, will so notify such Lender in writing within forty-five
(45) days following such Lender's denial, and such Lender will reassign its
interest to Heller or the Assigning Lender, as applicable, no later than five
(5) days following receipt of such notice.
8.4 SET OFF AND SHARING OF PAYMENTS. In addition to any rights now
or hereafter granted under applicable law and not by way of limitation of any
such
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rights, during the continuance of any Event of Default, each Lender is hereby
authorized by Borrowers at any time or from time to time, with reasonably prompt
subsequent notice to Borrowers' Representative (any prior or contemporaneous
notice being hereby expressly waived) to set off and to appropriate and to apply
any and all (A) balances held by such Lender at any of its offices for the
account of any Borrower or any of its Subsidiaries (regardless of whether such
balances are then due to such Borrower or its Subsidiaries), and (B) other
property at any time held or owing by such Lender to or for the credit or for
the account of any Borrower or any of its Subsidiaries, against and on account
of any of the Obligations; except that no Lender shall exercise any such right
without the prior written consent of Agent. Any Lender exercising a right to
set off shall, to the extent the amount of any such set off exceeds its Pro Rata
Share of the amount set off, purchase for cash (and the other Lenders shall
sell) interests in each such other Lender's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with each other
Lender in accordance with their respective Pro Rata Shares. Each Borrower
agrees, to the fullest extent permitted by law, that any Lender may exercise its
right to set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and upon doing so shall deliver such excess to Agent for the benefit
of all Lenders in accordance with their Pro Rata Shares.
8.5 DISBURSEMENT OF FUNDS. Agent may, on behalf of Lenders, disburse
funds to any Borrowers for Revolving Loans requested. Each Lender shall
reimburse any Agent, on demand for all funds disbursed on its behalf by Agent,
or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of
any Loan before Agent disburses same to Borrowers. If Agent elects to require
that each Lender make funds available to Agent, prior to a disbursement by Agent
to Borrowers, Agent shall advise each Lender by telephone or telecopy of the
amount of such Lender's Pro Rata Share of the Revolving Loan requested by any
Borrower no later than 1:00 p.m. (New York City time) on the Funding Date
applicable thereto, and each such Lender shall pay Agent such Lender's Pro Rata
Share of such requested Revolving Loan, in same day funds, by wire transfer to
Agent's account on such Funding Date. If any Lender fails
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to pay the amount of its Pro Rata Share forthwith upon the demand, Agent shall
promptly notify Borrowers' Representative, and Borrowers shall immediately repay
such amount to Agent. Any repayment required pursuant to this subsection 8.5
shall be without premium or penalty. Nothing in this subsection 8.5 or
elsewhere in this Agreement or the other Loan Documents, including without
limitation the provisions of subsection 8.6, shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that
Agent or Borrowers may have against any Lender as a result of any default by
such Lender hereunder.
8.6 DISBURSEMENTS OF ADVANCES; PAYMENT.
(A) REVOLVING LOAN ADVANCES, PAYMENTS AND SETTLEMENTS; RELATED FEE
PAYMENTS.
(1) The Revolving Loan balance may fluctuate from day to day through
the disbursement of funds by Agent to, and receipt of funds from, Borrower. In
order to minimize the frequency of transfers of funds between Agent and each
Lender notwithstanding terms to the contrary set forth in Section 1 or
subsection 8.5, Revolving Loan advances and payments will be settled among Agent
and Lenders according to the procedures described in this subsection 8.6.
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any advances made by Agent, to Borrowers will commence on the date such
advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) On the second (2nd) Business Day of each week, or more frequently
(including daily), if Agent so elects (each such day being a "Settlement Date"),
Agent will advise each Lender by telephone or telecopy of the amount of each
such Lender's Pro Rata Share of the Revolving Loan balance as of the close of
business of the second (2nd) Business Day immediately preceding the Settlement
Date. In the event that payments are necessary to adjust the amount of such
Lender's required Pro Rata Share of the Revolving Loan balance to such Lender's
actual Pro Rata Share of the Revolving Loan balance as of any
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Settlement Date, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 3:00 p.m.
(New York City time) on the Business Day following the Settlement Date.
(3) For purposes of this subsection 8.6(A)(3), the following terms
and conditions will have the meanings indicated:
(a) "Daily Loan Balance" means an amount calculated as of the end of
each calendar day by subtracting (i) the cumulative principal amount paid
by Agent to a Lender on a Loan from the Closing Date through and including
such calendar day, from (ii) the cumulative principal amount on a Revolving
Loan advanced by such Lender to Agent on that Revolving Loan from the
Closing Date through and including such calendar day.
(b) "Daily Interest Rate" means an amount calculated by dividing the
interest rate payable to a Lender on a Revolving Loan (as set forth in
subsection 1.2) as of each calendar day by three hundred sixty (360).
(c) "Daily Interest Amount" means an amount calculated by multiplying
the Daily Loan Balance of a Revolving Loan by the associated Daily Interest
Rate on that Revolving Loan.
(d) "Interest Ratio" means a number calculated by dividing the total
amount of the interest on a Revolving Loan received by Agent with respect
to the immediately preceding month by the total amount of interest on that
Revolving Loan due from the applicable Borrower during the immediately
preceding quarter or Interest Period.
On the first (1st) Business Day of each quarter or Interest Period
("Interest Settlement Date"), Agent will advise each Lender by telephone, telex,
or telecopy of the amount of such Lender's Pro Rata Share of interest and fees
on each of the Revolving Loans as of the end of the last day of the immediately
preceding quarter or Interest Period. Provided that such Lender has made all
payments
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required to be made by it under this Agreement, Agent will pay to such Lender,
by wire transfer to such Lender's account (as specified by such Lender on the
signature page of this Agreement or the applicable Lender Addition Agreement, as
amended by such Lender from time to time after the date hereof pursuant to the
notice provisions contained herein or in the applicable Lender Addition
Agreement) not later than 3:00 p.m. (New York City time) on the next Business
Day following the Interest Settlement Date, such Lender's Pro Rata Share of
interest and fees on each of the Revolving Loans. Such Lender's Pro Rata Share
of interest on each Revolving Loan will be calculated for that Revolving Loan by
adding together the Daily Interest Amounts for each calendar day of the prior
month for that Revolving Loan and multiplying the total thereof by the Interest
Ratio for that Revolving Loan. Such Lender's Pro Rata Share of each of the
commitment fee described in subsection 1.2(B) and the Risk Participation
Liability fee described in subsection 1.2(C) shall be paid and calculated in a
manner consistent with the payment and calculation of interest as described in
this subsection 8.6(A).
(B) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(1) Unless Agent has been notified by a Lender prior to a Funding
Date of such Lender's intention not to fund its Pro Rata Share of the Revolving
Loan amount requested by Borrowers, Agent may assume that such Lender will make
such amount available to Agent on the Business Day following the next Settlement
Date. If such amount is not, in fact, made available to Agent by such Lender
when due, Agent will be entitled to recover such amount on demand from such
Lender without set-off, counterclaim or deduction of any kind.
(2) Nothing contained in this subsection 8.6(B) will be deemed to
relieve a Lender of its obligation to fulfill its commitments or to prejudice
any rights Agent or Borrowers may have against such Lender as a result of any
default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each Lender
shall be obligated to fund its Pro Rata Share of any Revolving Loan made after
any Event of Default or acceleration of the Obligations with respect to any draw
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on a Lender Letter of Credit or a Risk Participation Agreement.
(C) RETURN OF PAYMENTS.
(1) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from Borrowers and such related payment is not received by Agent, then
Agent, will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind.
(2) Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other person
pursuant to any solvency law or otherwise, then, notwithstanding any other term
or condition of this Agreement, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent, has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrowers or such other Person, without set-off, counterclaim or deduction of
any kind.
SECTION 9
MISCELLANEOUS
9.1 INDEMNITIES. Borrowers agree, jointly and severally, to
indemnify, pay, and hold Agent, each Lender and their respective officers,
directors, employees, agents, and attorneys (the "Indemnitees") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits and claims of any kind or nature whatsoever that may
be imposed on, incurred by, or asserted against any of the Indemnitees as a
result of its being a party to this Agreement; provided that Borrowers shall
have no obligation to an Indemnitee hereunder with respect to liabilities
arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction. This subsection and other
indemnification provisions contained
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within the Loan Documents shall survive the termination of this Agreement.
9.2 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this
Agreement, the Revolving Notes or any of the other Loan Documents, or consent to
any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Requisite Lenders (or Agent,
if expressly set forth herein, in any Revolving Note or in any other Loan
Document) and the applicable Loan Party; provided, that except to the extent
permitted by the applicable Lender Addition Agreement, no amendment,
modification, termination or waiver shall, unless in writing and signed by all
Lenders, do any of the following: (a) increase any Lender's Pro Rata Share of
the Revolving Loan Commitment; (b) reduce the principal of, rate of interest on
or fees payable with respect to any Revolving Loan; (c) extend the Expiry Date
or change any date fixed for any payment of interest or fees; (d) change the
aggregate unpaid principal amount of the Revolving Loans; (e) change the
percentage of Lenders which shall be required for Lenders or any of them to take
any action hereunder; (f) release Collateral (except if the sale or disposition
of such Collateral is permitted under subsection 8.2 or any other Loan
Document); (g) amend or waive this subsection 9.2 or the definitions of the
terms used in this subsection 9.2 insofar as the definitions affect the
substance of this subsection 9.2; (h) consent to the assignment, delegation or
other transfer by any Loan Party of any of its rights and obligations under any
Loan Document; (i) change the form in which interest is required to be paid; and
(j) change the advance rates set forth in the Borrowing Base Certificate; and
PROVIDED FURTHER, that no amendment, modification, termination or waiver
affecting the rights or duties of Agent under any Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to
Lenders required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or
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waiver of any provision of any Revolving Note shall be effective without the
written concurrence of the holder of that Revolving Note. No notice to or
demand on any Borrower or any other Loan Party in any case shall entitle
Borrower or any other Loan Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this subsection 9.2 shall be
binding upon each holder of the Revolving Notes at the time outstanding, each
future holder of the Revolving Notes, and, if signed by a Loan Party, on such
Loan Party.
9.3 NOTICES. Any notice or other communication required shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been given: (a) if delivered in person, when
delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. New York City time; (c) if
delivered by overnight courier, two (2) days after delivery to the courier
properly addressed; or (d) if delivered by U.S. mail, four (4) Business Days
after deposit with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to any Borrower or Borrowers' Representative:
NATIONAL FIBERSTOK CORPORATION
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
ATTN: Rob Miklas
Telecopy: (404) 705-9929
With a copy to:
McCown De Leeuw & Co.
101 East 52nd St., 31st Floor
New York, New York 10022
ATTN: David King
Telecopy: (212) 355-6283
If to Heller individually as Lender or as Agent:
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HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Portfolio Manager
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
With a copy to:
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Legal Department
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
If to a Lender:
To the address set forth on the signature page hereto or in the
applicable Lender Addition Agreement
9.4 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Agent or any Lender to exercise, nor any partial
exercise of, any power, right or privilege hereunder or under any other Loan
Documents shall impair such power, right, or privilege or be construed to be a
waiver of any Default or Event of Default. All rights and remedies existing
hereunder or under any other Loan Document are cumulative to and not exclusive
of any rights or remedies otherwise available.
9.5 MARSHALLING; PAYMENTS SET ASIDE. Neither Agent nor any Lender
shall be under any obligation to marshal any assets in payment of any or all of
the Obligations. To the extent that any Borrower makes payment(s) or Agent
enforces its Liens or Agent or any Lender exercises its right of set-off, and
such payment(s) or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and
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effect as if such payment had not been made or such enforcement or set-off had
not occurred.
9.6 SEVERABILITY. The invalidity, illegality, or unenforceability in
any jurisdiction of any provision under the Loan Documents shall not affect or
impair the remaining provisions in the Loan Documents.
9.7 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS'
RIGHTS. The obligation of each Lender hereunder is several and not joint and no
Lender shall be responsible for the obligation or commitment of any other Lender
hereunder. In the event that any Lender at any time should fail to make a Loan
as herein provided, the Lenders, or any of them, at their sole option, may make
the Loan that was to have been made by the Lender so failing to make such Loan.
Nothing contained in any Loan Document and no action taken by Agent or any
Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt.
9.8 HEADINGS. Section and subsection headings are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes or be given substantive effect.
9.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that Borrowers may not assign its rights or obligations
hereunder without the written consent of all Lenders.
9.11 NO FIDUCIARY RELATIONSHIP. No provision in the Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty owing to Borrowers by Agent or any Lender.
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9.12 CONSTRUCTION. Agent, each Lender and Borrowers acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review the Loan Documents with its legal counsel and
that the Loan Documents shall be constructed as if jointly drafted by Agent,
each Lender and Borrowers.
9.13 CONFIDENTIALITY. Agent and each Lender agree to exercise their
best efforts to keep any non-public information delivered pursuant to the Loan
Documents confidential from Persons other than those employed by or engaged by
Agent or such Lender and those employed by or engaged by Agent's or such
Lender's assignees or participants, or potential assignees or participants.
This subsection shall not apply to disclosures required to be made by Agent or
any Lender to any regulatory or governmental agency or pursuant to legal
process.
9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(A) EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWERS IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST AGENT OR
ANY LENDER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
(B) EACH BORROWER DESIGNATES AND APPOINTS MCCOWN DE LEEUW & CO., 101
EAST 52ND ST., 31ST FLOOR, NEW YORK, NEW YORK 10022, AND SUCH OTHER PERSONS AS
MAY HEREAFTER BE SELECTED BY SUCH BORROWER WHICH IRREVOCABLY AGREE IN WRITING TO
SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF
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SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED BY SUCH BORROWER TO BE EFFECTIVE AND BINDING SERVICE
IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO SUCH BORROWER AT ITS ADDRESS PROVIDED IN SUBSECTION 9.3
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY ANY BORROWER REFUSES TO ACCEPT SERVICE, SUCH BORROWER HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
9.15 WAIVER OF JURY TRIAL. BORROWERS, AGENT AND EACH LENDER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. BORROWERS, AGENT
AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. BORROWERS, AGENT AND EACH LENDER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE REVOLVING
LOANS OR THE LENDER LETTERS OF CREDIT OR RISK PARTICIPATION AGREEMENTS. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT. BORROWERS, AGENT AND EACH LENDER ALSO WAIVE ANY BOND OR
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SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF AGENT AND EACH LENDER.
9.16 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the making of the Revolving Loans, issuances of
Lender Letters of Credit and Risk Participation Agreements and the execution and
delivery of the Revolving Notes. Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of Borrowers set forth in
subsections 1.3(C), 1.7 and 9.1 shall survive the payment of the Revolving Loans
and the termination of this Agreement.
9.17 ENTIRE AGREEMENT. This Agreement, the Revolving Notes and the
other Loan Documents referred to herein embody the final, entire agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, understandings, whether oral or written, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous or subsequent oral agreements or discussions of the
parties hereto.
9.18 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
waivers, consents or supplements 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 of which
counterparts together shall constitute but one in the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
9.19 LIMITATION ON LIABILITY. It is the intention of each Borrower
and the Lenders that the obligations of each Borrower (other than NFC) under
this Agreement shall be in, but not in excess of, the maximum amount that would
not render any such Borrower's obligations under this Agreement avoidable under
any provision of applicable law. This subsection 9.19 is intended solely to
preserve the rights of the Lenders under this Agreement to the maximum extent
permitted by law and no Borrower nor any other
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Person shall have any right under this subsection 9.19 that it would not
otherwise have under applicable law.
SECTION 10
DEFINITIONS
10.1 CERTAIN DEFINED TERMS. The terms defined below are used in this
Agreement as so defined. Terms defined in the preamble and recitals to this
Agreement are used in this Agreement as so defined.
"Accounting Changes" has the meaning ascribed thereto in subsection
4.4.
"Accounts" means, on any date of determination, the unpaid portion of
the obligations as stated on the respective invoices issued to a customer of any
Borrower or any of its Subsidiaries with respect to Inventory sold and shipped
or services performed in the ordinary course of business, net of any credits,
rebates or offsets owed by any Borrower or any of its Subsidiaries to the
respective customer and net of any commissions payable by any Borrower or any of
its Subsidiaries to third parties.
"Acquisition" has the meaning ascribed thereto in the preamble of this
Agreement.
"Affected Lender" has the meaning ascribed thereto in subsection 1.9
hereof.
"Affiliate" means any Person: (a) directly or indirectly controlling,
controlled by, or under common control with, any Borrower; (b) directly or
indirectly owning or holding five percent (5%) or more of any equity interest in
any Borrower; or (c) five percent (5%) or more of whose voting stock or other
equity interest is directly or indirectly owned or held by any Borrower. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through
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the ownership of voting securities or by contract or otherwise.
"Agent" means Heller in its capacity as agent for the Lenders under
this Agreement and each of the other Loan Documents and any successor in such
capacity appointed pursuant to subsection 8.2.
"Agreement" means this Credit Agreement (including all schedules and
exhibits hereto).
"A/L Systems" has the meaning ascribed thereto in the preamble of this
Agreement.
"Asset Disposition" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
following: (a) any of the stock of any Subsidiaries of any Borrower or (b) any
or all of the assets of any Borrower or any of its Subsidiaries other than sales
of inventory in the ordinary course of business.
"Assigning Lender" has the meaning ascribed thereto in
subsection 8.3(C) hereof.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.
"Base Rate" has the meaning ascribed thereto in subsection 1.2(A)(1)
hereof.
"Base Rate Loans" has the meaning ascribed thereto in
subsection 1.2(A)(1) hereof.
"Boharb" has the meaning ascribed thereto in the preamble of this
Agreement.
"Borrower" means individually, each of NFC, Label Art, InfoSeal,
Government Forms and Systems, Putnam Graphic Innovations, Short Run Labels,
Boharb and A/L Systems, together with their successors and permitted assigns
pursuant to subsection 9.10.
<PAGE>
Page 82
"Borrowers' Representative" means NFC in its capacity as Borrowers'
Representative under this Agreement and the other Loan Documents.
"Borrowing Base" has the meaning ascribed thereto in subsection 1.1(A)
hereof.
"Borrowing Base Certificate" has the meaning ascribed thereto in
subsection 1.1(A) hereof.
"Business Day" means (a) for all purposes other than as covered by
clause (b) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the Commonwealth of Pennsylvania or the States
of New York and Illinois, or is a day on which banking institutions located in
any such states are closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with Revolving Loans bearing interest at the
LIBOR, any day that is a Business Day described in clause (a) above and that is
also a day for trading by and between banks in Dollar deposits in the applicable
interbank LIBOR market.
"Capital Contribution" has the meaning ascribed thereto in the
preamble of this Agreement.
"Capital Expenditures" will be calculated as illustrated in Exhibit
4.3(C).
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including, without
limitation, all common stock and preferred stock.
"Capitalization/Acquisition Documents" means, collectively: (a) any
or all of the stock certificates, notes, debentures or other instruments
representing securities bought, sold or issued, or loans made, to facilitate the
consummation of the Related Transactions; (b) the indentures or other documents
pursuant to which such stock, notes, debentures or other instruments are issued
or to be issued; (c) each document governing the issuance of, or setting forth
the terms of, such stock, notes, debentures or other instruments; (d) any
stockholders, registration or Intercreditor agreement among or between the
holders of
<PAGE>
Page 83
such stock, notes, debentures or other instruments; (e) the Purchase Agreement;
(f) the Merger Agreement; and (g) all other instruments, documents and
agreements executed in connection with the Acquisition or the Merger; but
excluding all Loan Documents.
"Cash Equivalents" has the meaning ascribed thereto in subsection 3.3
hereof.
"Certificate of Exemption" has the meaning ascribed thereto in
subsection 1.8(C)(1) hereof.
"Closing Date" means June 28, 1996.
"Collateral" means, collectively: (a) all "Collateral" as defined in
the Security Documents; and (b) any property or interest provided in addition to
or in substitution for any of the foregoing.
"Companies" means Transkrit (prior to the Merger), Label Art,
InfoSeal, Government Forms and Systems, Putnam Graphic Innovations, Short Run
Labels, Boharb and A/L Systems.
"Contingent Obligation" has the meaning ascribed thereto in
subsection 3.4 hereof.
"Daily Interest Amount" has the meaning ascribed thereto in subsection
8.6(A)(3)(c) hereof.
"Daily Interest Rate" has the meaning ascribed thereto in subsection
8.6(A)(3)(b) hereof.
"Daily Loan Balance" has the meaning ascribed thereto in subsection
8.6(A)(3)(a) hereof.
"DEC" has the meaning ascribed thereto in the preamble of this
Agreement.
"DEC IPO" means a sale by DEC of its common stock in an underwritten
(firm commitment) public offering registered under the Securities Act, with
gross proceeds to DEC of not less than $35 million, resulting in the listing of
DEC's common stock on a nationally recognized stock
<PAGE>
Page 84
exchange, including, without limitation, the NASDAQ National Market System.
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning ascribed thereto in subsection 1.2(E)
hereof.
"EBIDAT" will be calculated as illustrated in Exhibit 4.3(C) hereof.
"Equity Interest" means (i) with respect to a corporation, any and all
Capital Stock or warrants, options or other rights to acquire Capital Stock (but
excluding any debt security which is convertible into, or exchangeable or
exercisable for, Capital Stock) and (ii) with respect to a partnership, limited
liability company or similar Person, any and all units, interests, rights to
purchase, warrants, options or other equivalents of, or other ownership
interests in any such Person.
"ERISA Affiliate" has the meaning ascribed thereto in subsection 5.10
hereof.
"Eurocurrency Liabilities" has the meaning ascribed thereto in
subsection 1.2 hereof.
"Event of Default" has the meaning ascribed thereto in subsection 6.1
hereof.
"Excess Revolving Loans" has the meaning ascribed thereto in
subsection 1.1(A)(3) hereof.
"Existing Indebtedness" has the meaning ascribed thereto in subsection
3.1(F).
"Expiry Date" means the earlier of (a) the suspension (subject to
reinstatement) of the Lenders' obligations to make Revolving Loans pursuant to
subsection 6.2, (b) the acceleration of the Obligations pursuant to subsection
6.3 or (c) June 28, 2001.
<PAGE>
Page 85
"Fiscal Year" means the 12-month period ending on December 31 of each
year.
"Fixed Charge Coverage" will be calculated as illustrated in
Exhibit 4.3(C) hereof.
"Fixed Charges" will be calculated as illustrated in Exhibit 4.3(C)
"Foreign Lender" has the meaning ascribed thereto in subsection 1.8(C)
hereof.
"Funding Date" has the meaning ascribed thereto in subsection 7.2
hereof.
"GAAP" means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of 'Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports'" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"Government Forms and Systems" has the meaning ascribed thereto in the
preamble of this Agreement.
"Heller" has the meaning ascribed thereto in the preamble of this
Agreement.
"Heller Warrant" means the warrants held by Heller to purchase 254,435
shares of DEC's Class B common stock.
"Indebtedness", as applied to any Person, means: (a) all indebtedness
for borrowed money; (b) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(d) any obligation (including any obligation in the form of an earn-out or
similar arrangement) owed for all or any part
<PAGE>
Page 86
of the deferred purchase price of property or services if the purchase price is
due more than six (6) months from the date the obligation is incurred or is
evidenced by a note or similar written instrument; and (e) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person.
"Indemnities" has the meaning ascribed thereto in subsection 9.1.
"Indenture" means the Indenture dated as of June 15, 1996 among NFC,
the Guarantors named therein and Wilmington Trust Company, as Trustee, pursuant
to which the Senior Notes are issued.
"InfoSeal" has the meaning ascribed thereto in the preamble of this
Agreement.
"Intellectual Property" has the meaning ascribed thereto in
subsection 5.6 hereof.
"Interest Period(s)" has the meaning ascribed thereto in
subsection 1.2(A)(2) hereof.
"Interest Ratio" has the meaning ascribed thereto in subsection
8.6(A)(3)(d).
"Inventory" means inventory (as defined in Article 9 of the UCC) to
the extent comprised of materials, products or goods of a type manufactured,
sold or consumed by any Borrower or any of its Subsidiaries in the ordinary
course of business.
"Investment" has the meaning ascribed thereto in subsection 3.3
hereof.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time and all rules and regulations promulgated thereunder.
"Label Art" has the meaning ascribed thereto in the preamble of this
Agreement.
<PAGE>
Page 87
"Lender" or "Lenders" means Heller, and each other financial
institution listed on the signature pages hereof together with their successors
and permitted assigns pursuant to subsection 8.1.
"Lender Addition Agreement" means an agreement among Agent, a Lender
and such Lender's assignee regarding their respective rights and obligations
with respect to assignments of the Revolving Loans, the Revolving Loan
Commitment, and other interests under this Agreement and the other Loan
Documents.
"Lender Letter of Credit" has the meaning ascribed thereto in
subsection 1.1(B).
"Letter of Non-Exemption" has the meaning ascribed thereto in
subsection 1.8(C)(2) hereof.
"LIBOR" has the meaning ascribed thereto in subsection 1.2(A)(2)
hereof.
"LIBOR Breakage Fee" has the meaning ascribed thereto in
subsection 1.3(B) hereof.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary (including any
conditional sale or other title retention agreement and any lease in the nature
thereof), and any agreement to give any lien, mortgage, pledge, security
interest, charge or encumbrance.
"Loan Documents" means this Agreement, the Revolving Notes, the
Security Documents and all other instruments, documents and agreements executed
by or on behalf of any Loan Party and delivered concurrently herewith or at any
time hereafter to or for the benefit of Agent or any Lender in connection with
the Revolving Loans and other transactions contemplated by this Agreement, all
as amended, supplemented or modified from time to time; but excluding all
Capitalization/Acquisition Documents.
"Loan Party" means, collectively, DEC, Borrowers, Borrowers,
Subsidiaries and any other Person (other than Agent and each Lender) which is
or becomes a party to any Loan Document.
<PAGE>
Page 88
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Borrowers and their Subsidiaries taken as a whole or (b) the material
impairment of the ability of any Loan Party to perform its obligations under any
Loan Document to which it is a party or (c) the impairment of the ability of
Agent or any Lender to enforce any Loan Document or collect any of the
Obligations. In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
"Maximum Revolving Loan Balance" has the meaning ascribed thereto in
subsection 1.1(A) hereof.
"Merger Agreement" means the Merger Agreement dated as of
June 28, 1996 between NFC and Transkrit, pursuant to which the Merger was
consummated.
"Merger" has the meaning ascribed thereto in the preamble of this
Agreement.
"NFC" has the meaning ascribed thereto in the preamble of this
Agreement.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to either Agent or any
Lender under the Loan Documents and any other agreement, instrument or document
relating to reimbursement or payment of Risk Participation Liability including
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable whether before or after the filing of a
proceeding under the Bankruptcy Code by or against any Borrower or any of its
Subsidiaries.
"Operating Cash Flow" will be calculated as illustrated in
Exhibit 4.3(C).
<PAGE>
Page 89
"Permitted Acquisition" has the meaning ascribed thereto in
subsection 1.1(A)(2) hereof.
"Permitted Encumbrances" has the meaning ascribed thereto in
subsection 3.2(A) hereof.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, limited liability partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof and their respective permitted successors and
assigns (or in the case of a governmental person, the successor functional
equivalent of such Person).
"Pro Forma" means the unaudited consolidated and consolidating balance
sheets of Borrowers and their Subsidiaries prepared in accordance with GAAP as
of the Closing Date after giving effect to the Related Transactions to be
consummated on such date. The Pro Forma as of the Closing Date is annexed
hereto as Schedule 10.1(A).
"Pro Rata Share" means (a) with respect to a Lender's obligation to
make Revolving Loans and receive payments of interest and principal with respect
thereto (and with respect to the related commitment fee described in subsection
1.2(B)) and with respect to a Lender's obligation to share in Risk Participation
Liability (and with respect to the related Risk Participation Liability fee
described in subsection 1.2(C)), the percentage obtained by dividing (i) such
Lender's commitment to make Revolving Loans, as set forth on the signature page
of this agreement opposite such Lender's signature or in the most recent Lender
Addition Agreement, if any, executed by such Lender, by (ii) all such
commitments of all Lenders to make Revolving Loans, (b) with respect to all
other matters (including without limitation the indemnification obligations
arising under subsection 8.2(E)), the percentage obtained by dividing (i) the
commitments of such Lender to make Revolving Loans, as set forth on the
signature page of this Agreement opposite such Lender's signature or in the most
recent Lender Addition Agreement, if any, executed by
<PAGE>
Page 90
such Lender, by (ii) the aggregate Revolving Loan Commitment.
"Projections" means Borrowers' forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash
flow statements; and (d) capitalization statements, all prepared on a division
by division and Subsidiary by Subsidiary basis on a consistent basis with
Borrowers' and their Subsidiaries' (taking into account availability of
pre-Closing Date financial statements) historical financial statements, together
with appropriate supporting details and a statement of underlying assumptions.
The Projections represent and will represent as of the date thereof the good
faith estimate of Borrowers and their senior management concerning the most
probable course of its business.
"Purchase Agreement" has the meaning ascribed thereto in the preamble
of this Agreement.
"Putnam Graphic Innovations" has the meaning ascribed thereto in the
preamble of this Agreement.
"Related Transactions" means the Acquisition, the Merger, closing of
the transactions contemplated by the Securities Purchase Agreement, the making
of the Capital Contribution, the execution and delivery of the Related
Transactions Documents, the funding of any Revolving Loans on the Closing Date,
the closing of the transactions contemplated by the Indenture, and the payment
of all fees, costs and expenses associated with all of the foregoing.
"Related Transactions Documents" means the Loan Documents, the
Capitalization/Acquisition Documents and all other agreements, instruments and
documents executed or delivered in connection with the Related Transactions.
"Replacement Lender" has the meaning ascribed thereto in subsection
1.9(A) hereof.
"Restricted Junior Payment" has the meaning ascribed thereto in
subsection 3.5 hereof.
"Requisite Lenders" means Lenders having (a) sixty-six and two-thirds
percent (66-2/3%) or more of the
<PAGE>
Page 91
Revolving Loan Commitment or, (b) if the Revolving Loan Commitment has been
terminated, sixty-six and two-thirds percent (66-2/3%) or more of the aggregate
outstanding principal balance of the Revolving Loans.
"Revolving Loan Commitment" has the meaning ascribed thereto in
subsection 1.1(A) hereof.
"Revolving Loans" has the meaning ascribed thereto in subsection
1.1(A) hereof.
"Revolving Note" means each promissory note of Borrowers substantially
in the form of Exhibit 10.1(A).
"Rice Warrant" means the warrants held by Rice Mezzanine Lenders, L.P.
to purchase 413,457 shares of DEC's Class A common stock.
"Risk Participation Agreement" has the meaning ascribed thereto in
subsection 1.1(B) hereof.
"Risk Participation Liability" means, as to each Lender Letter of
Credit and each Risk Participation Agreement, all reimbursement obligations of
Borrowers to the issuer of the Lender Letter of Credit or to the issuer of the
letter of credit with respect to the transaction for which the Risk
Participation Agreement was executed and delivered, consisting of (a) the amount
available to be drawn or which may become available to be drawn; (b) all amounts
which have been paid and made available by the issuing bank to the extent not
reimbursed by Borrowers, whether by the making of a Revolving Loan or otherwise;
and (c) all accrued and unpaid interest, fees and expenses with respect thereto.
For purposes of determining the outstanding amount of Risk Participation
Liability, the maximum amount potentially owing under any Risk Participation
Agreement will be considered outstanding unless the bank which is the
beneficiary of such Risk Participation Agreement reports daily activity to Agent
showing actual outstanding letters of credit subject to such Risk Participation
Agreement.
"Securities Act" has the meaning ascribed thereto in the preamble of
this Agreement.
<PAGE>
Page 92
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of June 28, 1996 among DEC, NFC and the purchasers party
thereto.
"Security Documents" means all instruments, documents and agreements
executed by or on behalf of any Loan Party to guaranty or provide collateral
security with respect to the Obligations including, without limitation, any
security agreement or pledge agreement, any guaranty of the Obligations, and all
instruments, documents and agreements executed pursuant to the terms of the
foregoing.
"Senior Notes" means the 11-5/8% Senior Notes of NFC Series A and
Series B due 2002 under the Indenture in an aggregate principal amount of up to
$100,000,000.
"Senior Notes Guarantees" means the guarantees of the Senior Notes by
Subsidiaries of NFC in accordance with the Indenture.
"Settlement Date" has the meaning ascribed thereto in subsection
8.6(A)(2) hereof.
"Severance Cost" means as of the last day of each calendar quarter
during the 12 month period from the Closing Date through June 30, 1997, the
actual amount of severance costs and other one-time integration costs related to
the Acquisition incurred by NFC and its Subsidiaries and paid in cash during
such period; PROVIDED, HOWEVER, that for purposes of computing the ratio of
Total Indebtedness to Operating Cash Flow, such severance costs and other
one-time integration costs shall only be added to Operating Cash Flow during
such 12 month period described above and only to the extent that such severance
costs and other one-time integration costs do not exceed $375,000 during such 12
month period; and PROVIDED FURTHER, that severance costs shall include only such
costs which relate to the termination of employees whose services are
duplicative as a result of the Acquisition and will therefore not be replaced.
"Short Run Labels" has the meaning ascribed thereto in the preamble of
this Agreement.
<PAGE>
Page 93
"Significant Subsidiary" means any Subsidiary of any Borrower, which
Subsidiary (i) has assets in excess of $500,000, or (ii) has annual Operating
Cash Flow in excess of $500,000.
"Subordinated Indebtedness" means all Indebtedness of any Borrower or
any of its Subsidiaries which is subordinated, in a manner satisfactory to
Agent, in right of payment to the Obligations.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than fifty
percent (50%) of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Tax Liabilities" has the meaning ascribed thereto in subsection
1.8(A) hereof.
"Total Indebtedness" will be calculated as illustrated in Exhibit
4.3(C).
"Transkrit" has the meaning ascribed thereto in the preamble of this
Agreement.
"UCC" means the Uniform Commercial Code, as amended from time to time,
and any successor statute.
"Unfinanced Capital Expenditures" will be calculated as illustrated in
Exhibit 4.3(C).
"Unqualified" has the meaning ascribed thereto in subsection 4.3(B)
hereof.
"Voting Securities" means any class of Equity Interests of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power ("Voting Power") under ordinary circumstances to vote for
the election of directors, managers, trustees or general partners of such Person
(irrespective of whether or
<PAGE>
Page 94
not at the time any other class or classes will have or might have voting power
by reason of the happening of any contingency).
10.2 OTHER DEFINITIONAL PROVISIONS. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 10.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, "hereof," "herein," "hereto," "hereunder,"
"hereinbefore" and the like mean and refer to this Agreement as a whole and not
merely to the specific section, paragraph or clause in which the respective word
appears; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to agreements and other contractual instruments shall be deemed to
include subsequent amendments, assignments, and other modifications thereto, but
only to the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document; references
to Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
NATIONAL FIBERSTOK
CORPORATION
By: /s/ Robert S. Webster
---------------------
Title: Executive Vice
President
<PAGE>
Page 95
LABEL ART, INC.
By: /s/ Robert S. Webster
---------------------
Title: Secretary
INFOSEAL INTERNATIONAL INC.
By: /s/ Robert S. Webster
---------------------
Title: Secretary
GOVERNMENT FORMS AND
SYSTEMS, INC.
By: /s/ Robert S. Webster
---------------------
Title: Secretary
PUTNAM GRAPHIC
INNOVATIONS, INC.
By: /s/ Robert S. Webster
---------------------
Title: Secretary
SHORT RUN LABELS, INC.
By: /s/ Robert S. Webster
----------------------
Title: Secretary
BOHARB CORPORATION
By: /s/ Robert S. Webster
----------------------
Title: Secretary
A/L SYSTEMS INC.
<PAGE>
Page 96
By: /s/ Robert S. Webster
----------------------
Title: Secretary
HELLER FINANCIAL, INC.,
as Agent and Lender
By: /s/ Michael S. Sznajder
------------------------
Title: Vice President
Commitment to Make
Revolving Loans: $20,000,000
Percentage of Revolving Loan
Commitment: 100%
<PAGE>
SCHEDULE 3.1(F)
EXISTING INDEBTEDNESS
1. Capitalized Lease of $2,200,000 with the CIT Group.
<PAGE>
SCHEDULE 3.2(A)(10)
EXISTING LIENS
a) Fleet Bank - security interest in accounts, accounts receivable, demand
deposits, cash collateral, contracts, contract rights, notes, bills,
drafts, chattel paper, choices in action, tax refund, insurance proceeds
and all other obligations owing to Label Art, Inc. in order to secure
$100,000 Letter of Credit in connection with workman's compensation plan.
<PAGE>
SCHEDULE 3.4
CONTINGENT OBLIGATIONS
The following employees of NFC are entitled to the continuation of their
current base compensation for the period of time set forth opposite their
respective names in the event that they are terminated for any reason other than
an illegal act; such severance would also be applicable should employment
terminate as a result of a transfer in ownership of DEC:
Robert M. Miklas - one year
Jack Resnick - one year
Robert B. Webster - nine months
Thomas J. Cobery - nine months
<PAGE>
SCHEDULE 3.8
AFFILIATE TRANSACTIONS
a) Advisory Services Agreement
NFC maintains an Advisory Services Agreement (the "Advisory Services
Agreement") with MDC Management Company II, L.P. ("MDC Management"), an
affiliate. Under the Advisory Services Agreement, MDC Management provides
certain consulting, financial, and managerial functions to the NFC for a
fee initially in an amount not to exceed $350,000 in any fiscal year, which
amount may be increased to an amount not to exceed $500,000 in any fiscal
year with the approval of the members of the Board of Directors of NFC who
do not have a direct financial interest in any person receiving such
payments under the Advisory Services Agreement.
b) NFC has agreed to pay the reasonable fees of and reasonable compensation to
its board of directors. Additionally, NFC will, based upon a good faith
determination of its board of directors, provide indemnification to its own
and its subsidiaries, officers, directors, consultants and employees.
c) NFC intends to purchase notes payable by shareholders of DEC from certain
affiliates of McCown De Leeuw & Co. in an aggregate amount not to exceed
$685,000.
d) NFC is liable for up to $30,000 in relocation expenses for Frank Neubauer.
<PAGE>
SCHEDULE 3.9
MANAGEMENT FEES AND COMPENSATION
a) See Schedule 3.8 items (a) & (b)
b) NFC has agreed to pay John Weil $8,000 per year in consulting fees.
<PAGE>
SCHEDULE 3.10
BUSINESS DESCRIPTION
The manufacturing, sales and distribution of mailers products, direct marketing
products and services, envelopes and labels, and related activities.
<PAGE>
SCHEDULE 5.3
VIOLATIONS, CONFLICTS,
BREACHES AND DEFAULTS
NONE
<PAGE>
SCHEDULE 5.4(A)
JURISDICTIONS OF INCORPORATION
All Loan Parties are organized under the laws of the State of
Delaware.
<PAGE>
SCHEDULE 5.4(B)
Page 1 of 3
CAPITALIZATION
<TABLE>
<CAPTION>
AUTHORIZED ISSUED PAR
COMPANY SHARES SHARES VALUE SHAREHOLDERS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEC
- ---
Class A Common Stock 4,000,000 2,512,551 .0001 See page 3 of 3
Class B Common Stock 300,000 0 .0001 None
Preferred Stock (as of June 250,000 10,000 .0001 TCW/Crescent
28, 1996) Mezzanine L.L.C.
- --------------------------------------------------------------------------------------------
Warrants/Options -
See page 2 of 3
- --------------------------------------------------------------------------------------------
NFC
Common Stock 300,000 283,807 $0.01 DEC
- --------------------------------------------------------------------------------------------
PUTNAM GRAPHIC INNOVATIONS, INC.
Common Stock 20,000 100 $0.01 NFC
- --------------------------------------------------------------------------------------------
GOVERNMENT FORMS & SYSTEMS, INC.
Common Stock 10,000 110 $1.00 NFC
- --------------------------------------------------------------------------------------------
INFOSEAL INTERNATIONAL, INC.
Common Stock 50,000 50,000 No NFC
- --------------------------------------------------------------------------------------------
LABEL ART, INC.
Common Stock 3,000,000 1,410,476 $0.01 NFC
- --------------------------------------------------------------------------------------------
A/L SYSTEMS, INC.
Common Stock 1,000 1,000 No Boharb Corporation
- --------------------------------------------------------------------------------------------
BOHARB CORPORATION
Common Stock 1,000 1,000 No Label Art, Inc.
- --------------------------------------------------------------------------------------------
SHORT RUN LABELS, INC.
Common Stock 3,000 100 $0.01 Label Art, Inc.
</TABLE>
<PAGE>
SCHEDULE 5.4(B)
Page 2 of 3
PREEMPTIVE OR OTHER OUTSTANDING RIGHTS,
OPTIONS, WARRANTS, CONVERSION RIGHT OR
SIMILAR RIGHTS FOR PURCHASE OF DEC CAPITAL STOCK
Warrants to purchase 132,240 shares of common stock issued to the holders of the
Preferred Stock; such warrants have preemptive rights
Options to purchase 248,847 shares of common stock issued to the management of
NFC and subsidiaries
<PAGE>
SCHEDULE 5.4(B)
Page 3 of 3
STOCKHOLDERS OF DEC INTERNATIONAL, INC.
STOCKHOLDER BALANCE
McCown De Leeuw & Co. II, L.P. 1,403,104.11
McCown De Leeuw Associates, L.P. 755,603.21
MDC/JAFCO Ventures, L.P. 52,174.00
Glenn McKenzie 9,293.68
Robert Miklas 57,736.00
William Britts 34,642.00
David Sinaway 13,857.00
Steve Hart 13,857.00
Wayne Dodson 13,857.00
Wendell Johnson 5,774.00
Scott Ebert 11,814.00
Robert Oliver 10,355.00
Greg Davis 4,619.00
Larry Quibel 5,774.00
Dalton Miller 40,415.00
Fred Tucker 23,094.00
Ray Lunsford 23,094.00
Jim Martin 13,857.00
Tom Koogler 13,857.00
Clay Bear, Jr. 5,774.00
<PAGE>
SCHEDULE 5.4 (D)
Page 1 of 2
FOREIGN QUALIFICATIONS
DEC INTERNATIONAL, INC.
Georgia
NATIONAL FIBERSTOK CORPORATION
Arkansas - (Transkrit)
California
Florida
Georgia
Illinois - (Transkrit)
Kentucky
Ohio - (Transkrit)
Nevada - (Transkrit)
Pennsylvania
South Carolina
Virginia
LABEL ART, INC.
Arkansas
California
New Hampshire
SHORT RUN LABELS, INC.
California
Maryland
A/L SYSTEMS, INC.
Massachusetts
PUTNAM GRAPHIC INNOVATIONS, INC.
New York
<PAGE>
SCHEDULE 5.4 (D)
Page 2 of 2
INFOSEAL INTERNATIONAL, INC.
Virginia
GOVERNMENT FORMS & SYSTEMS, INC.
Pennsylvania
New York
New Jersey
<PAGE>
SCHEDULE 5.5
Financial Statements Not
PREPARED IN ACCORDANCE WITH GAAP
a) Supplemental Combined Adjusted Historical Data contained on page 10 of
the Final Offering Memorandum dated June 21, 1996.
<PAGE>
SCHEDULE 5.6
INTELLECTUAL PROPERTY
a) Label Art, Inc. was recently notified by a company called Label Art of
California (a direct selling label company selling primarily in the State
of California) that it considers the use of the name "Label Art" in
California to be theirs. Both companies, ours and theirs, have been in
existence since the 1960's and neither company has invoked all measures
necessary to protect their trademark. Our Label Art was in existence
before Label Art in California. Our attorney has suggested several
alternatives to their attorney as to how the dispute might be resolved and
we are awaiting a response as of May 9, 1996.
A meeting between Tom Cobery and the son of the owner took place the week
of May 13, 1996, and a follow up meeting is schedule for early June. At
the present time, Label Art of California is insisting that we drop the use
of the name "Label Art" in their sales territory. Further meetings and
advice from our legal counsel is presently being contemplated.
b) Label Art has recently contacted 3 other companies (Label Arts Incorporated
in Kemps, Texas, Labelart Printing Corp., NY, NY and Label Art New York
Inc. (affiliated with Label Art California)) asking each to cease and
desist using the Label Art name.
<PAGE>
SCHEDULE 5.7
Page 1 of 2
INVESTIGATIONS AND AUDITS
(A) 1. The following purchased companies could be found to have nexus in
various states for which no state income tax and/or sales tax are paid
TRANSKRIT CORPORATION
TAXES NOT FILED
STATE NAME INCOMES (I)/SALES TAX (S)
---------- -------------------------
Tennessee I
Connecticut I
Massachusetts I
Georgia I
New Jersey I
PUTNAM GRAPHIC INNOVATIONS, INC.
TAXES NOT FILED
STATE NAME INCOMES (I)/SALES TAX (S)
---------- -------------------------
Pennsylvania S
Florida I/S
Illinois S
New Jersey I
LABEL ART, INC.
TAXES NOT FILED
STATE NAME INCOMES (I)/SALES TAX (S)
---------- -------------------------
Texas I/S
Georgia I/S
Pennsylvania I/S
Illinois I/S
Massachusetts I/S
<PAGE>
SCHEDULE 5.7
Page 2 0f 2
(b) Transkrit Corp. is currently being audited by the following states:
New York: Sales Tax through May 31, 1993 and Income Tax through
December 31, 1994
Arkansas: Sales Tax and Income Tax through December 31, 1995.
Nevada: Sales Tax through December 31, 1993.
<PAGE>
SCHEDULE 5.8
EMPLOYEE MATTERS
1. Employees' Retirement Plan of National Fiberstok Corporation
2. Transkrit Corporation Employees' Pension Plan
<PAGE>
SCHEDULE 5.10
1. Employees' Retirement Plan of National Fiberstok Corporation
2. Transkrit Corporation Employees' Pension Plan
<PAGE>
SCHEDULE 10.1(A)
PRO FORMA
See Attachment
<PAGE>
SCHEDULE 10.1(A)
Page 2
EXHIBIT 1.2(G)
LIBOR RATE LOAN REQUEST
NATIONAL FIBERSTOK CORPORATION
5775 PEACHTREE DUNWOODY ROAD
SUITE C150
ATLANTA, GEORGIA 30342
Date: __________, ____
Heller Financial, Inc., as Agent
500 West Monroe Street
Chicago, Illinois 60661
Attention: Account Analyst
Corporate Finance Group
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of June 28, 1996 (as the
same has been or may hereafter be amended, modified or supplemented, the "Credit
Agreement") by and among National Fiberstok Corporation, as Borrowers'
Representative and a Borrower, Label Art, Inc., InfoSeal International Inc.,
Government Forms and Systems, Inc., Putnam Graphic Innovations, Inc., Short Run
Labels, Inc., Boharb Corporation and A/L Systems Inc., each individually as a
Borrower and collectively as Borrowers, Heller Financial, Inc. as Agent and a
Lender ("Heller"), and such other persons executing that agreement as Lenders
from time to time. Capitalized terms used but not defined herein have the
meanings given to them in the Credit Agreement.
Pursuant to subsection 1.2(G) of the Credit Agreement, National
Fiberstok Corporation hereby:
(1) gives notice that on _________________, ____ it desires to borrow
an aggregate principal amount of $_____________ under the Revolving Loan
Commitment, which shall be a LIBOR Loan [must be a minimum of $500,000 and
<PAGE>
SCHEDULE 10.1(A)
Page 3
integral multiples of $10,000 in excess thereof]. The LIBOR Loan shall have an
Interest Period of ________________ days [insert 30, 60, 90 or 180]; or
(2) makes a request to:
(a) convert $__________________ [to convert to a LIBOR Loan, said
amount must be a minimum of $500,000 and integral multiples of $10,000 in excess
thereof] of presently outstanding [Base Rate/LIBOR] Revolving Loans [with an
Interest Period expiration date of__________________, _____] to [Base Rate/LIBOR
Loans] on _______________, ______. If converting to LIBOR Loans, the Interest
Period for such LIBOR Loans is requested to be a [thirty/sixty/ninety/one
hundred eighty] day period.
(b) continue as LIBOR Loans $____________ [must be a minimum of
$500,000 and integral multiples of $10,000 in excess thereof] of presently
outstanding LIBOR Loans constituting Revolving Loans with an Interest Period
expiration date of _________________, ________. The Interest Period for such
LIBOR Loans is requested to be a [thirty/sixty/ninety/ one hundred eighty] day
period.
The undersigned hereby certifies that, both before and after giving
effect to the advance, conversion or continuation request above (i) all of the
representations and warranties contained in the Credit Agreement and the other
Loan Documents, together with all supplemental disclosures delivered to Heller
prior to the date hereof, are true, correct and complete in all material
respects as of the date hereof, and (ii) no Default or Event of Default has
occurred and is continuing on the date hereof.
Sincerely,
NATIONAL FIBERSTOK CORPORATION
By:__________________________
Its: _____________________
<PAGE>
EXHIBIT 4.3(C)
COMPLIANCE CERTIFICATE
NATIONAL FIBERSTOK CORPORATION
Date: __________, ____
This certificate is given by National Fiberstok Corporation, a
Delaware corporation ("NFC"), pursuant to subsection 4.3(C) of that certain
Credit Agreement dated as of June 28, 1996 among NFC, as Borrowers'
Representative and a Borrower, Label Art, Inc., InfoSeal International Inc.,
Government Forms and Systems, Inc., Putnam Graphic Innovations, Inc., Short Run
Labels, Inc., Boharb Corporation and A/L Systems Inc., each individually as a
Borrower and collectively as Borrowers, Heller Financial, Inc. as Agent and a
Lender, and such other persons executing that agreement as Lenders from time to
time, as such agreement may have been amended, restated, supplemented or
otherwise modified from time to time (the "Credit Agreement"). Capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement.
The officer executing this certificate is the Chief Financial Officer
[Chief Executive Officer] of NFC and as such is duly authorized to execute and
deliver this certificate on behalf of Borrower. By executing this certificate
such officer hereby certifies to Agent and Lenders that:
(a) the financial statements delivered with this certificate in
accordance with subsection 4.3(A) and/or 4.3(B) of the Credit Agreement fairly
present in all material respects the results of operations and financial
condition of Borrowers and their Subsidiaries as of the dates of such financial
statements;
(b) I have reviewed the terms of the Credit Agreement and the
Revolving Notes and have made, or caused to be made under my supervision, a
review in reasonable detail of the transactions and conditions of Borrowers and
their Subsidiaries during the accounting period covered by such financial
statements;
(c) such review has not disclosed the existence during or at the end
of such accounting period, and I have
<PAGE>
EXHIBIT 4.3(C)
Page 2
no knowledge of the existence as of the date hereof, of any condition or event
that constitutes a Default or an Event of Default, except as set forth in
Exhibit A hereto which includes a description of the nature and period of
existence of such Default or an Event of Default and what action Borrower has
taken, is undertaking and proposes to take with respect thereto; and
(d) Each Borrower is in compliance with the covenants contained in
Section 4 of the Credit Agreement, as demonstrated below, except as set forth
below or described in Exhibit A.
IN WITNESS WHEREOF, NFC has caused this Certificate to be executed by
its Chief Financial Officer [Chief Executive Officer] this ________ day of
, ________.
NATIONAL FIBERSTOK CORPORATION
By____________________________
Chief Financial Officer
[Chief Executive Officer]
<PAGE>
EXHIBIT A
to
EXHIBIT 4.3(C)
COMPLIANCE CERTIFICATE
Capital Expenditures
Capital Expenditures are defined as follows:
Amount capitalized as capital expenditures for the period, under
GAAP, as property, plant, and equipment or similar fixed asset
accounts $_________
Plus: deposits made in the period in connection with property,
plant, and equipment; less deposits of a prior period
included above _________
Less: Net Proceeds of Asset Dispositions included in capital
expenditures above Capital Expenditures _________
Less: Portion of Capital Expenditures financed under capital _________
leases or other Indebtedness permitted under the Credit
Agreement (Indebtedness, for this purpose, does not
include drawings under the Revolving Loan Commitment)
Unfinanced Capital Expenditures (used in calculation of Fixed
Charge Coverage) $_________
<PAGE>
EXHIBIT A
Page 2
EBIDAT
EBIDAT is defined as follows:
Net income (or loss) for the period of $________
Borrowers and their Subsidiaries on a
consolidated basis determined in accordance
with GAAP, but excluding: (a) the income (or
loss) of any Person (other than any Subsidiary
of any Borrower) in which any Borrower or any
of its Subsidiaries has an ownership interest
unless received by any Borrower or its
Subsidiary in a cash distribution; and (b) the
income (or loss) of any Person accrued prior
to the date it became a Subsidiary of any
Borrower or is merged into or consolidated
with any Borrower
Plus: Any provision for (or less any benefit $________
from) income and franchise taxes
included in the determination of net
income
Interest expense deducted in the $________
determination of net income
Amortization and depreciation deducted $________
in determining net income
Losses (or less gains) from Asset $________
Dispositions or other non-cash items
included in the determination of net
income (excluding sales, expenses or
losses related to current assets)
Extraordinary losses (or less gains), as $________
defined under GAAP, net of related tax
effects
Expenses of the Related Transactions $________
included in the determination of net
income provided that such expenses were
included in the Pro Forma, or disclosed
in the notes thereto
Less: Expenditures pursuant to the last
sentence of subsection 4.4 applicable
to, but not included in, the Pro Forma;
including expenditures during the period
made in connection with the Related
Transactions and payment of liabilities
existing on the Closing Date
EBIDAT $________
<PAGE>
EXHIBIT A
Page 3
COVENANT 4.1 FIXED CHARGE COVERAGE
Fixed Charge Coverage is defined as follows:
Fixed Charges (without duplication):
Interest expense, net of interest income, $_________
included in the determination of net income,
including, without limitation, all accrued
interest, dividends (payable in such period
whether or not paid, declared or accrued) and
the interest portion of capitalized lease
obligations
Less: Amortization of capitalized fees and
expenses incurred with respect to the _________
Related Transactions included in
interest expense
Interest paid in kind and included in
interest expense
Interest Expenses $_________
Plus: Any provision for (benefit from) income
or franchise taxes included in the _________
determination of net income
Decreases (or less increases) in long- _________
term and short-term deferred tax
liabilities
Increases (or less decreases) in long- _________
term and short-term deferred tax assets
Scheduled payments of principal with
respect to all Indebtedness (including _________
the principal portion of scheduled
payments of capital lease obligations)
of Borrowers and their Subsidiaries on a
consolidated basis, but excluding
reductions of the Revolving Loan
Prepayments of the Senior Notes which
are made (i) out of Operating Cash Flow, _________
or (ii) pursuant to transactions which
are not permitted under the Credit
Agreement
Restricted Junior Payments made in cash _________
Fixed Charges $_________
Operating Cash Flow:
EBIDAT (defined above) $_________
Less: Unfinanced Capital Expenditures (defined _________
above)
<PAGE>
EXHIBIT A
Page 4
Other capitalized costs, defined as the
gross amount capitalized, for any fiscal _________
period, as long term assets (net of cash
received in respect of long term
assets), other than (a) Capital
Expenditures and (b) fees and expenses
capitalized with respect to the Related
Transactions
Operating Cash Flow $_________
Fixed Charge Coverage (Operating Cash Flow _________
DIVIDED BY Fixed Charges)
Required Fixed Charge Coverage _________
In Compliance YES/NO
<PAGE>
EXHIBIT A
Page 5
COVENANT 4.2 TOTAL INDEBTEDNESS TO OPERATING CASH FLOW RATIO
Total Indebtedness:
Outstanding principal balance of the Revolving $________
Loans on the last day of the applicable period
Plus: Outstanding principal balance of the $________
Senior Notes
Outstanding capital lease obligations of $________
Borrowers and their Subsidiaries
Outstanding principal balance of all $________
other Indebtedness for borrowed money of
Borrowers and their Subsidiaries
Less: Cash on the balance sheets of $________
Borrowers and their Subsidiaries
Total Indebtedness $__________
Operating Cash Flow (defined above) $__________
Total Indebtedness to Operating Cash Flow Ratio ___ to ___
Required Total Indebtedness to Operating Cash Flow ___ to ___
In Compliance Yes/No
<PAGE>
EXHIBIT A to
EXHIBIT 4.3(C)
EXHIBIT 4.3(E)
BORROWING BASE CERTIFICATE
NATIONAL FIBERSTOK CORPORATION
Date: __________, ____
This certificate is given by National Fiberstok Corporation, a Delaware
corporation ("NFC"), pursuant to subsection 4.3(E) of that certain Credit
Agreement dated as of June 28, 1996 among NFC, as Borrowers' Representative and
a Borrower, Label Art, Inc., InfoSeal International Inc., Government Forms and
Systems, Inc., Putnam Graphic Innovations, Inc., Short Run Labels, Inc., Boharb
Corporation and A/L Systems Inc., each individually as a Borrower and
collectively as Borrowers, Heller Financial, Inc. as Agent and a Lender, and
such other persons executing that agreement as Lenders from time to time, as
such agreement may have been amended, restated, supplemented or otherwise
modified from time to time (the "Credit Agreement"). Capitalized terms used
herein without definition shall have the meaning set forth in the Credit
Agreement.
The officer executing this certificate is the Chief Financial Officer
[Chief Executive Officer] of NFC and as such is duly authorized to execute and
deliver this certificate on behalf of NFC. By executing this certificate such
officer hereby certifies to Agent and Lenders that:
(a) Attached is a schedule of the Borrowing Base (Exhibit A) of
Borrowers as of the above date and the calculations made with
respect thereto;
(b) based on such schedule, the Borrowing Base as the above date is:
$________________________
<PAGE>
IN WITNESS WHEREOF, NFC has caused this Certificate to be executed by its
Chief Financial Officer [Chief Executive Officer] this ______ day of ______,
________.
NATIONAL FIBERSTOK CORPORATION
By:________________________
Chief Financial Officer
[Chief Executive Officer]
2
<PAGE>
EXHIBIT A to
EXHIBIT 4.3(E)
BORROWING BASE CERTIFICATE
Accounts of Borrowers reflected on Borrowers' consolidated
balance sheet (as of the date above).
Less Ineligible Accounts:
(a) Accounts which, at the date of issuance of the
respective invoice therefor, were payable more than
thirty (30) days after the date of issuance of such
invoice; $______________
(b) Accounts which remain unpaid for more than sixty (60)
days after the due date specified in the original
invoice or for more than ninety (90) days after
invoice date if no due date was specified; ______________
(c) Accounts due from a customer whose principal place of
business is located outside the United States of
America unless such Account is (i) due from a
customer whose principal place of business is located
in Canada (provided that Borrowers shall have
executed and filed, if necessary, any and all
documents, agreements and financing statements
requested by Agent and Agent shall have been granted
a valid, enforceable first priority security interest
in and lien on such Accounts, in form and substance
satisfactory to Agent) or (ii) backed by a letter of
credit issued or confirmed by a bank that is
organized under the laws of the United States of
America or a State thereof and has capital and
surplus in excess of $500,000,000 (provided that such
letter of credit has been delivered to Agent as
additional collateral under the Security Documents); ______________
(d) Accounts due from a customer which Agent has notified
Borrowers' Representative does not have a
satisfactory credit standing (as determined in the
sole discretion of Agent); ______________
(e) Accounts with respect to which the customer is the
United States of America or any department, agency or
instrumentality thereof unless Borrowers have, with
respect to such Accounts, complied with the Federal
Assignment of Claims Act (31 U.S.C. Section 3727); ______________
(f) Accounts with respect to which the customer is an
Affiliate of any Borrower or a director, officer,
agent, stockholder or employee of any Borrower or any
of its Affiliates; ______________
<PAGE>
(g) Accounts due from a customer if more than twenty-five
(25%) of the aggregate amount of Accounts (other than
disputed accounts) of such customer have at the time
remained unpaid for more than ninety (90) days after
invoice date; ______________
(h) Accounts with respect to which there is any
unresolved dispute with the respective customer (but
only to the extent of such dispute); ______________
(i) Accounts evidenced by an instrument (as defined in
Article 9 of the UCC) not in the possession of any
Lender; ______________
(j) Accounts with respect to which Lenders do not have a
valid, first priority and fully perfected security
interest and Accounts subject to any Lien except
those in favor of Agent and Permitted Encumbrances; ______________
(k) Accounts with respect to which the customer is the
subject of any bankruptcy or other insolvency
proceeding; ______________
(l) Accounts due from a customer to the extent that such
Accounts exceed in the aggregate an amount equal to
twenty percent (20%) of the aggregate of all Accounts
at said date; ______________
(m) Accounts with respect to which the customer's
obligation to pay is conditional or subject to a
repurchase obligation or right to return, including
bill and hold sales, guarantied sales, sale or return
transactions, sales on approval or consignment sales; ______________
(n) Accounts with respect to which the customer is
located in New Jersey, or any other state denying
creditors access to its courts in the absence of a
Notice of Business Activities Report or other similar
filing, unless Borrower has either qualified as a
foreign corporation authorized to transact business
in such state or has filed a Notice of Business
Activities Report or similar filing with the
applicable state agency for the then current year; ______________
(o) Accounts representing transactions that were
previously invoiced by any Borrower which are payable
more than ninety (90) days after the date of the
original invoice or which remain unpaid for more than
ninety (90) days after the date of the original
invoice; and ______________
(p) Accounts as to which the representations contained in
Section 5.6 of the Security Agreement are not true. ______________
2
<PAGE>
Total Ineligible Accounts $______________
Total Eligible Accounts (Accounts less Total Ineligible $______________
Accounts)
Advance Rate 80%
Accounts Availability $______________
Inventory owned by, and in the possession of any Borrower,
and located in the United States of America, reflected on
Borrowers' consolidated balance sheet (as of the date
above), valued at the lower of cost or market (including $______________
adequate reserves for obsolete, slow moving or excess
quantities), on a first-in, first-out basis.
Less Ineligible Inventory:
(a) Inventory with respect to which Agent does not have a
valid, first priority and fully perfected security
interest. ______________
(b) Inventory with respect to which there exists any Lien
(other than Permitted Encumbrances) in favor of any Person
other than Agent. ______________
(c) Inventory produced in violation of the Fair Labor
Standards Act and subject to the so-called "hot goods"
provisions contained in Title 25 U.S.C. 215(a)(i). ______________
(d) Work-in-process. ______________
(e) Inventory which Agent determines, in the exercise of
reasonable discretion and in accordance with Borrowers'
customary business practices, to be unacceptable for
borrowing purposes due to age, quality, type, category
and/or quantity. ______________
(f) Inventory as to which the representations contained in
Section 5.7 of the Security Agreement are not true. ______________
Total Ineligible Inventory $______________
Total Eligible Inventory (Inventory less Total Ineligible $______________
Inventory)
Advance Rate 50%
3
<PAGE>
Inventory Availability $______________
Plus: Accounts Availability $______________
Minus: Outstanding Risk Participation Liability $______________
Borrowing Base $______________
4
<PAGE>
EXHIBIT 10.1(A)
REVOLVING NOTE
$20,000,000 New York, New York
June 28, 1996
FOR VALUED RECEIVED, the undersigned, NATIONAL FIBERSTOK CORPORATION, a
Delaware corporation, with its principal place of business at 5775 Peachtree
Dunwoody Road, Suite C150, Atlanta, Georgia, 30342, LABEL ART, INC., a Delaware
corporation, with its principal place of business at 1 Riverside Way, Wilton,
New Hampshire, 03086, INFOSEAL INTERNATIONAL INC., a Delaware corporation, with
its principal place of business at 1825 Blue Hills Circle, NE, Roanoke,
Virginia, 24012, GOVERNMENT FORMS AND SYSTEMS, INC., a Delaware corporation,
with its principal place of business at 1825 Blue Hills Circle, NE, Roanoke,
Virginia, 24012, PUTNAM GRAPHIC INNOVATIONS, INC., a Delaware corporation, with
its principal place of business at 1825 Blue Hills Circle, NE, Roanoke,
Virginia, 24012, SHORT RUN LABELS, INC., a Delaware corporation, with its
principal place of business at 1681 Industrial Way, San Carlos, California,
94070, BOHARB CORPORATION, a Delaware corporation, with its principal place of
business at 1 Riverside Way, Wilton, New Hampshire, 03086, and A/L SYSTEMS INC.,
a Delaware corporation, with its principal place of business at 1 Riverside Way,
Wilton, New Hampshire, 03086 (hereinafter jointly and severally referred to as
the "Maker"), hereby promises to pay to the order of HELLER FINANCIAL, INC., a
Delaware corporation ("Heller"), with a place of business at 101 Park Avenue,
New York, New York 10178 (hereinafter together with any other holder hereof
referred to as the "Holder"), by wire transfer to the account of Heller, as
Agent (as defined in the Credit Agreement referred to below), ABA
No. 071 000 013, Account No. 55-00540 at The First National Bank of Chicago, One
First National Plaza, Chicago, Illinois 60670, Reference: DEC or at such other
place or places and to such account or accounts as Holder may direct from time
to time by notice to Maker in accordance with the Credit Agreement (as
hereinafter defined), in lawful money of the United States in immediately
available funds, the principal amount equal to TWENTY MILLION DOLLARS
($20,000,000) or, if less, the actual outstanding principal amount of advances
under the Revolving Loan (as defined in the Credit Agreement) advanced or issued
for the account of Maker by Holder pursuant to the Credit Agreement, payable,
subject to the fourth paragraph hereof, on or before June 28, 2001, as provided
in subsection 1.5 of the Credit Agreement.
Interest shall accrue on the outstanding principal amount hereof in
accordance with the Credit Agreement and shall be payable on such dates and in
such amounts as determined in accordance with the Credit Agreement. In no
contingency or event whatsoever, shall the interest rate charged pursuant to the
terms of this Note exceed the maximum amount of interest permitted by applicable
law. In the event that a court of competent jurisdiction determines that the
Credit Agreement provides for
<PAGE>
EXHIBIT 10.1(A)
Page 2
interest in excess of the maximum amount of interest permitted by applicable
law, the provisions of subsection 1.2(F) of the Credit Agreement shall apply.
The date and amount of each advance under the Revolving Loan and other
financial accommodations made to Maker, each payment made on account of
principal thereof and each payment of interest thereon shall, subject to
subsection 1.6 of the Credit Agreement, be recorded by Agent in its books and
records relating to the Revolving Loan, which books and records shall be
presumed correct and accurate and shall constitute an account stated between
Maker and Holder.
This Note is issued to evidence a Revolving Loan made pursuant to the
provisions of subsection 1.1(A) of a Credit Agreement dated as of June 28, 1996
by and among Maker, Heller as Agent and a Lender, and such other persons
executing that Agreement as Lenders (the "Lenders") (as from time to time in
effect, the "Credit Agreement") as to which reference is hereby made for a
statement of the terms, conditions and covenants under which the indebtedness
evidenced hereby was and will be made and is to be repaid, including those
related to the acceleration of the indebtedness represented hereby upon the
occurrence of an Event of Default (as defined in the Credit Agreement) or upon
the termination of the financing of which this Note is part pursuant to the
Credit Agreement. Payment of this Note is secured by the Collateral (as defined
in the Credit Agreement), including, without limitation, all capital stock and
other property pledged pursuant to the Security Documents (as defined in the
Credit Agreement), all real property mortgaged pursuant to the Credit
Agreement, if any, and any property or interest, tangible or intangible and the
proceeds thereof provided in addition to or in substitution for any of the
foregoing. Revolving loans evidenced by this Note may be repaid and reborrowed
as provided in the Credit Agreement. This Note is subject to mandatory
prepayment as provided in the Credit Agreement.
Holder shall not be required to look to the Collateral for the payment of
this Note, but may proceed against Maker, in such manner as it deems desirable.
None of the rights or remedies of Holder hereunder are to be deemed waived or
affected by failure or delay on the part of Holder to exercise the same. All
remedies conferred upon Holder by this Note or any other instrument or agreement
shall be cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at Holder's option.
Maker hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices in connection with this Note.
This Note has been executed and delivered in New York, New York and shall
be governed by the laws of the State of New York without giving effect to
principles of conflicts of law.
<PAGE>
EXHIBIT 10.1(A)
Page 3
WITNESS the hand and seal of Maker.
NATIONAL FIBERSTOK CORPORATION
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
LABEL ART, INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
INFOSEAL INTERNATIONAL INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
<PAGE>
EXHIBIT 10.1(A)
Page 4
GOVERNMENT FORMS AND SYSTEMS, INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
PUTNAM GRAPHIC INNOVATIONS, INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
SHORT RUN LABELS, INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
<PAGE>
EXHIBIT 10.1(A)
Page 5
BOHARB CORPORATION
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
A/L SYSTEMS INC.
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
<PAGE>
EXHIBIT 10.12
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
RESTATED AS OF JANUARY 1, 1989
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
TABLE OF CONTENTS
PAGE
----
Article 1. DEFINITIONS 1
Article 2. MEMBERSHIP
2.01 Membership Requirements 9
2.02 Determination of Service 9
2.03 Events Affecting Membership 9
2.04 Membership upon Reemployment 10
Article 3. SERVICE
3.01 Period of Service 11
3.02 Benefit Service 13
3.03 Restoration of Retired Member or Other
Former Employee to Service 14
Article 4. ELIGIBILITY FOR AND AMOUNT OF BENEFITS
4.01 Normal Retirement 17
4.02 Late Retirement 18
4.03 Early Retirement 19
4.04 Vesting 19
4.05 Spouse's Pension 20
4.06 Maximum Benefit Limitation 21
4.07 Transfers and Employment with an
Affiliated Employer 22
4.08 Special Provisions for Benefits
Accrued to January 1, 1994 23
Article 5. PAYMENT OF PENSIONS
5.01 Automatic Forms of Payment 24
5.02 Optional Forms of Payment 25
5.03 Election of Options 26
5.04 Commencement of Payments 27
5.05 Distribution Limitation 27
5.06 Direct Rollover of Certain Distributions 28
Article 6. CONTRIBUTIONS
6.01 Employer's Contributions 30
6.02 Return of Contributions 30
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
TABLE OF CONTENTS
(Continued)
PAGE
----
Article 7. ADMINISTRATION PLAN
7.01 Named Fiduciary and Administrator 32
7.02 Responsibility 32
7.03 Meetings 32
7.04 Action of Majority 33
7.05 Compensation and Bonding 33
7.06 Establishment of Rules 33
7.07 Prudent Conduct 33
7.08 Actuary 33
7.09 Maintenance of Accounts 34
7.10 Service in More then One Fiduciary Capacity 34
7.11 Limitation of Liability 34
7.12 Indemnification 34
Article 8. MANAGEMENT OF FUNDS
8.01 Funding Agent 36
8.02 Exclusive Benefit Rule 36
8.03 Appointment of Investment Manager 36
Article 9. GENERAL PROVISIONS
9.01 Nonalienation 37
9.02 Conditions of Employment Not Affected by Plan 37
9.03 Facility of Payment 38
9.04 Information 38
9.05 Top-Heavy Provisions 38
9.06 Construction 42
Article 10. AMENDMENT, MERGER AND TERMINATION
10.01 Amendment of Plan 43
10.02 Merger or Consolidation 43
10.03 Additional Participating Employers 44
10.04 Termination of Plan 44
10.05 Limitation Concerning 25 Highest Paid Employees 45
<PAGE>
TRANSKRIT CORPORATION
EMPLOYEES' PENSION PLAN
THE MASCULINE GENDER IS USED FOR SIMPLICITY THROUGHOUT THE PLAN DOCUMENT AND
IS INTENDED TO INCLUDE THE FEMININE GENDER.
ARTICLE 1. DEFINITIONS
1.01 "Accrued Benefit" means the normal retirement Pension computed under
Section 4.01(b) on the basis of the Member's Average Final
Compensation and Benefit Service as of the date of determination.
1.02 "Affiliated Employer" means any company not participating in the Plan
which is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) which also includes as a member the
Employer; any trade or business under common control (as defined in
Section 414(c) of the Code) with the Employer; any organization (whether
or not incorporated) which is a member of an affiliated service group
(as defined in Section 414(m) of the Code) which includes the Employer;
and any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
Notwithstanding the foregoing sentence, for purposes of Section 4.07,
the definitions in Sections 414(b) and (c) of the Code shall be modified
as provided in Section 415(h) of the Code.
1.03 "Annuity Starting Date" means the first day of the first period for
which an amount is paid as an annuity or any other form.
<PAGE>
Page 2
1.04 "Average Final Compensation" means the average annual Compensation of
an Employee during the five consecutive calendar years in the last 10 or
less calendar years of his Service with the Employer affording the
highest such average, or during all of the years of Service if the
Member's Service is less than five years. Any calendar year in which an
Employee earned compensation for less than six months or, if due to
disability, for less than nine months, will be excluded if such
exclusion results in a higher Average Final Compensation.
1.05 "Beneficiary" means the person or persons named by a Member by written
designation filed with the Committee to receive payments after the
Member's death.
1.06 "Benefit Service" means service recognized for purposes of computing
the amount of any benefit, determined as provided in Section 3.02.
1.07 "Board of Directors" means the Board of Directors of Transkrit
Corporation.
1.08 "Break in Service" means a period which constitutes a break in an
Employee's Period of Service, as provided in Section 3.01(a).
1.09 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.10 "Committee" or "Pension Committee" means the group of at least one
person chosen to administer the plan as provided in Article 7.
1.11 "Compensation" means the amount paid to an Employee for services
rendered to the Employer as base salary, overtime, and commissions, as
these forms are reported on his Earnings and Wage statement, determined
prior to any pre-tax contributions under a "qualified cash or deferred
<PAGE>
Page 3
arrangement" (as defined under Section 401(k) of the Code and its
applicable regulations) or under a "cafeteria plan" (as defined under
Section 125 of the Code and its applicable regulations). Bonuses and
incentive pay shall be excluded from an employee's Compensation for
benefit computation purposes. Compensation taken into account for any
purpose under the Plan shall not exceed $200,000 per year ($150,000 for
Plan years beginning after December 31, 1993). As of January 1 of each
calendar year on and after January 1, 1990, the applicable limitation as
determined by the Commissioner of Internal Revenue for that calendar
year shall become effective as the maximum Compensation to be taken into
account for Plan purposes for that calendar year in lieu of the $200,000
(or $150,000) limitation set forth in the preceding sentence. If
compensation is determined for a period of less than 12 months, the
$200,000 limit (or $150,000) (as adjusted) will be prorated accordingly.
In determining the compensation of a participant for purposes of this
limitation, the rules of section 414(g)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the participant and any lineal descendants of the participant
who have not attained age 19 before the close of the year. If, as a
result of the application of such rules the adjusted $200,000 (or
$150,000) limitation is exceeded, then the limitation shall be prorated
among the affected individuals in proportion to each such individual's
compensation as determined under this section prior to the application
of this limitation.
1.12 "Effective Date" means July 15, 1963.
1.13 "Effective Date of Restatement" means January 1, 1989, or such earlier
date, for any Plan provision, as is required by applicable statute or
regulation.
<PAGE>
Page 4
1.14 "Eligibility Service" means service recognized in determining
eligibility for membership in the Plan, as provided in Section 3.01.
1.15 "Employee" means any person employed by the Employer who receives
compensation other than a pension, severance pay, retainer or fee under
contract, but excluding any Leased Employee.
1.16 "Employer" means Transkrit Corporation or any successor by merger,
purchase or otherwise, with respect to its employees; or any other
company participating in the Plan as provided in Section 10.03 with
respect to its employees. Effective January 1, 1994, "Employee" shall
include Short Run Labels, Inc.
1.17 "Equivalent Actuarial Value" means (except as otherwise specified in
the Plan) the equivalent value when computed on the basis of the Unisex
Pension 1984 Mortality Table and an interest rate of 8%. The Pension
Benefit Guaranty Corporation (PBGC) annuity interest rates in effect on
the first day of the calendar year of determination shall be used in
determining the Lump Sum Value of a benefit, as follows:
(a) for lump sum amounts no more than $25,000, all the PBGC rates;
(b) for lump sum amounts over $25,000, 120% of the PBGC rates;
(c) if the result in (a) is greater than $25,000 and the result in
(b) is $25,000 or less, the lump sum shall be $25,000.
(d) if the lump sum value using the immediate annuity PBGC rate
results in a greater value than that otherwise determined under
this Section 1.17, that value shall be used.
(e) lump sum values shall be determined as payable at the Member's
Normal Retirement Age. If, however, the Member is eligible for
Early Retirement under Section 4.03, the
<PAGE>
Page 5
lump sum will be calculated as payable on the Member's Early
Retirement Date if that results in a larger value.
1.18 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.19 "Funding Agent" means the trustee or trustees or the legal reserve life
insurance company by whom the funds of the Plan are held, as provided
in Article 8.
1.20 "Hour of Service" means, with respect to any applicable computation
period,
(a) each hour for which the employee is paid or entitled to payment
for the performance of duties for the Employer or an Affiliated
Employer,
(b) each hour for which an employee is paid or entitled to payment
by the Employer or an Affiliated Employer on account of a period
during which no duties are performed, whether or not the
employment relationship has terminated, due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence, but not more than 501 hours
for any single continuous period,
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or an
Affiliated Employer, excluding any hour credited under (a) or
(b), which shall be credited to the computation period or
periods to which the award, agreement or payment pertains,
rather than to the computation period in which the award,
agreement or payment is made.
<PAGE>
Page 6
No hours shall be credited on account of any period during which the
Employee performs no duties and receives payment solely for the purpose
of complying with unemployment compensation, workers' compensation or
disability insurance laws. The Hours of Service credited shall be
determined as required by Title 29 of the Code of Federal Regulations,
Section 2530.200b-2(b) and (c).
1.21 "Leased employee" means any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially
full-time basis for a period of at least one year, and such services are
of a type historically performed by the employees in the business field
of the recipient employer. Contributions or benefits provided a leased
employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
1.22 "Limitation Year" means the Plan Year.
1.23 "Member" means any person included in the membership of the Plan, as
provided in Article 2.
1.24 "Normal Retirement Age" means an Employee's 65th birthday.
1.25 "Normal Retirement Date" means the first day of the calendar month
immediately following an Employee's Normal Retirement Age.
<PAGE>
Page 7
1.26 "Parental Leave" means a period in which the Employee is absent from
work immediately following his or her active employment because of the
Employee's pregnancy, the birth of the Employee's child or the placement
of a child with the Employee in connection with the adoption of that
child by the Employee, or for purposes of caring for that child for a
period beginning immediately following birth or placement.
1.27 "Pension" means annual payments under the Plan as provided in Article 5.
1.28 "Period of Service" means the service used to determine an Employee's
vested status and benefit, as defined in Article 3.
1.29 "Plan" means the Transkrit Corporation Employees' Pension Plan as set
forth in this document or as amended from time to time.
1.30 "Plan Year" means the calendar year.
1.31 "Prior Plan" means the Transkrit Corporation Hourly Employees' Pension
Plan or the Transkrit Corporation Salaried Employees' Pension Plan,
whichever is applicable.
1.32 "Qualified Joint and Survivor Annuity" means an annuity described in
Section 5.01(b).
1.33 "Severance Date" means the earlier of (a) the date an Employee quits,
retires, is discharged or dies, or (b) the first anniversary of the date
on which an Employee is first absent from service,
<PAGE>
Page 8
with or without pay, for any other reason such as vacation, sickness,
disability, layoff or leave of absence.
1.34 "Spousal Consent" means written consent given by a Member's spouse to
an election made by the Member which specifies the form of Pension and
Beneficiary or Beneficiaries designated by the Member. The specified
form or specified Beneficiary shall not be changed unless further Spousal
Consent is given, unless the spouse expressly waives the right to
consent to any future changes. Spousal Consent shall be duly witnessed by
a Plan representative or notary public and shall acknowledge the effect
on the spouse of the Member's election. The requirement for Spousal
Consent may be waived by the Committee in accordance with applicable
law. Spousal Consent shall be applicable only to the particular spouse
who provides such consent.
1.35 "Suspendible Month" means a month in which the Member completes at
least 40 Hours of Service with the Employer or an Affiliated Employer.
<PAGE>
Page 9
ARTICLE 2. MEMBERSHIP
2.01 Membership Requirements
Every person in the employ of the Employer shall become a Member of the
Plan as of the first day of the calendar month, beginning with the
Effective Date, but not before January 1, 1994 for employees of Short
Run Labels, Inc., coinciding with or immediately following the date he
completes one year of Eligibility Service, provided he is then an
Employee.
2.02 Determination of Service
Solely for purposes of this Article, an Employee shall be credited with
one year of Eligibility Service for the 12-month period beginning on the
date he first completes an Hour of Service, or any anniversary thereof,
if he completes at least 1,000 Hours of Service during that period.
Employees of Short Run Labels, Inc. who were such as of August 10, 1993
will be given Eligibility Service for periods of employment prior to
August 10, 1993 as if their service with Short Run Labels, Inc. were
service with the Employer.
2.03 Events Affecting Membership
An Employee's membership in the Plan shall end when he is no longer
employed by the Employer if he is not entitled to either an immediate
or a deferred Pension under the Plan. Membership shall continue while
on approved leave of absence from service or during a period while he is
not an Employee but is in the employ of the Employer or an Affiliated
Employer, but no Benefit Service shall be counted for that period,
except as specifically provided in Article 3 and Section 4.08.
<PAGE>
Page 10
2.04 Membership upon Reemployment
If an Employee's membership in the Plan ends and he again becomes an
Employee, he shall be considered a new Employee for all purposes of the
Plan, except as provided in Section 3.03.
<PAGE>
Page 11
ARTICLE 3. SERVICE
3.01 Period of Service
(a) An Employee's Period of Service shall begin on the date the Employee
first completes an Hour of Service and end on the Employee's Severance
Date. If an Employee's employment is terminated and he is later
reemployed within one year, the period between his Severance Date and
the date of his reemployment shall be included in his Period of Service.
However, if his employment is terminated during a period of absence from
service for reasons such as vacation, sickness, disability, layoff or
leave of absence approved by the Employer, the period from his Severance
Date to the date of his reemployment shall be included in his Period of
Service only if he is reemployed within one year of the first day of
that absence. A Break in Service shall occur if an Employee is not
reemployed within one year after a Severance Date, provided, however,
that if an Employee's employment is terminated or if the Employee is
otherwise absent from work because of Parental Leave, a Break in Service
shall occur only if the Employee is not reemployed or does not return to
active service within two years of his Severance Date; and provided
further that the first year of such absence for Parental Leave, measured
from his Severance Date, shall not be considered in determining the
Employee's "period of Break in Service" for purposes of Section 3.03(d).
If the Employee has a Break in Service, any period before the Break in
Service shall be excluded from his Period of Service, except as provided
in Section 3.03.
(b) If an Employee shall have been absent from the service of the Employer
because of service in the Armed Forces of the United States and if he
shall have returned to the service of the Employer
<PAGE>
Page 12
having applied to return while his reemployment rights were protected
by law, that absence shall not count as a Break in Service, but instead
shall be included in his Period of Service.
(c) A period during which an Employee is on a leave of absence approved by
the Employer shall not be considered as a Break in Service. Under rules
uniformly applicable to all Employees similarly situated, the Committee
may authorize that a Period of Service be included for any portion of a
period of leave that is not counted as a Period of Service under
paragraph (a) of this Section.
(d) For purposes of determining eligibility for membership and vesting,
each of the following periods of service shall be counted in a person's
Period of Service to the extent that it would be recognized under
paragraph (a) through (c) above with respect to Employees:
(i) a period of service as an employee, but not an Employee, of the
Employer,
(ii) a period of service as an employee of an Affiliated Employer, and
(iii) in the case of a person who is a Leased Employee before or after
a period of service as an Employee or a period of service
described in (i) or (ii) above, a period during which he has
performed services for the Employer or an Affiliated Employer as a
Leased Employee.
(iv) a period during which a Member is disabled and eligible to
receive payments under the Employer's or an Affiliated Employer's
long term disability benefits program or is entitled to receive
disability benefits under the Social Security Act provided he
provides evidence as required by the Committee of continuing
eligibility for such benefit.
(v) a period of service with Short Run Labels, Inc., provided the
person was an employee of Short Run Labels, Inc. on August 10,
1993.
<PAGE>
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The Break in Service rules of Section 3.03 shall be applied as though
all such periods of service were service as an Employee.
3.02 Benefit Service
(a) Except as provided below, all Periods of Service as an Employee after
becoming a Member shall be Benefit Service under the Plan. Any period
between a Severance Date and a reemployment date which is counted as a
Period of Service as provided in Section 3.01(a) shall not be counted as
Benefit Service.
(b) Benefit Service shall include any period of absence from service with
the Employer due to service in the Armed Forces of the United States
which is counted in a Member's Period of Service as provided in Section
3.01(b). Under rules uniformly applicable to all Employees similarly
situated, the Committee may count as Benefit Service any period, not
more than two years, during which an Employee is on an approved leave of
absence which is counted as a Period of Service as provided in Section
3.01(c).
(c) Benefit Service shall not be credited for any period in which a Member
is not an Employee but is in the employ of the Employer, or in the
employ of an Affiliated Employer, or performing services for the
Employer or an Affiliated Employer as a Leased Employee.
(d) In no event shall Benefit Service be less than that credited through
December 31, 1988 based on the Plan provisions in effect on that date.
<PAGE>
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(e) No Benefit Service shall be credited to Short Run Labels, Inc.
employees for periods prior to August 10, 1993, and the maximum amount
of Benefit Service earned for the period August 10, 1993 through
December 31, 1993 shall be 4.5 months.
(f) Other than the situation discussed in (e) above, a Member will earn a
full month of Benefit Service if he completes 16 days of service in
that month, and no Benefit Service otherwise.
3.03 Restoration of Retired Member or Other Former Employee to Service
(a) If a Member in receipt of a Pension is restored to service with the
Employer or an Affiliated Employer as an Employee, the following shall
apply:
(i) If his restoration to service occurs prior to his Normal
Retirement Date his Pension shall cease and any election of an
optional benefit in effect shall be void. If his restoration to
service occurs after his Normal Retirement Date (i) his Pension
shall be suspended during each Suspendible Month (unless the
provisions of Sections 4.02(c) and 5.04(b) are applicable), and
(ii) any optional benefit shall remain in effect, unless the
Member shall elect otherwise; if the Member had commenced
payment prior to his Normal Retirement Date, however, any
additional Pension he accrues after his restoration to service
shall be paid to his surviving spouse in accordance with the
provisions of Section 4.06 if he should die in active service.
(ii) Any Period of Service and Benefit Service to which he was
entitled when he retired or terminated service shall be restored
to him.
(iii) Upon later retirement or termination his Pension shall be based
on the benefit formula then in effect and his Compensation and
Benefit Service before and after the period when he was not in the
service of the Employer, reduced by an amount of Equivalent
Actuarial
<PAGE>
Page 15
Value to the benefits, if any, he received before the earlier of
the date of his restoration to service or his Normal Retirement
Date.
(iv) The part of the Member's Pension upon later retirement payable
with respect to Benefit Service rendered before his previous
retirement or termination of service shall never be less than the
amount of his previous Pension modified to reflect any option in
effect on his later retirement.
(v) Upon later retirement of a Member in service after his Normal
Retirement Date, payment of the Member's Pension shall resume no
later than the third month after the latest Suspendible Month
during the period of restoration, and shall be adjusted, if
necessary, in compliance with Title 29 of the Code of Federal
Regulations, Section 2530.203-3 in a consistent and
nondiscriminatory manner.
(b) If a Member entitled to but not in receipt of a Pension is restored to
service, his Period of Service and Benefit Service shall be determined
as provided in Sections 3.01 and 3.02.
(c) If a Member entitled to but not in receipt of a Pension is restored to
service with the Employer after having had a Break in Service or if a
former Member who received a lump sum settlement in lieu of a Pension is
restored to service with the Employer, the following shall apply:
(i) Upon completion of one year of a Period of Service following the
Break in Period of Service the Service to which he was previously
entitled shall be restored to him, and, if applicable, he shall
again become a Member as of his date of restoration to service as
an Employee.
(ii) Any Benefit Service to which the Member was entitled at the time
of his termination of service shall be restored to him.
<PAGE>
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(iii) Upon later termination or retirement of a Member whose previous
Benefit Service has been restored under this paragraph (c), his
Pension shall be based on the benefit formula then in effect and
his Compensation and Benefit Service before and after the period
when he was not in the service of the Employer.
(d) If a former Member who is not entitled to a Pension is restored to
service after having had a Break in Service, the following shall apply:
(i) Upon completion of a one year Period of Service following the
Break in Service, he shall again become a Member as of his date
of restoration to service as an Employee.
(ii) Upon his restoration to membership, the Period of Service to
which he was previously entitled shall be restored to him if his
period of Break in Service does not equal or exceed the greater
of (A) five years, or (B) his Period of Service before his Break
in Service, determined at the time of the Break in Service,
excluding any Period of Service disregarded under this paragraph
(d) by reason of any earlier Break in Service.
(iii) Any Benefit Service to which the Member was entitled at the time
of his termination of service which is included in the Period of
Service so restored shall be restored to him.
(iv) Upon later termination or retirement of a Member whose previous
Benefit Service has been restored under this paragraph (d), his
Pension, if any, shall be based on the benefit formula then in
effect and his Compensation and Benefit Service before and after
the period when he was not an Employee.
(e) An Employee who has received a lump sum payment equal to the value of
his vested benefit at the time of his termination and is rehired will,
upon subsequent retirement, have his Accrued Benefit reduced by the
vested benefit for which he received a lump sum payment.
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ARTICLE 4. ELIGIBILITY FOR AND AMOUNT OF BENEFITS
4.01 Normal Retirement
(a) The right of a Member to his normal retirement Pension shall be
nonforfeitable as of his Normal Retirement Age. A Member may retire
from service on a normal retirement Pension beginning on his Normal
Retirement Date or he may postpone his retirement and remain in service
after his Normal Retirement Date, in which event the provisions of
Section 4.02 shall be applicable.
(b) Subject to the provisions of Section 5.01 and effective January 1, 1989,
the annual normal retirement Pension payable upon retirement on a
Member's Normal Retirement Date shall be equal to the sum of:
(i) .4% of the Member's Average Final Compensation multiplied by his
Benefit Service completed before July 15, 1971,
(ii) .7% of the Member's Average Final Compensation multiplied by his
Benefit Service earned after July 15, 1971, and
(iii) an additional 0.3% of the Member's Average Final Compensation
multiplied by his Benefit Service earned while an employee of
Short Run Labels, Inc.
(c) Former Prior Plan Participants shall receive the benefit described in
(b) for service after December 31, 1988 plus the benefit accrued through
December 31, 1988 under the Prior Plan formula multiplied by Average
Final Compensation as of the determination date and divided by Average
Final Compensation as of December 31, 1988, if this provides a greater
benefit than that calculated under Section 4.01(b). If the PIA offset
to the accrued benefit calculated as of
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December 31, 1988 is greater than 50% of the accrued benefit calculated
before such offset, it will be reduced so that it is no more than 50%
of such benefit.
4.02 Late Retirement
(a) If a Member postpones his retirement as provided in Section 4.01(a), he
shall be retired from service on a late retirement Pension on the first
day of the calendar month after the Committee receives his written
application to retire.
(b) A Member who remains in service after his Normal Retirement Date shall
be entitled to a monthly retirement Pension for each month during the
postponement period which does not constitute a Suspendible Month. Upon
later retirement, the Member shall be entitled to an immediate late
retirement Pension beginning on the Member's late retirement date and,
subject to the provisions of Section 5.01, shall be equal to the amount
determined in accordance with Section 4.01 based on the Member's Benefit
and Average Final Compensation as of his late retirement date.
(c) In the event a Member's Pension is required to begin under Section 5.05
while the Member is in active service, such required beginning date
shall be the Member's Annuity Starting Date for purposes of Article 5
and the Member shall receive a late retirement Pension commencing on or
before such required beginning date in an amount determined as if he had
retired on such date. As of each succeeding January 1 prior to the
Member's actual late retirement date (and as of his actual late
retirement date), the Member's Pension shall be recomputed to reflect
additional accruals. The Member's recomputed Pension shall then be
reduced by the Equivalent Actuarial Value of the total payments of his
late retirement Pension made with respect to Suspendible
<PAGE>
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Months of continued employment which were paid prior to each such
recomputation to arrive at the Member's late retirement Pension;
provided that no such reduction shall reduce the Member's late retirement
Pension below the amount of late retirement Pension payable to the
Member prior to the recomputation of such Pension.
4.03 Early Retirement
(a) A Member who has not reached his Normal Retirement Date but who has
reached his 60th birthday and whose Period of Service is not less than
15 years shall be retired from service on an early retirement Pension on
the first day of the calendar month after the Committee receives his
written application to retire.
(b) The early retirement Pension shall be a deferred Pension beginning on
the Member's Normal Retirement Date and, subject to the provisions of
Section 5.01, shall be equal to his Accrued Benefit. Nevertheless, the
Member may elect to receive an early retirement Pension beginning on the
first day of any calendar month after satisfying the Early Retirement
eligibility requirements before his Normal Retirement Date. In that
case, the Member's Pension shall be equal to the deferred Pension
reduced by 1/180 for each month that the date of commencement of such
early retirement pension precedes the Member's Normal Retirement Date.
4.04 Vesting
(a) A Member shall be 100 percent vested in, and have a nonforfeitable right
to, his Accrued Benefit upon completion of a five year Period of
Service. In addition, any Member who terminates prior to January 1,
1994 but after the Effective Date of Restatement shall be 100 percent
vested in his Accrued Benefit if he has completed five Plan Years during
each of which he has earned 1,000
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Hours of Service. If the Member's employment with the Employer is
subsequently terminated for reasons other than retirement or death, he
shall be eligible for a vested Pension after the Committee receives
his written application for the Pension.
(b) The vested Pension shall begin on the Member's Normal Retirement Date
and, subject to the provisions of Section 5.01, shall be equal to his
Accrued Benefit. Nevertheless, the Participant may elect to have his
vested Pension begin on the first day of any calendar month before his
Normal Retirement Date, in which case the Member's Pension shall be
equal to the Equivalent Actuarial Value of his Accrued Benefit.
4.05 Spouse's Pension
(a) If a married Member:
(i) dies in active service and prior to his Annuity Starting Date
having met the requirements for any Pension, or
(ii) dies after retiring on any Pension, or after terminating service
with entitlement to a vested Pension, but in either case before his
Annuity Starting Date,
a spouse's Pension shall be payable to his surviving spouse for life
provided that he and his spouse have been married throughout the
one-year period ending on the date of his death.
(b) The spouse's Pension shall commence on what would have the Member's
Normal Retirement Date (or the first day of the month following his date
of death, if later). However, the spouse may elect to begin receiving
payments as of the first day of any month following the Member's date of
death and prior to what would have been his Normal Retirement Date.
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(c) The spouse's Pension shall be equal to the amount of benefit the spouse
would have received if the Pension to which the Member was entitled at
his date of death had commenced on his Normal Retirement Date (or the
first day of the month following his date of death, if later) in the
form of a Qualified Joint and Survivor Annuity and the Member had died
immediately thereafter. However, if within the 90 day period prior to
his Annuity Starting Date a Member has elected an optional form of
Pension which provides for monthly payments to his spouse for life in an
amount equal to at least 50% but not more than 100% of the monthly
amount payable under the option for the life of the Member and such
option is of Equivalent Actuarial Value to the Qualified Joint and
Survivor Annuity, such optional form of Pension shall be used for
computing the spouse's Pension instead of the Qualified Joint and
Survivor Annuity. If the spouse elects early commencement in accordance
with paragraph (b) above, the amount of the Pension payable to the
spouse will be based on the amount of early retirement Pension to which
the Member would have been entitled if he had requested benefit
commencement at that earlier date, reduced in accordance with Section
4.03(b). The spouse may elect to receive the Spouse's Pension as a Lump
Sum of Equivalent Actuarial Value.
4.06 Maximum Benefit Limitation
The maximum annual Pension payable to a Member under the Plan shall be
subject to the limitations set forth in Section 415 of the Code and any
regulations issued thereunder. If a Member is a participant in any
qualified defined contribution plan required to be taken into account
for purposes of applying the combined plan limitations contained in
Section 415(e) of the Code, then for any year the sum of the defined
benefit plan fraction and the defined contribution
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plan fraction, as such terms are defined in said Section 415(e), shall
not exceed 1.0. If for any year the foregoing combined plan limitation
would be exceeded, the benefit provided under this Plan shall be reduced
to the extent necessary to meet that limitation.
4.07 Transfers and Employment with an Affiliated Employer
(a) If an Employee (i) becomes employed by the Employer in any capacity
other than as an Employee as defined in Article 1, or (ii) becomes
employed by an Affiliated Employer, or (iii) becomes a Leased Employee,
he shall retain any Benefit Service he has under this Plan. Upon his
later retirement or termination of employment with the Employer or
Affiliated Employer (or upon benefit commencement in the case of a
Leased Employee), any benefits to which the Employee is entitled under
the Plan shall be determined under the Plan provisions in effect on the
date he ceases to be an Employee, and only on the basis of his Benefit
Service accrued while he was an Employee, but including his Compensation
until such retirement or termination of employment.
(b) Subject to the Break in Service provisions of Article 3, in the case of
a person who (i) was originally employed by the Employer in any capacity
other than as an Employee as defined in Article 1, or (ii) was
originally employed by an Affiliated Employer, or (iii) was originally
providing services to the Employer as a Leased Employee, and thereafter
becomes an Employee, upon his later retirement or termination of
employment, the benefits payable under the Plan shall be computed under
the Plan provisions in effect at that time, and only on the basis of the
Benefit Service accrued while he is an Employee.
4.08 Special Provisions for Benefits Accrued Prior to January 1, 1994
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Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the
accrued benefit determined for the employee under (a) or (b) below:
(a) the employee's accrued benefit determined with respect to the benefit
formula applicable for the plan year beginning on or after January 1,
1994, as applied to the employee's total years of service taken into
account under the plan for the purposes of benefit accruals, or
(b) the sum of:
(i) the employee's accrued benefit as of the last day of the last plan
year beginning before January 1, 1994, frozen in accordance with
Section 1.401(a)(4)-13 of the regulations, and
(ii) the employee's accrued benefit determined under the benefit
formula applicable for the plan year beginning on or after January
1, 1994, as applied to the employee's years of service credited to
the employee for plan years beginning on or after January 1, 1994,
for purposes of benefit accruals.
A section 401(a)(17) employee means an employee whose current accrued
benefit as of a date on or after the first day of the first plan year
beginning on or after January 1, 1994, is based on compensation for a
year beginning prior to the first day of the first plan year beginning
on or after January 1, 1994, that exceeded $150,000.
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ARTICLE 5. PAYMENT OF PENSIONS
5.01 Automatic Form of Payment
(a) If the Member is not married on his Annuity Starting Date and has not
elected an optional benefit as provided in Section 5.02, his Pension
shall be payable in monthly installments ending with the last monthly
payment before death.
(b) If the Member is married on his Annuity Starting Date, and if he has not
elected an optional form of benefit as provided in Section 5.02, the
Pension payable shall be in the form of a Qualified Joint and Survivor
Annuity of Equivalent Actuarial Value to the Pension otherwise payable,
providing for a reduced Pension payable to the Member during his life,
and after his death providing that one-half of that reduced Pension will
continue to be paid during the life of, and to, the spouse to whom he was
married at his Annuity Starting Date. Notwithstanding the preceding, if
an option described in Section 5.02 provides for payments continuing
after the Member's death for the life of a Beneficiary at a rate of at
least 50% but not more than 100% of the Pension payable for the life of
the Member and if such option, with the spouse to whom the Member is
married on his Annuity Starting Date named as Beneficiary, would be of
greater actuarial value than the joint and survivor annuity described
above, such option with such spouse as Beneficiary shall be the Qualified
Joint and Survivor Annuity.
(c) In any case, a lump sum payment of Equivalent Actuarial Value shall be
made in lieu of all benefits if the present value of the Pension payable
to or on the behalf of the Member determined as of the Member's Normal
Retirement Date or actual termination of service, if later, amounts to
$3,500 or less. In determining the amount of a lump sum payment payable
under this paragraph, the interest rate to be used shall be equal to
that which would be used by the Pension
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Benefit Guaranty Corporation for valuing immediate or deferred
annuities, whichever is applicable, for single employer plans that
terminate on the first day of the Plan Year in which the Annuity
Starting Date occurs. The lump sum payment shall be made as soon as
administratively practicable following the Member's termination of
service or death, but in any event prior to the date his Pension
payments would have otherwise commenced. In the event a Member is not
entitled to any Pension upon his termination of employment, he shall be
deemed cashed-out under the provisions of this paragraph (d) as of the
date he terminated service.
5.02 Optional Forms of Payment
Any Member may, subject to the provisions of Section 5.03, elect to
convert the Pension otherwise payable to him into an optional benefit of
Equivalent Actuarial Value, as provided in one of the options named
below.
OPTION 1. A Pension payable for the Member's life, with no Pension
payable after his death.
OPTION 2. A modified Pension payable during the Member's life, and
after his death payable during the life of, and to, the
spouse to whom he was married at the time of his benefit
commencement.
OPTION 3. A modified Pension payable during the Member's life; if the
Member dies within 10 years of his Annuity Starting Date,
the balance of those monthly payments shall be paid to the
Beneficiary named by him when he elected the option;
provided that if the Beneficiary does not survive the 10
year period, a lump sum payment of Equivalent Actuarial
Value to the remaining payments shall be paid to the estate
of the last to survive of the Member and the Beneficiary.
OPTION 4. A single lump sum.
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If a Member dies after Pension payments have commenced, any payments
continuing on to his spouse or Beneficiary shall be distributed at least
as rapidly as under the method of distribution being used as of the
Member's date of death.
5.03 Election of Options
(a) A married Member's election of any option shall only be effective if
Spousal Consent to the election is received by the Committee, unless:
(i) the option provides for monthly payments to his spouse for life
after the Member's death, in an amount equal to at least 50% but not
more than 100% of the monthly amount payable under the option to the
Member, and
(ii) the option is of Equivalent Actuarial Value to the Qualified
Joint and Survivor Annuity.
(b) The Employer shall furnish to each Member, no less than 30 days and no
more than 90 days, before his Annuity Starting Date a written
explanation in nontechnical language of the terms and conditions of the
Pension payable to the Member in the normal and optional forms described
in Sections 5.01 and 5.02. Such explanation shall include a general
description of the eligibility conditions for, and the material features
and relative values of, the optional forms of Pensions under the Plan,
any rights the Member may have to defer commencement of his Pension, the
requirement for Spousal Consent as provided in paragraph (a) above, and
the right of the Member to make, and to revoke, elections under Section
5.02. An election under Section 5.02 shall be made on a form provided by
the Committee and may be made during the 90-day period ending on the
Member's Annuity Starting Date, but not prior to the date the Member
receives the written explanation described in this paragraph (b).
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(c) An election of an option under Section 5.02 may be revoked on a form
provided by the Committee, and subsequent elections and revocations may
be made at any time and from time to time during the 90-day election
period. An election of an optional benefit shall be effective on the
Member's Annuity Starting Date. A revocation of any election shall be
effective when the completed form is filed with the Committee. If a
Member who has elected an optional benefit dies before the date the
election of the option becomes effective, the election shall be revoked
except as provided in Section 4.06(c). If the Beneficiary designated
under an option dies before the date the election of the option becomes
effective, the election shall be revoked.
5.04 Commencement of Payments
(a) Except as otherwise provided in Article 4 or this Article 5, payment of a
Member's Pension shall begin as soon as administratively practicable
following the latest of (i) the Member's 65th birthday, (ii) the fifth
anniversary of the date on which he became a Member, or (iii) the date
he terminates service with the Employer, (but not more than 60 days
after the close of the Plan Year in which the latest of (i), (ii) or
(iii) occurs).
5.05 Distribution Limitations
Notwithstanding any other provision of this Article 5, all distributions
from this Plan shall conform to the regulations issued under Section
401(a)(9) of the Code, including the minimum distribution incidental
benefit requirement of Sec. 1.402(a)(9)-2 of the proposed regulations.
Further, such regulations shall override any plan provision that is
inconsistent with Section 401(a)(9) of the Code.
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5.06 Direct Rollover of Certain Distributions
(a) This Subsection applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Subsection, a
distributee may elect, at the time and in the manner prescribed by the
Retirement Board, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) The following definitions apply to the terms used in this Subsection:
(i) An "eligible rollover distribution" is any distribution of all or
any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income.
(ii) An "eligible retirement plan" is an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
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(iii) A "distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
(iv) A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
(c) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under section 1.411(a)-11(c) of
the Income Tax Regulations is given, provided that:
(i) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular
distribution option), and
(ii) the participant, after receiving the notice, affirmatively elects
a distribution.
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ARTICLE 6. CONTRIBUTIONS
6.01 Employer's Contributions
It is the intention of the Employer to continue the Plan and make the
contributions that are necessary to maintain the Plan on a sound
actuarial basis and to meet the minimum funding standards prescribed by
law. However, subject to the provisions of Article 10, the Employer may
discontinue its contributions for any reason at any time. Any
forfeitures shall be used to reduce the Employer's contributions
otherwise payable.
6.02 Return of Contributions
(a) If a contribution is conditioned on initial qualification of the Plan
under Section 401(a) of the Code, and if the Commissioner of Internal
Revenue, on timely application made after the establishment of the Plan,
determines that the Plan is not initially so qualified, or refuses, in
writing, to issue a determination as to whether the Plan is so
qualified, said contribution shall be returned to the Employer without
interest. The return shall be made within one year after the date of the
final determination of the denial of qualification. The provisions of
this paragraph (a) shall apply only if the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted, or
such later date as the Secretary of the Treasury may prescribe.
(b) The Employer's contributions to the Plan are conditioned upon their
deductibility under Section 404 of the Code. If all or part of the
Employer's deductions for contributions to the Plan are disallowed by
the Internal Revenue Service, the portion of the contributions to which
that disallowance applies shall be returned to the Employer without
interest, but reduced by any
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investment loss attributable to those contributions. The return shall be
made within one year after the date of the disallowance of deduction.
(c) The Employer may recover without interest the amount of its
contributions to the Plan made on account of a mistake in fact, reduced
by any investment loss attributable to those contributions, if recovery
is made within one year after the date of those contributions.
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ARTICLE 7. ADMINISTRATION OF PLAN
7.01 Named Fiduciary and Administrator
The Employer shall be the "named fiduciary" within the meaning of Section
402(a) of ERISA, and shall carry out the duties of the "administrator"
of the Plan as imposed under ERISA.
7.02 Responsibility
The Employer shall appoint a Pension Committee or "Committee" of not
less than one person which shall be responsible for providing for the
general administration of the Plan and for carrying out the provisions
of the Plan. Subject to the limitations of the Plan, the Committee from
time to time shall establish rules for the administration of the Plan.
The Committee shall have discretionary authority to interpret the Plan
(including but not limited to, determination of an individual's
eligibility for Plan participation, the right and amount of any benefit
payable under the Plan and the date on which any individual ceases to be
a Member). The determination of the Committee as to the interpretation
of the Plan or any disputed question shall be conclusive and final to
the extent permitted by applicable law. In providing for the
administration of the Plan, the Committee may delegate responsibilities
for the operation and administration of the Plan by written document
filed with the Plan records.
7.03 Meetings
The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time determine.
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7.04 Action of Majority
Any act which the Plan authorizes or requires the Committee to do may be
done by a majority of its members. The action of that majority
expressed from time to time by a vote at a meeting or in writing without
a meeting shall constitute the action of the Committee and shall have
the same effect for all purposes as if assented to by all members of the
Committee at the time in office.
7.05 Compensation and Bonding
No member of the Committee shall receive any compensation from the Plan
for his services as such and no bond or other security need be required
of him in that capacity in any jurisdiction.
7.06 Establishment of Rules
Subject to the limitations of the Plan, the Committee from time to time
shall establish rules for the administration of the Plan and the
transaction of its business.
7.07 Prudent Conduct
The members of the Committee shall use that degree of care, skill,
prudence and diligence that a prudent man acting in a like capacity and
familiar with such matters would use in a similar situation.
7.08 Actuary
As an aid to the Committee in fixing the rate of contributions payable
to the Plan, the actuary designated by the Committee shall make annual
actuarial valuations of the contingent assets and
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liabilities of the Plan, and shall submit to the Committee the rates of
contribution which he recommends for use.
7.09 Maintenance of Accounts
The Committee shall maintain accounts showing the fiscal transactions of
the Plan and shall keep in convenient form such data as may be necessary
for actuarial valuations of the Plan.
7.10 Service in More than One Fiduciary Capacity
Any individual, entity or group of persons may serve in more than one
fiduciary capacity with respect to the Plan and/or the funds of the Plan.
7.11 Limitation of Liability
The Employer, the Directors of the Employer, the members of the
Committee, and any officer, employee or agent of the Employer shall not
incur any liability individually or on behalf of any other individuals
or on behalf of the Employer for any act, or failure to act, made in
good faith in relation to the Plan or the funds of the Plan. However,
this limitation shall not act to relieve any such individual or the
Employer from a responsibility or liability for any fiduciary
responsibility, obligation or duty under Part 4, Title I of ERISA.
7.12 Indemnification
The members of the Committee, Directors, officers, employees and agents
of the Employer shall be indemnified against any and all liabilities
arising by reason of any act, or failure to act, in relation to the Plan
or the funds of the Plan, including, without limitation, expenses
reasonably incurred in the defense of any claim relating to the Plan or
the funds of the Plan, and amounts
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paid in any compromise or settlement relating to the Plan or the funds
of the Plan, except for actions or failures to act made in bad faith.
The foregoing indemnification shall be from the funds of the Plan to the
extent of those funds and to the extent permitted under applicable law;
otherwise from the assets of the Employer.
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ARTICLE 8. MANAGEMENT OF FUNDS
8.01 Funding Agent
All the funds of the Plan shall be held by a Funding Agent appointed
from time to time by the Board of Directors under a trust instrument
or an insurance or annuity contract adopted, or as amended, by the
Employer for use in providing the benefits of the Plan and paying its
expenses not paid directly by the Employer. The Employer shall have no
liability for the payment of benefits under the Plan nor for the
administration of the funds paid over to the Funding Agent.
8.02 Exclusive Benefit Rule
Except as otherwise provided in the Plan, no part of the corpus or
income of the funds of the Plan shall be used for, or diverted to,
purposes other than for the exclusive benefit of Members and other
persons entitled to benefits under the Plan, before the satisfaction
of all liabilities with respect to them. No person shall have any
interest in or right to any part of the earnings of the funds of the
Plan, or any right in, or to, any part of the assets held under the
Plan, except as and to the extent expressly provided in the Plan.
However, expenses of the Plan may be paid from the Plan's assets to
the extent not paid by the Employer.
8.03 Appointment of Investment Manager
The Employer may, in its discretion, appoint one or more investment
managers (within the meaning of Section 3(38) of ERISA) to manage
(including the power to acquire and dispose of) all or part of the
assets of the Plan, as the Employer shall designate. In that event,
authority over and responsibility for the management of the assets so
designated shall be the sole responsibility of that investment manager.
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ARTICLE 9. GENERAL PROVISIONS
9.01 Nonalienation
Except as required by any applicable law, no benefit under the Plan
shall in any manner be anticipated, assigned or alienated, and any
attempt to do so shall be void. However, payment shall be made in
accordance with the provisions of any judgment, decree, or order which:
(a) creates for, or assigns to, a spouse, former spouse, child or other
dependent of a Member the right to receive all or a portion of the
Member's benefits under the Plan for the purpose of providing child
support, alimony payments or marital property rights to that spouse,
child or dependent,
(b) is made pursuant to a State domestic relations law,
(c) does not require the Plan to provide any type of benefit, or any option,
not otherwise provided under the Plan, and
(d) otherwise meets the requirements of Section 206(d) of ERISA, as amended,
as a "qualified domestic relations order", as determined by the
Committee.
If the present value of any series of payments meeting the criteria set
forth in clauses (a) through (d) above amounts to $3,500 or less, a lump
sum payment of Equivalent Actuarial Value, determined in the manner
described in Section 5.01(d), shall be made in lieu of the series of
payments.
9.02 Conditions of Employment Not Affected by Plan
The establishment of the Plan shall not confer any legal rights upon any
Employee or other person for a continuation of employment, nor shall it
interfere with the rights of the Employer
<PAGE>
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to discharge any Employee and to treat him without regard to the
effect which that treatment might have upon him as a Member or potential
Member of the Plan.
9.03 Facility of Payment
If the Committee shall find that a Member or other person entitled to
a benefit is unable to care for his affairs because of illness or
accident or because he is a minor, the Committee may direct that any
benefit due him, unless claim shall have been made for the benefit by
a duly appointed legal representative, be paid to his spouse, a child,
a parent or other blood relative, or to a person with whom he resides.
Any payment so made shall be a complete discharge of the liabilities
of the Plan for that benefit.
9.4 Information
Each Member or other person entitled to a benefit, before any benefit
shall be payable to him or on his account under the Plan, shall file
with the Committee the information that it shall require to establish
his rights and benefits under the Plan.
9.05 Top-Heavy Provisions
(a) The following definitions apply to the terms used in this Section:
(i) "applicable determination date" means the last day of the later of
the first Plan Year or the preceding Plan Year;
(ii) "top-heavy ratio" means the ratio of (A) the present value of the
cumulative Accrued Benefits under the Plan for key employees to
(B) the present value of the cumulative Accrued Benefits under
the Plan for all key employees and non-key employees; provided,
however, that if an individual has performed services for the
Employer at any time during
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the 5-year period ending on the applicable determination date,
regardless of whether such employee earned compensation during
such period, any accrued benefit for such individual (and the
account of such individual) shall be taken into account;
(iii) "applicable valuation date" means the date within the preceding
Plan Year as of which annual Plan costs are or would be computed
for minimum funding purposes;
(iv) "key employee" means an employee who is in a category of employees
determined in accordance with the provisions of Section 416(i)(1)
and (5) of the Code and any regulations thereunder, and, where
applicable, on the basis of the Employee's remuneration from the
Employer or an Affiliated Employer;
(v) "non-key employee" means any employee who is not a key employee;
(vi) "average remuneration" means the average annual remuneration of a
Member for the five consecutive years of his Eligibility Service
after December 31, 1983 during which he received the greatest
aggregate remuneration from the Employer or an Affiliated Employer,
excluding any remuneration for service after the last Plan Year
with respect to which the Plan is top-heavy;
(vii) "required aggregation group" means each other qualified plan of
the Employer or an Affiliated Employer (including plans that
terminated within the five-year period ending on the determination
date) in which there are members who are key employees or which
enables the Plan to meet the requirements of Section 401(a)(4) or
410 of the Code; and
(viii) "permissive aggregation group" means each plan in the required
aggregation group and any other qualified plan(s) of the Employer
or an Affiliated Employer in which all members are non-key
employees, if the resulting aggregation group continues to meet
the requirements of Sections 401(a)(4) and 410 of the Code.
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(b) For purposes of this Section, the Plan shall be "top-heavy" with respect
to any Plan Year if as of the applicable determination date the
top-heavy ratio exceeds 60 percent. The top-heavy ratio shall be
determined as of the applicable valuation date in accordance with
Section 416(g)(3) and (4)(B) of the Code on the basis of the Unisex
Pension 1984 Mortality Table and an interest rate of 5 percent per
year compounded annually. For purposes of determining whether the Plan
is top-heavy, the present value of Accrued Benefits under the Plan
will be combined with the present value of accrued benefits or account
balances under each other plan in the required aggregation group, and,
in the Employer's discretion, may be combined with the present value
of accrued benefits or account balances under any other qualified
plan(s) in the permissive aggregation group. The accrued benefit of a
non-key employee under the Plan or any other defined benefit plan in the
aggregation group shall be (i) determined under the method, if any,
that uniformly applies for accrual purposes under all plans maintained
by the Employer or an Affiliated Employer, or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule described in Section
411(b)(1)(C) of the Code.
(c) The following provisions shall be applicable to Members for any Plan
Year with respect to which the Plan is top-heavy:
(i) In lieu of the vesting requirements specified in Section 4.04, a
Member shall be vested in, and have a nonforfeitable right to,
a percentage of his Accrued Benefit determined in accordance
with the provisions of Section 1.01 and subparagraph (ii)
below, as set forth in the following vesting schedule:
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Years of Eligibility Service Percentage Vested
---------------------------- -----------------
Less than 2 years 0%
2 years 20
3 years 40
4 years 60
5 or more years 100
(ii) The Accrued Benefit of a Member who is a non-key employee shall
not be less than two percent of his average remuneration
multiplied by the number of years of his Eligibility Service, not
in excess of 10, during the Plan Years for which the Plan is top-
heavy. That minimum benefit shall be payable at a Member's Normal
Retirement Date.
If payments commence at a time other than the Member's Normal
Retirement Date, the minimum Accrued Benefit shall be of
Equivalent Actuarial Value to that minimum benefit.
(iii) With respect to benefits accruing during any Plan Year beginning
before 1989 for which the Plan is top-heavy, Compensation taken
into account under the Plan may not exceed the first $200,000 of
annual remuneration paid to an Employee for services rendered to
the Employer, as reported on Form W-2.
(iv) The multiplier "1.25" in Sections 415(e)(2)(B)(i) and (3)(B)(i) of
the Code shall be reduced to "1.0", and the dollar amount "$51,875"
in Section 415(e)(6)(B)(i)(I) of the Code shall be reduced to
$41,500".
(d) If the Plan is top-heavy with respect to a Plan Year and ceases to be
top-heavy for a subsequent Plan Year, the following provisions shall be
applicable:
<PAGE>
Page 42
(i) The Accrued Benefit in any such subsequent Plan Year shall not be
less than the minimum Accrued Benefit provided in paragraph
(c)(ii) above, computed as of the end of the most recent Plan
Year for which the Plan was top-heavy.
(ii) If a Member has completed three years of Eligibility Service on or
before the last day of the most recent Plan Year for which the
Plan was top-heavy, the vesting schedule set forth in paragraph
(c)(i) above shall continue to be applicable.
(iii) If a Member has completed at least two, but less than three,
years of Eligibility Service on or before the last day of the
most recent Plan Year for which the Plan was top-heavy, the
vesting provisions of Section 4.04 shall again be applicable;
provided, however, that in no event shall the vested percentage
of a Member's Accrued Benefit be less than the percentage
determined under paragraph (c)(i) above as of the last day of
the most recent Plan Year for which the Plan was top-heavy.
9.06 Construction
(a) The Plan shall be construed, regulated and administered under ERISA as
in effect from time to time, and the laws of New York, except
where ERISA controls.
(b) The masculine pronoun shall mean the feminine where appropriate, and
vice versa.
(c) The titles and headings of the Articles and Sections in this Plan are
for convenience only. In case of ambiguity or inconsistency, the text
rather than the titles or headings shall control.
<PAGE>
Page 43
ARTICLE 10. AMENDMENT, MERGER AND TERMINATION
10.1 Amendment of Plan
The Board of Directors reserves the right at any time and from time to
time, and retroactively if deemed necessary or appropriate, to amend in
whole or in part any or all of the provisions of the Plan. However, no
amendment shall make it possible for any part of the funds of the Plan
to be used for, or diverted to, purposes other than for the exclusive
benefit of persons entitled to benefits under the Plan, before the
satisfaction of all liabilities with respect to them. No amendment
shall be made which has the effect of decreasing the Accrued Benefit of
any Member or of reducing the nonforfeitable percentage of the Accrued
Benefit of a Member below the nonforfeitable percentage computed under
the Plan as in effect on the date on which the amendment is adopted or,
if later, the date on which the amendment becomes effective.
Additionally, any Employee with three years of service may elect to have
his nonforfeitable percentage continue to be calculated on the basis of
the Plan's provisions before the amendment.
10.2 Merger or Consolidation
The Plan may not be merged or consolidated with, and its assets or
liabilities may not be transferred to, any other plan unless each person
entitled to benefits under the Plan would, if the resulting plan were
then terminated, receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.
<PAGE>
Page 44
10.03 Additional Participating Employers
(a) If any company is now or becomes a subsidiary or associated company of
an Employer, the Board of Directors may include the employees of that
company in the membership of the Plan upon appropriate action by that
company necessary to adopt the Plan. In that event, or if any persons
become Employees of an Employer as the result of merger or
consolidation or as the result of acquisition of all or part of the
assets or business of another company, the Board of Directors shall
determine to what extent, if any, credit and benefits shall be granted
for previous service with the subsidiary, associated or other
company, but subject to the continued qualification of the trust for
the Plan as tax-exempt under the Code.
(b) Any subsidiary or associated company may terminate its participation
in the Plan upon appropriate action by it, in which event the funds of
the Plan held on account of Members in the employ of that company
shall be determined by the Committee and shall be applied as provided
in Section 10.04 if the Plan should be terminated, or shall be
segregated by the Funding Agent as a separate trust, pursuant to
certification to the Funding Agent by the Committee, continuing the
Plan as a separate plan for the employees of that company under which
the board of directors of that company shall succeed to all the powers
and duties of the Board of Directors, including the appointment of the
members of the Committee.
10.04 Termination of Plan
The Board of Directors may terminate the Plan for any reason at any
time. In case of termination of the Plan, the rights of Members to
the benefits accrued under the Plan to the date of the termination, to
the extent then funded or protected by law, if greater, shall be
nonforfeitable. The funds of the Plan shall be used for the exclusive
benefit of persons entitled
<PAGE>
Page 45
to benefits under the Plan as of the date of termination, except as
provided in Section 6.02. However, any funds not required to satisfy
all liabilities of the Plan for benefits because of erroneous
actuarial computation shall be returned to the Employer. The
Committee shall determine on the basis of acturial valuation the share
of the funds of the Plan allocable to each person entitled to benefits
under the Plan in accordance with Section 4044 of ERISA, or
corresponding provision of any applicable law in effect at the time.
In the event of a partial termination of the Plan, the provisions of
this Section shall be applicable to the Members affected by that
partial termination.
10.05 Limitations Concerning Highly Compensated Employees
(a) In the event of plan termination, the benefit of any highly
compensated employee (and any highly compensated former employee) is
limited to a benefit that is nondiscriminatory under section 401(a)(4).
(b)(i) Annual payments to an employee described in paragraph (ii) below are
restricted to an amount equal in each year to the payments that would
be made on behalf of the employee under-
(A) A straight life annuity that is the actuarial equivalent of the
accrued benefit and other benefits to which the employee is
entitled under the plan (other than a social security
supplement), and
(B) The amount of the payments that the employee is entitled to
receive under a social security supplement. The restrictions
in this paragraph (b) do not apply, however, if any one of the
following requirements is satisfied-
<PAGE>
Page 46
(1) After payment to an employee described in paragraph (ii)
below of all benefits payable to the employee under the
plan, the value of plan assets equals or exceeds 110 percent
of the value of current liabilities, as defined in Code
Section 412(l)(7).
(2) The value of the benefits payable to the employee under the
plan for an employee described in paragraph (ii) below is
less than 1 percent of the value of current liabilities
before distribution, or
(3) The value of the benefits payable to the employee under
the plan for an employee described in paragraph (ii)
below does not exceed the amount described in Code
Section 411(a)(11)(A) (restrictions on certain mandatory
distributions).
(ii) The employees whose benefits are restricted on distribution include
all highly compensated employees and highly compensated former
employees. In any one year, the total number of employees whose
benefits are subject to restriction under this section can be
limited by the plan to a group of not less than 25 highly
compensated employees and highly compensated former employees. If
the group of affected employees is so limited by the plan, the group
must consist of those highly compensated employees and highly
compensated former employees with the greatest compensation in
the current or any prior year. Plan provisions defining or
altering the group of employees whose benefits are restricted under
this Section 10.05 may be amended at any time without violating Code
Section 411(d)(6).
(iii) "Benefit" defined. For purposes of this Section 10.05, the term
"benefit" includes, among other benefits, loans in excess of the
amounts set forth in section 72(p)(2)(A), any periodic income, any
withdrawal values payable to a living employee, and any death
benefits not provided for by insurance on the employee's life.
<PAGE>
Page 47
(iv) Determination of current liabilities. For purposes of this
Section 10.05, the value of current liabilities is reported on
Schedule B of the employer's most recent, timely filed Form 5500
or Form 5500 C/R.
(v) The value of plan assets and the value of current liabilities
will be determined as of the same date.
(c) If it should subsequently be determined by statute, court decision
acquiesced in by the Commissioner of Internal Revenue, or ruling by the
Commissioner of Internal Revenue, that the provisions of this Section are
no longer necessary to qualify the Plan under the Code, this Section
shall be ineffective without the necessity of further amendment to the
Plan.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 25, 1996
<PAGE>
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
National Fiberstok Corporation:
We consent to the use of our report on the consolidated financial statements
of TRANSKRIT Corporation, included herein and to the reference to our firm under
the heading "Experts" in the prospectus. Our report dated May 24, 1996 refers to
a change in the method of accounting for income taxes.
KPMG Peat Marwick LLP
Roanoke, Virginia
July 25, 1996
<PAGE>
EXHIBIT 25.1
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Myfanwy P. Bonilla
Asst. Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8914
(Name, address and telephone number of agent for service)
NATIONAL FIBERSTOK CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 23-2574778
(State of incorporation) (I.R.S. employer identification no.)
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
(Address of principal executive offices) (Zip Code)
___% Senior Notes due 2002
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Wilmington Trust Company, a corporation organized and existing under
the laws of Delaware, has duly caused this Statement of Eligibility to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City of
Wilmington and State of Delaware on the 18th day of July, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald P. MacKelcan By: /s/ Norma P. Closs
----------------------- ----------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the United
States or of this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse
<PAGE>
to his interest therein, and to prepare and give certificates of title
for any lands or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
2
<PAGE>
bankruptcy, executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with surety, but
its capital stock shall be taken and held as security for the
performance of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or deeds of
trust or mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such bonds,
as and when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property of
any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
3
<PAGE>
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
4
<PAGE>
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the
5
<PAGE>
provisions of such resolution or resolutions as may be adopted by the
Board of Directors pursuant to section (b) of this Article FOURTH,
each holder of Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by the
stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
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directors constituting the entire Board shall be not less than five nor
more than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in
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accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other
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corporation (whether or not itself an Interested Stockholder), which,
after such merger or consolidation, would be an Affiliate (as
hereinafter defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of
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stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
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determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on the
third Thursday of each month at the principal office of the Company, or at such
other place and time as may be designated by the Board of Directors, the
Chairman of the Board, or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such
<PAGE>
meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a week in each week
the Board is not regularly scheduled to meet. A majority of its members shall
be necessary to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when a quorum is
present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in
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accordance with the provisions of Article III of these By-Laws; and if less than
three members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-
Law shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws(other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at least once a month. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Trust Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
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business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
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operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 5. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
5
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ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in
6
<PAGE>
the State of Delaware, or elsewhere, without any specific authority,
ratification, approval or confirmation by the Board of Directors or the
Executive Committee, and any and all such instruments shall have the same force
and validity as although expressly authorized by the Board of Directors and/or
the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or
7
<PAGE>
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
8
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, Wilmington
Trust Company hereby consents that reports of examinations by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: July 18, 1996 By: /s/ Norma P. Closs
-----------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -----------------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31, 1996.
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . 198,158
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 536,638
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . 862,050
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .82,000
Securities purchased under agreements to resell. . . . . . . . . . . . . 25,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,404,372
LESS: Allowance for loan and lease losses. . . . . . 48,153
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and
reserve. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,356,219
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . .76,915
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . .16,314
Investments in unconsolidated subsidiaries and associated companies. . . . . 146
Customers' liability to this bank on acceptances outstanding . . . . . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,403
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,240
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,265,083
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . 3,450,823
Noninterest-bearing . . . . . . . . 689,843
Interest-bearing. . . . . . . . . . 2,760,980
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . 99,885
Securities sold under agreements to repurchase . . . . . . . . . . . . . 198,506
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . .38,856
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . . 930,611
With original maturity of more than one year. . . . . . . . . . . . .28,000
Mortgage indebtedness and obligations under capitalized leases . . . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,832
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,847,513
Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . 354,791
Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . 417,570
Total liabilities, limited-life preferred stock, and equity capital. . 5,265,083
2
<PAGE>
EXHIBIT 99.6
------------
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--
Social Security numbers have nine digits separated by two hyphens: i.e., 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER OF:
- ------------------------ ------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the
account or, if combined funds,
any one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated ward, incompetent person(3)
minor or incompetent person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
state law
<PAGE>
EXHIBIT 99.6
Page 2
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER OF:
- ------------------------ ------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension trust The legal entity (Do not
furnish the identification
number of the personal
representative or trustee
unless the legal entity itself
is not designated in the
account title.)(5)
10. Corporate account The organization
11. Religious, charitable, or educational The corporation
organization account
12. Partnership account The partnership
13. Association, club or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or prison)
that receives agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
<PAGE>
EXHIBIT 99.6
Page 3
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- - A real estate investment trust.
<PAGE>
EXHIBIT 99.6
Page 4
- - A common trust fund operated by a bank under section 584(a) of the Code.
- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1) of the Code.
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- - Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
- - Payments on tax-free covenant bonds under section 1451 of the Code.
<PAGE>
EXHIBIT 99.6
Page 5
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 605ON of the Code and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
a tax return. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.6
Page 6
PAYER'S NAME: WILMINGTON TRUST COMPANY
SUBSTITUTE Part I--Please Part III--Social Security
FORM W-9 provide your TIN Number OR Employer
DEPARTMENT OF THE TREASURY in the box at Identification Number
INTERNAL REVENUE SERVICE right and certify __________________
by signing and (If awaiting TIN write
dating below. "Applied For")
Payer's Request Part II--For Payees Exempt From Backup
for Taxpayer Identification Withholding, see the enclosed Guidelines for
Number (TIN) Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete as
instructed therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
NAME_________________________________
(Please Print)
SIGNATURE____________________________ DATE____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
<PAGE>
EXHIBIT 99.6
Page 7
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within sixty (60)
days, 31% of all payments with respect to the Old Notes or the New Notes made to
me thereafter will be withheld until I provide a number.
SIGNATURE_________________________ DATE_________________
