<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PERRY-JUDD'S INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2752 51-0365965
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
575 WEST MADISON STREET
WATERLOO, WI 53594
(920) 478-3551
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
CRAIG A. HUTCHISON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PERRY-JUDD'S INCORPORATED
575 WEST MADISON STREET
WATERLOO, WI 53594
(920) 478-3551
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
KENNETH R. BENDER, ESQ.
Brobeck, Phleger & Harrison LLP
550 S. Hope Street
Los Angeles, CA 90071-2604
(213) 489-4060
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If 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 MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
<S> <C> <C> <C> <C>
10 5/8% Senior Subordinated Notes due
2007............................... $115,000,000 -- $115,000,000 $33,925
</TABLE>
(1) Pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended, the
registration fee has been estimated based on the book value of the
securities to be received by Registrant in exchange for the securities to be
issued hereunder in the Exchange Offer described herein.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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>
SUBJECT TO COMPLETION, DATED , 1998.
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 JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
($115,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
[LOGO]
---------------------
The Exchange Offer will expire at 5:00 p.m. New York City time, on
, 1998, unless extended.
------------------------
Perry-Judd's Incorporated, a Delaware corporation (the "Company" or
"Perry-Judd's") hereby offers, upon the terms and conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange its 10 5/8% Senior Subordinated Notes due 2007 (the
"Exchange Notes"), in an offering that has been registered under the Securities
Act of 1933, as amended (the "Securities Act") pursuant to a Registration
Statement on Form S-4 of which this prospectus is a part, for an equal principal
amount of its outstanding 10 5/8% Senior Subordinated Notes due 2007 (the
"Outstanding Notes") of which an aggregate of $115,000,000 in principal amount
is outstanding as of the date hereof (the "Exchange Offer"). The Exchange Notes
and the Outstanding Notes are sometimes referred to collectively herein as the
"Senior Notes." The form and terms of the Exchange Notes will be the same as the
form and term of the Outstanding Notes except that the Outstanding Notes will
not bear legends restricting the transfer thereof. The Exchange Notes will be
obligations of the Company entitled to the benefits of the Indenture, dated as
of December 16, 1997 (the "Indenture"), relating to the Senior Notes. See
"Description of Exchange Notes." Following the completion of the Exchange Offer,
none of the Senior Notes will be entitled to any rights under the Registration
Rights Agreement dated December 16, 1997, including but not limited to the
contingent increase in the interest rate provided for therein. See "The Exchange
Offer."
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH ANY INVESTMENT IN THE SENIOR NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE .
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE 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 , 1998.
<PAGE>
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered on or prior to 5:00 p.m., New York City time on the date the
Exchange Offer expires, which will be , 1998 unless the Exchange Offer
is extended (the "Expiration Date"). Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. The Company has not entered into
any arrangement or understanding with any person to distribute the Exchange
Notes to be received in the Exchange Offer.
The Outstanding Notes initially sold to Qualified Institutional Buyers (as
defined in Rule 144A) in reliance on Rule 144A under the Securities Act ("Rule
144A") were initially represented by two permanent global Notes in definitive,
fully registered form, registered in the name of a nominee of The Depositary
Trust Company ("DTC"), which were deposited with U.S. Trust of California, N.A.,
the Trustee under the Indenture (the "Trustee"), as custodian. The Exchange
Notes exchanged for the Outstanding Notes that are represented by the global Old
Notes will continue to be represented by the permanent global Old Notes (the
"Global Notes") in definitive, fully registered form, registered in the name of
a nominee of DTC and deposited with the Trustee as custodian, unless the
beneficial holders thereof request otherwise. See "Description of the Exchange
Notes--Book Entry; Delivery and Form." Outstanding Notes may be tendered only in
denominations of $1,000 and any integral multiple thereof.
Interest on the Exchange Notes will be payable semi-annually in arrears on
December 15 and June 15 of each year (each an "Interest Payment Date"),
commencing on the first such date following their date of issuance. Interest on
the Exchange Notes will accrue from the last Interest Payment Date on which
interest was paid on the Outstanding Notes that are accepted for exchange or, if
no interest has been paid, from December 15, 1998, as the case may be, will
cease to be payable upon issuance of the Exchange Notes. Untendered Outstanding
Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer
will remain outstanding and bear interest at a rate of 10 5/8% per annum after
the Expiration Date.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who acquires such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that 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 holder is acquiring the Exchange Notes in the ordinary course of such
holder's business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes. Holders of Outstanding Notes wishing to accept the Exchange
Offer must represent to the Company that such conditions have been met. Each
broker-dealer that receives Exchange 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 Exchange 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 Exchange Notes
received in exchange for Outstanding Notes where such Outstanding Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of 180 days from the date of this Prospectus, or such shorter period as
will terminate when all Outstanding Notes acquired by broker-dealers for their
own accounts as a result of market-making activities or other trading activities
have been exchanged for Exchange Notes and resold by such broker-dealers. See
"Plan of Distribution".
Prior to the Exchange Offer, there has been no public market for the Senior
Notes. The Company does not intend to list the Exchange 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
2
<PAGE>
Exchange Notes will develop. To the extent that a market for the Exchange Notes
develops, the market value of the Exchange Notes will depend on market
conditions (such as yields on alternative investments) general economic
conditions, the Company's financial condition and other conditions. Such
conditions might cause the Exchange Notes, to the extent that they are actively
traded, to trade at a significant discount from the face value. See "Risk
Factors--Lack of Public Market for Securities."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS
OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION,
CERTAIN STATEMENTS UNDER THE SECTION HEADINGS "SUMMARY," "THE COMPANY," "THE
ACQUISITION," "PPC HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "JUDD'S, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING THE COMPANY'S
FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY CAN BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL", "EXPECT",
"INTEND", "ESTIMATE", "ANTICIPATE", "BELIEVE", OR "CONTINUE" OR THE NEGATIVE
THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK
FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
PERRY-JUDD'S INCORPORATED, 575 WEST MADISON STREET, WATERLOO, WISCONSIN 53594,
ATTENTION: CHIEF FINANCIAL OFFICER (TELEPHONE NUMBER: (920) 478-3551). IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE 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.
4
<PAGE>
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
WITHOUT LIMITATION THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO (THE "COMPANY CONSOLIDATED FINANCIAL STATEMENTS"), THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO OF JUDD'S, INCORPORATED (THE "JUDD'S
CONSOLIDATED FINANCIAL STATEMENTS") AND THE "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL DATA" AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED OR THE CONTEXT CLEARLY IMPLIES OTHERWISE,
ALL REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO PERRY-JUDD'S
INCORPORATED (FORMERLY KNOWN AS PPC HOLDINGS, INC.) AND ITS SUBSIDIARIES
(INCLUDING, JUDD'S, INCORPORATED), ALL REFERENCES TO "PERRY" REFER TO PERRY
GRAPHIC COMMUNICATIONS, INC. AND ALL REFERENCES TO "JUDD'S" REFER TO JUDD'S,
INCORPORATED AND ITS SUBSIDIARIES.
THE COMPANY
The Company is a leading multi-regional printer of magazines, catalogs,
technical books and other commercial products. Its four printing facilities are
strategically located in the Midwest and Mid-Atlantic regions, with each plant
having state-of-the-art, integrated prepress, press, binding and distribution
capabilities. The Company services regional and national customers through sales
offices in twelve cities nationwide. Management believes both Perry and Judd's
have established reputations for high quality products and superior customer
service which have resulted in long-standing customer and supplier
relationships. The Company manages the total prepress, print and distribution
process to provide value-added solutions that reduce customer costs or assist
customers in increasing revenues. For the twelve months ended September 30,
1997, on a pro forma basis after giving effect to the Transactions and the
Sale/Leaseback, the Company had net sales and EBITDA (as defined) of $282.7
million and $29.7 million, respectively.
The Company specializes in three significant sectors of the printing
industry: Magazines, Catalogs and Technical Books.
MAGAZINES. The Company believes it is the eighth largest printer of
magazines in the United States, offering a full array of value-added services
specifically tailored to its magazine customers. The Company's customers include
some of the nation's leading publishers such as Time Inc., Newsweek, The
McGraw-Hill Companies, The Economist and the Washington Post Company. Magazines
printed by the Company include well known monthly and weekly publications such
as TIME, LIFE, SPORTS ILLUSTRATED, PEOPLE, IN STYLE, BUSINESS WEEK, THE
ECONOMIST, NEWSWEEK, KIPLINGER'S PERSONAL FINANCE and THE WASHINGTON POST
MAGAZINE. Substantially all of the Company's magazine printing is performed
under contracts with terms ranging from one to six years. The Company's success
in attracting and maintaining customers is enhanced by its sophisticated
prepress and printing capabilities and its ability to facilitate targeted
marketing and distribution through the use of its geo-demographic selective
binding, ink-jet addressing and customized list processing services. In
addition, the Company believes it is one of only six major printers with
specialized tabloid-size magazine printing and binding capabilities used for
titles such as COMPUTERWORLD and AMNEWS. The Company's magazine business
generated combined net sales of $151.3 million, or 52% of total combined net
sales for 1996.
CATALOGS. The Company believes it is the seventh largest catalog printer in
the U.S., producing catalogs for customers which include J.C. Penney, Hecht's,
Black Box and Doubleday Book & Music Club. Sophisticated prepress, press,
binding and distribution capabilities ensure that high quality catalogs reach
the consumer in a timely and cost-efficient manner. In addition, the Company
believes it is one of only four major printers with specialized digest-size
catalog printing and binding capabilities. The Company's catalog business
generated combined net sales of $82.0 million, or 28% of total combined net
sales for 1996.
5
<PAGE>
TECHNICAL BOOKS. The Company prints a variety of information-intensive
professional and technical journals, reference books and business directories.
The Company also offers data conversion and composition, database management and
multimedia publishing services to its technical book customers. In this segment,
the Company has over 350 customers including the American Medical Association,
Arbitron Rating Company, Dun & Bradstreet, Insurance Institute, Matthew Bender,
The McGraw-Hill Companies, Morningstar Inc. and Standard & Poor's. The Company's
technical books business generated combined net sales of $36.7 million, or 13%
of total combined net sales for 1996.
The Company also produces a variety of specialty commercial products such as
magazine inserts, calendars and general advertising products. These commercial
products enable the Company to optimize capacity utilization by supplementing
its magazine and catalog business. These products generated combined net sales
of $21.1 million, or 7% of total combined net sales for 1996.
ACQUISITION RATIONALE
As the commercial printing industry continues to consolidate and customer
needs become more complex and sophisticated, the Company believes that prospects
for future success and growth in the industry will depend in large part on
having sufficient financial, technological and distribution capabilities to
address the evolving needs of its customer base. The Company believes that the
acquisition of Judd's will contribute significantly to the Company's competitive
position in the industry and will position it as the seventh largest magazine
and catalog printer in the U.S. (on a total combined net sales basis).
The Company believes that there are significant opportunities and synergies
in acquiring Judd's, including a broadening of the Company's customer base, the
establishment of a physical presence in the Mid-Atlantic region, the enhancement
of the Company's technological capabilities and expansion into new segments of
the commercial printing market. Both Perry and Judd's have long-established
traditions of superior customer service, which the Company believes will help
ensure consistent quality of service to the Company's existing and future
customers and will help to facilitate the integration of the two companies. In
addition, by consolidating administrative operations and managing the production
capacity of the two companies, the Company expects to achieve greater production
efficiencies and a reduction of its costs of sales.
COMPANY STRENGTHS
SUPERIOR QUALITY AND CUSTOMER SERVICE. Perry and Judd's have each
established a reputation for providing superior quality and customer service.
The Company offers high value services that address customers' specific needs
and is committed to meeting those needs through responsive and flexible service.
To ensure continual process improvement, the Company has invested in training
and manages its operations using a total quality management approach. The
Company's commitment to provide timely, cost-effective, high quality printing
solutions combined with the Company's distinctive service orientation
differentiates it from its competitors. As evidence of its consistent focus on
quality, in March 1997 the Company was awarded Business Week's annual "Quality
Achiever" award for the fourth time in the past six years.
LONG-STANDING CUSTOMER RELATIONSHIPS. The Company has provided printing
services for customers such as Time Inc., J.C. Penney, Newsweek, and Kiplinger's
for over 15 years, The McGraw-Hill Companies for over 30 years and the American
Medical Association for 40 years. On a combined basis, the Company's customer
base included over 130 magazine publishers and 110 catalog merchants, with no
title comprising more than 5% of total combined net sales for 1996. The top ten
customers have been with the Company for an average of over 15 years and
accounted for approximately 35% of total combined net sales for 1996. The
Company believes its combination of outstanding performance and commitment to
responsive customer service have enabled the Company to build loyalty with its
customer base that allows it to grow its business relationships. These
relationships provide a strong foundation for growth in the business.
6
<PAGE>
TECHNOLOGICALLY-ADVANCED EQUIPMENT. The Company is committed to providing
advanced production capabilities which deliver value-added solutions to its
customers. Since the beginning of 1993, the Company has invested over $100
million (on a combined basis) in capital expenditures to upgrade and expand its
equipment base. Management believes that these investments, including
high-speed, high-yield press equipment, cost-effective binding equipment and
computer-to-plate technology, have enabled the Company to remain at the
forefront of technology, retain and expand relationships with existing
customers, increase capacity, lower production costs, improve quality, speed and
flexibility and attract new business.
STRATEGIC LOCATIONS. The Company's four printing plants are strategically
located to service major population centers throughout the U.S., enabling the
Company to provide rapid, cost-efficient national and regional distribution. The
location of the Company's plants, combined with its distribution volume, allows
the Company to ship directly to U.S. Postal Service sectional center facilities,
which lowers its customers' postage rates and provides for quicker delivery of
magazines and catalogs to consumers. The proximity of the Company's facilities
to a majority of the U.S. population and central distribution routes provides
significant distribution economies to its customers and a competitive advantage
to the Company.
EXPERIENCED MANAGEMENT TEAM AND PRINCIPAL STOCKHOLDERS. The Company's
executive officers and key management employees have spent the majority of their
careers in printing and publishing and have an average of over 20 years of
experience in the industry. Management's expertise and in-depth knowledge of the
Company's markets are further complemented by the experience of Robert E.
Milhous and Paul B. Milhous, the principal stockholders of the Company. Prior to
their ownership of Perry, the Milhouses owned Treasure Chest Advertising
Company, Inc., which grew from a start-up in 1967 to the sixth largest
commercial printer in the U.S., having net sales in excess of $550 million
before its sale to Big Flower Press, Inc. in 1993.
BUSINESS STRATEGY
The Company's strategic objective is to grow revenues and profits by
leveraging its competitive strengths as an integrated provider of high quality
products and value-added services in its targeted business sectors. Key elements
in this strategy include the Company's ability to capitalize on opportunities
presented by the combination of Perry and Judd's and to pursue complementary
acquisitions:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company intends to take
advantage of the considerable cross-selling opportunities presented by the
combination of Perry's and Judd's respective customer bases, product lines and
geographical locations. The Company expects to increase product penetration of
its existing customer base by capturing work that previously exceeded Perry's
and Judd's stand-alone capacities and particular areas of expertise. For
example, with the addition of Judd's medium- and short-run printing
capabilities, the Company will be well-positioned to serve the needs of many of
Perry's larger, long-run customers who are developing or acquiring additional
shorter-run targeted specialty magazines and catalogs. In addition, the Company
can now offer its customers a choice of Mid-Atlantic and Midwestern production
locations.
REALIZE OPERATIONAL SYNERGIES. The Company believes it can achieve
production rationalization from the integration of Perry's long-run and Judd's
medium- and short-run printing capabilities. By allocating production among the
various facilities, the Company can better absorb increased volumes and manage
available capacity, thereby optimizing labor and equipment utilization while
reducing printing and distribution costs. In addition, Judd's Mount Jackson,
Virginia facility, currently used for back-issue storage, provides the Company
with a ready-made expansion facility.
CAPTURE OVERHEAD COST AND VOLUME PURCHASING EFFICIENCIES. The Company
expects to consolidate overhead functions of Perry and Judd's resulting in
savings from the elimination of redundant administrative operations. In
addition, the Company believes the combined volume requirements for paper, other
raw materials and production supplies should allow it to negotiate improved
terms from vendors.
7
<PAGE>
Management also believes the combined Company can obtain better pricing from
equipment manufacturers.
DEVELOP NEW MEDIA SERVICES. The Company is among the printing industry's
leaders in offering innovative on-line and multimedia products and services. The
Company's New Media Services group develops and manages interactive web-sites
for both publishing and direct-marketing customers who desire to complement
ink-on-paper products with on-line products and services. The Company has also
successfully marketed its New Media Services to non-publishing customers. The
Company has implemented web-site advertising and electronic commerce programs
for its customers and believes multimedia and on-line products and services
present the Company with significant growth opportunities and further
differentiate it from its competitors.
GROW THROUGH COMPLEMENTARY ACQUISITIONS. The Company plans to capitalize on
the printing industry's fragmentation by pursuing selective complementary
acquisitions to broaden its geographic presence, extend its product offerings,
and expand production capacity within the magazine and catalog sectors.
Management believes such acquisitions can offer significant cost savings
realized through the combined purchasing of raw materials, reduction of overhead
costs and productivity gains captured by the Company's ability to integrate
newly acquired facilities with the Company's existing business.
RECENT DEVELOPMENTS
As of October 17, 1997, Perry-Judd's (under its corporate name at that time,
PPC Holdings, Inc.) and a wholly-owned subsidiary (the "Acquisition Subsidiary")
entered into a Plan and Agreement of Merger (the "Merger Agreement") with
Judd's. Pursuant to the Merger Agreement, on December 16, 1997 Perry-Judd's
acquired all of the outstanding capital stock of Judd's, and Judd's became a
wholly-owned subsidiary of Perry-Judd's (the "Acquisition"). The aggregate
merger consideration was $99.6 million, which included the repayment of
outstanding indebtedness of Judd's as of December 16, 1997 and a preliminary
working capital adjustment, and is subject to a final, post-closing working
capital adjustment as set forth in the Merger Agreement. The Acquisition was
effected by the merger of the Acquisition Subsidiary with and into Judd's.
Simultaneously with the closing of the Acquisition, PPC Holdings, Inc. was
renamed Perry-Judd's Incorporated. See "Description of the Acquisition."
The Company financed the Acquisition and the repayment of certain existing
indebtedness with (i) borrowings by certain of its subsidiaries under an amended
and restated credit agreement (the "Amended and Restated Credit Agreement"),
including $30.0 million of borrowings under a senior secured term loan facility
(the "Term Loan Facility") and $1.4 million of borrowings (on a pro forma basis
at September 30, 1997) under a $45.0 million senior secured revolving credit
facility (the "Revolving Credit Facility"), (ii) the gross proceeds of $115.0
million from the sale of Outstanding Notes, (iii) $9.5 million of preferred
stock resulting from the conversion of a $6.5 million promissory note plus
accrued interest thereon held by Ropamil Limited Partnership ("Ropamil"), an
affiliate of Robert E. Milhous and Paul B. Milhous (the "Note Conversion") and
(iv) $4.0 million of proceeds from the sale of common stock of Perry-Judd's to
certain existing stockholders (the "Equity Investment"). Each of the
Acquisition, the Amended and Restated Credit Agreement, the Offering, the Note
Conversion and the Equity Investment closed simultaneously on December 16, 1997,
and are sometimes referred to herein collectively as the "Transactions." See
"Description of Amended and Restated Credit Agreement" and "Description of Note
Conversion."
In addition, on December 16, 1997, Perry and Judd's, collectively as tenant,
entered into a sale/ leaseback transaction with a third party with respect to
all real property owned by Perry and its subsidiaries (the "Sale/Leaseback").
Net proceeds of approximately $17.6 million from the Sale/Leaseback were used to
repay certain outstanding indebtedness under the Existing Credit Agreement (as
defined). See "Description of Sale/Leaseback."
8
<PAGE>
The following chart sets forth the organizational structure of the Company
after taking into account the Transactions and the Sale/Leaseback:
The Perry-Judd's Incorporated
Organization Structure Chart
------------------------
Perry-Judd's is a Delaware corporation with its principal executive offices
at 575 West Madison Street, Waterloo, Wisconsin 53594. Perry-Judd's telephone
number is (920) 478-3551.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Company is offering to exchange $1,000 in principal
amount (and any integral multiple thereof) of Exchange
Notes for each $1,000 in principal amount (and any
integral multiple thereof) of Outstanding Notes that are
validly tendered pursuant to the Exchange Offer. The
Company will issue the Exchange Notes promptly after the
Expiration Date. As of the date of this Prospectus,
$115,000,000 in aggregate principal amount of
Outstanding Notes are outstanding. The Company has not
entered into any arrangement or understanding with any
person to distribute the Exchange Notes to be received
in the Exchange Offer.
Resale............................ The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be freely
transferable by the holders thereof without registration
or any prospectus delivery requirement under the
Securities Act, except that a "dealer" or any of the
Company's affiliates, as such terms are defined under
the Securities Act, that exchanges Outstanding Notes
held for its own account may be required to deliver
copies of this Prospectus in connection with any resale
of the Exchange Notes issued in exchange for such
Outstanding Notes. See The Exchange Offer--General and
Plan of Distribution.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless extended, in
which case the term Expiration Date means the latest
date and time to which the Exchange Offer is extended.
The Company will accept for exchange any and all
Outstanding Notes that are validly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time,
on the Expiration Date.
Accrued Interest on the New Notes
and the Outstanding Notes....... Each New Note will bear interest from the last Interest
Payment
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Date on which interest was paid on the Outstanding
Notes, or, if interest has not yet been paid on the
Outstanding Notes, from December 16, 1997, the date of
issuance (the "Issue Date"). Such interest will be paid
with the first interest payment on the Exchange Notes.
Accordingly, interest, which has accrued since the last
Interest Payment Date or December 16, 1997, as the case
may be, on the Outstanding Notes accepted for exchange
will cease to be payable upon issuance of the Exchange
Notes. Untendered Outstanding Notes that are not
exchanged for Exchange Notes pursuant to the Exchange
Offer will bear interest at a rate of 10 5/8% per annum
after the Expiration Date.
Termination....................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the Exchange
Offer could be materially impaired due to any legal or
governmental action, any new law, statute, rule or
regulation or any interpretation by the staff of the
Commission of any existing law, statute, rule or
regulation. Holders of Outstanding Notes will have
certain rights against the Company under the
Registration Rights Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer--Termination." No federal or state regulatory
requirements must be complied with or approvals obtained
in connection with the Exchange Offer, other than
applicable requirements under federal and state
securities laws.
Procedures for Tendering Old
Notes........................... Each holder of Outstanding Notes wishing to accept the
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 Outstanding Notes and
any other required documentation to Fleet National Bank,
as Exchange Agent (the "Exchange Agent"), at the address
set forth herein and therein, or effect a tender of
Outstanding Notes pursuant to the procedure for
book-entry transfer as provided for herein. By executing
the Letter of Transmittal, each holder will represent to
the Company that, among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not
such person is the holder, that neither the holder nor
any such other person has an arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes and, except as
otherwise disclosed in writing to the Company, that
neither the holder nor any such other person is an
"affiliate", as defined in Rule 405 under the Securities
Act, of the Company.
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer, commercial
bank, trust company
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
or other nominee and who wishes to tender such
Outstanding Notes in the Exchange Offer should contact
such registered holder promptly and 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 such owner's Outstanding Notes, either make
appropriate arrangements to register ownership of the
Outstanding Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date.
Guaranteed Delivery Procedures.... Holders of Outstanding Notes who wish to tender their
Outstanding Notes and whose Outstanding Notes are not
immediately available or who cannot deliver their
Outstanding 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 their Outstanding Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights................. Tenders of Outstanding Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Outstanding Notes
and Delivery of Exchange
Notes........................... Subject to certain conditions (as summarized above in
"Termination" and described more fully in "The Exchange
Offer--Termination"), the Company will accept for
exchange any and all Outstanding Notes that are validly
tendered in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See
"The Exchange Offer--General."
Certain Federal Income Tax
Considerations.................. The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income tax
purposes. For a discussion of certain federal income tax
considerations relating to the exchange of the
Outstanding Notes for the Exchange Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent.................... The Trustee is also the Exchange Agent. The mailing
address of the Exchange Agent is U.S. Trust Company of
California, N.A., c/o United States Trust Company of New
York, P. O. Box 841, Peter Cooper Station, New York, New
York 10276-0841. The address for deliveries by overnight
courier is: U.S. Trust Company of California, N.A., c/o
United States Trust Company of New York, 770 Broadway,
13th Floor, New York, New York 10003, Attention:
Corporate Trust Municipal Operations. Hand deliveries
should be made to U.S. Trust Company of California,
N.A., c/o United States Trust Company of New York, 111
Broadway, Lower Level, New York, New York 10006-1906,
Attention: Corporate Trust Operations. For information
with
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
respect to the Exchange Offer, the telephone number for
the Exchange Agent is (800) 225-2398 and the facsimile
number for the Exchange Agent is (212) 420-6504,
Attention: Customer Service.
Use of Proceeds................... There will be no cash proceeds payable to the Company
from the issuance of the Exchange Notes pursuant to the
Exchange Offer. Of the approximately $111.5 million of
net proceeds received by the Company from the sale of
the Outstanding Notes, approximately $99.6 million was
used to pay the aggregate merger consideration in the
Acquisition, approximately $10.8 million was used to pay
expenses related to the Acquisition and the other
Transactions and the remaining $1.1 million was used for
general corporate purposes. See "Use of Proceeds."
</TABLE>
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to an aggregate principal amount of $115,000,000
of the Outstanding Notes. The form and terms of the Exchange Notes will be the
same as the form and terms of the Outstanding Notes except that the Exchange
Notes will not bear legends restricting the transfer thereof. The New Notes will
be obligations of the Company entitled to the benefits of the Indenture. See
"Description of the Exchange Notes."
<TABLE>
<S> <C>
Exchange Notes Offered............ $115,000,000 aggregate principal amount of 10 5/8%
Senior Subordinated Notes due 2007.
Maturity Date..................... December 15, 2007.
Interest Payment Dates............ June 15 and December 15, commencing 15, 1998.
Optional Redemption............... The Exchange Notes will be redeemable, in whole or in
part, at the option of the Company on or after December
15, 2002, at the redemption prices set forth herein,
plus accrued interest to the date of redemption. In
addition, at any time on or prior to December 15, 2000,
the Company, at its option, may redeem up to 35% of the
aggregate principal amount of the Notes originally
issued with the net cash proceeds of one or more Public
Equity Offerings (as defined), at a redemption price
equal to 110.625% of the principal amount thereof, plus
accrued interest to the date of redemption; PROVIDED
that at least 65% of the aggregate principal amount of
Notes originally issued remains outstanding immediately
following such redemption. See "Description of Exchange
Notes--Redemption."
Ranking........................... The Exchange Notes will be general unsecured obligations
of the Company and will be subordinated in right of
payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Exchange Notes will
rank PARI PASSU in right of payment with any future
senior subordinated indebtedness of the Company and will
rank senior in right of payment to all other
subordinated indebtedness of the Company. As of
September 30, 1997, on a pro forma basis after giving
effect to the Transactions and the Sale/Leaseback and
the use of proceeds therefrom, the Company would have
had no Senior
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Indebtedness outstanding (excluding guarantees of
Guarantor Senior Indebtedness). See "Unaudited Pro Forma
Condensed Combined Financial Data."
Guarantees........................ The Exchange Notes will be unconditionally guaranteed
(the "Guarantees") on a senior subordinated basis by
each of the Company's existing or future subsidiaries
(the "Subsidiary Guarantors"). The Guarantees will be
general unsecured obligations of the Subsidiary
Guarantors and will be subordinated in right of payment
to all existing and future Guarantor Senior Indebtedness
(as defined), which will include any guarantee by such
Subsidiary Guarantors of the Company's indebtedness
under the Amended and Restated Credit Agreement. The
Guarantees will rank PARI PASSU in right of payment with
any future senior subordinated indebtedness of the
Subsidiary Guarantors and will rank senior in right of
payment to all other subordinated obligations of the
Subsidiary Guarantors. As of September 30, 1997, on a
pro forma basis after giving effect to the Transactions
and the Sale/Leaseback and the use of the proceeds
therefrom, the Subsidiary Guarantors would have had
$31.4 million of Guarantor Senior Indebtedness
outstanding, and undrawn capacity of $43.6 million under
the Revolving Credit Facility, which, if drawn, would
constitute outstanding Guarantor Senior Indebtedness.
See "Description of Exchange Notes-- Guarantees."
Change of Control................. Upon a Change of Control (as defined), each holder of
the Exchange Notes will have the right to require the
Company to repurchase such holder's Exchange Notes at a
price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the repurchase date.
See "Description of Exchange Notes--Change of Control."
Offer to Repurchase............... The Company will be obligated to offer to repurchase the
Exchange Notes at 100% of the principal amount thereof
plus accrued and unpaid interest to the date of
repurchase in the event of certain Asset Sales (as
defined). See "Description of Exchange
Notes--Covenants--Limitation on Asset Sales."
Certain Covenants................. The Indenture governing the Exchange Notes (the
"Indenture") will contain certain covenants that limit
the ability of the Company and its subsidiaries to,
among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain
transactions with affiliates, incur liens, incur
indebtedness that is subordinate to Senior Indebtedness
but senior in right of payment to the Exchange Notes,
impose restrictions on the ability of a subsidiary to
pay dividends or make certain payments to the Company
and its subsidiaries, 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. These restrictions and
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
qualifications are subject to a number of important
qualifications and exceptions.
</TABLE>
For additional information regarding the Exchange Notes, see "Description of
Exchange Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Exchange Notes.
14
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary financial data for Perry-Judd's (formerly PPC Holdings, Inc.)
set forth below have been derived from PPC Holdings, Inc. Consolidated Financial
Statements for the 248 day period ended December 31, 1995, the year ended
December 31, 1996 and the 117 day period ended April 27, 1995 for the Company's
predecessor, Perry Printing Corporation, which was acquired by the Company as of
April 28, 1995, all of which have been audited by Deloitte & Touche LLP,
independent auditors, whose report is included elsewhere in this Prospectus. The
summary financial data for PPC Holdings, Inc. for the nine month periods ended
September 30, 1996 and 1997 were derived from the Company's unaudited
consolidated interim financial statements included elsewhere in this Prospectus.
The summary financial data for Judd's, Incorporated have been derived from
Judd's Consolidated Financial Statements for the years ended December 31, 1995
and 1996, which have been audited by Stoy, Malone & Company, P.C., independent
auditors, whose report for the years ended December 31, 1995 and 1996 is
included elsewhere in this Prospectus. The summary financial data for Judd's,
Incorporated for the nine month periods ended September 30, 1996 and September
30, 1997 have been derived from Judd's unaudited consolidated interim financial
statements included elsewhere in this Prospectus.
The summary unaudited pro forma condensed combined financial data set forth
below have been derived from the unaudited pro forma condensed combined balance
sheet as of September 30, 1997 and the unaudited pro forma condensed combined
statements of operations for the year ended December 31, 1996, the nine month
periods ended September 30, 1996 and 1997 and the twelve month period ended
September 30, 1997, all of which are included elsewhere in this Prospectus.
The unaudited pro forma financial data set forth below and elsewhere in this
Prospectus do not purport to represent the actual results that would have been
achieved had the Transactions and the Sale/ Leaseback been consummated on the
dates or for the periods indicated, and do not purport to indicate results of
operations or financial condition as of any future date or for any future
period. The following information should be read in conjunction with "Unaudited
Pro Forma Condensed Combined Financial Statements," "PPC Holdings, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Judd's, Incorporated Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company Consolidated
Financial Statements and the Judd's Consolidated Financial Statements included
elsewhere in this Prospectus.
15
<PAGE>
PPC HOLDINGS, INC. AND PREDECESSOR
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR(1) PPC HOLDINGS, INC.
-------------------------------------------------- ------------------------------------------------------
248 DAYS
117 DAYS ENDED YEAR ENDED
ENDED APRIL DECEMBER 31, DECEMBER 31,
27, 1995 1995 1996
----------- ------------- -------------
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------------------- SEPTEMBER 30,
1993 1994 ------------------------
1992 ----------- ----------- 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales......... $ 107,271 $ 105,915 $ 116,967 $ 45,920 $ 115,647 $ 138,511 $ 101,307 $ 105,611
Depreciation and
amortization of
intangibles..... 9,353 10,070 9,899 3,049 4,000 6,449 4,768 5,174
Income from
operations...... 5,162 5,354 4,591 2,281 5,263 6,508 3,078 3,399
Interest
expense(2)...... 247 433 980 470 4,503 5,946 4,465 4,417
Net income
(loss).......... 3,052 2,771 2,643 1,062 (885) (1,084) (1,909) (1,875)
OTHER DATA:
EBITDA(3)......... $ 14,518 $ 15,431 $ 14,444 $ 5,330 $ 9,267 $ 12,906 $ 7,846 $ 8,603
Rents and
operating lease
expense......... 92 91 145 46 2,500 4,292 3,163 3,473
CAPITAL
EXPENDITURES:
Purchased(4)...... 10,451 15,889 5,577 10,047 -- 5,186 1,744 585
Capital
investments
under operating
leases.......... -- -- -- -- 4,076 3,256 3,256 10,719(7)
BALANCE SHEET DATA:
Operating working
capital(5)...... $ 12,700 $ 11,208 $ 15,794 $ 12,845 $ 19,552 $ 14,478 $ 17,309 $ 19,571
Net property,
plant and
equipment....... 57,953 63,659 58,461 65,302 65,863 65,044 63,274 59,363
Total assets...... 80,434 86,007 87,354 98,384 119,032 104,281 106,244 105,502
Total long-term
debt(6)......... -- -- -- -- 65,829 59,711 61,933 60,411
Minority
interests(8).... -- -- -- -- 9,012 6,772 6,732 6,894
Shareholders'
equity.......... 62,795 66,493 65,718 68,565 16,616 15,532 14,707 13,657
</TABLE>
16
<PAGE>
JUDD'S, INCORPORATED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
YEAR ENDED DECEMBER 31, --------- --------- NINE MONTHS ENDED
------------------------------------- SEPTEMBER 30,
1992 1993 1994 ------------------------
----------- ----------- ----------- 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................. $ 105,725 $ 113,957 $ 118,783 $ 141,222 $ 152,563 $ 114,644 $ 101,935
Depreciation and
amortization of
intangibles.............. 5,366 5,042 7,341 8,094 7,961 5,855 6,511
Income from operations..... 4,752 3,415 2,427 5,679 6,137 4,746 4,105
Interest expense(2)........ 901 1,131 2,817 3,327 3,066 2,386 2,581
Net income (loss).......... 2,143 2,035 (311) 1,841 1,993 1,613 1,220
OTHER DATA:
EBITDA(3).................. $ 9,891 $ 8,759 $ 9,630 $ 13,895 $ 14,187 $ 10,686 $ 11,669
Rents and operating lease
expense.................. 2,720 2,712 2,940 2,846 2,864 2,065 2,805
CAPITAL EXPENDITURES:
Purchased(4)............... 4,323 17,313 14,688 7,746 5,954 4,259 4,873
Capital investments under
operating leases(9)...... -- -- 418 579 8,040 -- --
BALANCE SHEET DATA:
Operating working
capital(5)............... $ 14,876 $ 32,820 $ 21,203 $ 23,423 $ 18,358 $ 24,799 $ 22,727
Net property, plant and
equipment................ 27,343 42,485 50,195 51,203 49,352 49,876 47,555
Total assets............... 53,384 92,285 86,833 90,846 86,555 90,589 86,610
Total long-term debt(10)... 12,019 45,348 42,097 44,423 34,811 41,845 46,436
Minority interests......... 220 205 197 187 176 179 159
Shareholders' equity....... 27,512 27,636 27,274 27,727 29,776 29,389 19,808
</TABLE>
17
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA(12)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, TWELVE MONTHS
YEAR ENDED -------------------- ENDED SEPTEMBER
DECEMBER 31, 1996 1996 1997 30, 1997
----------------- --------- --------- -----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 291,074 $ 215,951 $ 207,546 $ 282,669
Depreciation and amortization of intangibles......... 12,151 9,045 9,478 12,584
Income from operations............................... 15,721 10,015 10,324 16,030
Interest expense(2).................................. 15,133 11,324 11,349 15,158
Net loss............................................. (3,220) (3,391) (3,335) (3,164)
OTHER DATA:
EBITDA(3)............................................ $ 27,910 $ 19,145 $ 20,885 $ 29,650
Rents and operating lease expense.................... 8,956 6,578 7,628 10,006
CAPITAL EXPENDITURES:
Purchased(4)......................................... 11,140 6,003 5,458 10,595
Capital investments under operating leases........... 11,296 3,256 10,719 18,759
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30, 1997
-----------------
<S> <C>
BALANCE SHEET DATA:
Operating working capital(5)................................................. $ 33,670
Net property, plant and equipment............................................ 123,609
Total assets................................................................. 238,022
Total long-term debt(10)..................................................... 146,681
Average debt(11)............................................................. 137,672
Minority interests(8)........................................................ 6,894
Shareholders' equity......................................................... 26,705
</TABLE>
- ------------------------------
(1) Effective April 28, 1995, the Company acquired certain assets and assumed
certain liabilities of Perry Printing Corporation and North Star Print
Group (collectively, the "Predecessor"). Prior to April 28, 1995, the
Company had no operating activity and substantially no assets. See Note 1
to the Company Consolidated Financial Statements.
(2) Includes interest on debt, but excludes amortization of deferred financing
costs, dividends and accretion on preferred stock.
(3) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, gains and losses on dispositions of assets and
nonrecurring computer-to-plate conversion expenses. While EBITDA should not
be construed as a substitute for operating income or loss or a better
indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital expenditure
and working capital requirements. EBITDA is not necessarily a measure of
the Company's ability to fund its cash needs. See the Company Consolidated
Statements of Cash Flows, the Judd's Consolidated Statements of Cash Flows
and the Unaudited Pro Forma Condensed Combined Statements of Operations and
the related notes thereto included in this Prospectus.
(4) Includes the recorded book value of assets obtained under capital leases.
(5) Excludes current portion of long-term debt.
(6) Includes current portion of long-term debt and PPC Holdings note payable to
related party.
(7) Represents operating leases for digital prepress, press and binding
equipment. Prior to 1997, advance payments on substantial leased assets
were paid directly by the Company. Beginning in 1997, advance payments were
made directly to the manufacturer by the lessor.
(8) Represents preferred stock of Perry. See Note 5 to Company Consolidated
Financial Statements.
(9) Represents operating leases. In 1996, Judd's placed into service a new
press and related equipment.
(10) Includes current portion of long-term debt.
(11) Represents the sum of the pro forma outstanding debt balances at the end of
the most recent quarter plus comparable data for each of the preceding
three quarters divided by four.
(12) For a description of purchase accounting and pro forma adjustments, see the
notes to the Unaudited Pro Forma Condensed Combined Balance Sheet and
Statements of Operations included elsewhere herein.
18
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE EXCHANGE NOTES SHOULD CONSIDER CAREFULLY THE
RISK FACTORS SET FORTH BELOW, AS WELL AS THE MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS, BEFORE MAKING A DECISION TO INVEST IN THE EXCHANGE
NOTES.
HIGH LEVEL OF INDEBTEDNESS AND ABILITY TO SERVICE DEBT
In connection with the Acquisition, the Company has incurred a significant
amount of indebtedness and will be highly leveraged. As of September 30, 1997,
the Company's indebtedness would have been $146.7 million on a pro forma basis
after giving effect to the Transactions and the Sale/Leaseback. The Company may
also borrow an additional $43.6 million under the Revolving Credit Facility.
Also, on the same pro forma basis the Company's ratio of earnings to fixed
charges would have been 0.9 to 1.0 for the twelve months ended September 30,
1997. In addition, subject to the restrictions in the Amended and Restated
Credit Agreement and the Indenture, the Company may incur additional senior
indebtedness to finance acquisitions and capital expenditures and for other
general corporate purposes. Also, as of September 30, 1997, the Company had
significant commitments under operating leases, including the impact of the
Sale/Leaseback.
The level of the Company's indebtedness could have important consequences to
holders of the Senior 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 future ability to obtain
additional debt financing for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the printing industry and
economic conditions generally, which could limit its ability to withstand
competitive pressures or take advantage of business opportunities; (iv) the
Company's borrowings under the Amended and Restated Credit Agreement will be at
variable rates of interest, which could cause the Company to be vulnerable to
increases in interest rates; and (v) all of the indebtedness incurred in
connection with the Amended and Restated Credit Agreement will become due prior
to the time the principal payments on the Notes will become due. Certain of the
Company's competitors currently operate on a less leveraged basis and are likely
to have significantly greater operating and financing flexibility than the
Company.
The Company's ability to pay interest on the Senior 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 available borrowings under the
Amended and Restated Credit Agreement, will be sufficient to meet its operating
expenses, capital expenditure requirements and working capital needs and to
service its debt requirements as they become due. However, 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, that they would
enable the Company to continue to meet its debt service obligations or that they
would be permitted under the terms of the Amended and Restated Credit Agreement
or Indenture. See "PPC Holdings, Inc. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Amended and Restated Credit Agreement" and "Description of
Exchange Notes."
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Senior Notes and the Guarantees will be subordinated in right of payment
to all senior indebtedness of the Company and the Subsidiary Guarantors. In the
event of bankruptcy, liquidation or reorganization of the Company, the assets of
the Company or the Subsidiary Guarantors will be available to pay obligations on
the Senior Notes only after all senior indebtedness of the Company or the
Subsidiary
19
<PAGE>
Guarantors, as the case may be, has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding. As of September 30, 1997, on a pro forma basis after giving effect
to the Transactions, the Sale/Leaseback and the use of proceeds therefrom, the
Company and its subsidiaries would have had approximately $31.4 million of
senior indebtedness outstanding and undrawn capacity of $43.6 million under the
Revolving Credit Facility which, if drawn, would constitute outstanding Senior
Indebtedness of the Company. Additional senior indebtedness may be incurred by
the Company and the Subsidiary Guarantors from time to time, subject to certain
restrictions. The Indenture generally provides that a Restricted Subsidiary (as
defined) may incur indebtedness only if such Subsidiary agrees to guarantee the
Senior Notes on a senior subordinated basis. The holders of the Senior Notes
will have no direct claim against the Subsidiary Guarantors other than claims
created by the Guarantees, if any, which may themselves be subject to legal
challenge in the event of the bankruptcy or insolvency of a Subsidiary
Guarantor. If such a challenge were upheld, the Guarantees would be invalidated
and unenforceable. To the extent that the Guarantees are held to be
unenforceable or have been released pursuant to the terms of the Indenture, the
rights of holders of the Senior Notes to participate in any distribution of
assets of any Subsidiary Guarantor upon liquidation, bankruptcy or
reorganization may, as is the case with other unsecured creditors of the
Company, be subject to prior claims against such Subsidiary Guarantor.
HOLDING COMPANY STRUCTURE
The Company is a holding company, the principal assets of which consist of
equity interests in its subsidiaries. The Senior Notes are a direct obligation
of the Company, which derives all of its revenues from the operations of its
subsidiaries. As a result, the Company will be dependent on the earnings and
cash flow of, and dividends and distributions or advances from, its subsidiaries
to provide the funds necessary to meet its debt service obligations, including
the payment of principal of and interest on the Notes. Accordingly, the
Company's ability to pay interest on the Senior Notes and otherwise to meet its
liquidity requirements may be limited as a result of its dependence upon the
distribution of earnings and advances of funds by its subsidiaries. The payment
of dividends from the subsidiaries to the Company and the payment of any
interest on or the repayment of any principal of any loans or advances made by
the Company to any of its subsidiaries may be subject to statutory restrictions
and are contingent upon the earnings of such subsidiaries. The Company's
subsidiaries are guarantors of the indebtedness incurred under the Amended and
Restated Credit Agreement. The Notes will not be secured by liens against any of
the Company's and its subsidiaries' assets, while the indebtedness incurred
under the Amended and Restated Credit Agreement will be secured by liens against
substantially all of the Company's and its subsidiaries' assets.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture will restrict, among other things, the Company's and its
subsidiaries' ability to incur additional indebtedness, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur liens, incur indebtedness that is
subordinate to Senior Indebtedness but senior in right of payment to the Senior
Notes, impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to the Company and its subsidiaries, 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 Amended and Restated Credit Agreement contains other and more restrictive
covenants and will prohibit the Company and its subsidiaries from prepaying
other indebtedness (including the Senior Notes). The Amended and Restated Credit
Agreement also requires the Company to maintain specified financial ratios and
satisfy certain financial condition tests. The Company's ability to meet those
tests and ratios can be affected by events beyond its control, and there can be
no assurance it will meet those ratios and tests. A breach of any of these
covenants could result in a default under the Amended and Restated Credit
Agreement and/or the Indenture. Upon the occurrence of an event of default under
the Amended and Restated Credit
20
<PAGE>
Agreement, the lenders could elect to declare all amounts outstanding under the
Amended and Restated Credit Agreement, together with accrued interest, to be
immediately due and payable. If the Company were unable to repay those amounts,
the lenders could proceed against the collateral granted to them to secure that
indebtedness. If the Senior Indebtedness were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
that indebtedness and the other indebtedness of the Company, including the
Senior Notes. The Company's obligations under the Amended and Restated Credit
Agreement will be secured by a security interest in substantially all the assets
of the Company and its subsidiaries, including all of their cash and other
tangible and intangible assets, and all real property. In addition, Perry-Judd's
and Judd's pledged as security all of their shares of capital stock in each of
their subsidiaries. See "Description of Amended and Restated Credit Agreement"
and "Description of Exchange Notes--Certain Covenants."
INTEGRATION OF ACQUISITIONS
Although the Company believes that it has developed comprehensive plans to
integrate Judd's, no assurance can be given that the integration of Judd's or
future acquisitions will be successful or that the anticipated strategic
benefits of the Acquisition or of future acquisitions will be realized. There
can be no assurance that the Company will be able to successfully integrate such
operations or future acquisitions with those of the Company, and failure to do
so could have a material adverse effect on the Company's financial position,
results of operations and cash flows. See "Description of the Acquisition."
The Company intends to manage the operations of Judd's as an integrated
entity; however, there can be no assurance that the Company will be able to
realize expected operating and economic efficiencies following the Acquisition.
The operations of Judd's vary in scope and type from the Company's current
operations. Additionally, although the Company does not currently have any
agreement or understanding with respect to any specific acquisition plans other
than the Acquisition, the need to focus management's attention on integration of
new operations, as well as other factors, may limit the Company's ability to
successfully pursue acquisitions or other opportunities related to its business
for the foreseeable future. There can be no assurance that the Company will be
able to find or initiate negotiations with suitable acquisition candidates, that
any future acquisitions will be consummated or that any newly acquired companies
will be successfully integrated into the Company's operations. Also, successful
integration of operations will be subject to numerous contingencies, some of
which are beyond management's control, which include general and regional
economic conditions and competition.
COMPETITION
The commercial printing industry in the U.S. is highly competitive in most
product categories and geographic regions. Competition is largely based on
price, quality, range of services offered, distribution capabilities, ability to
service the specialized needs of customers, availability of printing time on
appropriate equipment and use of state-of-the-art technology. The Company
competes for commercial business not only with large national printers, but also
with smaller regional printers. In certain circumstances, due primarily to
factors such as freight rates and customer preference for local services,
printers with better access to certain regions of the country may have a
competitive advantage in such regions. In addition, many of the Company's
competitors have substantially greater financial, marketing, distribution,
management and other resources than the Company, and as the industry experiences
continued consolidation, the Company's competitors may further enhance such
resources. The Company also believes that excess capacity in the industry,
especially during periods of economic downturn, would result in downward pricing
pressure and intensified competition in the printing industry. Given these
factors, there can be no assurance that the Company will be able to continue to
compete successfully against existing or new competitors, and the failure to do
so may have a material adverse effect on the Company's financial condition and
results of operations. See "Business--Competition."
21
<PAGE>
TECHNOLOGICAL CHANGE
Technology in the printing industry has evolved and continues to evolve. The
Company has invested over $100 million (on a combined basis) in capital
expenditures for printing facilities and equipment since 1993. As technology
continues to evolve and as its customers' needs become more specialized and
sophisticated in the future, the Company will likely be required to invest
significant additional capital in new and improved technology in order to
maintain and enhance the quality and competitiveness of, and to expand, its
products and services. If the Company is unable to acquire new and improved
technology, facilities and equipment or to develop and introduce enhanced or new
products and services, the Company's financial condition, results of operations
and cash flows could be materially adversely affected. See "Business--Markets,
Products and Customers" and "--Production and Distribution."
RAW MATERIALS--PAPER
The cost of paper is a principal factor in the Company's manufacturing costs
and pricing to certain customers and consequently the cost of paper
significantly affects the Company's net sales. The Company is generally able to
pass increases in the cost of paper to its customers, while declines in paper
costs generally result in lower prices to customers. Fluctuations in paper costs
result in corresponding fluctuations in the Company's net sales, but generally
have not affected volume or profits to any significant extent. However, sharp
increases in paper prices and related reduction in print advertising programs
are more likely to adversely affect volumes and profits. To the extent that
there are future paper cost increases and the Company is not able to pass such
increases to its customers or its customers reduce their demand for the
Company's products and services, the Company's financial condition and results
of operations could be materially adversely affected.
Capacity in the paper industry has remained relatively stable in recent
years. Increases or decreases in demand for paper have led to corresponding
pricing changes and, in periods of high demand, to limitations on the
availability of certain grades of paper, including grades utilized by the
Company. Any loss of the sources for paper supply or any disruption in such
sources' business or failure to meet the Company's product needs on a timely
basis could cause, at a minimum, temporary shortages in needed materials which
could have a material adverse effect on the Company's results of operations.
Although the Company actively manages its paper supply and believes it has
established strong relationships with its suppliers, there can be no assurance
that the Company's sources of supply for its paper will be adequate or, in the
event that such sources are not adequate, that alternative sources can be
developed in a timely manner. If the Company is unable to secure sufficient
supplies of paper of appropriate quality, its financial condition, results of
operations and cash flows could be materially adversely affected. See
"Business--Raw Materials."
CERTAIN CUSTOMER RELATIONSHIPS
The Company currently provides products and services to certain customers
without a written contractual arrangement. While the Company believes that its
relationship with each of these customers is good, there can be no assurance
that such customers will continue to do business with the Company at current
levels, if at all. In addition, provisions in the Company's contracts with
certain of its customers (each a former Judd's customer) require that such
customers consent in writing to the transfer of the contract to the Company from
Judd's pursuant to the Acquisition. Although the Company believes that all such
consents will be obtained, there can be no assurance such customers will not
withhold their consents and choose to terminate their contracts with the
Company.
LIMITED INDEMNITY
Under the terms of the Merger Agreement, the Company is entitled to
indemnification from the former stockholders of Judd's for breaches of the
representations, warranties and covenants of Judd's set
22
<PAGE>
forth in the Merger Agreement. The former stockholders are only liable for
indemnification claims by the Company up to an aggregate amount of $9.75 million
held in an escrow account and subject to release to the stockholders in three
equal annual installments (less the amount of any claims asserted by the
Company). Certain of the escrowed funds are available only for breaches of a
specified representation. In addition, the former stockholders' obligation to
indemnify the Company expires as to many of the representations and warranties
on the first anniversary following the consummation of the Merger. Accordingly,
in the event that a breach of one or more representations, warranties or
covenants results in a loss or liability to the Company in excess of the
available indemnity amount for such breach, or occurs after such indemnity
obligation terminates, the Company will bear the full amount of such loss or
liability, and there can be no assurance that such loss or liability may not
have a material adverse effect on the Company's financial condition and results
of operations. See "Description of the Acquisition."
ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATION
The Company is subject to regulation under various federal, state and local
laws relating to the environment and to employee health and safety. These
environmental regulations relate to the generation, storage, transportation,
handling, disposal and emission into the environment of various substances.
Permits are required for operation of the Company's business, and these permits
are subject to renewal, modification and, in certain circumstances, revocation.
The Company is also subject to regulation under various federal, state and local
laws which allow regulatory authorities to compel (or seek reimbursement for)
cleanup of environmental contamination at the Company's own sites and at
facilities where its waste is or has been disposed. The Company has internal
controls and personnel dedicated to compliance with all applicable environmental
and employee health and safety laws. The Company expects to incur ongoing
capital and operating costs and administrative expenses to maintain compliance
with applicable environmental laws. The Company cannot predict the environmental
or employee health and safety legislation or regulations that may be enacted in
the future or how existing or future laws or regulations will be administered or
interpreted. Compliance with new laws or regulations, as well as more vigorous
enforcement policies of the regulatory agencies or stricter interpretation of
existing laws, may require additional expenditures by the Company, some or all
of which may be material. See "Business--Regulatory Compliance."
RELIANCE ON KEY PERSONNEL
The Company's success will continue to depend to a significant extent on its
executive officers 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 any acquisitions by the Company (including the Acquisition) may
depend, in part, on the Company's ability to retain management personnel of the
acquired companies. There can be no assurance that the Company will be able to
retain such management personnel. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDERS
Robert E. Milhous and Paul B. Milhous, the Chairman and Vice Chairman,
respectively, of Perry-Judd's will own beneficially an aggregate of 95% of the
outstanding capital stock of Perry-Judd's immediately following the
Transactions. Accordingly, these stockholders have the ability, acting together,
to control fundamental corporate transactions requiring stockholder approval,
including without limitation approval of merger transactions involving the
Company and sales of all or substantially all of the Company's assets. See
"Principal Stockholders" and "Management."
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control the Company will be required to offer to purchase
all outstanding Senior Notes at 101% of the principal amount thereof plus
accrued and unpaid interest to the repurchase date. A
23
<PAGE>
Change of Control will likely trigger an event of default under the Amended and
Restated Credit Agreement which will permit the lenders thereunder to accelerate
the debt under the Amended and Restated Credit Agreement. However, there can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of Senior Notes tendered, or that,
if applicable, restrictions in the Amended and Restated Credit Agreement will
allow the Company to make such required repurchases. See "Description of
Exchange Notes--Change of Control."
FRAUDULENT CONVEYANCE RISKS
In the event of a subsequent bankruptcy proceeding or a lawsuit by or on
behalf of creditors of the Company or any Subsidiary Guarantor, the incurrence
by the Company of the indebtedness evidenced by the Senior Notes and the
Guarantees would be subject to review under relevant U.S. federal and state
fraudulent conveyance statutes ("Fraudulent Conveyance Statutes"). Under these
statutes, if at the time the Senior Notes and the Guarantees were issued and the
proceeds applied, (i) the Company issued the Senior Notes and the Guarantees and
applied the proceeds with the intent of hindering, delaying or defrauding
creditors or (ii) the Company received less than a reasonable equivalent value
or fair consideration for issuing the notes and the Guarantees and, after so
applying the proceeds, the Company or any Subsidiary Guarantor (a) was insolvent
or rendered insolvent by reason of such transactions, (b) was engaged in a
business or transaction for which its assets constituted unreasonably small
capital or (c) intended to incur, or believed that it would incur, debts beyond
its ability to pay as they matured (as the foregoing terms are defined in or
interpreted under Fraudulent Conveyance Statutes), such court could subordinate
all or part of the Senior Notes to existing and future indebtedness of the
Company, recover any payments made on the Senior Notes or take other actions
detrimental to the holders of the Senior Notes, including, under certain
circumstances, invalidating the Senior Notes.
Based upon the financial and other information currently available to it,
the Company believes that the indebtedness and obligations evidenced by the
Senior Notes and the Guarantees will be incurred and proceeds of the Senior
Notes will be used for proper purposes and in good faith. The Company believes
that at the time of, and after giving effect to, the incurrence of the
indebtedness and obligations evidence by the Senior Notes, it will be solvent
and will have sufficient capital to carry on its business and that it will pay
its debts as they mature. No assurance can be given, however, that a court would
concur with such beliefs and positions.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, a company or a guarantor will
be considered insolvent for these purposes if it is unable to pay its debts as
they become due in the usual course of its business or the sum of its debts is
greater than all the Company's property at a fair valuation or if the present
fair salable value of its assets is less than the amount that will be required
to pay its probable liability on its existing debts as they become absolute and
mature. In rendering their respective opinions on the validity of the Senior
Notes, counsel for the Company and counsel for the Initial Purchaser will
express no opinion as to the effect of Fraudulent Conveyance Statutes or
affecting the enforcement of creditors' rights generally.
LACK OF PUBLIC MARKET FOR SECURITIES; TRANSFER RESTRICTIONS
There has previously been no public market for the Senior Notes. The Company
does not intend to list the Exchange Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active trading market in the Exchange Notes will be developed
or maintained. To the extent that a market for the Exchange Notes does develop,
they may trade at a discount from their face value, depending upon prevailing
interest rates, the market for similar securities and other factors, including
general economic conditions and the financial condition, performance and
prospects of the Company.
24
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Outstanding Notes that are not exchanged for New Notes pursuant
to the Exchange Offer will remain subject to the existing restrictions on
transfer of such Outstanding Notes. Additionally, holders of any Outstanding
Notes not tendered in the Exchange Offer will not have any rights under the
Registration Rights Agreement to cause the Company to register the Outstanding
Notes.
DESCRIPTION OF THE ACQUISITION
As the commercial printing industry continues to consolidate and customer
needs become more complex and sophisticated, the Company believes that its
prospects for future success and growth will depend in large part on having
sufficient financial, technological and distribution capabilities to address the
evolving needs of its customer base. The Company believes that the acquisition
of Judd's will contribute significantly to the Company's competitive position in
the industry and will position it as the seventh largest magazine and catalog
printer in the U.S. (on a total combined net sales basis).
The Company believes that there are significant opportunities and synergies
in acquiring Judd's, including a broadening of the Company's customer base, the
establishment of a physical presence in the Mid-Atlantic region, the enhancement
of the Company's technological capabilities and expansion into new segments of
the commercial printing market. Both Perry and Judd's have long-established
traditions of superior customer service, which the Company believes will help
ensure consistent quality of service to the Company's existing and future
customers and will help to facilitate the integration of the two companies. In
addition, by consolidating administrative operations and managing the production
capacity of the two companies, the Company expects to achieve greater production
efficiencies and a reduction of its costs of sales.
TERMS OF THE ACQUISITION
As of October 17, 1997, Perry-Judd's (under its corporate name at that time,
PPC Holdings, Inc.) and a wholly-owned subsidiary entered into a Merger
Agreement for the acquisition of Judd's. Pursuant to the Merger Agreement on
December 16, 1997, Perry-Judd's acquired Judd's in exchange for aggregate merger
consideration of $99.6 million, which included the repayment of outstanding
indebtedness of Judd's as of the closing date and a preliminary working capital
adjustment, and is subject to a final, post-closing working capital adjustment
as set forth in the Merger Agreement. The Acquisition was effected by the merger
of the Acquisition Subsidiary with and into Judd's, which became a wholly-owned
subsidiary of Perry-Judd's. Simultaneously with the closing of the Acquisition,
PPC Holdings, Inc. was renamed Perry-Judd's Incorporated
An aggregate of $10.45 million of the merger consideration was deposited in
escrow upon the closing of the Acquisition for the following purposes: (i)
$700,000 (the "Adjustment Escrow Fund") to be disbursed to the Company or the
former stockholders of Judd's upon the final, post-closing determination of the
working capital adjustment as provided in the Merger Agreement (the "Adjustment
Amount"); (ii) $4.75 million (the "Indemnity Escrow Fund") to be applied to (A)
any Adjustment Amount in favor of the Company to the extent in excess of
$500,000, and (B) claims for indemnification for breaches of representations,
warranties and covenants of Judd's; and (iii) $5.0 million (the "Additional
Escrow Fund") to be applied, in addition to the Indemnity Escrow Fund, to claims
for indemnification for breach of the representation and warranty with respect
to capitalization. The escrowed amounts are subject to partial release to the
former stockholders of Judd's (subject to any claims asserted by the Company) in
three equal annual installments commencing on the first anniversary of the
closing date. Except for breaches of representations and warranties with respect
to capitalization, tax and environmental matters, for which the indemnification
obligation continues for a period of three years, the indemnity obligation for
losses arising from breaches of representations and warranties made by Judd's in
the Merger Agreement terminates as to any unclaimed loss on the first
anniversary of the closing date.
25
<PAGE>
The above summary of certain material provisions of the Merger Agreement is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Merger Agreement.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Outstanding Notes in like principal amount, the terms of which are identical to
the Exchange Notes except that (i) the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) the Exchange Notes registered
hereunder will not be entitled to any rights under the Registration Rights
Agreement dated December 16, 1997, including but not limited to the contingent
increase in the interest rate provided for therein. The Outstanding Notes
surrendered in exchange for the Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, the issuance of the Exchange Notes will not
result in any increase in the indebtedness of the Company.
The net proceeds received by the Company from the sale of the Outstanding
Notes (after deducting the discount to the Initial Purchasers and other expenses
in connection with such sale and the related Transactions) of approximately
$111.5 million were used as follows: (i) approximately $99.6 million to pay the
purchase price for the Acquisition, (ii) approximately $10.8 million to pay
expenses related to the Acquisition and the other Transactions and (iii)
approximately $1.1 million for general corporate purposes.
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Outstanding Notes, the Company entered
into the Registration Rights Agreement, which requires the Company to file with
the Commission a registration statement (the "Exchange Offer Registration
Statement") under the Securities Act with respect to an issue of notes of the
Company with terms identical to the Outstanding Notes (except with respect to
restrictions on transfer) and to use its best efforts to cause such registration
statement to become effective under the Securities Act and, upon the
effectiveness of such registration statement, to offer to the holders of the
Outstanding Notes the opportunity, for a period of 20 business days from the
date the notice of the Exchange Offer is mailed to holders of the Outstanding
Notes, to exchange their Outstanding Notes for a like principal amount of
Exchange Notes. The Exchange Offer is being made pursuant to the Registration
Rights Agreement to satisfy the Company's obligations thereunder. The Company
has not entered into any arrangement or understanding with any person to
distribute the Exchange Notes to be received in the Exchange Offer.
Under existing interpretations of the staff of the Commission, the Exchange
Notes would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act by holders thereof (other than (i)
a broker-dealer who acquires such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that 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 Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangements with any person to participate in
the distribution of such Exchange Notes. Eligible holders wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives Exchange 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 Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
would not permit the Company to effect the Exchange Offer or, if for any other
reason the Exchange Offer is not consummated on or prior to July 29, 1998, the
Company has agreed to use its best efforts to cause to become effective a shelf
registration statement (the "Shelf Registration Statement") with respect to the
resale of the
26
<PAGE>
Outstanding Notes and to keep the Shelf Registration Statement effective until
two years after the date of the initial sale of the Outstanding Notes or until
all the Outstanding Notes covered by the Shelf Registration Statement have been
sold pursuant to such Shelf Registration Statement.
TERMS OF THE EXCHANGE OFFER
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including that (i) any Exchange Notes to be received by such
holder will be acquired in the ordinary course of its business, (ii) that at the
time of the consummation of the Exchange Offer such holder will have no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes in violation of
the provisions of the Securities Act, (iii) that such holder is not an affiliate
(as defined in Rule 405 under the Securities Act) of the Company or any
Subsidiary Guarantor, (iv) if such holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Exchange
Notes and (v) if such holder is a broker-dealer (a "Participating
Broker-Dealer") that will receive Exchange Notes for its own account in exchange
for Outstanding Notes that were acquired as a result of market-making activities
or other trading activities, that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sales of Outstanding Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers (and other persons, if any, subject to similar prospectus
delivery requirements) to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such Exchange Notes,
provided, however, the Company shall not be required to amend or supplement such
prospectus for a period exceeding 180 days after the consummation of the
Exchange Offer. In addition, under the Registration Rights Agreement,
Outstanding Notes held by (i) the Initial Purchaser which may have the status of
an unsold allotment in an initial distribution or (ii) holders who are otherwise
not entitled to participate in the Exchange Offer may, upon request of such
holders to the Company prior to the consummation of the Exchange Offer, be
exchanged, simultaneously with the exchange of Outstanding Notes in the Exchange
Offer, for unregistered notes ("Private Exchange Notes") identical to the
Exchange Notes, except for transfer restrictions thereon.
In the event an exchange offer is consummated on or before July 29, 1998,
the Company will not be required to file a Shelf Registration Statement to
register any Outstanding Notes, and the interest rate on such Outstanding Notes
will remain at its initial level of 10 5/8% per annum. The Exchange Offer shall
be deemed to have been consummated upon the Company's having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Outstanding Notes that have been
properly tendered and not withdrawn by the Expiration Date. In such event,
holders of Outstanding Notes not participating in the Exchange Offer who are
seeking liquidity in their investment would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act. Following the Exchange Offer, holders of Private Exchange Notes and holders
of Exchange Notes that may not be sold without restriction under state and
federal securities laws (other than solely due to the holder's status as an
affiliate of the Company) shall continue to have certain rights to require the
Company to register such notes as set forth in the Registration Rights
Agreement. If the Company fails to register such notes in accordance with the
Registration Rights Agreement, the Company must pay, as liquidated damages,
additional interest on such notes as set forth in the Registration Rights
Agreement ("Additional Interest") until its registration obligations thereunder
are satisfied.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all
Outstanding Notes validly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 in principal amount of
Exchange Notes (and any integral multiple thereof) in exchange for an equal
principal amount of
27
<PAGE>
Outstanding Notes tendered and accepted in the Exchange Offer. Holders may
tender some or all of their Outstanding Notes pursuant to the Exchange Offer in
any denomination of $1,000 or in integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such
Exchange Notes. Any holder of Outstanding Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange 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 any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Outstanding
Notes, where such Outstanding 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 Exchange
Notes.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes except that the Exchange Notes will not bear
legends restricting the transfer thereof. The Exchange Notes will evidence the
same debt as the Outstanding Notes. The Exchange Notes will be issued under and
entitled to the benefits of the Note Indenture.
As of the date of this Prospectus, $115,000,000 aggregate principal amount
of the Outstanding Notes are outstanding and there are two registered holders
thereof. In connection with the issuance of the Outstanding Notes, the Company
arranged for the Outstanding Notes to be eligible for trading in the Private
Offering, Resale and Trading through Automated Linkages (PORTAL) Market, the
National Association of Securities Dealers' screen based, automated market
trading of securities eligible for resale under Rule 144A and to be issued and
transferable in book-entry form through the facilities of DTC. The Exchange
Notes will also be issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1998 (the "Record
Date").
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. See "Exchange Agent." The Exchange Agent will act as agent
for the tendering holders of Outstanding Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Outstanding Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Outstanding Notes who tender 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
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "Fees and Expenses."
Holders of Outstanding Notes do not have any appraisal or dissenters' rights
under the Delaware Corporations Code or the Note Indenture in connection with
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 Securities Act and the rules and regulations of
the Commission
28
<PAGE>
thereunder. Outstanding Notes that are not tendered for exchange in the Exchange
Offer will remain outstanding and continue to accrue interest, but will not be
entitled to any rights or benefits under the Registration Rights Agreement.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
, 1998 unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Outstanding Notes not previously accepted, if any of the
conditions set forth herein under "Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Company),
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Outstanding Notes. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof. 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 in a manner reasonably
calculated to inform the holders of the Outstanding Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the last Interest Payment Date on
which interest was paid on the Outstanding Notes, or if interest has not yet
been paid on the Outstanding Notes, from December 16, 1997. Such interest will
be paid with the first interest payment on the Exchange Notes. Interest on the
Outstanding Notes accepted for exchange will cease to accrue upon issuance of
the Exchange Notes.
The Exchange Notes will bear interest at a rate of 10 5/8% per annum.
Interest on the Exchange Notes will be payable semi-annually, in arrears, on
each Interest Payment Date following the consummation of the Exchange Offer.
Untendered Outstanding Notes that are not exchanged for Exchange Notes pursuant
to the Exchange Offer will bear interest at a rate of 10 5/8% per annum after
the Expiration Date.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Outstanding Notes (unless the book-entry transfer procedures described below are
used) and any other required documents, to the Exchange Agent for receipt prior
to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Outstanding Notes by causing
DTC to transfer such Outstanding Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer.
29
<PAGE>
The tender by a holder of Outstanding Notes 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.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Outstanding Notes and the Letter of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. 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 timely delivery. No Letter of Transmittal should be sent to
the Company.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder or any person whose Outstanding Notes are held of
record by DTC who desires to deliver such Outstanding Notes by book-entry
transfer at DTC.
Any beneficial holder whose Outstanding Notes are registered in the name of
such holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on such holder's behalf. If such
beneficial holder wishes to tender on such holder's own behalf, such beneficial
holder must, prior to completing and executing the Letter of Transmittal and
delivering such holder's Outstanding Notes, either make appropriate arrangements
to register ownership of the Outstanding Notes in such holder's name or obtain a
properly completed bond power from the registered holder. The transfer of record
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by 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 (an "Eligible Institution") that is a participant in a
recognized medallion signature guarantee program unless the Outstanding 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.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Outstanding Notes listed therein, such Outstanding Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Outstanding Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the
Outstanding Notes.
If the Letter of Transmittal or any Outstanding 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, submit evidence satisfactory to the Company of their authority to so
act with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding 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
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter
30
<PAGE>
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Outstanding Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Outstanding
Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Outstanding 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
without cost by the Exchange Agent to the tendering holder of such Outstanding
Notes unless otherwise provided in the Letter of Transmittal as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "Termination," to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Outstanding Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available, or (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date, or if such holder cannot
complete the procedure for book-entry transfer on a timely basis, 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 of the Outstanding Notes, the certificate number
or numbers of such Outstanding Notes and the principal amount of Outstanding
Notes tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Outstanding Notes (unless the book-entry transfer procedures
are to be used) to be tendered in proper form for transfer and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing all tendered Outstanding
Notes in proper form for transfer (or confirmation of a book-entry transfer into
the Exchange Agent's account at DTC of Outstanding Notes delivered
electronically) and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three business 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 Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Outstanding Notes to be withdrawn (the
"Depositor"), (ii) identify the Outstanding Notes to be withdrawn (including the
certificate number or numbers and
31
<PAGE>
principal amount of such Outstanding Notes), (iii) be signed by the Depositor in
the same manner as the original signature on the Letter of Transmittal by which
such Outstanding Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to permit the
Trustee with respect to the Outstanding Notes to register the transfer of such
Outstanding Notes into the name of the Depositor withdrawing the tender and (iv)
specify the name in which any such Outstanding Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Outstanding Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer, and no Exchange Notes will
be issued with respect thereto unless the Outstanding Notes so withdrawn are
validly retendered. Any Outstanding Notes that have been tendered but which are
not accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be
retendered by following one of the procedures described above under "Procedures
for Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or Exchange Notes for any Outstanding Notes
not theretofore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Outstanding Notes if: (i)
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 judgment, might materially impair the Company's ability to proceed
with the Exchange Offer or (ii) 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 in a manner, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the expiration of the Exchange Offer, subject to the rights of such holders
of tendered Outstanding Notes to withdraw their tendered Outstanding Notes, or
(iii) waive such termination event with respect to the Exchange Offer and accept
all properly tendered Outstanding Notes that have not been withdrawn. If such
waiver constitutes a material change in the Exchange Offer, the Company will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Outstanding Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders of the Outstanding Notes, if the Exchange Offer would
otherwise expire during such period.
32
<PAGE>
EXCHANGE AGENT
U.S. Bank of California, N.A. has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
U.S. Trust of California, N.A. U.S. Trust Company of U.S. Trust Company
c/o United States Trust California, N.A. of California, N.A.
Company of New York c/o United States Trust Company c/o United States Trust
111 Broadway, Lower Level of New York Company of New York
New York, NY 10006-1906 770 Broadway, 13th Floor P. O. Box 841
Attention: Corporate Trust New York, NY 10003 Peter Cooper Station
Operations Attention: Corporate Trust New York, NY 10276-0841
Municipal Operations
Facsimile Transmission: (800) 225-2398
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or by telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Outstanding Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Outstanding Notes
tendered, or if tendered Outstanding 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 Outstanding 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.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company upon the consummation of the Exchange
Offer. The expenses of the Exchange Offer will be amortized by the Company over
the term of the Exchange Notes under generally accepted accounting principles.
33
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, on a pro forma combined basis after giving effect to the
Transactions and the Sale/Leaseback and the application of the proceeds
therefrom. The table should be read in conjunction with the Company's
Consolidated Financial Statements, the Judd's Consolidated Financial Statements
and the Unaudited Pro Forma Condensed Combined Financial Data contained
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1997
PRO FORMA
COMBINED
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Long-term debt (including current portion):
Revolving Credit Facility............................................. $ 1,388
Term Loan Facility.................................................... 30,000
Notes offered hereby.................................................. 115,000
Capital lease obligations............................................. 293
--------
Total long-term debt................................................ 146,681
Minority interests (1).................................................. 6,894
Shareholders' equity:
Series A Stock (2).................................................... 9,250
Common stock and paid in capital...................................... 21,501
Retained earnings (accumulated deficit)............................... (4,046)
--------
Total shareholders' equity.......................................... 26,705
--------
Total capitalization.............................................. $ 180,280
--------
--------
</TABLE>
- ------------------------
(1) Represents preferred stock of Perry. See Note 5 to Company Consolidated
Financial Statements.
(2) Series A Stock resulting from the Note Conversion.
34
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial statements
are based on and should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto and the Judd's Consolidated Financial
Statements and notes thereto which are included elsewhere in this Prospectus.
The unaudited pro forma information has been prepared to illustrate the effect
of (a) the Acquisition, (b) the Offering, (c) borrowings under the Amended and
Restated Credit Agreement, (d) the Equity Investment, (e) the Note Conversion
and (f) the Sale/Leaseback.
The unaudited pro forma condensed combined balance sheet as of September 30,
1997 assumes that the Transactions and the Sale/Leaseback occurred on September
30, 1997 and the unaudited pro forma condensed combined statements of operations
for the nine month period ended September 30, 1996, and the nine month and 12
month periods ended September 30, 1997 and the year ended December 31, 1996
assume that the Transactions and the Sale/Leaseback were consummated as of the
first day of the respective period presented.
The unaudited pro forma condensed combined financial data does not purport
to represent what the Company's financial condition or results of operations
actually would have been if the Transactions and the Sale/Leaseback had occurred
on the date or for the periods indicated or what such results will be for any
future date or future periods. The unaudited pro forma adjustments are based on
preliminary estimates which are derived from available information and applying
certain assumptions and adjustments described in the notes for the unaudited pro
forma condensed combined financial statements, and should be read in conjunction
therewith. The following information should be read in conjunction with "PPC
Holdings, Inc. Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Judd's, Incorporated Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Company
Consolidated Financial Statements and the Judd's Consolidated Financial
Statements included elsewhere in this Prospectus.
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PPC HOLDINGS, JUDD'S, PRO FORMA PRO FORMA
INC. INCORPORATED ADJUSTMENTS COMBINED
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 83 $ 8,268 $ (8,268)(1) $ 83
Short-term investment............................... -- 1,303 (1,303)(1) --
Accounts receivable, net............................ 30,354 18,613 48,967
Inventories......................................... 9,777 8,853 18,630
Prepaid expenses.................................... 1,568 381 1,949
Income tax receivable............................... 82 -- 82
Deferred income taxes............................... 680 664 1,344
-------- ------------ ----------- -----------
Total current assets.............................. 42,544 38,082 (9,571) 71,055
PROPERTY, PLANT AND EQUIPMENT, NET.................... 59,363 47,555 28,404(2) 123,609
(11,713)(3)
INTANGIBLE ASSETS, NET................................ 3,595 973 29,626(2) 43,358
9,164(4)
-------- ------------ ----------- -----------
Total............................................. $ 105,502 $ 86,610 $ 45,910 $ 238,022
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses............... $ 22,973 $ 15,355 $ 1,807(3) $ 37,385
(2,750)(5)
Current portion of long-term debt................... 12,915 4,757 2,000(6) 2,087
(17,585)(6)
-------- ------------ ----------- -----------
Total current liabilities......................... 35,888 20,112 (16,528) 39,472
-------- ------------ ----------- -----------
LONG-TERM DEBT........................................ 40,996 41,679 115,000(6) 144,594
28,000(6)
(16,230)(3)
1,388(6)
(9,571)(1)
(24,560)(6)
(32,108)(6)
-------- ------------ ----------- -----------
NOTE PAYABLE TO RELATED PARTY......................... 6,500 -- (6,500)(5) --
-------- ------------ ----------- -----------
DEFERRED INCOME TAXES................................. -- 3,540 (134)(4) 14,768
-- -- 11,362(2)
-------- ------------ ----------- -----------
OTHER NONCURRENT LIABILITIES.......................... 1,567 1,312 2,710(3) 5,589
-------- ------------ ----------- -----------
MINORITY INTERESTS.................................... 6,894 159 (159)(2) 6,894
-------- ------------ ----------- -----------
SHAREHOLDERS' EQUITY:
Common stock and paid in capital.................... 17,501 427 (427)(2) 21,501
4,000(7)
Preferred stock..................................... -- 6 (6)(2) 9,250
9,250(5)
Retained earnings (Accumulated deficit)............. (3,844) 21,098 (21,098)(2) (4,046)
(202)(4)
-------- ------------ ----------- -----------
13,657 21,531 (8,483) 26,705
-------- ------------ ----------- -----------
Less: treasury stock................................ -- (1,723) 1,723(2) --
-------- ------------ ----------- -----------
Total shareholders' equity........................ 13,657 19,808 (6,760) 26,705
-------- ------------ ----------- -----------
Total............................................. $ 105,502 $ 86,610 $ 45,910 $ 238,022
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
36
<PAGE>
PPC HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) Reflects the use of Judd's cash and short-term investments to repay debt
upon consummation of the Offering.
(2) The Acquisition will be accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion No. 16. The excess of purchase
cost over the book value of net assets acquired will be allocated to Judd's
assets and liabilities based on their relative fair values as of the closing
date of the Acquisition, based on valuations and other studies that are not yet
complete. Accordingly, the excess of purchase cost over the book value of net
assets acquired has not yet been fully allocated to the individual assets and
liabilities acquired. However, the Company estimates as of September 30, 1997,
the amount and allocation of the excess of purchase cost over the net assets
acquired is as follows:
<TABLE>
<CAPTION>
<S> <C>
Cost of acquisition less debt, minority interests and preferred stock............. $ 65,970
Estimated acquisition costs....................................................... 500
----------
Total purchase cost............................................................. 66,470
Less: Book value of net assets acquired........................................... (19,802)
Add: Deferred tax liability....................................................... 11,362
----------
Excess purchase cost over net assets acquired..................................... $ 58,030
----------
----------
Excess purchase cost over net assets acquired allocated to:
Property, plant and equipment................................................... $ 28,404
Goodwill........................................................................ 29,626
----------
$ 58,030
----------
----------
</TABLE>
(3) Reflects the Sale/Leaseback as follows:
<TABLE>
<CAPTION>
<S> <C>
Net proceeds from sale of real estate............................................. $ 16,230
Book value of real estate as of September 30, 1997................................ (11,713)
----------
Taxable gain.................................................................... 4,517
Income taxes (estimated at 40%)................................................... (1,807)
----------
Deferred long-term gain......................................................... $ 2,710
----------
----------
</TABLE>
(4) Reflects deferred financing costs of $9,500 related to the Transactions,
less the write-off of existing net deferred financing costs of $202 (net of a
deferred tax benefit of $134)
(5) Reflects the Note Conversion of $6,500 in principal and $2,750 of
accrued interest.
37
<PAGE>
PPC HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
(DOLLARS IN THOUSANDS)
(6) Reflects the Notes offered hereby, borrowings under the Amended and
Restated Credit Agreement, and repayment of existing long-term debt, as follows:
<TABLE>
<CAPTION>
<S> <C>
Revolving Credit Facility......................................................... $ 1,388
Term Loan Facility................................................................ 30,000
Notes offered hereby.............................................................. 115,000
----------
Total new debt.................................................................. 146,388
Less debt reduction by other sources:
Net proceeds from Sale/Leaseback................................................ (16,230)
Judd's cash and short-term investment........................................... (9,571)
Note Conversion................................................................. (6,500)
----------
Net funds available for repayment of existing debt................................ 114,087
Less repayment of existing debt:
PPC Holdings, Inc. long-term debt............................................... (24,560)
Judd's, Incorporated long-term debt............................................. (32,108)
Current portion of long-term debt............................................... (17,585)
----------
Increase in long-term debt........................................................ $ 39,834
----------
----------
</TABLE>
(7) Reflects the Equity Investment.
38
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PPC HOLDINGS, JUDD'S, PRO FORMA PRO FORMA
INC. INCORPORATED ADJUSTMENTS COMBINED
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................. $ 138,511 $ 152,563 $ 291,074
-------- ------------ -----------
OPERATING EXPENSES:
Costs of production................................. 113,185 119,039 $ 1,558(1) 232,247
(1,535)(2)
Selling, general and administrative................. 12,369 19,426 242(1) 30,955
(1,082)(2)
Depreciation........................................ 5,869 7,797 (3,000)(3) 10,666
Amortization of intangibles......................... 580 164 741(3) 1,485
-------- ------------ ----------- -----------
132,003 146,426 (3,076) 275,353
-------- ------------ ----------- -----------
INCOME FROM OPERATIONS................................ 6,508 6,137 3,076 15,721
-------- ------------ ----------- -----------
OTHER (INCOME) EXPENSES:
Interest expense.................................... 5,946 3,066 6,121(4) 15,133
Interest income..................................... -- (306) 306(5) --
Amortization of deferred financing costs............ 600 78 1,218(4) 1,896
Loss (gain) on disposition of assets, net........... (7) (64) (71)
Other, net.......................................... 51 (89) (38)
-------- ------------ ----------- -----------
Total other expenses.............................. 6,590 2,685 7,645 16,920
-------- ------------ ----------- -----------
Income (loss) before income taxes..................... (82) 3,452 (4,569) (1,199)
Provision (benefit) for income taxes.................. 4 1,447 (1,828)(6) (377)
-------- ------------ ----------- -----------
Income (loss) before dividends on preferred stock..... (86) 2,005 (2,741) (822)
Dividends on preferred stock.......................... 998 12 1,388(7) 2,398
-------- ------------ ----------- -----------
Net income (loss)..................................... $ (1,084) $ 1,993 $ (4,129) $ (3,220)
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
OTHER DATA:
EBITDA(8)............................................. $ 12,906 $ 14,187 $ 817 $ 27,910
Rents and operating lease expense..................... 4,292 2,864 1,800(1) 8,956
Capital expenditures:
Purchased(9)........................................ 5,186 5,954 11,140
Capital investments under operating leases.......... 3,256 8,040 11,296
Ratio of earnings to fixed charges(10)(11)............ --
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Statements of Operations
39
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PPC HOLDINGS, JUDD'S, PRO FORMA PRO FORMA
INC. INCORPORATED ADJUSTMENTS COMBINED
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................. $ 101,307 $ 114,644 $ 215,951
-------- ------------ -----------
OPERATING EXPENSES:
Costs of production................................. 84,321 90,044 $ 1,168(1) 174,382
(1,151)(2)
Selling, general and administrative................. 9,140 13,999 182(1) 22,509
(812)(2)
Depreciation........................................ 4,333 5,732 (2,134)(3) 7,931
Amortization of intangibles......................... 435 123 556(3) 1,114
-------- ------------ ----------- -----------
98,229 109,898 (2,191) 205,936
-------- ------------ ----------- -----------
INCOME FROM OPERATIONS................................ 3,078 4,746 2,191 10,015
-------- ------------ ----------- -----------
OTHER (INCOME) EXPENSES:
Interest expense.................................... 4,465 2,386 4,473(4) 11,324
Interest income..................................... -- (228) 228(5) --
Amortization of deferred financing costs............ 450 48 914(4) 1,412
Loss (gain) on disposition of assets, net........... -- (26) (26)
Other, net.......................................... -- (85) (85)
-------- ------------ ----------- -----------
Total other expenses.............................. 4,915 2,095 5,615 12,625
-------- ------------ ----------- -----------
Income (loss) before income taxes..................... (1,837) 2,651 (3,424) (2,610)
Provision (benefit) for income taxes.................. (674) 1,027 (1,370)(6) (1,017)
-------- ------------ ----------- -----------
Income (loss) before dividends on preferred stock..... (1,163) 1,624 (2,054) (1,593)
Dividends on preferred stock.......................... 746 11 1,041(7) 1,798
-------- ------------ ----------- -----------
Net income (loss)..................................... $ (1,909) $ 1,613 $ (3,095) $ (3,391)
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
OTHER DATA:
EBITDA(8)............................................. $ 7,846 $ 10,686 $ 613 $ 19,145
Rents and operating lease expense..................... 3,163 2,065 1,350(1) 6,578
Capital expenditures:
Purchased(9)........................................ 1,744 4,259 6,003
Capital investments under operating leases.......... 3,256 -- 3,256
Ratio of earnings to fixed charges(10)(11)............ --
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Statements of Operations
40
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PPC HOLDINGS, JUDD'S, PRO FORMA PRO FORMA
INC. INCORPORATED ADJUSTMENTS COMBINED
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................. $ 105,611 $ 101,935 $ 207,546
-------- ------------ ----------- -----------
OPERATING EXPENSES:
86,676 76,429 $ 1,168(1) 163,122
Costs of production................................. (1,151)(2)
Computer-to-plate conversion expenses............... -- 841 841
10,362 14,049 182(1) 23,781
Selling, general and administrative................. (812)(2)
Depreciation........................................ 4,873 6,361 (2,763)(3) 8,471
Amortization of intangibles......................... 301 150 556(3) 1,007
-------- ------------ ----------- -----------
102,212 97,830 (2,820) 197,222
-------- ------------ ----------- -----------
INCOME FROM OPERATIONS................................ 3,399 4,105 2,820 10,324
-------- ------------ ----------- -----------
OTHER (INCOME) EXPENSES:
Interest expense.................................... 4,417 2,581 4,351(4) 11,349
Interest income..................................... -- (286) 286(5) --
Amortization of deferred financing costs............ 450 27 914(4) 1,391
Loss (gain) on disposition of assets, net........... 296 (13) 283
Other, net.......................................... (30) (212) (242)
-------- ------------ ----------- -----------
Total other expenses.............................. 5,133 2,097 5,551 12,781
-------- ------------ ----------- -----------
Income (loss) before income taxes..................... (1,734) 2,008 (2,731) (2,457)
Provision (benefit) for income taxes.................. (625) 778 (1,092)(6) (939)
-------- ------------ ----------- -----------
Income (loss) before dividends on preferred stock..... (1,109) 1,230 (1,639) (1,518)
Dividends on preferred stock.......................... 766 10 1,041(7) 1,817
-------- ------------ ----------- -----------
Net income (loss)..................................... $ (1,875) $ 1,220 $ (2,680) $ (3,335)
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
Other Data:
EBITDA(8)............................................. $ 8,603 $ 11,669 $ 613 $ 20,885
Rents and operating lease expense..................... 3,473 2,805 1,350(1) 7,628
Capital expenditures:
Purchased(9)........................................ 585 4,873 5,458
Capital investments under operating leases.......... 10,719 -- 10,719
Ratio of earnings to fixed charges(10)(11)............ --
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Statements of Operations
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PPC HOLDINGS, JUDD'S, PRO FORMA PRO FORMA
INC. INCORPORATED ADJUSTMENTS COMBINED
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................................. $ 142,815 $ 139,854 -- $ 282,669
-------- ------------ ----------- -----------
OPERATING EXPENSES:
115,540 105,424 $ 1,558(1) 220,987
Costs of production................................. (1,535)(2)
Computer-to-plate conversion expenses............... 841 841
13,591 19,476 242(1) 32,227
Selling, general and administrative................. (1,082)(2)
Depreciation........................................ 6,409 8,426 (3,629)(3) 11,206
Amortization of intangibles......................... 446 191 741(3) 1,378
-------- ------------ ----------- -----------
135,986 134,358 (3,705) 266,639
-------- ------------ ----------- -----------
INCOME FROM OPERATIONS................................ 6,829 5,496 3,705 16,030
-------- ------------ ----------- -----------
OTHER (INCOME) EXPENSES:
Interest expense.................................... 5,898 3,261 5,999(4) 15,158
Interest income..................................... -- (364) 364(5) --
Amortization of deferred financing costs............ 600 57 1,218(4) 1,875
Loss (gain) on disposition of assets................ 289 (51) 238
Other, net.......................................... 21 (216) (195)
-------- ------------ ----------- -----------
Total other expenses.............................. 6,808 2,687 7,581 17,076
-------- ------------ ----------- -----------
Income (loss) before income taxes..................... 21 2,809 (3,876) (1,046)
Provision (benefit) for income taxes.................. 53 1,198 (1,550)(6) (299)
-------- ------------ ----------- -----------
Income (loss) before dividends on preferred stock..... (32) 1,611 (2,326) (747)
Dividends on preferred stock.......................... 1,018 11 1,388(7) 2,417
-------- ------------ ----------- -----------
Net income (loss)..................................... $ (1,050) $ 1,600 $ (3,714) $ (3,164)
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
Other Data:
EBITDA(8)............................................. $ 13,663 $ 15,170 $ 817 $ 29,650
Rents and operating lease expense..................... 4,602 3,604 1,800(1) 10,006
Capital expenditures:
Purchased(9)........................................ 4,027 6,568 10,595
Capital investments under operating leases.......... 10,719 8,040 18,759
Ratio of earnings to fixed charges(10)(11)............ --
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Statements of Operations
42
<PAGE>
PPC HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(1) Reflects increased operating lease expense related to the
Sale/Leaseback.
(2) Reflects production and administrative costs and expenses eliminated as
if the Acquisition were completed at the beginning of the respective period as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
TWELVE MONTHS TWELVE MONTHS
ENDED SEPTEMBER 30, ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1996 1996 1997 1997
--------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
Costs of production:
Labor and related costs....................................... $ 1,035 $ 776 $ 776 $ 1,035
Material purchases............................................ 500 375 375 500
------ --------- --------- ------
1,535 1,151 1,151 1,535
Selling, general and administrative:
Corporate salaries and related costs.......................... 684 514 514 684
Selling salaries and related costs............................ 398 298 298 398
------ --------- --------- ------
1,082 812 812 1,082
------ --------- --------- ------
$ 2,617 $ 1,963 $ 1,963 $ 2,617
------ --------- --------- ------
------ --------- --------- ------
</TABLE>
(3) Reflects adjustments to depreciation and amortization of property, plant
and equipment and intangible assets as if the Acquisition was completed at the
beginning of the respective period as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS ENDED TWELVE MONTHS
ENDED SEPTEMBER 30, ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1996 1996 1997 1997
-------------- --------- --------- --------------
<S> <C> <C> <C> <C>
Depreciation:
Property, plant and equipment acquired...................... $ 5,130 $ 3,848 $ 3,848 $ 5,130
Eliminate depreciation recorded for property, plant and
equipment................................................. (7,797) (5,732) (6,361) (8,426)
Eliminate depreciation on Sale/Leaseback assets............. (333) (250) (250) (333)
------- --------- --------- -------
$ (3,000) $ (2,134) $ (2,763) $ (3,629)
------- --------- --------- -------
------- --------- --------- -------
Amortization:
Excess purchase price over net assets acquired allocated to
goodwill.................................................. $ 741 $ 556 $ 556 $ 741
------- --------- --------- -------
------- --------- --------- -------
</TABLE>
Property, plant and equipment is amortized over useful lives ranging from 5
to 39 years. The excess purchase price over net assets acquired allocated to
goodwill is amortized over 40 years.
43
<PAGE>
PPC HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS) (CONTINUED)
(4) Reflects adjustments to interest expense and amortization of deferred
financing costs as if the Offering, Term Loan Facility and Revolving Credit
Facility were completed at the beginning of the respective period as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS ENDED TWELVE MONTHS
ENDED SEPTEMBER 30, ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1996 1996 1997 1997
-------------- --------- --------- --------------
<S> <C> <C> <C> <C>
Additional Interest Expense for:
Senior Subordinated Notes at 10.625%........................ $ 12,219 $ 9,164 $ 9,164 $ 12,219
Term Loan Facility at 8.5%.................................. 2,550 1,913 1,913 2,550
Revolving Credit Facility at 8.0%........................... 111 83 83 111
Unused Revolving Credit Facility at 0.5%.................... 218 164 164 218
Less interest expense on retired debt....................... (8,977) (6,851) (6,973) (9,099)
------- --------- --------- -------
$ 6,121 $ 4,473 $ 4,351 $ 5,999
------- --------- --------- -------
------- --------- --------- -------
Amortization of Deferred Financing Costs:
Related to new debt......................................... $ 1,348 $ 1,011 $ 1,011 $ 1,348
Less amortization of deferred financing costs of retired
debt...................................................... (130) (97) (97) (130)
------- --------- --------- -------
$ 1,218 $ 914 $ 914 $ 1,218
------- --------- --------- -------
------- --------- --------- -------
</TABLE>
Deferred financing costs are estimated to be $9.5 million related to the
Offering, Term Loan Facility and Revolving Credit Facility amortized over
approximately 7 years.
(5) Reflects the elimination of Judd's interest income.
(6) Reflects the tax effect of the Pro Forma Adjustments using a tax rate of
40%.
(7) Reflects dividends on the $9.250 million preferred stock issuance
related to the Note Conversion. The stock is expected to pay 15% stock dividends
on the carrying value.
(8) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, gains and losses on dispositions of assets and nonrecurring
computer-to-plate conversion expenses. While EBITDA should not be construed as a
substitute for operating income or loss or a better indicator of liquidity than
cash flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not necessarily a measure of the Company's ability to fund its cash
needs. See the Company Consolidated Statements of Cash Flows and the related
notes thereto included in this Prospectus.
(9) Includes the recorded book value of assets obtained under capital
leases.
(10) For purposes of this computation, fixed charges consist of interest
expense, amortization of deferred financing costs, capitalized interest,
one-third of rental and operating lease expense (representative of that portion
attributable to interest) and preferred stock dividends payable in cash.
Earnings consist of income (loss) before income taxes plus fixed charges
(excluding preferred stock dividends).
(11) Pro forma earnings were inadequate to cover pro forma fixed charges by
$2,821, $3,825, $3,539 and $2,533 for the year ended December 31, 1996, the nine
months ended September 30, 1996 and 1997 and for the twelve months ended
September 30, 1997, respectively.
44
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected financial data for PPC Holdings, Inc. set forth below have been
derived from the Consolidated Financial Statements of PPC Holdings, Inc. for the
248 day period ended December 31, 1995, the year ended December 31, 1996 and the
117 day period ended April 27, 1995 for the Company's predecessor, Perry
Printing, which was acquired by the Company as of April 28, 1995, all of which
have been audited by Deloitte & Touche LLP, independent auditors, whose report
is included elsewhere in this Prospectus. The selected financial data for PPC
Holdings for the nine month periods ended September 30, 1996 and 1997 were
derived from the Company's unaudited consolidated interim financial statements
included elsewhere in this Prospectus. The selected financial data for Judd's,
Incorporated for 1995 and 1996 have been derived from Judd's Consolidated
Financial Statements for the years ended December 31, 1995 and 1996, which have
been audited by Stoy, Malone & Company, P.C., independent auditors, whose report
for the years ended December 31, 1995 and 1996 is included elsewhere in this
Prospectus. The selected financial data for Judd's, Incorporated for the nine
month periods ended September 30, 1996 and 1997 were derived from Judd's
unaudited consolidated interim financial statements included elsewhere in this
Prospectus.
The selected unaudited pro forma condensed combined financial data set forth
below have been derived from the unaudited pro forma condensed combined balance
sheet as of September 30, 1997 and the unaudited pro forma condensed combined
statements of operations for the year ended December 31, 1996, the nine month
periods ended September 30, 1996 and 1997 and the twelve month period ended
September 30, 1997, all of which are included elsewhere in this Prospectus.
The unaudited pro forma financial data set forth below and elsewhere in this
Prospectus do not purport to represent the actual results that would have been
achieved had the Transactions been consummated on the dates or for the periods
indicated, and do not purport to indicate results of operations or financial
condition as of any future date or for any future period. The following
information should be read in conjunction with "Unaudited Pro Forma Condensed
Combined Financial Data," "PPC Holdings, Inc. Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Judd's,
Incorporated Management's Discussion and Analysis of Financial Condition and
Results of Operations," the Company Consolidated Financial Statements and the
Judd's Consolidated Financial Statements included elsewhere in this Prospectus.
45
<PAGE>
PPC HOLDINGS, INC. AND PREDECESSOR
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR (1)
------------------------------------------------ PPC HOLDINGS, INC.
--------------------------------------------------
117 DAYS 248 DAYS
ENDED ENDED YEAR ENDED
APRIL 27, DECEMBER DECEMBER
1995 31, 1995 31, 1996
--------- ----------- -----------
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------------------- SEPTEMBER 30,
1993 1994 ------------------------
1992 ----------- ----------- 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS
DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 107,271 $ 105,915 $ 116,967 $ 45,920 $ 115,647 $ 138,511 $ 101,307 $ 105,611
Depreciation and
amortization of
intangibles............ 9,353 10,070 9,899 3,049 4,000 6,449 4,768 5,174
Income from operations... 5,162 5,354 4,591 2,281 5,263 6,508 3,078 3,399
Interest expense(2)...... 247 433 980 470 4,503 5,946 4,465 4,417
Net income (loss)........ 3,052 2,771 2,643 1,062 (885) (1,084) (1,909) (1,875)
OTHER DATA:
EBITDA(3)................ $ 14,518 $ 15,431 $ 14,444 $ 5,330 $ 9,267 $ 12,906 $ 7,846 $ 8,603
Rents and operating lease
expense................ 92 91 145 46 2,500 4,292 3,163 3,473
Capital expenditures:
Purchased(4)........... 10,451 15,889 5,577 10,047 -- 5,186 1,744 585
Capital investments
under operating
leases............... -- -- -- -- 4,076 3,256 3,256 10,719(5)
Ratio of earnings to
fixed charges(6)(7).... 18.8x 11.5x 5.3x 4.6x -- -- -- --
BALANCE SHEET DATA:
Operating working
capital(8)............. $ 12,700 $ 11,208 $ 15,794 $ 12,845 $ 19,552 $ 14,478 $ 17,309 $ 19,571
Net property, plant and
equipment.............. 57,953 63,659 58,461 65,302 65,863 65,044 63,274 59,363
Total assets............. 80,434 86,007 87,354 98,384 119,032 104,281 106,244 105,502
Total long-term
debt(9)................ -- -- -- -- 65,829 59,711 61,933 60,411
Minority interests(10)... -- -- -- -- 9,012 6,772 6,732 6,894
Shareholders' equity..... 62,795 66,493 65,718 68,565 16,616 15,532 14,707 13,657
</TABLE>
46
<PAGE>
JUDD'S, INCORPORATED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1996
---------- ---------- NINE MONTHS ENDED
SEPTEMBER 30,
1992 1993 1994 ------------------------
----------- ----------- ----------- 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 105,725 $ 113,957 $ 118,783 $ 141,222 $ 152,563 $ 114,644 $ 101,935
Depreciation and amortization of
intangibles..................... 5,366 5,042 7,341 8,094 7,961 5,855 6,511
Income from operations............ 4,752 3,415 2,427 5,679 6,137 4,746 4,105
Interest expense(2)............... 901 1,131 2,817 3,327 3,066 2,386 2,581
Net income (loss)................. 2,143 2,035 (311) 1,841 1,993 1,613 1,220
OTHER DATA:
EBITDA(3)......................... $ 9,891 $ 8,759 $ 9,630 $ 13,895 $ 14,187 $ 10,686 $ 11,669
Rents and operating lease
expense......................... 2,720 2,712 2,940 2,846 2,864 2,065 2,805
CAPITAL EXPENDITURES:
Purchased(4).................... 4,323 17,313 14,688 7,746 5,954 4,259 4,873
Capital investments under
operating leases(11).......... -- -- 418 579 8,040 -- --
Ratio of earnings to fixed
charges(6)(7)................... 3.2x 2.3x -- 1.8x 1.7x 1.7x 1.6x
Balance Sheet Data:
Operating working capital(8)...... $ 14,876 $ 32,820 $ 21,203 $ 23,423 $ 18,358 $ 24,799 $ 22,727
Net property, plant and
equipment....................... 27,343 42,485 50,195 51,203 49,352 49,876 47,555
Total assets...................... 53,384 92,285 86,833 90,846 86,555 90,589 86,610
Total long-term debt(12).......... 12,019 45,348 42,097 44,423 34,811 41,845 46,436
Minority interests................ 220 205 197 187 176 179 159
Shareholders' equity.............. 27,512 27,636 27,274 27,727 29,776 29,389 19,808
</TABLE>
47
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA (14)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED ---------------------- TWELVE MONTHS ENDED
DECEMBER 31, 1996 1996 1997 SEPTEMBER 30, 1997
----------------- ---------- ---------- --------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $ 291,074 $ 215,951 $ 207,546 $ 282,669
Depreciation and amortization of
intangibles................................. 12,151 9,045 9,478 12,584
Income from operations........................ 15,721 10,015 10,324 16,030
Interest expense(2)........................... 15,133 11,324 11,349 15,158
Net loss...................................... (3,220) (3,391) (3,335) (3,164)
OTHER DATA:
EBITDA(3)..................................... $ 27,910 $ 19,145 $ 20,885 $ 29,650
Rents and operating lease expense............. 8,956 6,578 7,628 10,006
Capital expenditures:
Purchased(4)................................ 11,140 6,003 5,458 10,595
Capital investments under operating
leases.................................... 11,296 3,256 10,719 18,759
Ratio of earnings to fixed charges(6)(7)...... -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
-------------
<S> <C>
BALANCE SHEET DATA:
Operating working capital(8)..................................................................... $ 33,670
Net property, plant and equipment................................................................ 123,609
Total assets..................................................................................... 238,022
Total long-term debt(12)......................................................................... 146,681
Average debt(13)................................................................................. 137,672
Minority interests(10)........................................................................... 6,894
Shareholders' equity............................................................................. 26,705
</TABLE>
- ------------------------
(1) Effective April 28, 1995, the Company acquired certain assets and assumed
certain liabilities of Perry Printing Corporation and North Star Print
Group (collectively "Predecessor"). Prior to April 28, 1995, the Company
had no operating activity and substantially no assets. See Note 1 to the
Company Consolidated Financial Statements.
(2) Includes interest on debt, but excludes amortization of deferred financing
costs, dividends and accretion on preferred stock.
(3) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, gains and losses on dispositions of assets and
nonrecurring computer-to-plate conversion expenses. While EBITDA should not
be construed as a substitute for operating income or loss or a better
indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital expenditure
and working capital requirements. EBITDA is not necessarily a measure of
the Company's ability to fund its cash needs. See the Company Consolidated
Statements of Cash Flows and the related notes thereto included in this
Prospectus.
(4) Includes the recorded book value of assets obtained under capital leases.
48
<PAGE>
(5) Represents operating leases for digital prepress, press and binding
equipment. Prior to 1997, advance payments on substantial leased assets
were paid directly by the Company. Beginning in 1997, advance payments were
made directly to the manufacturer by the lessor.
(6) For purposes of this computation, fixed charges consist of interest
expense, amortization of deferred financing costs, capitalized interest,
one-third of rental and operating lease expense (representative of that
portion attributable to interest) and preferred stock dividends payable in
cash. Earnings consist of income (loss) before income taxes plus fixed
charges (excluding preferred stock dividends).
(7) Pro forma earnings were inadequate to cover pro forma fixed charges as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31,
SEPTEMBER 30,
------------------------------- -------------------- TWELVE MONTHS ENDED
1994 1995* 1996 1996 1997 SEPTEMBER 30, 1997
--------- --------- --------- --------- --------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
PPC Holdings, Inc................. $ 1,004 $ 1,437 $ 2,852 $ 2,749 $ 1,332
Judd's, Incorporated.............. $ 561
Pro Forma......................... $ 2,821 $ 3,825 $ 3,539 $ 2,533
</TABLE>
- ------------------------
* 248 days ended December 31, 1995
(8) Excludes current portion of long-term debt.
(9) Includes current portion of long-term debt and PPC Holdings, Inc. note
payable to related party.
(10) Represents preferred stock of Perry. See Note 5 to Company Consolidated
Financial Statements.
(11) Represents operating leases. In 1996, Judd's placed into service a new
press and related equipment.
(12) Includes current portion of long-term debt.
(13) Represents the sum of the pro forma outstanding debt balances at the end of
the most recent quarter plus comparable data for each of the preceding
three quarters divided by four.
(14) For a description of purchase accounting and pro forma adjustments, see the
notes to the Unaudited Pro Forma Condensed Combined Balance Sheet and
Statements of Operations included elsewhere herein.
49
<PAGE>
PPC HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
L]FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
GENERAL
Perry-Judd's Incorporated (formerly PPC Holdings, Inc.), through its
operating subsidiaries is a full service heatset web offset printer focusing
principally on the magazine and catalog commercial printing markets. Management
believes PPC Holdings, Inc. was the ninth largest commercial printer of
magazines and catalogs in the U.S. prior to the acquisition of Judd's Inc. in
December 1997. Management believes the combined Company, renamed Perry-Judd's
Incorporated upon the Acquisition, is the eighth largest printer of magazines
and seventh largest printer of catalogs in the U.S.
In order to present full-year data for PPC Holdings, Inc. for 1995 for
purposes of comparison with 1996, the consolidated financial data for 1995
contained herein represents the combination of the historical results of
operations for PPC Holdings, Inc. for the 248 day period ended December 31, 1995
and the 117 day period ended April 27, 1995 for PPC Holdings, Inc.'s
predecessor, Perry Printing, with certain pro forma adjustments as described
below:
a) Depreciation and interest expense for Perry Printing have been
eliminated for the 117 day period ended April 27, 1995 and actual expenses
incurred during the 248 day period ended December 31, 1995 have been
annualized for depreciation, amortization of intangibles and interest
expense.
b) The April 28, 1995 sale and leaseback of certain production
equipment was adjusted to reflect such transaction as having occurred on
January 1, 1995.
The Company's net sales are derived principally from the sale of printing
services and materials to its customer base, including prepress, press, binding
and distribution services. The Company serves both national and regional
publication and catalog customers, including Time Inc., The McGraw-Hill
Companies and J.C. Penney. Net sales represent gross sales less postage,
discounts and credits. The Company's net sales include sales by the Company to
its customers of paper purchased. The price of paper, the primary raw material
used by the Company, is volatile and may cause significant swings in net sales.
The Company is generally able to pass on to its customers increases in the price
of paper, ink, labor, electricity and other fixed and variable costs.
Operating expenses consist primarily of the cost of paper and ink, salaries
and employee benefits, depreciation and amortization and selling, general and
administrative expenses. Perry-Judd's strives to provide high-quality, timely
services to its customers within a low cost structure by increasing productivity
and efficiency through investment in state-of-the-art production technologies
and matching costs to revenues.
As of October 17, 1997, PPC Holdings, Inc. and a wholly-owned subsidiary
entered into a Merger Agreement for the acquisition of Judd's. Pursuant to the
Merger Agreement, on December 16, 1997, PPC Holdings, Inc. acquired all of the
outstanding capital stock of Judd's in exchange for aggregate merger
consideration of $99.6 million, which included the repayment of outstanding
indebtedness of Judd's as of the closing date and a preliminary working capital
adjustment, and is subject to a working capital adjustment as set forth in the
Merger Agreement.
50
<PAGE>
The following table sets forth certain consolidated financial data of
Perry-Judd's in dollars and as a percentage of net sales for the years ended
December 31, 1995 and 1996 and for the nine month periods ended September 30,
1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------ NINE MONTHS ENDED SEPTEMBER 30,
1995 ------------------------------------------
(PRO FORMA) 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 161,567 100.0% $ 138,511 100.0% $ 101,307 100.0% $ 105,611 100.0%
Costs of production................ 136,522 84.5 113,185 81.7 84,321 83.2 86,676 82.1
Selling, general and
administrative................... 11,247 7.0 12,369 8.9 9,140 9.0 10,362 9.8
Depreciation....................... 5,469 3.4 5,869 4.3 4,333 4.3 4,873 4.6
Amortization of intangibles........ 531 0.3 580 0.4 435 0.4 301 0.3
Income from operations............. 7,797 4.8 6,508 4.7 3,078 3.0 3,399 3.2
EBITDA............................. 13,738 8.5 12,906 9.3 7,846 7.7 8,603 8.1
Rents and operating lease
expense.......................... 3,342 2.1 4,292 3.1 3,163 3.1 3,473 3.3
Interest expense................... 6,761 4.2 5,946 4.3 4,465 4.4 4,417 4.2
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1996.
Net sales increased $4.3 million or 4.2% to $105.6 million for the nine
months ended September 30, 1997 from $101.3 million for the nine months ended
September 30, 1996. The increase resulted from substantially higher volume of
production units from new and existing customers offset by lower paper billings,
as a greater percentage of paper was customer supplied, and softness in the
pricing of catalog and other commercial printing sales. Paper costs were 28% of
net sales for the nine months ended September 30, 1997 compared to 33% of net
sales for the nine months ended September 30, 1996.
Costs of production increased $2.4 million or 2.8% to $86.7 million for the
nine months ended September 30, 1997 from $84.3 million for the nine months
ended September 30, 1996, principally from the increased volume of production
offset by lower paper costs related to the reduced percentage of paper purchased
for customer requirements. Costs of production as a percent of net sales were
82.1% for the nine months ended September 30, 1997 as compared to 83.2%
experienced for the nine months ended September 30, 1996, principally as a
result of the benefits from higher volume of production and improved operating
efficiencies gained from capital investments.
Selling, general and administrative expenses increased $1.3 million or 13.4%
to $10.4 million for the nine months ended September 30, 1997 compared to $9.1
million for the nine months ended September 30, 1996. Selling, general and
administrative expenses also increased as a percent of net sales from 9.0% in
the 1996 period to 9.8% in the 1997 period. Selling expenses increased as a
result of higher volume while general and administrative expenses increased due
to staff additions related to acquisition activities.
Depreciation expense increased $0.6 million or 12.5% to $4.9 million for the
nine months ended September 30, 1997 from $4.3 million for the nine months ended
September 30, 1996 as a result of additional fixed assets placed in service
during the twelve months ended September 30, 1997.
Income from operations increased $0.3 million or 10.4% to $3.4 million for
the nine months ended September 30, 1997 from $3.1 million for the nine months
ended September 30, 1996, due to the factors discussed in the preceding
paragraphs.
Rents and operating lease expense increased $0.3 million or 8.6% to $3.5
million from $3.2 million for the nine months ended September 30, 1997 versus
the nine months ended September 30, 1996 and was attributable to new capital
equipment investments in the prepress and bindery areas.
EBITDA increased $0.8 million or 10.3% to $8.6 million for the nine months
ended September 30, 1997 from $7.8 million for the nine months ended September
30, 1996 and also increased as a percent of
51
<PAGE>
net sales from 7.7% to 8.1% as a result of higher production volumes and the
operating benefits of new capital equipment investments.
Interest expense decreased $0.1 million or 2.2% to $4.4 million for the nine
months ended September 30, 1997 from $4.5 million for the nine months ended
September 30, 1996 as somewhat higher average borrowings were offset by lower
average interest rates.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER 31,
1995 (PRO FORMA).
Net sales decreased $23.1 million or 14.3% to $138.5 million for 1996 from
$161.6 million for 1995. The decrease resulted from lower volume of production
and lower paper prices. Perry-Judd's experienced lower demand in 1996 versus
1995 due to the significant increase in paper prices during 1995, substantial
postal rate increases in February 1996 and other industry factors. Paper costs
were 32% of net sales in 1996 and 33% of net sales in 1995.
Costs of production decreased $23.3 million or 17.1% to $113.2 million for
1996 from $136.5 million for 1995 and decreased as a percent of net sales from
84.5% to 81.7%, principally attributable to lower average cost of paper, lower
subcontracting costs, company-wide cost containment actions and improved
operating efficiencies.
Selling, general and administrative expenses increased $1.1 million or 10.0%
to $12.4 million for 1996 compared to $11.3 million for 1995. Selling, general
and administrative expenses also increased as a percent of net sales from 7.0%
in 1995 to 8.9% in 1996 due to increased payroll costs incurred to intensify
selling efforts and fill vacant corporate administrative positions that were
necessary to operate the business.
Depreciation expense increased $0.4 million or 7.3% to $5.9 million for 1996
from $5.5 million for 1995 as a result of additional fixed assets placed in
service during 1996.
Income from operations decreased $1.3 million or 16.5% to $6.5 million for
1996 from $7.8 million for 1995 due to the factors discussed in the preceding
paragraphs.
Rents and operating lease expense increased to $4.3 million for 1996 from
$3.3 million for 1995 as a result of new equipment funded under operating lease
arrangements.
EBITDA decreased $0.8 million or 5.8% to $12.9 million for the year ended
December 31, 1996 from $13.7 million for the year ended December 31, 1995 but
increased as a percent of net sales from 8.5% to 9.3%. The $0.8 million decrease
was attributable to increased lease expense and lower volume of production. The
increase in EBITDA as a percent of net sales was affected by a lower net sales
base resulting from reduced paper sales.
Interest expense decreased $0.9 million or 13.2% to $5.9 million for 1996
from $6.8 million for 1995 as a result of lower average borrowings and lower
average interest rates. Lower average borrowings occurred because of lower paper
costs resulting in lower average working capital requirements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital and operating requirements
with a combination of cash flow from operations, borrowings and external
operating leases. EBITDA was $12.9 million and $13.7 million for the years ended
December 31, 1996 and 1995, respectively, and $8.6 million and $7.8 million for
the nine months ended September 30, 1997 and 1996, respectively.
Operating working capital was $14.5 million and $19.6 million at December
31, 1996 and 1995, respectively, and $19.6 million and $17.3 million at
September 30, 1997 and 1996, respectively. Lower costs of paper and improved
inventory controls caused the reduced level of operating working capital at the
end
52
<PAGE>
of 1996 versus the end of 1995. Increased levels of production and sales were
responsible for the increase at September 30, 1997 versus the amount at
September 30, 1996.
Capital expenditures for purchased assets and asset acquisitions funded
under operating leases were as follows for the periods indicated (dollars in
millions):
<TABLE>
<CAPTION>
117 DAYS 248 DAYS YEAR ENDED NINE MONTHS ENDED
ENDED APRIL 27, ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
ASSETS 1995 1995 1996 1996 1997
- --------------------------------- ----------------- --------------------- --------------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchased........................ $ 10.0 -- $ 5.2 $ 1.7 $ 0.6
Funded under operating leases.... -- 4.1 3.3 3.3 10.7
</TABLE>
These capital expenditures reflect the purchase and lease of additional
prepress, press and bindery equipment. The purchased capital investments have
been funded by internally generated funds and by borrowings under the Existing
Credit Agreement. These capital expenditures have increased or will increase the
Company's capacity and are part of the Company's objective to maintain modern,
efficient plants and technologically advanced equipment. Capital expenditures
for fiscal 1998 (on a combined basis) are estimated to be approximately $30
million to be used primarily for additional press equipment. The Company expects
to fund a majority of these capital expenditures through operating leases.
Since the inception of operations on April 28, 1995, the Company has funded
the majority of its needs for production equipment through operating leases. In
April 1995, the Company successfully negotiated a sale and leaseback of three
presses and other printing equipment with a carrying value of approximately
$22.5 million. Simultaneously with the consummation of the Acquisition,
Perry-Judd's completed the sale and leaseback of all of its real property which
included two printing plants, three warehouses and the corporate headquarters in
Waterloo. The Sale/Leaseback generated net proceeds of approximately $17.6
million, which was used to prepay term debt outstanding under the Existing
Credit Agreement.
Rents and operating lease expense was approximately $3.3 million and $4.3
million for the years ended December 31, 1995 and 1996, respectively, and $3.2
million and $3.5 million for the nine months ended September 30, 1996 and 1997,
respectively. The initial annual lease expense expected to be incurred under the
operating lease resulting from the Sale/Leaseback will be approximately $1.8
million with 10.0% escalations scheduled at the start of the sixth, eleventh and
sixteenth years of the 20 year term.
At December 31, 1996 PPC Holdings, Inc. had net operating loss carryforwards
for federal income tax purposes of $9.8 million available to reduce future
taxable income, expiring in 2010 and 2011. Also, Judd's has alternative minimum
tax carryover credits of $1.7 million as of December 31, 1996 which do not
expire and may be applied against regular tax in the future, in the event
regular tax expense exceeds alternative minimum tax.
Concurrently with the consummation of the Transactions, the Company amended
and restated its existing term loan and revolving credit facility to provide
Perry, Shenandoah Valley and Port City with a $45 million Revolving Credit
Facility (based upon a borrowing base) and a $30 million Term Loan Facility. The
scheduled amortization of the Term Loan Facility will be payable in monthly
installments. In addition to the scheduled amortization, the Term Loan Facility
will be amortized by 75% of the annual excess cash flow with payments to be
applied in inverse order. The Amended and Restated Credit Agreement has an
initial term of five years with renewals thereafter upon the mutual agreement of
all parties.
Outstanding loans under the Amended and Restated Credit Agreement for the
Revolving Credit Facility will accrue interest at a variable rate per annum
equal to, at the option of the Company, either 0.75% above Bankers Trust
Company's prime rate, or 2.25% above the Eurodollar rate. Outstanding loans
under the Term Loan Facility will accrue interest at a variable rate per annum
equal to, at the option of the Company, either 1.25% above Bankers Trust
Company's prime rate, or 2.75% above the Eurodollar rate. The Company will also
pay a 2.25% per annum fee based on the average aggregate face amount of any
53
<PAGE>
outstanding letter of credit and a 0.50% commitment fee on the average daily
amount of the unutilized commitment under the Revolving Credit Facility.
The Company plans to fund the majority of its major new capital expenditures
through operating leases for the foreseeable future. The Company believes that
the net proceeds from the Transactions, cash generated from operations and
available borrowings under the Amended and Restated Credit Agreement will be
sufficient to fund planned capital expenditures, working capital requirements,
operating leases and interest and principal payments for the foreseeable future.
The Company experiences seasonal fluctuations, with generally higher sales
and working capital in the second half of the fiscal year. The Company
anticipates $1.4 million of borrowings under the Revolving Credit Facility will
be outstanding on a pro forma basis as of September 30, 1997. The Revolving
Credit Facility has an aggregate commitment of $45.0 million, of which
approximately $43.6 million will be available on a pro forma basis for future
working capital and other general corporate purposes.
The Company is currently evaluating the potential impact of the situation
referred to as the "Year 2000 Issue". The Year 2000 Issue concerns the inability
of computer software programs to properly recognize and process date sensitive
information relating to the year 2000. The Company is in the process of
determining the costs associated with and the potential impact of the Year 2000
Issue, but is unable to state at this time whether such costs are expected to be
material.
54
<PAGE>
JUDD'S, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Judd's
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.
GENERAL
Judd's is a full service heatset web offset printer focusing principally on
the magazine and technical book commercial printing markets. The Company
believes Judd's is the eleventh largest printer of magazines and catalogs in the
U.S.
Judd's net sales are derived principally from the sale of printing services
and materials to its customer base, including prepress, press, services and
distribution services. Net sales represent gross sales less postage, discounts
and credits. Judd's net sales include sales to its customers of paper purchased
by Judd's. The price of paper, the primary raw material used by Judd's, is
volatile and may cause significant swings in net sales. Judd's is generally able
to pass increases in the price of paper, ink, labor, electricity and other fixed
and variable costs to its customers.
Operating expenses consist primarily of the cost of paper and ink, salaries
and employee benefits, depreciation and amortization and selling, general and
administrative expenses. Judd's strives to provide high-quality, timely services
to its customers within a low cost structure by increasing productivity and
efficiency through investment in state-of-the-art production technologies and
matching costs to revenues.
The following table sets forth certain consolidated financial data of Judd's
for the years ended December 31, 1995 and 1996 and for the nine month periods
ended September 30, 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------ ------------------------------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 141,222 100.0% $ 152,563 100.0% $ 114,644 100.0% $ 101,935 100.0%
Costs of production................ 108,880 77.1 119,039 78.0 90,044 78.5 76,429 75.0
Selling, general and
administrative................... 18,569 13.1 19,426 12.7 13,999 12.2 14,049 13.8
Depreciation....................... 7,929 5.6 7,797 5.1 5,732 5.0 6,361 6.2
Amortization of intangibles........ 165 0.1 164 0.1 123 0.1 150 0.1
Income from operations............. 5,679 4.0 6,137 4.0 4,746 4.1 4,105 4.0
EBITDA............................. 13,895 9.8 14,187 9.3 10,686 9.3 11,669 11.4
Rents and operating lease
expense.......................... 2,846 2.0 2,864 1.9 2,065 1.8 2,805 2.8
Interest expense................... 3,327 2.4 3,066 2.0 2,386 2.1 2,581 2.5
Interest income.................... 825 0.6 306 0.2 228 0.2 286 0.3
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
Net sales decreased to $101.9 million for the nine months ended September
30, 1997 from $114.6 million for the nine months ended September 30, 1996, a
decrease of $12.7 million or 11.1%. The decrease was primarily due to the
bankruptcy of Best Products in late 1996, which had accounted for $10.6 million
in sales for the first nine months of 1996 ($7.1 million of which was a
pass-through of material expense). Judd's also outsourced work in early 1997
during the computer-to-plate conversion process at the Shenandoah Valley
facility. Paper costs decreased to $25.3 million, or 24.8% of net sales during
the nine months ended September 30, 1997, from $35.7 million, or 31.1% of net
sales for the nine months ended September 30, 1996.
55
<PAGE>
Costs of production (excluding the computer-to-plate conversion expense)
decreased to $76.4 million for the nine months ended September 30, 1997 from
$90.0 million for the nine months ended September 30, 1996, a decrease of $13.6
million or 15.1%. The decrease is attributable to the loss of the Best Products
business, which had accounted for $7.1 million in material expense for the first
nine months of 1996, and a decrease in paper prices in 1997. Costs of production
decreased as a percent of net sales to 75.0% from 78.5%.
Selling, general and administrative expense was $14.0 million, or 13.8% of
net sales for the nine months ended September 30, 1997 compared to $14.0
million, or 12.2% of net sales for the nine months ended September 30, 1996. The
increase as a percent of net sales is attributable to higher paper costs in 1996
over 1995.
Depreciation increased to $6.4 million for the nine months ended September
30, 1997 from $5.7 million for the nine months ended September 30, 1996, an
increase of $0.7 million or 12.3%, resulting from the addition of new capital
investments at Shenandoah Valley and Port City.
Income from operations decreased to $4.1 million for the nine months ended
September 30, 1997 from $4.7 million for the nine months ended September 30,
1996, a decrease of $0.6 million or 12.8%, and decreased as a percent of net
sales to 4.0% from 4.1%. The decrease relates to the loss of the Best Products
account and the start-up costs incurred during the conversion to
computer-to-plate technology at Shenandoah Valley.
Rents and operating lease expense in the costs of production category
increased to $2.8 million for the nine months ended September 30, 1997 from $2.1
million for the nine months ended September 30, 1996 due to the addition of a
new web press and related equipment at the Shenandoah Valley facility.
EBITDA increased to $11.7 million for the nine months ended September 30,
1997 from $10.7 million for the nine months ended September 30, 1996, an
increase of $1.0 million or 9.3%, and increased as a percent of net sales to
11.4% from 9.3%, due to increased operational efficiency, and to the smaller
impact that material expense has had on net sales in year-to-date 1997 than in
year-to-date 1996.
Interest expense net of interest income increased to $2.3 million for the
nine months ended September 30, 1997 from $2.2 million for the nine months ended
September 30, 1996.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER 31,
1995
Net sales increased by $11.4 million, or 8.0% from $141.2 million to $152.6
million. Judd's experienced high sales volumes in 1996 with accounts that were
new to Judd's for 1995, such as Black Box, the U.S. Chamber of Commerce, Retired
Officers and the American Society of Mechanical Engineers. Paper costs increased
to $44.4 million, or 29.1% of net sales in 1996, from $41.5 million, or 29.4% of
net sales in 1995.
Costs of production increased to $119.0 million for 1996 from $108.9 million
for 1995, an increase of $10.1 million or 9.3%, and increased slightly as a
percent of net sales to 78.0% from 77.1%. The higher expense is the result of
the aforementioned increase in sales.
Selling, general and administrative expense was $19.4 million, or 12.7% of
net sales for 1996 compared to $18.6 million, or 13.1% of net sales for 1995.
The 4.6% increase was due to the expansion of the Information and Customer
Services departments at Shenandoah Valley and additions to the sales force and
creation of a New Media Services group at Port City.
Depreciation decreased to $7.8 million in 1996 from $7.9 million for 1995, a
decrease of $0.1 million or 1.7%.
Income from operations increased to $6.1 million for 1996 from $5.7 million
for 1995 an increase of $0.4 million or 11.5%, and remained constant as a
percent of net sales at 4.0%. The increase in income resulted from the higher
sales volume at Shenandoah Valley.
56
<PAGE>
Rents and lease expense in the costs of production category increased to
$2.9 million for 1996 from $2.8 million for 1995.
EBITDA increased to $14.2 million for 1996 from $13.9 million for 1995, an
increase of $0.3 million or 2.2%, but decreased as a percent of net sales to
9.3% from 9.9%, as the higher sales volume was offset partly by the New Media
and sales force additions at Port City.
Interest expense net of interest income increased to $2.8 million for 1996
from $2.5 million for 1995, an increase of $0.3 million or 10.3%. Judd's had a
higher debt level in 1995 than in 1996, but this was more than offset by an
unrealized holding gain on marketable securities of $0.7 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Judd's historically has funded its liquidity and capital investment needs
with internally-generated funds and external borrowings. EBITDA was $13.9
million and $14.2 million for the fiscal years 1995 and 1996, respectively, and
was $10.7 million and $11.7 million for the first nine months of 1996 and 1997,
respectively.
Operating working capital was $23.4 million and $18.4 million for the fiscal
years 1995 and 1996, respectively, and was $24.8 million and $22.7 million for
the first nine months of 1996 and 1997, respectively.
Capital expenditures totaled $7.7 million and $6.0 million for the fiscal
years 1995 and 1996, respectively, and were $4.3 million and $4.9 million for
the first nine months of 1996 and 1997, respectively. Since 1993, Judd's has
undergone a major capital expenditure and re-equipping program, investing
approximately $60.0 million in enhanced short cutoff press capabilities and
perfect binding and pre-press technologies. In 1996 the Shenandoah Valley
entered into an operating lease agreement for a new web press at the Shenandoah
Valley facility and related equipment with a value of $8.0 million.
57
<PAGE>
BUSINESS
The Company is a leading multi-regional printer of magazines, catalogs,
technical books and other commercial products. Its four printing facilities are
strategically located in the Midwest and Mid-Atlantic regions, with each plant
having state-of-the-art, integrated prepress, press, binding and distribution
capabilities. The Company services regional and national customers through sales
offices in twelve cities nationwide. Management believes both Perry and Judd's
have established reputations for high quality products and superior customer
service which have resulted in long-standing customer and supplier
relationships. The Company manages the total prepress, print and distribution
process to provide value-added solutions that reduce customer costs or assist
customers in increasing revenues. Pro forma for the Transactions (as defined),
the combined Company had net sales and EBITDA (as defined) of $282.7 million and
$29.7 million, respectively, for the twelve months ended September 30, 1997.
COMPANY STRENGTHS
SUPERIOR QUALITY AND CUSTOMER SERVICE. Perry and Judd's have each
established a reputation for providing superior quality and customer service.
The Company offers high value services that address customers' specific needs
and is committed to meeting those needs through responsive and flexible service.
To ensure continual process improvement, the Company has invested in training
and manages its operations using a total quality management approach. The
Company's commitment to provide timely, cost-effective, high quality printing
solutions combined with the Company's distinctive service orientation
differentiates it from its competitors. As evidence of its consistent focus on
quality, in March 1997 the Company was awarded Business Week's annual "Quality
Achiever" award for the fourth time in the past six years.
LONG-STANDING CUSTOMER RELATIONSHIPS. The Company has provided printing
services for customers such as Time Inc., J.C. Penney, Newsweek, and Kiplinger's
for over 15 years, The McGraw-Hill Companies for over 30 years and the American
Medical Association for 40 years. On a combined basis, the Company's customer
base included over 130 magazine publishers and 110 catalog merchants, with no
title comprising more than 5% of total combined net sales for 1996. The top ten
customers have been with the Company for an average of over 15 years and
accounted for approximately 35% of total combined net sales for 1996. The
Company believes its combination of outstanding performance and commitment to
responsive customer service have enabled the Company to build loyalty with its
customer base that allows it to grow its business relationships. These
relationships provide a strong foundation for growth in the business.
TECHNOLOGICALLY-ADVANCED EQUIPMENT. The Company is committed to providing
advanced production capabilities which deliver value-added solutions to its
customers. Since the beginning of 1993, the Company has invested over $100
million (on a combined basis) in capital expenditures to upgrade and expand its
equipment base. Management believes that these investments, including
high-speed, high-yield press equipment, cost-effective binding equipment and
computer-to-plate technology, have enabled the Company to remain at the
forefront of technology, retain and expand relationships with existing
customers, increase capacity, lower production costs, improve quality, speed and
flexibility and attract new business.
STRATEGIC LOCATIONS. The Company's four printing plants are strategically
located to service major population centers throughout the U.S., enabling the
Company to provide rapid, cost-efficient national and regional distribution. The
location of the Company's plants, combined with its distribution volume, allows
the Company to ship directly to U.S. Postal Service sectional center facilities,
which lowers its customers' postage rates and provides for quicker delivery of
magazines and catalogs to consumers. The proximity of the Company's facilities
to a majority of the U.S. population and central distribution routes provides
significant distribution economies to its customers and a competitive advantage
to the Company.
EXPERIENCED MANAGEMENT TEAM AND PRINCIPAL STOCKHOLDERS. The Company's
executive officers and key management employees have spent the majority of their
careers in printing and publishing and have an
58
<PAGE>
average of over 20 years of experience in the industry. Management's expertise
and in-depth knowledge of the Company's markets are further complemented by the
experience of Robert E. Milhous and Paul B. Milhous, the principal stockholders
of the Company. Prior to their ownership of Perry, the Milhouses owned Treasure
Chest Advertising Company, Inc., which grew from a start-up in 1967 to the sixth
largest commercial printer in the U.S., having net sales in excess of $550
million before its sale to Big Flower Press, Inc. in 1993.
BUSINESS STRATEGY
The Company's strategic objective is to grow revenues and profits by
leveraging its competitive strengths as an integrated provider of high quality
products and value-added services in its targeted business sectors. Key elements
in this strategy include the Company's ability to capitalize on opportunities
presented by the combination of Perry and Judd's and to pursue complementary
acquisitions:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company intends to take
advantage of the considerable cross-selling opportunities presented by the
combination of Perry's and Judd's respective customer bases, product lines and
geographical locations. The Company expects to increase product penetration of
its existing customer base by capturing work that previously exceeded Perry's
and Judd's stand-alone capacities and particular areas of expertise. For
example, with the addition of Judd's medium- and short-run printing
capabilities, the Company will be well-positioned to serve the needs of many of
Perry's larger, long-run customers who are developing or acquiring additional
shorter-run targeted specialty magazines and catalogs. In addition, the Company
can now offer its customers a choice of Mid-Atlantic and Midwestern production
locations.
REALIZE OPERATIONAL SYNERGIES. The Company believes it can achieve
production rationalization from the integration of Perry's long-run and Judd's
medium- and short-run printing capabilities. By allocating production among the
various facilities, the Company can better absorb increased volumes and manage
available capacity, thereby optimizing labor and equipment utilization while
reducing printing and distribution costs. In addition, Judd's Mount Jackson,
Virginia facility, currently used for back-issue storage, provides the Company
with a ready-made expansion facility.
CAPTURE OVERHEAD COST AND VOLUME PURCHASING EFFICIENCIES. The Company
expects to consolidate overhead functions of Perry and Judd's resulting in
savings from the elimination of redundant administrative operations. In
addition, the Company believes the combined volume requirements for paper, other
raw materials and production supplies should allow it to negotiate improved
terms from vendors. Management also believes the combined Company can obtain
better pricing from equipment manufacturers.
DEVELOP NEW MEDIA SERVICES. The Company is among the printing industry's
leaders in offering innovative on-line and multimedia products and services. The
Company's New Media Services group develops and manages interactive web-sites
for both publishing and direct-marketing customers who desire to complement
ink-on-paper products with on-line products and services. The Company has also
successfully marketed its New Media Services to non-publishing customers. The
Company has implemented web-site advertising and electronic commerce programs
for its customers and believes multimedia and on-line products and services
present the Company with significant growth opportunities and further
differentiate it from its competitors.
GROW THROUGH COMPLEMENTARY ACQUISITIONS. The Company plans to capitalize on
the printing industry's fragmentation by pursuing selective complementary
acquisitions to broaden its geographic presence, extend its product offerings,
and expand production capacity within the magazine and catalog sectors.
Management believes such acquisitions can offer significant cost savings
realized through the combined purchasing of raw materials, reduction of overhead
costs and productivity gains captured by the Company's ability to integrate
newly acquired facilities with the Company's existing business.
59
<PAGE>
HISTORY
Perry Printing Corporation ("Perry Printing") was founded in 1931 by L.E.
Perry upon his purchase of the Waterloo Courier Newspaper. After World War II,
Mr. Perry sold the newspaper operation and began publishing farm newspapers and
printing advertising circulars. In 1956, Mr. Perry was joined by his son, Roger,
who led Perry's pioneering investments into heatset web offset technology, and
the business grew over time to become one of the Midwest's premier printers of
magazines and catalogs. Perry's largest plant, located in Waterloo, Wisconsin,
was built in 1959. The Company opened a second heatset web offset facility in
1982 in Baraboo, Wisconsin. In 1974, Perry Printing became a wholly-owned
subsidiary of Journal Communications, Inc. ("Journal"). In April 1995, PPC
Holdings acquired from Journal substantially all of the assets of Perry Printing
through a wholly-owned subsidiary, PPC Acquisitions, Inc., which was
subsequently renamed Perry Graphic Communications, Inc.
Judd's, Incorporated was founded in 1868 as Judd & Detweiler, a commercial
printer in Washington, D.C. serving government-sector clients. In 1895, Judd's
entered the magazine segment by printing National Geographic magazine, which
continued as a customer for 64 years until shifting to the rotogravure printing
process. In 1961, the Company acquired the book division of Lord Baltimore Press
in Baltimore, Maryland and renamed the subsidiary, a full-service supplier of
professional and technical journals, reference books and directories, Port City
Press. In the early 1970s, the Company built the Shenandoah Valley printing
facility to expand its printing capacity and to provide state-of-the-art heatset
web offset products and services to the publications, catalog and advertising
insert markets. The location is convenient to major distribution routes and
provides access to a skilled, lower-cost work force.
THE PRINTING INDUSTRY
Commercial printing in the U.S. is a large, highly fragmented,
capital-intensive industry which includes the printing of books, magazines,
advertising circulars, catalogs, direct mail, free-standing inserts,
directories, financial and legal documents, labels and wrappers and other
general printing material. There are approximately 35,000 commercial printers in
the U.S. today which generated over $60 billion of sales in 1996. Of these
35,000 commercial printers, only 132 had revenues in excess of $50 million and
only 37 had revenues in excess of $200 million in 1996. The Company believes
that the challenges of ongoing consolidation and competitive pricing trends in
the industry, the high level of capital investment necessary to keep pace with
changing technology, and customer demands for increasingly sophisticated,
specialized and time-sensitive printing and distribution services can be met
only by printers, such as the Company, with the resources and experience to
provide state-of-the-art production facilities, nationwide as well as regional
distribution capabilities, and high quality customer service.
MARKETS, PRODUCTS AND CUSTOMERS
The following is a table showing the Company's range of printed products:
<TABLE>
<CAPTION>
PRODUCT FORMAT RUN LENGTH FREQUENCY DISTRIBUTION
- ---------------------- --------------- ------------ -------------- ---------------------
<S> <C> <C> <C> <C>
Magazines - Standard - Short - Weekly - Subscription
- Tabloid -Medium -Monthly - Newsstand
- Long - Bimonthly
Catalogs - Standard - Medium - Variable - Direct mail
- Digest - Long
- Letter-sized
Technical Books - Standard - Short - Variable - Drop-ship
- 7x10 - Mail
- Order fulfillment
</TABLE>
60
<PAGE>
MAGAZINES
With the acquisition of Judd's, the Company believes it will be the eighth
largest printer of magazines in the U.S., with combined net sales of
approximately $151.3 million, representing nearly 52% of the Company's total
combined net sales for 1996.
The Company has the specialized equipment required to handle the complex
manufacturing requirements of the nation's premier magazine publishers. Given
its expertise and equipment, the Company can produce a broad range of formats,
run lengths and manufacturing frequencies using various types of paper stock.
The Company's success in attracting and maintaining customer accounts is
enhanced by its ability to facilitate sophisticated targeted marketing and
distribution through the use of its geo-demographic selective binding, ink-jet
addressing and customized list processing services. In addition, the Company
believes it is one of only six printers with specialized tabloid-size magazine
capabilities used for titles such as COMPUTERWORLD AND AMNEWS.
The cost to magazine publishers of switching printers is significant as a
result of the highly sophisticated nature of the magazine production and
distribution process and demanding deadlines. Therefore, publishers generally
establish long-term relationships with printers, such as the Company, which are
knowledgeable and experienced in the customers' particular production
requirements and which invest in state-of-the-art production equipment to meet
the customers' needs to improve quality, flexibility and to reduce production
costs.
The Company produces over 200 magazine titles. The Company's top ten
magazine customers (based on total combined net sales for 1996) include Time
Inc., The McGraw-Hill Companies, CW Communications, the American Medical
Association, the U.S. Chamber of Commerce, the Washington Post Company, Dobbs
Publications, The Economist, Kiplinger's and Newsweek. Titles printed by the
Company include:
- AMNEWS
- ATLANTIC MONTHLY
- AVIATION WEEK
- BUSINESS WEEK
- COMPUTERWORLD
- THE ECONOMIST
- ENTERTAINMENT WEEKLY
- IN STYLE
- KIPLINGER'S PERSONAL FINANCE
- LIFE
- MACWEEK
- NATION'S BUSINESS
- NEWSWEEK
- PEOPLE
- SPORTS ILLUSTRATED
- STEREOPHILE
- TIME
- WASHINGTON POST MAGAZINE
The Company has also recently signed a contract with Boy Scouts of America
for the printing of BOY'S LIFE, SCOUTING and EXPLORING magazines beginning in
1998.
Substantially all of the Company's magazine printing is performed under
contracts, the significant majority of which have remaining terms ranging from
one to six years. The Company's strong relationships with its magazine customers
have enabled it to extend the majority of such contracts beyond their initial
expiration dates. The Company's average relationship with its top ten magazine
customers is over 15 years, and both Time Inc. and Business Week have recently
extended their contracts with the Company to 2003 and 1999, respectively.
CATALOGS
The Company believes that, with the acquisition of Judd's, it will rank as
the seventh largest printer of catalogs in the U.S. with combined net sales of
approximately $82.0 million, representing over 28% of the Company's total
combined net sales for 1996. The Company's sophisticated prepress, printing,
binding and distribution capabilities ensure that high quality catalogs reach
the consumer in a timely and cost-efficient
61
<PAGE>
manner. In addition, the Company believes it is one of only four printers with
specialized digest-size catalog printing capabilities. The Company produces
catalogs for over 110 customers including:
- BLACK BOX
- BOOK-OF-THE-MONTH
- CONCEPTS DIRECT
- DOUBLEDAY BOOK & MUSIC CLUB
- HEARTLAND AMERICA
- HECHT'S
- HIGHSMITH COMPANY
- HOUSE OF LLOYD, INC.
- J.C. PENNEY
- MASON SHOES
- NATIONAL BUSINESS FURNITURE
- SIERRA TRADING
Consistent with industry practice, the Company performs most of its catalog
printing under short term agreements with its customers. The Company recently
signed a three-year agreement with Miles Kimball to produce its catalogs
beginning in 1998.
TECHNICAL BOOKS
The Company produces a variety of information-intensive professional and
technical journals, reference books and business directories, and also offers
data conversion and composition, database management and multimedia publishing
services to its technical book customers. Combined net sales in technical book
printing were $36.7 million, representing 13% of the Company's total combined
net sales for 1996. The Company serves approximately 350 publishers in this
market, including:
- AMERICAN MEDICAL ASSOCIATION
- ARBITRON RATING COMPANY
- DUN & BRADSTREET
- INSURANCE INSTITUTE
- MATTHEW BENDER
- THE MCGRAW-HILL COMPANIES
- MORNINGSTAR INC.
- STANDARD & POOR'S
Typically, the Company enters into contracts which set manufacturing prices
for one year (allowing for adjustments based on fluctuations in paper costs)
without specifying printing volume. The Company's average relationship with its
top ten customers in this segment is over 16 years.
OTHER COMMERCIAL PRINTING
The Company also produces a variety of specialty commercial products such as
magazine inserts, calendars and general advertising products. These commercial
products enable the Company to optimize capacity utilization by supplementing
its magazine and catalog business and generated combined net sales of $21.1
million, or 7% of total combined net sales for 1996.
NEW MEDIA SERVICES
In recent years, the Company has developed a variety of multimedia, on-line
and content repurposing products and services (the "New Media Services"), and
the Company believes it is among the industry leaders in providing its customers
with innovative, creative applications of such technologies to add value to
their businesses.
62
<PAGE>
The New Media Services began as the Company became involved in the
development and management of web-sites to enhance its traditional printing
capabilities and as a natural extension and expansion of its customer
relationships. The Company provides interactive web-site development, tracking,
analysis and reporting services to publishers and direct-marketers desiring to
complement ink-on-paper magazine products with on-line, brand-based products and
services and to take advantage of marketing and sales opportunities in
electronic commerce. Customers utilizing the Company's innovative multimedia
solutions include:
- AMERICAN DIABETES ASSOCIATION
- DOBBS PUBLISHING GROUP
- DORIS DAY ANIMAL LEAGUE
- HOME BUYER PUBLICATIONS
- MARTHA STEWART LIVING
- NATIONAL ASSOCIATION OF REALTORS
- NON-COMMISSIONED OFFICERS
ASSOCIATION
- THE SALVATION ARMY
- VISTA GRAPHICS
- WASHINGTON MAGAZINE
In addition, the Company's experience and reputation for building effective
interactive web-sites and creative electronic commerce solutions has expanded
its customer base for its New Media Services to non-publishing customers,
including Reba McEntire and Electronics Boutique. The Company, a Microsoft-
certified provider of web-site development services, intends to continue to
develop innovative multimedia products and services for publishing,
direct-marketing and non-publishing customers, including current projects
exploring web-site advertising and electronic commerce.
SALES AND MARKETING
The Company employs 39 sales representatives located in twelve regional
offices nationwide. The sales force is divided into separate groups focused on
each of the three sectors: magazines, catalogs/ commercial, and technical books.
This product-focused approach to sales meets the needs of customers for a sales
representative who is knowledgeable, experienced and technologically well-versed
in the dynamics of the customer's business. The sales force is compensated
through a commission plan that provides incentives for new business as well as
customer retention.
PRODUCTION AND DISTRIBUTION
The Company provides a full range of integrated printing services to its
customers. These services include electronic prepress, platemaking, high-speed
and high quality heatset web offset printing, finishing and distribution
services. The Company believes that it continues to be at the forefront of
rapidly evolving commercial printing technology. After combined capital spending
by Perry and Judd's of over $100 million in capital expenditures since 1993, the
majority of the Company's prepress, platemaking, press and binding equipment is
state-of-the-art. Over the past five years, the Company has acquired and
installed computer-to-plate technology, new cost-effective, high-yield, short
cut-off gapless presses, and advanced, high-speed, automated binding equipment.
Management views the successful application of new technology as a critical
success factor in its chosen markets, and continually evaluates and invests in
new equipment and technology which it believes will further enhance its printing
capabilities and competitiveness.
PREPRESS
In each of its facilities, the Company provides a full range of prepress
services and equipment utilizing the latest technology, answering the demand for
high quality, 24-hour preparatory services. The Company's prepress services
include conventional preparatory services, (such as typesetting, proofreading,
color separation, production of platemaking film, imposition and platemaking) as
well as state-of-the-art computer-to-plate technology. The Company has made
significant investments in transforming its prepress operations from
labor-intensive to equipment- and system-intensive processes, including the
introduction
63
<PAGE>
of electronic prepress capabilities enabling the Company to receive, create and
process pages electronically and to utilize automated platemaking equipment.
PRESS ROOM
The Company offers its customers state-of-the-art heatset web offset press
capabilities at its four printing facilities. The Company has invested in wide
web press technology which represents a substantial capital commitment that only
a small number of well-capitalized printers are able to justify. Wide web
presses generate a significant cost savings on longer press runs. Other
specialized press capabilities include short cut-off and gapless presses, which
reduce paper waste, and 5-color presses which are used to print covers. The
Company's presses can print on lower-cost paper stocks and certain presses
incorporate folders to produce tabloid- and digest-size publications. The
Company has both high-speed presses best suited for longer runs and other
presses with shorter makeready times which are better suited for short runs. The
Company's book presses are automated to reduce labor costs and makeready times.
Management believes its printing operations have the consistent high quality
reproduction, low paper waste, flexibility and dependability that is required by
the Company's customers.
BINDING AND FINISHING
The Company has invested significant capital to install high-speed,
automated binding and finishing equipment. Printed products requiring finishing
are either saddle bound (stapled) or perfect bound (square back with adhesive).
The Company's finishing services include blow-in-cards, polybagging, tipping and
tabbing.
Among the most significant recent technological advances currently employed
by the Company are ink-jet addressing and geo-demographic selective binding (on
both a regional and specific carrier route basis). All of the Company's magazine
and catalog binding equipment has ink-jet capabilities and partial or fully
selective systems. During the binding process, a product's content can be
modified to include or exclude certain materials using technologies that enable
a magazine publisher or catalog merchant to customize and personalize its market
by sending the same basic magazine or catalog to all consumers while inserting
different advertisements, messages, prices or product offerings, depending upon
the geographic and demographic characteristics of the individual customer or
subscriber.
Ink-jet personalizing is increasingly being used by many publishers and
catalogers. Ink-jet addressing eliminates the additional process of printing
paper labels and improves mailing efficiency. Ink-jet addressing allows both the
cover and the order form to be labeled and to contain customer coding
information. Furthermore, as magazine and catalog publishers continue to look
for methods to increase the level of personalization, the ink-jet process is
being used more frequently to add personal messages, specific inserts to
frequent buyers, or unique coding information for order entry.
DISTRIBUTION
Distribution is a key element in the production process to effectively
manage delivery costs, and the Company provides its customers with
state-of-the-art distribution and mail list services. The distribution services
provided by the Company include multiple entry point analysis, pool shipping,
drop shipping, load planning, over-the-road and rail services,
mailing/distribution consultation, freight tracking, co-mailing analysis, mail
tracking, ink-jet tape formatting and ink-jet tape processing.
The Company provides a number of mail list services which are designed to
improve deliverability and minimize shipping costs. Many mail list services are
integrated into the finishing operation, reducing the need for redundant
handling. These services include merging multiple lists and purging
duplications, formatting the tapes or optical disks which run the finishing
controller, isolating undeliverable addresses due to faulty zip codes,
correcting zip codes, creating postnet barcoding, and sorting files to support
customers' mailing strategies. Additionally, the mail list services can be used
to select names to target a
64
<PAGE>
specific audience for a particular publication or catalog. The Company is also
able to merge lists of names for the same customer or to co-mail catalogs and
magazines of different customers to achieve increased postal presort discounts.
Management believes smaller competitors either cannot offer these services or
can only offer them in a more limited way.
By integrating the mail list services with its distribution services, the
Company maximizes postal discounts for its customers through achieving optimum
presort savings and automation discounts, as well as ensuring on-time delivery.
Due to its large shipping volume, the Company's plants are designated postal
distribution centers, each with full-time postal employees. The Company's volume
and strategic locations enable it to ship directly to U.S. Postal Service
sectional center facilities, thus providing postal discounts and more timely
delivery for its customers. The Company believes its distribution capabilities
and favorable distribution locations provide a competitive advantage.
FACILITIES
Each of the Company's printing plants has a primary product expertise which
allows it to maximize the efficiency and responsiveness of its operations.
Information about the Company's printing plants is set forth below:
PRINTING PLANTS
<TABLE>
<CAPTION>
LOCATION PRIMARY PRODUCT OWN/LEASE SQUARE FOOTAGE ACREAGE
- ---------------------------------- --------------------------------------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Waterloo, WI...................... Long- and medium-run magazines Lease* 298,000 16
Strasburg, VA
(Shenandoah Valley)............. Medium- and short-run magazines Own 320,000 17
Baraboo, WI....................... Consumer/business catalogs Lease* 434,000 42
Baltimore, MD (Port City)......... Professional and technical journals, Own 175,000 6
directories & reference books
</TABLE>
- ------------------------
* Pursuant to the Sale/Leaseback. See "Description of Sale/Leaseback."
The Company's principal executive offices are located at 575 West Madison
Street, Waterloo, Wisconsin, and occupy 50,200 square feet of office space in a
facility that will be leased by the Company pursuant to the Sale/Leaseback. In
addition to the printing plants listed above, the Company owns a 60,000 square
foot printing plant on 47 acres in Mount Jackson, Virginia, which currently is
used for storage. The Company also owns the original Judd & Detweiler facilities
in Washington, D.C., consisting of 225,000 square feet of commercial office and
warehouse space, with a majority of that space currently under lease to third
parties. In addition, the Company leases three warehouses in Waterloo,
principally used for paper storage, having an aggregate square footage of
112,800 square feet. The Company also leases a 47,875 square foot facility in
Dorsey, Maryland nearby to the Port City plant, which is currently used as an
order-processing and fulfillment center for Port City customer orders and a
10,000 square foot warehouse in Winchester, Virginia used for spare parts
storage. The Company also stores paper in a facility in Chambersburg,
Pennsylvania.
The Company's locations provide easy access to air freight at metropolitan
airports in Chicago, Milwaukee and Madison and ground transportation links to
Chicago, Minneapolis, Detroit, St. Louis, New York City, Washington, D.C.,
Philadelphia, New Jersey and other major population centers, providing the
Company with the capability to offer timely, cost-effective delivery to the
entire country.
EMPLOYEES
As of September 30, 1997 on a combined basis, the Company had 2,216
employees, including 106 at its headquarters and sales offices, 689 at its
Waterloo plant, 448 at its Baraboo plant, 756 at its Shenandoah Valley plant and
217 at its Port City plant. The majority of the Waterloo plant employees are
represented
65
<PAGE>
by three unions. Perry entered into a labor contract with all three unions which
became effective July 1, 1994, was supplemented in 1995 in connection with the
acquisition of Perry Printing by PPC Holdings and expires on June 30, 1998. The
Baraboo, Shenandoah Valley and Port City plants are non-union and to date the
Company is not aware of any union organization activity at those plants. The
Company believes that its relations with its employees are good and the Company
has never experienced a work stoppage.
RAW MATERIALS AND SUPPLIERS
Paper and ink are the primary direct materials used by the Company.
Generally, direct material costs are passed on to the customer.
The primary raw material used by the Company in its operation is paper. In
1996, the Company's customers supplied approximately two-thirds of the paper
used in the printing process, and the Company supplied approximately one-third.
The cost of paper is a principal factor in the Company's manufacturing costs and
pricing to certain customers and consequently the cost of paper and the
proportion of paper supplied by customers significantly affects the Company's
net sales and cost of sales. The Company is generally able to pass increases in
the cost of paper to its customers, while declines in paper costs generally
result in lower prices to customers. Fluctuations in paper costs result in
corresponding fluctuations in the Company's net sales, but generally have not
affected volume or profits to any significant extent. However, sharp increases
in paper prices and related reduction in print advertising programs are more
likely to adversely affect volumes and profits. The Company believes that its
relationships with its paper suppliers are strong, and that it has adequate
allocations with its suppliers for its customers' needs.
The Company supplies all of the ink used by its customers and has strong
relationships with its suppliers. The Company believes that there are adequate
sources of supply for ink and that its relationships with its suppliers yield
improved quality, pricing and overall services to its customers. See "Certain
Relationships and Related Transactions."
COMPETITION
The Company competes in each of its market segments on the basis of price,
quality, range of services offered, distribution capabilities, ability to
service the specialized needs of customers, availability of printing time on
appropriate equipment and use of state-of-the-art technology.
The Company's competitors in the magazine and catalog printing market
consist of diversified printing companies who have facilities sufficient to
compete in the national market, along with various local or regional printers
with less extensive facilities who compete for local or regional business. The
Company's key competitors in these markets include R.R. Donnelley & Sons,
Quebecor Printing, World Color Press, Quad/Graphics, Banta Corp. and Brown
Printing.
Competition in the professional and technical journals, reference book and
business directories market is highly fragmented, with competition, arising from
multiple smaller printers, as well as larger competitors such as R.R. Donnelley
& Sons, Quebecor Printing, Cadmus Communications and Fry Communications.
REGULATORY COMPLIANCE
The Company is subject to regulation under various federal, state and local
laws relating to the environment and to employee health and safety. These
environmental regulations relate to the generation, storage, transportation,
handling, disposal and emission into the environment of various substances.
Permits are required for operation of the Company's business and these permits
are subject to renewal, modification and, in certain circumstances, revocation.
The Company is also subject to regulation under various federal, state and local
laws which allow regulatory authorities to compel (or seek reimbursement for)
cleanup of environmental contamination, if any, at the Company's own sites and
at facilities where its
66
<PAGE>
waste is or has been disposed. The Company has internal controls and personnel
dedicated to compliance with all applicable environmental and employee health
and safety laws. The Company expects to incur ongoing capital and operating
costs and administrative expenses to maintain compliance with applicable
environmental laws. The Company cannot predict the environmental or employee
health and safety legislation or regulations that may be enacted in the future
or how existing or future laws or regulations will be administered or
interpreted. Compliance with new laws or regulations, as well as more vigorous
enforcement policies of the regulatory agencies or stricter interpretation of
existing laws, may require additional expenditures by the Company, some or all
of which may be material, however the Company is not currently aware of any
environmental or employee health or safety matter which could have a material
adverse effect upon the Company's competitive or consolidated financial
position.
TRADE NAMES AND TRADEMARKS
The Company owns certain trade names and trademarks used in its business,
none of which it believes are material.
LEGAL PROCEEDINGS
Certain claims, suits and complaints which arise in the ordinary course of
business have been filed or are pending against the Company. The Company
believes that all such matters either are adequately reserved for, are covered
by insurance, or would not have a material adverse effect on the financial
condition or results of operations of the Company, taken as a whole, if
adversely determined against the Company.
67
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGEMENT EMPLOYEES
The table below sets forth certain information regarding the directors,
senior executive officers and certain other executive officers and key
management employees of the Company giving effect to the Acquisition. All of the
persons listed below are U.S. citizens.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ----------- ----------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND SENIOR
EXECUTIVE OFFICERS
Robert E. Milhous............. 60 Chairman of the Board of Directors, Perry-Judd's, Perry and Judd's
Paul B. Milhous............... 59 Vice-Chairman of the Board of Directors, Perry-Judd's, Perry and Judd's
Craig A. Hutchison............ 45 Director, President and Chief Executive Officer, Perry-Judd's, Perry and
Judd's
Thomas V. Bressan............. 48 Director and Secretary, Perry-Judd's, Perry and Judd's
Verne F. Schmidt.............. 57 Senior Vice President and Chief Financial Officer, Perry-Judd's, Perry and
Judd's
Beth A. Lindsay............... 43 Senior Vice President, Human Resources, Perry-Judd's, Perry and Judd's
EXECUTIVE OFFICERS AND KEY
MANAGEMENT EMPLOYEES
Walter A. Edwards............. 47 Vice President, Perry and Division Manager--Baraboo Plant
Larry C. Cole................. 54 Vice President, Perry and Division Manager--Waterloo Plant
Howard D. Sullivan............ 61 Senior Vice President, Publication Sales, Perry and Judd's
Larry F. Celey................ 52 Vice President, Commercial and Catalog Sales (Eastern Region), Perry and
Judd's
Timothy M. Smith.............. 40 Vice President, Publication Sales, Perry and Judd's
Stephen M. Sanfelippo......... 40 Vice President, Commercial and Catalog Sales (Central Region), Perry and
Judd's
Bradley J. Hoffman............ 36 Vice President, Finance, Perry-Judd's
Joseph J. Janela.............. 41 Vice President, Finance, Judd's and Port City
</TABLE>
ROBERT E. MILHOUS has been Chairman of the Board of both the Company and
Perry since December 1994. Mr. Milhous was Chairman of the Board of Treasure
Chest and its predecessor corporation from 1967 until the sale of Treasure Chest
in 1993. Mr. Milhous is also the Chairman of the Board of Directors of Novamil
Corporation ("Novamil"), which manages various manufacturing companies owned by
affiliates controlled by himself and Paul B. Milhous. Robert E. Milhous is the
brother of Paul B. Milhous.
PAUL B. MILHOUS has been Vice Chairman of the Board of both the Company and
Perry since December 1994. Mr. Milhous was Vice Chairman of the Board of
Treasure Chest and its predecessor corporation from 1967 until the sale of
Treasure Chest in 1993. Mr. Milhous is also the Vice-Chairman of the Board of
Directors of Novamil, which manages various manufacturing companies owned by
affiliates controlled by himself and Robert E. Milhous. Paul B. Milhous is the
brother of Robert E. Milhous.
CRAIG A. HUTCHISON has been the President of Perry since March 1989. From
March 1987 to March 1989, Mr. Hutchison served as Chief Operating Officer for
the Perry Web Division which included the Waterloo and Baraboo plants and a
non-heatset plant in Trumbull, Connecticut. Prior to his COO position, Mr.
Hutchison was Senior Vice President of Sales and Marketing for Perry Printing.
From January 1980 to February 1987, Mr. Hutchison held various positions
managing the sales and marketing
68
<PAGE>
operations of Perry. Mr. Hutchison joined Perry in 1976 as a sales
representative. Mr. Hutchison has served on the Boards of Directors of PPC
Holdings and Perry since April 1995.
THOMAS V. BRESSAN has been Managing Director of Mergers and Acquisitions for
Novamil since 1987. Prior to joining Novamil, Mr. Bressan was employed by
Bankers Trust Company, Los Angeles, from 1982 to 1987 and by Security Pacific
Business Credit from 1976 to 1982.
VERNE F. SCHMIDT has been Senior Vice President and Chief Financial Officer
since he joined Perry in January 1997. From 1974 through 1996, Mr. Schmidt held
various financial and accounting positions including Senior Vice President and
Chief Financial Officer of Ringier America and its predecessor companies. Prior
to 1974, Mr. Schmidt was an audit manager for Price Waterhouse.
BETH A. LINDSAY has been Senior Vice President of Human Resources since
joining Perry in March 1996. From 1982 to 1996, Ms. Lindsay was employed with
World Color Press in various positions, including Human Resource Director, Vice
President Human Resources, Commercial Division, and Regional Vice President,
Human Resources. Prior to 1982, Ms. Lindsay was employed by Levi Strauss from
1980 to 1982 and Burrough's Corporation from 1978 to 1980.
WALTER A. EDWARDS has been Vice President and General Manager of the Baraboo
Plant since joining Perry in December 1996. From 1991 to 1995, Mr. Edwards was
employed by World Color Press as Vice President and Regional Manager. From 1974
to 1991, Mr. Edwards held a variety of positions at R.R. Donnelley &
Sons/Meredith-Burda, including Vice President, Manufacturing and Group
Manufacturing Manager.
LARRY C. COLE has been Vice President and General Manager of the Waterloo
Plant since March 1991. From January 1990 to March 1991, Mr. Cole served as Vice
President of Operations of Perry. Mr. Cole joined Perry Printing in 1988 as
Director of Materials Management. From 1977 to 1988, Mr. Cole held various plant
and manufacturing management responsibilities with Butler Manufacturing Company
of Kansas City, Missouri.
HOWARD D. SULLIVAN. Following the Acquisition, Mr. Sullivan has served as
Senior Vice President, Publication Sales of Judd's. Prior to the Acquisition,
Mr. Sullivan served as Vice President of Sales and Customer Service, Shenandoah
Valley. Mr. Sullivan joined Judd & Detweiler in 1958 and rose to the position of
Executive Vice President by 1979. He left Judd's in 1988 to serve as President
and CEO of Holliday-Tyler Printing Corporation. He returned to Shenandoah Valley
as Vice President and Regional Sales Manager in 1992.
LARRY F. CELEY has been Vice President of Eastern Region Commercial Sales of
Perry since July 1997. From 1993 to July 1997, Mr. Celey served as Senior Vice
President of Sales and Marketing. From 1986 to August 1993, Mr. Celey served as
New York Regional Vice President of Sales for Publications and Commercial Sales
of W.A. Krueger (Ringier America). From 1980 to 1986, Mr. Celey served as
Director of Sales of Lehigh Press. From 1973 to 1980, Mr. Celey served as Sales
Manager at Media General.
TIMOTHY M. SMITH has been Vice President of Publication Sales of Perry since
January 1997. Prior to assuming his current responsibilities, Mr. Smith was Vice
President of National Accounts from 1994 to 1997. Mr. Smith served as Vice
President of Eastern Sales from May 1993 to 1994 and, before that, he was
Director of Sales from 1990 to 1993. Mr. Smith joined Perry in 1981 as a sales
representative.
STEPHEN M. SANFELIPPO has been Vice President Central Region Commercial
Sales of Perry since October 1997. Prior to assuming his current
responsibilities, Mr. Sanfelippo served as Director of Central Region Sales from
1994 to October 1997. Mr. Sanfelippo joined Perry in 1984 as a sales
representative.
BRADLEY J. HOFFMAN was Vice President, Finance of Perry since July 1994 and
has served in that position for Perry-Judd's since the Acquisition. From
December 1992 to July 1994, Mr. Hoffman served as Controller Web
Division/Waterloo Plant. From September 1989 to December 1992, Mr. Hoffman was
Chief Financial Officer and Director of Operations at Putman Publishing Company.
From 1985 to 1989,
69
<PAGE>
Mr. Hoffman served as Chief Financial Officer at the American Society for
Quality Control prior to which he served as an auditor for Price Waterhouse from
January 1984 to November 1985.
JOSEPH J. JANELA. Mr. Janela has served as Vice President, Finance of Judd's
and Port City since the Acquisition. Mr. Janela previously served as Vice
President of Finance and Secretary of Judd's and as Secretary and Treasurer of
all Judd's subsidiaries. Mr. Janela joined Judd's in 1995 as Vice President of
Finance and Secretary. Prior to that, he was a partner with Stoy, Malone &
Company, P.C., a Washington, D.C. area regional accounting firm and Judd's
independent auditors prior to the Acquisition. Prior to his employment with
Stoy, Malone, Mr. Janela was a manager at M.B. Hariton & Company, CPAs and also
was a controller for a private company for two years.
DIRECTOR COMPENSATION
Non-employee directors are reimbursed for their out-of-pocket expenses
incurred in attending meetings of the Board of Directors of the Company and its
subsidiaries. In addition, Robert E. Milhous and Paul B. Milhous each receive
$25,000 annual compensation for their services as Chairman and Vice-Chairman,
respectively, of the Board of Directors of the Company and its subsidiaries.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information with
respect to the compensation paid or accrued by the Company for services rendered
during the year ended December 31, 1997 by the Company's Chief Executive Officer
and each of the four other most highly compensated executive officers whose
annual salary and bonus for the year ended December 31, 1997 exceeded $100,000
(collectively, the "Named Executive Officers"):
1997 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION(2)
---------------------------------------- -------------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS (# OF SHARES) COMPENSATION(1)
- ------------------------------------- ---------- --------- ----------------- ------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Craig A. Hutchison, ................. $ 260,097 -- -- -- $ 124(3)
PRESIDENT AND CEO
Verne F. Schmidt, ................... $ 184,615 -- -- -- $ 22,166(4)
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Walter A. Edwards, .................. $ 179,615 $ 7,500 -- -- $ 7,121(4)
VICE PRESIDENT AND DIVISION MANAGER
Larry C. Cole, ...................... $ 174,000 -- -- -- --
VICE PRESIDENT AND DIVISION MANAGER
Larry F. Celey, ..................... $ 170,014 -- -- -- --
VICE PRESIDENT, COMMERCIAL AND
CATALOG SALES (EASTERN REGION)
</TABLE>
- ------------------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers
which are available generally to all salaried employees of the Company and
certain perquisites and other personal benefits, securities or property
received by the Named Executive Officers which do not exceed the lesser of
$50,000 or 10% of any such officer's salary and bonus disclosed in this
table.
70
<PAGE>
(2) The Company did not grant any restricted stock awards or stock appreciation
rights or make any long-term incentive plan payouts to the Named Executive
Officers during 1996.
(3) Consists of premiums for life and disability insurance paid by the Company
on behalf of the Named Executive Officer.
(4) Consists of relocation expenses paid by the Company.
OPTION GRANTS
No stock options on stock appreciation rights were granted to the Named
Executive Officers in 1997.
YEAR-END OPTION TABLE
The following table sets forth certain information concerning the number and
value of unexercised stock options held by each of the Named Executive Officers
as of December 31, 1997. No stock options were exercised by any Named Executive
Officer in 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED OPTIONS THE-MONEY OPTIONS AT YEAR-
AT YEAR- END(#)(1)(3) END($)(2)
SHARES ACQUIRED ON ------------------------------ ------------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------------- ------------------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Craig A. Hutchison . -- -- 8,750 -- $ 218,663(4) --
PRESIDENT AND CEO
Verne F. Schmidt ....... -- -- 3,500 -- $ 87,465(5) --
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL
OFFICER
Walter A. Edwards . -- -- 3,500 -- $ 87,465(6) --
VICE PRESIDENT AND
DIVISION MANAGER
Larry C. Cole .......... -- -- 2,625 -- $ 65,599(7) --
VICE PRESIDENT AND
DIVISION MANAGER
Larry F. Celey ......... -- -- -- -- -- --
VICE PRESIDENT,
COMMERCIAL AND
CATALOG SALES (EASTERN
REGION)
</TABLE>
- ------------------------
(1) No stock appreciation rights were outstanding or exercised in 1997.
(2) There was no public trading market for the common stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of the
fair market value immediately prior to the Acquisition as determined by the
Company's Board of Directors less the applicable exercise price.
(3) All options are immediately exercisable but option shares issued are subject
to repurchase by the Company on termination of employment at the $0.01
exercise price until vested. Options vest (i) as to 10% on December 31 of
each of the first five calendar years commencing with December 31 of the
calendar year of the option grant, (ii) as to 15% on December 31 of each of
the next two years and
71
<PAGE>
(iii) the remaining 20% on December 31 of the eighth calendar year from the
issuance date subject to acceleration in the first five calendar years after
issuance based on achievement of performance goals and in certain change of
control transactions. The exercise price is $0.01 per share. Vested shares
are also subject to repurchase by the Company upon termination of employment
pursuant to a formula based on Company earnings. See "1995 Stock Option
Plan."
(4) Includes $153,064 in value relating to unvested shares that are subject to
repurchase by the Company on termination of employment at the $0.01 exercise
price.
(5) Includes $69,972 in value relating to unvested shares that are subject to
repurchase by the Company on termination of employment at the $0.01 exercise
price.
(6) Includes $69,972 in value relating to unvested shares that are subject to
repurchase by the Company on termination of employment at the $0.01 exercise
price.
(7) Includes $45,919 in value relating to unvested shares that are subject to
repurchase by the Company on termination of employment at the $0.01 exercise
price.
EMPLOYMENT AGREEMENT
On April 28, 1995, Craig Hutchison entered into a three-year employment
agreement with Perry (the "Employment Agreement") to serve as President and
Chief Executive Officer of Perry. Unless terminated by written notice of either
party, the Employment Agreement renews automatically for up to five additional
one-year periods. The Employment Agreement provides for a base salary of
$235,000, subject to adjustment upward at the discretion of the Board of
Directors. Mr. Hutchison's current annual base salary is $275,000. Under the
Employment Agreement, Mr. Hutchison is entitled to participate in the Incentive
Compensation Plan (as defined below), the Stock Option Plan (as defined below)
and in all other life, welfare and health plans and benefit programs made
available by the Company to the senior executive officers of the Company.
SHAREHOLDER AGREEMENTS
Certain agreements among the shareholders of the Company, to which the
Company is also a party, provide majority shareholders proposing to sell shares
in a change of control transaction with the right to require the other
shareholders to include their shares in such sale. Conversely, minority
shareholders have the right to sell shares on a sale by majority shareholders on
a pro rata basis. In addition, the agreements provide shareholders with rights
of first refusal on proposed transfers of shares by other shareholders.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company's management employees, including the Named Executive Officers,
are eligible to participate in the Company's Management Incentive Compensation
Program (the "Management Incentive Program"). Under the Management Incentive
Program, management employees are eligible to receive an annual cash bonus based
on the Company's achievement of financial performance targets that are based on
the Company's annual budget as approved by the Board of Directors. To date, no
bonuses have been paid under the Management Incentive Program.
1995 STOCK OPTION PLAN
On May 6, 1995, the Board of Directors of PPC Holdings adopted and the
stockholders approved the 1995 Stock Option Plan which was subsequently amended
by the Board of Directors in September 1995 (the "Stock Option Plan"), which
provides for the grant of non-statutory stock options ("Options") for the
purchase of common stock of the Company to officers and employees of and
consultants to the Company. The maximum number of shares of common stock
issuable under the Stock Option Plan is 28,000. The
72
<PAGE>
Stock Option Plan is currently administered by the Board of Directors of the
Company, but can be delegated to an authorized committee thereof.
Options granted under the Stock Option Plan are "hybrid" performance
options. Options are immediately exercisable, but option shares issuable are
subject to repurchase by the Company on termination of employment at the $0.01
original exercise price until vested. Options vest as follows: 10% on December
31 of each of the first five calendar years of service commencing with December
31 of the calendar year of the option grant; 15% on December 31 of the next two
calendar years; and the remaining 20% on December 31 of the eighth calendar year
from the issuance date. Accelerated vesting of Options can occur during the
first five calendar years after issuance upon the Company's attainment of
performance milestones, determined annually by the Board of Directors. For each
year in which performance milestones are attained, 10% of the shares under the
Options shall vest on an accelerated basis, with the installments that would
vest latest under the Options being accelerated first. Outstanding Options also
accelerate upon the occurrence of a change of control of the Company, unless the
successor adopts the Stock Option Plan and does not terminate or constructively
terminate the optionholder (other than for cause) for one year following the
change of control. To date, no accelerated vesting has occurred. The exercise
price of Options under the Stock Option Plan is set at $0.01 per share, and each
Option has an 18-year term.
In addition to the right to repurchase unvested option shares described
above, under the Stock Option Plan, the Company has a right to repurchase vested
shares at a per share price based on a multiple of the Company's EBITDA less
outstanding debt. In addition, the Company is obligated to repurchase, based on
the same formula as above, any vested option shares issued or issuable under
outstanding Options at the end of their 18-year term. The Stock Option Plan also
provides that the Company has a right of first refusal on any proposed
disposition of shares acquired under an Option by sale, transfer or in
connection with a marital dissolution, which right shall lapse upon the initial
public offering of the Company's common stock.
401(K) PLAN
The Company's operating subsidiary, Perry, implemented a 401(k) Retirement
Savings Plan effective April 28, 1995 (the "401(k) Plan"). All employees 21
years of age or older employed by Perry and any affiliated company who adopts
the plan (which will, after the Acquisition, include Judd's and the former
Judd's subsidiaries) are or will be eligible to participate in the 401(k) Plan.
Participants in the 401(k) Plan may not contribute more than certain specified
amounts depending upon the employee's level of compensation. Each company
participating in the 401(k) Plan makes contributions to the 401(k) Plan equal to
3% of eligible earnings of all qualified participating employees, as determined
under the 401(k) Plan. Participating employees are 100% vested in all
contributions.
73
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of December 31, 1997 (i) by each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) by each director and Named Executive Officer and
(iii) by all directors and executive officers of the Company as a group. Except
as otherwise listed below, the address of each person listed is c/o Perry
Graphic Communications, Inc., 575 West Madison Street, Waterloo, Wisconsin
53594.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1) AT DECEMBER
31, 1997
----------------------
NAME NUMBER PERCENT
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Ropamil Limited Partnership(2) ......................................................... 817,510 95.0%
791 Park of Commerce Drive
Boca Raton, Florida 33487
Craig A. Hutchison(3)................................................................... 17,500 2.0
Thomas V. Bressan....................................................................... 7,000 *
Larry C. Cole(4)........................................................................ 5,250 *
Walter A. Edwards(5).................................................................... 4,375 *
Timothy M. Smith(6)..................................................................... 4,000 *
Bradley J. Hoffman(7)................................................................... 3,500 *
Beth A. Lindsay(8)...................................................................... 3,500 *
Verne F. Schmidt(9)..................................................................... 3,500 *
Larry F. Celey.......................................................................... -- --
Howard D. Sullivan...................................................................... -- --
All directors and executive officers as a group (14 persons)(10)........................ 866,135 97.8%
</TABLE>
- ------------------------
* LESS THAN 1%
(1) Includes shares of Common Stock issuable upon the exercise of stock options
exerciseable within 60 days of December 31, 1997.
(2) Robert E. Milhous, a director and the Chairman of the Board of Directors of
the Company and Paul B. Milhous, a director and the Vice-Chairman of the
Board of Directors of the Company and certain affiliated entities
beneficially own the partnership interests in this partnership.
(3) Includes 8,750 shares issuable under immediately exercisable options. Of
such shares, 6,125 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(4) Includes 2,625 shares issuable under immediately exercisable options. Of
such shares, 1,837.5 shares are unvested and, if issued on an exercise of
the options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(5) Includes 3,500 shares issuable under immediately exercisable options. Of
such shares, 2,800 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(6) Includes 2,000 shares issuable under immediately exercisable options. Of
such shares, 1,200 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
74
<PAGE>
(7) Includes 1,750 shares issuable under immediately exercisable options. Of
such shares, 1,225 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(8) Includes 3,500 shares issuable under immediately exercisable options. Of
such shares, 2,800 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(9) Includes 3,500 shares issuable under immediately exercisable options. Of
such shares, 3,150 shares are unvested and, if issued on an exercise of the
options as of December 31, 1997, would be subject to repurchase by the
Company on termination of employment at the original $0.01 exercise price.
(10) Includes an aggregate of 25,625 shares issuable under immediately
exercisable options. Of such shares, an aggregate of 19,337.5 shares are
unvested and, if issued on an exercise of the options as of December 31,
1997, would be subject to repurchase by the Company on termination of
employment at the original $0.01 exercise price.
75
<PAGE>
CERTAIN TRANSACTIONS
Perry and Novamil Corporation, a California corporation owned beneficially
by Robert E. Milhous and Paul B. Milhous ("Novamil"), were parties to a
Management Agreement dated as of April 28, 1995 which was subsequently assigned
by Perry to Perry-Judd's and amended by Perry-Judd's and Novamil as of December
16, 1997 (the "Amended Management Agreement"). Pursuant to the Amended
Management Agreement, Novamil provides to Perry-Judd's certain management
services by agents and employees of Novamil other than Robert E. Milhous and
Paul B. Milhous in connection with business strategy, operations and finance.
Under the Amended Management Agreement, as amended, Perry-Judd's pays to Novamil
an annual management fee of $750,000 payable in equal monthly installments and
subject to annual adjustment for increases in costs of living. The Amended
Management Agreement has a term of five years from December 16, 1997, subject to
one-year extensions thereafter, unless earlier terminated upon the liquidation
or dissolution of the Company, or ten days after a party has received written
notice of a material breach where such breach remains uncured after such ten-day
period.
Pursuant to a consulting agreement dated April 28, 1995 (the "Consulting
Agreement"), Robert E. Milhous and Paul B. Milhous provided consulting services
to Perry as principals of New House Capital Management Corp., a Delaware
corporation, for which Perry pays an annual consulting fee of $450,000, payable
in equal monthly installments. The Consulting Agreement has an initial term of
five years, subject to one year extensions thereafter, unless earlier terminated
upon the liquidation or dissolution of the Company or ten days after a party has
received written notice of a material breach where such breach remains uncured
after such ten-day period. Upon consummation of the Transactions on December 16,
1997, the Consulting Agreement was assigned by Perry to Perry-Judd's.
Pursuant to a promissory note dated November 15, 1996, PPC Holdings loaned
to Thomas V. Bressan the principal amount of $175,000 at an interest rate of 7%
per annum. Principal and interest is payable in four annual installments of
$26,100 with a final payment of all principal and interest outstanding
thereafter due and payable on November 15, 2001.
Pursuant to a consulting agreement dated as of January 10, 1997, Thomas V.
Bressan provides consulting services to Perry regarding strategic planning,
acquisition analysis and structuring, financing and other significant corporate
transactions, and other business strategies. The agreement has a term of five
years, unless earlier terminated upon the liquidation or dissolution of the
Company, or ten days after a party has received written notice of a material
breach where such breach remains uncured after such ten-day period. The total
consulting fee payable under the agreement is $225,000, payable in five equal
annual installments of $45,000.
On December 16, 1997, Ropamil, an affiliate of Robert E. Milhous and Paul B.
Milhous, was issued 95,000 shares of Series A Preferred Stock of the Company in
exchange for $9.5 million in outstanding principal and interest under a certain
$6.5 million promissory note of the Company dated May 2, 1995.
On December 16, 1997, a trust of which Robert E. Milhous is trustee and a
trust of which Paul B. Milhous is the trustee each purchased an aggregate of
80,000 shares of Common Stock at a purchase price of $2.0 million.
Since May 1995, Perry has purchased a substantial portion of its total ink
requirements from Marpax, Inc. ("Marpax"). A company owned by Robert E. Milhous
and Paul B. Milhous acts as a procurement agent for Marpax in procuring the raw
materials used by Marpax in the manufacture of its ink. The Company also
purchases ink from other vendors on terms and at prices substantially the same
as those provided by Marpax. The Company expects to continue to purchase a
substantial portion of its total ink requirements from Marpax so long as it is
able to do so on terms no less favorable than those generally available from
other vendors. As a result of its relationship with Marpax, the Company believes
it has been able to improve product quality and overall services to its
customers.
76
<PAGE>
DESCRIPTION OF AMENDED AND RESTATED CREDIT AGREEMENT
Concurrently with the consummation of the other Transactions, the Company
amended and restated its then-existing term loan and revolving credit facility
with BTCC and certain other lenders (the "Existing Credit Agreement"). The
Amended and Restated Credit Agreement provides Perry, Shenandoah Valley and Port
City with a $45 million Revolving Credit Facility and a $30 million Term Loan
Facility. Borrowings by any subsidiary under the Amended and Restated Credit
Agreement are guaranteed by Perry-Judd's and all of its present and future
subsidiaries. The Amended and Restated Credit Agreement has an initial term of
five years with renewals thereafter upon the mutual agreement of all parties.
The Amended and Restated Credit Agreement provides for borrowings under the
Revolving Credit Facility in the aggregate amount equal to the lesser of $45
million or an aggregate borrowing base advanced against the Company's
receivables and inventory.
The scheduled amortization of the Term Loan Facility will be payable in
monthly installments. In addition to the scheduled amortization, the Term Loan
Facility will be amortized by 75% of the annual excess cash flow with payments
to be applied in inverse order. Any remaining principal balance will be due at
the maturity of the Term Loan Facility.
Outstanding loans under the Amended and Restated Credit Agreement for the
Revolving Credit Facility will accrue interest at a variable rate per annum
equal to, at the option of the Company, either 0.75% above Bankers Trust
Company's prime rate, or 2.25% above the Eurodollar rate for the interest period
for each Eurodollar rate borrowing elected by the Company. Outstanding loans
under the Term Loan Facility will accrue interest at a variable rate per annum
equal to, at the option of the Company, either 1.25% above Bankers Trust
Company's prime rate, or 2.75% above the Eurodollar rate for the interest period
for each Eurodollar rate borrowing elected by the Company. The Company will also
pay a 2.25% per annum fee based on the average aggregate face amount of any
outstanding letter of credit and a 0.50% commitment fee on the average daily
amount of the unutilized commitment under the Revolving Credit Facility.
The Amended and Restated Credit Agreement contains representations and
warranties, affirmative and negative covenants and events of default customary
for an asset-based, working capital and term loan facility. The Amended and
Restated Credit Agreement also contains certain negative covenants that, among
other things, limit the Company's ability to sell assets, incur additional
indebtedness, incur additional liens, pay dividends, make capital expenditures,
enter into guarantees, make investments, prepay indebtedness and enter into
other transactions not in the ordinary course of business. In addition, the
Company will agree to maintain specified financial ratios and tests, including a
minimum tangible net worth test, a minimum current ratio, a minimum fixed charge
coverage ratio, a minimum interest coverage ratio, a maximum debt ratio and
other customary financial ratios all as set forth in the Amended and Restated
Credit Agreement.
The Company's obligations under the Amended and Restated Credit Agreement
are secured by a security interest in substantially all the assets of the
Company and its subsidiaries, including all of their cash and other tangible and
intangible assets, and all real property. In addition, Perry-Judd's and Judd's
have pledged as security all of their shares of capital stock in each of their
subsidiaries.
DESCRIPTION OF NOTE CONVERSION
The Company effected the Note Conversion concurrently with the consummation
of the other Transactions. In the Note Conversion, Perry-Judd's converted the
$9.5 million in outstanding principal and interest under that certain Senior
Note dated May 2, 1995 in the principal amount of $6.5 million held by
77
<PAGE>
Ropamil into 95,000 shares of Series A Preferred Stock, par value $.001 per
share (the "Series A Stock"). The rights, preferences and privileges of the
Series A Stock are as follows:
The Series A Stock bears cumulative dividends at the per annum rate of 15%
multiplied by the number of shares of Series A Stock outstanding, payable
quarterly in arrears. Dividends shall be payable in additional shares of Series
A Stock.
Upon a liquidation, dissolution or winding up of Perry-Judd's, whether
voluntary or involuntary, each holder of Series A Stock shall be entitled to
receive, in preference to any distribution of the assets or funds to the common
stockholders, the amount of $100 per share of Series A Stock held or issuable to
such holder in payment of accrued and unpaid dividends.
The Series A Stock shall be redeemable in whole or in part by Perry-Judd's
at its option at any time. In addition, all outstanding shares of Series A Stock
shall be redeemed upon the sale of all of the outstanding common stock of
Perry-Judd's, whether pursuant to a sale, merger, consolidation or other
transaction. Upon a redemption, each holder of Series A Stock shall be entitled
to receive the amount of $100 per share of Series A Stock held or issuable to
such holder in payment of accrued and unpaid dividends on the shares to be
redeemed.
The Series A Stock shall be nonvoting stock, except that holders of at least
51% of the outstanding Series A Stock must approve, by vote or written consent,
any amendment to the Company's Certificate of Incorporation which would result
in an adverse change to the rights, preferences and privileges of Series A
Stock.
The above summary of certain material terms of the Series A Stock is subject
to, and is qualified in its entirety by reference to, all of the provisions of
the Company's Restated Certificate of Incorporation.
DESCRIPTION OF SALE/LEASEBACK
On December 16, 1997, Perry and Judd's, collectively as tenant, entered into
the Sale/Leaseback whereby the printing plants at Baraboo and Waterloo, the
Company's corporate headquarters in Waterloo and three warehouse facilities in
Waterloo (each formerly owned by Perry or a wholly-owned subsidiary of Perry)
were sold to a third party for the aggregate purchase price (exclusive of fees
and costs) of $18.25 million and immediately leased back to Perry and Judd's,
collectively as the tenant. The lease has an initial term of 20 years, with an
economic abandonment buyout for one property selected by the tenant after five
years, and may be extended for three additional five year terms at the tenant's
option. Initial annual rent under the lease is approximately $1.8 million
payable quarterly in advance with 10% escalations scheduled at the start of the
sixth, eleventh and sixteenth years of the 20 year term (and a corresponding 10%
increase at the beginning of any option term). Subject to the lessor's
reasonable consent, so long as tenant is not in default under the lease and
certain other conditions are met, tenant can require the landlord to pay the
costs of expansion of the Baraboo premises, with the annual rent payable under
the lease to be increased in an amount satisfactory to the lessor. For the first
ten years of the lease, tenant shall have a right of first refusal on any
proposed sale of all of the leased properties by the lessor to a third party,
exercisable within 30 days of the tenant's receipt of the proposed sale
contract.
The net proceeds of $17.6 million from the Sale/Leaseback were being used to
prepay term debt under the Existing Credit Agreement immediately prior to the
consummation of the Transactions.
78
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued under an indenture (the "Indenture"),
dated as of December 16, 1997 by and among the Company, the Subsidiary
Guarantors and U.S. Trust Company of California, N.A., as Trustee (the
"Trustee"). The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from the Company or the Initial Purchaser. The definitions of certain
capitalized terms used in the following summary are set forth below under
"--Certain Definitions." For purposes of this section, references to the
"Company" include only the Company and not its Subsidiaries.
The Exchange Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Indebtedness of the Company.
The Exchange 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 Exchange Notes. The
Exchange Notes may be presented for registration or 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 Exchange Notes (the "Holders"). The Company will pay principal
(and premium, if any) on the Exchange Exchange 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
address of Holders. Any Exchange Notes that remain outstanding after the
completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes are limited in aggregate principal amount to
$200,000,000, of which $115,000,000 will be issued in the Offering, and will
mature on December 15, 2007. Additional amounts may be issued in one or more
series from time to time subject to the limitations set forth under
"--Covenants--Limitation on Incurrence of Additional Indebtedness" and
restrictions contained in the Credit Agreement. Interest on the Exchange Notes
will accrue at the rate of 10 5-8% per annum and will be payable semi-annually
in cash on each June 15 and December 15, commencing on June 15, 1998, to the
persons who are registered Holders at the close of business on the June 1 and
December 1 immediately preceding the applicable interest payment date. Interest
on the Exchange Notes will accrue from 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 Exchange Notes will not be entitled to the benefit of any mandatory
sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. The Exchange Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after December 15, 2002, 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
December 15 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2002............................................................................. 105.313%
2003............................................................................. 103.542%
2004............................................................................. 101.771%
2005 and thereafter.............................................................. 100.000%
</TABLE>
79
<PAGE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time, or from time
to time, on or prior to December 15, 2000, 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% of the aggregate principal amount of Exchange Notes
originally issued at a redemption price equal to 110.625% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; PROVIDED that at least 65% of the principal amount of Exchange Notes
originally issued remains outstanding immediately after 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 90 days after the
receipt of proceeds of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Exchange Notes are to be redeemed at
any time, selection of such Exchange Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Exchange Notes are listed or, if such Exchange
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 Exchange Notes of a principal amount of $1,000 or
less shall be redeemed in part; PROVIDED, FURTHER, that if a partial redemption
is made with the proceeds of a Public Equity Offering, selection of the Exchange
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
DTC procedures), 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 Exchange 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 Exchange Notes or portions thereof called
for redemption as long as the Company has deposited with the Paying Agent funds
in satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Exchange Notes is subordinated in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Indebtedness. Upon any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property, whether
voluntary or involuntary, all Obligations due or to become due upon all Senior
Indebtedness shall first be paid in full in cash or Cash Equivalents, or such
payment duly provided for to the satisfaction of the holders of such Senior
Indebtedness, before any payment or distribution of any kind or character is
made on account of any Obligations on the Exchange Notes, or for the acquisition
of any of the Exchange Notes for cash or property or otherwise. If any default
occurs and is continuing in the payment when due, whether at stated maturity,
upon any redemption, by declaration or otherwise, of any principal of, interest
on, unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Indebtedness, no payment of any kind
or character shall be made by or on behalf of the Company or any other Person on
its or their behalf with respect to any Obligations on the Exchange Notes or to
acquire any of the Exchange Notes for cash or property or otherwise.
80
<PAGE>
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative for the
respective issue of Designated Senior Indebtedness gives written notice of the
event of default to the Trustee (a "Default Notice"), then, unless and until all
events of default have been cured or waived or have ceased to exist or the
Trustee receives notice from the Representative for the respective issue of
Designated Senior Indebtedness terminating the Blockage Period (as defined
below), during the 180 days after the delivery of such Default Notice (the
"Blockage Period"), neither the Company nor any other Person on its behalf shall
(x) make any payment of any kind or character with respect to any Obligations on
the Exchange Notes or (y) acquire any of the Exchange Notes for cash or property
or otherwise. Notwithstanding anything herein to the contrary, in no event will
a Blockage Period extend beyond 180 days from the date the payment on the
Exchange Notes was due and only one such Blockage Period may be commenced within
any 360 consecutive days. No event of default which existed or was continuing on
the date of the commencement of any Blockage Period with respect to the
Designated Senior Indebtedness shall be, or be made, the basis for commencement
of a second Blockage Period by the Representative of such Designated Senior
Indebtedness whether or not within a period of 360 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Exchange Notes, may recover less, ratably, than
holders of Senior Indebtedness.
On a pro forma basis, after giving effect to the Transactions and the
Sale/Leaseback and the application of the proceeds therefrom at September 30,
1997, the aggregate amount of Senior Indebtedness would have been approximately
$31.4 million, including guarantees of Guarantor Senior Indebtedness.
GUARANTEES
Each Subsidiary Guarantor unconditionally guarantees, on a senior
subordinated 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 Exchange Notes, including the payment of principal of and interest on the
Exchange Notes. The Guarantees will be subordinated to Guarantor Senior
Indebtedness on the same basis as the Exchange Notes are subordinated to Senior
Indebtedness. The obligations of each Subsidiary Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
will result in the obligations of such Subsidiary Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution of
more than its proportionate share under a Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in an amount pro rata, based
on the net assets of each Subsidiary Guarantor, determined in accordance with
GAAP.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company without limitation, or with other Persons
upon the terms and conditions set forth in the Indenture. See "Certain
Covenants." In the event all of the Capital Stock of a Subsidiary Guarantor is
sold by the Company and the
81
<PAGE>
sale complies with the provisions set forth in "Certain Covenants--Limitation on
Asset Sales," the Subsidiary Guarantor's Guarantee will be released.
Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable with
respect to the Company's obligations pursuant to the Exchange Notes, and the
aggregate net assets, earnings and equity of the Subsidiary Guarantors and the
Company are substantially equivalent to the net assets, earnings and equity of
the Company on a consolidated basis.
HOLDING COMPANY STRUCTURE
The Company is a holding company for its Subsidiaries, with no material
operations of its own and only limited assets. Accordingly, the Company is
dependent upon the distribution of the earnings of its Restricted Subsidiaries,
whether in the form of dividends, advances or payments on account of
intercompany obligations, to service its debt obligations. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets available from the Company and its Restricted Subsidiaries to satisfy the
claims of the Holders of Exchange Notes. See "Risk Factors-Holding Company
Structure."
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 Exchange 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 interest to the date of purchase.
The Indenture will provide that, prior to the mailing of the notice referred
to below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Indebtedness the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Indebtedness and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all other Senior Indebtedness to permit
the repurchase of the Exchange Notes as provided below. The Company shall first
comply with the covenant in the immediately preceding sentence before it shall
be required to repurchase Exchange Notes pursuant to the provisions described
below. The Company's failure to comply with the covenant described in the
immediately preceding sentence shall constitute an Event of Default described in
clause (iii) and not in clause (ii) under "Events of Default" below.
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"). 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 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 Exchange 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 Exchange 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.
82
<PAGE>
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on
its 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 Board of Directors of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Exchange Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
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 or any of its Subsidiaries 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 Exchange Notes protection in all
circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
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 Exchange 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.
The Credit Agreement will prohibit the Company from purchasing any Exchange
Notes and also provides that certain change of control events with respect to
the Company would constitute a default thereunder. Any future credit agreements
or other agreements relating to Senior Indebtedness to which the Company becomes
a party may contain similar restrictions and provisions. In the event a Change
of Control occurs at a time when the Company is prohibited from purchasing
Exchange Notes, the Company could seek the consent of its lenders to the
purchase of Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Exchange
Notes. In such case, the Company's failure to purchase tendered Exchange Notes
would constitute an Event of Default under the Indenture, which would, in turn,
constitute a default under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of Exchange Notes.
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 its 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 may incur Indebtedness
(including, without limitation, Acquired Indebtedness) and Restricted
Subsidiaries of the Company may incur Acquired Indebtedness, in each case if on
the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof and the application of the proceeds therefrom, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution
83
<PAGE>
(other than dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company'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 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
that is subordinate or junior in right of payment to the Exchange Notes or (d)
make any Investment (other than Permitted Investments) (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 "Limitation on Incurrence of Additional Indebtedness"
covenant 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: (v) 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 (w) 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 (x) without duplication of any amounts included in clause
(iii) (w) 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) (w) and (x), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the Exchange
Notes); plus (y) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, interest payments,
repayments of loans or advances, or other transfers of cash, in each case, to
the Company or to any Wholly Owned Restricted Subsidiary of the Company from
Unrestricted Subsidiaries (but without duplication of any such amount included
in Consolidated Net Income of the Company), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued as
provided in the definition of "Investment"), not to exceed, in the case of an
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary of the Company in such Unrestricted
Subsidiary and which were treated as a Restricted Payment under the Indenture;
plus (z) $1.0 million.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend 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, either (i) solely in exchange for shares of Qualified
Capital Stock of the Company or (ii) 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 that is subordinate or junior in right of
payment to the Exchange Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) if no Default or Event of Default shall have
occurred and be continuing, repurchases by the Company of Common Stock of the
Company from officers, directors and employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such officers, directors and employees, in an
aggregate amount not to exceed $500,000 in any calendar year plus the aggregate
cash proceeds from any reissuance during
84
<PAGE>
such calendar year of Common Stock by the Company to employees, officers or
directors of the Company and its Subsidiaries plus the aggregate cash proceeds
from any payments on life insurance policies with respect to any employees,
officers or directors of the Company and its Subsidiaries which proceeds are
used to purchase the Common Stock of the Company held by any such employees,
officers or directors; and (5) if no Default or Event or Default shall have
occurred and be continuing, the redemption at stated maturity of the existing
Class B Preferred Stock of Perry Graphic Communications, Inc. (the "Class B
Preferred Stock") and the payment of scheduled dividend payments thereon in
accordance with the terms of the Class B Preferred Stock. 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) (ii), (4) and (5) shall be included in
such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) 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), (ii) at least 85% of the consideration
(other than indebtedness assumed by the purchaser in connection with such Asset
Sale and as to which there is no further recourse against the Company or the
Restricted Subsidiaries) 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 (iii) 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
365 days of receipt thereof either (A) to prepay any Senior Indebtedness and, in
the case of any Senior Indebtedness under any revolving credit facility, effect
a permanent reduction in the availability under such revolving credit facility,
(B) to make an investment in properties and assets that replace the properties
and assets that were the subject of such Asset Sale or in properties and assets
that will be used in the business of the Company and its Subsidiaries as
existing on the Issue Date or in businesses reasonably related thereto
(including investments in 100% of the equity interest in a Person that owns such
properties and assets) ("Replacement Assets"), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii) (A) and (iii)
(B). On the 366th day after an Asset Sale or such earlier date, if any, as the
Board of Directors of the Company or of such Restricted Subsidiary determines
not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (iii) (A), (iii) (B) and (iii) (C) 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 (iii) (A), (iii) (B) and (iii) (C) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or
such Restricted Subsidiary to make an offer to purchase (the "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 amount of Exchange Notes equal to the Net
Proceeds Offer Amount at a price equal to 100% of the principal amount of the
Exchange Notes to be purchased, plus accrued and unpaid interest thereon, if
any, to the date of purchase; PROVIDED, HOWEVER, that if at any time any
non-cash consideration received by the Company or any Restricted Subsidiary of
the Company, 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 $5,000,000 resulting from one
or more Asset Sales (at which time, the
85
<PAGE>
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 its 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 its 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 its 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
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 85% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; PROVIDED that any consideration not
constituting Replacement Assets received by the Company or any of its 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 preceding paragraphs.
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 Exchange Notes in whole or in part in integral multiples
of $1,000 in exchange for cash. To the extent Holders properly tender Exchange
Notes in an amount exceeding the Net Proceeds Offer Amount, Exchange Notes of
tendering Holders will be purchased on a pro rata basis (based on 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. To the extent the
aggregate amount of the Exchange Notes tendered pursuant to the Net Proceeds
Offer is less than the Net Proceeds Offer Amount, the Company may use such
deficiency for general corporate purposes. Upon completion of such offer to
purchase, the Net Proceeds Offer Amount shall be reset at zero.
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 Exchange 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. The agreements governing certain outstanding Senior Indebtedness
of the Company will require that the Company and its Subsidiaries apply all
proceeds from asset sales to repay in full outstanding obligations under such
Senior Indebtedness prior to the application of such proceeds to repurchase
outstanding notes.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
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 of the Company 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 of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or
86
<PAGE>
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; (5) agreements existing on the Issue Date (including, without
limitation, the Credit Agreement) to the extent and in the manner such
agreements are in effect on the Issue Date; or (6) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (4) or (5) above; PROVIDED,
HOWEVER, that the provisions relating to such encumbrance or restriction
contained in any such Indebtedness are no less favorable to the Company 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 agreements referred to in such clause
(2), (4) or (5).
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company, other than the Class B Preferred Stock and
any Preferred Stock issued as dividends as expressly provided in the terms of
the Class B Preferred Stock as in effect on the Issue Date.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of its 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 its 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 (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Exchange Notes or any
Guarantee, the Exchange Notes and such Guarantee are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Exchange Notes are equally and ratably secured, except
for (A) Liens existing as of the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date; (B) Liens securing Senior Indebtedness
and Liens securing Guarantor Senior Indebtedness; (C) Liens securing the
Exchange Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned
Restricted Subsidiary of the Company on assets of any Subsidiary of the Company;
(E) 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 (i) 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 (ii) do not extend to
or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted
Liens.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS. The Company
will not, and will not permit any Subsidiary Guarantor to, incur or suffer to
exist Indebtedness that is expressly by its terms senior in right of payment to
the Exchange Notes or such Subsidiary Guarantor's Guarantee and subordinate in
right of payment to any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
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 of the Company 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
Company's 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 of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly
87
<PAGE>
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 Exchange Notes and the performance of every
covenant of the Exchange Notes, the Indenture 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 and Acquired 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 the
"--Limitation on Incurrence of Additional Indebtedness" covenant; (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 and Acquired 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 (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 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 of the Company 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.
The Indenture will provide that 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 Exchange Notes with the same effect as
if such surviving entity had been named as such.
Each Subsidiary Guarantor (other than any Subsidiary 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 "--Limitation on Asset Sales") will not, and the Company will not cause or
permit any Subsidiary Guarantor to, consolidate with or merge with or into any
Person other than the Company or any other Subsidiary Guarantor unless: (i) the
entity formed by or surviving any such consolidation or merger (if other than
the Subsidiary 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;
(ii) such entity assumes by supplemental indenture all of the obligations of the
Subsidiary Guarantor on the Guarantee; (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 (ii) of the first paragraph of this covenant.
Any merger or consolidation of a Subsidiary Guarantor with and into the Company
(with the Company being the surviving entity) or another Subsidiary Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company need only comply
with clause (iv) of the first paragraph of this covenant.
88
<PAGE>
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of its 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
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable 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 $500,000 shall be approved
by the Board of Directors of the Company or such Restricted Subsidiary, as the
case may be, 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 of the Company
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 $2,500,000, the Company or such Restricted Subsidiary, as the
case may be, 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 of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Wholly Owned Restricted Subsidiaries or exclusively
between or among such Wholly Owned Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture; (iii) any agreement
as in effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (iv) payments of
annual fees and reimbursement of reasonable expenses to Novamil Corporation in
accordance with the provisions of the Management Agreement dated April 28, 1995,
as in effect on the Issue Date, to New House Capital Management Corp. in
accordance with the provisions of the Consulting Agreement dated April 28, 1995,
as in effect on the Issue Date and to Thomas V. Bressan in accordance with the
provisions of a consulting agreement dated January 10, 1997, as in effect on the
Issue Date; (v) payments made in accordance with the Marpax, Inc. Supply
Agreement, as in effect on the Issue Date, or any other such ink supply
agreement with Marpax entered into on terms no less favorable to the Company
than those that may reasonably have been obtained in an arm's length transaction
as determined in good faith by the Company's Board of Directors; (vi) advances
or loans to employees, officers and directors of the Company and its Restricted
Subsidiaries permitted by clauses (iv) and (v) of the definition of Permitted
Investments; and (vii) Restricted Payments permitted by the Indenture.
ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its 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 Subsidiary Guarantor, or if the Company or any of its Restricted
Subsidiaries shall organize, acquire or otherwise invest in another Restricted
Subsidiary having total assets with a book value in excess of $500,000, then
such transferee or acquired or other Restricted Subsidiary shall (i) 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 Exchange
Notes and the Indenture on the terms set forth in the Indenture and (ii) 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
89
<PAGE>
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of the
Indenture.
CONDUCT OF BUSINESS. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar, related or necessary
to the businesses in which the Company and its Restricted Subsidiaries are
engaged on the Issue Date.
REPORTS TO HOLDERS. The Indenture will provide that 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. The
Indenture further provides that, 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 TIA Section
314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Exchange Notes when the same becomes
due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(ii) the failure to pay the principal on any Exchange Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Exchange
Notes tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer) (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture 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 Exchange Notes (except in the case of a default with
respect to the "Merger, Consolidation and Sale of Assets" covenant,
which will constitute an Event of Default with such notice requirement
but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of any
Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has
been accelerated, aggregates $5,000,000 or more at any time;
(v) one or more judgments in an aggregate amount in excess of $5,000,000
shall have been rendered against the Company or any of its 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;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or any of
the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the
90
<PAGE>
Subsidiary Guarantors denies its liability under its Guarantee (other
than by reason of release of a Subsidiary Guarantor in accordance with
the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Exchange Notes may declare the principal of and accrued interest on all the
Exchange 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" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or 5 business days after
receipt by the Company and the Representative under the Credit Agreement of such
Acceleration Notice. In the event of a declaration of acceleration because of an
Event of Default described in clause (iv) above has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if such payment
default is cured or waived or the holders of the Indebtedness which is the
subject of such event of default have rescinded their declaration of
acceleration in respect of such Indebtedness within 60 days thereof and the
Trustee has received written notice of such cure, waiver or rescission and no
other Event of Default described in clause (iv) above has occurred that has not
been cured or waived within 60 days of the declaration of such acceleration in
respect thereof and if (i) the repayment of Indebtedness or annulment of such
acceleration, as the case may be, would not conflict with any judgment or decree
of a court of competent jurisdiction and (ii) all existing Events of Default,
except non-payment of principal or interest which have become due solely due to
such acceleration, have been cured or waived. If an Event of Default specified
in clause (vi) above with respect to the Company occurs and is continuing, then
all unpaid principal of, and premium, if any, and accrued and unpaid interest on
all of the outstanding Exchange 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 Exchange Notes as described in the preceding
paragraph, the Holders of a majority in principal amount of the Exchange Notes
may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) 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, (iii) 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, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, 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 Exchange 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 Exchange Notes.
Holders of the Exchange Notes may not enforce the Indenture or the Exchange
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 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 Exchange 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.
91
<PAGE>
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 Subsidiary Guarantors discharged with
respect to the outstanding Exchange 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 Exchange Notes, except
for (i) the rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest on the Exchange Notes when such payments are
due, (ii) the Company's obligations with respect to the Exchange Notes
concerning issuing temporary Exchange Notes, registration of Exchange Notes,
mutilated, destroyed, lost or stolen Exchange Notes and the maintenance of an
office or agency for payments, (iii) the rights, powers, trust, duties and
immunities of the Trustee and the Company's obligations in connection therewith
and (iv) 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 Exchange 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 Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. 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 Exchange Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be; (ii) 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 (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) 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; (iii) 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;
(iv) 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; (v) 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 material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) 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; (vii) the Company shall have delivered to
the Trustee an officers' certificate and an
92
<PAGE>
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with; (viii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any rights
of holders of Senior Indebtedness, including, without limitation, those arising
under the Indenture and (B) 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 (ix) 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 or registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when (i) either (a) all the Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed
Exchange Notes which have been replaced or paid and Exchange 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 (b) all
Exchange 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 Exchange Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Exchange 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; (ii) the Company has paid
all other sums payable under the Indenture by the Company; and (iii) 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 Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Indenture 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 may be made with
the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Notes issued under the Indenture, except that, without the
consent of each Holder affected thereby, no amendment may: (i) reduce the amount
of Exchange Notes whose Holders must consent to an amendment; (ii) reduce the
rate of or change or have the effect of changing the time for payment of
interest, including defaulted interest, on any Exchange Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Exchange Notes, or change the date on which any Exchange Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price therefor;
(iv) make any Exchange Notes payable in money other than that stated in the
Exchange Notes; (v) 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 Exchange Notes to
waive Defaults or Events of Default; (vi) 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; (vii) modify
or change any provision of the Indenture or the related definitions affecting
the subordination or ranking of the Exchange Notes or any Guarantee in a manner
93
<PAGE>
which adversely affects the Holders; or (viii) release any Subsidiary Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise than
in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture will provide that it, the Exchange 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, 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 used in the
Indenture. Reference is made to the 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 of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"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.
"ASSET ACQUISITION" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary
of the Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company, or (b) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person (other than a
Restricted Subsidiary of the Company) 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.
"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
94
<PAGE>
the Company or any of its Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company or
any Restricted Subsidiary of the Company 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 its
Restricted Subsidiaries receive aggregate consideration of less than $500,000
and (ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "Merger,
Consolidation and Sale of Assets."
"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.
"BORROWING BASE" means the sum of (i) 85% of the net book value (after
allowance for doubtful accounts) of accounts receivable (other than intercompany
receivables) of the Company and the Restricted Subsidiaries arising in the
ordinary course of business from the sale of products sold by the Company and
the Restricted Subsidiaries or the provision of services by the Company and the
Restricted Subsidiaries and (ii) 60% of the net book value (after appropriate
write-downs of obsolescence, quality problems and the like) of inventories of
the Company and the Restricted Subsidiaries held in the ordinary course of
business, in each case on a consolidated basis with Restricted Subsidiaries in
accordance with generally accepted accounting principles.
"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, for purposes of this definition,
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 (i) 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 (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"CASH EQUIVALENTS" means (i) 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; (ii)
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"); (iii) 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; (iv)
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 U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all
95
<PAGE>
of the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of the Indenture); (ii) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of the
Indenture); (iii) any Person or Group (other than the Permitted Holders) 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 (iv) the replacement
of a majority of the Board of Directors of the Company over a two-year period
from the directors who constituted the Board of Directors of the Company 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 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.
"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.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) all income taxes of such
Person and its 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), (B) Consolidated Interest Expense and
(C) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person 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
such Person 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 basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence 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 (and the application of the proceeds thereof)
occurred on the first day of the Four Quarter Period and (ii) 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 such Person or one of
its 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 (including any pro forma expenses and cost reductions
calculated on a basis consistent with Regulation S-X under the Securities Act in
effect on the Issue Date) (provided that such Consolidated EBITDA shall be
included only to the extent includable pursuant to the definition of
"Consolidated Net Income") 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
96
<PAGE>
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its 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 such Person or any Restricted
Subsidiary of such Person 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," (1) 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; (2) 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 (3) notwithstanding clause (1) 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. Any Indebtedness repaid out of the proceeds of Indebtedness
properly incurred under the Indenture during any Four Quarter Period shall be
deemed to have been repaid on the first day of such Four Quarter Period.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) 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 tax
rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its 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
or losses 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 of the referent Person or
is merged or consolidated with the referent Person or any Restricted Subsidiary
of the referent Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person 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 of the referent Person, except
to the extent of cash dividends or distributions paid to the referent Person or
to a Wholly Owned Restricted Subsidiary of the referent Person by such Person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date, (g) 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 (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
97
<PAGE>
"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.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries 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).
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as
of the Issue Date, among Perry Graphic Communications, Inc., Shenandoah Valley
Press, Inc. and Port City Press, Inc. as borrowers, the Company and the
Subsidiary Guarantors as guarantors, the lenders party thereto in their
capacities as lenders thereunder and BT Commercial Corporation, as agent,
together with the related documents thereto (including, without limitation, any
promissory notes, letters of credit, 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 "Limitation on Incurrence of Additional Indebtedness" covenant
above) or adding Restricted 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.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"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.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness under or in respect
of the Credit Agreement and (ii) any other Indebtedness constituting Senior
Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $25,000,000 and is
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company or by a Subsidiary Guarantor."
"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 (other than
upon the sale (by merger or otherwise) of all of the Common Stock of the
Company), 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 Exchange 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 and able 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 Person making such
determination acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of such Person delivered to the
Trustee.
98
<PAGE>
"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 SENIOR INDEBTEDNESS" means with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of a
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantee of such Subsidiary Guarantor.
Without limiting the generality of the foregoing, "Guarantor Senior
Indebtedness" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, (x) all monetary obligations of every
nature of the Company under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Guarantor Senior Indebtedness" shall not include (i) any
Indebtedness of such Subsidiary Guarantor to a Restricted Subsidiary of such
Subsidiary Guarantor or any Affiliate of such Subsidiary Guarantor or any of
such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of,
any shareholder, director, officer or employee of such Subsidiary Guarantor or
any Restricted Subsidiary of such Subsidiary Guarantor (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by such Subsidiary Guarantor, (vi) Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Subsidiary Guarantor.
"INDEBTEDNESS" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations of such Person 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
90 days or more or are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted), (v) all Obligations of such
Person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
Obligations of such Person in respect of Indebtedness referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all Obligations of any other
Person of the type referred to in clauses (i) through (vi) 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, (viii) all Obligations of such
Person under currency agreements and interest swap agreements of such Person and
(ix) all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
book value of such Disqualified Capital Stock. For purposes hereof, the amount
outstanding at any time of any Indebtedness with original issue
99
<PAGE>
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) 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.
"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 its Restricted Subsidiaries on commercially reasonable terms in the
ordinary course of business. For the purposes of the "Limitation on Restricted
Payments" covenant, (i) "Investment" shall include and be valued at the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall
exclude the fair market value of the net assets of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary and (ii) the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; PROVIDED that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, 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 Common
Stock of such Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Exchange Notes.
"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).
"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 its Restricted Subsidiaries from such Asset Sale net of
(a) cash 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
provided by the Company or any Restricted Subsidiary, as the case
100
<PAGE>
may be, as a reserve, in accordance with GAAP, against any 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.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED HOLDER" means Ropamil Limited Partnership, Robert E. Milhous,
Paul B. Milhous and their Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(i) Indebtedness incurred on the Issue Date under the Exchange Notes,
the Indenture and the Guarantees, and Indebtedness and Guarantees of such
Indebtedness under the Indenture properly incurred in accordance with the
"Certain Covenants--Limitation on Incurrence of Additional Indebtedness"
covenant;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed (A) $30
million with respect to the Indebtedness under the Term Loan Facility, less
the amount of all mandatory principal payments actually made by the Company
in respect of the Term Loan Facility (excluding any such payments to the
extent Refinanced at the time of payment under a replaced Credit Agreement)
and (B) with respect to Indebtedness under the Revolving Credit Facility,
the greater of $45 million in the aggregate or the Borrowing Base; PROVIDED,
HOWEVER, that the aggregate amount of Indebtedness under clause (A) shall be
reduced by any required permanent repayment pursuant to the provisions set
forth under "Certain Covenants-- Limitation on Asset Sales";
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that such
Interest Swap Obligations are entered into to protect the Company and its
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;
(v) Indebtedness under Currency Agreements; PROVIDED that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary of the Company for
so long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; PROVIDED that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company 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;
101
<PAGE>
(vii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien;
PROVIDED that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated, pursuant
to a written agreement, to the Company's obligations under the Indenture and
the Exchange Notes and (b) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) 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;
(ix) Indebtedness of the Company or any of its 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;
(x) Refinancing Indebtedness;
(xi) Purchase money obligations incurred to fund progress payments in
connection with the lease of equipment in the ordinary course of business.
(xii) Capitalized Lease Obligations and Purchase Money Indebtedness of
the Company and its Restricted Subsidiaries incurred in the ordinary course
of business not to exceed $5.0 million at any one time outstanding; and
(xiii) additional Indebtedness of the Company in an aggregate principal
amount not to exceed $10.0 million at any one time outstanding.
"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, (ii) Investments in the Company by any
Restricted Subsidiary of the Company; PROVIDED that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Exchange Notes and the Indenture; (iii)
Investments in cash and Cash Equivalents; (iv) loans and advances to employees,
officers and directors of the Company and its 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; (v) loans to employees, officers and
directors of the Company and its Restricted Subsidiaries to finance the purchase
of Qualified Capital Stock of the Company not to exceed $2.5 million at any one
time outstanding; (vi) Currency Agreements and Interest Swap Obligations entered
into in the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture; (vii) Investments in
Unrestricted Subsidiaries not to exceed $2.5 million at any one time
outstanding; (viii) 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; (ix) Investments
made by the Company or its Restricted Subsidiaries as a result of consideration
received in connection with an Asset Sale made in compliance with the
"Limitation on Asset Sales" covenant; and (x) additional Investments not to
exceed $2.5 million at any one time outstanding.
102
<PAGE>
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) 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;
(iii) 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
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);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) 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 its Restricted Subsidiaries;
(vi) 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;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; PROVIDED, HOWEVER, that (A) the related Purchase Money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(ix) 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;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant; PROVIDED
that (A) such Liens secured such
103
<PAGE>
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company and were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its 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 of the Company 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 of the Company.
"PERSON" means an individual, partnership, corporation, limited liability
company, 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.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"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 "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (xi) or (xii) of
the definition of Permitted Indebtedness), in each case that does not (1) 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
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; PROVIDED that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Exchange
Notes, then such Refinancing Indebtedness shall be subordinate to the Exchange
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; PROVIDED that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness or such lesser percentage as shall be permitted to act on
behalf of the holders of such Designated Senior Indebtedness pursuant to the
instrument governing such Designated Senior Indebtedness.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means one or more revolving credit facilities
under the Credit Agreement.
104
<PAGE>
"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,
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.
"SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate PROVIDED for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Exchange Notes. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate PROVIDED for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) any Indebtedness of the Company to a Subsidiary of the Company
or any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness incurred in violation of the Indenture
provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"SUBSIDIARY", with respect to any Person, means (i) 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 (ii) 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.
"SUBSIDIARY GUARANTOR" means (i) each of the Company's Restricted
Subsidiaries as of the Issue Date and (ii) each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of the Indenture as a
Subsidiary Guarantor; PROVIDED that any Person constituting a Subsidiary
Guarantor as described above shall cease to constitute a Subsidiary Guarantor
when its respective Guarantee is released in accordance with the terms of the
Indenture.
"TERM LOAN FACILITY" means one or more term loan facilities under the Credit
Agreement.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner PROVIDED below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
105
<PAGE>
Board of Directors of such Person may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
Company certifies to the Trustee that such designation complies with the
"Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"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" of any Person means any Restricted
Subsidiary of such Person 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 such Person or any Wholly Owned
Restricted Subsidiary of such Person.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The discussion set forth in this summary is based on the provisions of the
Internal Revenue Code of 1986, as amended, final, temporary and proposed
Treasury regulations thereunder ("Treasury Regulations"), and administrative and
judicial interpretations thereof, all as in effect on the date hereof and all of
which are subject to change (possibly on a retroactive basis). Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could affect the tax consequences to holders of Senior Notes.
This summary is for general information only and does not purport to address
all of the federal income tax consequences that may be applicable to a holder of
Senior Notes. The tax treatment of a holder of Senior Notes may vary depending
on its particular situation. For example, certain holders, including individual
retirement and other tax-deferred accounts, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
individuals who are not citizens or residents of the United States, may be
subject to special rules not discussed below. In addition, this discussion
addresses the tax consequences to the initial holders of the Senior Notes and
not the tax consequences to subsequent transfers of the Senior Notes.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL
INCOME TAX CONSEQUENCES SET FORTH BELOW AND ANY OTHER FEDERAL, STATE, LOCAL, OR
FOREIGN TAX CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES FOR EXCHANGE NOTES AND
OF HOLDING AND DISPOSING OF THE EXCHANGE NOTES.
106
<PAGE>
EXCHANGE OFFER
Under Section 1001 of the Code modifications in debt instruments may in
certain cases be deemed to constitute a taxable exchange of the existing debt
instrument for a new debt instrument. The Internal Revenue Service (the "IRS")
has issued Regulations providing rules for determining when a modification of a
debt instrument constitutes a taxable exchange. Because the terms of the
Exchange Notes do not modify significantly the terms of the Outstanding Notes,
each Exchange Note will be viewed as a continuation of the corresponding
Outstanding Note, the issuance of the Exchange Note will be disregarded for
federal income tax purposes, and a holder exchanging an Old note for an Exchange
Note (as well as a non-exchanging holder) will not recognize any gain or loss as
a result of the Exchange (or the Exchange Offer).
STATED INTEREST
A holder of an Exchange Note will be required to report as income for
federal income tax purposes interest earned on an Exchange Note in accordance
with the holder's method of tax accounting. A holder of an Exchange Note using
the accrual method of accounting for tax purposes is, as a general rule,
required to include interest in ordinary income as such interest accrues, while
a cash basis holder must include interest income when cash payments are received
(or made available for receipt) by such holder.
ORIGINAL ISSUE DISCOUNT
If the Exchange Notes are issued with original issue discount ("OID") within
the meaning of Sections 1272 and 1273 of the Code and the pertinent Treasury
Regulations, holders of the Exchange Notes generally will be required to include
such OID in gross income as it accrues in advance of the receipt of the cash
attributable to such income. The total amount of OID with respect to each
Exchange Note will be any excess of its "stated redemption price at maturity"
over its "issue price"; provided that an Exchange Note will not be deemed to
have OID if such excess is less than 1/4 of 1% of the Exchange Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity from its issue date. The "issue price of an Exchange Note will be equal
to its fair market value when issued. The "stated redemption price at maturity"
of an Exchange Note is the sum of all payments provided by the Exchange Note
other than "qualified stated interest" payments. The term "qualified stated
interest" generally means stated interest that is unconditionally payable in
cash or property (other than debt instruments of the issuer) at least annually
at a single fixed rate.
A holder of an Exchange Note must include OID income for federal income tax
purposes as it accrues under a "constant yield method" in advance of receipt of
cash payments attributable to such income, regardless of such holder's method of
accounting for tax purposes. The Company will furnish to the IRS and to record
holders of the Exchange Notes information with respect to the OID, if any,
accruing during the calendar year (as well as interest paid during that year).
SALE, EXCHANGE, OR REDEMPTION OF A NOTE
Upon the sale, exchange (other than pursuant to the Exchange as discussed
above), or redemption of a Senior Note, a holder will recognize taxable gain or
loss equal to the difference between (i) the amount of cash and the fair market
value of property received (other than amounts received attributable to interest
not previously taken into account, which amount will be treated as interest
received), and (ii) the holder's adjusted tax basis in the Senior Note. A
holder's adjusted tax basis in a Senior Note generally will equal the cost of
the Senior Note to the holder, increased by the amount of any OID previously
included in income by the older with respect to the Senior Note and reduced by
any payments previously received by the older with respect to the Senior Note,
other than qualified stated interest payments, and by any premium amortization
deductions previously claimed by the holder. Provided the Senior Note is a
capital asset in the
107
<PAGE>
hands of the holder and has been held for more than one year, any gain or loss
recognized by the holder will generally be a long-term capital gain or loss.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of a Senior Note may be subject
to a backup withholding at the rate of 31% on interest paid on the Senior Note
or on any other cash payment with respect to the sale or redemption of the
Senior Note, unless (i) such holder is a corporation or comes under certain
other exempt categories and when required demonstrates this fact or (ii) such
holder provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules in the Treasury
Regulations. Prospective holders of the Senior Notes (who have not previously
furnished a Form W-9 with respect to the Outstanding Notes) will be required to
complete a Form W-9 in order to provide the required information to the Company.
A holder of a Senior Note who does not provide the Company with the holder's
correct taxpayer identification number may be subject to penalties imposed by
the IRS.
The Company will report to the holders of the Senior Notes and to the IRS
the amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to payments on the Senior Notes.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against the holder's federal income tax liability, provided
that the required information is furnished to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER SHOULD
CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE
EXCHANGE, OWNERSHIP, AND DISPOSITION OF THE SENIOR NOTES (INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS).
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange 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 Exchange Notes. 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 Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale for a period of 180 days from the date of
this Prospectus, or such shorter period as will terminate when all Outstanding
Notes acquired by broker-dealers for their own account as a result of
market-making activities or other trading activities have been exchanged for
Exchange Notes and resold by such broker-dealers.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market or, in negotiated transactions 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
Exchange Notes. Any broker-dealer that resells Exchange 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
108
<PAGE>
resale or Exchange 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.
For a period of 180 days from the date of this Prospectus, or such shorter
period as will terminate when all Outstanding Notes acquired by broker-dealers
for their own accounts as a result of market-making activities or other trading
activities have been exchanged for Exchange Notes and resold by such
broker-dealers, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to indemnify such broker-dealers against certain liabilities,
including liabilities under the Securities Act.
TRANSFER RESTRICTIONS
Unless and until an Outstanding Note is exchanged for an Exchange Note
pursuant to the Exchange Offer, it will bear a legend substantially to the
following effect unless otherwise agreed by the Company and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. 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 NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER
THEREOF 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" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (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 FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 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 TWO 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
CERTIFICATIONS, 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
109
<PAGE>
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
BOOK-ENTRY; DELIVERY AND FORM
The Outstanding Notes were initially, and the Exchange Notes will be
represented by the Global Notes deposited with the Trustee as custodian for DTC
and registered in the name of a nominee of DTC on December 16, 1997 (except for
such Outstanding Notes or Exchange Notes, if any, that are issued in
certificated form as described below).
Senior Notes (i) originally purchased by or transferred to "foreign
purchasers" (which term shall include purchasers other than U.S. persons
purchasing Senior Notes outside the U.S., including dealers or other
professional fiduciaries in the U.C. acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust) in reliance upon Regulation S
under the Securities Act) or (ii) held by QIBs or Accredited Investors who are
not QIBs who elect to take physical delivery of their certificates instead of
holding their interests through the Global Notes (and which are thus ineligible
to trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers") will be issued in registered form (the "Certificated Security").
Upon the transfer to a QIB of any Certificated Security initially issued to a
Non-Global Purchaser, such Certificated Security will, unless the transferee
requests otherwise or the Global Note has previously been exchanged in whole for
Certificated Securities, be exchanged for an interest in the Global Note.
THE GLOBAL NOTES. Pursuant to procedures established by DTC (i) upon the
issuance of the Global Notes, DTC or its custodian credited, and, upon the
issuance of Exchange Notes in the Exchange Offer, will credit on its internal
system, the principal amount of Senior Notes of the individual beneficial
interests represented by such Global Notes to the respective accounts of persons
who have accounts with such depositary and (ii) 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) and the records of
participants (with respect to interests of persons other than participants).
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. QIBs and Accredited Investors may hold their interests in
the Global Notes directly through DTC if they are participants in such system,
or indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Senior Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Senior Notes represented by such Global Notes for
all purposes under the Indenture. No beneficial owner of an interest in the
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 with
respect to the Senior Notes.
Payments of the principal of, premium (if any), 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 the Company, 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.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on 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. The Company
also expects that payments by participants to owners of beneficial 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.
110
<PAGE>
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Senior Notes to persons
in states which require physical delivery of the Senior Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Senior Notes (including the presentation of Senior 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 Senior
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 for Certificated Securities, which, it will
distribute to its participants and which, if applicable, will be legended as set
forth under the heading "Transfer Restrictions."
DTC has advised the Company 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 Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its 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 of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. 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 the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Note, which certificates, if applicable, will bear
the legends referred to under the heading "Transfer Restrictions."
LEGAL MATTERS
The validity of the issuance of Exchange Notes offered hereby will be passed
upon for the Company by Brobeck, Phleger & Harrison LLP, Los Angeles,
California.
EXPERTS
The consolidated financial statements of PPC Holdings, Inc. and the
Predecessor subsidiary as of December 31, 1996 and 1995 and for the period ended
December 31, 1995 and the year ended December 31, 1996 and the statements of
operations and cash flows for the Predecessor subsidiary for the period January
1, 1995 to April 27, 1995, included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein and elsewhere in the Registration Statement (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to certain
indemnity claims), and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
111
<PAGE>
The consolidated financial statements of Judd's, Incorporated and
Subsidiaries as of December 31, 1995 and 1996 and for the years then ended
included in this Prospectus have been audited by Stoy, Malone & Company, P.C.,
independent auditors, as stated in their report appearing herein, and has been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed jointly with the SEC a
Registration Statement on Form S-4 under the Securities Act, with respect to the
Exchange Notes offered by this Prospectus. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the schedules and exhibits thereto,
to which reference hereby is made. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. Any interested party may inspect the Registration Statement
and its exhibits, without charge, at the public reference facilities of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional office at 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10007. Any interested party may obtain copies of all
or any portion of the Registration Statement and its exhibits at prescribed
rates from the Public Reference Section of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington DC
20549.
Following the effective date of the Registration Statement, the Company will
be subject to the periodic reporting and other information requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") pursuant to
Section 15(d) thereof. The Company has agreed that, whether or not it is
required to do so by the rules and regulations of the Commission, for so long as
any of the Senior Notes remain outstanding, it will furnish to the holders of
the Senior Notes and to the extent permitted by applicable law or regulation,
file with the Commission following the consummation of the Exchange Offer (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
was required to file such forms, including for each a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's independent
auditors and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. All
reports filed with the Commission will be available on the Commission's web site
at http:\\www.sec.gov. In addition, for so long as any of the Senior Notes
remain outstanding, the Company has agreed to make available to any prospective
purchaser of the Senior Notes or beneficial owner of the Senior Notes, in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Deloitte & Touche LLP, Independent Auditors..................................................... F-3
PPC HOLDINGS, INC.:
Consolidated Balance Sheets as of December 31, 1995 and 1996 and (unaudited) September 30, 1997........... F-4
Consolidated Statements of Operations for the 117 days ended April 27, 1995 (Predecessor Subsidiary), the
248 days ended December 31, 1995, the year ended December 31, 1996 and (unaudited) the nine months ended
September 30, 1996 and 1997............................................................................. F-6
Consolidated Statements of Minority Interests and Shareholders' Equity for the 117 days ended April 27,
1995 (Predecessor Subsidiary), the 248 days ended December 31, 1995, the year ended December 31, 1996
and (unaudited) the nine months ended September 30, 1997................................................ F-7
Consolidated Statements of Cash Flows for the 117 days ended April 27, 1995 (Predecessor Subsidiary), the
248 days ended December 31, 1995, the year ended December 31, 1996 and (unaudited) the nine months ended
September 30, 1996 and 1997............................................................................. F-8
Notes to Consolidated Financial Statements................................................................ F-10
Report of Stoy, Malone & Company, P.C., Independent Auditors.............................................. F-19
JUDD'S, INCORPORATED:
Consolidated Balance Sheets as of December 31, 1995 and 1996.............................................. F-20
Consolidated Statements of Operations for the years ended December 31, 1995 and 1996...................... F-22
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1995 and 1996............ F-23
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1996...................... F-24
Notes to Consolidated Financial Statements................................................................ F-25
Unaudited Condensed Consolidated Balance Sheet as of September 30, 1997................................... F-34
Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 1996 and
1997.................................................................................................... F-35
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and
1997.................................................................................................... F-36
Notes to Unaudited Condensed Consolidated Financial Statements............................................ F-37
</TABLE>
F-1
<PAGE>
(This page has been left blank intentionally.)
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
PPC Holdings, Inc.
We have audited the accompanying consolidated balance sheets of PPC
Holdings, Inc. and subsidiary as of December 31, 1995 and 1996, and the related
consolidated statements of operations, minority interests and shareholders'
equity and cash flows for the period ended December 31, 1995 (248 days) and the
year ended December 31, 1996. We have also audited the statements of operations
and cash flows for the Predecessor subsidiary for the period January 1, 1995 to
April 27, 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, such consolidated financial statements and the Predecessor
subsidiary financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for the period ended December
31, 1995 (248 days) and the year ended December 31, 1996 and the statements of
operations and cash flows for the Predecessor subsidiary for the period January
1, 1995 to April 27, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 11 to the financial statements, the Company filed
indemnity claims against the former owner of Perry Printing Corporation. The
Company's Asset Purchase Agreement allows immediate redemption of the Series A
Preferred Stock up to the maximum redemption value for these claims.
Accordingly, the carrying value of the Series A Preferred Stock has been reduced
to zero as of December 31, 1996.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 14, 1997
F-3
<PAGE>
PPC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
ASSETS
<TABLE>
<CAPTION>
DECEMBER DECEMBER SEPTEMBER
31, 1995 31, 1996 30, 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash.................................................. $ 1,694 $ 2,183 $ 83
Accounts receivable:
Trade, net.......................................... 28,499 19,829 26,935
Other............................................... 771 1,410 3,419
Inventories:
Raw materials....................................... 9,415 4,342 4,740
Work in process..................................... 3,257 3,855 2,776
Production supplies and repair parts................ 2,427 2,354 2,261
Prepaid expenses...................................... 1,064 833 1,568
Income tax receivable................................. -- 138 82
Deferred income taxes................................. -- -- 680
----------- ----------- -----------
Total current assets.............................. 47,127 34,944 42,544
PROPERTY, PLANT AND EQUIPMENT:
Machinery and equipment............................... 54,692 57,263 56,717
Buildings and improvements............................ 7,390 9,342 9,463
Office furniture and equipment........................ 2,272 3,866 4,462
Projects in progress.................................. 3,867 2,683 1,261
Land and land improvements............................ 1,007 1,133 1,133
Licensed vehicles..................................... 281 251 251
----------- ----------- -----------
69,509 74,538 73,287
Less accumulated depreciation......................... 3,646 9,494 13,924
----------- ----------- -----------
Property, plant and equipment, net.................. 65,863 65,044 59,363
----------- ----------- -----------
INTANGIBLE ASSETS:
Deferred financing costs, net......................... 2,600 2,000 1,550
Acquisition costs, net................................ 1,709 1,561 1,478
Covenant not to compete, net.......................... 1,733 732 567
----------- ----------- -----------
TOTAL............................................. $ 119,032 $ 104,281 $ 105,502
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PPC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER DECEMBER SEPTEMBER
31, 1995 31, 1996 30, 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable...................................... $ 16,433 $ 9,529 $ 10,572
Accrued expenses...................................... 9,276 8,422 8,947
Accrued interest and dividends........................ 1,814 2,515 3,454
Income taxes payable.................................. 52
Current portion of long-term debt................... 7,664 7,172 12,915
----------- ----------- -----------
Total current liabilities......................... 35,239 27,638 35,888
----------- ----------- -----------
LONG-TERM DEBT........................................ 51,665 46,039 40,996
----------- ----------- -----------
NOTE PAYABLE TO RELATED PARTY......................... 6,500 6,500 6,500
----------- ----------- -----------
OTHER NONCURRENT OBLIGATIONS.......................... 1,800 1,567
----------- ----------- -----------
MINORITY INTERESTS, Redeemable Preferred Stock Series
A, B and D with stated redemption value of $100 per
share, aggregate liquidation value of $11,610,
$6,975 and $6,894 at December 31, 1995 and 1996 and
September 30, 1997, respectively.................... 9,012 6,772 6,894
----------- ----------- -----------
SHAREHOLDERS' EQUITY:
Common stock-par value $0.001, 1,000,000 shares
authorized, 700,010 issued and outstanding.......... 1 1 1
Additional paid-in capital............................ 17,500 17,500 17,500
Accumulated deficit................................... (885) (1,969) (3,844)
----------- ----------- -----------
Total shareholders' equity............................ 16,616 15,532 13,657
----------- ----------- -----------
TOTAL............................................. $ 119,032 $ 104,281 $ 105,502
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PPC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------- --------------------------------------------------------
117 DAYS ENDED 248 DAYS ENDED YEAR ENDED
APRIL 27, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
--------------- ----------------- ----------------- NINE MONTHS ENDED
------------------
SEPTEMBER 30, 1996
------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES.............................. $ 45,920 $ 115,647 $ 138,511 $ 101,307
------- -------- -------- --------
OPERATING EXPENSES:
Costs of production.................. 37,066 98,660 113,185 84,321
Selling, general and
administrative..................... 3,524 7,724 12,369 9,140
Depreciation......................... 3,049 3,646 5,869 4,333
Amortization of intangibles.......... -- 354 580 435
------- -------- -------- --------
43,639 110,384 132,003 98,229
------- -------- -------- --------
INCOME FROM OPERATIONS................. 2,281 5,263 6,508 3,078
OTHER (INCOME) EXPENSES:
Interest expense..................... 470 4,503 5,946 4,465
Amortization of deferred financing
costs.............................. -- 400 600 450
Other, net........................... 67 (4) 44 --
------- -------- -------- --------
Total other expenses............... 537 4,899 6,590 4,915
------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES...... 1,744 364 (82) (1,837)
PROVISION (BENEFIT) FOR INCOME TAXES... 682 148 4 (674)
------- -------- -------- --------
INCOME (LOSS) BEFORE DIVIDENDS AND
ACCRETION ON PREFERRED STOCK.......... 1,062 216 (86) (1,163)
------- -------- -------- --------
DIVIDENDS AND ACCRETION ON PREFERRED
STOCK................................. -- 1,101 998 746
------- -------- -------- --------
NET INCOME (LOSS)...................... $ 1,062 $ (885) $ (1,084) $ (1,909)
------- -------- -------- --------
------- -------- -------- --------
<CAPTION>
SEPTEMBER 30, 1997
------------------
(UNAUDITED)
<S> <C>
NET SALES.............................. $ 105,611
--------
OPERATING EXPENSES:
Costs of production.................. 86,676
Selling, general and
administrative..................... 10,362
Depreciation......................... 4,873
Amortization of intangibles.......... 301
--------
102,212
--------
INCOME FROM OPERATIONS................. 3,399
OTHER (INCOME) EXPENSES:
Interest expense..................... 4,417
Amortization of deferred financing
costs.............................. 450
Other, net........................... 266
--------
Total other expenses............... 5,133
--------
INCOME (LOSS) BEFORE INCOME TAXES...... (1,734)
PROVISION (BENEFIT) FOR INCOME TAXES... (625)
--------
INCOME (LOSS) BEFORE DIVIDENDS AND
ACCRETION ON PREFERRED STOCK.......... (1,109)
--------
DIVIDENDS AND ACCRETION ON PREFERRED
STOCK................................. 766
--------
NET INCOME (LOSS)...................... $ (1,875)
--------
--------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PPC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MINORITY INTERESTS COMMON STOCK
---------------------- --------------------
CARRYING CARRYING ACCUMULATED
SHARES VALUE SHARES VALUE DEFICIT
--------- ----------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
January 1, 1995......................................... 1,000 $ 1
Stock issuance........................................ 115,000 $ 9,000 699,010 17,500 --
--------- ----------- --------- --------- ------------
April 28, 1995.......................................... 115,000 9,000 700,010 17,501
Net loss.............................................. -- -- $ (885)
Stock dividends....................................... 1,104 110 -- -- --
Accretion............................................. 167 -- -- --
Redeemed shares....................................... (2,650) (265) -- -- --
--------- ----------- --------- --------- ------------
December 31, 1995....................................... 113,454 9,012 700,010 17,501 (885)
Net loss.............................................. -- -- -- -- (1,084)
Stock dividends....................................... 1,619 162 -- -- --
Redeemed shares....................................... (47,350) (2,402) -- -- --
--------- ----------- --------- --------- ------------
December 31, 1996....................................... 67,723 6,772 700,010 17,501 (1,969)
Net loss (unaudited).................................. -- -- -- -- (1,875)
Stock dividends (unaudited)........................... 1,219 122 -- -- --
--------- ----------- --------- --------- ------------
September 30, 1997 (unaudited).......................... 68,942 $ 6,894 700,010 $ 17,501 $ (3,844)
--------- ----------- --------- --------- ------------
--------- ----------- --------- --------- ------------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
PPC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------- ----------------------------------------------------------------
117 DAYS ENDED 248 DAYS ENDED YEAR ENDED
APRIL 27, DECEMBER 31, DECEMBER 31,
1995 1995 1996
--------------- --------------- ------------- NINE MONTHS ENDED
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................... $ 1,062 $ (885) $ (1,084) $ (1,909) $ (1,875)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization........... 3,049 4,000 6,449 4,768 5,174
Amortization of deferred financing
costs................................. -- 400 600 450 450
Deferred income taxes................... (39) (680)
Loss (gain) on sale of fixed assets..... 67 -- (7) -- 296
Changes in assets and liabilities
excluding effect of acquired business:
Receivables........................... (2,321) (7,954) 8,031 4,192 (9,115)
Inventories........................... (1,913) (4,589) 4,548 4,115 774
Prepaid expenses...................... 907 (956) 231 193 (735)
Accounts payable...................... 6,928 1,396 (6,904) (6,734) 1,043
Accrued expenses...................... 210 3,301 (854) (669) 525
Accrued interest and dividends........ -- 2,090 864 474 1,061
Income taxes, net..................... -- 52 (190) (840) 56
Intangible assets..................... -- -- (33) (33) (53)
Other liabilities..................... -- -- -- -- (233)
--------------- --------------- ------------- ------- -------
Net cash provided (used) by
operating activities.............. 7,950 (3,145) 11,651 4,007 (3,312)
--------------- --------------- ------------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for business acquired......... -- (77,805) -- -- --
Proceeds from sale of fixed assets...... 89 142 1,097
Capital expenditures.................... (10,047) (3,265) (8,442) (5,000) (1,133)
Capital projects converted to operating
leases................................ -- 4,076 3,256 3,256 548
--------------- --------------- ------------- ------- -------
Net cash (used) provided by
investing activities.............. (9,958) (76,994) (5,044) (1,744) 512
--------------- --------------- ------------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Transfers from parent................... 1,784 -- -- -- --
Proceeds from long term debt............ -- 61,355 1,609 314 --
Financing costs incurred................ -- (3,000) -- -- --
Increase (decrease) in revolver debt.... -- 8,308 (3,077) (831) 4,991
Repayment of term debt.................. -- (2,333) (4,650) (3,381) (4,291)
Sale of capital stock................... -- 17,500 -- -- --
--------------- --------------- ------------- ------- -------
Net cash provided (used) by
financing activities.............. 1,784 81,830 (6,118) (3,898) 700
--------------- --------------- ------------- ------- -------
NET (DECREASES) INCREASES IN
CASH.................................... (224) 1,691 489 (1,635) (2,100)
Balance at beginning of period............ 227 3 1,694 1,694 2,183
--------------- --------------- ------------- ------- -------
Balance at end of period.................. $ 3 $ 1,694 $ 2,183 $ 59 $ 83
--------------- --------------- ------------- ------- -------
--------------- --------------- ------------- ------- -------
</TABLE>
F-8
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period:
<TABLE>
<CAPTION>
PREDECESSOR
---------------
117 DAYS ENDED 248 DAYS YEAR ENDED
APRIL 27, DECEMBER 31, DECEMBER 31,
1995 1995 1996
--------------- ------------- ------------- COMPANY
----------------------------
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30,
SEPTEMBER 30, 1997
1996 -------------
------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest............................. $ 653 $ 3,172 $ 4,996 $ 3,856 $ 3,284
------ ------ ------ ------ ------
Income Taxes......................... $ 1,665 $ 260 $ 185 $ -- $ --
------ ------ ------ ------ ------
</TABLE>
NONCASH TRANSACTIONS:
On April 28, 1995, the Company issued 50,000 and 65,000 shares of Series A
and B preferred stock, respectively, to the owner of the Predecessor company.
The fair value of these securities approximated $8,700 after adjustments to the
purchase price of the assets acquired.
Stock dividends issued to minority interests approximated $110,000 and
$162,000 based on their value at the time of issuance for the years ended
December 31, 1995 and 1996.
Cash dividends accrued on Series D preferred stock were approximately $4,000
and $26,000 during the years ended December 31, 1995 and 1996. Such amounts are
cumulative and payable on November 1, 2000.
Accretion related to the Series A preferred stock was $167,000 for the year
ended December 31, 1995. There was no accretion related to Series A preferred
stock in the year ended December 31, 1996 or the 117 days ended April 27,
1995--See Note 5.
See notes to consolidated financial statements.
F-9
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of PPC Holdings, Inc. and its wholly-owned subsidiary Perry Graphic
Communications, Inc. (the "Company"). All significant intercompany balances and
transactions have been eliminated.
The consolidated statements of operations, minority interests and
shareholders' equity and cash flows for the 117 day period ended April 27, 1995
represent the activity of the former Perry Printing Corporation and certain
assets of North Star Print Group ("Perry Printing"). Effective April 28, 1995,
the Company acquired certain assets and assumed certain liabilities of Perry
Printing for approximately $77.8 million in cash and an additional $8.7 million
in preferred stock. Prior to the acquisition of Perry Printing, PPC Holdings,
Inc. had no operations and substantially no assets. Therefore, the accompanying
financial statements reflect the operating activity of Perry Printing as
"Predecessor" and operating results after the acquisition date as the "Company."
The acquisition was treated under the purchase method of accounting and a final
allocation of the purchase price has been reflected in the accompanying
financial statements.
NATURE OF BUSINESS--The Company is a full service heatset web offset printer
of magazines and catalogs. The Company serves a national domestic market in the
printing of weekly and monthly magazine publications, business-to-business and
consumer catalogs, and a variety of other direct advertising products.
UNAUDITED INTERIM FINANCIAL STATEMENTS--In the opinion of management, the
unaudited interim financial statements as of and for the nine months ended
September 30, 1996 and 1997 have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations as of such dates and for such periods.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT RISK CONSIDERATIONS--The Company has long-standing relationships
serving certain large customers, typically under multi-year contracts. The
Company has one customer, consisting of four publication titles, which comprised
approximately 19%, 15% and 20% of total gross sales volume for the 117 days
ended April 27, 1995 and the 248 days ended December 31, 1995 and the year ended
December 31, 1996, respectively. Three of this customer's titles are under
contract through December 31, 2003. The fourth title's contract expires on
December 31, 1999. The Company has recorded an allowance for doubtful accounts
to estimate the difference between recorded receivables and ultimate
collections. The allowance and provision for bad debts are adjusted periodically
based upon the Company's evaluation of historical collection experience,
industry trends and other relevant factors. The allowance for doubtful accounts
was $428,000, $320,000 and $257,000 at December 31, 1995 and 1996 and September
30, 1997 (unaudited), respectively.
INVENTORY VALUATION--Inventories are stated at the lower of cost (first-in,
first-out method) or market. At December 31, 1995 and 1996 and September 30,
1997 (unaudited), allowances for obsolete and excess inventories were $300,000,
$645,000 and $542,000, respectively.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Assets are depreciated on the straight-line basis over estimated useful
lives which range from three to forty years.
F-10
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS--Deferred financing costs are being amortized over the
lives of the applicable debt agreements. Accumulated amortization on these costs
was $400,000, $1,000,000 and $1,450,000 at December 31, 1995 and 1996 and
September 30, 1997 (unaudited), respectively. Direct and external costs related
to the acquisition of Perry Printing (See Note 1) are being amortized over five
to fifteen years. Accumulated amortization on these costs was $87,000, $267,000
and $403,000 at December 31, 1995 and 1996 and September 30, 1997 (unaudited),
respectively. The Company received a covenant not to compete from the former
owner of Perry Printing which is being amortized over the life of the covenant
of five years. Accumulated amortization on these costs was $267,000, $667,000
and $831,000 at December 31, 1995 and 1996 and September 30, 1997 (unaudited),
respectively.
IMPAIRMENT OF LONG-LIVED ASSETS--The Company periodically evaluates the
carrying value of intangible assets and if future cash flows are believed
insufficient to recover the remaining carrying value of the related assets, the
carrying value is written down in the period the impairment is identified to its
estimated future recoverable value.
REVENUE RECOGNITION--Revenue on printing sales is recognized when complete
orders of printed materials are shipped.
INCOME TAXES--Deferred income taxes are determined utilizing an asset and
liability approach. This method gives consideration to the future tax
consequences associated with differences between financial accounting and tax
bases of assets and liabilities. This method gives immediate effect to changes
in income tax laws upon enactment.
ESTIMATES--The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities as of the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying value of cash, accounts
receivable, accounts payable and accrued expenses approximates fair value at
December 31, 1995 and 1996 and September 30, 1997 (unaudited) due to their
short-term nature; the carrying value of the Company's long-term debt
approximates fair value due to its variable interest rates.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No.131, "Disclosure About Segments of an Enterprise and Related Information."
Both Statements are effective for fiscal years beginning after December 15,
1997. The Company is analyzing the reporting and disclosure requirements and
will adopt SFAS No. 130 and SFAS No. 131 in the upcoming year.
F-11
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------- ------------- SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Employee related expenses........................ $ 4,658 $ 4,686 $ 4,576
Accrued paper costs.............................. 1,712 1,929 1,963
Acquisition reserve.............................. 682 307 307
Taxes other than income.......................... 1,219 676 851
Other accrued expenses........................... 1,005 824 1,250
------ ------ ------
$ 9,276 $ 8,422 $ 8,947
------ ------ ------
------ ------ ------
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------ SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility........................ $ 19,553 $ 16,476 $ 21,467
Term loan facility............................... 39,666 35,083 30,875
Mortgage note.................................... -- 1,295 1,276
Capital lease obligations........................ 110 357 293
------------ ------------ -------------
Total debt....................................... 59,329 53,211 53,911
Less current portion............................. (7,664) (7,172) (12,915)
------------ ------------ -------------
Long-term debt................................... $ 51,665 $ 46,039 $ 40,996
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
On April 28, 1995, the Company entered into a five year Credit Agreement
with a commercial bank consortium that provides a revolving and term loan
facility. These loans are collateralized by substantially all assets of the
Company. The Credit Agreement further requires the Company to maintain and meet
certain minimum net worth and other operating ratios and limits expenditures for
property and equipment, dividends, investments, other indebtedness, commitments,
guarantees and contingent liabilities. The Company has been in compliance with
substantially all covenants and has received waivers and amendments for 1995 and
1996 covering certain financial ratio covenants not met.
REVOLVING CREDIT FACILITY--The Company has the ability to borrow, subject to
certain terms and conditions, up to $26.0 million until April 28, 2000, at which
time any outstanding borrowings become due and payable unless otherwise extended
based upon mutual agreement of the Company and lenders. Borrowings against the
line are either at a Eurodollar rate plus 2.50%, fixed for periods up to 180
days, or at the prime rate plus 1.00%. The bank prime rate at December 31, 1995
and 1996 and September 30, 1997 (unaudited) was 8.50%, 8.25% and 8.50%,
respectively. The weighted average interest rate on the outstanding borrowings
approximated 8.81%, 8.44% and 8.37% as of December 31, 1995 and 1996 and
September 30, 1997 (unaudited), respectively.
TERM LOAN FACILITY--The term loan facility is due in installment amounts at
the last day of each month until April 28, 2000, at which time any outstanding
borrowings become due and payable. Repayments may
F-12
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
not be reborrowed. Borrowings are either at a Eurodollar rate plus 3.25%, fixed
for periods of up to 180 days, or at the prime rate plus 1.75%. The weighted
average interest rate on the outstanding borrowings approximated 9.27%, 8.99%
and 9.02% as of December 31, 1995 and 1996 and September 30, 1997 (unaudited),
respectively.
MORTGAGE NOTE--The Company entered an agreement to purchase its corporate
office building from the former owner of Perry Printing. The agreement which was
executed on December 31, 1996, required a 30% down payment with the resulting
balance financed by the former owner of Perry Printing as a five year prime rate
mortgage based upon a twenty year amortization with a balloon payment due on the
fifth anniversary of the loan.
Future minimum principal payments required under the terms of the note
agreements are as follows as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................... $ 7,172
1998............................................................................... 6,697
1999............................................................................... 7,699
2000............................................................................... 30,451
2001............................................................................... 55
Thereafter......................................................................... 1,137
---------
Total............................................................................ $ 53,211
---------
---------
</TABLE>
5. MINORITY INTERESTS
REDEEMABLE PREFERRED STOCK A--At April 28, 1995, Series A Preferred issued
in the amount of $5.0 million reflects an original issue discount of $2.5
million which is the difference between the net present value at the time of
issuance and the April 28, 2005 redemption value. The difference is accreted by
changing operations until redemption. Each share of Series A, $0.001 par value,
$100 redemption value, nonconvertible, non-voting preferred stock entitles its
holder to receive an annual cash dividend equivalent to carrying value times 90%
of the prime interest rate. At December 31, 1995, 50,000 shares were authorized
and 47,350 shares were issued and outstanding. During 1996, the carrying value
of the Series A preferred stock was written down to $-0- to offset certain
purchase accounting adjustments and no accretion was made. (See Note 11.)
REDEEMABLE PREFERRED STOCK B--Each share of Series B, $0.001 par value, $100
redemption value, nonconvertible, non-voting preferred stock entitles its holder
to receive cash dividends of 12.5% of carrying value and stock dividends of 2.5%
of carrying value. At December 31, 1995 and 1996, and September 30, 1997
(unaudited), 65,000 shares were authorized, issued, and outstanding and are
mandatorily redeemable on November 1, 2000.
REDEEMABLE PREFERRED STOCK D--Each share of Series D, $0.001 par value, $100
redemption value, nonconvertible, non-voting preferred stock entitles its holder
to receive cash dividends equivalent to 15% of carrying value. At December 31,
1995 and 1996 and September 30, 1997 (unaudited), 100,000 shares were authorized
with 1,104, 2,723 and 3,942 shares issued and outstanding, respectively. Series
D Preferred shares are mandatorily redeemable on November 1, 2000.
F-13
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. MINORITY INTERESTS (CONTINUED)
All of the above preferred stock was issued by Perry Graphic Communications,
Inc.
6. STOCK OPTION PLAN
In 1995, shareholders of the Company approved the adoption of the PPC
Holdings, Inc. 1995 Stock Option Plan (the "Stock Option Plan"). Under the terms
of the Stock Option Plan, options may be granted to officers and key employees.
Options have terms of eighteen years and an exercise price of $.01 per share.
Options are immediately exercisable, but option shares issuable are subject to
repurchase by the Company on termination of employment at the original exercise
price until vested. Option shares vest in gradual increments over an eight year
period.
A summary of option activity under the Stock Option Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
-----------
<S> <C>
Outstanding at January 1, 1995.................................................... 0
Granted........................................................................... 15,125
-----------
Outstanding at December 31, 1995.................................................. 15,125
Granted........................................................................... 7,000
-----------
Outstanding at December 31, 1996.................................................. 22,125
Granted (unaudited)............................................................... 3,500
-----------
Outstanding at September 30, 1997 (unaudited)..................................... 25,625
-----------
-----------
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretation in accounting for its
employee stock option plan. Accordingly, compensation expense is recorded to the
extent the fair value of each share exceeds the estimated option price at the
date of grant. Under the provisions of SFAS 123, "Accounting for Stock-Based
Compensation," the Company would have been required to report compensation
expense based on the deemed fair value of the options at the date of issuance.
Had compensation cost for such options been determined consistent with the fair
value method outlined in SFAS No.123, the impact on the Company's net income
(loss) for any period or shareholders' equity as of any date, would not have
been material since the inception of the Stock Option Plan.
The following table summarizes information concerning outstanding and
exercisable options and vested option shares at December 31, 1996:
<TABLE>
<S> <C>
Outstanding and exercisable options.............................. 22,125
Weighted Average Remaining Contractual Life of Outstanding 16.4
Options........................................................ years
Vested option shares issuable.................................... 3,725
Weighted Average Remaining Contractual Life of Exercisable 16.3
Options........................................................ years
</TABLE>
7. OPERATING LEASES
The Company leases certain equipment and office space under non-cancelable
operating lease agreements. Lease expense under such agreements was
approximately $45,700, $2.5 million and $4.3 million for the 117 days ended
April 27, 1995, the 248 days ended December 31, 1995 and for the year ended
F-14
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. OPERATING LEASES (CONTINUED)
December 31, 1996, respectively. Future minimum annual lease payments required
under the operating lease agreements are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................... $ 4,414
1998............................................................................... 4,333
1999............................................................................... 4,281
2000............................................................................... 3,821
2001............................................................................... 3,436
Thereafter......................................................................... 1,623
---------
Total minimum lease payments..................................................... $ 21,908
---------
---------
</TABLE>
Total assets under capital lease were $436,000 at December 31, 1996 and
September 30, 1997, with accumulated amortization of $59,000 and $122,000
respectively.
8. INCOME TAXES
The provision for income taxes consists of the following components (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- --------------------------------------------
117 DAYS ENDED 248 DAYS ENDED YEAR ENDED
APRIL 27, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ------------------- -----------------------
<S> <C> <C> <C>
Current:
Federal............................... $ 537 $ 89 $ 3
State................................. 60 -- 1
--
----- -----
597 89 4
Deferred:
Federal............................... 77 59 --
State................................. 8 -- --
--
----- -----
85 59 --
--
----- -----
Provision for income taxes............ $ 682 $ 148 $ 4
--
--
----- -----
----- -----
</TABLE>
Following is a reconciliation of the U.S. statutory federal income tax rate
to the effective rate (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ----------------------------------------
117 DAYS ENDED 248 DAYS ENDED YEAR ENDED
APRIL 27, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ------------------- -------------------
<S> <C> <C> <C>
Tax expense (benefit) at Federal
statutory rate (35%)................ $ 610 $ 127 $ (30)
State income taxes (benefit) net of
Federal income tax benefit.......... 60 13 (4)
Other permanent differences........... 12 8 38
----- ----- ---
Provision for income taxes............ $ 682 $ 148 $ 4
----- ----- ---
----- ----- ---
</TABLE>
F-15
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Significant components of deferred tax assets and deferred tax liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
----------------- -----------------
<S> <C> <C>
Deferred Tax Assets:
Inventory items...................................... -- $ 292
ccounts receivable items............................. -- 128
Accrued vacation..................................... -- 505
Tax loss carryforwards............................... $ 1,232 4,436
Tax credit carryforwards............................. 59 59
Other items.......................................... 53 8
------ -------
1,344 5,428
------ -------
Deferred Tax Liabilities:
Prepaid items........................................ (26) (340)
Property, plant and equipment........................ (1,330) (4,705)
1,356 5,045
------ -------
Net deferred tax (liability) asset..................... (14) 383
Valuation allowance.................................... -- (383)
------ -------
Net deferred income taxes.............................. $ (14) $ 0
------ -------
------ -------
</TABLE>
Included in tax assets at December 31, 1996 are net operating loss
carryforwards of approximately $9.8 million and $5.6 million for federal and
state income tax purposes, respectively, which begin to expire in the year 2000
and alternative minimum tax credits of approximately $59,000 which can be used
to offset future regular tax and have no expiration date. Due to uncertainty
regarding the future financial results of the Company, a valuation allowance has
been used to reduce the net deferred tax assets (after giving effect to deferred
tax liabilities) to zero at December 31, 1996. The deferred tax asset at
September 30, 1997 has not been offset as it is more likely than not that income
in the remaining three months of the year will offset losses to date.
9. RELATED PARTY TRANSACTIONS
On April 28, 1995, the Company entered into management agreements (the
"Agreements") with two companies owned beneficially by the majority shareholders
of the Company. The Agreements provide for certain management and consulting
services in connection with business strategy, operations and finance. The
Agreements have initial terms of five years, subject to one-year extensions
thereafter and require the Company to pay an annual management fee totaling
$700,000 per year plus reimbursement of certain expenses. Management fees and
expense reimbursements paid in conjunction with the Agreements approximated
$486,000 and $738,000 during the period ended December 31, 1995 and the year
ended December 31, 1996, respectively.
F-16
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RELATED PARTY TRANSACTIONS (CONTINUED)
A California corporation owned beneficially by the majority shareholders,
loaned $6.5 million to the Company in connection with the acquisition of Perry
Printing. The loan was evidenced by a senior note bearing interest at 15% per
annum. Interest is payable quarterly in arrears at the end of each calendar
quarter on the unpaid principal amount. Accrued interest on the note amounted to
$1.8 million and $2.7 million at December 31, 1996 and September 30, 1997
(unaudited), respectively. The note is due on November 1, 2000. Prior to its
maturity date, the note may be redeemed in whole or in part, at any time by
paying in cash a redemption price equal to 100% of the principal amount to be
redeemed together with all accrued and unpaid interest thereon to the date of
redemption. Management intends to convert the note and accrued and unpaid
interest into preferred stock in connection with a planned acquisition and debt
offering (See Notes 4 and 12). In connection with obtaining this financing, the
Company paid a one-time fee of $650,000. This amount has been capitalized as
deferred financing costs in the consolidated financial statements and is being
amortized over the life of the note.
Since May 1995, the Company has purchased a substantial portion of its total
ink requirements from a company affiliated with the majority shareholders. The
Company expects to continue to purchase a substantial portion of its total ink
requirements from this vendor. Total purchases for the 248 days ended December
31, 1995 and for year ended December 31, 1996 and for the nine months ended
September 30, 1997, amounted to $2.8 million, $9.7 million, and $6.5 million,
respectively.
10. RETIREMENT PLAN
The Company has a defined contribution plan referred to as the Perry Graphic
Communications Retirement Savings Plan (the "Plan"). The Plan covers
substantially all employees who have attained 21 years of age and are credited
with twelve months of service on their enrollment date. The Company contributed
approximately $514,000 and $862,000 for the 248 days ended December 31, 1995 and
the year ended December 31, 1996, respectively, to the Plan, representing 3% of
eligible employee wages.
11. COMMITMENTS AND CONTINGENCIES
INDEMNIFICATION--In connection with the acquisition, the Company issued
50,000 and 65,000 shares of Series A and B preferred stock, respectively, to the
former owner of Perry Printing. During 1996, the Company made two indemnity
claims against the former owner of Perry Printing principally involving breaches
of warranties and representations made on certain assets under its Asset
Purchase Agreement. Redemption features of the Series A preferred stock provided
the Company with the option to offset such claims as immediate redemption of the
Series A preferred stock up to the maximum redemption value of $5 million.
Accordingly, the carrying value of the Series A preferred stock was reduced to
$-0- in the financial statements at December 31, 1996. The former owner of Perry
Printing has objected to these claims for indemnification and management
anticipates the claims may result in litigation but believes the Company's
position on the claims will be upheld.
Additionally, the Company has asserted a claim against the former owner of
Perry Printing for an approximate $1.8 million employee benefit obligation
incurred prior to April 28, 1995, which is now an obligation of the Company to
its employees covered by collective bargaining agreements. This amount has been
reflected as an increase to both assets and liabilities in the final purchase
accounting allocations, pending resolution with the former owner of Perry
Printing.
F-17
<PAGE>
PPC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
PURCHASE COMMITMENTS--At December 31, 1996, the Company has commitments to
purchase or lease approximately $13.9 million of operating assets.
12. SUBSEQUENT EVENTS (UNAUDITED)
The Company has entered into a Plan and Agreement of Merger (the "Merger
Agreement") with Judd's, Incorporated ("Judd's"). Pursuant to the Merger
Agreement, the Company will acquire all of the outstanding capital stock of
Judd's, which will become a wholly-owned subsidiary of the Company (the
"Acquisition"). The aggregate merger consideration will be $103.0 million, less
outstanding indebtedness of Judd's at the closing date and subject to adjustment
as set forth in the Merger Agreement. The acquisition will be effected by the
merger of a wholly-owned subsidiary of PPC Holdings with and into Judd's.
The Company will require approximately $113.0 million to consummate the
Acquisition. This sum is expected to be provided by (a) $115.0 million resulting
from a debt offering (the "Offering") and (b) borrowings under a revolving
credit facility and term loan facility with certain lenders having a maximum
total availability of approximately $75.0 million (the "Amended and Restated
Credit Agreement"). In order to facilitate the Offering and Amended and Restated
Credit Agreement, the Company will be selling additional shares of common stock
(the "Equity Investment") and effecting a conversion of an outstanding
promissory note into a new class of preferred stock (the "Note Conversion")--See
Note 9. The Acquisition, the Amended and Restated Credit Agreement, the
Offering, the Equity Investment and the Note Conversion are collectively
referred to as the "Transactions." The Offering is conditioned upon the
consummation of the other Transactions, and the consummation of each event
comprising the Transactions is contingent upon the consummation of all other
events.
In addition, prior to the consummation of the Transactions, the Company will
have entered into a sale/ leaseback transaction with respect to all real
property owned by the Company and its subsidiaries prior to the Acquisition (the
"Sale/Leaseback"). The Sale/Leaseback will involve the sale of real property
with a net book value of $11.7 million, as of September 30, 1997, and net
proceeds of $16.2 million. Management intends to effect the Sale/Leaseback
regardless of the Acquisition.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Judd's, Incorporated
We have audited the accompanying consolidated balance sheets of Judd's,
Incorporated and Subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years then ended. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Judd's,
Incorporated and Subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
February 4, 1997
F-19
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 1,179 $ 3,895
Marketable equity securities, at fair value........................................ 1,202 1,250
Accounts receivable:
Trade, net....................................................................... 20,118 19,401
Other............................................................................ 668 864
Income taxes receivable............................................................ 67 196
Inventories:
Raw materials.................................................................... 12,105 7,328
Work in process.................................................................. 2,441 2,065
Prepaid expenses................................................................... 530 483
Deferred income taxes.............................................................. 365 624
------------ ------------
Total current assets........................................................... 38,675 36,106
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................................................... 922 922
Buildings.......................................................................... 22,406 23,384
Equipment.......................................................................... 82,453 87,818
Projects in progress............................................................... 2,766 749
------------ ------------
108,547 112,873
------------ ------------
Less accumulated depreciation.................................................... 57,344 63,521
Property, plant and equipment, net............................................. 51,203 49,352
OTHER ASSETS:
Deferred costs, net:
Lease acquisition costs.......................................................... 533 714
Debt expense..................................................................... 184 161
Lease commissions................................................................ 23 46
Other.............................................................................. 228 176
------------ ------------
Total other assets............................................................. 968 1,097
------------ ------------
Total assets................................................................. $ 90,846 $ 86,555
------------ ------------
------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-20
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable--current maturities.................................................. $ 4,215 $ 8,680
Accounts payable................................................................... 10,046 11,809
Accrued expenses................................................................... 4,974 5,279
Income taxes payable............................................................... 21 15
Security deposits.................................................................. 43 39
Deferred income.................................................................... 168 606
------------ ------------
Total current liabilities........................................................ 19,467 26,428
------------ ------------
LONG-TERM LIABILITIES:
Notes payable...................................................................... 36,950 22,838
Debenture bonds payable............................................................ 3,258 3,293
Accrued pension plan............................................................... 620 659
Deferred income taxes.............................................................. 2,637 3,385
------------ ------------
Total long-term liabilities...................................................... 43,465 30,175
------------ ------------
Total liabilities.............................................................. 62,932 56,603
------------ ------------
MINORITY INTERESTS IN SUBSIDIARIES................................................... 187 176
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock; $10 par value; 7% cumulative; nonparticipating; 100,000 shares
authorized; shares outstanding, 1995--799 and 1996--620.......................... 8 6
Common stock; Class A voting; $1 par value; 500,000 shares authorized; 427,320
shares issued.................................................................... 427 427
Common stock; Class B nonvoting; $1 par value; 1,000,000 shares authorized; 985,580
shares issued.................................................................... 986 986
Capital contributed in excess of par value......................................... 9,064 9,287
Retained earnings.................................................................. 26,514 28,506
------------ ------------
36,999 39,212
Treasury stock, at cost; 1995--787,490 shares and 1996--816,717 shares............. (9,272) (9,436)
------------ ------------
Total shareholders' equity....................................................... 27,727 29,776
------------ ------------
Total liabilities and shareholders' equity..................................... $ 90,846 $ 86,555
------------ ------------
------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-21
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
NET SALES............................................................................ $ 141,222 $ 152,563
------------ ------------
OPERATING EXPENSES:
Costs of production................................................................ 108,880 119,039
Selling, general and administrative................................................ 18,569 19,426
Depreciation....................................................................... 7,929 7,797
Amortization of intangibles........................................................ 165 164
------------ ------------
135,543 146,426
------------ ------------
INCOME FROM OPERATIONS............................................................... 5,679 6,137
------------ ------------
OTHER (INCOME) EXPENSES:
Interest expense................................................................... 3,327 3,066
Amortization of deferred debt expense.............................................. 23 78
Investment income, net............................................................. (825) (306)
Other, net......................................................................... (160) (153)
------------ ------------
2,365 2,685
------------ ------------
Income before income taxes and minority interests in earnings of subsidiaries........ 3,314 3,452
Income taxes......................................................................... 1,459 1,447
------------ ------------
Income before minority interests in earnings of subsidiaries......................... 1,855 2,005
Minority interests in earnings of subsidiaries....................................... 14 12
------------ ------------
NET INCOME........................................................................... $ 1,841 $ 1,993
------------ ------------
------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-22
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
PREFERRED ------------------------ RETAINED TREASURY SHAREHOLDERS'
STOCK CLASS A CLASS B EARNINGS STOCK EQUITY
------------- ----------- ----------- CAPITAL ----------- --------- ------------------
CONTRIBUTED IN
EXCESS OF PAR
VALUE
---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995................... $ 8 $ 427 $ 986 $ 8,936 $ 24,674 $ (7,756) $ 27,275
Net income............. -- -- -- -- 1,841 -- 1,841
Purchase of 72,445
shares of treasury
stock................ -- -- -- -- -- (1,565) (1,565)
Reissuance of 4,490
shares of treasury
stock.................. -- -- -- 128 -- 49 177
Cash dividends on
preferred stock ($.70
per share)............. -- -- -- -- (1) -- (1)
--- ----- ----- ------ ----------- --------- -------
Balance, December 31,
1995................... 8 427 986 9,064 26,514 (9,272) 27,727
Net income............. -- -- -- -- 1,993 -- 1,993
Redemption of 179
shares of preferred
stock................ (2) -- -- -- -- -- (2)
Purchase of 36,058
shares of treasury
stock................ -- -- -- -- -- (244) (244)
Reissuance of 6,831
shares of treasury
stock................ -- -- -- 223 -- 80 303
Cash dividends on
preferred stock ($.70
per share)........... -- -- -- -- (1) -- (1)
--- ----- ----- ------ ----------- --------- -------
Balance, December 31,
1996................... $ 6 $ 427 $ 986 $ 9,287 $ 28,506 $ (9,436) $ 29,776
--- ----- ----- ------ ----------- --------- -------
--- ----- ----- ------ ----------- --------- -------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-23
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................................... $ 1,841 $ 1,993
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment.................................... 7,929 7,797
Amortization of deferred costs................................................... 192 251
Deferred income taxes............................................................ 390 489
Provision for doubtful accounts.................................................. (32) 292
Net gain on sales of equipment................................................... (39) (64)
Profit sharing distribution paid through the issuance of debenture bonds......... 252 287
Profit sharing and bonus distribution paid through the reissuance of treasury
stock........................................................................... 177 278
Minority interests in earnings of subsidiaries................................... 14 12
Changes in operating assets and liabilities:
Marketable equity securities................................................... 5,935 (48)
Accounts receivable............................................................ (3,788) 229
Income taxes receivable........................................................ 70 (129)
Inventories.................................................................... (6,781) 5,203
Prepaid expenses............................................................... (116) (3)
Lease acquisition costs........................................................ -- (348)
Deferred lease commissions..................................................... (27) (29)
Other assets................................................................... 42 52
Accounts payable............................................................... (835) 1,872
Accrued expenses............................................................... 512 304
Income taxes payable........................................................... (213) (5)
Security deposits.............................................................. 18 (4)
Deferred income................................................................ 168 438
Long-term accrued pension plan................................................. 102 39
------------- -------------
Net cash provided by operating activities.................................... 5,811 18,906
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of equipment................................................... 205 169
Purchases of property, plant and equipment......................................... (7,746) (5,954)
------------- -------------
Net cash used in investing activities........................................ (7,541) (5,785)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable........................................................ 5,010 8,953
Principal payments on notes payable................................................ (4,069) (18,841)
Payment of loan acquisition fees................................................... -- (55)
Proceeds from issuance of debenture bonds.......................................... 18 21
Redemption of debenture bonds...................................................... (223) (273)
Redemption of preferred stock...................................................... -- (2)
Proceeds from reissuance of treasury stock......................................... -- 25
Payments to acquire treasury stock................................................. (345) (209)
Redemption of minority interests in subsidiaries................................... (10) (11)
Cash dividends..................................................................... (1) (1)
Cash dividends paid to minority interests in subsidiaries.......................... (14) (12)
------------- -------------
Net cash provided by (used in) financing activities.......................... 366 (10,405)
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (1,364) 2,716
CASH AND CASH EQUIVALENTS:
Beginning of year.................................................................. 2,543 1,179
------------- -------------
End of year........................................................................ $ 1,179 $ 3,895
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:.....................................................
Interest......................................................................... $ 3,339 $ 3,149
------------- -------------
------------- -------------
Income taxes..................................................................... $ 1,387 $ 1,116
------------- -------------
------------- -------------
Additions to property, plant and equipment not paid for during the year............ $ 1,224 $ 1,115
------------- -------------
------------- -------------
Notes issued to acquire treasury stock............................................. $ 1,220 $ 35
------------- -------------
------------- -------------
Seller-financed property, plant and equipment addition............................. $ -- $ 205
------------- -------------
------------- -------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-24
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Judd's, Incorporated and Subsidiaries (the "Company") is a full service
heatset web offset and sheetfed printer of magazines, catalogs and books. The
Company's Shenandoah Division serves a national domestic market in the printing
of weekly and monthly consumer, special interest and trade magazines, as well as
catalogs and advertising inserts. The Company's Port City Division prints a
variety of association, medical, legal and reference books, along with business
directories.
A summary of significant accounting policies of the Company is presented
below.
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of Judd's, Incorporated and its subsidiaries.
The Company owns 100% of the common stock of each subsidiary. Minority interests
in subsidiaries represents the outstanding preferred stock of those companies.
All significant intercompany transactions and balances have been eliminated.
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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS. The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
MARKETABLE EQUITY SECURITIES. Marketable equity securities consist of an
investment in a fixed income mutual fund. Management considers its investment to
be a trading security. Accordingly, this security is reported at fair value and
unrealized holding gains and losses are included in the consolidated statement
of operations in the year in which such gains and losses occur.
ACCOUNTS RECEIVABLE. Accounts receivable--trade is shown net of allowance
for doubtful accounts. Management's periodic evaluation of the adequacy of the
allowance is based on past loss experience, known and inherent risks in the
receivables, and other applicable factors. The allowance for doubtful accounts
was $669,000 and $969,000 at December 31, 1995 and 1996, respectively.
INVENTORIES. Inventories are stated at the lower of cost or market, with
cost being determined by the first-in, first-out method. Work in process is
valued under the standard job cost method using the full-absorption method. In
all significant areas, the standard costs are reviewed annually and adjusted
accordingly.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated at
cost less accumulated depreciation. Depreciation is computed using primarily the
straight-line method at rates calculated to allocate the cost of the applicable
assets over their estimated useful lives.
DEFERRED COSTS. Deferred costs are amortized over their estimated lives
using the straight-line method. Lease acquisition costs and lease commissions
are amortized over the terms of the related leases. Debt expense is amortized
over the length of the applicable loan. Accumulated amortization of deferred
costs was $1,165,723 and $1,416,947 at December 31, 1995 and 1996, respectively.
F-25
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS. The Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset in question may not be recoverable. No impairment
losses were recorded for 1995 and 1996.
REVENUE RECOGNITION. Revenue from sales is recognized upon the completion
of each job, which generally coincides with physical delivery and acceptance.
Amounts paid by customers prior to job completion are reflected as deferred
income.
INCOME TAXES. Deferred income taxes are provided using an asset and
liability approach whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their respective tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of cash and cash
equivalents, accounts receivable, accounts payable, and accrued expenses
approximates fair value at December 31, 1995 and 1996 due to their short-term
nature. Based on interest rates currently available to the Company, the carrying
value of the variable rate notes payable is a reasonable estimation of fair
value, because the debt bears interest based on short-term interest rates. The
Company's carrying value of its fixed rate notes payable and debenture bonds
payable is a reasonable estimation of fair value because the stated interest
rates approximate market rates.
NEW ACCOUNTING PRONOUNCEMENTS. Statement of Financial Accounting Standards
No. 129, "Disclosure of Information about Capital Structure," was issued in
February 1997. This statement establishes standards for disclosing information
about an entity's capital structure. This statement is effective for financial
statements for periods ending after December 15, 1997. The Company is currently
analyzing the reporting and disclosure requirements and will adopt this standard
in the upcoming year.
NOTE 2--ACCRUED EXPENSES:
Accrued expenses at December 31, 1995 and 1996 are detailed below:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation..................................... $ 1,203 $ 1,286
Vacation and holiday pay................................................... 969 617
Pension plan............................................................... 758 857
Profit sharing............................................................. 695 461
401(k) plan................................................................ -- 477
Interest and taxes......................................................... 690 785
Insurance.................................................................. 659 796
--------- ---------
$ 4,974 $ 5,279
--------- ---------
--------- ---------
</TABLE>
F-26
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT:
Long-term notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Notes payable, unsecured:
10-year notes due November 18, 2003; (see below for details)... $ 26,667 $ 23,333
Notes payable, banks:
Unsecured line of credit; (see below for details).............. 10,210 --
Secured line of credit; (see below for details)................ -- 4,604
Notes payable, treasury stock:
Unsecured 10-year notes to former shareholders for the purchase
of treasury stock; interest at rates varying from 6% to 9%
per annum; these notes mature during 1998 to 2006............ 3,939 3,396
Notes payable, other:
Seller-financed installment note requiring interest only
payments at 6.9% per annum; the principal balance was paid in
July 1996.................................................... 262 --
Seller-financed installment note bearing interest at 10% per
annum and requiring monthly principal and interest payments
of $3,869; secured by equipment.............................. 87 47
Seller-financed installment note bearing interest at 8% per
annum and requiring monthly principal and interest payments
of $17,708; secured by equipment............................. -- 138
------------ ------------
41,165 31,518
------------ ------------
Less current maturities...................................... 4,215 8,680
------------ ------------
Total long-term notes payable.............................. $ 36,950 $ 22,838
------------ ------------
------------ ------------
</TABLE>
The notes payable, unsecured in the original amount of $30 million were
issued by the Company to finance the purchase of certain printing equipment and
building expansion. These notes are payable in semi-annual installments of
$1,666,667 which commenced May 18, 1995 and continue through November 18, 2003.
However, the Company can, at its option, prepay principal amounts in whole or in
part any time subsequent to November 18, 1996 in multiples of $500,000. These
notes bear interest at a rate of 7.71% per annum which is payable semi-annually.
The Company is subject to certain financial and other covenants under the terms
of these notes.
The notes payable, banks consist of two lines of credit, one of which was
amended as of June 30, 1995. The amended line of credit, which is unsecured,
requires that the aggregate unpaid balance be paid on December 31, 1997.
However, the Company can, at its option, generally prepay the outstanding
balance in whole or in part. Borrowings under this line of credit bear interest
at varying rates per annum which are based on the Prime, Federal Funds or Euro
Dollar interest rates. The Company has the option to elect between these rates
each calendar quarter. The committed amount under the amended line of credit at
F-27
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT: (CONTINUED)
December 31, 1996 was $12,000,000. The Company is subject to certain financial
and other covenants under the terms of this line of credit.
The other line of credit, which is secured by equipment, requires that the
aggregate unpaid balance be paid on March 31, 1997. However, the Company can, at
its option, generally prepay the outstanding balance in whole or in part.
Borrowings under this line of credit bear interest at varying rates per annum
which are based on the Prime, Federal Funds or Euro Dollar interest rates. The
Company has the option to elect between these rates each calendar quarter. The
committed amount under this line of credit was $7,960,165 at December 31, 1996.
The Company is subject to certain financial and other covenants under the terms
of this line of credit.
Debenture bonds payable:
The Company has two series of unsecured debenture bonds outstanding at
December 31, 1995 and 1996 as described below:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Series A bonds; redeemable at the option of the holder and bearing interest
at a rate of 9% per annum................................................ $ 250 $ 250
Series B bonds; due 30 years from the date of issuance and bearing interest
at a rate of 8% per annum; all Series B bonds outstanding at December 31,
1995 and 1996 are due after the year ending December 31, 2010; the
Company has reserved the right to call the Series B bonds prior to
maturity without payment of a call premium............................... 3,008 3,043
--------- ---------
Total.................................................................. $ 3,258 $ 3,293
--------- ---------
--------- ---------
</TABLE>
Future maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR
- ------------------------------------------------------------------------------ AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997.......................................................................... $ 8,680
1998.......................................................................... 3,891
1999.......................................................................... 3,851
2000.......................................................................... 3,845
2001.......................................................................... 3,714
Later years................................................................... 10,830
-------
Total..................................................................... $ 34,811
-------
-------
</TABLE>
NOTE 4--LEASE COMMITMENTS:
The Company leases office space and equipment under operating leases, which
expire during 1997 through 2006. Certain office space leases provide for
additional payments of a pro rata share of operating expenses and future
increases in real estate taxes. Certain equipment leases contain options to
purchase
F-28
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--LEASE COMMITMENTS: (CONTINUED)
the equipment at the end of the lease term at fair value. The following is a
schedule by years of future minimum rental payments required as of December 31,
1996 under these leases:
<TABLE>
<CAPTION>
YEAR
- ------------------------------------------------------------------------------ AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997.......................................................................... $ 3,600
1998.......................................................................... 3,501
1999.......................................................................... 2,283
2000.......................................................................... 1,272
2001.......................................................................... 1,177
Later years................................................................... 5,221
-------
Total..................................................................... $ 17,054
-------
-------
</TABLE>
The following is an analysis of total rent expense for all operating leases
for the years ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Long-term leases:
Minimum rentals.......................................................... $ 2,649 $ 2,634
Contingent rentals....................................................... 60 48
--------- ---------
2,709 2,682
--------- ---------
Short-term leases:
Equipment................................................................ 50 44
Warehouse................................................................ 60 111
Sales office............................................................. 27 27
--------- ---------
137 182
--------- ---------
Total.................................................................. $ 2,846 $ 2,864
--------- ---------
--------- ---------
</TABLE>
NOTE 5--COMMITMENTS:
The Company has entered into contracts for the purchase and installation of
various printing equipment. The total commitment under these contracts at
December 31, 1996 is approximately $762,000.
NOTE 6--CAPITAL STOCK:
The Company, under an agreement with its shareholders, has the option to
purchase the Class A voting common stock of the Company at its book value at the
end of the year preceding the year in which the Company exercises its option to
purchase the stock. The agreement also states that notes payable issued for 90%
of the purchase price shall be curtailed annually by equal payments over a
ten-year period, plus interest.
The Company has entered into stock purchase agreements to purchase 351,130
shares of its Class B nonvoting common stock for $2,018,295. The terms of the
agreements stipulate that 10% of the shares are
F-29
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--CAPITAL STOCK: (CONTINUED)
to be purchased each year on July 1, (the "closing") beginning July 1, 1990.
However, under certain circumstances, the closing (other than the first closing)
can be postponed, provided that all shares to be purchased under the agreements,
including shares not purchased when one or more scheduled closings have been
postponed, are purchased and paid for no later than July 1, 2003. During both
1995 and 1996, the Company purchased 35,080 shares under these agreements at a
total cost of $201,640. As of December 31, 1996, there were 115,770 shares
remaining to be purchased at a total cost of $665,453.
Treasury stock at December 31, 1995 includes 167,760 and 619,730 shares of
the Class A and Class B common stock, respectively. Treasury stock at December
31, 1996 includes 161,907 and 654,810 shares of the Class A and Class B common
stock, respectively.
NOTE 7--PENSION PLAN:
The Company participates in a noncontributory defined benefit pension plan
which provides coverage for all full-time permanent employees who meet the
length of service and age requirements specified in the plan. Contributions to
the plan reflect benefits attributed to employees' services to date and benefits
for expected future services. Plan assets were primarily invested in various
mutual funds at December 31, 1995 and 1996.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Projected benefit obligation........................................... $ (6,741) $ (7,829)
Plan assets at fair value.............................................. 6,247 7,588
--------- ---------
Projected benefit obligation in excess of plan assets.................... (494) (241)
Unrecognized net transition obligation................................... 56 49
Unrecognized prior service benefit....................................... (109) (99)
Unrecognized net gain.................................................... (831) (1,225)
--------- ---------
Accrued pension cost................................................. $ (1,378) $ (1,516)
--------- ---------
--------- ---------
</TABLE>
Net pension cost for 1995 and 1996 included the following components:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Service cost................................................................. $ 780 $ 811
Interest cost on projected benefit obligation................................ 454 537
Actual return on plan assets................................................. (304) (388)
Net amortization............................................................. (3) (9)
--------- ---------
Net pension cost......................................................... $ 927 $ 951
--------- ---------
--------- ---------
</TABLE>
The weighted-average discount rate for 1995 and 1996 used to measure the
projected benefit obligation is 8.0%. The rate of increase in future
compensation levels for 1995 and 1996 is 6.5%, and the
F-30
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--PENSION PLAN: (CONTINUED)
expected long-term rate of return on assets is 6.0% for 1995 and 1996. The
Company uses the straight-line method of amortization for the unrecognized
items.
During 1996, the Company adopted a nonqualified pension plan for certain key
employees. Pension expense under this plan amounted to $120,000 for the year
ended December 31, 1996.
NOTE 8--401(K) PLAN:
The Company maintains a contributory retirement 401(k) savings plan for
employees. Employees who meet the length of service and age requirements
specified in the plan agreement can contribute from 2% to 15% of their salary to
the plan, up to a maximum established by law. For eligible employees electing to
participate, the Company will also make a contribution to the plan equal to 25%
of the first 6% contributed by the employees. The total expense under this plan
amounted to $336,764 and $351,988 for 1995 and 1996, respectively.
NOTE 9--INVESTMENT INCOME:
Investment income is summarized below for the years ended December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Interest and dividends........................................................ $ 460 $ 330
Realized loss on sales........................................................ (290) --
Net unrealized holding gains (losses)......................................... 655 (24)
--------- ---------
Investment income, net.................................................... $ 825 $ 306
--------- ---------
--------- ---------
</TABLE>
F-31
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment.................................. $ 4,588 $ 5,414
Other.......................................................... 154 259
------ ------
Total deferred tax liabilities............................... 4,742 5,673
------ ------
Deferred tax assets:
Allowance for doubtful accounts................................ 273 369
Accrued pension and vacation liabilities....................... 345 342
Alternative minimum tax credit carryforwards................... 1,441 1,689
Other.......................................................... 501 649
------ ------
2,560 3,049
Less valuation allowance..................................... 90 137
------ ------
Total deferred tax assets.................................. 2,470 2,912
------ ------
Net deferred tax liabilities............................... $ 2,272 $ 2,761
------ ------
------ ------
</TABLE>
The deferred tax amounts above have been classified in the accompanying
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Long-term liabilities............................................ $ 2,637 $ 3,385
Current assets................................................... 365 624
------ ------
Net deferred tax liabilities................................... $ 2,272 $ 2,761
------ ------
------ ------
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current.................................................................... $ 1,069 $ 958
Deferred................................................................... 390 489
--------- ---------
Total.................................................................... $ 1,459 $ 1,447
--------- ---------
--------- ---------
</TABLE>
F-32
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES: (CONTINUED)
Income tax expense differs from that computed at the statutory Federal
income tax rate as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Statutory Federal income tax rate.......................................... 34% 34%
Income tax expense at statutory rate....................................... $ 1,127 $ 1,174
State income taxes, net of Federal income tax benefit...................... 154 162
Other...................................................................... 178 111
--------- ---------
Total.................................................................... $ 1,459 $ 1,447
--------- ---------
--------- ---------
</TABLE>
NOTE 11--CONCENTRATION OF CREDIT RISK:
The Company's largest customer filed for bankruptcy in late 1996. Net sales
to this customer represented approximately 9% and 8% of total net sales for the
years ended December 31, 1995 and 1996, respectively.
Financial instruments consist principally of cash, cash equivalents,
accounts receivable and marketable equity securities. The Company's cash is
maintained primarily in two commercial banks located in the metropolitan
Washington, D.C. area and generally exceeds the federally insured limits. The
Company's cash equivalents consist of repurchase agreements through a financial
institution. Concentrations of credit risk with respect to accounts receivable
are limited due to the number of customers comprising the Company's customer
base and their dispersion across many different industries. Generally, the
Company does not require collateral or other security to support customer
receivables.
NOTE 12--SUBSEQUENT EVENTS (UNAUDITED):
PLAN OF RECAPITALIZATION. On April 30, 1997, the Company's shareholders
approved a plan of recapitalization. In connection with this plan, the Company
subsequently acquired all of the outstanding Class B common shares in exchange
for notes payable.
MERGER. In 1997, the Company entered into a Plan and Agreement of Merger
(the "Merger Agreement") with Perry-Judd's Incorporated (formerly PPC Holdings,
Inc.) ("Perry Judd's"). Pursuant to the Merger Agreement, in December 1997,
Perry-Judd's acquired all of the outstanding capital stock of the Company, and
the Company became a wholly-owned subsidiary of Perry-Judd's (the
"Acquisition"). The aggregate merger consideration was approximately $100
million, which included the repayment of outstanding indebtedness of the Company
at the closing date, subject to adjustment as set forth in the Merger Agreement.
The Acquisition was effected by the merger of a wholly-owned subsidiary of
Perry-Judd's with and into the Company.
F-33
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
(UNAUDITED)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................................... $ 8,268
Marketable equity securities, at fair value................................................. 1,303
Accounts receivable:
Trade, net................................................................................ 17,251
Other..................................................................................... 1,362
Inventories:
Raw materials............................................................................. 6,361
Work in process........................................................................... 2,492
Prepaid expenses............................................................................ 381
Deferred income taxes....................................................................... 664
--------
Total current assets...................................................................... 38,082
PROPERTY, PLANT AND EQUIPMENT:
Machinery and equipment..................................................................... 89,475
Buildings and improvements.................................................................. 23,487
Projects in progress........................................................................ 3,289
Land and land improvements.................................................................. 922
--------
117,173
Less accumulated depreciation............................................................... 69,618
--------
Property, plant and equipment, net........................................................ 47,555
--------
INTANGIBLE ASSETS:
Deferred financing costs, net............................................................... 375
Deferred acquisition costs, net............................................................. 564
Other....................................................................................... 34
--------
TOTAL......................................................................................... $ 86,610
--------
--------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................................ $ 9,660
Accrued expenses............................................................................ 3,573
Accrued interest and dividends.............................................................. 1,896
Income taxes payable........................................................................ 226
Current portion of long-term debt........................................................... 4,757
--------
Total current liabilities................................................................. 20,112
--------
LONG-TERM DEBT................................................................................ 41,679
DEFERRED INCOME TAXES......................................................................... 3,540
OTHER NONCURRENT OBLIGATIONS.................................................................. 1,312
MINORITY INTERESTS............................................................................ 159
SHAREHOLDERS' EQUITY:
Preferred stock............................................................................. 6
Common stock................................................................................ 427
Retained earnings........................................................................... 21,098
--------
21,531
Less: Treasury Stock........................................................................ 1,723
--------
Total shareholders' equity.................................................................. 19,808
--------
TOTAL......................................................................................... $ 86,610
--------
--------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-34
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES................................................................. $ 114,644 $ 101,935
-------- --------
OPERATING EXPENSES:
Costs of production..................................................... 90,044 76,429
Computer-to-plate conversion expenses................................... -- 841
Selling, general and administrative..................................... 13,999 14,049
Depreciation............................................................ 5,732 6,361
Amortization of intangibles............................................. 123 150
-------- --------
109,898 97,830
-------- --------
INCOME FROM OPERATIONS.................................................... 4,746 4,105
-------- --------
OTHER (INCOME) EXPENSES:
Interest expense........................................................ 2,386 2,581
Interest income......................................................... (228) (286)
Amortization of deferred financing costs................................ 48 27
Other, net.............................................................. (111) (225)
-------- --------
Total other expenses.................................................. 2,095 2,097
-------- --------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS......................... 2,651 2,008
PROVISION FOR INCOME TAXES................................................ 1,027 778
-------- --------
INCOME BEFORE MINORITY INTERESTS.......................................... 1,624 1,230
Less: Minority Interests.................................................. 11 10
-------- --------
NET INCOME................................................................ $ 1,613 $ 1,220
-------- --------
-------- --------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-35
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 1,613 $ 1,220
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 5,855 6,511
Amortization of deferred financing costs................................ 48 27
Deferred income taxes................................................... 590 115
Net gain on sales of equipment.......................................... (26) (13)
Changes in assets and liabilities:
Marketable equity securities.......................................... (27) (53)
Accounts receivable................................................... 2,513 1,848
Inventories........................................................... 4,087 540
Accounts payable and accrued expenses................................. (368) (1,448)
------- -------
Net cash provided by operating activities........................... 14,285 8,747
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment......................................... 60 46
Capital expenditures.................................................... (4,259) (4,873)
------- -------
Net cash used in investing activities................................. (4,199) (4,827)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (redemption) of debentures..................................... 103 (8)
Redemption of preferred stock........................................... (10) (17)
Issuance (redemption) of common stock................................... 98 (406)
Proceeds from notes payable............................................. 4,809 7,954
Principal payments on notes payable..................................... (7,490) (7,070)
------- -------
Net cash (used) provided by financing activities...................... (2,490) 453
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS..................................... 7,596 4,373
Balance at beginning of period.......................................... 1,179 3,895
------- -------
Balance at end of period................................................ $ 8,775 $ 8,268
------- -------
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest.............................................................. $ 2,362 $ 1,604
------- -------
------- -------
Income Taxes.......................................................... $ 537 $ 663
------- -------
------- -------
NONCASH TRANSACTIONS:
During the nine months ended September 30, 1997, the Company issued debt in exchange for Series B common stock of
approximately $10.8 million.
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-36
<PAGE>
JUDD'S, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of September 30, 1997,
and the related unaudited condensed consolidated statements of operations and
cash flows for the nine-month periods ended September 30, 1996 and 1997 have
been prepared by the management of Judd's, Incorporated (the "Company"). In the
opinion of management, all adjustments (which include reclassifications and
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1997 and for all
periods presented, have been made.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
unaudited condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
audited consolidated financial statements for the year ended December 31, 1996.
The results of operations for the nine-month periods ended September 30, 1996
and 1997 are not necessarily indicative of the operating results for the full
respective years.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No.131, "Disclosure About Segments of
an Enterprise and Related Information." Both statements are effective for fiscal
years beginning after December 15, 1997. The Company is analyzing the disclosure
requirements and will adopt SFAS No. 130 in the upcoming year. Management
believes adoption of SFAS No. 131 will not have an impact on the Company's
disclosure requirements as the Company operates in a single segment.
3. NONRECURRING ITEM
The Company incurred approximately $841,000 of nonrecurring costs related to
computer-to-plate conversion.
4. SUBSEQUENT EVENTS (UNAUDITED)
In October 1997, the Company entered into a Plan and Agreement of Merger
(the "Merger Agreement") with Pery-Judd's Incorporated (formerly PPC Holdings,
Inc.) ("Perry Judd's"). Pursuant to the Merger Agreement, in December 1997,
Perry-Judd's acquired all of the outstanding capital stock of the Company, and
the Company became a wholly-owned subsidiary of Perry-Judd's (the
"Acquisition"). The aggregate merger consideration was approximately $100
million, which included the repayment of outstanding indebtedness of the Company
at the closing date, subject to adjustment as set forth in the Merger Agreement.
The Acquisition was effected by the merger of a wholly-owned subsidiary of
Perry-Judd's with and into the Company.
------------------------
F-37
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 5
Risk Factors.............................................................. 19
Description of the Acquisition............................................ 25
Use of Proceeds........................................................... 26
The Exchange Offer........................................................ 26
Capitalization............................................................ 34
Unaudited Pro Forma Condensed Combined Financial Data..................... 35
Selected Historical and Pro Forma Financial Data.......................... 45
Perry-Judd's Incorporated Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 50
Judd's, Incorporated Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 55
Business.................................................................. 58
Management................................................................ 68
Principal Stockholders.................................................... 74
Certain Transactions...................................................... 76
Description of Amended and Restated Credit Agreement...................... 77
Description of Note Conversion............................................ 77
Description of Sale/Leaseback............................................. 78
Description of Exchange Notes............................................. 79
Certain Federal Income Tax
Considerations.......................................................... 106
Transfer Restrictions..................................................... 108
Book Entry; Delivery and Form............................................. 110
Legal Matters............................................................. 111
Independent Auditors...................................................... 111
Available Information..................................................... 112
Index to Financial Statements............................................. F-1
</TABLE>
OFFER TO EXCHANGE
ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED
NOTES DUE 2007
($115,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 5/8% SENIOR SUBORDINATED
NOTES DUE 2007
OF
[LOGO]
---------------------
PROSPECTUS
---------------------
, 1998
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the state of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person as an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
In accordance with Delaware Law, the certificate of incorporation of the
Company contains a provision to limit the personal liability of the directors of
the Registrant for violations of their fiduciary duty. This provision eliminates
each director's liability to the Registrant or its stockholders for monetary
damages except (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
Article VII, Section 6 of the Amended and Restated Bylaws of the Registrant
provides for indemnification of the officers and directors of the Registrant to
the fullest extent permitted by applicable law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<S> <C>
2.1 Plan and Agreement of Merger by and among PPC Holdings, Inc., Naomi Acquisition Corp. and Judd's
Incorporated dated as of October 17, 1997.
3.1 Restated Certificate of Incorporation, as amended, of Perry-Judd's Incorporated.
3.2 Amended and Restated By-laws of Perry-Judd's Incorporated.
4.1 Indenture dated as of December 16, 1997 between the Company and U.S. Trust Company of California, N.A.,
as Trustee, including forms of Senior Notes.
4.2 Registration Rights Agreement dated as of December 16, 1997 between the Company and BT Alex. Brown as
Initial Purchaser.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Lease Agreement by and between Print (WI) QRS 12-40, Inc., Perry Graphic Communications, Inc. and Judd's
Incorporated dated as of December 16, 1997.
10.2 Amended and Restated Credit Agreement among Perry Graphic Communications, Inc., Shenandoah Valley Press,
Inc., and Port City Press, Inc., as Borrowers, the Lenders (as defined therein) and BT Commercial
Corporation as Agent dated as of December 16, 1997.
10.3 1995 Stock Option Plan, as amended.
10.4 Employment Agreement by and between the Company and Craig A. Hutchison dated April 28, 1995.
10.5 Stockholders Agreement by and among the stockholders of the Company named therein dated as of the 1st
day of July, 1996.
10.6 Amended and Restated Co-Sale Agreement by and among the stockholders of the Company named therein dated
as of December 30, 1996.
12* Statement of Computation of Ratios.
21 Subsidiaries of Registrant.
23.1* Consent of Brobeck, Phleger & Harrison LLP (contained in the opinion filed as Exhibit 5.1).
23.2 Independent Accountants' Consent of Deloitte & Touche LLP.
23.3 Independent Accountants' Consent of Stoy, Malone & Company, P.C.
24 Power of Attorney (contained on the signature page of this Prospectus).
25* Form T-1 Statement of Eligibility of U.S. Trust Company of California, N.A.
27 Financial Data Schedule.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* To be filed by amendment.
II-2
<PAGE>
FINANCIAL STATEMENT SCHEDULES
Schedule I--Condensed Financial Information on Registrant*
Schedule II--Valuation and Qualifying Accounts and Reserves*
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or the notes thereto.
- ------------------------
* To be filed by amendment based on 1997 fiscal year financial data.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
registrant has 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 for 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 it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a party of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(c) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement, relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the 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.
(e) The undersigned registrant hereby undertakes 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.
(f) The undersigned registrant hereby undertakes to file an application for
the purpose of determining eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waterloo,
Wisconsin on the 29th day of January, 1998.
<TABLE>
<S> <C> <C>
PERRY-JUDD'S INCORPORATED
By: /s/ CRAIG A. HUTCHISON
-----------------------------------------
Craig A. Hutchison
DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Craig A. Hutchison and Thomas V. Bressan and each
of them his attorneys-in-fact, each with the power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming that such
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLES DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ CRAIG A. HUTCHINSON Officer (principal
- ------------------------------ executive officer), January 29, 1998
Craig A. Hutchinson Director
/s/ ROBERT E. MILHOUS
- ------------------------------ Chairman of the Board, January 29, 1998
Robert E. Milhous Director
/s/ PAUL B. MILHOUS
- ------------------------------ Vice Chairman of the January 29, 1998
Paul B. Milhous Board, Director
/s/ THOMAS V. BRESSAN
- ------------------------------ Director, Secretary January 29, 1998
Thomas V. Bressan
Vice President, Finance,
/s/ BRADLEY J. HOFFMAN acting chief financial
- ------------------------------ officer (principal January 29, 1998
Bradley J. Hoffman accounting officer)
</TABLE>
II-4
<PAGE>
Exhibit 2.1
PLAN AND AGREEMENT OF MERGER
BY AND AMONG
PPC HOLDINGS, INC., NAOMI ACQUISITION CORP.
AND
JUDD'S, INCORPORATED
AS OF OCTOBER 17, 1997
<PAGE>
TABLE CONTENTS
<TABLE>
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I. MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. ARTICLES OF INCORPORATION
AND DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . . 2
2.1 Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . 2
2.2 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III. CONVERSION AND EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Stock of Newco: Parent Capital Stock. . . . . . . . . 3
3.2 Conversion of Company Common Stock. . . . . . . . . . . . . . . . . 3
3.3 Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Adjustments to Consideration. . . . . . . . . . . . . . . . . . . . 5
3.5 Post-Closing Audit. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Exchange of Certificates: Receipt of Cash;
Creation of Indemnity Escrow. . . . . . . . . . . . . . . . . . . . 9
3.7 No Further Transfers. . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 11
4.1 Representations and Warranties of the Company . . . . . . . . . . . 11
4.1.1 Corporate Organization and Good Standing;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 11
4.1.2 Capitalization of the Company and Subsidiaries. . . . . . . 12
4.1.3 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1.4 Financial Information . . . . . . . . . . . . . . . . . . . 13
4.1.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 14
4.1.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 14
4.1.7 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1.10 Governmental Authorizations; Compliance with Laws . . . . . 15
4.1.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1.12 Brokers; Finders. . . . . . . . . . . . . . . . . . . . . . 17
4.1.13 Absence of Certain Changes. . . . . . . . . . . . . . . . . 17
4.1.14 Properties and Assets . . . . . . . . . . . . . . . . . . . 17
4.1.15 Material Contracts. . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.1.16 Intellectual Property Rights. . . . . . . . . . . . . . . . 19
4.1.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 20
4.1.18 No Consent. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1.19 Authorization . . . . . . . . . . . . . . . . . . . . . . . 21
4.1.20 Compliance with ERISA . . . . . . . . . . . . . . . . . . . 21
4.1.21 Environmental Matters . . . . . . . . . . . . . . . . . . . 24
4.1.22 Company Action. . . . . . . . . . . . . . . . . . . . . . . 26
4.1.23 Books and Records . . . . . . . . . . . . . . . . . . . . . 26
4.1.24 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Representations and Warranties of Parent and Newco. . . . . . . . . 26
4.2.1 Newco's Corporate Status . . . . . . . . . . . . . . . . . . 26
4.2.2 Authority for Agreement; No Conflict . . . . . . . . . . . . 26
4.2.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2.4 Brokers; Finders . . . . . . . . . . . . . . . . . . . . . . 27
4.2.5 Buyer's Investigation. . . . . . . . . . . . . . . . . . . . 27
4.2.6 Financial Ability to Perform . . . . . . . . . . . . . . . . 28
4.2.7 Financial Condition. . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V. CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1 Access and Information; Confidentiality . . . . . . . . . . . . . . 28
5.2 Conduct of Business of the Company. . . . . . . . . . . . . . . . . 29
5.3 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Financial Information . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Authorization of Agreement and Merger . . . . . . . . . . . . . . . 30
5.7 HSR Notification. . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Treatment of Employees. . . . . . . . . . . . . . . . . . . . . . . 31
5.9 Port City Press . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.10 Directors' and Officers' Insurance and
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.11 Post-Closing Operations of the Company. . . . . . . . . . . . . . . 31
ARTICLE VI. CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Stockholder Approvals . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Representations and Warranties True . . . . . . . . . . . . . . . . 34
6.4 Performance by the Company. . . . . . . . . . . . . . . . . . . . . 34
6.5 Funded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.7 Exchange Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.10 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . 34
6.11 Demands of Dissenting Stockholders. . . . . . . . . . . . . . . . . 34
6.12 Information; No Adverse Change. . . . . . . . . . . . . . . . . . . 35
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS
OF COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Stockholder Approvals . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Representations and Warranties True . . . . . . . . . . . . . . . . 36
7.4 Performance by Parent and Newco . . . . . . . . . . . . . . . . . . 36
7.5 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 Exchange Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 Limited Responsibility for Company Warranties . . . . . . . . . . . 36
8.2 Indemnification of Parent . . . . . . . . . . . . . . . . . . . . . 37
8.3 Notice of Claim: Right to Defend. . . . . . . . . . . . . . . . . . 39
8.4 Action by Company Stockholders. . . . . . . . . . . . . . . . . . . 40
8.5 Sole and Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . 40
8.6 Indemnification of Stockholders . . . . . . . . . . . . . . . . . . 40
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 [Intentionally Omitted]
9.3 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Assignment: Successors. . . . . . . . . . . . . . . . . . . . . . . 42
9.7 Amendment and Modification: Waivers . . . . . . . . . . . . . . . . 42
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.9 Further Assurances: Records . . . . . . . . . . . . . . . . . . . . 44
9.10 Headings; Entire Agreement; Counterparts; Governing La. . . . . . . 44
GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
ANNEXES
Annex I Certain Definitions
Annex II Officers and Directors of Company and Subsidiaries
Annex III Determination of Adjusted Working Capital at August 31, 1997
Annex IV Items to be Included in Current Liabilities
COMPANY SCHEDULES
Schedule 4.1.1. Organization of the Company and each Subsidiary
Schedule 4.1.2. Authorized, issued and outstanding capital stock and the
record and beneficial ownership of the Company and each
Subsidiary
Schedule 4.1.4. Financial Statements
Schedule 4.1.5. Undisclosed Liabilities
-iii-
<PAGE>
Schedule 4.1.6. Accounts Receivable
Schedule 4.1.7. Inventory
Schedule 4.1.8. Insurance
Schedule 4.1.9. Litigation
Schedule 4.1.10. Governmental Authorizations
Schedule 4.1.11. Tax Matters
Schedule 4.1.13. Certain Changes
Schedule 4.1.14. Properties and Assets
Schedule 4.1.15. Material Contracts
Schedule 4.1.16. Intellectual Property
Schedule 4.1.17. Labor Matters
Schedule 4.1.18. Consents
Schedule 4.1.20. ERISA
Schedule 4.1.21. Environmental Matters
PARENT/NEWCO SCHEDULES
Schedule 4.2.2 Material Consents
Schedule 4.2.3 Litigation
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B-1 Certificate of Incorporation of the Surviving Corporation
Exhibit B-2 By-laws of the Surviving Corporation
-iv-
<PAGE>
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (this "AGREEMENT") is made as of
October 17, 1997 by and among PPC Holdings, Inc. a Delaware corporation
("PARENT"), Naomi Acquisition Corp. Inc., a Maryland corporation ("NEWCO"),
and Judd's, Incorporated, a Maryland corporation (the "COMPANY"). Newco and
the Company, the only parties to the merger hereby contemplated, are
sometimes referred to herein as the "CONSTITUENT CORPORATIONS", and the
Company as the surviving Constituent Corporation upon the merger with Newco
is sometimes referred to herein as the "SURVIVING CORPORATION". Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
respective meanings assigned thereto in ANNEX I hereto.
RECITALS
A. The Company was incorporated in the State of Maryland on March 26,
1976 as a holding company for the Subsidiaries herein defined. Its principal
executive offices are located at 1500 Eckington Place, N.E., Washington, D.C.
20002. The authorized capital stock of the Company consists of Two Million,
Five Hundred Thousand (2,500,000) shares of common stock, par value $1.00 per
share (the "COMPANY COMMON STOCK"), and Five Hundred Thousand (500,000)
shares of Director Designated Preferred Stock, par value $100 per share
("COMPANY PREFERRED STOCK"), and One Hundred Thousand (100,000) shares of 7%
Preferred Stock, par value $10.00 per share ("7% PREFERRED STOCK"). As of
September 30, 1997, 270,592 shares of the Company Common Stock were issued
and outstanding and entitled to vote, no shares of the Company Preferred
Stock were issued or outstanding and 620 shares of 7% Preferred Stock were
issued and outstanding.
B. Newco was incorporated in the state of Maryland on October 17,
1997. The authorized capital stock of Newco consists of One Thousand (1,000)
shares of common stock, par value $.001 per share (the "NEWCO COMMON STOCK"),
of which 1,000 shares are issued and outstanding, entitled to vote and owned
by Parent.
C. The respective Boards of Directors of the Constituent Corporations
and of Parent have approved this Agreement and deem it advisable and in the
best interests of their respective corporations and their stockholders that
Newco merge with and into the Company on the terms and conditions herein set
forth (the "MERGER"), whereby the holders of the shares of the Company Common
Stock outstanding at the Effective Time shall receive cash in the amounts and
in the manner set forth in ARTICLE III and upon the terms and conditions
otherwise set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and of the premises, representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto
agree as follows:
<PAGE>
ARTICLE I.
MERGER
1.1 MERGER. As soon as practicable after all of the conditions to the
Merger shall have been satisfied or waived, and subject to the rights of
termination and abandonment hereinafter set forth, a Certificate of Merger,
substantially in the form attached as EXHIBIT A to this Agreement (the
"CERTIFICATE OF MERGER"), shall be filed with the Secretary of State of the
State of Maryland, in accordance with the laws of the State of Maryland.
Effective as of the date and time of the filing of the Certificate of Merger,
Newco shall merge with and into the Company, which as the Surviving
Corporation shall continue its corporate existence under the laws of the
State of Maryland under the name of Judd's, Incorporated. The date and time
of the filing of the Certificate of Merger, when the Merger shall become
effective in accordance with SECTIONS 3-105, 3-107 and 3-114 of the
Corporations and Associations Article of the Annotated Code of Maryland ("MD
GCL"), shall be referred to herein as the "EFFECTIVE TIME".
1.2 EFFECT OF THE MERGER. The Merger shall have the effect set forth
in SECTION 3-114 of the Md GCL.
1.3 CLOSING. The closing of the merger of the Company and Newco (the
"CLOSING") will take place at the offices of Whitman Breed Abbott & Morgan
LLP, 200 Park Avenue, New York, New York 10166, at 10:00 A.M. E.S.T. on or
before December 12, 1997, or at such other time and date as the parties
hereto may agree in writing (the "CLOSING DATE").
ARTICLE II.
ARTICLES OF INCORPORATION
AND DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION AND BY-LAWS. At the Effective Time the
articles of incorporation and the by-laws of the Surviving Corporation shall
be amended to read in their entirety as set forth in EXHIBITS B-1 AND B-2
(the "AMENDED ARTICLES" and "AMENDED BY-LAWS," respectively). As so amended,
such articles of incorporation and by-laws shall be the articles and by-laws
of the Surviving Corporation until further amended in accordance with law.
2.2 DIRECTORS AND OFFICERS. The directors and officers of Newco at the
Effective Time shall be the directors and officers of the Surviving
Corporation and shall hold office as provided in the Amended By-Laws of the
Surviving Corporation.
-2-
<PAGE>
ARTICLE III.
CONVERSION AND EXCHANGE OF SHARES
3.1 CONVERSION OF STOCK OF NEWCO: PARENT CAPITAL STOCK. At the
Effective Time, each issued and outstanding share of Newco Common Stock
shall, by virtue of the Merger, and without any action on the part of the
holder thereof, be converted into one share of Common Stock, par value One
Dollar ($1.00) per share, of the Surviving Corporation. The Merger and the
transactions contemplated by this Agreement shall effect no change in the
shares of Parent capital stock and none of such shares shall be converted as
a result thereof.
3.2 CONVERSION OF COMPANY COMMON STOCK. (a) At the Effective Time,
each issued and outstanding share of Company Common Stock, other than shares
of the Company Common Stock issued and held in the treasury of the Company or
Dissenting Shares in respect of which appraisal rights are properly exercised
and perfected, shall be converted into and shall become, by virtue of the
Merger and without any further action by the holder thereof, the right to
receive that number of dollars in cash determined as described in this
ARTICLE III.
(b) Each share of Company Common Stock issued and held in the
treasury of the Company immediately prior to the Effective Time shall
automatically be canceled and retired without any conversion thereof, and no
cash shall be exchangeable therefor.
3.3 MERGER CONSIDERATION.
(a) The aggregate price payable in exchange for the issued and
outstanding shares of Company Common Stock shall be that amount remaining
after (i) deducting from the sum of One Hundred Three Million Dollars
($103,000,000), (x) the difference between (A) the Funded Indebtedness of the
Company (hereinafter defined) immediately prior to the Effective Time and (B)
the amount of cash, marketable securities and other cash equivalents of the
Company immediately prior to the Effective Time, and (y) Ten Million Two
Hundred Fifty Thousand Dollars ($10,250,000), subject to adjustment as
provided in ANNEX IV, to be deposited in escrow pursuant to SECTION 3.3(c)
hereof (the "Escrow Amounts," which consists of (A) Five Hundred Thousand
Dollars ($500,000), subject to adjustment as provided in ANNEX IV, to be held
pending the final determination of the Adjustment Amount pursuant to SECTION
3.4 hereof (the "Adjustment Escrow Amount"), (B) Four Million Seven Hundred
Fifty Thousand Dollars ($4,750,000), which shall constitute the "Indemnity
Escrow Amount" and shall be disbursed as provided hereinafter, and (C) Five
Million Dollars ($5,000,000), which shall constitute the "Additional Escrow
Amount" and shall be disbursed as provided in SECTION 8.2"), and (ii)
deducting from or adding to such amount, as the case may be, the Estimated
Adjustment Amount (as defined in SECTION 3.4(b) below) (the result of the
foregoing adjustments being the "NOMINAL CONSIDERATION"). The result
obtained by dividing the Nominal Consideration by the number of issued and
outstanding shares of Company Common Stock immediately prior to the Effective
Time shall be referred to
-3-
<PAGE>
herein as the "NOMINAL PER SHARE CASH AMOUNT". Each holder of Company Common
Stock on the Closing Date (individually a "Stockholder" and collectively the
"Stockholders") shall be entitled to receive that portion of the Nominal
Consideration equal to the Nominal Per Share Cash Amount multiplied by the
number of shares of Company Common Stock held by such Stockholder (such
holder's "NOMINAL AGGREGATE PER SHARE CASH AMOUNT"), PROVIDED that the
Nominal Aggregate Per Share Cash Amount attributable to all holders of
Dissenting Shares (the "AGGREGATE DISSENTING SHARES AMOUNT") shall be held by
the Exchange Agent for distribution pursuant to SECTION 3.8 hereof.
(b) At the Closing, the Company shall provide to Parent and Newco
a certificate (the "CERTIFICATE OF INDEBTEDNESS") of the President and the
Vice President of the Company which states the total amount of Funded
Indebtedness of the Company immediately prior to the Effective Time. For
purposes of this Agreement, "FUNDED INDEBTEDNESS" shall mean all indebtedness
of the Company to third parties (other than trade indebtedness arising in the
Ordinary Course of Business), including the banks and financial institutions
listed in SCHEDULE 4.1.15(c) hereto, holders of preferred stock of the
Company and the Subsidiaries, holders of Senior Subordinated Notes, holders
of Series A and Series B debenture bonds and holders of treasury stock notes,
including the amount of any and all prepayment penalties, premiums, fees or
other amounts due and payable to any such person in connection with the
repayment of any such indebtedness, including accrued interest expense net of
the Company's accrued interest income. The Certificate of Indebtedness shall
also state the amount of such indebtedness owed to each such person or entity
as of the Closing Date. The amount of Funded Indebtedness at the date of this
Agreement (assuming full repayment on the date hereof) is approximately
$49,600,000. Immediately after the Effective Time, Parent shall cause the
Surviving Corporation to repay or otherwise retire all Funded Indebtedness.
(c) At or immediately prior to the Effective Time, Parent shall
deposit the Escrow Amounts with an escrow agent reasonably acceptable to the
Company and Parent (the "ESCROW AGENT"). The Adjustment Escrow Amount, the
Indemnity Escrow Amount and the Additional Escrow Amount shall be held by the
Escrow Agent in separate accounts referred to herein as the "Adjustment
Escrow Fund", the "Indemnity Escrow Fund" and the "Additional Escrow Fund",
respectively, and shall be distributed to Parent and/or for the benefit of
the Stockholders in accordance with the terms hereof and of an escrow
agreement in the form agreed to by the Company and Parent, which agreement
shall be consistent in all respects with the terms and conditions of this
Agreement (the "ESCROW AGREEMENT").
(d) In the event that the Merger is approved by the Stockholders,
effective upon such vote and without the further act of any Stockholder, John
J. Broderick and Joseph J. Janela shall be appointed, ratified and confirmed
as agents for and on behalf of each Stockholder (the "STOCKHOLDER AGENTS"),
in connection with the determination of the Adjustment Amount and the
distribution of the Adjustment Escrow Fund, including without limitation
conferring the authority to act (unanimously unless only one shall survive or
be legally competent, in which case that person shall have authority to act
alone) on behalf of each of the Stockholders in giving and receiving
-4-
<PAGE>
notices and communications, to authorize delivery to Parent and/or the
Stockholders of monies from the Adjustment Escrow Fund and the Indemnity
Escrow Fund in satisfaction of the Adjustment Amount (as defined below), to
review and object to the determination of the Adjustment Amount, to agree to,
negotiate, enter into settlements and compromises of and comply with orders
of courts and awards of arbitrators with respect to determinations regarding
and payments of the Adjustment Amount, and to take all actions necessary or
appropriate in the judgment of the Stockholder Agents for the accomplishment
of the foregoing. No bond shall be required of the Stockholder Agents, and
the Stockholder Agents shall not receive any compensation for services
rendered. A decision, act, consent or instruction of the Stockholder Agents
shall constitute a decision of all of the Stockholders and shall be final,
binding and conclusive upon each of the Stockholders, and the Escrow Agent
and Parent may rely upon any such decision, act, consent or instruction of
the Stockholder Agents as being the decision, act, consent or instruction of
each and every Stockholder. The Escrow Agent and Parent are hereby relieved
from any liability to any person for any acts done by them in accordance with
any such decision, act, consent or instruction of the Stockholder Agents.
3.4 ADJUSTMENTS TO CONSIDERATION.
(a) The Nominal Consideration shall be subject to adjustment as
follows: (i) if (x) the current assets of the Company and the Subsidiaries
excluding cash, marketable securities and cash equivalents, minus (y) the
current liabilities of the Company and the Subsidiaries (including without
limitation all Company Transaction Expenses) but excluding that portion of
Funded Indebtedness included in current liabilities, determined (with the
exception of such adjustments required by the provisions of the last sentence of
this SECTION 3.4(a)) in accordance with generally accepted accounting principles
applied consistently with the past practices of the Company, subject to normal,
recurring year-end adjustments as if the Company's and the Subsidiaries' fiscal
year-end ended on the Closing Date (as so determined, the "ADJUSTED WORKING
CAPITAL") immediately prior to the Effective Time prior to giving effect to the
Merger, is less than $13,893,000 (the "TARGET WORKING CAPITAL"), the Nominal
Consideration shall be reduced by an amount equal to such deficiency; and (ii)
if the Adjusted Working Capital immediately prior to the Effective Time prior to
giving effect to the Merger is in excess of the Target Working Capital, the
Nominal Consideration shall be increased by an amount equal to such excess. The
amount of such adjustment to the Nominal Consideration is hereinafter referred
to as the "ADJUSTMENT AMOUNT." By way of illustration, the Adjusted Working
Capital of the Company and its Subsidiaries, determined in the manner required
in this SECTION 3.3(a) based on the Unaudited Financial Statements, was
$14,055,000 as set forth on Annex III attached hereto, in which case the
Adjustment Amount would be $162,000 if August 31, 1997 were the Closing Date,
and the Nominal Consideration would be increased by such amount.
Notwithstanding the foregoing provisions of this Section 3.4, Parent and the
Company agree that, for purposes of determining the Adjustment Amount, current
liabilities shall include the items set forth on ANNEX IV attached hereto in the
amounts as determined in accordance with Annex IV.
-5-
<PAGE>
(b) Not less than five (5) business days prior to the Closing Date,
the Company shall deliver to Parent a consolidated balance sheet for Company and
the Subsidiaries as of the end of the most recent interim accounting period (the
"PRE-CLOSING BALANCE SHEET"), together with a calculation of the Adjustment
Amount determined based upon the Pre-Closing Balance Sheet (the "ESTIMATED
ADJUSTMENT AMOUNT"). The Target Working Capital as increased or decreased by
the Estimated Adjustment Amount is referred to herein as the "ADJUSTED TARGET
WORKING CAPITAL." The Pre-Closing Balance Sheet shall be prepared in accordance
with the same conditions as are applicable to the preparation of the Interim
Balance Sheet, as described in SECTION 4.1.4 below, subject to the adjustments
set forth in SECTION 3.4(a) above, including the reference therein to ANNEX IV.
(c) In the event that there is any difference between the Estimated
Adjustment Amount and the Adjustment Amount (as calculated pursuant to SECTION
3.5 below), the amount of such difference shall be paid to Parent in the event
that the Adjusted Working Capital is less than the Adjusted Target Working
Capital or by Parent in the manner directed by the Stockholder Agents for
disbursement to the Stockholders in accordance with the Exchange Agreement in
the event that the Adjusted Working Capital is more than the Adjusted Target
Working Capital, in accordance with this SECTION 3.4(c).
(i) Any amount to be paid to Parent on behalf of the
Stockholders hereunder shall be satisfied out of the Adjustment Escrow
Amount, PROVIDED that if the amount in the Adjustment Escrow Fund is less
than the amount required to be paid to Parent hereunder, then such
additional amount shall be satisfied out of the Indemnity Escrow Fund
(without regard to the limitation set forth in Section 8.2(b)(iii)) by
certified check or by wire transfer of such amount from the Escrow Agent at
the same time the amount in the Adjustment Escrow Fund is transferred to
Parent from the Adjustment Escrow Fund.
(ii) To the extent that Parent owes additional consideration to
the Stockholders pursuant to this SECTION 3.4(c), Parent shall pay such
amount by certified check or wire transfer of funds in the manner directed
by the Stockholder Agent on or before the fifth business day following the
final determination of the Adjustment Amount under SECTION 3.5(c) hereof
for disbursement to the Stockholders in the manner directed by the
Stockholder Agent.
(iii) After satisfaction of any payment obligation to Parent
pursuant to clause (i) above and the payment to the Independent Accountant,
if any, of certain expenses pursuant to SECTION 3.5(c), any amount
remaining in the Adjustment Escrow Fund shall be disbursed by the
Adjustment Escrow Agent in the manner directed by the Stockholder Agent for
distribution to the Stockholders of the Company in accordance with the
Exchange Agreement.
-6-
<PAGE>
3.5 POST-CLOSING AUDIT.
(a) The determination of the Adjustment Amount shall be made in
accordance with generally accepted accounting principles, applied consistently
with the practices applied in the preparation of the Financial Statements,
subject to normal year-end adjustments as if the fiscal year of the Company and
the Subsidiaries ended on the Closing Date prior to giving effect to the Merger
but subject to the adjustments set forth in SECTION 3.4(a) above, including the
reference therein to ANNEX IV.
(b) The Surviving Corporation will prepare and deliver to Parent and
the Stockholder Agent, within ninety (90) calendar days after the Closing Date,
a balance sheet of the Company immediately prior to the Effective Time (the
"CLOSING BALANCE SHEET"), and the Surviving Corporation's calculation of
Adjusted Working Capital immediately prior to the Effective Time (the "SURVIVING
CORPORATION'S COMPUTATION"), all as reviewed by Deloitte & Touche LLP (the
"SURVIVING CORPORATION'S ACCOUNTANT"). The Stockholder Agents will have thirty
(30) days after receipt of the Surviving Corporation's Computation to review and
deliver a written notice of objection (the "Objection Notice") to the Surviving
Corporation. The Objection Notice shall state each item to which the
Stockholder Agents take exception as not being in accordance with Section 3.5(a)
or as having computational errors, specifying in reasonable detail the nature
and amount of any such exception. Any amounts not disputed in the Objection
Notice shall be paid promptly in accordance with Section 3.4(c). In connection
with such review, the Stockholder Agents and Stoy Malone & Company, P.C. (the
"STOCKHOLDERS' ACCOUNTANT") will have the right to review the methods used in
the preparation of the Closing Balance Sheet, including the right to review all
work papers related to the review by the Surviving Corporation's Accountant, and
to confer with the Surviving Corporation and the Surviving Corporation's
Accountant. If the Stockholder Agents do not provide an Objection Notice to the
Surviving Corporation within such thirty (30) days after receipt of the Closing
Balance Sheet and the Surviving Corporation's Computation, the Stockholder
Agents will be deemed to have accepted and agreed to the Surviving Corporation's
Computation on behalf of each Stockholder as the Adjustment Amount. If the
Stockholder Agents deliver an Objection Notice to the Surviving Corporation
within such time period, then within thirty (30) days after the Objection Notice
is received by the Surviving Corporation, the Stockholder Agents, the Surviving
Corporation and Parent will (i) meet to consider such objections and may agree
to revise the Surviving Corporation's Computation, in which case the amount so
agreed will be the Adjustment Amount and will be binding on the Surviving
Corporation, Parent and the Stockholders, or (ii) specify that Price Waterhouse
(the "INDEPENDENT ACCOUNTANT") will review the Surviving Corporation's
Computation and the Objection Notice and report to the Surviving Corporation,
Parent and the Stockholder Agents the Independent Accountant's determination of
the Adjustment Amount, which determination will be made within thirty (30) days
after the date that the Independent Accountant receives the Surviving
Corporation's Computation and the Objection Notice. Such determination by the
Independent Accountant will be final and binding on the Surviving Corporation,
Parent and the Stockholders.
-7-
<PAGE>
(c) The Stockholders and the Surviving Corporation shall each pay
one-half of the fees and expenses of the Independent Accountant for its
services. Any such expenses owed by the Stockholders shall be satisfied out of
the Adjustment Escrow Fund before any amount is disbursed to Parent or the
Exchange Agent pursuant to SECTION 3.4.
(d) Notwithstanding the foregoing provisions of this Section 3.5,
Parent accepts and agrees to instruct the Company's Accountant to accept and
use the amounts for accounts receivable or paper which are the subject of
claims ("Best Claims") by the Company in IN RE BEST PRODUCTS CO., INC., Case
No. 96-35267-T filed in the United States Bankruptcy Court in the Eastern
District of Virginia, Richmond Division, against the bankruptcy estate ("Best
Estate") and the amounts reserved for the collectibility thereof
(collectively, the "Best Reserves") which are established as provided in
SECTION 3.4(a). The Company has also made the subject of its claims an
amount for manufacturing under the contract which was in effect at the time
of the bankruptcy filing by Best Products Co., Inc., but which manufacturing
had not been accomplished (the "Manufacturing Claim"). The Manufacturing
Claim represents losses based in part on scheduled press time not able to be
rescheduled for other customers. For purposes of this subsection, the
Manufacturing Claim is included in the Best Claims. The difference between
the Best Claims and the Best Reserves is hereinafter referred to as the "Net
Best Amount". Parent agrees that after the Closing Date it shall, and shall
cause the Surviving Corporation to use, commercially reasonable efforts to
collect the Best Claims, including without limitation selling the paper
identified to the Best Products account and for which a claim for payment has
been made (the "Best Paper"). After (i) the Best Claims have been settled
or finally adjudicated and payments, if any, made by the Best Estate
(including without limitation any payments by the Best Estate with respect to
the Best Paper) and (ii) all of the Best Paper has been sold and payments
therefor been made, but not later than the date which is twelve (12) months
following the Closing Date ("Close-out Date"), if the aggregate amount
collected by the Surviving Corporation in respect of the Best Claims is less
than the Net Best Amount, the difference shall be deducted from the Indemnity
Escrow Amount and paid to the Surviving Corporation or Parent, as Parent may
direct, and the Surviving Corporation shall assign to the Stockholder Agents,
as agents for the Stockholders, the remaining unpaid Best Claims and the
remaining unsold Best Paper. Such remaining unsold Best Paper, if any, may
remain in storage at storage facilities of the Surviving Corporation for a
period not to exceed ninety (90) days. If, at the Close-out Date, the
aggregate amounts collected by the Surviving Corporation is greater than the
Net Best Amount, the difference shall be paid promptly by the Surviving
Corporation or Parent in the manner directed by the Stockholder Agents for
disbursement to the Stockholders.
-8-
<PAGE>
3.6 EXCHANGE OF CERTIFICATES: RECEIPT OF CASH; CREATION OF INDEMNITY
ESCROW.
(a) After the Effective Time, each Stockholder upon surrender of a
certificate evidencing shares of Company Common Stock to Exchange Agent as
provided in SECTION 3.6(c) hereof, shall be entitled to receive in exchange
therefor cash in the amount of the Nominal Per Share Cash Amount for each share
of Company Common Stock represented by such certificate as provided in this
ARTICLE III, without any interest thereon.
(b) Parent shall deposit with the Exchange Agent, in trust for the
benefit of the Stockholders, as promptly as practicable and in no event later
than immediately prior to the Effective Time, the total Nominal Consideration
(in immediately available funds) to which the Stockholders shall be entitled
pursuant to SECTION 3.3. The Exchange Agent may invest portions of the cash
deposited with it only in (i) direct obligations of the United States of America
or agencies thereof, including mortgage-backed securities issued by such
agencies, or (ii) commercial paper rated A-I or better by Standard & Poor's
Corporation and P-1 or better by Moody's Investors Service, Inc. and only as
directed by Parent. Any net profit resulting from, or interest or income
produced by, investments of cash deposited with the Exchange Agent shall be
payable to Parent or the Surviving Corporation, as Parent shall direct. Should
the funds remaining with the Exchange Agent at any time within one year after
the Effective Time be less than the aggregate amount of cash to which the
Stockholders shall then be entitled pursuant to this ARTICLE III, Parent shall
promptly deposit with the Exchange Agent the amount of such difference. Any
funds remaining with the Exchange Agent one year after the Effective Time shall
be released and repaid by the Exchange Agent to Parent or the Surviving
Corporation, as Parent shall direct, after which time persons entitled thereto
(including, without limitation, any Stockholder who has not yet surrendered
certificates for shares of the Company Common Stock) may and shall look, subject
to applicable abandoned property, escheat and other similar laws, only to Parent
or the Surviving Corporation for payment and shall have no greater rights
against Parent or the Surviving Corporation than may be accorded to general
creditors thereof under applicable law.
(c) As soon as practicable after the Effective Time, the Exchange
Agent shall send a notice and a transmittal form to each Stockholder (other than
the Company with respect to certificates formerly representing shares of Company
Common Stock to be canceled pursuant to SECTION 3.2(b) and the holders of
certificates representing Dissenting Shares) advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent such certificates for exchange. Each Stockholder, upon proper surrender
of one or more certificates representing the Company Common Stock owned by such
Stockholder to the Exchange Agent, together and in accordance with such
transmittal form, shall be entitled to receive in exchange therefor the holder's
Nominal Aggregate Per Share Cash Amount, without interest thereon.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a Stockholder for any amount which may be required to be paid
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
-9-
<PAGE>
(d) In the event any certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Stockholder
claiming such certificate to be lost, stolen or destroyed, the Exchange Agent
will pay in exchange for such lost, stolen or destroyed certificate the Nominal
Per Share Cash Amount for each share of Company Common Stock represented
thereby, without interest thereon. When authorizing the payment of any Nominal
Per Share Cash Amount with respect to any allegedly lost, stolen or destroyed
certificate, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the Exchange Agent's payment thereof,
require the owner of such lost, stolen or destroyed certificate to give the
Surviving Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Surviving Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
(e) Adoption of this Agreement by the Stockholders shall constitute,
as an integral part of the Merger, ratification of the appointment of the
Exchange Agent or any successor thereto.
3.7 NO FURTHER TRANSFERS. After the Effective Time, there shall be no
registration of transfers of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time on the stock transfer books
of the Company.
3.8 DISSENTING SHARES. (a) Notwithstanding anything in this Agreement to
the contrary, no share of the Company Common Stock which is issued and
outstanding immediately prior to the Effective Time and which is held by a
Stockholder who has properly exercised and perfected appraisal rights under
SECTIONS 3-202 and 3-203 of the Md GCL (the "DISSENTING SHARES") shall be
converted into or be exchangeable for the right to receive the Nominal Per Share
Cash Amount, but such Stockholder shall be entitled to receive such
consideration as shall be determined pursuant to SECTION 3-211 of the Md GCL
with respect to such share (the "PER SHARE APPRAISAL AMOUNT"); PROVIDED,
HOWEVER, that if any such Stockholder shall have failed to perfect or shall have
effectively withdrawn or otherwise lost his or her rights to appraisal under the
Md GCL, such Stockholder's Dissenting Shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Nominal Aggregate Per Share Cash Amount for all
such shares, without any interest thereon, and such shares shall no longer be
Dissenting Shares.
(b) In the event that the aggregate Per Share Appraisal Amount
payable with respect to all Dissenting Shares as finally determined pursuant to
Md GCL Section 3-211 exceeds the Aggregate Dissenting Shares Amount held by the
Exchange Agent pursuant to Section 3.3(a) above, then the amount of such excess
shall be paid out of the Indemnity Escrow Fund by the Escrow Agent to the
Exchange Agent for distribution to the holders of the Dissenting Shares together
with the Aggregate Dissenting Shares Amount. In the event that all funds held
by the Exchange Agent have been released to Parent pursuant to Section 3.6(b) at
the time that the Per Share Appraisal Amount is finally determined, then the
amount of such excess shall be paid by the Escrow Agent to the Surviving
Corporation for distribution to the holders of Dissenting Shares in
substantially the same manner as set forth in the Exchange Agreement.
-10-
<PAGE>
(c) In the event that the aggregate Per Share Appraisal Amount
payable with respect to all Dissenting Shares as finally determined pursuant to
Md GCL Section 3-211 is less than the Aggregate Dissenting Shares Amount held by
the Exchange Agent pursuant to Section 3.3(a) above, then the amount of such
difference shall be distributed by the Exchange Agent to the Stockholders other
than the holders of Dissenting Shares in accordance with the Exchange Agreement.
In the event that all funds held by the Exchange Agent have been released to
Parent pursuant to Section 3.6(b) at the time that the Per Share Appraisal
Amount is finally determined, then the amount of such difference shall be
distributed directly by Parent, or the Surviving Corporation on Parent's behalf,
to Stockholders in substantially the same manner as set forth in the Exchange
Agreement.
(d) Regardless of whether any payments are made pursuant to
Section 3.8(b) or 3.8(c) above, in the event that the Surviving Corporation
is assessed with any costs, fees, expenses or appraisers' compensation in
connection with a determination of the value of Dissenting Shares pursuant to
Md GCL Section 3-211, then the aggregate amount of all such expenses shall be
paid to the Surviving Corporation out of the Indemnity Escrow Fund.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Parent and Newco as follows:
4.1.1 CORPORATE ORGANIZATION AND GOOD STANDING; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and has all corporate
power and authority to own or lease its properties and to carry on its business
as presently conducted. The Company has delivered to Parent and Newco complete
and correct copies of the articles of incorporation and bylaws of the Company
and all amendments thereto. The Company is duly qualified and in good standing
as a foreign corporation duly authorized to do business in all jurisdictions in
which the failure to be so qualified could reasonably be expected to have a
material adverse effect on (i) the properties, assets, operations, business or
financial condition of the Company and its Subsidiaries taken as a whole, (ii)
the properties, assets, operations, business or financial condition of
Shenandoah Valley Press or Port City Press, respectively or (iii) the ability of
the Company to consummate the transactions contemplated hereby (any of the
foregoing, a "MATERIAL ADVERSE EFFECT"). SCHEDULE 4.1.1(a) accurately sets
forth all jurisdictions in which the Company is so qualified.
(b) The Company does not own directly or indirectly any shares of
capital stock of any corporation other than the corporations listed on SCHEDULE
4.1.1(b) hereto (the "SUBSIDIARIES" and each a "SUBSIDIARY"). SCHEDULE 4.1.1(b)
accurately sets forth the jurisdiction of incorporation of each Subsidiary and
all jurisdictions in which each Subsidiary is qualified to do business. Each
Subsidiary is a corporation duly
-11-
<PAGE>
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate power and authority
to own or lease its properties and to carry its business as presently
conducted. The Company has caused each Subsidiary to deliver to Parent and
Newco complete and correct copies of its articles of incorporation and bylaws
and all amendments thereto. Each Subsidiary is duly qualified and in good
standing as a foreign corporation duly authorized to do business in all
jurisdictions in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
4.1.2 CAPITALIZATION OF THE COMPANY AND SUBSIDIARIES.
(a) The authorized, issued and outstanding capital stock of the
Company, and the record and beneficial ownership thereof, is as set forth on
SCHEDULE 4.1.2(a) hereto. All issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable. No options, warrants, conversion or other rights, agreements or
commitments of any kind obligating the Company, contingently or otherwise, to
issue or sell any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares, are outstanding, and no
authorization therefor has been given. Except as set forth on SCHEDULE 4.1.2(a)
hereto, the Company is not obligated to repurchase or redeem any shares of its
capital stock.
(b) The authorized, issued and outstanding capital stock of each of
the Subsidiaries, and the record and beneficial ownership thereof, is as set
forth on SCHEDULE 4.1.2(b). All issued and outstanding shares of capital stock
of the Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable. No options, warrants, conversion or other rights,
agreements or commitments of any kind obligating any of the Subsidiaries,
contingently or otherwise, to issue, sell, repurchase or redeem any shares of
its capital stock of any class or any securities convertible into or
exchangeable for any such shares, are outstanding, and no authorization therefor
has been given. All Capital Stock of any Subsidiary held by the Company is held
free and clear of any security interests, liens, charges, encumbrances,
equities, claims, options, limitations or restrictions of whatever nature
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock).
(c) There are no preemptive or similar rights, and there are no
claims or any basis therefor, in either case whether by contractual agreement,
under applicable law or otherwise, on the part of any holder or former holder of
any class of securities of the Company or of any Subsidiary in connection with
any transactions between the Company and any such holder involving any of the
securities of the Company.
4.1.3 NO CONFLICT. The execution and delivery of this Agreement by
Company, the consummation by the Company and its Subsidiaries of the
transactions contemplated herein in the manner contemplated herein and
compliance by the Company and its Subsidiaries with any of the provisions hereof
or thereof, will not (a) conflict with or result in any violation of or default
under any provision of the respective articles of incorporation or bylaws of the
Company or any Subsidiary, (b) result in a breach of, or
-12-
<PAGE>
a default under, or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement, lease or other similar
instrument or obligation to which the Company or any Subsidiary is a party or
by which any of the businesses, properties or assets of the Company or any
Subsidiary may be bound, except for such breaches or defaults or rights of
termination, cancellation or acceleration as to which requisite waivers or
consents have been obtained or will be obtained prior to the Closing Date or
which could not reasonably be expected to have a Material Adverse Effect or
(c) violate any order, judgment, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any Subsidiary, or any of the
businesses, properties or assets of the Company or any Subsidiary.
4.1.4 FINANCIAL INFORMATION.
(a) The Company has delivered to Parent and Newco the consolidated
balance sheets of the Company and the Subsidiaries as of December 31, 1996 and
December 31, 1995, and the related consolidated statements of income, retained
earnings, and statements of cash flow for the years then ended, together with
the notes thereto, audited and reported upon by Stoy Malone & Company, P.C. (the
"FINANCIAL STATEMENTS"). The Financial Statements are included as SCHEDULE
4.1.4(a) hereto. The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly the financial condition of the Company and the Subsidiaries at
the date indicated and the results of their operations for the period indicated.
(b) The Company has delivered to Parent and Newco the unaudited
consolidated balance sheet of the Company and the Subsidiaries as of August 31,
1997 (the "INTERIM BALANCE SHEET"), and the related consolidated statements of
income, and statements of cash flows for the eight month period then ended
("UNAUDITED INTERIM FINANCIALS"). The Unaudited Interim Financials are included
as SCHEDULE 4.1.4(b) hereto. The Unaudited Interim Financials have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and present fairly the financial condition of the Company and
the Subsidiaries at the date indicated and the results of their operations for
the period indicated, subject, however, to normal, recurring year-end
adjustments consistent with past practices (which will not be material in the
aggregate) for preparation of the Company's interim financial statements;
PROVIDED, however, the Unaudited Interim Financials omit footnotes required
under generally accepted accounting principles.
4.1.5 UNDISCLOSED LIABILITIES. The Company and its Subsidiaries have
no liabilities or obligations (absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise), except (i) as set forth in SCHEDULE 4.1.5 or on any
other Schedule hereto, or reflected in either the Financial Statements (or the
notes thereto) or the Interim Balance Sheet; and (ii) for liabilities or
obligations which have not had, and could not reasonably be expected to have, a
Material Adverse Effect.
-13-
<PAGE>
4.1.6 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 4.1.6,
the accounts receivable and all other receivables shown on the Financial
Statements and the Interim Balance Sheet and all receivables acquired or
generated by the Company and its Subsidiaries since August 31, 1997 (in each
case subject to reserves for non-collectibility as reflected on the books and
financial statements of the Company and its Subsidiaries and as adjusted, in
the ordinary course of business of the Company and its Subsidiaries in
connection with their respective businesses, consistent with past custom and
practice (the "ORDINARY COURSE OF BUSINESS"), for operations and transactions
through the Closing Date), (a) are reflected properly on the books and
financial statements of the Company and its Subsidiaries and (b) are valid
receivables subject, to the knowledge of the Company, to no set-offs or
counterclaims. The reserves for non-collectibility referenced above have
been reflected on the books and financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles.
The Company has provided Parent with an accurate schedule of the twenty (20)
largest customers of the Company and its Subsidiaries, in terms of sales
volume, for the year-to-date period ended August 31, 1997.
4.1.7 INVENTORY. Except as set forth in SCHEDULE 4.1.7, the
inventories reported on the Financial Statements and the Interim Balance Sheet
are stated at the lower of cost (first in, first out method) or market in
accordance with generally accepted accounting principles applied on a consistent
basis. Except as set forth in SCHEDULE 4.1.7, all inventories used in or
relating to the conduct of the respective businesses of the Company and its
Subsidiaries are usable or saleable in the Ordinary Course of Business (subject
to reserves for obsolescence as reflected on the books and financial statements
of the Company and its Subsidiaries and as adjusted, in the Ordinary Course of
Business, for operations and transactions through the Closing Date) and are
owned by the Company and its Subsidiaries free and clear of any mortgage,
security interest, pledge, lien, conditional sale agreement, charge or other
encumbrance (each, an "ENCUMBRANCE"). Such reserves have been reflected on the
books and financial statements of the Company in accordance with generally
accepted accounting principles. SCHEDULE 4.1.7 sets forth all paper supplied to
the Company and its Subsidiaries by its customers as of September 28, 1997.
4.1.8 INSURANCE. SCHEDULE 4.1.8 hereto completely and accurately
lists all primary, excess and umbrella policies, bonds and other forms of
insurance currently owned or held by or on behalf of and/or providing
insurance coverage to the Company, any Subsidiary or their respective
properties, assets and operations, or any of their respective directors,
officers, agents or employees. SCHEDULE 4.1.8 also sets forth the following
information for each such policy: type(s) of insurance coverage provided;
name of insurer; effective dates; policy number; per occurrence and annual
aggregate deductibles or self-insured retentions; per occurrence and annual
aggregate limits of liability and the extent, if any, to which the limits of
liability have been exhausted. No notice of termination or cancellation of
any such policy has been received by the Company or any Subsidiary, all such
policies are in full force and effect and, with respect to all such policies,
all premiums currently payable or previously due have been paid. Except as
set forth on SCHEDULE 4.1.8., none of such policies contains any provision
that would permit the termination, limitation, lapse, exclusion or change in
the
-14-
<PAGE>
terms of coverage (including, without limitation, a change in the limits of
liability) by reason of the consummation of the transactions contemplated by
this Agreement. Complete and accurate copies of all such policies and
related documentation have been made available to Parent and Newco.
4.1.9 LITIGATION. Except as set forth on SCHEDULE 4.1.9 hereto,
neither the Company nor any Subsidiary has received written notice of any
action, suit, proceeding or investigation at law, in equity or admiralty, or
before or by any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, pending or threatened against,
or affecting the properties, assets or operations of the Company or any
Subsidiary that if adversely determined could reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect. There are
no orders, judgments, writs, injunctions or decrees currently in force (a) which
could reasonably be expected, either individually or in the aggregate, (i) to
result in any material liability on the part of the Company or any of its
Subsidiaries or (ii) to have a Material Adverse Effect; (b) with respect to
which the Company or any Subsidiary is in default; or (c) which questions the
validity of this Agreement or of any action taken or to be taken in connection
herewith or the consummation of the transactions contemplated herein.
4.1.10 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAWS. (a) The
Company and each Subsidiary owns, holds or possesses in its own name, all
governmental licenses, franchises, permits, approvals and other governmental
authorizations, other than those the absence of which could reasonably be
expected to have a Material Adverse Effect (collectively, "GOVERNMENTAL
AUTHORIZATIONS"), which are necessary to entitle it to use its corporate name,
to own or lease, operate and use its assets and properties and to carry on and
conduct its business and operations as presently conducted. All such
Governmental Authorizations, and the relevant issuing agency, are listed on
SCHEDULE 4.1.10 hereto. Each Governmental Authorization listed on SCHEDULE
4.1.10 is valid, subsisting and in full force and effect and, to the best of the
Company's knowledge, no suspension or cancellation of any such Governmental
Authorization is pending or threatened and there is no basis for believing that
any such Governmental Authorization subject to renewal will not be renewed upon
expiration.
(b) Except as set forth on SCHEDULE 4.1.10 hereto, neither the
Company nor any Subsidiary is in violation of or default under any Governmental
Authorization, any statute, law, ordinance, rule or regulation applicable to it,
which could reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect.
4.1.11 TAX MATTERS. (a) The Company and each Subsidiary have filed or
will have filed prior to the Closing Date all federal, state, local and foreign
Tax Returns (as hereinafter defined) required to have been filed by each of them
on or before the Closing Date, and each such return is or will be true, correct
and complete in all material respects. The Company and each Subsidiary have
paid all Taxes (as hereinafter defined) due to any federal, state, local or
foreign taxing authority with respect to all periods prior to the date hereof
shown as due on said returns. The reserves for Taxes reflected in the Financial
Statements and the Interim Balance Sheet are sufficient for the payment of all
-15-
<PAGE>
unpaid Taxes (whether or not currently disputed) accrued through the date
thereof. Since December 31, 1996, neither the Company nor any Subsidiary has
incurred any liability for Taxes other than in the Ordinary Course of Business.
Except as set forth on SCHEDULE 4.1.11 hereto, the Company has not received
written notice that the Internal Revenue Service or any other taxing authority
has asserted against the Company or any Subsidiary any deficiency or claim for
additional Taxes which has not been fully paid or finally settled, and any such
deficiency or assessment shown on such SCHEDULE 4.1.11 is being contested in
good faith through appropriate proceedings. No issue has been raised in writing
by any federal, state, local or foreign taxing authority in any examination of
the Company or any Subsidiary which, by application of the same or similar
principles to similar transactions by the Company or any Subsidiary could
reasonably be expected to result in a proposed deficiency for any period. To
the Company's knowledge, no state of facts exists or has existed which would
constitute grounds for the assessment of any liability for Taxes with respect to
the periods prior to the Closing Date which have not been audited by any taxing
authority. No power of attorney has been executed by the Company or any
Subsidiary with respect to any matter relating to Taxes which is currently in
force. Neither the Company nor any Subsidiary is a party to any agreement,
contract, or other arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE").
None of the Company or any Subsidiary has filed (or will file prior to the
Effective Time) a consent pursuant to Section 341(f) of the Code or has or will
have agreed to have Section 341(f) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any Subsidiary. Except as set forth on SCHEDULE 4.1.11,
neither the Company nor any Subsidiary has granted or requested, as the case may
be, any waiver of any statute of limitations with respect to, or any extension
of a period for the assessment or filing of, any federal, state, county,
municipal or foreign tax.
(b) For purposes of this Agreement, "TAXES" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state or local or any foreign taxing authority, including but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, and including any interest,
penalties or additions attributable thereto, regardless of whether such
interest, penalties or additions are attributable to a taxable period ending
before, on or after the Closing Date.
(c) For purposes of this Agreement, "TAX RETURN" shall mean any
return, report, information return, schedule or other document (including any
related reporting information) filed or required to be filed with any taxing
authority with respect to any Taxes.
4.1.12 BROKERS; FINDERS. Other than Berenson Minella & Company
("BM&C"), whose fees and expenses will be paid by the Company at or prior to the
Closing, the Company has not retained any broker or finder in connection with
the transactions contemplated herein so as to give rise to any valid claim for
any brokerage or finder's commission, fee or similar compensation.
-16-
<PAGE>
4.1.13 ABSENCE OF CERTAIN CHANGES. Except as set forth on
SCHEDULE 4.1.13, (a) since December 31, 1996, no event, occurrence or
development has occurred with respect to the Company or any Subsidiary which has
had, or could reasonably be expected to have, a Material Adverse Effect or (b)
since the date of the Interim Balance Sheet, neither the Company nor any
Subsidiary has taken any action which, if taken after the date of this Agreement
without Parent's prior written consent, would violate SECTION 5.2 hereof.
4.1.14 PROPERTIES AND ASSETS. SCHEDULE 4.1.14 hereto sets forth a
complete and correct list of (a) all real property owned by the Company or a
Subsidiary, (b) any lease pursuant to which the Company or a Subsidiary is the
lessee of real property and (c) each item of tangible personal property used in
or relating to the conduct of the businesses of the Company and its Subsidiaries
that has been capitalized for accounting purposes. The Company and the
Subsidiaries have (a) good and valid title to all of their respective personal
property, including, without limitation, all those reflected in the Financial
Statements or acquired after the date of the Interim Balance Sheet (except for
inventories and other assets sold or otherwise disposed of in the Ordinary
Course of Business since such date), and (b) good and marketable title to all
the real property listed in SCHEDULE 4.1.14 as owned by them, and valid
leasehold interests in all real properties listed in SCHEDULE 4.1.14 as leased
by them, in each case free and clear of all mortgages, liens, charges,
encumbrances, easements, security interests or title imperfections other than
(i) those reflected in the Financial Statements or listed in SCHEDULE 4.1.14 and
(ii) those which do not, individually or in the aggregate, (x) materially
interfere with the operation of their businesses as presently conducted or
(y) otherwise have, or could reasonably be expected to have, a Material Adverse
Effect. The Company and each Subsidiary enjoys peaceful and undisturbed
possession under all real property leases under which it operates. The Company
has not received written notice that the ownership or lease of real property by
the Company and the Subsidiaries and the use thereof, as presently used by the
Company and the Subsidiaries, violates any local zoning or similar land use laws
or governmental regulations. The Company has not received written notice of
violation of or noncompliance with any covenant, condition, restriction, order
or easement affecting the real property owned or leased by the Company or the
Subsidiaries. Neither the Company nor any Subsidiary has received written
notice of condemnation or threatened condemnation affecting the real property
owned or leased by the Company or any Subsidiary. The Company has made
available to Parent and Newco complete and correct copies of the lease
agreements referred to in SCHEDULE 4.1.14. The personal property, equipment,
plants, buildings, structures, facilities and all other assets and properties
that will be owned or leased by the Surviving Corporation and/or the
Subsidiaries at the Effective Time will include all personal property,
equipment, plants, buildings, structures, facilities and all other assets and
properties necessary to permit the Surviving Corporation and each Subsidiary to
conduct their respective businesses as presently conducted, except for such
changes as are permitted by SECTION 5.2.
4.1.15 MATERIAL CONTRACTS. SCHEDULE 4.1.15 hereto lists all of the
Material Contracts (as hereinafter defined) to which the Company or a Subsidiary
is a party, or by which any of them is bound. As used in this SECTION 4.1.15,
the term "MATERIAL
-17-
<PAGE>
CONTRACTS" shall mean any oral or written (a) lease or other agreement under
which the Company or a Subsidiary is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property owned by a
third party and which entails annual payments, in the case of any such lease
or other agreement, in excess of $50,000, (b) contract and agreement to which
the Company or a Subsidiary is a party and which are (i) outstanding
contracts with its present or former officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors, sales
agents or dealers other than (x) contract involving payments of $10,000 or
less which by their terms are cancelable by the Company or any Subsidiary
with notice of not more than 60 days and without cancellation penalties,
severance or other termination payments and (y) contract which provides for
payments based solely on commissions and require no minimum payments which by
their terms are cancelable by the Company or any Subsidiary with notice of
not more than 60 days and without cancellation penalties, severance or other
termination payments, (ii) pension, profit-sharing, bonus, retirement, stock
option or employee benefit plan or other similar plan or arrangement of the
Company or a Subsidiary, (c) mortgage, indenture, security agreement, pledge,
note, loan agreement or guaranty relating to the Company or any Subsidiary,
(d) contract and agreement between the Company and its stockholders or
between the Company and any person controlled by, controlling or under common
control with the Company or any Subsidiary, (e) guaranty of any obligation
for borrowings or performances, or guaranty or warranty of products or
services, excluding endorsements or guaranties of instruments made in the
Ordinary Course of Business in connection with the deposit of items for
collection and express product and statutory warranties, (f) contract for the
purchase of any real estate, machinery, equipment or other capital assets
with a purchase price exceeding $50,000, (g) contract pursuant to which it is
or may be obligated to make payments, contingent or otherwise, on account of
or arising out of prior acquisitions or sales of businesses, assets, or stock
of other entities, (h) sales commitment which continues for a period of more
than twelve (12) months, (i) contract or agreement which restricts the
Company's or any Subsidiary's ability to do business in any geographic area,
with any particular person or persons, or in any particular line of business
or industry and (j) other contracts and agreements to which the Company or a
Subsidiary is a party (other than (i) Governmental Authorizations listed in
SCHEDULE 4.1.10 and (ii) leases of real property listed in SCHEDULE 4.1.14)
with respect to which the aggregate annual amount reasonably expected to be
received or paid by the Company or a Subsidiary thereunder exceeds $50,000.
The Company has made available to Parent and Newco true, complete and correct
copies of all Material Contracts. Neither the Company nor any Subsidiary or,
to the knowledge of the Company, any other person is in default under any
Material Contract which default has had, or could reasonably be expected to
have a Material Adverse Effect. To the Company's knowledge, there is no
basis for any default or claim under any Material Contract that could
reasonably be expected to have a Material Adverse Effect, or event which,
with the passage of time, could reasonably be expected to have a Material
Adverse Effect.
4.1.16 INTELLECTUAL PROPERTY RIGHTS. (a) There are no trade names,
trademarks, patents, copyrights, service marks, patent applications or patent
licenses owned by or registered in the name of the Company or any of its
Subsidiaries or necessary to the respective businesses of the Company or any of
its Subsidiaries other
-18-
<PAGE>
than those listed in SCHEDULE 4.1.16(a) hereto, which also lists (i) the
federal or foreign registration (or application) number and the date of
registration (or application) concerning registrations of any such trade
names, trademarks, copyrights, patents and any other registered trade right,
and any and all applications for any of the foregoing. The Company has
delivered to Parent and Newco true and complete copies of all registrations,
applications and related documents set forth on SCHEDULE 4.1.16(a).
(b) SCHEDULE 4.1.16(b) (i) lists all material intellectual property
rights owned by any third party which are not generally commercially available
and are currently used by the Company or any of its Subsidiaries in the conduct
of their respective businesses and (ii) states whether such use is or will be
pursuant to license, sublicense, agreement or permission. The Company has
delivered to Parent and Newco true and complete copies of all agreements and
other documents relating to the intellectual property rights set forth on
SCHEDULE 4.1.16(b).
(c) The Company and each Subsidiary owns or possesses adequate and
enforceable licenses or other rights to use (i) all intellectual property rights
listed on SCHEDULES 4.1.16(a) and 4.1.16(b), (ii) all computer software used by
the Company and any Subsidiary in the conduct of their respective businesses and
(iii) all other trade names, trademarks, patents, copyrights, service marks, all
applications for any of the foregoing, and all other trade secrets, designs,
plans, specifications and other intellectual property rights of every kind
(whether or not registered) that are used in, possessed by or necessary for the
conduct of their respective businesses (all of the items referred to in this
SECTION 4.1.16(c) being the "INTELLECTUAL PROPERTY").
(d) Entry into this Agreement and consummation of the transactions
contemplated hereby will not impair either the Company's or any Subsidiary's
ownership or use of the Intellectual Property. No person has a right to receive
a royalty or similar payment in respect of any item of Intellectual Property
pursuant to any contractual arrangements entered into by the Company or any
Subsidiary other than as set forth on SCHEDULE 4.1.16(b) hereto. Neither the
Company nor any Subsidiary has granted any license, sublicense or other similar
agreement relating in whole or in part to any Intellectual Property other than
as set forth on Schedule 4.1.16(b) hereto. Neither the Company nor any
Subsidiary has received written notice that the Company's and/or any
Subsidiary's use of any item of Intellectual Property is interfering with,
infringing upon or otherwise violating the rights of any third party in or to
such Intellectual Property, and no written notice has been received by the
Company or any Subsidiary alleging that the use or proposed use of any item of
Intellectual Property by the Company or any Subsidiary infringes upon or
otherwise violates any rights of a third party in or to such Intellectual
Property and, to the knowledge of the Company, no proceedings have been
instituted against the Company or any Subsidiary alleging any such claim. The
Company has no knowledge of any infringement, interference or other violation by
any third person of the Company's or any Subsidiary's rights in and to any of
the Intellectual Property.
4.1.17 LABOR MATTERS. Except as set forth on SCHEDULE 4.1.17, there
are (a) not in existence or, to the knowledge of the Company, threatened any
labor strikes, disputes, slowdowns, lockouts or work stoppages by employees of
the Company or any
-19-
<PAGE>
of its Subsidiaries, and during the past five (5) years there has not been
any such action in existence or, to the knowledge of the Company, threatened,
(b) no collective bargaining agreements to which the Company or any
Subsidiary is a party, nor any side letter agreement or other writing, or
work rules or practices agreed to, with any labor organization or employee
association, (c) no grievance or arbitration proceedings arising out of any
arrangements, formal or informal, to which the Company or any Subsidiary is a
party relating to employment policies or (d) no unfair labor practice charges
or complaints against the Company or any of its Subsidiaries pending or, to
the knowledge of the Company, threatened, before the National Labor Relations
Board or any similar state or foreign agency, (e) no charges with respect to
or relating to the Company or any Subsidiary pending or, to the knowledge of
the Company, threatened before the Equal Employment Opportunity Commission or
any other state or foreign agency responsible for the prevention of unlawful
employment practices, (f) no representation of the employees of the Company
or any Subsidiary by any labor organization and, to the knowledge of the
Company, no union organizing activities among such employees nor, to the
Company's knowledge, any question concerning such representation concerning
such employees, (g) no written notices received by the Company or any
Subsidiary of the intent of any federal, state, local or foreign agency
responsible for the enforcement of any labor or employment laws to conduct an
investigation with respect to or relating to the Company or any Subsidiary,
nor, to the Company's knowledge, is any such investigation in progress, (h)
no written personnel policies, rules or procedures applicable to any
employees of the Company or any Subsidiary, except as set forth in employee
handbooks, complete and accurate copies of which have been made available to
Parent and Newco, nor any representation regarding longevity of employment to
any such employee, (i) no instances of noncompliance by the Company or any
Subsidiary with any applicable law or regulation respecting employment or
employment practices, terms and conditions of employment, wages, hours of
work and, to the Company's knowledge, occupational safety and health, except
where such noncompliance would not individually or in the aggregate have, or
could not reasonably be expected to have, a Material Adverse Effect. Since
the enactment of the Worker Adjustment and Retraining Notification Act of
1988 (the "WARN ACT"), neither the Company nor any Subsidiary has effectuated
or experienced (x) a "plant closing" (as defined in the WARN Act) affecting
any site of employment or one or more facilities or operating units within
any site of employment or facility used by the Company or any Subsidiary or
(y) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility used by the Company or any Subsidiary, nor has the
Company or any Subsidiary been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law.
4.1.18 NO CONSENT. Other than as set forth on SCHEDULE 4.1.18 hereto
and for compliance with the applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and regulations thereunder (the
"HSR ACT"), no consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third person
("CONSENT") is required to be obtained by the Company in connection with the
execution and delivery of this Agreement by the Company, or the consummation by
the Company of the Merger and the other transactions contemplated herein, or the
performance by the Company and its
-20-
<PAGE>
Subsidiaries of any of the provisions hereof, other than any Consent where
the failure of the Company to obtain such Consent, either in any case or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
4.1.19 AUTHORIZATION. The Company has all requisite corporate power
and authority to enter into and perform this Agreement and to consummate the
transactions contemplated herein, and this Agreement has been duly executed and
delivered by the Company pursuant to all necessary corporate authorization and
is the legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except as enforcement may be limited by equitable
principles limiting the right to obtain specific performance or other equitable
remedies, or by applicable bankruptcy or insolvency laws and related decisions
affecting creditors' rights generally.
4.1.20 COMPLIANCE WITH ERISA. (a) SCHEDULE 4.20 contains a complete
and accurate list of each employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (each a "PENSION PLAN"), including without limitation any
multiemployer plan as defined in Section 3(37) of ERISA (each a "MULTIEMPLOYER
PLAN"); employee welfare benefit plan (as defined in Section 3(1) of ERISA (each
a "WELFARE PLAN"); or any other written or oral plan, contract, or other
arrangement of benefit to any group of employees, including without limitation,
profit-sharing, deferred compensation, stock purchase, stock option, severance
or termination pay, supplemental unemployment benefits or similar arrangement
("OTHER BENEFIT PLANS") contributed to or required to be contributed to by the
Company or any Subsidiary or by any trade or business, whether or not
incorporated (an "ERISA AFFILIATE"), that together with the Company or any
Subsidiary would be deemed as of the Closing Date a "single employer" within the
meaning of section 4001 of ERISA, in each case maintained as of the Closing
Date, for the benefit of any employee or terminated employee of the Company or
any Subsidiary for work performed for the Company or any Subsidiary or for such
persons' beneficiaries.
(b) With respect to each Pension Plan, the Company has heretofore
delivered or will prior to the Closing Date deliver to Parent and Newco true and
complete copies of each of the following documents:
(i) a copy of each current Pension Plan document, including
all amendments;
(ii) a copy of the most recent summary plan description of each
Pension Plan and any summaries of material modifications thereto;
(iii) a copy of the most recent report prepared with respect
thereto, if any, in accordance with Statement of Financial Accounting
Standards No. 87, Employer's Accounting for Pensions;
(iv) a copy of the three (3) most recent Forms 5500, 5500-C or
5500-R required to be filed for each Pension Plan; and
-21-
<PAGE>
(v) with respect to each Pension Plan that has received a
determination letter from the Internal Revenue Service regarding its
qualified status under Section 401(a) of the Code, a copy of the most
recent Internal Revenue Service determination letter and any subsequently
filed determination letter request.
(c) To the knowledge of the Company, each Pension Plan has been
operated and administered in all material respects in accordance with its terms
and with ERISA and the Code.
(d) Each Pension Plan (or its prototype) which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable letter from the Internal Revenue Service regarding its tax-qualified
status.
(e) To the knowledge of the Company, none of the Pension Plans or
their fiduciaries has engaged in a non-exempt "prohibited transaction" (within
the meaning of ERISA and the Code) which might, directly or indirectly, subject
such Pension Plan, the Company or any Subsidiary to liability for any losses,
expenses, damages, penalties or excise Taxes.
(f) Except as set forth in SCHEDULE 4.20, neither the Company nor any
Subsidiary has "withdrawn" from any Multiemployer Plan. All contributions
required to be made to any Multiemployer Plan so listed have been made on or
before their due dates.
(g) Each Pension Plan that the Company, any Subsidiary or any ERISA
Affiliate maintains, or to which the Company, any Subsidiary or an ERISA
Affiliate is obligated to contribute, other than any Pension Plan that is a
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA),
is, as of the respective last annual valuation date for each such Pension Plan
in compliance with Section 412 of the Code. None of such Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived.
(h) Except as set forth in SCHEDULE 4.1.20, no Welfare Plan or Other
Benefit Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
of the Company or any Subsidiary for work performed for the Company or any
Subsidiary beyond their retirement or other termination of service (other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any Pension Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company and its Subsidiaries, or (iv) benefits
the full premium cost of which is borne by the current or former employee (or
his beneficiary)).
(i) With respect to the employees and former employees of the Company
or any Subsidiary, their spouses and their dependents, the Company and each
Subsidiary is in compliance in all material respects with the notice and
continuation
-22-
<PAGE>
coverage requirements of Section 4980B(f) of the Code and regulations
thereunder ("COBRA").
(j) No Welfare Plan contains any provisions expressly limiting the
right of the Company or any Subsidiary to amend or terminate such Welfare Plan,
and to the Company's knowledge no communications have been made to employees
that would have the effect of preventing the Company or any Subsidiary from
amending or terminating any Welfare Plan.
(k) Except as set forth in SCHEDULE 4.1.20, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or officer of the Company or any Subsidiary to severance pay,
except as expressly provided in this Agreement or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
(l) There are no pending or, to the knowledge of the Company,
anticipated or threatened claims by or on behalf of any Pension Plan, by any
employee or beneficiary covered under any such Pension Plan, or otherwise
involving any such Pension Plan (other than routine claims for benefits).
4.1.21 ENVIRONMENTAL MATTERS. (a) Except as set forth or referred to
in SCHEDULE 4.1.21, the Company and each Subsidiary and the properties and
assets used in their respective businesses are in compliance with all applicable
Environmental Laws (as defined below) and, to the knowledge of the Company,
there are no circumstances of a significant nature which may materially prevent
or interfere with compliance in the future. Except as set forth or referred to
in SCHEDULE 4.1.21, in the last five (5) years, neither the Company nor any
Subsidiary has received any communication (whether written or, to the knowledge
of the Company, oral), whether from a governmental authority, citizen group,
employee or otherwise, that alleges that the Company, any Subsidiary, or any of
the properties or assets used in their respective businesses is not in full
compliance with Environmental Laws. The Company and the Subsidiaries hold all
permits, licenses, registrations and other governmental authorizations currently
held by the Company or any Subsidiary pursuant to Environmental Laws
(collectively, "PERMITS") necessary for the conduct of their business and
operations as currently conducted prior to the Closing Date. The Company has
made available to Parent and Newco the Permits. Except as set forth on
SCHEDULE 4.1.21, the Company and each Subsidiary is, and has been for the last
five (5) years, in compliance with all Permits except where the failure so to
comply could not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary has been notified by any relevant
governmental authority that any Permit will be modified, suspended or revoked or
cannot be renewed in the ordinary course of business.
(b) Except as set forth or referred to in SCHEDULE 4.1.21, there is
no Environmental Notice (as defined below) that is pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary. Neither the
Company nor any Subsidiary has received any written notice with respect to any
Environmental Notice
-23-
<PAGE>
pending or threatened against any person or entity whose liability for such
Environmental Notice may have been retained or assumed by or could reasonably
be imputed or attributed, in whole or in part, to the Company or any
Subsidiary.
(c) Except as set forth or referred to in SCHEDULE 4.1.21, there are
no past or present actions, activities, circumstances, conditions, events or
incidents arising from the operation, ownership or use of any property currently
or, formerly owned, operated or used by the Company or any Subsidiary (or, to
the knowledge of the Company, any entity formerly an affiliate of the Company or
any Subsidiary), including, without limitation, the release, emission, discharge
or disposal of any Material into the Environment (each as defined below), that
could reasonably be expected to form the basis of any Environmental Notice
against or with respect to the Company or any Subsidiary.
(d) Except as set forth or referred to in SCHEDULE 4.1.21, to the
knowledge of the Company, there have been no suspected or acknowledged releases
of Materials at, from or onto any property adjacent to any property currently or
formerly owned, operated or used by the Company or any Subsidiary (or any entity
formerly an affiliate of the Company or any Subsidiary).
(e) Without in any way limiting the generality of the foregoing, to
the knowledge of the Company or any Subsidiary, (i) all underground storage
tanks, and the capacity and contents of such tanks, located on property owned,
leased or used by the Company or any Subsidiary are set forth or referred to in
SCHEDULE 4.1.21, (ii) except as set forth or referred to in SCHEDULE 4.1.21,
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned, leased or used by the Company or any
Subsidiary, (iii) except as set forth or referred to in SCHEDULE 4.1.21, no
polychlorinated biphenyls (PCB's) are used or stored on any property owned,
leased or used by the Company or any Subsidiary, and (iv) all locations
currently or formerly owned, leased or used by the Company or any Subsidiary (or
any former affiliate of the Company or any Subsidiary) at which any Material
generated, used, owned or controlled by the Company or any Subsidiary or any
former affiliate of the Company or any Subsidiary (or by any previous owner or
operator) may have been disposed of or released into the Environment (as defined
below) are set forth or referred to in SCHEDULE 4.1.21.
(f) The Company has identified for Parent and Newco all
environmental audits, assessments, inspections, or occupational health
studies of which the Company has knowledge relating to the properties and
assets used in the businesses or the conduct of the businesses undertaken by,
or at the direction of, any governmental authority, the Company or any
Subsidiary, any predecessor-in-interest or any prior potential purchaser.
(g) For purposes of this Agreement:
(i) "ENVIRONMENT" means any surface water, ground water,
drinking water supply, land surface or subsurface strata, ambient air and
any indoor workplace.
-24-
<PAGE>
(ii) "ENVIRONMENTAL NOTICE" means any written notice by any
person or entity alleging potential civil or criminal liability (including,
without limitation, potential liability for investigatory costs, cleanup
costs, governmental costs, harm or damages to person, property, natural
resources or other fines or penalties) arising out of, based on or
resulting from (a) the emission, discharge, treatment, storage, disposal,
release or threatened release in or into the Environment of any Material or
(b) circumstances forming the basis of any violation, or alleged violation,
of any applicable Environmental Law or Permit provision.
(iii) "ENVIRONMENTAL LAWS" means all national, state, local
and foreign laws, codes, regulations, common law, requirements, directives,
orders, and administrative or judicial interpretations thereof, all as in
effect on the date hereof or on the Closing Date, that may be enforced by
any governmental agency or court, relating to pollution, the protection of
the Environment, or the emission, discharge, treatment, storage, disposal,
release or threatened release of Materials in or into the Environment.
(iv) "MATERIALS" means pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes, as such terms are
defined in any applicable Environmental Law, and includes, without
limitation, petroleum products and their constituent parts.
4.1.22 COMPANY ACTION. The Board of Directors of the Company, at a
meeting duly called and held, has by the unanimous vote of all directors
(i) determined that the Merger is fair and in the best interests of the Company
and its stockholders, (ii) adopted this Agreement in accordance with the
provisions of the Md GCL, and (iii) directed that this Agreement and the Merger
be submitted to the stockholders of the Company for their adoption and approval
in accordance with the Md GCL and resolved to recommend that stockholders of the
Company vote in favor of the adoption of this Agreement, the transactions
contemplated herein and the approval of the Merger.
4.1.23 BOOKS AND RECORDS. The minute books and other similar records
of the Company and each Subsidiary contain true and complete records of all
actions taken at any meetings of the stockholders of the Company, Board of
Directors or any committee thereof and of all written consents executed in lieu
of the holding of any such meeting, except for those occurring before March 26,
1976.
4.1.24 DISCLOSURE. The representations and warranties by the Company
and its Subsidiaries in this Agreement and the statements contained in the
schedules, certificates, exhibits, instruments and other writings furnished and
to be furnished by the Company and its Subsidiaries to Parent and Newco pursuant
to this Agreement do not and will not contain any untrue statement of a material
fact, and do not and will not omit to state any material fact necessary to make
the statements herein or therein not misleading.
- 25 -
<PAGE>
4.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO. Parent and Newco
represent and warrant to the Company as follows:
4.2.1 NEWCO'S CORPORATE STATUS. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. Each of Parent and Newco has
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated herein and perform its
obligations hereunder. Each of Parent and Newco has delivered to the Company
complete and correct copies of its articles of incorporation and bylaws and all
amendments thereto.
4.2.2 AUTHORITY FOR AGREEMENT; NO CONFLICT. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein have been duly authorized by each of Parent and Newco. This Agreement
has been duly executed and delivered by each of Parent and Newco and constitutes
the valid, legal and binding obligation of each, enforceable in accordance with
its terms, except as enforcement may be limited by equitable principles limiting
the right to obtain specific performance or other equitable remedies, or by
applicable bankruptcy or insolvency laws and related decisions affecting
creditors' rights generally. The execution and delivery of this Agreement by
each of Parent and Newco and the consummation by each of the transactions
contemplated herein do not and will not conflict with or result in any violation
of or default under any provision of its respective articles of incorporation or
by laws or of any material provision of note, mortgage, indenture, deed of
trust, loan agreement or other agreement to which each is a party or under any
other material instrument, permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to either of Parent or Newco or any of their respective properties. Except as
set forth on SCHEDULE 4.2.2 hereto, no Consent is required to be obtained by
Parent or Newco in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated herein, except where the
failure to obtain such Consent, either individually or in the aggregate, does
not have a material adverse effect on the ability of Company or Newco to
consummate the transactions contemplated herein.
4.2.3 LITIGATION. Except as set forth on SCHEDULE 4.2.3 hereto,
neither Parent nor Newco has received written notice of any action, suit,
proceeding or investigation pending or threatened against Parent or Newco and
there are no orders, writs, injunctions or decrees currently in force which (a)
could reasonably be expected, either individually or in the aggregate, to result
in any material liability on the part of Parent or Newco that are not adequately
covered by insurance, or (b) question the validity of this Agreement or of any
action taken or to be taken in connection herewith or the consummation of the
transactions contemplated herein.
4.2.4 BROKERS; FINDERS. Neither Parent nor Newco has retained any
broker or finder in connection with the transactions contemplated herein so as
to give rise to any valid claim for any brokerage or finder's commission, fee or
similar compensation.
- 26 -
<PAGE>
4.2.5 BUYER'S INVESTIGATION. Each of Parent and Newco has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the merger of Newco and the Company. Parent
and Newco each confirm that Parent and Newco have conducted inspections of the
properties and financial and other records of the Company and the Subsidiaries
and have engaged in other due diligence with respect to the Company and the
Subsidiaries and their business, financial affairs, and operations. Parent and
Newco have had an opportunity to ask questions of the Company, certain of the
Company's Stockholders, certain employees (as requested) and the officers of the
Company relating to the business, management and financial affairs of the
Company and the Subsidiaries, Parent and Newco have had an opportunity to
acquire such additional information and documents about the business and
financial condition of the Company and the Subsidiaries as Parent or Newco has
requested and all such information and documents have been received by Parent or
Newco; and Parent and Newco have had an opportunity to examine all books and
records of the Company and the Subsidiaries.
4.2.6 FINANCIAL ABILITY TO PERFORM. Parent and Newco have sufficient
funds, and credit arrangements or financing commitments with responsible
financial institutions to deliver the aggregate Consideration described in
ARTICLE III hereof and the other amounts payable by it hereunder at the Closing
and to take such other actions as may be required by it to consummate the
transactions contemplated herein. Parent and Newco have provided to the Company
a copy of such financing commitments pursuant to which it intends to enter into
agreements (the "FINANCING AGREEMENTS") to provide Parent and/or Newco and/or
the Surviving Corporation with sufficient funds to consummate the transactions
contemplated herein.
4.2.7 FINANCIAL CONDITION. Parent has heretofore delivered to the
Company the audited financial statements for its operating subsidiary, Perry
Graphic Communications, Inc., a Delaware corporation (the "OPERATING COMPANY")
for the year ended December 31, 1996 (the "OPERATING COMPANY FINANCIALS"). The
Operating Company Financials are true, correct, and complete in all material
respects and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and present fairly the financial
condition of the Operating Company at the date indicated and the results of its
operations for the period indicated.
ARTICLE V.
CERTAIN COVENANTS
5.1 ACCESS AND INFORMATION; CONFIDENTIALITY. The Company will give to
Parent and Newco and their representatives (upon reasonable advance notice and
during normal business hours) full and complete access to its properties, books,
records, contracts and commitments and will furnish all such information and
documents relating to its properties and business as Parent or Newco may
reasonably request. Notwithstanding the foregoing, such access, investigation,
analysis and evaluation of the Company by Parent and Newco shall not release the
Company and its Subsidiaries from any of their respective representations,
warranties, covenants or agreements contained in or
- 27 -
<PAGE>
contemplated by this Agreement, nor be deemed to constitute a waiver or
compromise of Parent's and Newco's rights to enforce against the Company and
its Subsidiaries any provision of this Agreement. Parent and Newco will
furnish to the Company and its representatives all such information and
documents relating to Newco and Parent as the Company may reasonably request.
Each of the parties will treat, and will cause its representatives to treat,
all information that is received under this SECTION 5.1, if not in the public
domain, as confidential, PROVIDED that during the term of this Agreement
Parent and Newco may in good faith show any such information to any potential
lender or equity participant or other advisors who first agree to treat such
information as confidential. If the Closing shall not occur as contemplated
hereby, Parent and Newco will return to the Company, and the Company will
return to Parent and Newco, all documents containing any such information
delivered to Parent and Newco or the Company and their representatives and
all copies thereof.
5.2 CONDUCT OF BUSINESS OF THE COMPANY. (a) From the date hereof to the
Closing, the Company will, and will cause each Subsidiary to, (i) conduct its
operations and business only in the Ordinary Course of Business, (ii) maintain
and keep its properties and equipment in good repair, working order and
condition, except for ordinary wear and tear, (iii) keep in full force and
effect all insurance now maintained, (iv) perform in all material respects all
of its obligations under all Material Contracts, (v) use commercially reasonable
efforts to maintain and preserve all material Intellectual Property, (vi) use
commercially reasonable efforts to maintain and preserve its business
organization intact, to retain its present employees so that they may be
available after the Closing, and to maintain its relationships with suppliers
and customers so that they may be preserved after the Closing, (vii) maintain
its books of account and records in the usual and regular manner, (viii) comply
in all material respects with all laws and regulations applicable to it and to
the conduct of its business, and (ix) promptly advise Parent and Newco in
writing of any event or development that has, or could reasonably be expected to
have, a Material Adverse Effect, including without limitation any damage,
destruction or loss of any property or assets (whether or not covered by
insurance) and any breach, default, termination, or any notice thereof, under
any Material Contract.
(b) In addition, from and after the date hereof, neither the Company
nor any Subsidiary shall, without the prior written consent of Parent, (i)
issue, sell or deliver, or agree to issue, sell or deliver any additional shares
of its capital stock or any options, warrants or rights to acquire any such
capital stock, or securities convertible into or exchangeable for such capital
stock, (ii) mortgage, pledge or subject to any lien, lease, security interest or
other charge or encumbrance, its assets, tangible or intangible, other than in
the Ordinary Course of Business, (iii) dispose of any assets or properties
having a fair market value, individually or in the aggregate, in excess of
$50,000, or enter into any agreement or other arrangements for any such
disposition, other than in the Ordinary Course of Business, (iv) declare, make,
pay or set apart any sum for any dividend or other distribution to its
stockholders or purchase or redeem any shares of its capital stock or any
option, warrant or right to purchase any of its capital stock, or reclassify its
capital stock, (v) increase the wages, salaries, compensation, pension or other
benefits payable to any employee or grant any severance or termination pay
(except such as shall have occurred in the Ordinary Course of Business,
including normal periodic
- 28 -
<PAGE>
performance review and related compensation and benefit increases), or enter
into any employment agreement with any officer or salaried employee which is
not terminable by the employer, without cause and without penalty, upon
notice of 30 days or less, (vi) forgive or cancel any material debts or
claims or waive, amend, cancel or terminate any rights of material value,
(vii) incur any indebtedness for borrowed money, except in the Ordinary
Course of Business, (viii) amend its articles of incorporation or by laws,
(ix) merge or consolidate with or agree to merge or consolidate with, or
purchase substantially all of the assets of, or otherwise acquire, any
business or any business organization or division thereof or (x) amend or
modify any agreement, understanding, arrangement or policy respecting
indemnification of its directors or officers.
5.3 BEST EFFORTS. Each of the Company, Parent and Newco shall use its
reasonable best efforts to take or cause to be taken all actions required to
consummate the Merger and the other transactions contemplated hereby including,
without limitation, such actions as may be necessary to obtain prior to the
Closing all necessary governmental or other third-party approvals and consents
required to be obtained by them in connection therewith. In addition, the
Company shall use, and cause each Subsidiary to use, its reasonable best efforts
to assist Parent in obtaining or establishing all licenses, permits, benefits,
plans, programs or contractual arrangements, including welfare benefit plans,
necessary for the Surviving Corporation to conduct the businesses of the Company
and its Subsidiaries in substantially the manner in which they were conducted
prior to the Closing.
5.4 NO SOLICITATION. Unless and until this Agreement shall have been
terminated pursuant to SECTION 9.1, the Company shall not directly or
indirectly, through any of its officers, directors, agents, brokers (including
without limitation BM&C) (a) solicit, initiate or encourage the submission of
inquiries, proposals or offers (each, a "PROPOSAL") from, or engage in any
discussions with, any corporation, partnership, person, or other entity or group
relating to any transaction involving the sale of the assets or shares of stock
of the Company or any Subsidiary, or relating to or involving any merger,
consolidation or business combination involving the Company or any Subsidiary,
(b) except as customary in the Ordinary Course of Business, disclose any
information to any person concerning the business and assets of the Company or
any Subsidiary, or afford any person access to the properties, books and records
of the Company or any Subsidiary, (c) otherwise assist any person or facilitate
their efforts in connection with any of the foregoing or (d) cause or permit any
Subsidiary, directly or indirectly through its officers, directors, agents,
brokers (including without limitation BM&C) to do any of the foregoing. The
Company shall immediately give notice to Parent and Newco upon the Company's or
any Subsidiary's receipt of any written or oral Proposal, and the terms and
conditions thereof, and shall consult with Parent prior to any response thereto.
5.5 FINANCIAL INFORMATION. Prior to the Closing, the Company shall provide
to Parent and Newco, as soon as such information becomes available, financial
statements for the Company and its Subsidiaries for each accounting period of
the Company, and such other financial information as Parent and Newco may
reasonably request. Such financial statements shall be prepared in the same
form and in accordance with the same conditions as the Unaudited Interim
Financial Statements.
- 29 -
<PAGE>
5.6 AUTHORIZATION OF AGREEMENT AND MERGER. As promptly as practicable
after the date hereof, the Company shall take all necessary and appropriate
corporate actions necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated herein by the
Company, and the consummation of the Merger, including without limitation
using its best efforts to solicit and obtain the consent of its stockholders
thereto. The materials submitted to the Company's stockholders shall be
subject to review and approval by Parent and Newco, and shall include without
limitation, information regarding the Company, the terms of the Merger and
this Agreement, the recommendation of the Board of Directors of the Company
in favor of the Merger and this Agreement, the existence and procedures for
exercise of stockholders' dissenters' rights and all other information
required under applicable law.
5.7 HSR NOTIFICATION. As soon as practicable, the Company and Newco will
file, or cause to be filed by their appropriate parent entities, with the
Federal Trade Commission and with the Antitrust Division of the Department of
Justice the notification and documentation material required to be filed under
the HSR Act, in connection with the Merger of the Company and Newco pursuant to
this Agreement. Thereafter, the parties will promptly file any additional
information requested as soon as practicable after receipt of a request for
additional information and will use all reasonable efforts to obtain early
termination of the applicable waiting period under said Act.
5.8 TREATMENT OF EMPLOYEES. Parent shall (i) give each employee of the
Company and the Subsidiaries credit for all past service for all purposes
(including for purposes of determining eligibility, vesting, computation of
Benefits and any applicable waiting and entitlement periods) and (ii) waive any
pre-existing condition restricting benefits in connection with its employee
benefit plans to the same extent as if such employees had been employees of
Parent during the times of their respective employment by the Company or the
Subsidiaries, as the case may be.
5.9 PORT CITY PRESS. Parent shall cause the Surviving Corporation to hold
as a subsidiary of the Surviving Corporation, and shall cause the Surviving
Corporation to operate, Port City Press for a reasonable period of time
following the Closing Date sufficient to evaluate the business conducted by Port
City Press, and shall provide to Port City Press working capital and management
support at a level which is at least consistent with the current operations of
Port City Press prior to the Closing.
5.10 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. Parent or
the Surviving Corporation shall purchase a "tail" which extends the discovery
period under the Company's existing officers' and directors' liability insurance
issued by National Union Fire Insurance Company of Pitts., Pa., Policy Number
484-57-42 ("D&O POLICY") for a period of not less than three years after the
Effective Time. The Company has heretofore furnished a copy of the D & O Policy
to Parent.
5.11 POST-CLOSING OPERATIONS OF THE COMPANY. (a) Without limiting
the generality or specificity of any provision of this Agreement, Parent agrees
that it shall cause the Surviving Corporation after the Closing Date to:
- 30 -
<PAGE>
(i) Continue in effect any leases relating to vehicles under
lease ("Auto Leases") and made available to the employees listed in
SCHEDULE 5.11 hereto for either the duration of such Auto Lease or until
the termination of such employee's employment by the Surviving Corporation
or a Subsidiary, whichever first occurs, and upon either such event, the
employee shall have the right to buy out the lease or purchase the vehicle,
as the case may be, in accordance with the terms and conditions of the
applicable Auto Lease or the plan under which such Auto Lease was written.
In the case of Mari-Ane Fowler, the Surviving Corporation shall continue at
the level immediately prior to the Closing Date the payments being made in
lieu of providing a vehicle under lease for the same period, as set forth
on SCHEDULE 5.11.
(ii) Continue in effect the monthly payments of unfunded
pension benefits to the three retired Judd & Detweiler employees for their
respective lives (an aggregate of $3,600 per year for the three employees)
and to Victoria Manning ("Manning") through February 28, 1998, which is the
date on which the Company's obligation to Manning expires (a total of
$2,252.64 per year).
(iii) Continue in effect through December 31, 1997 the
Company's Pension Plan and its 401(k) Plan for all eligible employees and
to make all contributions for calendar year 1997 required to be made by the
Company thereunder and to match employee contributions as required by such
plans.
(iv) Continue in effect through December 31, 1997 the Company's
Profit Sharing, Management Incentive Bonus, and Christmas Bonus plans in
accordance with the terms, conditions and eligibility requirements in
effect for each such plan at the date of this Agreement, including without
limitation the funding by the Company under each such plan. Without
limiting the generality of the foregoing, the Christmas Bonus will be paid
to each eligible employee at its normal time; distribution of amounts, if
earned, for Profit Sharing and under the Management Incentive Bonus Plan
shall be made to eligible individuals not later than March 15, 1998, and
any employee terminating employment after the Merger has occurred but prior
to actual distribution of any such amount to which such employee may have
become entitled shall receive the employee's full share under such plan as
if such person had been employed on December 31, 1997. The amounts to be
distributed and the persons to whom such amounts will be distributed under
each such plan shall be determined jointly by the Surviving Corporation and
by Judd's Compensation Committee ("Compensation Committee") as constituted
as of the date of this Agreement, of which John J. Broderick is Chairman,
whether or not the persons on the Compensation Committee are employed by
the Surviving Corporation or any Subsidiary on March 15, 1998.
(v) Continue in effect through December 31, 1997 the
Company's Sales Incentive Plans for sales persons for Judd's,
Shenandoah Valley Press, and Port City Press, and any such sums earned
by such
- 31 -
<PAGE>
persons who are employed as of the Closing Date shall be paid
not later than March 15, 1998, regardless of whether such persons are
employed by any of such entities on December 31, 1997.
(b) If the Merger has not occurred prior to December 31, 1997, Parent
agrees that it will not assert that it is excused from performing under this
Agreement as a result of the Company taking actions as may be appropriate to
accomplish and perform any of the foregoing or to obligate the Surviving
Corporation for comparable periods of time.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND NEWCO
All obligations of Parent and Newco to consummate the Merger under
this Agreement are subject to the fulfillment and satisfaction, prior to or at
the Closing (at which the Effective Time is scheduled by the parties to occur),
of each of the following conditions, any one or more of which may be waived by
Parent and Newco in writing.
6.1 STOCKHOLDER APPROVALS. This Agreement and the Merger shall have
been submitted to a vote of the Company's stockholders entitled to vote
thereon at a meeting of such stockholders called for such purpose, in
accordance with the Md GCL (including, without limitation, SECTIONS 3-201 ET
SEQ. thereof respecting dissenting stockholders' rights) and with the
Articles of Incorporation, as amended, and the By-Laws of the Company and
shall have been approved and adopted by the holders of the requisite number
of shares of the Company Common Stock under such applicable law and the
Articles of Incorporation, as amended, and By-Laws of the Company, and all
other corporate action necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation of the
Merger and other transactions contemplated hereby shall have been duly and
validly taken, and the Company shall have full corporate power and authority
to consummate the Merger and perform this Agreement on the terms provided
herein.
6.2 CONSENTS. (a) Other than Consents that if not obtained could not
reasonably be expected to have a Material Adverse Effect, all of the Consents
identified or referred to on SCHEDULE 4.1.18 and any other Consents necessary
for the consummation of the transactions contemplated by this Agreement by the
Company shall have been obtained.
(b) Without limiting the generality of the foregoing, the pre-merger
filing and waiting period requirements applicable to the Merger under the HSR
Act shall have expired or shall have been terminated.
6.3 REPRESENTATIONS AND WARRANTIES TRUE. Each of the representations and
warranties of the Company contained in this Agreement and any Schedule or Annex
hereto or instrument, certificate, or agreement delivered to Parent or Newco
pursuant
- 32 -
<PAGE>
hereto will be true and correct at and as of the Closing Date as if made on
and as of such date and time, other than any such representations and
warranties which are made as of a specific date, which shall be true and
correct at and as of such date, in each case except to the extent affected by
the transactions contemplated hereby or to the extent that the breach thereof
could not reasonably be expected to have a Material Adverse Effect, and the
Company shall have delivered to Parent a certificate to such effect signed,
on behalf of the Company, by the President and the Chief Financial Officer of
the Company.
6.4 PERFORMANCE BY THE COMPANY. Each of the obligations of the Company to
be performed by it on or before the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or prior to
the Closing, and the Company shall have delivered to Parent a certificate to
such effect signed, on behalf of the Company, by the President and the Chief
Financial Officer of the Company.
6.5 FUNDED INDEBTEDNESS. Parent shall have received a true, correct,
complete and executed Certificate of Indebtedness, as required under SECTION
3.3(b) hereof.
6.6 ESCROW AGREEMENT. The requisite parties shall have executed and
delivered the Escrow Agreement.
6.7 EXCHANGE AGREEMENT. The requisite parties shall have executed and
delivered the Exchange Agreement.
6.8 OPINION OF COUNSEL. Parent and Newco shall have received a favorable
opinion, addressed to Parent and Newco and dated the Closing Date of the Merger,
of Berliner, Corcoran & Rowe, L.L.P., special counsel to the Company, in form
and substance reasonably satisfactory to them.
6.9 MISCELLANEOUS. The Company shall deliver to Parent and Newco such
other certificates, instruments and other documents as are reasonably requested
by Parent and Newco.
6.10 NO PROCEEDING OR LITIGATION. No action, suit, proceeding or
investigation shall have been commenced, nor any law, rule or regulation
enacted, which questions or challenges the validity of this Agreement, of any
action taken or to be taken in connection herewith, the consummation of the
transactions contemplated herein or imposing damages or relief in connection
with any of the foregoing.
6.11 DEMANDS OF DISSENTING STOCKHOLDERS. There shall not be any written
demands or objections made under SECTIONS 3-202 and 3-203 of the Md GCL which
have not been withdrawn or otherwise have become ineffective under the Md GCL by
persons holding in the aggregate more than five percent (5%) of the shares of
the Common Stock outstanding immediately prior to Closing.
6.12 INFORMATION; NO ADVERSE CHANGE. (a) The Company shall have provided to
Parent and Newco, such financial statements, plans of operation, cash flow
analyses,
- 33 -
<PAGE>
projections, and other financial information with respect to the Company and
any Subsidiary as are reasonably requested by Parent and Newco.
(b) Since the date of the Interim Balance Sheet, there shall not have
been any event, occurrence or development with respect to the Company,
Shenandoah Valley Press or Port City Press having, or which could reasonably be
expected to have, a Material Adverse Effect.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF COMPANY
All obligations of the Company to consummate the Merger and the other
transactions contemplated under this Agreement are subject to the fulfillment
and satisfaction, prior to or at the time of the Closing (at which the Effective
Time is scheduled by the parties to occur), of each of the following conditions,
any one or more of which may be waived by the Company in writing. Obtaining
financing to consummate the Transaction shall not be a condition to performance
under this Agreement.
7.1 STOCKHOLDER APPROVALS. This Agreement and the Merger shall be
submitted to a vote of the Company's stockholders entitled to vote thereon at a
meeting of such stockholders called for such purpose, in accordance with the Md.
Code (including, without limitation, SECTIONS 3-201 ET SEQ. respecting
dissenting stockholders' rights) and with the Articles of Incorporation, as
amended, and ByLaws of the Company and shall have been approved and adopted by
the holders of the requisite number of shares of the Company Common Stock under
such applicable law and the Articles of Incorporation, as amended, and By-Laws
of the Company, and all other corporate action necessary to authorize the
execution, delivery and performance of this Agreement by the Company and the
consummation of the Merger and other transactions contemplated hereby shall have
been duly and validly taken, and the Company shall have full corporate power and
authority to consummate the Merger on the terms provided herein.
7.2 CONSENTS. (a) All Consents listed on SCHEDULE 4.2.2 and any other
Consent necessary for the consummation by Parent and Newco of the transactions
contemplated by this Agreement shall have been obtained.
(b) Without limiting the generality of the foregoing, the pre-merger
filing and waiting period requirements applicable to the Merger under the HSR
Act shall have expired or shall have been terminated.
7.3 REPRESENTATIONS AND WARRANTIES TRUE. At the Effective Time, the
representations and warranties of Parent and Newco contained in this Agreement
or any Schedule or Annex hereto or any certificate delivered to the Company
pursuant hereto or otherwise made in writing to the Company in connection with
the transactions contemplated hereby will be true and correct in all material
respects at and as of such date and time as if made on and as of such date and
time, other than any such
- 34 -
<PAGE>
representations and warranties which are make as of a specified date, which
shall be true and correct in all material respects at and as of such date, in
each case, except to the extent affected by the transactions contemplated
hereby and except to the extent waived by the Company, at the Effective Time,
each of Parent and Newco shall have delivered to the Company a certificate to
such effect signed, on behalf of Parent, by the President and Chief Financial
Officer of Parent, and, on behalf of Newco, by an authorized officer of Newco.
7.4 PERFORMANCE BY PARENT AND NEWCO. Each of the obligations of Parent
and Newco to be performed by them on or before the Effective Time (as the case
may be) pursuant to the terms of this Agreement shall have been duly performed
in all material respects at the Effective Time (as the case may be), except to
the extent waived by the Company and, at the Effective Time, each of Parent and
Newco shall have delivered to the Company a certificate to such effect signed,
on behalf of Parent, by the President and Chief Financial Officer of Parent and,
on behalf of Newco, by an authorized officer of Newco.
7.5 ESCROW AGREEMENT. The requisite parties shall have executed and
delivered the Escrow Agreement.
7.6 EXCHANGE AGREEMENT. The requisite parties shall have executed and
delivered the Exchange Agreement.
7.7 OPINION OF COUNSEL. The Company shall have received a favorable
opinion, addressed to it and dated the Effective Time, of Brobeck, Phleger &
Harrison, LLP, counsel for Newco and Parent, in form and substance reasonably
satisfactory to it.
7.8 NO PROCEEDING OR LITIGATION. No action, suit, proceeding or
investigation shall have been commenced which questions the validity of this
Agreement or of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated herein.
ARTICLE VIII.
INDEMNIFICATION
8.1 LIMITED RESPONSIBILITY FOR COMPANY WARRANTIES. The representations,
warranties, covenants and agreements of the Company set forth in SECTION 4.1
hereof (including the confirmation thereof at the Closing pursuant to SECTION
6.3 hereof) and in any Schedule, certificate, document, instrument or other
agreement delivered by the Company or any Subsidiary pursuant hereto (the
"COMPANY WARRANTIES" and individually a "COMPANY WARRANTY") are not and shall
not be deemed to be representations and warranties of the Stockholders. In the
event of breach of any one or more of the Company Warranties, any liability and
responsibility therefor shall be limited to the Indemnity Escrow Amount and the
Additional Escrow Amount as and to the extent provided herein and shall be on
the terms and conditions and within the limitations provided in SECTION 8.2
hereof.
- 35 -
<PAGE>
8.2 INDEMNIFICATION OF PARENT. (a) Subject to the terms, conditions and
limitations hereinafter provided in this SECTION 8.2, the Stockholders, by
virtue of the approval of the Merger, and without the further act of any
Stockholder, hereby agree to indemnify, defend and hold harmless Parent and the
Surviving Corporation from and against any Loss, as hereinafter defined, and
agree to pay to Parent and the Surviving Corporation from the Indemnity Escrow
Fund or the Additional Escrow Fund as provided herein and only therefrom the
amount of any Loss. As used herein, "LOSS" means any and all losses, damages,
liabilities, claims, actions, suits, proceedings, penalties, fines and all other
expenses, including without limitation the costs of defense thereof (including
reasonable attorneys' fees and disbursements), suffered or incurred by Parent or
the Surviving Corporation or any of their respective shareholders, officers,
directors or agents by reason of or arising out of (i) the breach of any Company
Warranty (other than the Company Warranty set forth in SECTION 4.1.24, which
shall not survive the Closing), such breach being determined for purposes of
this ARTICLE VIII without regard to any materiality or Material Adverse Effect
qualification set forth in such Company Warranties (as if such qualifications
were not part of such Company Warranties), and with respect to the Company
Warranties set forth in SECTION 4.1.21, without regard to the matters set forth
on SCHEDULE 4.1.21 (as if such Schedule were not part of this Agreement), or
(ii) the breach of any covenant or agreement made by the Company in this
Agreement (together with breaches under SUBSECTION (i) a "COMPANY BREACH"), but
subject to each and all of the terms, conditions and limitations set forth in
this ARTICLE VIII.
(b) The obligation of the Stockholders to indemnify Parent and the
Surviving Corporation pursuant to this SECTION 8.2 shall be limited in each of
the following respects:
(i) In the event of a breach of the Company Warranty set forth in
SECTION 4.1.2, the Surviving Corporation and Parent shall in good faith
seek recovery for their Losses under the D&O Policy, provided, however,
that the Surviving Corporation and Parent shall not be required to initiate
or pursue any legal action to seek such recovery. To the extent that the
Surviving Corporation and Parent have not recovered their Losses under the
D&O Policy, forty-five cents of each dollar of Loss shall be paid to the
Surviving Corporation or Parent, as the case may be, from each of the
Additional Escrow Fund and the Indemnity Escrow Fund (it being understood
that the Surviving Corporation and Parent shall not be entitled to any
indemnity with respect to ten cents of each dollar of Loss arising out of a
breach of the Company Warranty set forth in SECTION 4.1.2) until such time
as the amount then remaining in the Indemnity Escrow Fund shall have been
fully disbursed, or reserved in respect of a claim with respect to one or
more other Company Breaches or other claims which may be made against the
Indemnity Escrow Fund pursuant to this Agreement, in which case any
remaining Loss shall be paid from the amount then remaining in the
Additional Escrow Fund. In the event of any Loss as a result of any other
Company Breach, the amount finally determined to be due to Parent or the
Surviving Corporation as provided in SECTION 8.3 hereof shall be paid
solely from the amount then remaining in the Indemnity Escrow Fund.
- 36 -
<PAGE>
(ii) The amount required to be held in the Indemnity Escrow
Fund and the Additional Escrow Fund shall be reduced by one-third of the
Indemnity Escrow Amount and the Additional Escrow Amount on each of the
first three anniversary dates of the Closing Date less the aggregate Losses
claimed with respect to Company Breaches as to which Parent and/or the
Surviving Corporation shall have in good faith given the Stockholders (or
their duly authorized agent(s) or representative(s)) written notice
specifying the Company Warranty or Warranties or covenant or agreement
alleged to have been breached by reference to a specific subsection or
subsections of this Agreement and/or the relevant Schedule, certificate,
document, instrument or other agreement, together with a description in
reasonable detail of the nature and basis of the asserted breach (a "Notice
of Claim"), and against which a claim can be made by virtue of the terms
hereof that has not been resolved.
(iii) Notwithstanding the foregoing, other than with respect to a
breach of the Company Warranty set forth in SECTION 4.1.2, no
indemnification shall be due from either the Indemnity Escrow Fund or the
Additional Escrow Fund with respect to the first Two Hundred Fifty Thousand
Dollars ($250,000) of aggregate Losses (the "Deductible Amount") resulting
from one or more Company Breaches, provided that no Loss in connection with
a separate claim of less than Twenty Five Hundred Dollars ($2,500) shall
count against the Deductible Amount.
(iv) Unless a Notice of Claim with respect to the breach of any
Company Warranty is made by Parent and received by the Stockholder
Committee in accordance with the provisions of Section 8.3 prior to the
first anniversary of the Closing Date, neither Parent nor the Surviving
Corporation shall have any claim for any Loss resulting from a breach of
such Company Warranty, except that a Notice of Claim may be made for a Loss
arising in respect of the Company Warranties set forth in SECTIONS 4.1.2,
4.1.11 AND 4.1.21 provided it is received by the Stockholder Committee at
any time prior to the third anniversary of the Closing Date.
(v) The Indemnity Escrow Fund and the Additional Escrow Fund
shall be the sole means of providing funds pursuant to this SECTION 8.2.
Parent's recourse for Company Breaches shall be limited to the amount then
remaining in the Indemnity Escrow Fund and the Additional Escrow Fund and
available under the terms hereof with respect to the Loss claimed, and the
Stockholders shall never have personal liability for any obligation of the
Company under this Agreement.
8.3 NOTICE OF CLAIM; RIGHT TO DEFEND. If a third party commences any
action, suit or proceeding or asserts any claim, demand or assessment
(hereinafter individually or collectively referred to as a "THIRD PARTY CLAIM")
in respect of which Parent claims or proposes to claim a Loss, the Stockholder
Committee shall be given prompt notice thereof by Parent. Thereafter, Parent
shall furnish to the Stockholder Committee, in reasonable detail, such
information as it may have with respect to such claim, action, suit
- 37 -
<PAGE>
or proceeding, including copies of any summons, complaint, or other pleading
which may have been served or any written claim, demand, invoice, billing or
other document evidencing or asserting the same. Parent shall designate in
writing all information and documents which it furnishes to the Stockholder
Committee pursuant to this SECTION 8.3 as being with respect to a claim,
action, suit or proceeding under this SECTION 8.3. The Stockholders shall
have the right, acting through the Stockholder Committee, subject to the
provisions of this SECTION 8.3, to assume control of the defense, compromise
or settlement thereof if (a) the amount of the Third Party Claim does not
exceed the then remaining amount in the Indemnity Escrow Fund and/or the
Additional Escrow Fund, as the case may be, against which a claim may be
asserted under SECTION 8.2(b) hereof, and (b) the Stockholder Committee
acknowledges the intention of the Stockholders to so defend by written notice
to Parent within twenty (20) days after receipt of the notice of the Third
Party Claim. Parent shall be entitled to defend such claim until it receives
such notice. If the Stockholders are entitled to assume such defense and
control and elect to do so, (i) the defense against the Third Party Claim
shall be conducted by the Stockholder Committee, at the expense of the
Stockholders, with counsel selected by the Stockholder Committee and
reasonably satisfactory to Parent, (ii) Parent shall be entitled to
participate in (but not control) such defense with its counsel and at its
expense, (iii) the Stockholder Committee shall keep Parent fully advised as
to the conduct of the defense if Parent has chosen not to participate in the
defense, and (iv) no compromise or settlement shall be agreed to or made
without Parent's written consent, which shall not be unreasonably withheld,
delayed or conditioned. If the Stockholders elect to assume control of the
defense, but fail to defend against the Third Party Claim as aforesaid,
Parent may assume control of the defense and settle the Third Party Claim at
the Stockholders' expense (up to then remaining amount in the Indemnity
Escrow Fund and/or the Additional Escrow Fund, as the case may be).
If the Stockholders do not elect, or do not have the right, to assume
control of the defense, (x) Parent shall conduct the defense, with counsel
selected by Parent and reasonably satisfactory to the Stockholder Committee, (y)
the Stockholders, acting through the Stockholder Committee, shall be entitled to
participate in (but not control) such defense at their expense, and (z) Parent
shall keep the Stockholder Committee fully advised as to its conduct of such
defense, if the Stockholders have chosen not to participate in the defense.
Parent shall be free to compromise or settle such claim unless the Stockholder
Committee within ten (10) days after receipt of notice of the proposed
compromise or settlement admits in writing that the full amount of such claim if
adversely determined shall constitute a Loss for which indemnity shall be due to
Parent hereunder. If such admission is made, no compromise shall be agreed to
or made without the written consent of the Stockholder Committee, which shall
not be unreasonably withheld.
8.4 ACTION BY COMPANY STOCKHOLDERS. For purposes of this ARTICLE VIII, a
majority in interest of members of the Stockholder Committee, measured by the
number of shares of the Company Common Stock held by them on the date hereof,
shall be entitled to make all decisions required pursuant to this Article VIII
and to take any actions so determined and bind thereby all of the Company
Stockholders. No bond shall be required of the Stockholder Committee, and the
Stockholder Committee shall not
- 38 -
<PAGE>
receive any compensation for services rendered. A decision, act, consent or
instruction of the Stockholder Committee shall constitute a decision of all
of the Stockholders on the matters referred to in this ARTICLE VIII and shall
be final, binding and conclusive upon each of the Stockholders, and the
Escrow Agent, Parent and the Surviving Corporation may rely upon any such
decision, act, consent or instruction of the Stockholder Committee as being
the decision, act, consent or instruction of each and every Stockholder. The
Escrow Agent, Parent and the Surviving Corporation are hereby relieved from
any liability to any person for any acts done by them in accordance with any
such decision, act, consent or instruction of the Stockholder Committee.
8.5 SOLE AND EXCLUSIVE REMEDY. The provisions for indemnification as
provided in this ARTICLE VIII shall constitute Parent's and the Surviving
Corporation's sole and exclusive remedy for any Losses sustained by Parent or
the Surviving Corporation or any of their respective shareholders, officers,
directors or agents and shall be limited as provided in this ARTICLE VIII.
8.6 INDEMNIFICATION OF STOCKHOLDERS. Parent shall indemnify, defend, and
hold the Stockholders harmless from and against any claims, expenses, damages,
liabilities, losses, and expenses (including reasonable attorney's fees and
disbursements) by reason of, or arising out of the breach of any representation,
warranty or covenant of Parent or Newco contained in this Agreement or the
conduct of the business and operations of the Company or the Subsidiaries after
the Effective Time. The Stockholder Committee shall act for the Stockholders
with respect to any such claim for indemnification and the provisions of SECTION
8.3 shall apply thereto except that the references to the parties shall be
reversed as appropriate.
ARTICLE IX.
MISCELLANEOUS
9.1 TERMINATION. This Agreement may be terminated, by written notice by
the terminating party to the other parties, at any time prior to the Effective
Time, whether before or after approval by the Company's Stockholders or
authorization by the shareholders of Newco:
(a) by mutual consent of Newco and the Company; or
(b) by Newco if any of the conditions set forth in ARTICLE VI hereof
shall not have been fulfilled on or prior to the date specified for fulfillment
thereof, or shall have become incapable of fulfillment, or Newco shall have
learned of any misrepresentation of a material fact which has a material adverse
effect on the Company and its Subsidiaries taken as a whole, and any of the
foregoing shall not have been waived by Newco; or
(c) by the Company if any of the conditions set forth in ARTICLE VII
hereof shall not have been fulfilled on or prior to the date specified for
fulfillment thereof, or shall have become incapable of fulfillment, or the
Company shall have
- 39 -
<PAGE>
learned of any misrepresentation of a material fact, and any of the foregoing
shall not have been waived by the Company; or
(d) by the Company or by Parent if the Effective Time has not
occurred on or before December 12, 1997, unless such failure so to consummate
the merger shall be due to the failure of the party seeking to terminate this
Agreement to perform in all material respects each of its obligations under
this Agreement required to be performed by it on or prior to the Effective
Time pursuant to the terms hereof; provided, however, that the December 12,
1997 date specified herein shall be extended to December 17, 1997 if BT Alex
Brown Incorporated shall have entered into a purchase agreement with respect
to at least $100,000,000 of senior subordinated notes of Parent (the "NOTE
OFFERING"), that is scheduled to close on or before December 17, 1997.
If this Agreement is terminated in accordance with the foregoing provisions,
all further obligations of the parties hereunder shall terminate, except that
nothing herein will relieve any party from liability for any breach of this
Agreement which gave rise to such termination.
9.2 [Intentionally Omitted.]
9.3 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that the other would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached and is entitled to enforce
specifically this Agreement and the terms and provisions thereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over Parent, Newco and the Company and the matter, in
addition to any other remedy to which they may be entitled, at law or in
equity.
9.4 EXPENSES. Except as otherwise provided in this Agreement, the Company
shall assume and bear all expenses, costs and fees incurred or assumed by the
Company Stockholders hereto and the Company in the preparation and execution of
this Agreement and compliance herewith, and Parent shall assume and bear all
expenses, costs and fees incurred or assumed by Newco and Parent in the
preparation and the execution of this Agreement and compliance herewith, in each
case whether or not the merger provided for herein shall be consummated.
9.5 PUBLIC ANNOUNCEMENTS. Except as may otherwise be required by law,
neither Parent nor Newco shall, directly or indirectly, make or cause to be made
any public announcement or issue any notice in any form with respect to this
Agreement or the transactions contemplated herein without the prior written
consent of the Company, and none of the Company or any Subsidiary shall,
directly or indirectly, make or cause to be made any public announcement or
issue any notice in any form with respect to this Agreement or the transactions
contemplated herein without the prior written consent of Parent.
- 40 -
<PAGE>
9.6 ASSIGNMENT; SUCCESSORS. This Agreement shall not be assigned by any
party hereto without the prior written consent of all of the other parties;
provided, however, that Parent and the Surviving Corporation may assign this
Agreement as collateral to the financial institutions providing the financing or
the refinancing of the senior credit facilities funding the transactions
contemplated hereby. This Agreement shall inure to the benefit of, and be
binding on and enforceable against, the successors and permitted assigns of the
respective parties hereto.
9.7 AMENDMENT AND MODIFICATION; WAIVERS. This Agreement or any term
hereof may be changed, waived, discharged or terminated only by an agreement in
writing signed by the party against which such change, waiver, discharge or
termination is sought to be enforced. No waiver by a party of any condition or
of any breach of any term, covenant, representation or warranty contained herein
shall be effective unless in writing, and no waiver in any one or more instances
shall be deemed to be a further or continuing waiver of any such condition or
breach in any other instances or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.
9.8 NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served, if in writing and delivered personally
or sent by telecopier, telex (with confirmation copy by any other means herein
provided) or registered or certified mail, postage prepaid, if to the Company at
the following address:
Judd's Incorporated
1500 Eckington Place, N.E.
Washington, D.C. 20002
Attention: John Broderick
FAX No. 202-636-9509
with copies to:
Berliner, Corcoran & Rowe, LLP
1101 17th Street, N.W., Suite 1100
Washington, D.C. 20036
Attention: Richard Landfield
FAX No. 202-293-9035
if to Newco or Parent at:
Perry Graphic Communications
575 West Madison Street
Madison, Wisconsin 53594
Attention: Craig Hutchison
FAX No. 414-478-1511
with a copy to:
- 41 -
<PAGE>
Novamil Corporation
1172-B Nicole Court
Glendora, California 91740
Attention: Thomas V. Bressan
FAX No. 909-599-8391
and to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attention: Kenneth R. Bender, Esq.
FAX No. (213) 239-1324
- 42 -
<PAGE>
and if to the Stockholder Agents or the Stockholder Committee at:
John J. Broderick
21125 Golf Estates Drive
Laytonsville, Maryland 20882
FAX No. 301-926-3461
or, in each case, at such other address as may be specified in writing, but
no such change shall be deemed to have been given until it is actually
received by the parties sought to be charged with its contents. All notices
and other communications given hereunder shall be effective upon delivery if
delivered personally or sent by telecopier or telex and if delivered by mail
shall be effective three business days after deposit in the United States
mail.
9.9 FURTHER ASSURANCES; RECORDS. (a) Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement. Each party shall provide the other party
or parties with access to all relevant documents and other information
pertaining to the Company and the Subsidiaries which are needed by such other
party or parties for the purposes of preparing tax returns or responding to an
audit by any governmental agency or for any other reasonable purpose. Such
access will be during normal business hours and not subject to time limitations,
except as provided below. Further, for a period extending three years after the
Effective Time, Newco shall not destroy or otherwise dispose of any records of
the Company or the Subsidiaries, or permit the Company or the Subsidiaries to do
so, relating to the period prior to Newco's merger with the Company. After such
three-year period until six years after the Effective Time, Newco may destroy or
otherwise dispose of (or permit the Company or the Subsidiaries to destroy or
other dispose of) such records if Newco, the Company or the Subsidiary shall
have first offered in writing to surrender such records to the members of the
Stockholder Committee and no such person shall have agreed in writing to take
possession thereof during the thirty-day period after such offer is made. After
such six-year period Newco may destroy or otherwise dispose of such records and
may permit the Company or the Subsidiaries to destroy or otherwise dispose of
such records.
(b) The Company shall cooperate with Parent and Newco in connection
with the Note Offering, including, without limitation, providing Parent and
Newco and their representatives with access to such personnel, documents and
other information, in each case as may be reasonably requested in connection
therewith.
9.10 HEADINGS; ENTIRE AGREEMENT; COUNTERPARTS; GOVERNING LAW. The article
and section headings and the table of contents contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement, together with the Schedules,
Annexes and Exhibits hereto, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement may be executed in
any number of counterparts, each
- 43 -
<PAGE>
of which shall be deemed an original, and all of which, together, shall
constitute one and the same instrument. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the law of
the State of New York (other than the law governing conflict of law
questions).
IN WITNESS WHEREOF, the parties have duly executed this Plan and Agreement
of Merger as of the date first above written.
NAOMI ACQUISITION CORP.
By: /s/ Thomas V. Bressan
-------------------------------
Name: Thomas V. Bressan
----------------------------
Title: Vice President & Secretary
----------------------------
PPC HOLDINGS, INC.
By: /s/ Thomas V. Bressan
------------------------------
Name: Thomas V. Bressan
----------------------------
Title: Secretary
---------------------------
JUDD'S, INCORPORATED
By: /s/ John J. Broderick
------------------------------
Name: John J. Broderick
----------------------------
Title: President
---------------------------
- 44 -
<PAGE>
GUARANTY
In order to induce Judd's, Incorporated (the "Company") to enter into
the above Plan and Agreement of Merger dated as of October 17, 1997 (the
"Agreement") with PPC Holdings, Inc. ("Parent") and Newco ("Newco"), and in
consideration of the benefits and advantages to be derived from the Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Perry Graphic Communications, Inc., a Delaware
corporation ("Perry"), hereby unconditionally and irrevocably guarantees to
the Company and its Stockholders the due and punctual performance of and
compliance with each and every covenant, term and condition contained in the
Agreement to be performed or complied with by Parent and Newco in accordance
with the terms of the Agreement. Such guaranty is an absolute,
unconditional, primary, present and continuing guaranty of performance and
compliance and not of collectibility and is in no way conditioned or
contingent upon any attempt to enforce performance or compliance by Parent or
Newco or upon any other action, occurrence, event or circumstance whatsoever.
Upon any default by Parent or Newco punctually to perform or comply with any
covenant, term or condition under the Agreement to be performed or complied
with by Parent or Newco, Perry will promptly perform or comply therewith or
cause the same to be performed or complied with. Upon consummation of the
transactions contemplated by the Agreement at the Effective Time (as defined
in the Agreement), this guaranty shall terminate and be of no force and
effect.
IN WITNESS WHEREOF, this Guaranty has been duly executed by Perry as of the
17th day of October 1997.
PERRY GRAPHIC COMMUNICATIONS, INC.
By: /s/ Thomas V. Bressan
-------------------------------
Its:
- 45 -
<PAGE>
ANNEX I
In addition to the words and terms elsewhere defined in the Agreement, the
following words and terms as used in this Agreement shall have the following
meanings, unless the context or use indicates another or different meaning or
intent:
ADDITIONAL ESCROW AMOUNT: the meaning specified in SECTION 3.3(a).
ADDITIONAL ESCROW FUND: the meaning specified in SECTION 3.3(a).
ADJUSTED TARGET WORKING CAPITAL: the meaning specified in SECTION 3.4(b).
ADJUSTED WORKING CAPITAL: the meaning specified in SECTION 3.4(a).
ADJUSTMENT AMOUNT: the meaning specified in SECTION 3.4(a).
ADJUSTMENT ESCROW AMOUNT: the meaning specified in SECTION 3.3(a).
ADJUSTMENT ESCROW FUND: the meaning specified in SECTION 3.3(a).
AGGREGATE DISSENTING SHARES AMOUNT: the meaning specified in SECTION
3.3(a).
AGREEMENT: the meaning specified in the introductory paragraph.
AMENDED ARTICLES: the meaning specified in SECTION 2.1.
AMENDED BYLAWS: the meaning specified in SECTION 2.1
BENEFIT PLANS: the meaning specified in SECTION 4.1.17.
BM&C: the meaning specified in SECTION 4.1.12.
CERTIFICATE OF INDEBTEDNESS: the meaning specified in SECTION 3.3(b).
CERTIFICATE OF MERGER: the meaning specified in SECTION 1.1.
CLOSING AND CLOSING DATE: the meanings specified in SECTION 1.3.
CLOSING BALANCE SHEET: the meaning specified in SECTION 3.5(b).
COBRA: the meaning specified in SECTION 4.1.21(i).
CODE: the meaning specified in SECTION 4.1.11(a).
COMPANY: the meaning specified in the introductory paragraph.
COMPANY BREACH: the meaning specified in SECTION 8.2(a).
- 46 -
<PAGE>
COMPANY COMMON STOCK: the meaning specified in the Recitals.
COMPANY TRANSACTION EXPENSES: all expenses and other amounts incurred
or accrued by the Company and the Company Stockholders in connection with the
initiation, negotiation, consummation and performance of this Agreement, the
Merger and all other transactions contemplated herein, including without
limitation, the fees and expenses of advisors, consultants, accountants,
lawyers, investment bankers, brokers, agents and other professionals,
including the fee payable to BM&C.
COMPANY WARRANTIES: the meaning specified in SECTION 8.1.
CONSENT: the meaning specified in SECTION 4.1.19.
CONSTITUENT CORPORATION: the meaning specified in the introductory
paragraph.
DISSENTING SHARES: the meaning specified in SECTION 3.8.
D & O POLICY: the meaning specified in SECTION 5.10.
EFFECTIVE TIME: the meaning specified in SECTION 1.1.
ENCUMBRANCE: the meaning specified in SECTION 4.1.7.
ENVIRONMENT: the meaning specified in SECTION 4.1.22(g).
ENVIRONMENTAL LAWS: the meaning specified in SECTION 4.1.22(g).
ENVIRONMENTAL NOTICE: the meaning specified in SECTION 4.1.22(g).
ERISA: the meaning specified in SECTION 4.1.21(A).
ERISA AFFILIATE: the meaning specified in SECTION 4.1.21(a).
ESCROW AGENT: the meaning specified in SECTION 3.3(c.
ESCROW AGREEMENT: the meaning specified in SECTION 3.3(c).
ESCROW AMOUNTS: the meaning specified in SECTION 3.3(a).
ESTIMATED ADJUSTMENT AMOUNT: the meaning specified in SECTION 3.4(b).
EXCHANGE AGENT: the meaning specified in SECTION 3.6(a).
FINANCIAL STATEMENTS: the meaning specified in SECTION 4.1.4(a).
FINANCING AGREEMENTS: the meaning specified in SECTION 4.2.5.
- 47 -
<PAGE>
FUNDED INDEBTEDNESS: the meaning specified in SECTION 3.3(b).
GOVERNMENTAL AUTHORIZATIONS: the meaning specified in SECTION 4.1.10.
HSR ACT: the meaning specified in SECTION 4.1.19.
INDEMNITY ESCROW ACCOUNT: the meaning specified in SECTION 8.2(b).
INDEMNITY ESCROW AGREEMENT: the meaning specified in SECTION 8.2(b).
INDEMNITY ESCROW AMOUNT: the meaning specified in SECTION 3.3(a).
INDEMNITY ESCROW FUND: the meaning specified in SECTION 3.3(a).
INDEPENDENT ACCOUNTANT: the meaning specified in SECTION 3.5(b).
INTELLECTUAL PROPERTY: the meaning specified in SECTION 4.1.17(c).
INTERIM BALANCE SHEET: the meaning specified in SECTION 4.1.4(b).
KNOWLEDGE: with respect to an individual making a representation to his or
her "knowledge" or having "knowledge," those facts and circumstances personally
known by such individual; and with respect to an entity making a representation
to its "knowledge" or having "knowledge," those facts and circumstances
personally known by any officer or director of such entity identified on ANNEX
II attached hereto.
LIMITATION DATE: the meaning specified in SECTION 8.2(b)(i).
LOSS: the meanings specified in SECTION 8.2(a).
MATERIALS: the meaning specified in SECTION 4.1.22(g).
MATERIAL ADVERSE EFFECT: the meaning specified in SECTION 4.1.1(a).
MATERIAL CONTRACTS: the meaning specified in SECTION 4.1.16.
MD GCL: the meaning specified in SECTION 1.1.
MERGER: the meaning specified in the Recitals.
MULTIEMPLOYER PLAN: the meaning specified in SECTION 4.1.21(a).
NEWCO: the meaning specified in the introductory paragraph.
NEWCO COMMON STOCK: the meaning specified in the Recitals.
- 48 -
<PAGE>
NOMINAL AGGREGATE PER SHARE CASH AMOUNT: the meaning specified in
SECTION 3.3(a).
NOMINAL CONSIDERATION: the meaning specified in SECTION 3.3(a).
NOMINAL PER SHARE CASH AMOUNT: the meaning specified in SECTION 3.3(a).
NOTE OFFERING: the meaning specified in SECTION 9.1.
OBJECTION NOTICE: the meaning specified in SECTION 3.5(b).
OPERATING COMPANY: the meaning specified in SECTION 4.2.6.
OPERATING COMPANY FINANCIALS: the meaning specified in SECTION 4.2.6.
ORDINARY COURSE OF BUSINESS: the meaning specified in SECTION 4.1.6.
ORDINARY COURSE OF BUSINESS: the meaning specified in SECTION 4.1.6.
OTHER BENEFIT PLANS: the meaning specified in SECTION 4.1.21(a).
PARENT: the meaning specified in the introductory paragraph.
PENSION PLAN: the meaning specified in SECTION 4.1.21(a).
PER SHARE APPRAISAL AMOUNT: the meaning specified in SECTION 3.8(a).
PERMITS: the meaning specified in SECTION 4.1.22(a).
PRE-CLOSING FINANCIAL STATEMENTS: the meaning specified in SECTION 3.4(b).
PROPOSAL: the meaning specified in SECTION 5.4.
7% PREFERRED STOCK: the meaning specified in the Recitals.
SHARES: all shares of Common Stock, par value $1.00 per share, of the
Company issued and outstanding immediately prior to the Effective Time.
STOCKHOLDER AGENTS: the meaning specified in SECTION 3.3(d).
STOCKHOLDER COMMITTEE: John J. Broderick and two persons designated by him
in a written notice delivered to Parent at least two days prior to the Closing
Date.
STOCKHOLDERS: the holders of shares of Common Stock of the Company
immediately prior to the Effective Time.
STOCKHOLDERS' ACCOUNTANT: the meaning specified in SECTION 3.5(b).
- 49 -
<PAGE>
SUBSIDIARY: the meaning specified in SECTION 4.1.1(b).
SURVIVING CORPORATION: the meaning specified in the introductory
paragraph.
SURVIVING CORPORATION'S ACCOUNTANT: the meaning specified in SECTION
3.5(b).
SURVIVING CORPORATION'S COMPUTATION: the meaning specified in
SECTION 3.5(b).
TARGET WORKING CAPITAL: the meaning specified in SECTION 3.4(a).
TAX RETURN: the meaning specified in SECTION 4.1.11(c).
TAXES: the meaning specified in SECTION 4.1.11(b).
THIRD PARTY CLAIM: the meaning specified in SECTION 8.3.
UNAUDITED INTERIM FINANCIALS: the meaning specified in SECTION 4.1.4(b).
WARN ACT: the meaning specified in SECTION 4.1.18.
WELFARE PLAN: the meaning specified in SECTION 4.1.21(a).
- 50 -
<PAGE>
EXHIBIT A
ARTICLES OF MERGER
OF
NAOMI ACQUISITION CORP.
AND
JUDD'S, INCORPORATED
FIRST: Naomi Acquisition Corp. and Judd's, Incorporated, being the
corporations which are the parties to these Articles of Merger, do hereby agree
to effect a merger of said corporations upon the terms and conditions herein set
forth.
SECOND: The name of the successor corporation is Judd's, Incorporated,
which is a corporation incorporated in the State of Maryland under the provision
of the Maryland General Corporation Law and with its principal office in the
State of Maryland located in Baltimore City, and which will continue its
corporate existence under its present name pursuant to the provision of the
Maryland General Corporation Law.
THIRD: The name of the corporation to be merged into the successor
corporation is Naomi Acquisition Corp., which is a corporation incorporated in
the State of Maryland under the provisions of the Maryland General Corporation
Law with its principal office in the State of Maryland located in Baltimore
City, and the corporate existence of which will cease upon the effective date of
the merger pursuant to the provisions of the Maryland General Corporation Law.
Naomi Acquisition Corp. owns no interest in land in the State of Maryland.
FOURTH: The authorized share structure of each of the corporations which
is a party to these Articles of Merger at the time of execution thereof is as
follows:
NAOMI ACQUISITION CORP. JUDD'S, INCORPORATED
----------------------- --------------------
Total number of
shares of all
classes: 1,000 3,100,000
Number and par 1,000 shares of - 2,500,000 shares
value of shares of Common Stock, $.001 of Common Stock,
each class: par value $1 par value
- 100,000 shares
of 7% Preferred
Stock, $10 par
value
- 500,000 shares
of Director
Classified
Preferred Stock,
$100 par value
<PAGE>
NAOMI ACQUISITION CORP. JUDD'S, INCORPORATED
----------------------- --------------------
Number of shares
without par value
of each class: 0 0
----------- -----------
Aggregate par
value of all shares
with par value: $1 $53,500,000
----------- ------------
The merger herein provided for changes in the authorized share structure of
Judd's, Incorporated so that said authorized share structure will be as follows
on the effective date of the merger:
Total number of
shares of all
classes: 1,000 SHARES OF COMMON STOCK
----------------------------
Number and par
value of shares
of each class: 1,000 SHARES OF COMMON STOCK, $.001 PAR VALUE
---------------------------------------------
Number of shares
without par value
of each class: 0
----------- ----------
Aggregate par value
of all shares with
par value: $1
----------- ----------
FIFTH: Each issued share of stock of Naomi Acquisition Corp. shall, upon
the effective date of the merger, be converted into one share of stock of
Judd's, Incorporated. The issued shares of stock of Judd's, Incorporated which
are issued as of the effective date of the merger shall be converted into and
shall become, by virtue of the merger and without any further action by the
holders thereof, the right to receive that number of dollars in cash.
SIXTH: The terms and conditions of the merger herein set forth were
advised, authorized, and approved by Naomi Acquisition Corp. in the manner and
by the vote required by its charter and the provisions of the Maryland General
Corporation Law, and the said merger was approved in the manner hereinafter set
forth.
The terms and conditions of the merger herein set forth were advised,
authorized, and approved by Judd's, Incorporated in the manner and by the vote
required by its
2
<PAGE>
charter and the provisions of the Maryland General Corporation Law, and the
said merger was approved in the manner hereinafter set forth.
SEVENTH: The merger was duly advised by the Board of Directors of Naomi
Acquisition Corp. in the following manner. The Board of Directors of the
corporation adopted a resolution declaring that the merger of Naomi
Acquisition Corp. into Judd's, Incorporated is advisable on substantially the
terms and conditions set forth or referred to in said resolution. Said
resolution of the Board of Directors was adopted without a meeting by a
written consent dated as of October 17, 1997 by all of the members of the
Board of Directors.
The merger was duly advised by the Board of Directors of Judd's,
Incorporated in the following manner. The Board of Directors of the
corporation adopted a resolution declaring that the merger of Naomi
Acquisition Corp. into Judd's, Incorporated is advisable on substantially the
terms and conditions set forth or referred to in said resolution. Said
resolution of the Board of Directors was adopted at a meeting duly held on
October 17, 1997, at which a quorum was present, and at which the Board acted
by at least a majority of its members present thereat.
EIGHTH: The Board of Directors of Naomi Acquisition Corp. directed the
Secretary of the corporation to prepare a written notice of the time, place
and purpose of a meeting of stockholders to take action upon the proposed
merger and the aforesaid terms and conditions and to furnish a copy of said
notice to all of the stockholders of the corporation entitled to vote upon
the proposed merger and the aforesaid terms and conditions unless said
stockholders shall duly waive notice of the meeting.
The Board of Directors of Judd's, Incorporated directed the Secretary of
the corporation to prepare a written notice of the time, place, and purpose
of a meeting of stockholders to take action upon the proposed merger and the
aforesaid terms and conditions and to furnish a copy of said notice to all of
the stockholders of the corporation entitled to vote upon the proposed merger
and the aforesaid terms and conditions unless said stockholders shall duly
waive notice of the meeting.
NINTH: The merger and the aforesaid terms and conditions were duly
approved by the stockholders of Naomi Acquisition Corp. in the following
manner. All of the stockholders entitled to vote thereon approved the same
without a meeting by a written consent signed by them.
The merger and the aforesaid terms and conditions were duly approved by
the stockholders of Judd's, Incorporated at a meeting of stockholders duly
held on November 17, 1997 pursuant to notice duly given. The stockholders
approved the same by the affirmative vote of at least two-thirds of all of
the votes entitled to be cast thereon.
TENTH: These Articles of Merger shall be effective as of the later of
(i) the time the State Department of Assessments and Taxation accepts these
Articles of Merger or (ii) December ____, 1997.
3
<PAGE>
ELEVENTH: The amendments to the charter of Judd's, Incorporated which are
to be effected as part of the merger are to amend and restate the entire
Articles of Incorporation and to substitute therefor the following Amended and
Restated Articles of Incorporation:
* * *
THIS IS TO CERTIFY
FIRST: That the undersigned, FRANCIS B. BROGAN, JR., whose
post office address is 730 Fifteenth Street, N.W., Suite 800,
Washington, D.C., 20005, being at least eighteen (18) years of age,
does hereby form a corporation under and by virtue of the general laws
of the State of Maryland.
SECOND: The name of the corporation is Judd's, Incorporated.
THIRD: The purposes for which the corporation is formed are as
follows:
(a) To engage in all aspects of the businesses of
printing, publishing, binding, composition, plate making,
publication distribution and direct-mailing, directly or
indirectly, by any and all means and processes.
(b) To purchase, subscribe for, or otherwise acquire
and own, hold, use, sell, assign, transfer, mortgage,
pledge, exchange, or otherwise dispose of real and personal
property of every kind and description, including shares of
stock, bonds, debentures, notes, evidences of indebtedness,
and other securities, contracts, or obligations of any
corporation or corporations, association or associations,
domestic or foreign, and to pay therefor in whole or in part
in cash or by exchanging therefor stocks, bonds, or other
evidences of indebtedness or securities of this or any other
corporation, and while the owner or holder of any such real
or personal property, stocks, bonds, debentures, notes,
evidences of indebtedness or other securities, contracts, or
obligations, to receive, collect, and dispose of the
interest, dividends and income arising from such property,
and to possess and exercise in respect thereof, all the
rights, powers and privileges of ownership, including all
voting powers on any stocks so owned.
(c) To aid either by loans or by guaranty of
securities or in any other manner, any corporation, domestic
or foreign, any shares of stock, or any bonds,
4
<PAGE>
debentures, evidences of indebtedness or other securities whereof
are held by this corporation or in which it shall have any
interest, and to do any acts designed to protect, preserve,
improve, or enhance the value of any property at any time held or
controlled by this corporation or in which it at that time may be
interested.
(d) To purchase, receive, lease or otherwise acquire;
to own, hold, use, improve, and otherwise deal in and with;
to sell, convey, mortgage, pledge, lease, exchange, transfer
or otherwise dispose of real and personal property,
mortgages, chattels real and all interest and rights
therein.
(e) To manage, supervise and operate real property,
personal property, buildings and structures; to negotiate
and consummate for itself and for others or both, leases and
other contracts with respect to such property; to enter
contracts, either as principal or as agent, for the
furnishing, maintenance, repair or improvement of any
property the corporation owns, leases, manages, supervises
or operates.
(f) To borrow money and to secure loans by pledge,
mortgage or assignment of its interest in real or personal
property or both and to issue its notes, bonds, debentures,
and other obligations as evidence thereof and the security
therefor.
(g) To purchase, acquire, invest in, manage, exchange,
own or hold the stock or assets of other corporations or
entities and to do every act and thing incident to the
ownership thereof, including the direction of the operations
of any lawful business that such other corporations or
entities may be engaged in through the ownership of stock or
assets therein, or otherwise.
(h) To conduct its business, carry on its operation,
have officers and exercise its corporate powers in any
state, territory, district or possession of the United
States, and in any foreign country.
(i) To such extent as a corporation organized under
the laws of the State of Maryland may now or hereafter
lawfully do, to do, either as principal, agent, or
otherwise, either alone or in association with other
corporations, firms, associations, or individuals, all and
5
<PAGE>
everything necessary, suitable, convenient, or proper for,
or in connection with, or incident to, the accomplishment of
any of the purposes or the attainment of any one or more of
the objects herein enumerated, or designed directly or
indirectly to promote the interest of this corporation, or
to enhance the value of its property (including without
limitation effecting any acquisition, consolidation, merger
or other business combination with any other person(s) or
entity or entities); and in general to do any and all things
and exercise any and all powers, rights, and privileges,
which a corporation may now or hereafter be organized to do
or to exercise under the General Corporation Law of the
State of Maryland or under any act amendatory thereof,
supplemental thereto, or substituted therefor.
(j) The purposes, powers, rights and privileges
provided in these Articles of Incorporation are not deemed
to be in limitation of similar, other, or additional
purposes, powers, rights, and privileges granted or
permitted to this corporation by the laws of the State of
Maryland under which this corporation is incorporated.
FOURTH: The duration of the corporation shall be perpetual.
FIFTH: The post office address of the principal office of the
corporation is 575 West Madison Street, Madison, Wisconsin 53594.
SIXTH: The name and the post address of the resident agent of
the corporation in Maryland are National Registered Agents, Inc. of
MD, 11 East Chase Street, Baltimore City, Maryland 21202.
SEVENTH: The corporation has authority to issue One Thousand
(1,000) shares of stock, all of which are of a par value of $.001 each
and classified as Common Stock. The aggregate par value of all the
shares of all classes is $1.
EIGHTH: No holder of any of the shares of the corporation
shall, as such holder, have any right to purchase or subscribe for any
shares of any class which the corporation may issue or sell, whether
or not such shares are exchangeable for any shares of the corporation
of any other class or classes, and whether such shares are issued out
of the number of shares authorized by the Articles of Incorporation of
the corporation as originally filed, or by any amendment thereof, or
out of shares of the corporation acquired by it after the issue
thereof, nor shall any holder of any of the shares of the corporation,
as such holder, have any right to purchase or subscribe for any
obligations which the corporation may issue or sell that shall be
convertible into, or
6
<PAGE>
exchangeable for, any shares of the corporation of any class or classes,
or to which shall be attached or shall appertain to any warrant or
warrants or other instrument or instruments that shall confer upon the
holder thereof the right to subscribe for, or purchase from the
corporation any shares of any class or classes.
NINTH: The number of directors of the corporation shall be one
(1), which may be increased or decreased pursuant to the bylaws of the
corporation; and the name of the director who shall act until the
first annual meeting or until his successors is elected and qualified
is Thomas V. Bressan.
TENTH: The personal liability of all of the directors of the
corporation is hereby eliminated to the fullest extent allowed as
provided by the Maryland General Corporation Law, as the same may be
supplemented and amended.
ELEVENTH: The corporation shall, to the fullest extent legally
permissible under the provisions of the Maryland General Corporation
Law, as the same may be amended and supplemented, indemnify and hold
harmless any and all persons whom it shall have power to indemnify
under said provisions from and against any and all liabilities
(including expenses) imposed upon or reasonably incurred by him in
connection with any action, suit or other proceeding in which he may
be involved or with which he may be threatened, or other matters
referred to in or covered by said provisions both as to action in his
official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director or officer of the corporation. Such indemnification provided
shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any Bylaw, Agreement or Resolution
adopted by the stockholders entitled to vote thereon after notice.
* * *
IN WITNESS WHEREOF, these Articles of Merger are hereby signed for and on
behalf of Naomi Acquisition Corp. by its Vice-President, who does hereby
acknowledge that said Articles of Merger are the act of said corporation, and
who does hereby state under the penalties for perjury that the matters and facts
set forth therein with respect to authorization and approval of said merger are
true in all material respects to the best of his knowledge, information, and
belief; and these Articles of Merger have been signed for and on behalf of
Judd's, Incorporated by its President, who does hereby acknowledge that said
Articles of Merger are the act of said corporation, and who does hereby state
under the penalties for perjury that the matters and facts stated therein with
respect to authorization and approval of said merger are true in all material
respects to the best of his knowledge, information, and belief.
7
<PAGE>
Executed on this ____ day of December, 1997.
NAOMI ACQUISITION CORP.
By ---------------------------------
Thomas V. Bressan
Vice-President
Attest:
- ----------------------------------
Kenneth R. Dorff
Assistant Secretary
Executed on this ____ day of December, 1997.
JUDD'S, INCORPORATED
By ---------------------------------
John J. Broderick
President
Attest:
- ----------------------------------
Joseph J. Janela
Secretary
8
<PAGE>
EXHIBIT B-1
ARTICLES OF INCORPORATION
OF
NAOMI ACQUISITION CORP.
The undersigned, being at least eighteen years of age and acting as
incorporator, does hereby adopt the following Articles of Incorporation for the
purpose of forming a business corporation (hereinafter called the "corporation")
in the State of Maryland, under the provisions of the Maryland General
Corporation Law.
FIRST: The name of the incorporator is Patty H. Le, Esq., whose post
office address is 550 South Hope Street, Los Angeles, California 90071-2604.
SECOND: The name of the corporation is Naomi Acquisition Corp.
THIRD: The purposes for which the corporation is formed are as follows:
(a) To engage in all aspects of the businesses of printing,
publishing, binding, composition, plate making, publication
distribution and direct-mailing, directly or indirectly, by any and
all means and processes.
(b) To purchase, subscribe for, or otherwise acquire and own,
hold, use, sell, assign, transfer, mortgage, pledge, exchange, or
otherwise dispose of real and personal property of every kind and
description, including shares of stock, bonds, debentures, notes,
evidences of indebtedness, and other securities, contracts, or
obligations of any corporation or corporations, association or
associations, domestic or foreign, and to pay therefor in whole or in
part in cash or by exchanging therefor stocks, bonds, or other
evidences of indebtedness or securities of this or any other
corporation, and while the owner or holder of any such real or
personal property, stocks, bonds, debentures, notes, evidences of
indebtedness or other securities, contracts, or obligations, to
receive, collect, and dispose of the interest, dividends and income
arising from such property, and to possess and exercise in respect
thereof, all the rights, powers and privileges of ownership, including
all voting powers on any stocks so owned.
(c) To aid either by loans or by guaranty of securities or in
any other manner, any corporation, domestic or foreign, any shares of
stock, or any bonds, debentures, evidences of indebtedness or other
securities whereof are held by this corporation or in which it shall
have any interest, and to do any acts designed to protect, preserve,
improve, or enhance the value of any property at any time held or
controlled by this corporation or in which it at that time may be
interested.
(d) To purchase, receive, lease or otherwise acquire; to own,
hold, use, improve, and otherwise deal in and with; to sell, convey,
mortgage, pledge, lease,
1
<PAGE>
exchange, transfer or otherwise dispose of real and personal
property, mortgages, chattels real and all interest and rights
therein.
(e) To manage, supervise and operate real property, personal
property, buildings and structures; to negotiate and consummate for
itself and for others or both, leases and other contracts with respect
to such property; to enter contracts, either as principal or as agent,
for the furnishing, maintenance, repair or improvement of any property
the corporation owns, leases, manages, supervises or operates.
(f) To borrow money and to secure loans by pledge, mortgage or
assignment of its interest in real or personal property or both and to
issue its notes, bonds, debentures, and other obligations as evidence
thereof and the security therefor.
(g) To purchase, acquire, invest in, manage, exchange, own or
hold the stock or assets of other corporations or entities and to do
every act and thing incident to the ownership thereof, including the
direction of the operations of any lawful business that such other
corporations or entities may be engaged in through the ownership of
stock or assets therein, or otherwise.
(h) To conduct its business, carry on its operation, have
officers and exercise its corporate powers in any state, territory,
district or possession of the United States, and in any foreign
country.
(i) To such extent as a corporation organized under the laws of
the State of Maryland may now or hereafter lawfully do, to do, either
as principal, agent, or otherwise, either alone or in association with
other corporations, firms, associations, or individuals, all and
everything necessary, suitable, convenient, or proper for, or in
connection with, or incident to, the accomplishment of any of the
purposes or the attainment of any one or more of the objects herein
enumerated, or designed directly or indirectly to promote the interest
of this corporation, or to enhance the value of its property
(including without limitation effecting any acquisition,
consolidation, merger or other business combination with any other
person(s) or entity or entities); and in general to do any and all
things and exercise any and all powers, rights, and privileges, which
a corporation may now or hereafter be organized to do or to exercise
under the General Corporation Law of the State of Maryland or under
any act amendatory thereof, supplemental thereto, or substituted
therefor.
(j) The purposes, powers, rights and privileges provided in
these Articles of Incorporation are not deemed to be in limitation of
similar, other, or additional purposes, powers, rights, and privileges
granted or permitted to this corporation by the laws of the State of
Maryland under which this corporation is incorporated.
FOURTH: The duration of the corporation shall be perpetual.
FIFTH: The post office address of the principal office of the
corporation is 575 West Madison Street, Madison, Wisconsin 53594.
2
<PAGE>
SIXTH: The name and the post address of the resident agent of the
corporation in Maryland are National Registered Agents, Inc. of MD, 11 East
Chase Street, Baltimore City, Maryland 21202.
SEVENTH: The corporation has authority to issue One Thousand (1,000)
shares of stock, all of which are of a par value of $.001 each and classified as
Common Stock. The aggregate par value of all the shares of all classes is $1.
EIGHTH: No holder of any of the shares of the corporation shall, as such
holder, have any right to purchase or subscribe for any shares of any class
which the corporation may issue or sell, whether or not such shares are
exchangeable for any shares of the corporation of any other class or classes,
and whether such shares are issued out of the number of shares authorized by the
Articles of Incorporation of the corporation as originally filed, or by any
amendment thereof, or out of shares of the corporation acquired by it after the
issue thereof, nor shall any holder of any of the shares of the corporation, as
such holder, have any right to purchase or subscribe for any obligations which
the corporation may issue or sell that shall be convertible into, or
exchangeable for, any shares of the corporation of any class or classes, or to
which shall be attached or shall appertain to any warrant or warrants or other
instrument or instruments that shall confer upon the holder thereof the right to
subscribe for, or purchase from the corporation any shares of any class or
classes.
NINTH: The number of directors of the corporation shall be one (1),
which may be increased or decreased pursuant to the bylaws of the corporation;
and the name of the director who shall act until the first annual meeting or
until his successors is elected and qualified is Thomas V. Bressan.
TENTH: The personal liability of all of the directors of the corporation
is hereby eliminated to the fullest extent allowed as provided by the Maryland
General Corporation Law, as the same may be supplemented and amended.
ELEVENTH: The corporation shall, to the fullest extent legally permissible
under the provisions of the Maryland General Corporation Law, as the same may be
amended and supplemented, shall indemnify and hold harmless any and all persons
whom it shall have power to indemnify under said provisions from and against any
and all liabilities (including expenses) imposed upon or reasonably incurred by
him in connection with any action, suit or other proceeding in which he may be
involved or with which he may be threatened, or other matters referred to in or
covered by said provisions both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer of the corporation. Such
indemnification provided shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any Bylaw, Agreement or Resolution
adopted by the stockholders entitled to vote thereon after notice.
3
<PAGE>
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act.
Dated this _____ day of October, 1997.
--------------------------------
Patty H. Le, Incorporator
4
<PAGE>
EXHIBIT B-2
BYLAWS
OF
NAOMI ACQUISITION CORP.
ARTICLE I
OFFICES
Section 1. The registered office shall be in Baltimore City,
Maryland.
Section 2. The corporation may also have offices at such other places
both within and without the State of Maryland as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the State of Maryland, at such place as may be fixed
from time to time by the Board of Directors, or at such other place either
within or without the State of Maryland, as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Maryland, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1998, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
1
<PAGE>
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer
2
<PAGE>
than ten (10) nor more than sixty (60) days before the date of the meeting,
to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Articles of Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
3
<PAGE>
Section 10. Unless otherwise provided in the Articles of
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period.
Section 11. Unless otherwise provided in the Articles of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
if the following are filed with the records of stockholders' meetings:
(a) A unanimous written consent which sets forth the action and is
signed by each stockholder entitled to vote on the matter; and
(b) A written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to
vote at it.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board of Directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the entire Board of Directors
4
<PAGE>
and the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and shall qualify, unless sooner
displaced. A majority of the remaining directors, whether or not sufficient
to constitute a quorum, may fill a vacancy on the Board of Directors which
results from any cause except an increase in the number of directors. If
there are no directors in office, then an election of directors may be held
in the manner provided by statute.
The stockholders may elect a successor to fill a vacancy on the
Board of Directors which results from the removal of a director. A director
elected by the stockholders to fill a vacancy which results from the removal
of a director serves for the balance of the term of the removed director.
Section 3. The business and affairs of the corporation shall be
managed under the direction of its Board of Directors. All powers of the
corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders of the corporation by
law or by the Articles of Incorporation or these bylaws.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Maryland.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of
5
<PAGE>
Directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board of Directors may be
called by the president on two (2) days' notice to each director by mail or
forty-eight (48) hours notice to each director either personally or by
telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors
unless the Board of Directors consists of only one (1) director, in which
case special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the Board a majority of the
directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
Section 9. Unless otherwise restricted by the Articles of
Incorporation or these bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or
6
<PAGE>
of any committee thereof may be taken without a meeting, if a unanimous
written consent which sets forth the action is:
(a) Signed by each member of the Board of Directors or the committee;
and
(b) Filed with the minutes of proceedings of the Board of Directors
or the committee.
Section 10. Unless otherwise restricted by the Articles of
Incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors, or any committee, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of
the corporation. The Board may designate one (1) or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, 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 absent or disqualified member.
7
<PAGE>
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of
the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it; but no such committee shall have the
power or authority in reference to authorizing dividends on stock, issuing
stock other than as provided in Section 2-411(b) of the Maryland General
Corporation Law, recommending to the stockholders any action which requires
stockholder approval, amending the bylaws, and approving any merger or share
exchange which does not require stockholder approval. Such committee or
committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Articles of
Incorporation or these bylaws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
8
<PAGE>
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Articles of
Incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the Articles of Incorporation or of these bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Articles of Incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, a treasurer and a secretary.
The Board of Directors may elect from among its members a Chairman of the
Board and a Vice Chairman. The Board of Directors
9
<PAGE>
may also choose one (1) or more vice-presidents, assistant secretaries and
assistant treasurers. Any number of offices may be held by the same person,
unless the Articles of Incorporation or these bylaws otherwise provide;
PROVIDED, HOWEVER, that a person may not serve concurrently as both president
and vice-president of the corporation. A person who holds more than one (1)
office in the corporation may not act in more than one (1) capacity to
execute, acknowledge, or verify an instrument required by law to be executed,
acknowledged or verified by more than one (1) officer.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors, if the Board of Directors in its
judgment finds that the best interests of the corporation will be served by
such removal. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
10
<PAGE>
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall
be present. He shall have and may exercise such powers as are, from time to
time, assigned to him by the Board and as may be provided by law.
VICE CHAIRMAN
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman, if any, shall preside at all meetings of the Board of Directors and
of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board
and as may be provided by law.
PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of
the corporation; and in the absence of the Chairman of the Board and Vice
Chairman he shall preside at all meetings of the stockholders and the Board
of Directors; he shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any (or in the event there
be more than one (1) vice-president,
11
<PAGE>
the vice-presidents in the order designated by the directors, or in the
absence of any designation, then in the order of their election), shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or president, under whose supervision he shall be. He
shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by
the signature of such assistant secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the corporation
and to attest the affixing by his signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary
12
<PAGE>
and shall perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe.
TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall be the chief financial officer of
the corporation and shall have the custody of the corporate funds and
securities 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.
Section 14. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as treasurer and of the financial condition
of the corporation.
Section 15. If required by the Board of Directors, he shall give
the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of his
13
<PAGE>
inability or refusal to act, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman of the Board of Directors, the president or a vice-president
and counter-signed by the treasurer, an assistant treasurer, the secretary or
an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and
the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one (1)
class of stock, the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue shall be set forth in full
or summarized on the face or back of the certificate which the corporation
shall issue to represent such class, provided that, except as otherwise
provided in section 2-211 of the Maryland General Corporation Law, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class of
stock, a statement that the
14
<PAGE>
corporation will furnish without charge to each stockholder who so requests
the required information.
Section 2. Any of or all the signatures on the certificate may be
facsimile.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
15
<PAGE>
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder
or 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 or 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 (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Maryland.
16
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Articles of Incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums
as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation,
or for such other purposes as the directors shall think conducive to the
interest of the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
17
<PAGE>
SEAL
Section 5. The Board of Directors may adopt a corporate seal
having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Maryland". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Maryland, as those laws may be amended and
supplemented from time to time, indemnify any director or officer made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being a director or
officer of the corporation or a predecessor corporation or, at the
corporation's request, a director or officer of another corporation;
PROVIDED, HOWEVER, that the corporation shall indemnify any such agent in
connection with a proceeding initiated by such agent only if such proceeding
was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement or vote of stockholders or disinterested directors
or otherwise, both as to action in their official capacities and as to action
in another capacity while holding such office, (ii) continue as to a person
who has ceased to be a director or officer, and (iii) inure to the benefit of
the heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Section 6 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
18
<PAGE>
Expenses incurred by a director or officer of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the
fact that he is or was a director or officer of the corporation (or was
serving at the corporation's request as a director or officer of another
corporation) shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of a written
affirmation by the director or officer of his good faith belief that the
standard of conduct necessary for indemnification by the corporation as
authorized in these bylaws and in Section 2-418 of the Maryland General
Corporation Law has been met and a written undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that the standard of conduct has not been met. Notwithstanding the
foregoing, the corporation shall not be required to advance such expenses to
an agent who is a party to an action, suit or proceeding brought by the
corporation and approved by a majority of the Board of Directors of the
corporation which alleges willful misappropriation of corporate assets by
such agent, disclosure of confidential information in violation of such
agent's fiduciary or contractual obligations to the corporation or any other
willful and deliberate breach in bad faith of such agent's duty to the
corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director or officer who serves in
such capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any statement of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole
or in part upon any such statement of facts.
19
<PAGE>
The Board of Directors in its discretion shall have the power on
behalf of the corporation to indemnify any person, other than a director or
officer, made a party to any action, suit or proceeding by reason of the fact
that he, his testator or intestate, is or was an employee or agent of the
corporation.
Section 2-418(i) of the General Corporation Law of Maryland ensures
indemnification under this Section 6 of all directors, officers and employees
who have served any employee benefit plan of the corporation.
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Articles of
Incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
Articles of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
20
<PAGE>
Plan and Agreement of Merger by and among PPC Holdings, Inc., Naomi
Acquisition Corp. and Judd's Incorporated dated as of October 17, 1997.
- -------------------------------------------------------------------------------
Annexes II - IV and Schedules Omitted In Accordance
With Item 601(b)(2) of Regulation S-K
-------------------------------------
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted annex, schedule or exhibit to the Securities and Exchange Commission
upon request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
annex, schedule or exhibit so furnished.
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
PPC HOLDINGS, INC.
PPC Holdings, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of PPC Holdings,
Inc. was filed with the Secretary of State of Delaware on December 28, 1994
and amended by a Certificate of Amendment filed on April 26, 1995.
SECOND: The Restated Certificate of Incorporation of PPC Holdings,
Inc. in the form attached hereto as EXHIBIT A has been duly adopted in
accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
THIRD: The Restated Certificate of Incorporation so adopted reads
in full as set forth in EXHIBIT A attached hereto and is hereby incorporated
herein by this reference.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certificate of Incorporation this 10th day of December, 1997 and certifies
under penalty of perjury that the Restated Certificate is the act and deed of
the Corporation and that the statements herein are true.
/s/ Thomas V. Bressan
---------------------------------------
Thomas V. Bressan
Secretary
1.
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
PPC HOLDINGS, INC.
FIRST: The name of the corporation (hereinafter called the
"Corporation") is PPC Holdings, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of the registered agent of the Corporation in the State
of Delaware at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH:
A. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is One Million Seven Hundred
Seventy-Five Thousand (1,775,000) shares, consisting of One Million
(1,000,000) shares of Common Stock, par value of $.001 per share ("Common
Stock"), and Seven Hundred Seventy-Five Thousand (775,000) shares of
Preferred Stock, par value of $.001 ("Preferred Stock"), all of which shares
of Preferred Stock shall be designated "Series A Preferred Stock."
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers, relative, participating, optional or
other special rights and privileges and the qualifications, limitations and
restrictions of the Common Stock and Series A Preferred Stock are as follows:
B. SERIES A PREFERRED STOCK
1. NUMBER OF SHARES. The series of Preferred Stock designated
and known as "Series A Preferred Stock" shall consist of 775,000 shares.
2. RANK. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up or dissolution of the
Corporation, rank prior to the Corporation's Common Stock and to all other
classes and series of equity securities of the Corporation now or (except as
otherwise approved by the holders of the Series A Preferred Stock) hereafter
created, authorized, issued or outstanding (the Common Stock and such other
classes and series of equity securities collectively referred to herein as
the "Junior Stock").
1.
<PAGE>
3. DIVIDENDS.
a. The holders of the Series A Preferred Stock shall be
entitled to receive dividends payable in that number of shares of Series A
Preferred Stock equal to 15% multiplied by the aggregate number of shares of
Series A Preferred Stock held by such stockholder (as adjusted for any stock
dividends, combinations or splits with respect to such shares) per annum,
payable out of funds legally available therefor and in preference to and in
priority over any dividends with respect to Junior Stock.
b. Dividends on the outstanding shares of Series A
Preferred Stock shall begin to accrue and be cumulative (regardless of
whether such dividends shall have been declared by the Board of Directors)
from and including the date of original issuance of any shares of Series A
Preferred Stock, and shall be payable in arrears on March 31, June 30,
September 30 and December 31 of each year (each of such dates, a "Dividend
Payment Date"), commencing December 31, 1997.
c. The amount of any dividends "accumulated" on any
share of Series A Preferred Stock at any Dividend Payment Date shall be
deemed to be the amount of any unpaid dividends accrued thereon to and
excluding such Dividend Payment Date regardless of whether declared, and the
amount of dividends "accumulated" on any share of Series A Preferred Stock at
any date other than a Dividend Payment Date shall be calculated as the amount
of any unpaid dividends accrued, plus an amount calculated on the basis of
the annual dividend rate for the period from and including such last
preceding Dividend Payment Date (regardless of whether declared) to and
excluding the date as of which the calculation is made.
d. So long as any shares of Series A Preferred Stock
shall be outstanding, if (i) the Corporation shall fail to pay any
accumulated dividend (regardless of whether declared) on any outstanding
shares of Series A Preferred Stock on any applicable Dividend Payment Date
and such failure shall be continuing or (ii) the Corporation shall be in
default or in arrears with respect to the mandatory redemption, or with
respect to any agreement for the redemption, purchase or other acquisition,
or retirement of, or with respect to, any shares of the Series A Preferred
Stock, then the Corporation may not (A) declare, pay or set apart for payment
any cash dividends on any shares of Common Stock or other Junior Stock, or
(B) make any payment on account of, or set apart payment for, the purchase or
other acquisition, redemption, retirement or other requirement of, or with
respect to, any sinking or other similar fund or agreement for the purchase
or other acquisition, redemption, retirement or other requirement of, or with
respect to, any shares of Common Stock or other Junior Stock or any warrants,
rights, calls or options exercisable or exchangeable for or convertible into
Common Stock or other Junior Stock, other than redemptions of Series A
Preferred Stock pursuant to Section 6(c) below, or (C) make any distribution
in respect of any shares of Common Stock or other Junior Stock or any
warrants, rights, calls or options exercisable or exchangeable for or
convertible into Common Stock or other Junior Stock, whether directly or
indirectly, and whether in cash, obligations or securities of the Corporation
or other property, other than dividends or distributions of (I) Common Stock
or other Junior Stock which is neither convertible into nor exchangeable or
exercisable for any securities of the Corporation other than Common Stock or
other Junior Stock, or (II) rights, warrants, option or calls exercisable or
exchangeable for or convertible into Common Stock or other Junior Stock, or
(D) permit any corporation or other
2.
<PAGE>
entity controlled directly or indirectly by the Corporation to purchase or
otherwise acquire or redeem any shares of Common Stock or other Junior Stock
or any warrants, rights, calls or options exercisable or exchangeable for or
convertible into shares of Common Stock or other Junior Stock; PROVIDED,
HOWEVER, that the foregoing restrictions shall not apply to (x) the
repurchase of all, but not less than all, shares of Common Stock from any
employee, officer, director, consultant or other person performing services
for the Corporation or any of its subsidiaries (each a "Management
Individual") pursuant to agreements under which the Corporation has the
option to repurchase such shares upon the termination of employment, by
reason of death, disability, resignation, retirement or otherwise, PROVIDED,
that such repurchases of shares of Management Individuals, LESS sales of such
shares to Management Individuals (but not in excess of repurchases of such
shares prior to the date of any relevant sale), shall not exceed in the
aggregate 10% of the outstanding Common Stock at the time of any such
repurchase.
e. Subject to the foregoing provisions, dividends with
respect to the outstanding shares of Series A Preferred Stock may be declared
and paid or set apart for payment at any time and from time to time, without
reference to any regular Dividend Payment Date, to holders of record as they
appear on the stock transfer books of the Corporation at the close of
business on the record date established with respect to such payment. All
dividends paid with respect to Series A Preferred Stock shall be paid pro
rata to the holders of Series A Preferred Stock entitled thereto.
f. Subject to the foregoing provisions hereof and
applicable law, the Board of Directors (i) may declare and the Corporation
may pay or set apart for payment of dividends on any Junior Stock, (ii) may
make any payment on account of, or set apart payment for, sinking fund or
other similar fund or agreement for the purchase or other acquisition,
redemption, retirement or other requirements of, or with respect to, any
Junior Stock or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into any Junior Stock, (iii) may make any
distribution in respect to any Junior Stock or any warrants, rights, calls or
options exercisable or exchangeable for or convertible into any Junior Stock,
whether directly or indirectly, and whether in cash, obligations or
securities of the Corporation or other property, and (iv) may, and may permit
any corporation or other entity controlled directly or indirectly by the
Corporation to, purchase or otherwise acquire, redeem or retire any Junior
Stock or any warrants, rights, calls or options exercisable or exchangeable
for or convertible into any Junior Stock, and the holders of the shares of
the Series A Preferred Stock shall not be entitled to share therein.
4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock or any
other Junior Stock by reason of their ownership thereof, the amount of
$100.00 (as adjusted for any stock dividends, combinations or splits with
respect to such shares), plus all accrued or declared but unpaid dividends,
to and including the date of such liquidation, dissolution and winding up of
the Corporation, on such share for each share of Series A Preferred Stock
3.
<PAGE>
then held by them or accrued as dividends under Section 3 of this Article
IV.B. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive.
a. COMMON STOCK. After the completion of the
distribution required by subsection (a) above, subject to the rights of other
series of preferred stock which may from time to time come into existence,
the entire remaining assets and funds of the Corporation legally available
for distribution, if any, shall be distributed among the holders of the
Common Stock in proportion to the shares of Common Stock then held by them.
5. REDEMPTION.
a. The Corporation shall redeem, from any source of
funds legally available therefor, all shares of Series A Preferred Stock
outstanding or accrued as dividends under Section 3 of this Article IV.B. on
the date (the "Series A Mandatory Redemption Date") that is 30 days after the
date of a Triggering Event. The Corporation shall effect such redemption by
paying in cash, in exchange for the shares of Series A Preferred Stock to be
redeemed, a sum equal to $100.00 per share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) plus all accrued or declared but unpaid dividends, to but excluding
the date of redemption, on such shares (the "Redemption Price") in accordance
with the provisions of Section 6(c) below. A "Triggering Event" shall occur
on the sale of all of the outstanding Common Stock of the Corporation by
means of a sale, merger, consolidation or other form of corporate
reorganization in which outstanding shares of the Corporation are exchanged
for securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction).
b. At the option of the Corporation, the Corporation
may redeem on any date (each a "Redemption Date") ratably the number of
shares of Series A Preferred Stock of each such holder that is specified in a
request for redemption delivered by the Corporation to the holder in
accordance with the provisions of Section 6(c) below, by paying in cash
therefor, the Redemption Price for such shares.
c. As used herein and in Sections 5(d) and 5(e) hereof,
the term "Redemption Date" shall refer to each "Redemption Date" under this
Section 5. At least 15 but no more than 30 days prior to each Redemption
Date written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of the Series A Preferred Stock to be
redeemed at the address last shown on the records of the Corporation for such
holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date,
the Redemption Price, the place at which payment, if any, may be obtained,
calling upon such holder to surrender to the Corporation, in the manner and
at the place designated, his certificate or certificates representing the
shares to be redeemed (the "Redemption Notice"). Except as provided in
Section 5(d) on or after the Redemption Date, each holder of Preferred Stock
to be redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place
designated in the Redemption Notice, and thereupon (i) the Redemption Price
of such shares shall be payable to the order of the person
4.
<PAGE>
whose name appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be cancelled. In the event less than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
d. From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of
the holders of shares of Series A Preferred Stock designated for redemption
in the Redemption Notice as holders of Series A Preferred Stock (except the
right to receive the Redemption Price, without interest, upon surrender of
their certificate or certificates) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. If
the funds of the Corporation legally available for redemption of the
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of such shares to be redeemed on such date, those funds which are
legally available will be used to redeem: first, the maximum possible number
of shares of Series A Preferred Stock ratably from the holders thereof. The
shares of Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation become legally available
for the redemption of Series A Preferred Stock, such funds will be used, at
the end of the next succeeding fiscal quarter, to redeem the balance (if any)
of the shares of Series A Preferred Stock ratably from the holders thereof
which the Corporation has become obliged to redeem on any Redemption Date but
which it has not redeemed.
e. On or not more than five (5) days prior to each
Redemption Date, the Corporation may, in the sole discretion of the
Corporation, deposit the Redemption Price of all shares of Series A Preferred
Stock designated for redemption in the Redemption Notice and not yet redeemed
with a bank or trust corporation having aggregate capital and surplus in
excess of $100,000,000, as a trust fund (in the case of a Redemption Price),
for the benefit of the respective holders of the shares designated for
redemption and not yet redeemed, with irrevocable instructions and authority
to the bank or trust corporation to pay the Redemption Price for such shares
to their respective holders on or after the Redemption Date upon receipt of
notification from the Corporation that such holder has surrendered his share
certificate to the Corporation pursuant to Section 6(c) above. As of the
date of such deposit of the Redemption Price (even if prior to the Redemption
Date), the deposit shall constitute full payment for the shares to their
holders, and from and after the date of the deposit the shares so called for
redemption shall be redeemed and shall be deemed to be no longer outstanding,
and the holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect thereto except the rights to
receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor.
The balance of any moneys or documents deposited by the Corporation pursuant
to this Section 6(e) remaining unclaimed at the expiration of two (2) years
following the Redemption Date shall thereafter be returned to the Corporation
upon its request expressed in a resolution of its Board of Directors.
6. VOTING RIGHTS; RESTRICTIONS AND LIMITATIONS.
a. The Series A Preferred Stock shall be nonvoting
stock, except to the extent required by Delaware General Corporation Law, and
as described in subsection (b) below.
5.
<PAGE>
b. The Corporation will not amend its Certificate of
Incorporation or Bylaws without the approval, by vote or written consent, of
the holders of 51% of the Series A Preferred Stock, if such amendment would
change the powers, preferences, or special rights of shares of the Series A
Preferred Stock so as to affect them adversely. Without limiting the
generality of the preceding sentences of this Section 6(b), the Corporation
will not amend its Certificate of Incorporation or Bylaws without the
approval, by vote or written consent, of the holders of 51% of the Series A
Preferred Stock, if such amendment would:
(i) Reduce the dividend rates on the Series A
Preferred Stock provided for herein, make such dividends noncumulative, or
defer the date from which dividends will accrue, or cancel accrued and unpaid
dividends, change the relative seniority rights of the holders of the Series
A Preferred Stock as to the payment of dividends in relation to the holders
of the Series A Preferred Stock, Common Stock or any other Junior Stock;
(ii) Reduce the amount payable to the holders of any
series of Preferred Stock upon the voluntary or involuntary liquidation,
dissolution, or winding up the Corporation, change the relative seniority of
the liquidation preferences of the holders of the Series A Preferred Stock to
the rights upon liquidation of the holders of the Series A Preferred Stock,
Common Stock or any other Junior Stock;
(iii) Reduce the Redemption Price specified in
Section 5 hereof with respect to such series;
(iv) Delay any of the Redemption Dates provided for
in Section 5 hereof;
(v) Increase the aggregate number of authorized
shares of the Series A Preferred Stock, or decrease such number below the
number of the Series A Preferred Stock then outstanding; PROVIDED, HOWEVER,
that the number of shares of Series A Preferred Stock shall not be decreased
below such number necessary to pay dividends on any issued and outstanding
shares of Series A Preferred Stock; or
(vi) Increase or decrease the par value of the
Series A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
the Series A Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
8. MAXIMUM RATE. It is the intention of the Corporation to
comply with applicable laws (now or hereafter enacted); accordingly,
notwithstanding any provision to the contrary in this Restated Certificate of
Incorporation, in no event shall this Restated Certificate of Incorporation
require the payment or permit the collection of additional dividends or other
return on investment in excess of the maximum amount permitted by such laws.
If any such excess additional dividends or return is charged, taken, reserved
or received under this Restated Certificate of Incorporation, so that under
any of such circumstances the amount of additional
6.
<PAGE>
dividends or return charged, taken, reserved or received under this Restated
Certificate of Incorporation shall exceed the maximum amount of additional
dividends or return permitted by applicable laws, now or hereafter enacted,
then in any such event the provisions of this Section 8 shall govern and
control and the amount of additional dividends or return shall be
automatically reduced to the maximum lawful rate permitted under applicable
laws as now or hereafter construed by the courts having jurisdiction thereof.
C. COMMON STOCK
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK. All
preferences, voting powers, relative, participating, optional or other
special rights and privileges, and qualifications, limitations, or
restrictions of the Common Stock are expressly made subject and subordinate
to those that may be fixed with respect to any shares of the Series A
Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or
this Restated Certificate of Incorporation, each holder of Common Stock shall
have one vote in respect of each share of stock held by him of record on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation.
3. DIVIDENDS. Subject to the preferential rights of the
Series A Preferred Stock, if any, the holders of shares of Common Stock shall
be entitled to receive, when and if declared by the Board of Directors, out
of the assets of the Corporation which are by law available therefor,
dividends payable either in cash, in property or in shares of capital stock.
4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of
any dissolution, liquidation or winding up of the affairs of the Corporation,
after distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Series A Preferred Stock, holders
of Common Stock shall be entitled, unless otherwise provided by law or this
Certificate of Incorporation, to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively.
FIFTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors shall have the power, both before and
after receipt of any payment for any of the Corporation's capital stock, to
adopt, amend, repeal or otherwise alter the Bylaws of the Corporation without
any action on the part of the stockholders.
SIXTH: The number of directors of the Corporation shall be fixed
from time to time by, or in the manner provided in, the Bylaws or amendment
thereof duly adopted by the Board of Directors or by the stockholders.
SEVENTH: Elections of directors need not be by written ballot
unless the Bylaws shall so provide.
EIGHTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation
may be kept (subject to any
7.
<PAGE>
provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors or in the Bylaws.
NINTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any 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 or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after the date hereof, to authorize corporate
action further eliminating or limiting the personal liability of directors
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation
Law as so amended.
Any repeal or modification of the foregoing provisions of this
Article Nine by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at
the time of such repeal or modification.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
8.
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
PPC HOLDINGS, INC.,
a Delaware corporation
PPC Holdings, Inc. (hereinafter called the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
a. The name of the Corporation is PPC Holdings, Inc.
b. The certificate of incorporation of the Corporation is hereby
amended by striking out Article 1 thereof in its entirety and by substituting
in lieu of said Article the following Article:
"The name of the corporation is Perry-Judd's Incorporated."
c. The amendment of the certificate of incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
141, 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment this 16th day of December, 1997, and certifies under penalty of
perjury that this Certificate is the act and deed of the Corporation and that
the statements herein are true.
/s/ Thomas V. Bressan
----------------------------------
Thomas V. Bressan
Secretary
9.
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
PERRY-JUDD'S INCORPORATED
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Boca Raton, State of Florida, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1996, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote
<PAGE>
a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
2.
<PAGE>
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by
3.
<PAGE>
express provision of the statutes or of the certificate of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined by resolution of the Board of Directors or by the
stockholders at the
4.
<PAGE>
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
5.
<PAGE>
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or forty-eight (48)
hours notice to each director either personally or by telegram; special meetings
shall be called by the president or secretary in like manner and on like notice
on the written request of two directors unless the board consists of only one
director, in which case special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
6.
<PAGE>
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he
7.
<PAGE>
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 absent or
disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the
8.
<PAGE>
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
9.
<PAGE>
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, a treasurer and a secretary.
The Board of Directors may elect from among its members a Chairman of the
Board and a Vice Chairman. The Board of Directors may also choose one or
more vice-presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
10.
<PAGE>
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
VICE CHAIRMAN
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman, if any, shall preside at all meetings of the Board of Directors and of
the stockholders at which he shall be present. He shall have and may exercise
such powers as are, from time to time, assigned to him by the Board and as may
be provided by law.
PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman of the Board and Vice Chairman
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any (or in the event there
be more than one vice-president,
11.
<PAGE>
the vice-presidents in the order designated by the directors, or in the
absence of any designation, then in the order of their election), shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the
12.
<PAGE>
secretary and shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall be the chief financial officer of the
corporation and shall have the custody of the corporate funds and securities 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.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in
13.
<PAGE>
the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman of the Board of Directors, the vice-chairman, the president
or a vice-president and the treasurer, an assistant treasurer, the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without
14.
<PAGE>
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of
15.
<PAGE>
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
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 or 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. 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.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
16.
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
17.
<PAGE>
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director or officer made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being a director or officer
of the corporation or a predecessor corporation or, at the corporation's
request, a director or officer of another corporation, provided, however, that
the corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director or officer, and (iii)
inure to the benefit of the heirs, executors and administrators of such a
person. The corporation's obligation to provide indemnification under this
Section 6 shall be offset to the extent of any other source of
18.
<PAGE>
indemnification or any otherwise applicable insurance coverage under a policy
maintained by the corporation or any other person.
Expenses incurred by a director or officer of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was a director or officer of the corporation (or was serving at
the corporation's request as a director or officer of another corporation) shall
be paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized by
relevant sections of the General Corporation Law of Delaware. Notwithstanding
the foregoing, the corporation shall not be required to advance such expenses to
an agent who is a party to an action, suit or proceeding brought by the
corporation and approved by a majority of the Board of Directors of the
corporation which alleges willful misappropriation of corporate assets by such
agent, disclosure of confidential information in violation of such agent's
fiduciary or contractual obligations to the corporation or any other willful and
deliberate breach in bad faith of such agent's duty to the corporation or its
stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director or officer who serves in such
capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
19.
<PAGE>
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an employee or agent of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the
20.
<PAGE>
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new bylaws be contained in the notice of
such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the certificate of incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
21.
<PAGE>
EXHIBIT 4.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INDENTURE
Dated as of December 16, 1997
Among
PERRY-JUDD'S INCORPORATED, as Issuer,
each of the Subsidiary Guarantors named herein
and
U.S. TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
------------------
up to $200,000,000
10 5/8% Senior Subordinated Notes due 2007, Series A
10 5/8% Senior Subordinated Notes due 2007, 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;
13.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 13.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06; 4.07;
13.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04
(c) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04
(c) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 13.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a) (last sentence) . . . . . . . . . . . . . . . . . . . . 2.09
(a) (1) (A) . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a) (1) (B) . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.01
- -------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . . .28
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . .28
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount . . .30
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . .31
SECTION 2.04. Paying Agent To Hold Assets in Trust . . . . . . . . . . . . .32
SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . .33
SECTION 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . . .34
SECTION 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . .34
SECTION 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . .36
SECTION 2.13. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . . . . .37
SECTION 2.15. Book-Entry Provisions for Global Notes . . . . . . . . . . . .38
SECTION 2.16. Special Transfer Provisions. . . . . . . . . . . . . . . . . .39
SECTION 2.17. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . .43
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . .43
SECTION 3.02. Selection of Notes To Be Redeemed. . . . . . . . . . . . . . .43
SECTION 3.03. Optional Redemption. . . . . . . . . . . . . . . . . . . . . .44
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . .45
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . . . . .46
SECTION 3.06. Deposit of Redemption Price. . . . . . . . . . . . . . . . . .46
SECTION 3.07. Notes Redeemed in Part.. . . . . . . . . . . . . . . . . . . .47
-i-
<PAGE>
Page
----
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . .47
SECTION 4.03. Corporate Existence. . . . . . . . . . . . . . . . . . . . . .48
SECTION 4.04. Payment of Taxes and Other Claims. . . . . . . . . . . . . . .48
SECTION 4.05. Maintenance of Properties and Insurance. . . . . . . . . . . .48
SECTION 4.06. Compliance Certificate; Notice of Default. . . . . . . . . . .49
SECTION 4.07. Reports to Holders . . . . . . . . . . . . . . . . . . . . . .50
SECTION 4.08. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . .51
SECTION 4.09. Limitation on Restricted Payments. . . . . . . . . . . . . . .51
SECTION 4.10. Limitations on Transactions with Affiliates. . . . . . . . . .54
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness. . . . . .55
SECTION 4.12. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries . . . . . . . . . . . . .56
SECTION 4.13. Change of Control. . . . . . . . . . . . . . . . . . . . . . .56
SECTION 4.14. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . .59
SECTION 4.15. Prohibition on Incurrence of Senior
Subordinated Indebtedness . . . . . . . . . . . . . . . . .63
SECTION 4.16. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . .63
SECTION 4.17. Conduct of Business. . . . . . . . . . . . . . . . . . . . . .64
SECTION 4.18. Limitation on Preferred Stock of Restricted Subsidiaries . . .64
SECTION 4.19. Additional Subsidiary Guarantees . . . . . . . . . . . . . . .64
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets . . . . . . . . . . .65
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . .67
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . .67
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . .69
-ii-
<PAGE>
Page
----
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . .70
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . .71
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . .71
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . .71
SECTION 6.07. Rights of Holders To Receive Payment . . . . . . . . . . . . .72
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . .72
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . .73
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . .73
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . .74
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . .74
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . .76
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . .77
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . .77
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . .78
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . .78
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . .79
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . .80
SECTION 7.09. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . .81
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . .81
SECTION 7.11. Preferential Collection of Claims Against the Company. . . . .82
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations . . . . . . . . . . .82
SECTION 8.02. Legal Defeasance and Covenant Defeasance . . . . . . . . . . .83
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. . . . .85
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . . . . . .87
SECTION 8.05. Repayment to the Company . . . . . . . . . . . . . . . . . . .87
SECTION 8.06. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . .88
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . .88
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . .89
-iii-
<PAGE>
Page
----
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . 91
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . 91
SECTION 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . 91
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . 92
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinated to Senior Indebtedness. . . . . . . . . . 92
SECTION 10.02. No Payment on Notes in Certain Circumstances . . . . . . . . 92
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc . . . . . . . 94
SECTION 10.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . . 96
SECTION 10.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 10.06. Application by Trustee of Assets Deposited with It . . . . . 97
SECTION 10.07. Obligations of the Company Unconditional . . . . . . . . . . 97
SECTION 10.08. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . 98
SECTION 10.09. Reliance on Judicial Order or Certificate
of Liquidating Agent. . . . . . . . . . . . . . . . . . . 98
SECTION 10.10. Trustee's Relation to Senior Indebtedness. . . . . . . . . . 99
SECTION 10.11. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness . . . . . . 99
SECTION 10.12. Noteholders Authorize Trustee To Effectuate Subordination
of Notes. . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 10.13. This Article Ten Not To Prevent Events of Default. . . . . . 101
SECTION 10.14. Trustee's Compensation Not Prejudiced. . . . . . . . . . . . 101
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . 101
SECTION 11.02. Subordination of Guarantee . . . . . . . . . . . . . . . . . 102
SECTION 11.03. Severability . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.04. Release of a Subsidiary Guarantor. . . . . . . . . . . . . . 103
SECTION 11.05. Limitation of Subsidiary Guarantor's Liability . . . . . . . 103
SECTION 11.06. Subsidiary Guarantors May Consolidate, etc., on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . 104
-iv-
<PAGE>
Page
----
SECTION 11.07. Contribution . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.08. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . 106
SECTION 11.09. Execution of Guarantee . . . . . . . . . . . . . . . . . . . 106
SECTION 11.10. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . 107
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE OBLIGATIONS
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness . . . . . . . . . . . . . . . . . . . 107
SECTION 12.02. No Payment on Notes in Certain Circumstances . . . . . . . . 108
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc . . . . . . . 109
SECTION 12.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . . 111
SECTION 12.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.06. Application by Trustee of Assets Deposited with It . . . . . 112
SECTION 12.07. Obligations of the Subsidiary Guarantors Unconditional . . . 113
SECTION 12.08. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . 113
SECTION 12.09. Reliance on Judicial Order or Certificate of Liquidating
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 12.10. Trustee's Relation to Guarantor Senior Indebtedness. . . . . 114
SECTION 12.11. Subordination Rights Not Impaired by Acts or Omissions of
the Subsidiary Guarantors or Holders of Guarantor
Senior Indebtedness . . . . . . . . . . . . . . . . . . . 115
SECTION 12.12. Noteholders Authorize Trustee To Effectuate Subordination
of Guarantee Obligations. . . . . . . . . . . . . . . . . 116
SECTION 12.13. This Article Twelve Not To Prevent Events of Default . . . . 116
SECTION 12.14. Trustee's Compensation Not Prejudiced. . . . . . . . . . . . 117
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 13.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 13.03. Communications by Holders with Other Holders . . . . . . . . 118
-v-
<PAGE>
Page
----
SECTION 13.04. Certificate and Opinion as to Conditions Precedent . . . . . 118
SECTION 13.05. Statements Required in Certificate or Opinion. . . . . . . . 119
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . 119
SECTION 13.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 13.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 13.09. No Adverse Interpretation of Other Agreements. . . . . . . . 120
SECTION 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . 120
SECTION 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 13.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . 121
SECTION 13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 13.14. Independence of Covenants. . . . . . . . . . . . . . . . . . 121
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Legend for Global Notes
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Exhibit E - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit F - Form of Guarantee
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture.
-vi-
<PAGE>
INDENTURE, dated as of December 16, 1997, among PERRY-JUDD'S
INCORPORATED, a Delaware corporation (the "Company"), each of the Subsidiary
Guarantors named herein, as guarantors, and U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10 5/8%
Senior Subordinated Notes due 2007, Series A, and 10 5/8% Senior Subordinated
Notes due 2007, Series B, to be issued in exchange for the 10 5/8% Senior
Subordinated Notes due 2007, Series A, pursuant to a Registration Rights
Agreement (as defined) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things
necessary to make the Notes (as defined), when duly issued and executed by
the Company and authenticated and delivered hereunder, the valid and binding
obligations of the Company and to make this Indenture a valid and binding
agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
10 5/8% Senior Subordinated Notes due 2007, Series A and Series B:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acceleration Notice" has the meaning provided in Section 6.02.
"Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Restricted Subsidiaries or assumed in connection with
the acquisition of assets from such Person and in each case not incurred by
such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such acquisition,
merger or consolidation.
"Additional Interest" has the meaning provided in the Registration
Rights Agreement.
<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 provided in Section 4.10 .
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Bank" means BT Commercial Corporation or any successor as
agent under the Credit Agreement.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition
by the Company or any Restricted Subsidiary of the Company of the assets of
any Person (other than a Restricted Subsidiary of the Company) 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.
"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 its Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company of (a) any Capital Stock of any
Restricted Subsidiary of the Company; or (b) any other property or assets of
the Company or any Restricted Subsidiary of the Company 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 its Restricted Subsidiaries receive aggregate consideration of
less than $500,000 and (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially
<PAGE>
-3-
all of the assets of the Company as permitted under Article Five.
"Bankruptcy Law" means Title 11, United States Code or any similar
federal, state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"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.
"Borrowing Base" means the sum of (i) 85% of the net book value
(after allowance for doubtful accounts) of accounts receivable (other than
intercompany receivables) of the Company and the Restricted Subsidiaries
arising in the ordinary course of business from the sale of products sold by
the Company and the Restricted Subsidiaries or the provision of services by
the Company and the Restricted Subsidiaries and (ii) 60% of the net book
value (after appropriate write-downs of obsolescence, quality problems and
the like) of inventories of the Company and the Restricted Subsidiaries held
in the ordinary course of business, in each case on a consolidated basis with
Restricted Subsidiaries in accordance with generally accepted accounting
principles.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means (i) 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 (ii) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
Obligations of such Person under a lease that are re-
<PAGE>
-4-
quired to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of this definition, the amount of such Obligation at
any date shall be the capitalized amount of such Obligations at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) 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; (ii) 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"); (iii) 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; (iv) 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 U.S. branch of a foreign bank having at
the date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause
(iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) 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 to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the
provisions of the Indenture); (ii) the approval by the holders of Capital
Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) any Person or Group (other than the
Permitted Holders) shall become the owner, directly or indirectly, bene-
<PAGE>
-5-
ficially 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 (iv) the replacement of a majority of the Board of
Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company 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 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 provided in Section 4.13.
"Change of Control Payment Date" has the meaning provided in
Section 4.13.
"Commission" or "SEC" means the Securities and Exchange Commission,
or any successor agency.
"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.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its 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), (B) Consolidated Interest Expense and (C) Consolidated Non-cash
Charges LESS any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
<PAGE>
-6-
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person 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 such Person 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 basis for the period of such calculation
to (i) the incurrence of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence 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
(and the application of the proceeds thereof) occurred on the first day of
the Four Quarter Period and (ii) 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 such Person or one of its 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
(including any PRO FORMA expenses and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act in effect on the
Issue Date) (PROVIDED that such Consolidated EBITDA shall be included only to
the extent includable pursuant to the definition of "Consolidated Net
Income") 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 such Person or any of its 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
such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges"
<PAGE>
-7-
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) 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; (2) 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 (3) notwithstanding clause (1)
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. Any Indebtedness repaid
out of the proceeds of Indebtedness properly incurred under the Indenture
during any Four Quarter Period shall be deemed to have been repaid on the
first day of such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on
any series of Preferred Stock of such Person (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) 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 tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, including,
without limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by
such Person and its Restricted Subsidiaries during such period as determined
on a consolidated basis in accordance with GAAP.
<PAGE>
-8-
"Consolidated Net Income" means, with respect to any Person, for
any period, the aggregate net income (or loss) of such Person and its
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 or losses 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 of the referent Person or is merged or consolidated with the
referent Person or any Restricted Subsidiary of the referent Person, (d) the
net income (but not loss) of any Restricted Subsidiary of the referent Person
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 of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a Wholly Owned
Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) 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 (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings 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.
"Consolidated Non-cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries 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).
<PAGE>
-9-
"Covenant Defeasance" has the meaning set forth in Section 8.02.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of the Issue Date, among Perry Graphic Communications, Inc.,
Shenandoah Valley Press, Inc. and Port City Press, Inc. as borrowers, the
Company and the Subsidiary Guarantors as guarantors, the lenders party
thereto in their capacities as lenders thereunder and BT Commercial
Corporation, as agent, together with the related documents thereto
(including, without limitation, any promissory notes, letters of credit,
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 4.11) or adding
Restricted 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.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
the Company or any Restricted Subsidiary of the Company against fluctuations
in currency values.
"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.
"Default Notice" has the meaning provided in Section 10.02.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
<PAGE>
-10-
"Designated Senior Indebtedness" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $25,000,000 and
is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company or by a
Subsidiary Guarantor.
"Discharged" means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by, and obligations under,
the Notes and to have satisfied all the obligations under this Indenture
relating to the Notes (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same upon compliance by the
Company with the provisions of Article Eight, except (i) the rights of the
Holders of Notes to receive, from the trust fund described in Article Eight,
payment of the principal of and the interest on such Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes under
Sections 2.03 through 2.07, 7.07 and 7.08 and (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder.
"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 (other than upon the sale (by merger or otherwise) of all of the Common
Stock of the Company), 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.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto, and the rules and
regulations of the Commission promulgated thereunder.
"Exchange Notes" means the 10 5/8% Senior Subordinated Notes due
2007, Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement substantially identical to the Registration
Rights Agreement.
<PAGE>
-11-
"Exchange Offer" has the meaning provided in the Registration
Rights Agreement.
"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 and able 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 Person making such determination acting reasonably and in good faith
and shall be evidenced by a Board Resolution of the Board of Directors of
such Person delivered to the Trustee.
"Funds" means the aggregate amount of U.S. Legal Tender and/or U.S.
Government Obligations deposited with the Trustee pursuant to Article Eight.
"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 Note" has the meaning provided in Section 2.01.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part
of any Indebtedness.
"Guarantor Senior Indebtedness" means with respect to any
Subsidiary Guarantor, the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable
law) on any Indebtedness of a Subsidiary Guarantor, whether outstanding on
the Issue Date or thereafter created, incurred or assumed, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Guarantee of
such Subsidi-
<PAGE>
-12-
ary Guarantor. Without limiting the generality of the foregoing, "Guarantor
Senior Indebtedness" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all
monetary obligations of every nature of the Subsidiary Guarantors under the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on
the Issue Date or thereafter incurred. Notwithstanding the foregoing,
"Guarantor Senior Indebtedness" shall not include (i) any Indebtedness of
such Subsidiary Guarantor to a Restricted Subsidiary of such Subsidiary
Guarantor or any Affiliate of such Subsidiary Guarantor or any of such
Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of,
any shareholder, director, officer or employee of such Subsidiary Guarantor
or any Restricted Subsidiary of such Subsidiary Guarantor (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or
owing by such Subsidiary Guarantor, (vi) Indebtedness incurred in violation
of the provisions set forth in Section 4.11, (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of such Subsidiary Guarantor.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"incur" has the meaning provided in Section 4.11.
"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations of such Person under any title retention agree-
<PAGE>
-13-
ment (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations of such Person for
the reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (vi) guarantees and other contingent
Obligations of such Person in respect of Indebtedness referred to in clauses
(i) through (v) above and clause (viii) below, (vii) all Obligations of any
other Person of the type referred to in clauses (i) through (vi) 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, (viii) all
Obligations of such Person under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the book value of such Disqualified Capital
Stock. For purposes hereof, the amount outstanding at any time of any
Indebtedness with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) 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 Notes" means, collectively, (i) the 10 5/8% Senior
Subordinated Notes due 2007, Series A, of the Company issued on the Issue
Date and (ii) one or more series of 10 5/8% Senior Subordinated Notes due 2007
that are issued under this Indenture subsequent to the Issue Date pursuant to
Section 2.02, in each case for so long as such securities constitute
Restricted Notes.
"Initial Purchaser" means BT Alex. Brown Incorporated.
<PAGE>
-14-
"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 Notes.
"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 its Restricted Subsidiaries on
commercially reasonable terms in the ordinary course of business. For the
purposes of Section 4.09, (i) "Investment" shall include and be valued at the
fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts
received in respect of such Investment; PROVIDED that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Restricted Subsidiary of the
<PAGE>
-15-
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, 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 Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means December 16, 1997, the date of original issuance
of the Notes.
"Legal Defeasance" has the meaning set forth in Section 8.02.
"Legal Holiday" has the meaning provided in Section 13.07.
"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).
"Maturity Date" means December 15, 2007.
"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 its Restricted
Subsidiaries from such Asset Sale net of (a) cash 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 provided by the Company or
any Restricted Subsidiary, as the case may be, as a reserve, in accordance
with GAAP, against any 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 liabili-
<PAGE>
-16-
ties under any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.14.
"Net Proceeds Offer Amount" has the meaning provided in Section
4.14.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.14.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.14.
"Non-U.S. Person" has the meaning assigned to such term in
Regulation S.
"Notes" means, collectively, the Initial Notes, the Private
Exchange Notes, if any, and the Exchange Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with
the terms of this Indenture, that are issued pursuant to this Indenture.
"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 Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors
serving in a similar capacity.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person
that shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee complying with the requirements of Sections
13.04 and 13.05, as they relate to the giving of an Opinion of Counsel, and
delivered to the Trustee.
<PAGE>
-17-
"Paying Agent" has the meaning provided in Section 2.03, except
that, during the continuance of a Default or Event of Default and for the
purposes of Articles Three and Eight and Sections 4.13 and 4.14, the Paying
Agent shall not be the Company or any Affiliate of the Company.
"Permitted Holder" means Ropamil Limited Partnership, Robert E.
Milhous, Paul B. Milhous and their Affiliates.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness incurred on the Issue Date under the Notes, the
Indenture and the Guarantees, and Indebtedness and Guarantees of such
Indebtedness under the Indenture properly incurred in accordance with
Section 4.11;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed (A) $30
million with respect to the Indebtedness under the Term Loan Facility,
less the amount of all mandatory principal payments actually made by the
Company in respect of the Term Loan Facility (excluding any such
payments to the extent Refinanced at the time of payment under a
replaced Credit Agreement) and (B) with respect to Indebtedness under
the Revolving Credit Facility, the greater of $45 million in the
aggregate or the Borrowing Base; PROVIDED, HOWEVER, that the aggregate
amount of Indebtedness under clause (A) shall be reduced by any required
permanent repayment pursuant to the provisions set forth in Section 4.14;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that such
Interest Swap Obligations are entered into to protect the Company and
its 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 ex-
<PAGE>
-18-
ceed the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(v) Indebtedness under Currency Agreements; PROVIDED that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary of the Company, in each case subject
to no Lien held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company; PROVIDED that if as of any date
any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company 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;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject
to no Lien; PROVIDED that (a) any Indebtedness of the Company to any
Wholly Owned Restricted Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's
obligations under the Indenture and the Notes and (b) if as of any date
any Person other than a Wholly Owned Restricted Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien
in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
the Company;
(viii) 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;
<PAGE>
-19-
(ix) Indebtedness of the Company or any of its 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;
(x) Refinancing Indebtedness;
(xi) Purchase money obligations incurred to fund progress payments
in connection with the lease of equipment in the ordinary course of
business;
(xii) Capitalized Lease Obligations and Purchase Money Indebtedness
of the Company and its Restricted Subsidiaries incurred in the ordinary
course of business not to exceed $5.0 million at any one time
outstanding; and
(xiii) additional Indebtedness of the Company in an aggregate
principal amount not to exceed $10.0 million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, (ii) Investments in the Company by any
Restricted Subsidiary of the Company; PROVIDED that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Notes and the
Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and
advances to employees, officers and directors of the Company and its
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;
(v) loans to employees, officers and directors of the Company and its
Restricted Subsidiaries to finance the purchase of Qualified Capital Stock of
the Company not to exceed $2.5 million at any one time outstanding; (vi)
Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses
and otherwise in compliance with the Indenture; (vii) Investments in
Unrestricted Subsidiaries not to exceed $2.5 million at any one time
outstanding; (viii) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar ar-
<PAGE>
-20-
rangement upon the bankruptcy or insolvency of such trade creditors or
customers; (ix) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an
Asset Sale made in compliance with Section 4.14; and (x) additional
Investments not to exceed $2.5 million at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) 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;
(iii) 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 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);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(v) 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 its Restricted Subsidiaries;
<PAGE>
-21-
(vi) 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;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; PROVIDED, HOWEVER, that (A) the related
Purchase Money Indebtedness shall not exceed the cost of such property
or assets and shall not be secured by any property or assets of the
Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) 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;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.11; PROVIDED that (A) 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 of the Company
and were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the
<PAGE>
-22-
Company or a Restricted Subsidiary of the Company and (B) such Liens do not
extend to or cover any property or assets of the Company or of any of its
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 of the Company 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 of the Company.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Notes" shall have the meaning provided in Section 2.01.
"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.
"Private Exchange Notes" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Notes 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.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means Indebtedness of the Company and
its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or
<PAGE>
-23-
any part of the purchase price, or the cost of installation, construction or
improvement, of property.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities act.
"Redemption Date" means, with respect to any Notes, the Maturity Date
of such Note or the earlier date on which such Note is to be redeemed by the
Company pursuant to paragraph 5 of the Notes.
"Redemption Price" has the meaning provided in Section 3.04.
"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 4.11 (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (xi) or (xii) of the definition of Permitted Indebtedness), in
each case that does not (1) 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 in connection with such Refinancing) or
(2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; PROVIDED that (x) if such Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
<PAGE>
-24-
"Registration Rights Agreement" means the registration rights
agreement dated the Issue Date between the Company, the Subsidiary Guarantors
and the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent Global Note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Regulation S.
"Replacement Assets" has the meaning provided in Section 4.14.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Indebtedness; PROVIDED
that if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness or such lesser percentage as shall be permitted to act on
behalf of the holders of such Designated Senior Indebtedness pursuant to the
instrument governing such Designated Senior Indebtedness.
"Restricted Note" means a Note that constitutes a "Restricted
Security" within the meaning of Rule 144(a)(3) under the Securities Act;
PROVIDED, HOWEVER, that the Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Note.
"Restricted Payment" has the meaning provided in Section 4.09.
"Restricted Subsidiary" of a Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit
facilities under the Credit Agreement.
"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
<PAGE>
-25-
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 Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) any Indebtedness of the Company to a Subsidiary of the Company
or any Affiliate of the Company or any of such Affiliate's Subsidiaries,
(ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of the Company or any Subsidiary of the Company (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness incurred in violation of the Indenture
provisions set forth in Section 4.12, (vii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11,
<PAGE>
-26-
United States Code, is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in
Rule 1.02(w) of Regulation S-X under the Securities Act.
"Subsidiary" with respect to any Person, means (i) 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 (ii) 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.
"Subsidiary Guarantor" means (i) each of the Company's Restricted
Subsidiaries as of the Issue Date and (ii) each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of the Indenture as a
Subsidiary Guarantor; PROVIDED that any Person constituting a Subsidiary
Guarantor as described above shall cease to constitute a Subsidiary Guarantor
when its respective Guarantee is released in accordance with the terms of this
Indenture.
"Term Loan Facility" means one or more term loan facilities under the
Credit Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters or, in the
case of a successor trustee, an officer assigned to the department, division or
group performing the corporate trust work of such successor.
"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.
<PAGE>
-27-
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors of such Person may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED that
(x) the Company certifies to the Trustee that such designation complies with
Section 4.09 and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.11
and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"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.
"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
<PAGE>
-28-
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" of any Person means any
Restricted Subsidiary of such Person 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 such Person or
any Wholly Owned Restricted Subsidiary of such Person.
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 Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA by reference to another statute or defined by SEC 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 as in effect on the Issue Date;
<PAGE>
-29-
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
(5) "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 NOTES
SECTION 2.01. FORM AND DATING.
The Initial Notes, the notation thereon relating to the Guarantees, if
any, and the Trustee's certificate of authentication shall be substantially in
the form of EXHIBIT A hereto. The Exchange Notes, the notation thereon relating
to the Guarantees, if any, and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of EXHIBIT B hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement thereon. Each Note shall be
dated the date of issuance and shall show the date of its authentication. Each
Note shall have an executed Guarantee from each of the Subsidiary Guarantors
endorsed thereon substantially in the form of EXHIBIT F hereto.
The terms and provisions contained in the Notes annexed hereto as
EXHIBITS A AND B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company, the Subsidiary
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, and Notes offered and
sold in reliance on Regulation S shall be issued initially in the form of one or
more Global Notes, substantially in the form set forth in EXHIBIT A (the "Global
Note"), deposited with the Trustee, as custodian for the Depository, duly
executed by the Company (and having an executed Guarantee from each of the
Subsidiary Guarantors endorsed thereon) and authenticated by the Trustee as
hereinafter pro-
<PAGE>
-30-
vided and shall bear the legend set forth in EXHIBIT C. The aggregate
principal amount of the Global Note 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.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued and Notes offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in EXHIBIT A, with
respect to Initial Notes, and EXHIBIT B, with respect to Exchange Notes (in each
case, the "Physical Notes".)
All Notes offered and sold in reliance on Regulation S shall remain in
the form of a Global Note until the consummation of the Exchange Offer pursuant
to the Registration Rights Agreement; PROVIDED, HOWEVER, that all of the time
periods specified in the Registration Rights Agreement to be complied with by
the Company and the Subsidiary Guarantors have been so complied with.
SECTION 2.02. EXECUTION AND AUTHENTICATION; AGGREGATE PRINCIPAL AMOUNT.
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 Notes for the Company, and the Guarantees for the
Subsidiary Guarantors, by manual or facsimile signature and may be imprinted or
otherwise reproduced.
If an Officer or Assistant Secretary whose signature is on a Note or a
Guarantee, as the case may be, was an Officer or Assistant Secretary at the time
of such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note and Guarantee shall nevertheless be
valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature of
such representative of the Trustee shall be conclusive evidence that the Note
has been authenticated under this Indenture.
<PAGE>
-31-
The Trustee shall authenticate (i) Initial Notes for original issue in
an aggregate principal amount not to exceed $200,000,000 in one or more series;
PROVIDED that the aggregate principal amount of Initial Notes on the Issue Date
shall not exceed $115,000,000, (ii) Private Exchange Notes from time to time
only in exchange for a like principal amount of Initial Notes and (iii) Exchange
Notes from time to time only in exchange for (A) a like principal amount of
Initial Notes or (B) a like principal amount of Private Exchange Notes, in each
case upon a written order of the Company in the form of an Officers' Certificate
of the Company. Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Private Exchange Notes or Exchange Notes and
whether (subject to Section 2.01) the Notes are to be issued as Physical Notes
or Global Notes and such other information as the Trustee may reasonably
request. The aggregate principal amount of Notes outstanding at any time may
not exceed $200,000,000, except as provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Notes issued under this Indenture
shall vote and consent together on all matters (as to which any of such Notes
may vote or consent) as one class and no series of Notes will have the right to
vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Notes 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 Notes shall be issuable in fully registered form only, 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 (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon
<PAGE>
-32-
the Company in respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes 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 may change the Paying Agent or Registrar without notice
to any Holder. The Company may act as its own Paying Agent.
In the event that the Company shall retain any Person not a party to
this Indenture as an Agent hereunder, the Company shall enter into an
appropriate agency agreement with such Agent, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed. Any of the Registrar, the Paying Agent or any other agent may resign
upon 30 days' notice to the Company. The office of the Paying Agent as
Registrar for purposes of this Section 2.03 shall initially be at New York, New
York.
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 the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, premium, if any, or interest on, the Notes
(whether such assets have been distributed to it by the Company or any other
obligor on the Notes), and shall notify the Trustee of any default by the
Company (or any other obligor on the Notes) 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 Agent and the completion of any ac-
<PAGE>
-33-
counting required to be made hereunder, the Paying Agent shall have no
further liability for such assets.
SECTION 2.05. HOLDER 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
the Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall cause the Registrar to furnish to the
Trustee five (5) Business Days before each Interest Payment Date and at such
other times as the Trustee may request in writing a list as of the applicable
Record Date and in such form as the Trustee may reasonably require of the names
and addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to Sections 2.15 and 2.16, when Notes are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes of
other authorized denominations, 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 Notes presented or
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 Subsidiary Guarantors shall
execute Guarantees thereon and the Trustee shall authenticate Notes 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 similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.10, 3.04, 4.13, 4.14 or 9.05, in which event
the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) se-
<PAGE>
-34-
lected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such beneficial interest, agree that transfers of beneficial
interests in such Global Notes may be effected only through a book entry system
maintained by the Holder of such Global Note (or its agent), and that ownership
of a beneficial interest in the Note shall be required to be reflected in a book
entry system.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note shall provide the Company and the Trustee with evidence to their
satisfaction that the Note has been lost, destroyed or stolen, the Company shall
issue and the Trustee shall authenticate a replacement Note and each of the
Subsidiary Guarantors shall execute a Guarantee thereon 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 reasonable
judgment of the Company, the Subsidiary Guarantors and the Trustee, to protect
the Company, the Subsidiary Guarantors, the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. The Company and the Trustee
may charge such Holder for its reasonable out-of-pocket expenses in replacing a
Note, including reasonable fees and expenses of counsel. Every replacement Note
shall constitute an additional obligation of the Company and every replacement
Guarantee shall constitute an additional obligation of the Subsidiary
Guarantors.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it or at its direction,
those delivered to it for cancellation and those described in this Section as
not outstanding. Subject to Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), such Note, together with the related
Guarantee, ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Note is held by a BONA FIDE purchaser. A
mutilated
<PAGE>
-35-
Note and the related Guarantee cease to be outstanding upon surrender of such
Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal, premium, if any, and interest due on the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver, consent or
notice, Notes owned by the Company or an Affiliate shall be considered as
though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
waiver or consent, only Notes which the Trustee actually knows are so owned
shall be so considered. The Company shall notify the Trustee, in writing,
when it or any of its Affiliates repurchases or otherwise acquires Notes, of
the aggregate principal amount of such Notes so repurchased or otherwise
acquired and such other information as the Trustee may reasonably request and
the Trustee shall be entitled to rely thereon, provided that any failure on
the part of the Company to provide the aforesaid notice to the Trustee shall
not constitute a default under this Indenture.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes and the Subsidiary Guarantors
shall prepare temporary Guarantees thereon 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 Notes to be authenticated and the date on
which the temporary Notes are to be authenticated. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and so indicate in the
Officers' Certificate. Without unreasonable delay, the Company shall prepare
and execute, and the Trustee shall authenticate and the Subsidiary Guarantors
shall execute Guarantees on, upon receipt of a written order of the Company
pur-
<PAGE>
-36-
suant to Section 2.02, definitive Notes in exchange for temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes 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, in its customary manner, and deliver evidence of disposal of, all
Notes surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.07, the Company may not issue new Notes to replace Notes that the
Company has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
The Company will pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Company shall,
to the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. The
Company shall notify the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Note and the date of the proposed payment (a
"Default Interest Payment Date"), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such defaulted interest or shall make arrangements
satisfactory to the
<PAGE>
-37-
Trustee for such deposit on or prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the Persons
entitled to such defaulted interest as provided in this Section; PROVIDED,
HOWEVER, that in no event shall the Company deposit monies proposed to be
paid in respect of defaulted interest later than 11:00 a.m. New York City
time on the proposed Default Interest Payment Date. At least 15 days before
the subsequent special record date, the Company shall mail to each Holder,
with a copy to the Trustee, a notice that states the subsequent special
record date, the Default Interest Payment Date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(1) shall be paid to
Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Company may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the Trustee shall use the CUSIP numbers in notices of redemption or
exchange as a convenience to Holders; PROVIDED, HOWEVER, that no representation
is hereby deemed to be made by the Trustee as to the correctness or accuracy of
the CUSIP numbers printed in the notice or on the Notes, and that reliance may
be placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date, and Net Proceeds
Offer Payment 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, Maturity Date, Redemption Date, Change of Control
Payment Date, and Net Proceeds Offer Payment 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, Maturity Date, Redemption Date,
<PAGE>
-38-
Change of Control Payment Date, and Net Proceeds Offer Payment Date, as the
case may be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) The Global Notes 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 Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
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 Note.
(b) Transfers of Global Notes 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 Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.16. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note 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 written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be
<PAGE>
-39-
transferred, and the Company shall execute and the Trustee shall authenticate
and deliver, one or more Physical Notes of authorized denominations in an
aggregate principal amount equal to the principal amount of the beneficial
interest in the Global Note so transferred.
(d) In connection with the transfer of a Global Note in its entirety
to beneficial owners pursuant to paragraph (b) of this Section 2.15, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Subsidiary Guarantors shall execute Guarantees on 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 such Global Note, an equal aggregate principal amount
of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of
this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the
Private Placement Legend.
(f) The Holder of any Global Note 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 Notes.
SECTION 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Restricted Note to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Restricted Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
PROVIDED, HOWEVER, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such note, or portion thereof,
at any time on or prior to the second anniversary of the Issue Date or
(y) (1) in the case of a transfer to an Institutional Accredited Investor
which is not a QIB (excluding Non-U.S. Persons), the proposed transferee
has delivered to the Registrar a certificate
<PAGE>
-40-
substantially in the form of EXHIBIT D hereto and any legal opinions and
certifications required thereby and (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the Registrar
a certificate substantially in the form of EXHIBIT E hereto;
(ii) if the proposed transferee is a Participant and the Notes to be
transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of (x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall register
the transfer and reflect on its books and records the date and an increase
in the principal amount of the Global Note in an amount equal to the
principal amount of Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred; and
(iii)if the proposed transferor is a Participant seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of (x)
written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall register
the transfer and reflect on its books and records the date and (A) a
decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal amount
of the Notes to be transferred and (B) an increase in the principal amount
of the Global Note in an amount equal to the principal amount of the Notes
to be transferred.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Restricted Security to
a QIB:
(i) the Registrar shall register the transfer of any Restricted Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
PROVIDED, HOWEVER, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Note, or portion thereof,
at any time on or prior to the second anniversary of the Issue Date or
(y) such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Note stating, or has otherwise
<PAGE>
-41-
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) if the proposed transferee is a Participant and the Notes to be
transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its book and records the date and an increase in the principal
amount of the Global Note in an amount equal to the principal amount of
Physical Notes to be transferred, and the Trustee shall cancel the Physical
Note so transferred; and
(iii)if the proposed transferor is a Participant seeking to
transfer an interest in the Regulation S Global Note, upon receipt by the
Registrar of written instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall register the transfer
and reflect on its books and records the date and (A) a decrease in the
principal amount of the Regulation S Global Note in an amount equal to the
principal amount of the Notes to be transferred and (B) an increase in the
principal amount of the Global Note in an amount equal to the principal
amount of the Notes to be transferred.
(c) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provisions of this Indenture, a Global Note 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.
<PAGE>
-42-
(d) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar or
co-Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar or co-Registrar shall deliver only Notes that
bear the Private Placement Legend unless (i) the requested transfer is after the
second anniversary of the Issue Date (PROVIDED, HOWEVER, that neither the
Company nor any Affiliate of the Company has held any beneficial interest in
such Note, or portion thereof, at any time prior to or on the second anniversary
of the Issue Date), (ii) 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 (iii)
such Note has been sold pursuant to an effective registration statement under
the Securities Act.
(e) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note 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.
(f) TRANSFERS OF NOTES HELD BY AFFILIATES. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after the
last date on which either the Company or any Affiliate of the Company was an
owner of such Note, in each case, bear the Private Placement Legend, unless
otherwise agreed by the Company (with written notice thereof to the Trustee).
<PAGE>
-43-
SECTION 2.17. RESTRICTIVE LEGENDS.
Each Global Note and Physical Note that constitutes a Restricted Note
shall bear the legend (the "Private Placement Legend") as set forth in EXHIBIT A
on the face thereof until after the second anniversary of the later of the Issue
Date and the last date on which the Company or any Affiliate of the Company was
the owner of such Note (or any predecessor security) (or such shorter period of
time as permitted by Rule 144(k) under the Securities Act or any successor
provision thereunder) (or such longer period of time as may be required under
the Securities Act or applicable state securities laws in the opinion of counsel
for the Company, unless otherwise agreed by the Company and the Holder thereof).
Each Global Note shall also bear the legend as set forth in EXHIBIT C.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to paragraph 5 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the aggregate principal amount of the Notes to be redeemed.
Such notice must be given at least 45 days prior to the Redemption Date (unless
a shorter notice shall be satisfactory to the Trustee), but shall not be given
more than 60 days before the Redemption Date. Any such notice may be cancelled
at any time prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
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 such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a PRO RATA basis or by lot; PROVIDED,
HOWEVER, that no Notes of a principal amount of $1,000 or less shall be redeemed
in part; PROVIDED, FURTHER, that if a partial redemption is made with the
proceeds of a
<PAGE>
-44-
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 DTC procedures), 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 funds
in satisfaction of the applicable Redemption Price.
SECTION 3.03. 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 December 15, 2002, 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 December 15 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
YEAR PERCENTAGE
---- ----------
2002 ..................... 105.313%
2003 ..................... 103.542%
2004 ..................... 101.771%
2005 and thereafter ...... 100.000%
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to December 15, 2000, 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% of the aggregate principal amount of Notes originally issued at a
redemption price equal to 110.625% of the principal amount thereof plus accrued
and unpaid interest thereon, if any, to the date of redemption; PROVIDED that at
least 65% of the principal amount of Notes originally issued remains outstanding
immediately after 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 90
<PAGE>
-45-
days after the receipt of proceeds of any such Public Equity Offering.
SECTION 3.04. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
and, in the case of an offer based upon the proceeds from a Public Equity
Offering, within 30 days following the date upon which the relevant Public
Equity Offering is consummated, the Company shall mail or cause to be mailed a
notice of redemption by first-class mail to each Holder whose Notes are to be
redeemed at its registered address, with a copy to the Trustee. At the
Company's request, 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 Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price (the "Redemption Price") and the amount of
accrued and unpaid interest, if any, to be paid as of the Redemption Date;
(3) the paragraph and subparagraph of the Notes pursuant to which the
Notes are being redeemed;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued and unpaid
interest, if any;
(6) that, unless the Company defaults in paying the Redemption Price,
interest, if any, on Notes called for redemption shall cease to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Notes is to receive payment of the Redemption Price plus accrued
and unpaid interest as of the Redemption Date, if any, upon surrender to
the Paying Agent of the Notes redeemed;
(7) that, if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
and
<PAGE>
-46-
(8) that, if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
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 purchase
of Notes.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued and unpaid interest, if any. Upon surrender to the Trustee or Paying
Agent, such Notes called for redemption shall be paid at the Redemption Price
plus accrued and unpaid 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 referred to in the Notes. Interest shall accrue on or
after the Redemption Date and shall be payable only if the Company defaults in
payment of the Redemption Price.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.
On or before 11:00 a.m. New York City 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 and unpaid interest, if any, of all Notes to
be redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited that is not required for that purpose, except
with respect to monies owed as obligations to the Trustee pursuant to Article
Seven.
Unless the Company fails to comply with the preceding paragraph and
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
<PAGE>
-47-
SECTION 3.07. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal, of premium, if any, and interest
on the Notes on the dates and in the manner provided in the Notes and in this
Indenture. An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or an Affiliate of the Company) holds, prior to 11:00 a.m. New York
City on that date, U.S. Legal Tender designated for and sufficient to pay in a
timely manner the installment in full and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal, premium or interest payments hereunder.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior 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, the presentations,
surrenders, notices and demands referred to in Section 2.03 may be made or
served at the address of the Trustee set forth in Section 13.02.
<PAGE>
-48-
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Articles Four and Five, the Company
shall do or cause to be done, at its own cost and expense, all things reasonably
necessary to preserve and keep in full force and effect its corporate or other
existence and the corporate or other existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents of the
Company and each such Restricted Subsidiary and the material rights (charter and
statutory) and franchises of the Company and each such Restricted Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to preserve, with
respect to itself, any material right or franchise and, with respect to any of
its Restricted Subsidiaries, any such existence, material right or franchise, if
the Board of Directors of the Company or such Restricted Subsidiary, as the case
may be, shall determine that the preservation thereof is no longer reasonably
necessary or desirable in the conduct of the business of the Company or its
Subsidiaries, taken as a whole.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all material lawful claims
for labor, materials, supplies and services that, if unpaid when due, might by
law become a Lien upon the property of it or any of its Subsidiaries; PROVIDED,
HOWEVER, that there shall not be required to be paid or discharged any such tax,
assessment, charge or claim, the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
provision has been made or for which adequate reserves, to the extent required
under GAAP, have been taken or where the failure to effect such payment or
discharge is not adverse in any material respect to the Holders.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain all properties used or necessary in the conduct of its
business in good working order and in normal condition (subject to ordinary wear
and tear) and make or cause to be made all repairs, renewals, replacements,
<PAGE>
-49-
additions, betterments and improvements thereto, all as in the reasonable
judgment of the Company is necessary so that the business carried on by the
Company and its Restricted Subsidiaries may be actively conducted; PROVIDED,
HOWEVER, that nothing in this Section 4.05 shall prevent the Company or any of
its Restricted Subsidiaries from discontinuing the operation and maintenance of
any of its properties, if such properties are, in the reasonable and good faith
judgment of the Board of Directors of the Company or the Restricted Subsidiary,
as the case may be, no longer reasonably necessary in the conduct of their
respective businesses and is not disadvantageous in any material respect to the
Holders.
(b) The Company shall provide or cause to be provided, for itself
and each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith judgment of the Board of Directors of the Company, are adequate
and appropriate for the conduct of the business of the Company and such
Restricted Subsidiaries in a prudent manner, with reputable insurers or with
the government of the United States of America or any state thereof or an
agency or instrumentality of such governments, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Board of Directors of the Company, for companies similarly
situated in the industry.
SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each of the Company's fiscal years, an Officers' Certificate (signed
by the principal executive officer, principal financial officer or principal
accounting officer) stating that a review of its activities and the activities
of its Restricted Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing officers with a view to determining whether
it has kept, observed, performed and fulfilled in all material respects its
obligations under this Indenture and further stating, as to each such officer
signing such certificate, that to the best of such officers' knowledge the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such obligation 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 the Default or Event of
<PAGE>
-50-
Default and 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.
(b) So long as not contrary to the then-current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.07 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be a
firm of established national reputation) stating whether, in connection with
their audit examination, any Default or Event of Default has come to their
attention and if such a Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; PROVIDED, HOWEVER, that,
without any restriction as to the scope of the audit examination, such
independent certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards.
(c) So long as any of the Notes are outstanding (i) if any Default or
Event of Default has occurred and is continuing or (ii) if any Holder shall have
notified the Company that it seeks to exercise any remedy hereunder with respect
to a claimed Default under this Indenture or the Notes, the Company shall
promptly deliver to the Trustee by registered or certified mail or by telegram,
telex or facsimile transmission followed by hard copy by registered or certified
mail an Officers' Certificate specifying such event, notice or other action
within five Business Days of its becoming aware of such occurrence.
SECTION 4.07. REPORTS TO HOLDERS.
(a) The Company (at its own expense) 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, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report on the financial
statements included therein by the Company's certified independent accountants.
<PAGE>
-51-
(b) 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 provide the Trustee and each Holder with such quarterly and annual reports
and such information, documents and other reports, each containing the
information specified in Sections 13 and 15(d) of the Exchange Act, within 105
days after the end of each fiscal year of the Company and within 60 days of the
end of each of the first three quarters of each fiscal year.
(c) In addition, whether or not required by the rules and regulations
of the Commission, at any time after the Company files the Exchange Offer
Registration Statement with the Commission, the Company will file a copy of all
such information with the Commission for public availability (unless the
Commission will not accept such a filing) and make such information available to
investors who request it in writing. The Company will also comply with the
other provisions of TIA Section 314(a).
SECTION 4.08. 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, premium or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the obligations 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 4.09. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
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 Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value
<PAGE>
-52-
any Capital Stock of the Company 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 that is subordinate or junior in right of payment to the Notes or
(d) make any Investment (other than Permitted Investments) (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 Section 4.11 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: (v) 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 (w) 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 (x) without duplication of any amounts included in clause
(iii)(w) 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)(w) and (x), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the
Notes); plus (y) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, interest payments,
repayments of loans or advances, or other transfers of cash, in each case, to
the Company or to any Wholly Owned Restricted Subsidiary of the Company from
Unrestricted Subsidiaries (but without duplication of any such amount
included in Consolidated Net Income of the Company), or from redesignations
of Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued
as provided in the definition of "Investment"), not to exceed, in the case of
an Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary of the Company
<PAGE>
-53-
in such Unrestricted Subsidiary and which were treated as a Restricted
Payment under the Indenture; plus (z) $1.0 million.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend 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, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) 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 that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or
(B) Refinancing Indebtedness; (4) if no Default or Event of Default shall have
occurred and be continuing, repurchases by the Company of Common Stock of the
Company from officers, directors and employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such officers, directors and employees, in an
aggregate amount not to exceed $500,000 in any calendar year plus the aggregate
cash proceeds from any reissuance during such calendar year of Common Stock by
the Company to employees, officers or directors of the Company and its
Subsidiaries plus the aggregate cash proceeds from any payments on life
insurance policies with respect to any employees, officers or directors of the
Company and its Subsidiaries which proceeds are used to purchase the Common
Stock of the Company held by any such employees, officers or directors; and
(5) if no Default or Event of Default shall have occurred and be continuing, the
redemption at stated maturity of the existing Class B Preferred Stock of Perry
Graphic Communications, Inc. (the "Class B Preferred Stock") and the payment of
scheduled dividend payments thereon in accordance with the terms of the Class B
Preferred Stock. 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)(ii), (4) and (5) shall be included in such calculation.
<PAGE>
-54-
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its
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 its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms
that are no less favorable 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 $500,000
shall be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, 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 of the Company 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 $2,500,000, the Company
or such Restricted Subsidiary, as the case may be, 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 of the Company as determined in good faith by the
Company's Board
<PAGE>
-55-
of Directors or senior management; (ii) transactions exclusively between or
among the Company and any of its Wholly Owned Restricted Subsidiaries or
exclusively between or among such Wholly Owned Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by the Indenture;
(iii) any agreement as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders
in any material respect than the original agreement as in effect on the Issue
Date; (iv) payments of annual fees and reimbursement of reasonable expenses
to Novamil Corporation in accordance with the provisions of the Management
Agreement dated April 28, 1995, as in effect on the Issue Date, to New House
Capital Management Corp. in accordance with the provisions of the Consulting
Agreement dated April 28, 1995, as in effect on the Issue Date and to Thomas
V. Bressan in accordance with the provisions of a consulting agreement dated
January 10, 1997, as in effect on the Issue Date; (v) payments made in
accordance with the Marpax, Inc. Supply Agreement, as in effect on the Issue
Date, or any other such ink supply agreement with Marpax entered into on
terms no less favorable to the Company than those that may reasonably have
been obtained in an arm's length transaction as determined in good faith by
the Company's Board of Directors; (vi) advances or loans to employees,
officers and directors of the Company and its Restricted Subsidiaries
permitted by clauses (iv) and (v) of the definition of Permitted Investments;
and (vii) Restricted Payments permitted by the Indenture.
SECTION 4.11. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any of its 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 may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and
Restricted Subsidiaries of the Company may incur Acquired Indebtedness, in each
case if on the date of the incurrence of such Indebtedness, after giving effect
to the incurrence thereof and the application of the proceeds therefrom, the
Consolidated
<PAGE>
-56-
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.
SECTION 4.12. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
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 of the Company 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 of the Company; or (c) transfer
any of its property or assets to the Company or any other Restricted
Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) the Indenture; (3)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (4) 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;
(5) agreements existing on the Issue Date (including, without limitation, the
Credit Agreement) to the extent and in the manner such agreements are in
effect on the Issue Date; or (6) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; PROVIDED, HOWEVER,
that the provisions relating to such encumbrance or restriction contained in
any such Indebtedness are no less favorable to the Company 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 agreements referred to in such clause
(2), (4) or (5).
SECTION 4.13. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder will have
the right to require the Company to 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, to the date of purchase.
<PAGE>
-57-
(b) Prior to the mailing of the notice referred to in paragraph (c)
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Indebtedness the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Indebtedness and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all other Senior Indebtedness to permit
the repurchase of the Notes as provided below. The Company shall first comply
with the covenant in the immediately preceding sentence before it shall be
required to repurchase Notes pursuant to the provisions described below. The
Company's failure to comply with the covenant described in the immediately
preceding sentence shall constitute an Event of Default described in clause (3)
and not in clause (2) under Section 6.01.
(c) Within 30 days following the date upon which a Change of Control
occurs, 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:
(1) that the Change of Control Offer is being made pursuant to
Section 4.13 of this Indenture and that all Notes validly tendered and not
withdrawn will be accepted for payment and that the Change of Control Offer
shall remain open for a period of 20 Business Days or such longer period as
may be required by law;
(2) the purchase price (including the amount of accrued and unpaid
interest, if any) and the purchase date (which shall 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");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
<PAGE>
-58-
(5) that 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 and Registrar 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;
(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
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
(d) On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes 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 and unpaid interest, if any,
of all Notes so tendered and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued and unpaid interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Upon the payment of the purchase
price for the Notes accepted for purchase, the Trustee shall return the Notes
purchased to the Company for cancellation. Any Notes not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.13, the Trustee shall act as the Paying Agent.
<PAGE>
-59-
Neither the Board of Directors of the Company nor the Trustee may
waive provisions of this Section 4.13 relating to the Company's obligations to
make a Change of Control Offer.
(e) 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 this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.13 by virtue thereof.
SECTION 4.14. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) 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), (ii) at least 85% of the consideration (other
than indebtedness assumed by the purchaser in connection with such Asset Sale
and as to which there is no further recourse against the Company or the
Restricted Subsidiaries) 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 (iii) 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
365 days of receipt thereof either (A) to prepay any Senior Indebtedness and, in
the case of any Senior Indebtedness under any revolving credit facility, effect
a permanent reduction in the availability under such revolving credit facility,
(B) to make an investment in properties and assets that replace the properties
and assets that were the subject of such Asset Sale or in properties and assets
that will be used in the business of the Company and its Subsidiaries as
existing on the Issue Date or in businesses reasonably related thereto
(including investments in 100% of the equity interest in a Person that owns such
properties and assets) ("Replacement Assets"), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines
<PAGE>
-60-
not to apply the Net Cash Proceeds relating to such Asset Sale as set forth
in clauses (iii)(A), (iii)(B) and (iii)(C) 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 (iii)(A), (iii)(B) and (iii)(C) of
the next preceding sentence (each a "Net Proceeds Offer Amount") shall be
applied by the Company or such Restricted Subsidiary to make an offer to
purchase (the "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 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 thereon, if any, to the date of purchase;
PROVIDED, HOWEVER, that if at any time any non-cash consideration received by
the Company or any Restricted Subsidiary of the Company, 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 $5,000,000 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 its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Article Five, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its 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 its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
(b) Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) at least 85% of
the consid-
<PAGE>
-61-
eration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; PROVIDED that any consideration not
constituting Replacement Assets received by the Company or any of its
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 preceding paragraphs.
(c) Subject to the deferral of the Net Proceeds Offer contained in
clause (a) above, each notice of a 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. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Net Proceeds Offer and shall state the following
terms:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.14, that all Notes tendered will be accepted for payment;
PROVIDED, HOWEVER, that if the aggregate principal amount of Notes tendered
in a Net Proceeds Offer plus accrued and unpaid interest at the expiration
of such offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be purchased on a PRO RATA basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or multiples thereof shall be purchased)
and that the Net Proceeds Offer shall remain open for a period of 20
Business Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued and unpaid
interest) and the Net Proceeds Offer Payment Date (which shall be not less
than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date;
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder
<PAGE>
-62-
to Elect Purchase" on the reverse of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Net Proceeds Offer
Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have such Note purchased; and
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof;
On or before the Net Proceeds Offer Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (c)(i)
above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price plus accrued and unpaid interest, if any, of all Notes to
be purchased and (iii) deliver to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued and unpaid interest, if any. For purposes of this Section 4.14,
the Trustee shall act as the Paying Agent. The Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to
any unpurchased portion of the Notes surrendered. Upon the payment of the
purchase price for the Notes accepted for purchase, the Trustee shall return
the Notes purchased to the Company for cancellation. Any monies remaining
after the purchase of Notes pursuant to a Net Proceeds Offer shall be
returned within three Business Days by the Trustee to the Company except with
respect to monies owed as obligations to the Trustee pursuant to Article
Seven. For purposes of this Section 4.14, the Trustee shall act as the
Paying agent.
To the extent the aggregate amount of the Notes tendered pursuant to
any Net Proceeds Offer is less than the Net
<PAGE>
-63-
Proceeds Offer Amount, the Company may use such deficiency for general
corporate purposes. Upon completion of such offer to purchase, the Net
Proceeds Offer Amount shall be reset at zero.
(d) 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. The agreements governing certain outstanding Senior Indebtedness of
the Company will require that the Company and its Subsidiaries apply all
proceeds from asset sales to repay in full outstanding obligations under such
Senior Indebtedness prior to the application of such proceeds to repurchase
outstanding notes.
SECTION 4.15. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not, and shall not permit any Subsidiary Guarantor
to, incur or suffer to exist Indebtedness that is expressly by its terms senior
in right of payment to the Notes or such Subsidiary Guarantor's Guarantee and
subordinate in right of payment to any other Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be.
SECTION 4.16. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any of its
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 its 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 (i) 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 and such Guarantee are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens and (ii) in all other cases,
the Notes are equally and ratably secured, except for (A) Liens existing as of
the Issue Date to the extent and in the manner such Liens are in effect on the
<PAGE>
-64-
Issue Date; (B) Liens securing Senior Indebtedness and Liens securing Guarantor
Senior Indebtedness; (C) Liens securing the Notes and the Guarantees; (D) Liens
of the Company or a Wholly Owned Restricted Subsidiary of the Company on assets
of any Subsidiary of the Company; (E) 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 (i) 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 (ii) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens.
SECTION 4.17. CONDUCT OF BUSINESS.
The Company and its Restricted Subsidiaries shall not engage in any
businesses which are not the same, similar, related or necessary to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
SECTION 4.18. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company, other than the
Class B Preferred Stock and any Preferred Stock issued as dividends as expressly
provided in the terms of the Class B Preferred Stock as in effect on the Issue
Date.
SECTION 4.19. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its 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 Subsidiary
Guarantor, or if the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest in another Restricted Subsidiary having
total assets with a book value in excess of $500,000, then such transferee or
acquired or other Restricted Subsidiary shall (i) execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant
<PAGE>
-65-
to which such Restricted Subsidiary shall unconditionally guarantee all of
the Company's obligations under the Notes and this Indenture on the terms set
forth herein and (ii) 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 Subsidiary Guarantor for all purposes of
this Indenture.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS.
(a) The Company shall 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 of the Company 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 Company's 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 of the Company's 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 Notes and the
performance of every covenant of the Notes, the Indenture 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 and Acquired Indebtedness incurred or anticipated to be incurred in
connection
<PAGE>
-66-
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
Section 4.11; (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 and
Acquired 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 (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, 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 of the Company, 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 Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Guarantee is to be released in accordance with the terms of the Guarantee
and this Indenture in connection with any transaction complying with the
provisions of Section 4.14) will not, and the Company will not cause or permit
any Subsidiary Guarantor to, consolidate with or merge with or into any Person
other than the Company or any other Subsidiary Guarantor unless: (i) the entity
formed by or surviving any such consolidation or merger (if other than the
Subsidiary 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;
(ii) such entity assumes by supplemental indenture all of the obligations of the
Subsidiary Guarantor on the Guarantee; (iii) immediately after giving effect to
such transaction, no Default or Event of De-
<PAGE>
-67-
fault 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 (ii)
of the first paragraph of this Section 5.01. Any merger or consolidation of
a Subsidiary Guarantor with and into the Company (with the Company being the
surviving entity) or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company need only comply with clause (iv) of
Section 5.01(a).
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, 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
this Indenture and the Notes with the same effect as if such successor Person
had been named as the Company herein. When a successor corporation assumes all
of the obligations of the predecessor hereunder and under the Notes and agrees
to be bound hereby and thereby, the predecessor shall be released from such
obligations.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following shall be an "Event of Default":
(1) 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 (whether
or not such payment shall be prohibited by Article Ten of this Indenture);
(2) 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 Net Proceeds
Offer)(whether or not such payment shall be prohibited by Article Ten of
this Indenture);
<PAGE>
-68-
(3) a default in the observance or performance of any other covenant
or agreement contained in this Indenture 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 (except in the case of a default with respect to Section 5.01, which
will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5,000,000 or more at any time;
(5) one or more judgments in an aggregate amount in excess of
$5,000,000 shall have been rendered against the Company or any of its
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;
(6) the Company or any of its Significant Subsidiaries pursuant to or
under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(d) makes a general assignment for the benefit of its creditors;
or
(e) shall generally not pay its debts when such debts become due
or shall admit in writing its inability to pay its debts generally;
<PAGE>
-69-
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding,
(b) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its
properties, or
(c) orders the liquidation of the Company or any Significant
Subsidiary of the Company.
(8) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Subsidiary
Guarantors denies its liability under its Guarantee (other than by reason
of release of a Subsidiary Guarantor in accordance with the terms of the
Indenture).
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.01(6) above with respect to the Company) 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 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" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or 5 business days after
receipt by the Company and the Representative under the Credit Agreement of such
Acceleration Notice. In the event of a declaration of acceleration because of
an Event of Default described in clause (iv) above has occurred
and is continuing, such declaration of acceleration shall be automatically
annulled if such payment default is cured or waived or the holders of the
Indebtedness which is the subject of such event of default have rescinded
their declaration of acceleration in respect of such Indebtedness within 60
days thereof and the Trustee has received written notice of such cure, waiver
or rescission and no other Event of Default described in clause (iv) above
has occurred
<PAGE>
-70-
that has not been cured or waived within 60 days of the
declaration of such acceleration in respect thereof and if (i) the repayment
of Indebtedness or annulment of such acceleration, as the case may be, would
not conflict with any judgment or decree of a court of competent jurisdiction
and (ii) all existing Events of Default, except non-payment of principal or
interest which have become due solely due to such acceleration, have been
cured or waived.
(b) If an Event of Default specified in Section 6.01(6) or (7) with
respect to the Company occurs and is continuing, 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.
(c) At any time after a declaration of acceleration with respect to
the Notes as described in Section 6.02(a), the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest, if any, that has become due solely because
of the acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest, if any, and overdue principal that
has become due otherwise than by such declaration of acceleration has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
Section 6.01(6) or (7), 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, premium, if any, or accrued and unpaid interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
<PAGE>
-71-
All rights of action and claims under this Indenture or the Notes may
be entered by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee
or any Noteholder 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.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may, on behalf of the Holders of all the Notes, waive any
existing Default or Event of Default and its consequences under this Indenture,
except a Default or Event of Default specified in Section 6.01(1) or (2) or in
respect of any provision hereof which cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.02. When a Default or
Event of Default is so waived, it shall be deemed cured and shall cease to
exist. This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA
and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes then
outstanding 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, including, without limitation, any remedies provided for in
Section 6.03. Subject to Section 7.01, however, the Trustee may, in its
discretion, refuse to follow any direction that conflicts with any law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of another Holder (it being understood that the Trustee shall have no duty to
ascertain whether or not such actions or forbearances are unduly prejudicial to
such Holders) or that may involve the Trustee in personal liability; PROVIDED,
HOWEVER, that the Trustee may take any other action deemed proper by the
Trustee, in its discretion, that is not inconsistent with such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
<PAGE>
-72-
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in aggregate principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holders offer to the Trustee indemnity or security against
any loss, liability or expense to be incurred in compliance with such
request which is satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of satisfactory indemnity or security;
and
(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
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, premium and interest on a Note,
on or after the respective due dates expressed in such Note, 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 such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) 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 Notes for the whole amount of principal and
accrued interest 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 at the rate set forth in the Notes and such further
amount as shall be sufficient to cover the costs and expenses
<PAGE>
-73-
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, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective 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 each Holder 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 Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07.
The Company's payment obligations under this Section 6.09 shall be secured in
accordance with the provisions of 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 Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Sections 6.09 and 7.07;
Second: to holders of Senior Indebtedness, to the extent required in
Article Ten.
Third: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
<PAGE>
-74-
Fourth: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium, if any, and interest, respectively;
and
Fifth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
Fifth: 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 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
aggregate principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent Person would exercise or use under the
circumstances in the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
<PAGE>
-75-
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no duties,
covenants, responsibilities or obligations shall be implied in this
Indenture that are adverse to 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 (including Officers'
Certificates) or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture. However, as
to any certificates or opinions which are required by any provision of this
Indenture to be delivered or provided to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, 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:
(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 Trust 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 6.02, 6.04 or 6.05.
(d) No provision of this Indenture 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 in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
<PAGE>
-76-
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree with the Company. Assets
held in trust by the Trustee need not be segregated from other assets except to
the extent required by law.
(g) In the absence of negligence or willful misconduct on the part of
the Trustee, the Trustee shall not be responsible for the application of any
money by any Paying Agent other than the Trustee.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon 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 consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee
shall not be liable for and shall be fully protected in respect of any
action it takes or omits to take in good faith in reliance on such
Officers' Certificate, or an Opinion of Counsel or advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent or
attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith that it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any
Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit
<PAGE>
-77-
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, upon reasonable notice to the
Company, to examine the books and records of the Company pertaining to
the Notes, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Notes pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from
liability with respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(h) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Restricted or Unrestricted Subsidiary, 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 makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
<PAGE>
-78-
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if
the Trustee has knowledge of such Default or Event of Default, the Trustee shall
mail to each Holder notice of the uncured Default or Event of Default within 60
days after such Default or Event of Default occurs. Except in the case of a
Default or an Event of Default in the payment of interest or principal of,
premium or interest on, any Note, including an accelerated payment and the
failure to make payment on the Change of Control Payment Date pursuant to a
Change of Control Offer or on the Net Proceeds Offer Payment Date pursuant to a
Net Proceeds Offer and, except in the case of a failure to comply with Article
Five, the Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a committee of
its Board of Directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. The Trustee shall not
be deemed to have knowledge of a Default or Event of Default other than (i) any
Event of Default occurring pursuant to Sections 6.01(1) or 6.01(2); or (ii) any
Default or Event of Default of which a Trust Officer shall have received written
notification or obtained actual knowledge. As used herein, the term "actual
knowledge" means the actual fact or statement of knowing, without any duty to
make any investigation with regard thereto.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after May 15 of each year beginning with May 15, 1998,
the Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange, and if the Notes are so listed, the Trustee shall
comply with TIA Section 313(d).
<PAGE>
-79-
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time, and the
Trustee shall be entitled to, such compensation as may be agreed upon 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 out-of-pocket expenses,
disbursements and advances incurred or made by it in connection with the
performance of its duties and the discharge of its obligations under this
Indenture. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, stockholders and directors for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence or willful misconduct on their part, arising out
of or in connection with the acceptance or administration of this trust
including the reasonable costs and expenses of defending themselves against or
investigating any claim or liability in connection with the exercise or
performance of any of the Trustee's rights, powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee or any of its agents, employees, officers, stockholders and directors
for which it may seek indemnity. The Company shall defend the claim and the
Trustee shall cooperate in the defense; PROVIDED that any settlement of a claim
shall be approved in writing by the Trustee. Alternatively, the Trustee may at
its option have separate counsel of its own choosing and the Company shall pay
the reasonable fees and expenses of such counsel; PROVIDED, HOWEVER, that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense and there is no conflict of interest between the Company and
the Trustee and its agents, employees, officers, stockholders and directors
subject to the claim in connection with such defense as reasonably determined by
the Trustee. The Company need not pay for any settlement made without its
written consent. The Company need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its
<PAGE>
-80-
capacity as Trustee, except assets or money held in trust to pay principal of
or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) occurs, such expenses and the compensation
for such services shall be paid to the extent allowed under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing at least
10 days in advance. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by so notifying the Company and the
Trustee and may appoint a successor Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only with
the successor Trustee's acceptance of appointment as provided in this Section.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
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 Notes 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. Promptly after that,
the retiring Trustee shall transfer 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
Holder.
<PAGE>
-81-
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 aggregate principal amount of the outstanding Notes
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 Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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.
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; PROVIDED, HOWEVER, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA Section 310(a)(2). 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 indentures under which
other notes, or certificates of interest or participation in other notes, of the
Company are outstanding, if the requirements for such exclusion set forth in TIA
Section 310(b)(1) are met. The provisions of TIA Section 310 shall apply to
the Company and any other obligor of the Notes.
<PAGE>
-82-
SECTION 7.11. PREFERENTIAL COLLECTION OF
CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor 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
therein. The provisions of TIA Section 311 shall apply to the Company and any
other obligor of the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S
OBLIGATIONS.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all Notes
have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, U.S. Legal Tender in such amount as is
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, without consideration of reinvestment of such interest,
to pay principal of, premium, if any, and interest on the
<PAGE>
-83-
outstanding Notes to maturity or redemption; PROVIDED that the Trustee
shall have been irrevocably instructed to apply such U.S. Legal Tender to
the payment of said principal, premium, if any, and interest with respect
to the Notes and, PROVIDED, FURTHER, that from and after the time of
deposit, the money deposited shall not be subject to the rights of holders
of Senior Indebtedness pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for or relating to the termination of the Company's
obligations under the Notes and this Indenture have been complied with.
Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under the Credit Agreement (if then
in effect) or any other agreement or instrument then known to such counsel
that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive until
the Notes are no longer outstanding pursuant to the last paragraph of Section
2.08. After the Notes are no longer outstanding, the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT
DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time,
<PAGE>
-84-
elect to have either paragraph (b) or (c) below be applied to all outstanding
Notes upon compliance with the conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 8.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Indebtedness under Article Ten or otherwise,
except for the following provisions, which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section, payments in respect of the
principal of and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Article Two and Section
4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and
(iv) this Article Eight. Subject to compliance with this Article Eight, the
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through 4.19
and Article Five hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such
<PAGE>
-85-
covenants, but shall continue to be deemed "outstanding" for all other
purposes hereunder (it being understood that such Notes shall not be deemed
outstanding for accounting purposes) and Holders of the Notes and any amounts
deposited under Section 8.03 hereof shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Indebtedness under
Article Ten or otherwise. For this purpose, such Covenant Defeasance means
that, with respect to the outstanding Notes, the Company 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(3) hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under paragraph (a) hereof
of the option applicable to this paragraph (c), subject to the satisfaction
of the conditions set forth in Section 8.03 hereof, Sections 6.01(3),
6.01(4), 6.01(5) and 6.01(8) shall not constitute Events of Default.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR
COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
(a) the Company shall have irrevocably deposited with the Trustee, in
trust, for the benefit of the Holders U.S. Legal Tender or U.S. Government
Obligations, or a combination thereof, in such amount 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 (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) 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
<PAGE>
-86-
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 (other than a Default or Event of
Default with respect to the Indenture resulting from the incurrence of
Indebtedness all or a portion of which will be used to defease the Notes
concurrently with such incurrence) 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
(other than as permitted by clause (d) above) or any other material
agreement or instrument to which the Company is a party or by which the
Company 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 have been complied with; and
<PAGE>
-87-
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holder of Senior Indebtedness, including, without limitation,
those arising under the Indenture and (B) 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.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them
<PAGE>
-88-
for the payment of principal or interest that remains unclaimed for two years
after the date of payment of such principal and interest; PROVIDED that the
Trustee or such Paying Agent, before being required to make any payment, may
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, Holders
entitled to such money must look to the Company for payment as general
creditors unless an applicable law designates another Person.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight 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, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Article
Eight until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Article
Eight; PROVIDED that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes 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 and the Subsidiary Guarantors, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture or
the Notes without the consent of any Holders:
(1) to cure any ambiguity, defect or inconsistency;
<PAGE>
-89-
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA;
(5) to make any other change that would provide any additional
benefit or rights to the Holders or that does not adversely affect in any
material respect the rights of any Holders hereunder;
(6) to provide for issuance of the Exchange Notes, which will have
terms substantially identical in all material respects to the Initial Notes
(except that the transfer restrictions contained in the Initial Notes will
be modified or eliminated, as appropriate), and which will be treated
together with any outstanding Initial Notes, as a single issue of
securities; or
(7) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any Holders
hereunder, and in making such determination, in the absence of bad faith,
the Trustee may conclusively rely on the advice of counsel and not be
liable therefor;
PROVIDED, HOWEVER, 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, when authorized by a Board
Resolution, 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
Notes, may amend or supplement this Indenture or the Notes, without notice to
any other Holders. Subject to Section 6.07, the Holder or Holders of a majority
in aggregate principal amount of the outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes without notice to
any other Holder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each Note
affected thereby:
<PAGE>
-90-
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, if any, including defaulted interest, on any
Notes;
(3) 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;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal 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;
(6) 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;
(7) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner that adversely affects the Holders; or
(8) release any Subsidiary Guarantor from any of its obligations
under its Guarantee or this Indenture otherwise than in accordance with the
terms of this Indenture.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Company shall mail to the
Holders affected thereby at their registered addresses 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.
<PAGE>
-91-
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
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 Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to his Note or portion of his Note 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 Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver (at which time such amendment, supplement or
waiver shall become effective).
The Company may, but shall not be obligated to, fix such record date
as it may select 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.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note 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 Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
<PAGE>
-92-
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
PROVIDED, HOWEVER, 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. Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. NOTES SUBORDINATED TO SENIOR
INDEBTEDNESS.
The Company covenants and agrees, and the Trustee and each Holder of
the Notes, by its acceptance thereof, likewise covenants and agrees, that all
Notes shall be issued subject to the provisions of this Article Ten; and the
Trustee and each Person holding any Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the payment of
all Obligations on the Notes by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all Obligations on the
Senior Indebtedness; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Indebtedness, and that each
holder of Senior Indebtedness whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Indenture and the Notes.
SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN
CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at stated maturity, upon any redemption, by declaration or otherwise, of
any principal of, inter-
<PAGE>
-93-
est on, unpaid drawings for letters of credit issued in respect of or
regularly accruing fees with respect to any Senior Indebtedness, no payment
of any kind or character shall be made by or on behalf of the Company or any
other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect
to any Designated Senior Indebtedness, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Indebtedness,
permitting the holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative for
the respective issue of Designated Senior Indebtedness gives written notice
of the event of default to the Trustee (a "Default Notice"), then, unless and
until all events of default have been cured or waived or have ceased to exist
or the Trustee receives notice from the Representative for the respective
issue of Designated Senior Indebtedness terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on its
behalf shall (x) make any payment of any kind or character with respect to
any Obligations on the Notes or (y) acquire any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in
no event will a Blockage Period extend beyond 180 days from the date the
payment on the Notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed
or was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Indebtedness shall be, or be made, the basis
for commencement of a second Blockage Period by the Representative of such
Designated Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness
<PAGE>
-94-
(PRO RATA to such holders on the basis of the respective amount of Senior
Indebtedness held by such holders) or their respective Representatives, as
their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on the Senior
Indebtedness, if any, received from the holders of Senior Indebtedness (or
their Representatives) or, if such information is not received from such
holders or their Representatives, from the Company and only amounts included
in the information provided to the Trustee shall be paid to the holders of
Senior Indebtedness.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; PROVIDED that all Senior Indebtedness thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Notes.
SECTION 10.03. PAYMENT OVER OF PROCEEDS UPON
DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Indebtedness, before
any payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash or
property or otherwise (except that Holders of Notes may receive securities of
the Company that are unsecured and subordinated at least to the same extent as
the Notes to Senior Indebtedness as provided in the Indenture, do not have a
maturity any shorter than the security which it is replacing and will not cause
the Notes to be treated in any case or proceeding as part of the same class of
claims as the Senior Indebtedness or any class of claims PARI PASSU with, or
senior to, the Senior Indebtedness for any payment or distribution). Upon any
such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Company
<PAGE>
-95-
of any kind or character, whether in cash, property or securities, to which
the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, or by the Holders or by the
Trustee under this Indenture if received by them, directly to the holders of
Senior Indebtedness (PRO RATA to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant
to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been
paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or
on behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Indebtedness (PRO RATA to such holders on the basis of
the respective amount of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
<PAGE>
-96-
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior
Indebtedness shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, assume the
Company's obligations hereunder in accordance with Article Five hereof.
SECTION 10.04. PAYMENTS MAY BE PAID PRIOR TO
DISSOLUTION.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
by the Trustee that a given payment would be prohibited by Section 10.02 or
10.03, the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of, and interest on, the Notes to
the Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment would otherwise become due and payable a Trust Officer
shall have actually received the written notice provided for in the second
sentence of Section 10.02(a) or in Section 10.08 (PROVIDED that, notwithstanding
the foregoing, such application shall otherwise be subject to the provisions of
the first sentence of Section 10.02(a) and Section 10.03). The Company shall
give prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of the Company.
SECTION 10.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness, the Holders of the Notes shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company applicable to the Senior
Indebtedness until the Notes shall be paid in full; and, for the purposes of
such subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders by
virtue of
<PAGE>
-97-
this Article Ten which otherwise would have been made to the Holders
shall, as between the Company and the Holders of the Notes, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Article Ten are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
SECTION 10.06. APPLICATION BY TRUSTEE OF ASSETS
DEPOSITED WITH IT.
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Eight shall be for
the sole benefit of the Holders of the Notes and, to the extent allocated for
the payment of Notes, shall not be subject to the subordination provisions of
this Article Ten. Otherwise, any deposit of assets or securities by or on
behalf of the Company with the Trustee or any Paying Agent (whether or not in
trust) for the payment of principal of or interest on any Notes shall be subject
to the provisions of this Article Ten; PROVIDED, HOWEVER, that if prior to the
second Business Day preceding the date on which by the terms of this Indenture
any such assets may become distributable for any purpose (including, without
limitation, the payment of either principal of or interest on any Note) the
Trustee or such Paying Agent shall not have received with respect to such assets
the notice provided for in Section 10.06, then the Trustee or such Paying Agent
shall have full power and authority to receive such assets and to apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary received by it on or after such date. The foregoing
shall not apply to the Paying Agent if the Company or any Subsidiary or
Affiliate of the Company is acting as Paying Agent. Nothing contained in this
Section 10.07 shall limit the rights of the holders of Senior Indebtedness to
recover payments as contemplated by this Article Ten.
SECTION 10.07. OBLIGATIONS OF THE COMPANY
UNCONDITIONAL.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with
<PAGE>
-98-
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Holder of any
Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
SECTION 10.08. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment to or by the Trustee unless and until a Trust officer shall have
received notice in writing from the Company, or from a holder of Senior
Indebtedness or a Representative therefor, and, prior to the receipt of any such
written notice, the Trustee shall be entitled to assume (in the absence of
actual knowledge by a Trust officer to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
satisfaction of the Trustee as to the amounts of Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such person to receive such payment.
SECTION 10.09. RELIANCE ON JUDICIAL ORDER OR
CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
disso-
<PAGE>
-99-
lution, winding-up, liquidation or reorganization proceedings are pending, or
upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered
to the Trustee or the Holders of the Notes, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Ten.
SECTION 10.10. TRUSTEE'S RELATION TO SENIOR
INDEBTEDNESS.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Indebtedness, the distribution may be made and the notice may
be given to their Representative, if any.
SECTION 10.11. SUBORDINATION RIGHTS NOT IMPAIRED BY
ACTS OR OMISSIONS OF THE COMPANY OR
HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
<PAGE>
-100-
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Indebtedness,
do any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness, or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the payment or
collection of Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 10.12. NOTEHOLDERS AUTHORIZE TRUSTEE TO
EFFECTUATE SUBORDINATION OF NOTES.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior
Indebtedness and the Holders of Notes, the subordination provided in this
Article Ten, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, the filing of a claim for the unpaid balance of its Notes and
accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
af-
<PAGE>
-101-
fecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 10.13. THIS ARTICLE TEN NOT TO PREVENT EVENTS
OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article Six or to pursue any rights or remedies hereunder
or under applicable law, subject to the rights, if any, under this Article Ten
of the holders, from time to time, of Senior Indebtedness.
SECTION 10.14. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees, subject to Article Twelve, to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (i) the principal of and interest on the Notes 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 Notes 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
<PAGE>
-102-
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Notes 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 11.05. Each
Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Subsidiary
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 Notes, this
Indenture and in this Guarantee. If any Holder or the Trustee is required by
any court or otherwise to return to the Company, any Subsidiary Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Subsidiary Guarantor, any amount paid by the Company or
any Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor further agrees that, as between each Subsidiary
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 Subsidiary
Guarantor for the purpose of this Guarantee.
SECTION 11.02. SUBORDINATION OF GUARANTEE.
The obligations of each Subsidiary Guarantor to the Holders of Notes
and to the Trustee pursuant to the Guarantee and this Indenture are expressly
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness of such Subsidiary Guarantor, to the extent and in
the manner provided in Article Twelve.
<PAGE>
-103-
SECTION 11.03. 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 11.04. RELEASE OF A SUBSIDIARY GUARANTOR.
Upon (i) the release by the lenders under the Credit Agreement,
related documents and future refinancings thereof of all guarantees of a
Subsidiary Guarantor and all Liens on the property or assets of said Subsidiary
Guarantor relating to such Indebtedness or (ii) the sale or disposition (whether
by merger, stock purchase, asset sale or otherwise) of a Subsidiary Guarantor
(or all or substantially all its assets) to an entity which is not a Subsidiary
of the Company and which sale or disposition is otherwise in compliance with the
terms of this Indenture, such Subsidiary 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; PROVIDED, HOWEVER, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under the Credit Agreement and all of its guarantees of,
and under all of its pledges of assets or other security interests which
secure, such Indebtedness of the Company or the Subsidiary Guarantor shall also
terminate upon such release, sale or transfer.
The Trustee shall execute an appropriate instrument delivered by the
Company 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 Subsidiary Guarantor not so
released remains liable for the full amount of principal of and interest on the
Notes as provided in this Article Eleven.
SECTION 11.05. LIMITATION OF SUBSIDIARY GUARANTOR'S
LIABILITY.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the 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 Subsidiary
<PAGE>
-104-
Guarantor hereby irrevocably agree that the obligations of such Subsidiary
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
Subsidiary Guarantor (including, but not limited to, the Guarantor Senior
Indebtedness of such Subsidiary Guarantor) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Guarantee or pursuant to Section 11.07, result in the obligations
of such Subsidiary Guarantor under the Guarantee not constituting such
fraudulent transfer or conveyance.
SECTION 11.06. SUBSIDIARY GUARANTORS MAY CONSOLIDATE,
ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor that is a Wholly Owned Restricted
Subsidiary of the Company or shall prevent any sale of assets or conveyance of
the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety, to the Company or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company. Upon any such consolidation, merger, sale
or conveyance, the Guarantee given by such Subsidiary Guarantor shall no longer
have any force or effect.
(b) Except as set forth in Article Four and Article Five hereof,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into a corporation or
corporations other than the Company or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor) or shall prevent any sale of
assets or conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to a corporation or corporations other than the
Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor); PROVIDED, HOWEVER, that, in the event that such
transaction is not subject to Section 4.14 hereof, then subject to Sections
11.04 and 11.06(a), (i) immediately after such transaction and giving effect
thereto, such transaction does not (a) violate any covenants set forth herein or
(b) result in a Default or Event of Default under this Indenture that is
continuing, (ii) upon any such consolidation, merger, sale or conveyance, the
Guarantee of such Subsidiary Guarantor set forth in this Article Eleven, and the
due and punctual performance and observance of all of the
<PAGE>
-105-
covenants and conditions of this Indenture to be performed by such Subsidiary
Guarantor, shall be expressly assumed (in the event that the Subsidiary
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form to the Trustee and in compliance with Section
9.06, executed and delivered to the Trustee, by the corporation formed by
such consolidation, or into which the Subsidiary Guarantor shall have merged,
or by the corporation that shall have acquired such property, and (iii) in
the event that such Subsidiary Guarantor is not the surviving corporation in
the merger, such surviving corporation shall be a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia. In the case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by
supplemental indenture executed and delivered to the Trustee and satisfactory
in form to the Trustee of the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Subsidiary
Guarantor, such successor corporation shall succeed to and be substituted for
the Subsidiary Guarantor with the same effect as if it had been named herein
as a Subsidiary Guarantor.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, INTER SE, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under the Guarantee, such Funding Subsidiary
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a PRO RATA amount based on the Adjusted Net Assets of each
Subsidiary Guarantor (including the Funding Subsidiary Guarantor) for all
payments, damages and expenses incurred by that Funding Subsidiary Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Subsidiary Guarantor's obligations with respect to the Guarantee. "Adjusted Net
Assets" of such Subsidiary Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Subsidiary 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 Subsidiary Guarantor at such date and (y) the present
fair salable value of the assets of such Subsidiary Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Subsidiary Guarantor on its debts
<PAGE>
-106-
including, without limitation, Guarantor Senior Indebtedness (after giving
effect to all other fixed and contingent liabilities incurred or assumed on
such date and after giving effect to any collection from any Subsidiary of
such Subsidiary Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding debt in respect of the Guarantee of such
Subsidiary Guarantor, as they become absolute and matured.
SECTION 11.08. WAIVER OF SUBROGATION.
Until all Obligations are paid in full each Subsidiary Guarantor
hereby irrevocably waives any claim or other rights which it may now or
hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Subsidiary Guarantor's obligations under the
Guarantees 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 Notes 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 Subsidiary Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Subsidiary
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Notes, and shall, subject to the provisions of Section 11.02, Article Ten
and Article Twelve, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with the terms of this Indenture. Each Subsidiary 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 11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Holders set forth in this Article
Eleven, the Subsidiary Guarantors hereby agree to execute the Guarantees in
substantially the form included in EXHIBIT F, which shall be endorsed on each
Note ordered to be authenticated and delivered by the Trustee. Each Subsidiary
Guarantor hereby agrees that its Guarantee set forth in this Article Eleven
shall remain in full force and effect notwith-
<PAGE>
-107-
standing any failure to endorse on each Note a notation of such Guarantee.
SECTION 11.10. WAIVER OF STAY, EXTENSION OR USURY
LAWS.
Each Subsidiary Guarantor 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 each
such Subsidiary 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 Subsidiary 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
SUBORDINATION OF GUARANTEE OBLIGATIONS
SECTION 12.01. GUARANTEE OBLIGATIONS SUBORDINATED TO
GUARANTOR SENIOR INDEBTEDNESS.
Each Subsidiary Guarantor covenants and agrees, and the Trustee and
each Holder of the Notes, by its acceptance thereof, likewise covenants and
agrees, that all Guarantees shall be issued subject to the provisions of this
Article Twelve; and the Trustee and each Person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that the payment of all Obligations on the Notes pursuant to the
Guarantees by any Subsidiary Guarantor shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all Obligations on the Guarantor
Senior Indebtedness of such Subsidiary Guarantor; that the subordination is for
the benefit of, and shall be enforceable directly by, the holders of Guarantor
Senior Indebtedness, and that each holder of Guarantor Senior Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have
<PAGE>
-108-
acquired Guarantor Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture, the Notes and the Guarantees.
SECTION 12.02. NO PAYMENT ON NOTES IN CERTAIN
CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at stated maturity, upon any redemption, by declaration or otherwise, of
any principal of, interest on, unpaid drawings for letters of credit issued in
respect of or regularly accruing fees with respect to any Guarantor Senior
Indebtedness of any Subsidiary Guarantor, no payment of any kind or character
shall be made by or on behalf of such Subsidiary Guarantor or any other Person
on its or their behalf with respect to any Obligations on the Notes or to
acquire any of the Notes for cash or property or otherwise. In addition, if any
other event of default occurs and is continuing with respect to any Designated
Senior Indebtedness, as such event of default is defined in the instrument
creating or evidencing such Designated Senior Indebtedness, permitting the
holders of such Designated Senior Indebtedness then outstanding to accelerate
the maturity thereof and if the Representative for the respective issue of
Designated Senior Indebtedness gives written notice of the event of default to
the Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or waived or have ceased to exist or the Trustee receives notice
from the Representative for the respective issue of Designated Senior
Indebtedness terminating the Blockage Period (as defined below), during the 179
days after the delivery of such Default Notice (the "Blockage Period"), neither
such Subsidiary Guarantor nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Notes or
(y) acquire any of the Notes for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 179 days from the date the payment on the Notes was due and only one such
Blockage Period may be commenced within any 360 consecutive days. No event of
default which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Indebtedness shall be, or
be made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Indebtedness whether or not within a
period of 360 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action or any breach of any financial covenants
for a period commencing after the date of
<PAGE>
-109-
commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 12.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Guarantor Senior
Indebtedness (PRO RATA to such holders on the basis of the respective amount of
Guarantor Senior Indebtedness held by such holders) or their respective
Representatives, as their respective interests may appear. The Trustee shall be
entitled to rely on information regarding amounts then due and owing on the
Guarantor Senior Indebtedness, if any, received from the holders of Guarantor
Senior Indebtedness (or their Representatives) or, if such information is not
received from such holders or their Representatives, from the Subsidiary
Guarantors and only amounts included in the information provided to the Trustee
shall be paid to the holders of Guarantor Senior Indebtedness.
Nothing contained in this Article Twelve shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; PROVIDED that all Guarantor Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Guarantees.
SECTION 12.03. PAYMENT OVER OF PROCEEDS UPON
DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of any Subsidiary
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any total or partial liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to such Subsidiary Guarantor
or its property, whether voluntary or involuntary, all Obligations due or to
become due upon all Guarantor Senior Indebtedness shall first be paid in full in
cash or Cash Equivalents, or such payment duly provided for to the satisfaction
of the holders of Guarantor Senior In-
<PAGE>
-110-
debtedness, before any payment or distribution of any kind or character is
made on account of any Obligations on the Notes, or for the acquisition of
any of the Notes for cash or property or otherwise. Upon any such
dissolution, winding-up, liquidation, reorganization, receivership or similar
proceeding, any payment or distribution of assets of any Subsidiary Guarantor
of any kind or character, whether in cash, property or securities, to which
the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by such Subsidiary
Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders
or by the Trustee under this Indenture if received by them, directly to the
holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor (PRO
RATA to such holders on the basis of the respective amounts of such Guarantor
Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant
to which any of such Guarantor Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the payment of such
Guarantor Senior Indebtedness remaining unpaid until all such Guarantor
Senior Indebtedness has been paid in full in cash or Cash Equivalents after
giving effect to any concurrent payment, distribution or provision therefor
to or for the holders of such Guarantor Senior Indebtedness.
(b) To the extent any payment of such Guarantor Senior Indebtedness
(whether by or on behalf of such Subsidiary Guarantor, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared to be fraudulent
or preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, such
Guarantor Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of such Subsidiary Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 12.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of such Guarantor Senior Indebtedness (PRO RATA to
such holders on the
<PAGE>
-111-
basis of the respective amount of such Guarantor Senior Indebtedness held by
such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear,
for application to the payment of such Guarantor Senior Indebtedness
remaining unpaid until all such Guarantor Senior Indebtedness has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such
Guarantor Senior Indebtedness.
(d) The consolidation of any Subsidiary Guarantor with, or the merger
of any Subsidiary Guarantor with or into, another corporation or the liquidation
or dissolution of any Subsidiary Guarantor following the conveyance or transfer
of all or substantially all of its assets, to another corporation upon the terms
and conditions provided in Section 11.06 hereof and as long as permitted under
the terms of the Guarantor Senior Indebtedness of such Subsidiary Guarantor
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume such Subsidiary
Guarantor's obligations hereunder in accordance with Section 11.06 hereof.
SECTION 12.04. PAYMENTS MAY BE PAID PRIOR TO
DISSOLUTION.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Subsidiary Guarantor, except under the conditions
described in Sections 12.02 and 12.03, from making payments at any time for the
purpose of making payments in respect of its Guarantee, or from depositing with
the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
12.02 or 12.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments in respect of the Notes to the Holders
entitled thereto unless at least two Business Days prior to the date upon which
such payment would otherwise become due and payable a Trust Officer shall have
actually received the written notice provided for in the second sentence of
Section 12.02(a) or in Section 12.07 (PROVIDED that, notwithstanding the
foregoing, such application shall otherwise be subject to the provisions of the
first sentence of Section 12.02(a) and Section 12.03). A Subsidiary Guarantor
shall give prompt writ-
<PAGE>
- 112 -
ten notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of such Subsidiary Guarantor.
SECTION 12.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Indebtedness of a Subsidiary Guarantor, the Holders of the
Guarantee of such Subsidiary Guarantor shall be subrogated to the rights of
the holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor to
receive payments or distributions of cash, property or securities of such
Subsidiary Guarantor applicable to such Guarantor Senior Indebtedness until
the Notes shall be paid in full; and, for the purposes of such subrogation,
no such payments or distributions to the holders of such Guarantor Senior
Indebtedness by or on behalf of such Subsidiary Guarantor or by or on behalf
of the Holders by virtue of this Article Twelve which otherwise would have
been made to the Holders shall, as between such Subsidiary Guarantor and the
Holders of the Notes, be deemed to be a payment by such Subsidiary Guarantor
to or on account of such Guarantor Senior Indebtedness, it being understood
that the provisions of this Article Twelve are and are intended solely for
the purpose of defining the relative rights of the Holders of the Notes, on
the one hand, and the holders of the Guarantor Senior Indebtedness, on the
other hand.
SECTION 12.06. APPLICATION BY TRUSTEE OF ASSETS
DEPOSITED WITH IT.
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Right shall be
for the sole benefit of the Holders of the Notes and, to the extent allocated
for the payment of Notes, shall not be subject to the subordination
provisions of this Article Twelve. Otherwise, any deposit of assets or
securities by or on behalf of the Company with the Trustee or any Paying
Agent (whether or not in trust) for the payment of principal of or interest
on any Notes shall be subject to the provisions of this Article Twelve;
PROVIDED, HOWEVER, that if prior to the second Business Day preceding the
date on which by the terms of this Indenture any such assets may become
distributable for any purpose (including, without limitation, the payment of
either principal of or interest on any Note) the Trustee or such Paying Agent
shall not have received with respect to such assets the notice provided for
in Section 10.06, then the Trustee or such Paying Agent shall have full power
and authority to receive such assets and to apply the same to the purpose for
which they were received, and shall not be affected
<PAGE>
- 113 -
by any notice to the contrary received by it on or after such date. The
foregoing shall not apply to the Paying Agent if the Company or any
Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 12.06 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by this
Article Twelve.
SECTION 12.07. OBLIGATIONS OF THE SUBSIDIARY
GUARANTORS UNCONDITIONAL.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair,
as among the Subsidiary Guarantors, its creditors other than the holders of
Guarantor Senior Indebtedness, and the Holders, the obligation of the
Subsidiary Guarantors, which is absolute and unconditional, to pay to the
Holders all amounts due and payable under the Guarantees as and when the same
shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders and creditors of the
Subsidiary Guarantors other than the holders of the Guarantor Senior
Indebtedness, nor shall anything herein or therein prevent the Holder of any
Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, in respect of cash, property or securities of the Subsidiary
Guarantors received upon the exercise of any such remedy.
SECTION 12.08. NOTICE TO TRUSTEE.
The Subsidiary Guarantors shall give prompt written notice to the
Trustee of any fact known to the Subsidiary Guarantors which would prohibit
the making of any payment to or by the Trustee in respect of the Notes and
the Guarantees pursuant to the provisions of this Article Twelve. Regardless
of anything to the contrary contained in this Article Twelve or elsewhere in
this Indenture, the Trustee shall not be charged with knowledge of the
existence of any default or event of default with respect to any Guarantor
Senior Indebtedness or of any other facts which would prohibit the making of
any payment to or by the Trustee unless and until a Trust officer shall have
received notice in writing from the Subsidiary Guarantors, or from a holder
of Guarantor Senior Indebtedness or a Representative therefor, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to
assume (in the absence of actual knowledge to the contrary) that no such
facts exist.
<PAGE>
- 114 -
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to
furnish evidence to the satisfaction of the Trustee as to the amounts of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article Twelve,
and if such evidence is not furnished the Trustee may defer any payment to
such Person pending judicial determination as to the right of such person to
receive such payment.
SECTION 12.09. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Subsidiary
Guarantors referred to in this Article Twelve, the Trustee, subject to the
provisions of Article Seven hereof, and the Holders of the Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or the Holders
of the Notes, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Guarantor Senior
Indebtedness and other Indebtedness of the Subsidiary Guarantors, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.10. TRUSTEE'S RELATION TO GUARANTOR SENIOR
INDEBTEDNESS.
The Trustee and any agent of the Subsidiary Guarantors or the
Trustee shall be entitled to all the rights set forth in this Article Twelve
with respect to any Guarantor Senior Indebtedness which may at any time be
held by it in its individual or any other capacity to the same extent as any
other holder of Guarantor Senior Indebtedness and nothing in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such
holder.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe
<PAGE>
- 115 -
only such of its covenants and obligations as are specifically set forth in
this Article Twelve, and no implied covenants or obligations with respect to
the holders of Guarantor Senior Indebtedness shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Guarantor Senior Indebtedness.
Whenever a distribution is to be made or a notice given to holders
or owners of Guarantor Senior Indebtedness, the distribution may be made and
the notice may be given to their Representative, if any.
SECTION 12.11. SUBORDINATION RIGHTS NOT IMPAIRED BY
ACTS OR OMISSIONS OF THE SUBSIDIARY GUARANTORS OR HOLDERS OF
GUARANTOR SENIOR INDEBTEDNESS.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Subsidiary Guarantors or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Subsidiary Guarantors with
the terms of this Indenture, regardless of any knowledge thereof which any
such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee, without
incurring responsibility to the Trustee or the Holders of the Notes and
without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Notes to the
holders of the Guarantor Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Guarantor Senior Indebtedness, or
otherwise amend or supplement in any manner Guarantor Senior Indebtedness, or
any instrument evidencing the same or any agreement under which Guarantor
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Guarantor
Senior Indebtedness; (iii) release any Person liable in any manner for the
payment or collection of Guarantor Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Subsidiary Guarantors and any
other Person.
<PAGE>
- 116 -
SECTION 12.12. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
GUARANTEE OBLIGATIONS.
Each Holder of the Notes and the Guarantees by its acceptance of
them authorizes and expressly directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate, as between the
holders of Guarantor Senior Indebtedness and the Holders, the subordination
provided in this Article Twelve, and appoints the Trustee its
attorney-in-fact for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of any Subsidiary
Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of any
Subsidiary Guarantor, the filing of a claim for the unpaid balance of its
Notes and accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of
the time to file such claim or claims, then the holders of the Guarantor
Senior Indebtedness or their Representative are or is hereby authorized to
have the right to file and are or is hereby authorized to file an appropriate
claim for and on behalf of the Holders of said Notes. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of
Guarantor Senior Indebtedness or their Representative to authorize or consent
to or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of
any Holder thereof, or to authorize the Trustee or the holders of Guarantor
Senior Indebtedness or their Representative to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 12.13. THIS ARTICLE TWELVE NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment in respect of the Guarantees by
reason of any provision of this Article Twelve will not be construed as
preventing the occurrence of an Event of Default.
Nothing contained in this Article Twelve shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any,
under this
<PAGE>
- 117 -
Article Ten of the holders, from time to time, of Guarantor Senior
Indebtedness.
SECTION 12.14. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Twelve will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control. If any provision of this
Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
SECTION 13.02. 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, by reputable overnight delivery service,
or registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Subsidiary Guarantor:
PERRY-JUDD'S INCORPORATED
575 West Madison Street
Waterloo, WI 53594
Attention: Chief Financial Officer
with a copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, CA 90071-2604
Attention: Kenneth Bender, Esq.
<PAGE>
- 118 -
if to the Trustee:
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
515 South Flower Street, Suite 2700
Los Angeles, CA 90071-2291
Attention: Corporate Trust Department
The Company, the Subsidiary Guarantors and the Trustee by written
notice to each other may designate additional or different addresses for
notices. Any notice or communication to the Company, the Subsidiary
Guarantors or 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 faxed; one (1) business day after
mailing by reputable overnight courier, 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 Holder 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 Noteholder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 13.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or the Subsidiary
Guarantors to the Trustee to take any action under this Indenture, the
Company shall furnish to the Trustee:
<PAGE>
- 119 -
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 13.05. 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 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition and the definitions relating thereto;
(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 reasonably 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.
SECTION 13.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
<PAGE>
- 120 -
SECTION 13.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, or at such place of payment are not required to be open. If
a payment date is a Legal Holiday at such place, payment may be made at such
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
SECTION 13.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY. 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 INDENTURE OR THE NOTES.
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. NO RECOURSE AGAINST OTHERS.
A past, present or future director, officer, employee, stockholder
or incorporator, as such, of the Company or any Subsidiary Guarantor shall
not have any liability for any obligations of the Company or any Subsidiary
Guarantor under the Notes, the Guarantees or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Holder by accepting a Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the
Notes.
SECTION 13.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
<PAGE>
- 121 -
SECTION 13.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 13.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Notes 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.
SECTION 13.14. INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture and the Notes shall
be given independent effect so that if any particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or otherwise be within the limitations of, another
covenant shall not avoid the occurrence of a Default or an Event of Default
if such action is taken or condition exists.
[Remainder of Page Intentionally Left Blank]
<PAGE>
- S-1 -
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
PERRY-JUDD'S INCORPORATED,
as Issuer
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
PERRY GRAPHIC COMMUNICATIONS, INC.,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
JUDD'S, INCORPORATED,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
JUDD & DETWEILER, INC.,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
<PAGE>
- S-2 -
MOUNT JACKSON PRESS, INC.,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
PORT CITY PRESS, INC.,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
SHENANDOAH VALLEY PRESS, INC.,
as Subsidiary Guarantor
By: /s/ Thomas V. Bressan
---------------------------
Name: Thomas V. Bressan
Title: Secretary
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By: /s/ Stuart Weiss
---------------------------
Name: Stuart Weiss
Title: Vice-President
<PAGE>
Indenture dated as of December 16, 1997 between the Company and U.S.
Bank of California, N.A., as Trustee, including forms of Senior Notes.
- -------------------------------------------------------------------------------
ALL EXHIBITS OMITTED IN ACCORDANCE WITH ITEM 601(b)(2) OF REGULATION S-K
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished.
<PAGE>
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS 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 ACT) OR (B) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT, (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED
STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),(2),(3) or
(7) UNDER THE ACT) (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 FOR THIS SECURITY), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 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 TWO
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 CERTIFICATIONS, 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 REGISTRATION REQUIREMENTS OF THE ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATIONS S UNDER THE ACT.
A-1
<PAGE>
CUSIP No.
PERRY-JUDD'S INCORPORATED
10-5/8% Senior Subordinated Note due 2007, Series A
No. 1 $115,000,000
PERRY-JUDD'S INCORPORATED, a Delaware corporation (the "Company"),
for value received, promises to pay to CEDE & CO. or registered assigns, the
principal sum of One Hundred Fifteen Million Dollars, on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at
this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: December 16, 1997
PERRY-JUDD'S INCORPORATED
By: --------------------------
Name:
Title:
By: --------------------------
Name:
Title:
Trustee's Certificate of Authentication
This is one of the 10-5/8% Senior Subordinated Notes due 2007,
Series A, referred to in the within-mentioned Indenture.
Dated: December 16, 1997
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By: ----------------------------
Authorized Signatory
A-3
<PAGE>
(REVERSE OF NOTE)
10-5/8% Senior Subordinated Note due 2007, Series A
1. INTEREST. PERRY-JUDD'S INCORPORATED, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from December 16, 1997. The Company will pay interest semi-annually in arrears
on each June 15 and December 15 (each, an "Interest Payment Date") and at stated
maturity, commencing on June 15, 1998. Interest will be computed on the basis
of a 360-day year of twelve 30-day months and in the case of a partial month,
the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes 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 Notes
(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 Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal, premium
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, premium and interest by its 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. U.S. TRUST COMPANY OF CALIFORNIA,
N.A. (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.
A-4
<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 16, 1997 (the "Indenture"), among the Company, each of the
Subsidiary Guarantors named therein and the Trustee. This Note is one of a duly
authorized issue of Notes of the Company designated as its 105 8% Senior
Subordinated Notes due 2007, Series A (the "Initial Notes"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$200,000,000, which may be issued under the Indenture; PROVIDED the principal
amount of Initial Notes issued on the Issue Date will not exceed $115,000,000.
The Notes include the Initial Notes, the Private Exchange Notes (as defined in
the Registration Rights Agreement) and the Exchange Notes, as defined below,
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement. The Initial Notes, the Private Exchange Notes and the Exchange Notes
are treated as a single class of securities under the Indenture. Capitalized
terms used herein shall have the meanings assigned to them in the Indenture
unless otherwise defined herein. The terms 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 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company.
5. (a) 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
December 15, 2002, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as a percentage of principal amount
thereof) if redeemed during the twelve-month period commencing on December 15 of
each year set forth below, plus, in each case, accrued interest thereon to the
date of redemption:
YEAR PERCENTAGE
2002 . . . . . . . . . . . . . . . . . . 105.313%
2003 . . . . . . . . . . . . . . . . . . 103.542%
2004 . . . . . . . . . . . . . . . . . . 101.771%
2005 and thereafter. . . . . . . . . . . 100.000%
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time,
or from time to time, on or prior to December 15, 2000, the Company may, at its
option, use the net cash
A-5
<PAGE>
proceeds of one or more Public Equity Offerings (as defined below) to redeem
up to 35% of the aggregate principal amount of Notes originally issued at a
redemption price equal to 110.625% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption;
PROVIDED that at least 65% of the principal amount of Notes originally issued
remains outstanding immediately after any such redemption.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 90
days after the consummation of any such Public Equity Offering.
6. 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 Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued and unpaid interest, if any, the
Notes called for redemption will cease to bear interest from and after such
Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
7. OFFERS TO PURCHASE. Sections 4.13 and 4.14 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. SUBORDINATION. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash
A-6
<PAGE>
Equivalents of all Senior Indebtedness of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. The Guarantees in respect of the Notes are subordinated in right
of payment, in the manner and to the extent set forth in the Indenture, to
the prior payment in full in cash or Cash Equivalents of all Guarantor Senior
Indebtedness of each Subsidiary Guarantor, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. Each
Holder by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the Indenture and appoints the Trustee his attorney-in-fact
for such purposes.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer or exchange of Notes in accordance
with this 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 required by law or as permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes during a period beginning 15 days
before the mailing of a redemption notice for any Notes or portions thereof
selected for redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of, premium and interest on the Notes to
redemption or maturity and complies with the other provisions of this Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of, premium and interest on the Notes).
A-7
<PAGE>
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes, and any existing
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Notes. Without consent of any Holder, the
parties thereto may amend or supplement this Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, pay dividends or make certain other Restricted
Payments, consummate certain Asset Sales, enter into certain transactions with
Affiliates, incur Liens, incur Indebtedness that is subordinate to Senior
Indebtedness but senior in right of payment to the Notes, impose restrictions on
the ability of a Subsidiary to pay dividends or make certain payments to the
Company and its Subsidiaries, 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. Such limitations are subject to
a number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable in
the manner, at the time and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the Notes
unless it has been offered indemnity or security reasonably satisfactory to it.
The
A-8
<PAGE>
Indenture permits, subject to certain limitations therein provided, Holders
of a majority in aggregate principal amount of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest) if it
determines in good faith that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Notes 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 Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the Trustee
or authenticating agent manually signs the certificate of authentication on this
Note.
20. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE HOLDERS
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 NOTE.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note 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).
A-9
<PAGE>
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 Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement, the Company and the Subsidiary Guarantors will be obligated upon the
occurrence of certain events to consummate an exchange offer pursuant to which
the Holder of this Note shall have the right to exchange this Series A Note for
a 105 8% Senior Subordinated Note due 2007, Series B, of the Company (an
"Unrestricted Note") which have been registered under the Securities Act, in
like principal amount and having terms identical in all material respects as the
Series A Notes. 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.
24. INDENTURE. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of this Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have
the meanings ascribed thereto in the Indenture.
25. GUARANTEES. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
PERRY-JUDD'S INCORPORATED, 575 West Madison Street, Waterloo, WI 53594,
Attention: Chief Financial Officer.
A-10
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
- --------------------------------
- --------------------------------------------------------------------------------
(please print or type name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
- --------------------------------------------------------------------------------
attorney to transfer the Note on the books of the Company with full power of
substitution in the premises.
Dated:
-------------------------------- ----------------------------------------
NOTICE: The signature on this
assignment must correspond with the name
as it appears upon the face of the
within Note in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:
----------------------------------------------------------
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") covering resales of
this Note (which effectiveness shall not have been suspended or terminated at
the date of the transfer) and (ii) December 16, 1999 the undersigned confirms
that it has not utilized any general solicitation or general advertising in
connection with the transfer:
A-11
<PAGE>
[Check One]
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign purchaser" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) ___ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
statement requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if item
(3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior
to registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4) and other information as the Trustee or the Company have
reasonably requested to confirm that such transfer is being made pursuant to
A-12
<PAGE>
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of l933, as amended.
If none of the foregoing items are checked, the Trustee or
Registrar shall not be obligated to register this Note in the name of any
person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 2.16 of the
Indenture shall have been satisfied.
Dated: __________________ Signed:_________________________
(Sign exactly as name
appears on the other side
of this Note)
Signature Guarantee:__________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated: __________________ _____________________________
NOTICE: To be executed by an
executive officer
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.13 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.13 [ ] Section 4.14 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state the
amount: $_____________
Date: ______________________ Your Signature: _______________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-14
<PAGE>
EXHIBIT B
CUSIP NO.
PERRY-JUDD'S INCORPORATED
10-5/8% Senior Subordinated Note due 2007, Series B
No. 1 $
PERRY-JUDD'S INCORPORATED, a Delaware corporation (the
"Company"), for value received, promises to pay to or registered assigns, the
principal sum of Dollars, on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: PERRY-JUDD'S INCORPORATED
By: -------------------------
Name:
Title:
By: -------------------------
Name:
Title:
Trustee's Certificate of Authentication
This is one of the 105 8% Senior Subordinated Notes due 2007,
Series B referred to in the within-mentioned Indenture.
Dated:
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By: -----------------------------
Authorized Signatory
B-2
<PAGE>
(REVERSE OF NOTE)
10-5/8% Senior Subordinated Note due 2007, Series B
1. INTEREST. PERRY-JUDD'S INCORPORATED, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest
has been paid, from December 16, 1997. The Company will pay interest
semi-annually in arrears on each June 15 and December 15 (each, an "Interest
Payment Date") and at stated maturity, commencing on June 15, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months and
in the case of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes 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
Notes (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 Notes are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal, premium 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, premium
and interest by its 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, U.S. TRUST COMPANY OF
CALIFORNIA, N.A. (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.
B-3
<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 16, 1997 (the "Indenture"), among the Company, each of
the Subsidiary Guarantors named therein and the Trustee. This Note is one of
a duly authorized issue of Notes of the Company designated as its 105 8%
Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"), limited
(except as otherwise provided in the Indenture) in aggregate principal amount
to $200,000,000, which may be issued under the Indenture; PROVIDED, the
principal amount of Initial Notes issued on the Issue Date shall not exceed
$115,000,000. The Notes include the 105 8% Senior Subordinated Notes due
2007, Series A (the "Initial Notes"), the Private Exchange Notes (as defined
in the Registration Rights Agreement) and the Exchange Notes. The Initial
Notes, the Private Exchange Notes and the Exchange Notes are treated as a
single class of securities under the Indenture. Capitalized terms used
herein shall have the meanings assigned to them in the Indenture unless
otherwise defined herein. The terms 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 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company.
5. (a) 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 December 15, 2002 at the following redemption prices (expressed as a
percentage of principal amount thereof) if redeemed during the twelve-month
period commencing on December 15 of each year set forth below, plus, in each
case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
---- ----------
2002 . . . . . . . . . . . . . .105.313%
2003 . . . . . . . . . . . . . .103.542%
2004 . . . . . . . . . . . . . .101.771%
2005 and thereafter. . . . . . .100.000%
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time, or
from time to time, on or prior to December 15, 2000, 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% of the aggregate principal amount of
B-4
<PAGE>
Notes originally issued at a redemption price equal to 110.625% of the
principal amount of Notes to be redeemed, plus accrued and unpaid interest
thereon, if any, to the date of redemption; PROVIDED that at least 65% of the
principal amount of Notes originally issued remains outstanding immediately
after any such redemption.
As used in the preceding paragraph, "Public Equity Offering" means
an underwritten public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act.
In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more
than 90 days after the consummation of any such Public Equity Offering.
6. 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 Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and
unpaid interest, if any.
7. OFFERS TO PURCHASE. Sections 4.13 and 4.14 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and
upon the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
8. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Indebtedness
of the Company, whether
B-5
<PAGE>
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes are
subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full in cash or Cash Equivalents of
all Guarantor Senior Indebtedness of each Subsidiary Guarantor, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be
bound by such provisions and authorizes and expressly directs the Trustee, on
his behalf, to take such action as may be necessary or appropriate to
effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes 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
Notes in accordance with this 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 required by law or as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Notes during a period beginning 15 days before the mailing of a redemption
notice for any Notes or portions thereof selected for redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall
be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at
any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium and interest on the
Notes to redemption or maturity and complies with the other provisions of
this Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of, premium and interest on the
Notes).
B-6
<PAGE>
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority
in aggregate principal amount of the then outstanding Notes, and any existing
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Notes. Without consent of any Holder, the
parties thereto may amend or supplement this Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or
comply with Article Five of the Indenture or make any other change that does
not adversely affect in any material respect the rights of any Holder of a
Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among
other things, incur additional Indebtedness, pay dividends or make certain
other Restricted Payments, consummate certain Asset Sales, enter into certain
transactions with Affiliates, incur Liens, incur Indebtedness that is
subordinate to Senior Indebtedness but senior in right of payment to the
Notes, impose restrictions on the ability of a Subsidiary to pay dividends or
make certain payments to the Company and its Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company.
Such limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable in
the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has been offered indemnity or Security
reasonably satisfactory to it. The In-
B-7
<PAGE>
denture permits, subject to certain limitations therein provided, Holders of
a majority in aggregate principal amount of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest) if it
determines in good faith that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Notes 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 Note by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or authenticating agent manually signs the certificate of
authentication on this Note.
20. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
EACH OF THE HOLDERS AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF RELATING TO THIS
NOTE.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may
be used in the name of a Holder of a Note 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).
B-8
<PAGE>
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 Notes as a convenience to the
Holders of the Notes. No representation is made as to the accuracy of such
numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
23. INDENTURE. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of this Indenture, as the same may
be amended from time to time. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.
24. GUARANTEES. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference
is hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
PERRY-JUDD'S INCORPORATED, 575 West Madison Street, Waterloo, WI 53594,
Attention: Chief Financial Officer.
B-9
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
_______________________________________
_______________________________________________________________________________
(please print or type name and address)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
_______________________________________________________________________________
attorney to transfer the Note on the books of the Company with full power of
substitution in the premises.
Dated: ______________________________ ______________________________________
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of the
within Note in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: __________________________________________________________
B-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.13 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.13 [ ] Section 4.14 [ ]
If you want to elect to have only part of this Note purchased by
the Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state
the amount: $_____________
Date:___________________ Your Signature: __________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
B-11
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR GLOBAL NOTE
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case
of a Restricted Note) 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
COMPANY 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
[ ], [ ]
U.S. Trust Company of California, N.A.
515 South Flower Street, Suite 2700
Los Angeles, CA 90071-2291
Ladies and Gentlemen:
In connection with our proposed purchase of 105 8% Senior
Subordinated Notes due 2007 (the "Notes") of Perry-Judd's Incorporated (the
"Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated December 10, 1997, relating to the Notes and
such other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated
on pages (i)-(iii) of the Offering Memorandum and in the section entitled
"Transfer Restrictions" of the Offering Memorandum, including the
restrictions on duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in this Indenture
relating to the Notes (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act")
and all applicable state securities laws.
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be
offered or sold 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 Notes prior to the date that
is two years after the original issuance of the Notes, we will
D-1
<PAGE>
do so only (i) to the Company or any of its subsidiaries, (ii) inside the
United States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act), (iii) inside the United States to an institutional "accredited
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 (as defined
in the Indenture relating to the Notes), a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes (the form of which letter can be obtained from the Trustee), (iv)
outside the United States in accordance with Rule 904 of Regulation S under
the Securities Act, (v) pursuant to the exemption from registration provided
by Rule 144 under the Securities Act (if available), or (vi) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We are not acquiring the Notes for or on behalf of, and will
not transfer the Notes to, any pension or welfare plan (as defined in Section
3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, 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 Notes
purchased by us will bear a legend to the foregoing effect.
6. 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 Notes,
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.
7. We are acquiring the Notes purchased by us for our account or
for one or more accounts (each of which is an
D-2
<PAGE>
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
D3
<PAGE>
You, the Company, the Trustee and others 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 Transferee]
By:
--------------------------------
Name:
Title:
D-4
<PAGE>
EXHIBIT E
Form of Certificate To Be Delivered
in Connection with Transfers
PURSUANT TO REGULATION S
[ ], [ ]
U.S. Trust Company of California, N.A.
515 South Flower Street, Suite 2700
Los Angeles, CA 90071-2291
Re: Perry-Judd's Incorporated (the Company)
10-5/8% Senior Subordinated Notes
due 2007 (the notes)
---------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly,
we represent that:
(1) the offer of the Notes 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;
E-1
<PAGE>
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You, the Company and counsel for 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. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Transferor]
By: -------------------------
Authorized Signature
E-2
<PAGE>
EXHIBIT F
GUARANTEE
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in
the amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the
payment or performance of all other obligations of the Company under the
Indenture (as defined below) or the Notes, to the Holder of this Note and the
Trustee, all in accordance with and subject to the terms and limitations of
this Note, Articles Eleven and Twelve of the Indenture and this Guarantee.
This Guarantee will become effective in accordance with Article Eleven of the
Indenture and its terms shall be evidenced therein. The validity and
enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of December 16, 1997, among
Perry-Judd's Incorporated, a Delaware corporation, as issuer (the "Company"),
each of the Subsidiary Guarantors named therein and U.S. Trust Company of
California, N.A. as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Articles Eleven and Twelve of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Guarantee and all of the other
provisions of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. THE UNDERSIGNED SUBSIDIARY GUARANTOR HEREBY 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 GUARANTEE.
F-1
<PAGE>
This Guarantee is subject to release upon the terms set forth in the
Indenture and subordination as set forth in Article Twelve thereof.
F-2
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guarantee
to be duly executed. Dated: December 16, 1997
PERRY GRAPHIC COMMUNICATIONS,
INC., as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
JUDD'S, INCORPORATED,
as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
JUDD & DETWEILER, INC.,
as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
MOUNT JACKSON PRESS, INC.,
as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
F-3
<PAGE>
PORT CITY PRESS, INC.,
as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
SHENANDOAH VALLEY PRESS, INC.,
as Subsidiary Guarantor
By: ___________________________________
Name:
Title:
F-4
<PAGE>
EXHIBIT 4.2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of December 16, 1997
By and Among
PERRY-JUDD'S INCORPORATED
(FORMERLY PPC HOLDINGS, INC.)
THE SUBSIDIARY GUARANTORS
named herein
and
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
10 5/8% Senior Subordinated Notes due 2007
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . 11
4. Additional Interest. . . . . . . . . . . . . . . . . . . . . . . 13
5. Registration Procedures. . . . . . . . . . . . . . . . . . . . . 16
6. Registration Expenses. . . . . . . . . . . . . . . . . . . . . . 30
7. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 31
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . 36
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . 37
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) No Inconsistent Agreements. . . . . . . . . . . . . . . . . 37
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . 38
(c) Amendments and Waivers. . . . . . . . . . . . . . . . . . . 38
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Successors and Assigns. . . . . . . . . . . . . . . . . . . 40
(f) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 40
(g) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 41
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . 41
(i) Severability. . . . . . . . . . . . . . . . . . . . . . . . 41
(j) Securities Held by the Company, the Subsidiary Guarantors
or Their Respective Affiliates. . . . . . . . . . . . . . . 41
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . 42
(l) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 42
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is dated as of
December 16, 1997, by and among PERRY-JUDD'S INCORPORATED (formerly known as
PPC HOLDINGS, INC.), a Delaware corporation (the "COMPANY"), PERRY GRAPHIC
COMMUNICATIONS, INC., JUDD'S INCORPORATED, JUDD & DETWEILER, INC., MOUNT
JACKSON PRESS, INC., PORT CITY PRESS, INC. and SHENANDOAH VALLEY PRESS, INC.,
as guarantors (collectively, the "SUBSIDIARY GUARANTORS"), and BT ALEX. BROWN
INCORPORATED (the "INITIAL PURCHASER").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of December 10, 1997, by and among the Company, the
Subsidiary Guarantors and the Initial Purchaser (the "PURCHASE AGREEMENT"),
which provides for the sale by the Company to the Initial Purchaser of
$115,000,000 aggregate principal amount of its 10 5/8% Senior Subordinated
Notes due 2007 (the "NOTES"). In order to induce the Initial Purchaser to
enter into the Purchase Agreement, the Company and the Subsidiary Guarantors
have agreed to provide the registration rights set forth in this Agreement
for the benefit of the Initial Purchaser and any subsequent holder or holders
of the Notes. The execution and delivery of this Agreement is a condition to
the Initial Purchaser's obligation to purchase the Notes under 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: See Section 4(a) hereof.
ADVICE: See the last paragraph of Section 5 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
COMPANY: See the introductory paragraphs hereto.
EFFECTIVENESS DATE: The 180th day after the Issue Date.
<PAGE>
-2-
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2(a) hereof.
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of December 16, 1997, by and
among the Company, the Subsidiary Guarantors and U.S. Trust Company of
California, N.A., as Trustee, pursuant to which the Notes are issued, as
amended or supplemented from time to time in accordance with the terms
thereof.
INITIAL PURCHASER: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
INSPECTORS: See Section 5(n) hereof.
ISSUE DATE: December 16, 1997, the date of original issuance of the
Notes.
NASD: See Section 5(s) hereof.
NOTES: See the introductory paragraphs hereto.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
<PAGE>
-3-
PERSON: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A under the Securities Act and any term sheet filed pursuant to Rule 434
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(n) hereof.
REGISTRABLE NOTES: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) 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 (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer 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 Registration Statement, (ii) such Note has
been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange
Notes that may be resold without restriction under federal securities laws,
(iii) such Note, Exchange Note or Private Exchange Note, as the case may be,
ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
<PAGE>
-4-
REGISTRATION STATEMENT: Any registration statement of the Company
and the Subsidiary Guarantors that covers any of the Notes, the Exchange
Notes or the Private Exchange Notes filed with the SEC under the Securities
Act, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission, or any successor agency.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
SHELF FILING DATE: See Section 3(a) hereof.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The Trustee under the Indenture and the trustee (if any)
under any indenture governing the Exchange Notes and Private Exchange Notes.
<PAGE>
-5-
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company and the Subsidiary Guarantors shall file with the
SEC, no later than the Filing Date, a Registration Statement (the "EXCHANGE
OFFER REGISTRATION STATEMENT") on an appropriate registration form with
respect to an offer (the "EXCHANGE OFFER") to exchange any and all of the
Registrable Notes for the same aggregate principal amount of notes (the
"EXCHANGE NOTES") of the Company, guaranteed by the Subsidiary Guarantors and
registered under the Securities Act, which are identical in all material
respects to the Notes except that the Exchange Notes shall contain no
restrictive legend thereon, and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than terms with respect to Additional Interest,
restrictions on transfer, and such other changes to the Indenture or any such
identical trust indenture as are necessary to comply with the TIA) and which,
in either case, has been qualified under the TIA. The Exchange Offer shall
comply with all applicable tender offer rules and regulations under the
Exchange Act and other applicable laws. The Company and the Subsidiary
Guarantors shall use their best efforts to (x) cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on
or before the Effectiveness Date; (y) keep the Exchange Offer open for not
less than 20 business days (or longer if required by applicable law) after
the date that notice of the Exchange Offer is mailed to Holders; and (z)
consummate the Exchange Offer on or prior to the 45th day following the date
on which the Exchange Offer Registration Statement is declared effective by
the SEC. If, after the Exchange Offer Registration Statement is initially
declared effective by the SEC, the Exchange Offer or the issuance of the
Exchange Notes thereunder is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or
court, the Exchange Offer Registration Statement shall be deemed not to have
become effective for purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be
required to represent in writing (which may be contained in the applicable
letter of transmittal) that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) that at the time of
the consummation of the Exchange Offer such Holder will have no ar-
<PAGE>
-6-
rangement or understanding with any Person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes in violation
of the provisions of the Securities Act, (iii) that such Holder is not an
affiliate (as defined in Rule 405 under the Securities Act) of the Company or
any Subsidiary Guarantor, (iv) if such Holder is not a broker-dealer, that it
is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes and (v) if such Holder is a broker-dealer (a "PARTICIPATING
BROKER-DEALER") that will receive Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making activities
or other trading activities, that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(v) is applicable and Exchange
Notes held by Participating Broker-Dealers, and the Company and the
Subsidiary Guarantors shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in
respect of any Exchange Notes as to which clause 2(c)(v) hereof applies)
pursuant to this Agreement. No securities other than the Exchange Notes and
Guarantees shall be included in the Exchange Offer Registration Statement.
(b) The Company and the Subsidiary Guarantors shall include within
the Prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchaser, which shall contain a summary statement of the positions taken or
policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by a
Participating Broker-Dealer, whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by
all Persons subject to the prospectus delivery requirements of the Securities
Act, including, to the extent permitted by applicable policies and
regulations of the SEC, all Participating Broker-Dealers, and include a
statement describing the means by which Partici-
<PAGE>
-7-
pating Broker-Dealers may resell the Exchange Notes in compliance with the
Securities Act.
The Company and the Subsidiary Guarantors shall use their best
efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as is
necessary to comply with applicable law in connection with any resale of the
Exchange Notes covered thereby; PROVIDED, HOWEVER, that such period shall not
exceed 180 days after such Exchange Offer Registration Statement is declared
effective (or such longer period if extended pursuant to the last paragraph
of Section 5 hereof) (the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an
initial distribution, or any Holder is not entitled to participate in the
Exchange Offer, the Company upon the request of any such Holder shall
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to any such Holder, in exchange (the "PRIVATE EXCHANGE")
for such Notes held by any such Holder, the same principal amount of Notes
(the "PRIVATE EXCHANGE NOTES") of the Company that are identical in all
material respects to the Exchange Notes (except that they may bear a
customary legend with respect to restrictions on transfer) and the Subsidiary
Guarantors shall guarantee such Private Exchange Notes. The Private Exchange
Notes shall be issued pursuant to the same indenture as the Exchange Notes
and bear the same CUSIP number as the Exchange Notes.
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 Issue Date.
In connection with the Exchange Offer, the Company and the
Subsidiary Guarantors shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
<PAGE>
-8-
(2) keep the Exchange Offer open for not less than 20 business days
after the date that notice of the Exchange Offer is mailed to Holders (or
longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and
the Private Exchange, if any, the Company and the Subsidiary Guarantors shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer and the Private Exchange,
if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver to each Holder of
Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal
in principal amount to the Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall
have been instituted or threatened in any court or by any governmental agency
which would be reasonably likely to materially impair the ability of the
Company and the Subsidiary Guarantors to proceed with the Exchange Offer or
the Private Exchange, and no material adverse development shall have occurred
in any existing action or proceeding with respect to the Company or any of
the Subsidiary Guarantors and (iii) all governmental approvals shall have
been obtained, which approvals the Company and the Subsidiary Guarantors deem
necessary for the consummation of the Exchange Offer or Private Exchange.
<PAGE>
-9-
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and 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 none of the Exchange
Notes, the Private Exchange Notes or the Notes will have the right to vote or
consent as a separate class on any matter.
(c) If (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Company and the
Subsidiary Guarantors are not permitted to effect the Exchange Offer, (ii)
the Exchange Offer is not consummated within 225 days of the Issue Date,
(iii) the Initial Purchaser or any holder of Private Exchange Notes so
requests in writing to the Company at any time after the consummation of the
Exchange Offer or (iv) in the case of any Holder that participates in the
Exchange Offer, such Holder does not receive Exchange Notes on the date of
the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of any of the Company or the Subsidiary Guarantors within the
meaning of the Securities Act), then in the case of each of clauses (i) to
and including (iv) of this sentence, then the Company shall promptly deliver
to the Holders and the Trustee written notice thereof (the "SHELF NOTICE")
and as promptly as practicable shall file a Shelf Registration pursuant to
Section 3 hereof.
3. SHELF REGISTRATION
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) SHELF REGISTRATION. The Company and the Subsidiary
Guarantors shall as promptly as practicable file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Registrable Notes not permitted to be exchanged in
the Exchange Offer in accordance with the terms of this Agreement, Private
Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable
(the "INITIAL SHELF REGISTRATION"). The Company and the Subsidiary
Guarantors shall use their best efforts to file with the SEC the Initial
Shelf Registration within 45 days
<PAGE>
-10-
of the Shelf Notice (the "SHELF FILING DATE"). The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company and the Subsidiary Guarantors shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
The Company and the Subsidiary Guarantors shall use their best
efforts to cause the Initial Shelf Registration to be declared effective
under the Securities Act on or prior to the Effectiveness Date and to keep
the Initial Shelf Registration continuously effective under the Securities
Act until the date which is the earlier of two years after the Issue Date
(the "EFFECTIVENESS PERIOD"), or such shorter period ending when all
Registrable Notes covered by the Shelf Registration have been sold in the
manner set forth and as contemplated in the Initial Shelf Registration or, if
applicable, a Subsequent Shelf Registration; PROVIDED, HOWEVER, that the
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities
Act and as otherwise provided herein. Notwithstanding the prior sentence,
the Company shall not be obligated to keep the Initial Shelf Registration
effective if (i) the Company determines, in its reasonable judgment, upon
advice of counsel, as authorized by a resolution of its Board of Directors,
that the continued effectiveness and usability of the Initial Shelf
Registration would (x) require the disclosure of material information which
the Company has a BONA FIDE business reason for preserving as confidential,
or (y) interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its subsidiaries
or its parent, provided that the failure to keep the Initial Shelf
Registration effective and usable for offers and sales of Notes for such
reasons shall last no longer than 45 days in any 12-month period (whereafter
Additional Interest shall accrue and be payable) and (ii) the Company
promptly thereafter complies with the requirements of Section 5(k) hereof, if
applicable. Any such period during which the Company is excused from keeping
the Initial Shelf Registration effective and usable for offers and sales of
Notes is referred to herein as a "SUSPENSION PERIOD." A Suspension Period
shall commence on and include the date that the Company gives notice that the
registration statement is no longer effective or the prospectus included
therein is no longer usable for offers and
<PAGE>
-11-
sales of Notes and shall end on the earlier to occur of (1) the date on which
each seller of Notes covered by the Initial Shelf Registration either
receives the copies of the supplemented or amended prospectus contemplated by
Section 5(k) hereof or is advised in writing by the Company that the use of
the prospectus may be resumed and (2) the expiration of 45 days in any
12-month period during which one or more Suspension Periods have been in
effect.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period (other than because of
the sale of all of the securities registered thereunder), the Company and the
Subsidiary Guarantors shall use their best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 30 days of such cessation of effectiveness amend the
Initial Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional Shelf
Registration Statement pursuant to Rule 415 covering all of the Registrable
Notes covered by and not sold under the Initial Shelf Registration or an
earlier Subsequent Shelf Registration (each, a "SUBSEQUENT SHELF
REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company and
the Subsidiary Guarantors shall use their best efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities
Act as soon as practicable after such filing and to keep such subsequent
Shelf Registration continuously effective for a period equal to the number of
days in the Effectiveness Period less the aggregate number of days during
which the Initial Shelf Registration or any Subsequent Shelf Registration was
previously continuously effective. As used herein the term "SHELF
REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company and the Subsidiary
Guarantors shall promptly supplement and amend any Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such
Registration Statement or by any underwriter of such Registrable Notes.
<PAGE>
-12-
4. ADDITIONAL INTEREST
(a) The Company, the Subsidiary Guarantors and the Initial
Purchaser agree that the Holders will suffer damages if the Company and the
Subsidiary Guarantors fail to fulfill their obligations under Section 2 or
Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Company and the Subsidiary
Guarantors agree to pay, as liquidated damages, additional interest on the
Notes ("ADDITIONAL INTEREST") under the circumstances and to the extent set
forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing Date or
(B) notwithstanding that the Company and the Subsidiary Guarantors have
consummated or will consummate the Exchange Offer, the Company and the
Subsidiary Guarantors are required to file a Shelf Registration and such
Shelf Registration is not filed on or prior to the Shelf Filing Date, then,
commencing on the day after either the Filing Date or the Shelf Filing
Date, as the case may be, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following each such applicable Filing Date, and such Additional
Interest rate shall increase by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date applicable thereto or (B) notwithstanding that the
Company and the Subsidiary Guarantors have consummated or will consummate
the Exchange Offer, the Company and the Subsidiary Guarantors are required
to file a Shelf Registration and such Shelf Registration is not declared
effective by the SEC on or prior to the 60th day following the date such
Shelf Registration was filed, then, commencing on the day after the
Effectiveness Date or such Shelf Filing Date, as the case may be,
Additional Interest shall accrue on the principal amount of the Notes at
a rate of 0.50% per annum for the first 90 days immediately following the
day after the Effectiveness Date or such Shelf Filing Date, as the case
may be, and such Additional Interest rate shall increase by an additional
0.50% per annum at the beginning of each subsequent 90-day period; or
<PAGE>
-13-
(iii) if (A) the Company and the Subsidiary Guarantors have not
exchanged Exchange Notes for all Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to the 45th day after the date
on which the Exchange Offer Registration Statement relating thereto was
declared effective or (B) if applicable, a Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective at
any time during the Effectiveness Period (other than after such time as all
Notes have been sold thereunder), then Additional Interest shall accrue on
the principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days commencing on the (x) 46th day after such effective date, in
the case of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, and such Additional Interest rate shall
increase by an additional 0.50% per annum at the beginning of each such
subsequent 90-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may not
exceed at any one time in the aggregate 1.0% per annum; PROVIDED, FURTHER,
HOWEVER, that (1) upon the filing of the applicable Exchange Offer
Registration Statement or the applicable Shelf Registration as required
hereunder (in the case of clause (i) above of this Section 4), (2) upon the
effectiveness of the Exchange Offer Registration Statement or the applicable
Shelf Registration Statement as required hereunder (in the case of clause
(ii) of this Section 4), or (3) upon the exchange of the Exchange Notes for
all Notes tendered (in the case of clause (iii)(A) of this Section 4), or
upon the effectiveness of the applicable Shelf Registration Statement which
had ceased to remain effective (in the case of (iii)(B) of this Section 4),
Additional Interest on the Notes as a result of such clause (or the relevant
subclause thereof, as the case may be), shall cease to accrue.
(b) The Company and the Subsidiary Guarantors shall notify the
Trustee within one business day after each and every date on which an event
occurs in respect of which Additional Interest is required to be paid (an
"EVENT DATE"). Any Additional Interest due pursuant to (a)(i), (a)(ii) or
(a)(iii) of this Section 4 will be payable in cash semi-annually on each
regular interest payment date specified in the Indenture (to the Holders of
Registrable Notes of record on the regular record date therefor (as specified
in the Indenture) immediately preceding such dates), commencing with the
first such regular interest payment date occurring after any such Additional
Interest commences, to accrue. The amount of Additional Interest
<PAGE>
-14-
will be determined by multiplying the applicable Additional Interest rate by
the principal amount of the Notes subject thereto, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate
was applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company and the Subsidiary Guarantors
shall effect such registrations to permit the sale of the securities covered
thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto and in connection with any Registration
Statement filed by the Company and the Subsidiary Guarantors hereunder, the
Company and the Subsidiary Guarantors shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use their best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to
Section 3 hereof or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period relating thereto,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company and the Subsidiary Guarantors shall
furnish to and afford the Holders of the Registrable Notes covered by such
Registration Statement or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five business
days prior to such filing, or such later date as is reasonable under the
circumstances). The Company and the Subsidiary Guarantors shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Regis-
<PAGE>
-15-
tration Statement, their counsel, or the managing underwriters, if any,
shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period or until consummation of the Exchange
Offer, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it
with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such Prospectus.
The Company and the Subsidiary Guarantors shall be deemed not to have used
their best efforts to keep a Registration Statement effective during the
Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if the Company and the Subsidiary Guarantors voluntarily takes any
action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
permitted by this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto from whom
the Company and the Subsidiary Guarantors have received written notice that
it will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel and the managing underwriters, if
any, promptly (but in any event within one business day), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed,
<PAGE>
-16-
and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, at the sole expense of the Company and the Subsidiary
Guarantors, one conformed copy of such Registration Statement or post-
effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference therein and
exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time when a prospectus
is required by the Securities Act to be delivered in connection with sales
of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Company and the
Subsidiary Guarantors contained in any agreement (including any
underwriting agreement) contemplated by Section 5(m) hereof cease to be
true and correct in all material respects, (iv) of the receipt by the
Company or any Subsidiary Guarantor of any notification with respect to
the suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement made
in such 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 or
amendments or supplements to such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, 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 the 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, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
<PAGE>
-17-
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, use their best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer, for sale in any jurisdiction, and,
if any such order is issued, to use their best efforts to obtain the
withdrawal of any such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Company and
the Subsidiary Guarantors have received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if any, at
the sole expense of the Company and the Subsidiary Guarantors, one
conformed copy of the Registration Statement or Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if re-
<PAGE>
-18-
quested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters, if any, at
the sole expense of the Company and the Subsidiary Guarantors, as many
copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
and the Subsidiary Guarantors hereby consent to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by,
or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters reasonably request in writing; PROVIDED,
HOWEVER, that where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten offering,
the Company and the Subsidiary Guarantors agree to
<PAGE>
-19-
cause their counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
necessary to enable the disposition in such jurisdictions of the Exchange
Notes held by Participating Broker-Dealers or the Registrable Notes covered
by the applicable Registration Statement; PROVIDED, HOWEVER, that the
Company and the Subsidiary Guarantors shall not be required to (A) qualify
generally to do business in any jurisdiction where they are not then so
qualified, (B) take any action that would subject them to general service
of process in any such jurisdiction where they are not then so subject or
(C) subject themselves to taxation in excess of the dollar amount in any
such jurisdiction where they are not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable 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 enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company and the Subsidiary Guarantors will
cooperate in all respects with the filing of such Registration Statement
and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
<PAGE>
-20-
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file with the
SEC, at the sole expense of the Company and the Subsidiary Guarantors, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any 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 the light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes in form and substance reasonably satisfactory to the Company and the
Subsidiary Guarantors and take all such other actions as are reasonably
requested by the managing underwriter or underwriters in order to expedite
or facilitate the registration or the disposition of such Registrable Notes
and, in such connection, (i) make such representations and warranties to,
and covenants with, the underwriters with respect to the business of the
Company and the Subsidiary Guarantors and their respective subsidiaries and
the Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings of
debt securities similar to the Notes, and confirm the same in writing if
and when requested in form and substance reasonably satisfactory to the
Company; (ii) obtain the written opinion of counsel to the Company and the
Sub-
<PAGE>
-21-
sidiary Guarantors and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions reasonably requested in underwritten
offerings of debt securities similar to the Notes and such other matters as
may be reasonably requested by the managing underwriter or underwriters;
(iii) use their best efforts to obtain "cold comfort" letters and updates
thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Company and the Subsidiary Guarantors (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or any Subsidiary Guarantors or of any business
acquired by the Company or any Subsidiary Guarantor for which financial
statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to the
underwriter, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
sellers and 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 Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents, if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent re-
<PAGE>
-22-
tained by any such selling Holder or each such Participating Broker-
Dealer, as the case may be, or underwriter (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and instruments of the Company and the Subsidiary Guarantors
and their respective subsidiaries (collectively, the "RECORDS") as
shall be reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the officers, directors and
employees of the Company and the Subsidiary Guarantors and
their respective subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration
Statement and Prospectus. Each Inspector shall agree in writing that it
will keep the Records confidential and that it will not disclose any of the
Records unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration Statement or
Prospectus, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction,
(iii) disclosure of such information is necessary or advisable, in the
opinion of counsel for any Inspector, in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, relating to, or
involving this Agreement or the Purchase Agreement, or any transactions
contemplated hereby or thereby or arising hereunder or thereunder, or
(iv) the information in such Records has been made generally available to
the public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed confidential
and shall not be used by it as the basis for any market transactions in the
securities of the Company unless and until such is made generally available
to the public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Company's sole expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Sec-
<PAGE>
-23-
tion 2(a) hereof, as the case may be, to be qualified under the TIA
not later than the effective date of the first Registration Statement
relating to the Registrable Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use their best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) 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 Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(r) Use their best efforts to cause the Registrable Notes covered by
a Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement or the Ex-
<PAGE>
-24-
change Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD")
(t) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company and the Subsidiary Guarantors,
in a form customary for underwritten transactions, addressed to the Trustee
for the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, and the
related indenture constitute legal, valid and binding obligations of the
Company and the Subsidiary Guarantors, enforceable against the Company and
the Subsidiary Guarantors in accordance with their respective terms.
(u) Use their best efforts to take all other steps necessary to
effect the registration of the Exchange Notes and/or Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Notes as the Company may, from time to time, reasonably request. The Company
may exclude from such registration the Registrable Notes of any seller so
long as such seller fails to furnish such information within a reasonable
time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information
previously furnished to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be,
that, upon actual receipt of any notice from the Company of the happening of
any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or
<PAGE>
-25-
5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Registrable Notes covered by such Registration Statement or Prospectus or
Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as
the case may be, until such Holder's or Participating Broker-Dealer's receipt
of the copies of the supplemented or amended Prospectus contemplated by
Section 5(k) hereof, or until it is advised in writing (the "ADVICE") by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event that
the Company shall give any such notice, each of the Effectiveness Period and
the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company and the Subsidiary Guarantors
shall be borne by the Company and the Subsidiary Guarantors whether or not
the Exchange Offer Registration Statement or any Shelf Registration Statement
is filed or becomes effective or the Exchange Offer is consummated,
including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to
be made with the NASD in connection with an underwritten offering and (B)
fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or
Exchange Notes for investment under the laws of such jurisdictions (x) where
the holders of Registrable Notes are located, in the case of the Exchange
Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable
Notes or Exchange Notes to be sold by a Participating Broker-Dealer during
the Applicable Period)), (ii) printing expenses, including, without
limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriter or underwriters, if any, by the Holders
of a majority in aggregate principal amount of the Registrable
<PAGE>
-26-
Notes included in any Registration Statement or in respect of Exchange Notes
to be sold by any Participating Broker-Dealer during the Applicable Period,
as the case may be, (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and the Subsidiary
Guarantors and, in the case of a Shelf Registration, fees and disbursements
of one special counsel for all of the sellers of Registrable Notes (exclusive
of any counsel retained pursuant to Section 7 hereof), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company and the
Subsidiary Guarantors desire such insurance, (vii) fees and expenses of all
other Persons retained by the Company and the Subsidiary Guarantors, (viii)
internal expenses of the Company and the Subsidiary Guarantors (including,
without limitation, all salaries and expenses of officers and employees of
the Company and the Subsidiary Guarantors performing legal or accounting
duties), (ix) the expense of any annual audit, (x) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange, and the obtaining of a rating of the securities, in
each case, if applicable, and (xi) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply
with this Agreement.
(b) The Company and the Subsidiary Guarantors shall (i) reimburse
the Holders of the Registrable Notes being registered in a Shelf Registration
Statement for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be
included in such Registration Statement and (ii) reimburse out-of-pocket
expenses (other than legal expenses) of Holders of Registrable Notes incurred
in connection with the registration and sale of the Registrable Notes
pursuant to a Shelf Registration Statement or in connection with the exchange
of Registrable Notes pursuant to the Exchange Offer.
7. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors, jointly and
severally, agree to indemnify and hold harmless each Holder of Registrable
Notes and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the
<PAGE>
-27-
affiliates, officers, directors, employees and agents of each such Person,
and each Person, if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "PARTICIPANT"), from and against any and all losses, claims,
damages, judgments, liabilities and expenses (including, without limitation,
the legal fees and other expenses actually incurred in connection with any
suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) or
Prospectus (as amended or supplemented if the Company or any Subsidiary
Guarantor shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by, arising out of or based upon 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
the Prospectus in the light of the circumstances under which they were made,
not misleading, EXCEPT insofar as such losses, claims, damages or liabilities
are caused by, arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the
Company or any Subsidiary Guarantor in writing by such Participant expressly
for use therein; PROVIDED, HOWEVER, that the Company and the Subsidiary
Guarantors will not be liable if such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary
prospectus and corrected in the final Prospectus or any amendment or
supplement thereto and any such loss, liability, claim, or damage or expense
suffered or incurred by the Participants resulted from any action, claim or
suit by any Person who purchased Registrable Notes or Exchange Notes which
are the subject thereof from such Participant and it is established in the
related proceeding that such Participant failed to deliver or provide a copy
of the final Prospectus (as amended or supplemented) to such Person with or
prior to the confirmation of the sale of such Registrable Notes or Exchange
Notes sold to such Person if required by applicable law, unless such failure
to deliver or provide a copy of the Prospectus (as amended or supplemented)
was a result of noncompliance by the Company or any Subsidiary Guarantor with
Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Subsidiary Guarantors, their
respective affiliates, officers, directors, employees and agents and each
Person, if any, who
<PAGE>
-28-
controls the Company or any Subsidiary Guarantor 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 Company and the Subsidiary
Guarantors to each Participant, but only with reference to information
relating to such Participant furnished to the Company or any Subsidiary
Guarantor in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes giving rise to such
obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such Person (the "INDEMNIFIED
PERSON") shall promptly notify the Persons against whom such indemnity may be
sought (the "INDEMNIFYING PERSONS") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person
and any others the Indemnifying Persons may reasonably designate in such
proceeding and shall pay the fees and expenses actually incurred by such
counsel related to such proceeding; PROVIDED, HOWEVER, that the failure to so
notify the Indemnifying Persons shall not relieve any of them of any
obligation or liability which any of them may have hereunder or otherwise
(unless and only to the extent that such failure directly results in the loss
or compromise of any material rights or defenses by the Indemnifying Person
and the Indemnifying Person was not otherwise aware of such action or claim).
In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Persons
and the Indemnified Person shall have mutually agreed to the contrary, (ii)
the Indemnifying Persons shall have failed within a reasonable period of time
to retain counsel reasonably satisfactory to the Indemnified Person or (iii)
the named parties in any such proceeding (including any impleaded parties)
include both any Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicting interests between them. It is understood
that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Persons shall not, in connection with such proceeding or
separate but substantially similar related proceeding in the same jurisdic-
<PAGE>
-29-
tion arising out of the same general allegations, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses shall be
reimbursed as they are incurred. Any such separate firm for the Participants
and such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and any such separate firm for
the Company and the Subsidiary Guarantors, their respective affiliates,
officers, directors, employees and agents and such control Persons of the
Company and the Subsidiary Guarantors shall be designated in writing by the
Company and shall be reasonably acceptable to the Holders. The Indemnifying
Persons shall not be liable for any settlement of any proceeding effected
without its prior written consent, but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an Indemnified Person shall have requested an Indemnifying Person to
reimburse the Indemnified Person for fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of
the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to
the date of such settlement; PROVIDED, HOWEVER, that the Indemnifying Person
shall not be liable for any settlement effected without its consent pursuant
to this sentence if the Indemnifying Person is contesting, in good faith, the
request for reimbursement. No Indemnifying Person shall, without the prior
written consent of the Indemnified Persons, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, or indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement (A)
includes an unconditional written release of such Indemnified Person, in form
and substance reasonably satisfactory to such Indemnified Person, 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 such Indemnified Person.
<PAGE>
-30-
(d) If the indemnification provided for in paragraphs (a) and (b)
of this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect relative fault of the Indemnifying Person or Persons on the one hand
and the Indemnified Person or Persons 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 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 omission to state a material fact relates to
information supplied by the Company and the Subsidiary Guarantors on the one
hand or such Participant or such other Indemnified Person, as the case may
be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result
of the losses, claims, damages, judgments, liabilities and expenses referred
to in the immediately preceding paragraph shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any
amount in excess of the amount by which proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes, as the case may be,
exceeds the amount of any damages that such Participant has otherwise been
required to pay or has paid 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 con-
<PAGE>
-31-
tribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
The Company and the Subsidiary Guarantors covenant and agree that,
so long as Registrable Notes remain outstanding, they will file the reports
required to be filed by them under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely
manner in accordance with the requirements of the Securities Act and the
Exchange Act and, if at any time they are not permitted to file such reports,
they will, upon the request of any Holder or beneficial owner of Registrable
Notes, make publicly available annual reports and such information, documents
and other reports of the type specified in Sections 13 and 15(d) of the
Exchange Act. The Company and the Subsidiary Guarantors further covenant for
so long as any Registrable Notes remain outstanding, to make available to any
Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such
Holder or beneficial owner the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A. Notwithstanding the foregoing, nothing in this
Section 8 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable 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 manage the offering will
be selected by the Holders of a majority in aggregate principal amount of
such Registrable Notes included in such offering and shall be reasonably
acceptable to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
<PAGE>
-32-
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
10. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. None of the Company or the
Subsidiary Guarantors has entered, as of the date hereof, and none of the
Company or the Subsidiary Guarantors shall enter, after the date of this
Agreement, into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of any of the Company's
or of the Subsidiary Guarantors' other issued and outstanding securities
under any such agreements. None of the Company or the Subsidiary Guarantors
has entered or will enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back rights with respect to a
Registration Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. None of the Company
or the Subsidiary Guarantors shall, directly or indirectly, knowingly take
any action with respect to the Registrable Notes as a class that would
adversely affect the ability of the Holders of Registrable Notes as a class
to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement 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 (A) the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 7 and this
Section 10(c) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer
(including any person who was a Holder or Participating Broker-Dealer of
Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant
to any Registration Statement) affected by any such amendment, modification
or supplement. Notwithstanding the foregoing, a waiver or consent to depart
from
<PAGE>
-33-
the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as follows:
BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
(ii) if to the Initial Purchaser, at the address specified in Section
10(d)(1);
(iii) if to the Company and the Subsidiary Guarantors, at the
address as follows:
Perry-Judd's Incorporated
575 West Madison Street, P.O. Box 97
Waterloo, Wisconsin 53594
Facsimile No.: (414) 478-1511
Attention: Chief Financial Officer
<PAGE>
-34-
with a copy to:
Brobeck, Phleger & Harrison
550 South Hope Street
Los Angeles, California 90071-2604
Facsimile No.: (213) 239-1324
Attention: Kenneth Bender, Esq.
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; one
business day after being timely delivered to a next-day air courier; and upon
receiving confirmation receipt by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto, including, without limitation and without the need for
express assignments, subsequent Holders of Registrable Notes; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such
successor or assign holds Registrable Notes.
(f) 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.
(g) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. 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 ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 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 RELATIVE TO THIS AGREEMENT.
<PAGE>
-35-
(i) SEVERABILITY. 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 best 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) SECURITIES HELD BY THE COMPANY, THE SUBSIDIARY GUARANTORS OR
THEIR RESPECTIVE AFFILIATES Whenever the consent or approval of Holders of a
specified percentage of Registrable Notes is required hereunder, Registrable
Notes held by the Company, the Subsidiary Guarantors or any of their
respective affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Company and the Subsidiary Guarantors on the other, and the or
between or among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
THE COMPANY:
PERRY-JUDD'S INCORPORATED
By: /s/ Thomas V. Bressan
------------------------
Name: Thomas V. Bressan
Title: Secretary
THE SUBSIDIARY GUARANTORS:
PERRY GRAPHIC COMMUNICATIONS, INC.
By: /s/ Thomas V. Bressan
-------------------------
Name: Thomas V. Bressan
Title: Secretary
JUDD'S, INCORPORATED
By: /s/ Thomas V. Bressan
--------------------------
Name: Thomas V. Bressan
Title: Secretary
JUDD & DETWEILER, INC.
By: /s/ Thomas V. Bressan
--------------------------
Name: Thomas V. Bressan
Title: Secretary
<PAGE>
MOUNT JACKSON PRESS, INC.
By: /s/ Thomas V. Bressan
------------------------------
Name: Thomas V. Bressan
Title: Secretary
PORT CITY PRESS, INC.
By: /s/ Thomas V. Bressan
------------------------------
Name: Thomas V. Bressan
Title: Secretary
SHENANDOAH VALLEY PRESS, INC.
By: Thomas V. Bressan
------------------------------
Name: Thomas V. Bressan
Title: Secretary
THE INITIAL PURCHASER:
BT ALEX. BROWN INCORPORATED
By: /s/ Anthony C. Haas
------------------------------
Name: Anthony C. Haas
Title: Vice President
<PAGE>
Registration Rights Agreement dated as of December 16, 1997 between the
Company and BT Alex. Brown as Initial Purchaser.
- -----------------------------------------------------------------------------
ALL EXHIBITS OMITTED IN ACCORDANCE WITH ITEM 601(b)(2) OF REGULATION S-K
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished
<PAGE>
EXHIBIT 10.1
LEASE AGREEMENT
by and between
PRINT (WI) QRS 12-40, INC.,
a Wisconsin corporation
as LANDLORD
and
PERRY GRAPHIC COMMUNICATIONS, INC.,
a Delaware corporation, and
JUDD'S, INCORPORATED,
a Maryland, corporation, jointly
as TENANT
Premises: 1300 Sauk Avenue, Baraboo, WI
161 N. Jackson St., Waterloo, WI
275 S. Jackson St., Waterloo, WI
200 S. Jackson St., Waterloo, WI
207 S. Jackson St., Waterloo, WI
575 W. Madison St., Waterloo, WI
Dated as of: December , 1997
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
Parties............................................... 1
1. Demise of Premises.................................... 1
2. Certain Definitions................................... 1
3. Title and Condition................................... 7
4. Use of Leased Premises; Quiet Enjoyment............... 8
5. Term.................................................. 9
6. Basic Rent............................................ 9
7. Additional Rent....................................... 10
8. Net Lease; Non-Terminability.......................... 11
9. Payment of Impositions................................ 12
10. Compliance with Law; Environmental Matters............ 13
11. Liens; Recording and Title............................ 14
12. Maintenance and Repair................................ 15
13. Alterations and Improvements.......................... 15
14. Permitted Contests.................................... 16
15. Indemnification....................................... 16
16. Insurance............................................. 17
17. Casualty and Condemnation............................. 20
18. Termination Events.................................... 21
19. Restoration........................................... 22
20. Procedures Upon Purchase.............................. 23
21. Assignment and Subletting; Prohibition
against Leasehold Financing........................... 24
22. Events of Default..................................... 27
23. Remedies and Damages Upon Default..................... 28
24. Notices............................................... 31
25. Estoppel Certificate.................................. 31
26. Surrender............................................. 32
27. No Merger of Title.................................... 32
28. Books and Records..................................... 32
29. Determination of Value................................ 33
30. Non-Recourse as to Landlord........................... 34
31. Financing............................................. 34
32. Subordination......................................... 35
33. Financial Covenants................................... 35
34. Tax Treatment; Reporting.............................. 35
35. Right of First Refusal................................ 36
36. Baraboo Premises Expansion............................ 37
37. Economic Abandonment.................................. 35
38. Miscellaneous......................................... 36
EXHIBITS
- --------
-i-
<PAGE>
Exhibit "A" - Premises
Exhibit "B" - Machinery and Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Rent Schedule
Exhibit "E" - Acquisition Costs
Exhibit "F" - Percentage Allocation of Basic Rent
Exhibit "G" - Financial Covenants
Exhibit "H" - Form of Memorandum of Lease
-ii-
<PAGE>
LEASE AGREEMENT, made as of this day of December, 1997, between
PRINT (WI) QRS 12-40, INC., a Wisconsin corporation, as landlord
("LANDLORD"), with an address c/o W. P. Carey & Co., Inc., 50 Rockefeller
Plaza, 2nd Floor, New York, New York 10020, and PERRY GRAPHIC COMMUNICATIONS,
INC., a Delaware corporation and JUDD'S, INCORPORATED, a Maryland
corporation, as tenants in common (collectively, "TENANT"), each with an
address at 575 West Madison Street, Waterloo, Wisconsin 53594.
In consideration of the rents and provisions herein stipulated to be paid
and performed, Landlord and Tenant hereby covenant and agree as follows:
1. DEMISE OF PREMISES. Landlord hereby demises and lets to Tenant, and
Tenant hereby takes and leases from Landlord, for the term and upon the
provisions hereinafter specified, the following described property
(hereinafter referred to collectively as the "LEASED PREMISES" and
individually as the "Baraboo Premises" "161 N. Jackson St. Premises" "200 S.
Jackson St. Premises" "275 S. Jackson St. Premises" "207 S. Jackson St.
Premises" and "575 W. Madison St. Premises" each of which premises is more
particularly described in the applicable description in Exhibit "A" attached
hereto and made a part hereof and shall include the portions of items (a),
(b) and (c) of this Paragraph 1 located thereon or therein and appertaining
thereto): (a) the premises described in EXHIBIT "A" hereto, together with
the Appurtenances (collectively, the "LAND"); (b) the buildings, structures
and other improvements now or hereafter constructed on the Land
(collectively, the "IMPROVEMENTS"); and (c) the fixtures, machinery,
equipment and other property described in EXHIBIT "B" hereto (collectively,
the "EQUIPMENT") which shall not include Tenant's printing equipment or other
trade fixtures or equipment.
2. CERTAIN DEFINITIONS.
"Acquisition Cost" of each of the Related Premises shall mean the
amount set forth opposite such premises on EXHIBIT "E" hereto.
"Additional Rent" shall mean Additional Rent as defined in Paragraph 7.
"Adjoining Property" shall mean all sidewalks, driveways, curbs, gores
and vault spaces adjoining any of the Leased Premises.
"Affected Premises" shall mean the Affected Premises as defined in
Paragraph 18.
"Alterations" shall mean all changes, additions, improvements or
repairs to, all alterations, reconstructions, renewals, replacements or
removals of and all substitutions or replacements for any of the Improvements
or Equipment, both interior and exterior, structural and non-structural, and
ordinary and extraordinary.
"Appurtenances" shall mean all tenements, hereditaments, easements,
rights-of-way, rights, privileges in and to the Land, including (a) easements
over other lands granted by any Easement Agreement and (b) any streets, ways,
alleys, vaults, gores or strips of land adjoining the Land.
"Assignment" shall mean any assignment of rents and leases from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified from time to time.
<PAGE>
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6.
"Basic Rent Payment Dates" shall mean the Basic Rent Payment Dates as
defined in Paragraph 6.
"Casualty" shall mean any injury to or death of any person or any loss
of or damage to any property (including the Leased Premises) included within
or related to the Leased Premises or arising from the Adjoining Property.
"Commencement Date" shall mean Commencement Date as defined in
Paragraph 5.
"Condemnation" shall mean a Taking and/or a Requisition.
"Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.
"Costs" of a Person or associated with a specified transaction shall
mean all actual and reasonable out-of-pocket costs and expenses incurred by
such Person or associated with such transaction, including without
limitation, reasonable attorneys' fees and expenses, court costs, brokerage
fees, escrow fees, title insurance premiums, mortgage commitment fees,
mortgage points, recording fees and transfer taxes, as the circumstances
require.
"Covenants" shall mean the covenants and agreements described on
EXHIBIT "G" hereto.
"Default Rate" shall mean the Default Rate as defined in Paragraph
7(a)(iv).
"Default Termination Amount" shall mean the Default Termination Amount
as defined in Paragraph 23(a)(iii).
"Easement Agreement" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements (i)
listed as Permitted Encumbrances or (ii) as may, with the consent of Tenant,
hereafter affect any Leased Premises.
"Environmental Law" shall mean (i) whenever enacted or promulgated,
any applicable federal, state, foreign and local law, statute, ordinance,
rule, regulation, license, permit, authorization, approval, consent, court
order, judgment, decree, injunction, code, requirement or agreement with any
governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water, groundwater, drinking
water supply, land (including land surface or subsurface), plant, aquatic and
animal life from injury caused by a Hazardous Substance or (y) concerning
exposure to, or the use, containment, storage, recycling, reclamation, reuse,
treatment, generation, discharge, transportation, processing, handling,
labeling, production, disposal or remediation of Hazardous Substances,
Hazardous Condition or Hazardous Activity, in each case as amended and as now
or hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose
liability or obligations or injuries or damages due to or threatened as a
result of the presence of, exposure to, or ingestion of, any Hazardous
Substance. The term Environmental Law includes, without limitation, the
federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the federal Water
Pollution Control Act, the federal Clean Air Act, the federal Clean Water
Act, the federal Resources Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments
-2-
<PAGE>
to RCRA), the federal Solid Waste Disposal Act, the federal Toxic Substance
Control Act, the federal Insecticide, Fungicide and Rodenticide Act, the
federal Occupational Safety and Health Act of 1970, the federal National
Environmental Policy Act and the federal Hazardous Materials Transportation
Act, each as amended and as now or hereafter in effect and any similar state
or local Law.
"Environmental Violation" shall mean (a) any direct or indirect
discharge, disposal, spillage, emission, escape, pumping, pouring, injection,
leaching, release, seepage, filtration or transporting of any Hazardous
Substance at, upon, under, onto or within the Leased Premises, or from the
Leased Premises to the environment, in violation of any Environmental Law or
in excess of any reportable quantity established under any Environmental Law
or which could result in any liability to Landlord (including any Lender
succeeding to Landlord's interest hereunder) or Tenant, any Federal, state or
local government or any other Person for the costs of any removal or remedial
action or natural resources damage or for bodily injury or property damage,
(b) any deposit, storage, dumping, placement or use of any Hazardous
Substance at, upon, under or within the Leased Premises or which extends to
any Adjoining Property in violation of any Environmental Law or in excess of
any reportable quantity established under any Environmental Law or which
could result in any liability to any Federal, state or local government or to
any other Person for the costs of any removal or remedial action or natural
resources damage or for bodily injury or property damage, (c) the abandonment
or discarding of any barrels, containers or other receptacles containing any
Hazardous Substances in violation of any Environmental Laws, (d) any
activity, occurrence or condition which could result in any liability, cost
or expense to Landlord or any other owner or occupier of the Leased Premises,
or which could result in a creation of a lien on any Related Premises under
any Environmental Law or (e) any violation of or noncompliance with any
Environmental Law.
"Equipment" shall mean the Equipment as defined in Paragraph 1.
"Event of Default" shall mean an Event of Default as defined in
Paragraph 22(a).
"Fair Market Value" of either the Leased Premises or any Related
Premises, as the case may be, and the context may require, shall mean the
higher of (a) the fair market value of the Leased Premises or any Related
Premises, as the case may be, as of the Relevant Date as if unaffected and
unencumbered by this Lease or (b) the fair market value of the Leased
Premises or Related Premises, as the case may be, as of the Relevant Date as
affected and encumbered by this Lease; provided that, with respect to a
determination of Fair Market Value in connection with an Intended Assignment
Offer, the Fair Market Value of the Leased Premises for the Term shall not be
assumed to have been extended for any unexercised extension period. For all
purposes of this Lease, Fair Market Value shall be determined in accordance
with the procedure specified in Paragraph 29.
"Fair Market Value Date" shall mean the date when the Fair Market
Value is determined in accordance with Paragraph 29.
"Federal Funds" shall mean federal or other immediately available
funds which at the time of payment are legal tender for the payment of public
and private debts in the United States of America.
"Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates
any Hazardous Substance; (ii) causes or results in (or threatens to cause or
result in) the release, seepage, spill, leak, flow, discharge or emission of
any Hazardous Substance into the environment (including the air, ground
water, watercourses or water systems), (iii) involves the containment or
storage of
-3-
<PAGE>
any Hazardous Substance; or (iv) would cause any of the Leased Premises or
any portion thereof to become a hazardous waste treatment, recycling,
reclamation, processing, storage or disposal facility within the meaning of
any Environmental Law.
"Hazardous Condition" means any condition which would support any
claim or liability under any Environmental Law, including the presence of
underground storage tanks.
"Hazardous Substance" means (i) any substance, material, product,
petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in
each case whether naturally occurring, man-made or the by-product of any
process, that is toxic, harmful or hazardous or acutely hazardous to the
environment or public health or safety or (ii) any substance supporting a
claim under any Environmental Law, whether or not defined as hazardous as
such under any Environmental Law. Hazardous Substances include, without
limitation, any toxic or hazardous waste, pollutant, contaminant, industrial
waste, petroleum or petroleum-derived substances or waste, radon, radioactive
materials, asbestos, asbestos containing materials, urea formaldehyde foam
insulation, lead, polychlorinated biphenyls.
"Impositions" shall mean the Impositions as defined in Paragraph 9(a).
"Improvements" shall mean the Improvements as defined in Paragraph 1.
"Indemnitee" shall mean an Indemnitee as defined in Paragraph 15.
"Insurance Requirements" shall mean the requirements of all insurance
policies maintained in accordance with this Lease.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, requirement
or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Year" shall mean, with respect to the first Lease Year, the
period commencing on the Commencement Date and ending at midnight on the last
day of the twelfth (12th) consecutive calendar month following the month in
which the Commencement Date occurred, and each succeeding twelve (12) month
period during the Term.
"Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1.
"Legal Requirements" shall mean the requirements of all present and
future Laws (including but not limited to Environmental Laws) and all
Easement Agreements now or hereafter of record which may be applicable to
Tenant or to any of the Leased Premises or Related Premises, or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration,
repair or restoration of any of the Leased Premises or Related Premises, even
if compliance therewith necessitates structural changes or improvements or
results in interference with the use or enjoyment of any of the Leased
Premises or Related Premises.
-4-
<PAGE>
"Lender" shall mean any person or entity (and their respective
successors and assigns) which may, after the date hereof, make a Loan to
Landlord or is the holder of any Note.
"Loan" shall mean any loan made by one or more Lenders to Landlord,
which loan is secured by a Mortgage and an Assignment and evidenced by a Note.
"Monetary Obligations" shall mean Rent and all other sums payable by
Tenant under this Lease to Landlord, to any third party on behalf of Landlord
or to any Indemnitee.
"Mortgage" shall mean any mortgage or deed of trust from Landlord to a
Lender which (a) encumbers any of the Leased Premises and (b) secures
Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified.
"Net Award" shall mean (a) the entire award payable pursuant to the
terms of this Lease to Landlord or Lender by reason of a Condemnation whether
pursuant to a judgment or by agreement or otherwise, or (b) the entire
proceeds of any insurance required under clauses (i), (ii) (to the extent
payable to Landlord or Lender), (iv), (v) or (vi) of Paragraph 16(a), as the
case may be, less any reasonable expenses incurred by Landlord, Lender and
Tenant in collecting such award or proceeds.
"Note" shall mean any promissory note evidencing Landlord's obligation
to repay a Loan, as the same may be amended, supplemented or modified.
"Offer Amount" shall mean the greater of (a) Fair Market Value or (b)
the sum of the Acquisition Cost and any Prepayment Premium which Landlord
will be required to pay in prepaying any Loan in connection with the payment
of such Acquisition Cost.
"Partial Casualty" shall mean any Casualty which does not constitute a
Termination Event.
"Partial Condemnation" shall mean any Condemnation which does not
constitute a Termination Event.
"Permitted Encumbrances" shall mean those covenants, restrictions,
reservations, liens, conditions and easements and other encumbrances, other
than any Mortgage or Assignment, listed on EXHIBIT "C" hereto (but such
listing shall not be deemed to revive any such encumbrances that have expired
or terminated or are otherwise invalid or unenforceable).
"Person" shall mean an individual, partnership, association,
corporation or other entity.
"Prepayment Premium" shall mean any payment (other than a payment of
principal and/or interest which Landlord is required to make under a Note or
a Mortgage) by reason of any prepayment by Landlord of any principal due
under a Note or Mortgage, and which may be (in lieu of such prepayment
premium or prepayment penalty) a "make whole" clause requiring a prepayment
premium or other charges in an amount sufficient to compensate the Lender for
the loss of the benefit of the Loan due to prepayment; provided any such
Prepayment Premium is not materially at variance with then prevailing
prepayment premiums or prepayment penalties in the market for similar loans
at the time of placement.
-5-
<PAGE>
"Present Value" of any amount shall mean such amount discounted by a
rate per annum which is the lower of (a) the Prime Rate at the time such
present value is determined or (b) seven percent (7%) per annum.
"Prime Rate" shall mean the interest rate per annum as published, from
time to time, in THE WALL STREET JOURNAL as the "Prime Rate" in its column
entitled "Money Rate". The Prime Rate may not be the lowest rate of interest
charged by any "large U. S. money center commercial banks" and Landlord makes
no representations or warranties to that effect. In the event THE WALL
STREET JOURNAL ceases publication or ceases to publish the "Prime Rate" as
described above, the Prime Rate shall be the average per annum discount rate
(the "DISCOUNT RATE") on ninety-one (91) day bills ("TREASURY BILLS") issued
from time to time by the United States Treasury at its most recent auction,
plus three hundred (300) basis points. If no such 91-day Treasury Bills are
then being issued, the Discount Rate shall be the discount rate on Treasury
Bills then being issued for the period of time closest to ninety-one (91)
days.
"Related Premises" shall mean any one of the "Baraboo Premises" "161
N. Jackson St. Premises" "200 S. Jackson St. Premises" "275 S. Jackson St.
Premises" "207 S. Jackson St. Premises" and "575 W. Madison St. Premises".
"Relevant Amount" shall mean the Termination Amount or the Default
Termination Amount, as the case may be.
"Relevant Date" shall mean (a) the date immediately prior to the date
on which the applicable Condemnation Notice is received, in the event of a
Termination Notice under Paragraph 18 which is occasioned by a Taking, (b)
the date immediately prior to the date on which the applicable Casualty
occurs, in the event of a Termination Notice under Paragraph 18 which is
occasioned by a Casualty, (c) the date when Fair Market Value is
redetermined, in the event of a redetermination of Fair Market Value pursuant
to Paragraph 20(c), (d) the date immediately prior to the Event of Default
giving rise to the need to determine Fair Market Value in the event Landlord
provides Tenant with notice of its intention to require Tenant to make a
Termination Offer under Paragraph 23(a)(iii)), (e) the Intended Assignment
Purchase Date, in the event Landlord receives an Intended Assignment Offer to
purchase the Leased Premises pursuant to Paragraph 21(c) or (f) the date
immediately prior to the date on which Tenant vacates the Related Premises in
the event Tenant exercises its rights under Paragraph 37(a) or Landlord
elects to treat an Event of Default under subparagraph 22(a)(ix) as an
exercise by Tenant of its rights under Paragraph 37.
"Remaining Premises" shall mean the Related Premises which are not
Affected Premises under Paragraph 18.
"Rent" shall mean, collectively, Basic Rent and Additional Rent.
"Site Assessment" shall mean a Site Assessment as defined in Paragraph
10(c).
"State" shall mean the State of Wisconsin.
"Surviving Obligations" shall mean any obligations of Tenant under
this Lease, actual or contingent, which arise on or prior to the expiration
or prior termination of this Lease or which survive such expiration or
termination by their own terms.
"Taking" shall mean any taking of all or a portion of any of the
Leased Premises (i) in or by condemnation or other eminent domain proceedings
pursuant to any Law, general or special, or (ii) by reason of any agreement
with any condemnor in settlement of or
-6-
<PAGE>
under threat of any such condemnation or other eminent domain proceeding, or
(iii) by any other means. The Taking shall be considered to have taken place
as of the later of the date actual physical possession is taken by the
condemnor, or the date on which the right to compensation and damages accrues
under the law applicable to the Related Premises.
"Term" shall mean the Term as defined in Paragraph 5.
"Termination Amount" shall mean (i) the sum of the Acquisition Cost
and any Prepayment Premium which Landlord will be required to pay in
prepaying any Loan with proceeds of the Termination Amount or (ii) if an
Event of Default shall have occurred and then be continuing, the greater of
(a) Fair Market Value or (b) the sum of the Acquisition Cost and any
Prepayment Premium which Landlord will be required to pay in prepaying any
Loan with proceeds of the Termination Amount.
"Termination Date" shall mean the Termination Date as defined in
Paragraph 18.
"Termination Event" shall mean a Termination Event as defined in
Paragraph 18.
"Termination Notice" shall mean Termination Notice as defined in
Paragraph 18(a).
"Third Party Purchaser" shall mean the Third Party Purchaser as
defined in Paragraph 21(f).
"Treasury Rate" shall mean the rate per annum as conclusively
determined by Landlord (absent manifest error). The Treasury Rate will be
based upon the weekly average Treasury Constant Maturity yields reported in
the most recently available Federal Reserve Statistical Release H.15 -
Selected Interest Rates (or its successor publication). The Treasury Rate
will be the yield implied by the Treasury Constant Maturity series for a U. S.
Treasury obligation having a maturity date of ten (10) years. In the
event that Release H.15 is no longer published, Landlord may select a
comparable publication to determine the Treasury Rate.
3. TITLE AND CONDITION.
(a) The Leased Premises are demised and let subject to (i) the
rights of any Persons in possession of the Leased Premises, (ii) the existing
state of title of any of the Leased Premises, including any Permitted
Encumbrances, but excluding any liens or encumbrances resulting solely from
the acts of Landlord without the consent of Tenant (other than any lien of
any Lender as contemplated by this Lease), (iii) any state of facts which an
accurate survey or physical inspection of the Leased Premises might show,
(iv) all Legal Requirements, including any existing violation of any thereof,
and (v) the condition of the Leased Premises as of the commencement of the
Term, without representation or warranty by Landlord.
(b) Tenant acknowledges that the Leased Premises are in good
condition and repair at the inception of this Lease. LANDLORD LEASES AND WILL
LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT
ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY
OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR
-7-
<PAGE>
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED
PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT,
LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE
WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x)
MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv)
OPERATION OR (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE; AND ALL RISKS
INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE
LEASED PREMISES ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
LEASED PREMISES HAVE BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN
THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY
NATURE, WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY
OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS
PARAGRAPH 3(b) HAVE BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE
EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY OF THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING
OTHERWISE.
(c) Tenant represents to Landlord that Tenant has examined the title
to the Leased Premises prior to the execution and delivery of this Lease and
has found the same to be satisfactory for the purposes contemplated hereby.
Tenant acknowledges that (i) fee simple title (both legal and equitable) to
the Leased Premises is in Landlord and except, as provided in Paragraph 35
hereof with respect to certain rights of refusal to purchase the Leased
Premises that Tenant has only the leasehold right of possession and use of
the Leased Premises as provided herein, (ii) this Lease is a single Lease for
multiple properties and shall not be terminable with respect to less than all
of the Leased Premises or severable with respect to any one or more Related
Premises except as specifically provided herein, (iii) the Improvements
conform to all material Legal Requirements and all Insurance Requirements,
(iv) all easements necessary or appropriate for the use or operation of the
Leased Premises have been obtained, (v) all contractors and subcontractors
who have performed work on or supplied materials to the Leased Premises have
been fully paid, and all materials and supplies have been fully paid for,
(vi) the Improvements have been fully completed in all material respects in a
good and workmanlike manner, and (vii) all Equipment necessary or appropriate
for the use or operation of the Leased Premises has been installed and is
presently fully operative in all material respects.
(d) Landlord hereby assigns to Tenant, without recourse or warranty
whatsoever, all assignable warranties, guaranties, indemnities and similar
rights which Landlord may have against any manufacturer, seller, engineer,
contractor or builder in respect of any of the Leased Premises. Such
assignment shall remain in effect until an Event of Default occurs or until
the expiration or earlier termination of this Lease, whereupon such
assignment shall cease and all of said warranties, guaranties, indemnities
and other rights shall automatically revert to Landlord.
4. USE OF LEASED PREMISES; QUIET ENJOYMENT.
(a) Tenant may occupy and use the Leased Premises for the operation
of Tenant's printing business and for uses incidental thereto, and for no
other purpose. In the event that Tenant desires to use and occupy the Leased
Premises or any portion thereof for a use unrelated to Tenant's printing
business, Tenant shall first obtain the written consent of Landlord
-8-
<PAGE>
to such change in use, which consent shall not be unreasonably withheld,
delayed or conditioned by Landlord. Notwithstanding the foregoing, Tenant
shall not, in any event, use or occupy or permit any of the Leased Premises
to be used or occupied, nor do or permit anything to be done in or on any of
the Leased Premises, in a manner which would or might (i) violate any Law or
Legal Requirement, (ii) make void or voidable or cause any insurer to cancel
any insurance required by this Lease, or make it impracticable to obtain any
such insurance at commercially reasonable rates, (iii) cause structural
injury to any of the Improvements or (iv) constitute a public or private
nuisance or waste.
(b) Subject to the provisions hereof, so long as no Event of Default
has occurred and is continuing, Tenant shall quietly hold, occupy and enjoy
the Leased Premises throughout the Term, without any hindrance, ejection or
molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord or its agents may enter upon and examine any
of the Leased Premises at such reasonable times as Landlord may select and
upon reasonable prior notice to Tenant (except in the case of any emergency,
in which event no notice shall be required) for the purpose of inspecting the
Leased Premises, verifying compliance or non-compliance by Tenant with its
obligations hereunder and the existence or non-existence of an Event of
Default or event which with the passage of time and/or notice would
constitute an Event of Default, showing the Leased Premises to prospective
Lenders and purchasers and taking such other action with respect to the
Leased Premises as is permitted by any provision hereof; provided that,
Landlord shall exercise its rights of entry hereunder in a manner reasonably
designed to minimize interference with the normal operation of Tenant's
business at the Leased Premises.
5. TERM.
(a) Subject to the provisions hereof, Tenant shall have and hold the
Leased Premises for an initial term (such term, as extended or renewed in
accordance with the provisions hereof, being called the "TERM") commencing on
the date hereof (the "COMMENCEMENT DATE") and ending on the last day of the
two hundred fortieth (240th) calendar month next following the date hereof
(the "EXPIRATION DATE").
(b) Provided that if, on or prior to the Expiration Date or any
other Renewal Date (as hereinafter defined) this Lease shall not have been
terminated pursuant to any provision hereof, then on the Expiration Date and
on the fifth (5th) and tenth (10th) anniversaries of the Expiration Date (the
Expiration Date and each such anniversary being a "RENEWAL DATE"), the Term
shall have the option, at its election, to extend the Term for an additional
period of five (5) years, by giving notice of such election to Landlord in
writing in recordable form at least eighteen (18) months prior to the
expiration of the initial Term or the applicable Renewal Term, as the case
may be. Any such extension of the Term shall be subject to all of the
provisions of this Lease, as the same may be amended, supplemented or
modified.
(c) If (i) Tenant fails to timely exercise its option pursuant to
Paragraph 5(b) or (ii) an Event of Default shall occur and then be
continuing, then Landlord shall have the right during the remainder of the
Term then in effect (and at any time during the last year of the Term),
Landlord shall have the right to (i) advertise the availability of any of the
Leased Premises for sale or reletting and to erect upon any of the Leased
Premises signs indicating such availability and (ii) show any of the Leased
Premises to prospective purchasers or tenants or their agents at such
reasonable times as Landlord may select; provided that, Landlord shall use
reasonable efforts to exercise its rights hereunder in a manner reasonably
designed to minimize interference with the normal operation of Tenant's
business at the Leased Premises.
6. BASIC RENT. Tenant shall pay to Landlord, as annual rent for the
Leased Premises during the Term, the amounts determined in accordance with
EXHIBIT "D" hereto
-9-
<PAGE>
("BASIC RENT"), commencing on the first day of January, 1998, and continuing
on the first day of each April, July, October and January thereafter during
the Term (each such day being a "BASIC RENT PAYMENT DATE"). Each such rental
payment shall be made, at Landlord's sole discretion, (a) to Landlord at its
address set forth above and/or to such one or two other Persons, at such
addresses and in such proportions as Landlord may direct by fifteen (15)
days' prior written notice to Tenant (in which event Tenant shall give
Landlord notice of each such payment concurrent with the making thereof), and
(b) by a check hand delivered or mailed and received on or before the
applicable Basic Rent Payment Date, or by wire transfer of immediately
available Federal Funds. Pro rata Basic Rent for the period from the date
hereof through the last day of the initial calendar quarter (or portion
thereof) shall be paid on the date hereof.
7. ADDITIONAL RENT.
(a) Tenant shall pay and discharge, as additional rent
(collectively, "ADDITIONAL RENT"):
(i) except as otherwise specifically provided herein, all costs
and expenses of Tenant, and all actual and reasonable costs and expenses
incurred, payable or reimbursable by Landlord in connection with (A) the
ownership, use, non-use, occupancy, possession, operation, condition, design,
construction, maintenance, alteration, repair or restoration of any of the
Leased Premises, (B) the performance of any of Tenant's obligations under
this Lease, (C) any sale or other transfer of any of the Leased Premises to
Tenant under this Lease (except that in the case of Tenant's exercise of its
rights pursuant to Paragraph 35 hereof, only to the extent such third party
would be obligated to pay such costs or expenses), (D) to the extent same are
not paid from any Net Award, any Condemnation proceedings, (E) to the extent
same are not paid from any Net Award, the adjustment, settlement or
compromise of any insurance claims involving or arising from any of the
Leased Premises, (F) other than a suit by Tenant against Landlord in which
Tenant is the prevailing party, the prosecution, defense or settlement of any
litigation involving or arising from any of the Leased Premises, this Lease,
or the sale of the Leased Premises to Landlord, (G) the exercise or
enforcement by Landlord, its successors and assigns, of any of its rights
under this Lease, (H) any amendment to or modification or termination of this
Lease made at the request of Tenant, (I) Costs of Landlord's counsel in
connection with the preparation, negotiation and execution of this Lease or
Costs incurred in connection with any act undertaken by Landlord (or its
counsel) at the request of Tenant, or incurred in connection with any act of
Landlord performed on behalf of Tenant, and (J) the reasonable Costs of
Landlord incurred in connection with any act undertaken by Landlord at the
request of Tenant or Tenant's failure to act promptly in an emergency
situation, and (K) any other items specifically required to be paid by Tenant
under this Lease;
(ii) after the date all or any portion of any installment of
Basic Rent is due and not paid, an amount equal to four percent (4%) of the
amount of such unpaid installment or portion thereof, provided, however, that
with respect to the first two late payments of all or any portion of any
installment of Basic Rent in any consecutive twelve (12) month period, the
Late Charge shall not be due and payable unless the Basic Rent has not been
paid within five (5) business days' following the due date thereof;
(iii) a sum equal to any additional sums (including any late
charges, default penalties and interest, and Landlord's and Lender's
reasonable attorneys' fees) which are actually incurred and paid by Landlord
under any Note, by reason of Tenant's late payment or non-payment of Basic
Rent or by reason of an Event of Default; and
(iv) interest at the rate (the "Default Rate") of five percent
(5%) over the Prime Rate per annum on the following sums until paid in full:
(A) all overdue installments of Basic Rent from the respective due dates
thereof, (B) all overdue amounts of
-10-
<PAGE>
Additional Rent relating to obligations which Landlord shall have paid on
behalf of Tenant, from the date of payment thereof by Landlord, and (C) all
other overdue amounts of Additional Rent, from the date when any such amount
becomes overdue.
(b) Tenant shall pay and discharge (i) any Additional Rent referred
to in Paragraph 7(a)(i) when the same shall become due, provided that amounts
which are billed to Landlord or any third party, but not to Tenant, shall be
paid within thirty (30) days after Landlord's demand for payment thereof, and
(ii) any other Additional Rent, within thirty (30) days after Landlord's
demand for payment thereof.
(c) In no event shall amounts payable under Paragraph 7(a)(ii),
(iii) and (iv) exceed the maximum amount permitted by applicable Law.
8. NET LEASE; NON-TERMINABILITY.
(a) This is a net lease and all Monetary Obligations shall be paid
without notice or demand (except as otherwise expressly provided herein to
the contrary), and without set-off, counterclaim, recoupment, abatement,
suspension, deferment, diminution, deduction, reduction or defense
(collectively, a "SET-OFF"). Notwithstanding anything to the contrary
contained this Lease, Perry Graphic Communications, Inc. and Judd's,
Incorporated each acknowledge and agree that each of them shall be jointly
and severally liable for the payment, performance and observance of all
Monetary Obligations and all non-monetary obligations of Tenant under this
Lease.
(b) Except as otherwise expressly provided herein, this Lease and
the rights of Landlord and the obligations of Tenant hereunder shall not be
affected by any event or for any reason, including the following: (i) any
damage to or theft, loss or destruction of any of the Leased Premises, (ii)
any Condemnation, (iii) Tenant's acquisition of ownership of any of the
Leased Premises other than pursuant to an express provision of this Lease or
any subsequent written agreement executed by and between Landlord and Tenant,
(iv) subject to the terms of any non-disturbance subordination and attornment
agreement between Tenant and Lender, any default on the part of Landlord
hereunder or under any Note, Mortgage, Assignment or any other agreement, (v)
any latent or other defect in any of the Leased Premises, (vi) the breach of
any warranty of any seller or manufacturer of any of the Equipment, (vii) any
violation of Paragraph 4(b) or any other provision of this Lease by Landlord,
(viii) the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution or winding-up of, or other proceeding affecting
Landlord, (ix) subject to the provisions of Paragraph 32 hereof, the exercise
of any remedy, including foreclosure, under any Mortgage or Assignment, (x)
any action with respect to this Lease (including the disaffirmance hereof)
which may be taken by any trustee, receiver or liquidator of Landlord or any
court under the Federal Bankruptcy Code or other similar proceeding, (xi)
subject to the provisions of Paragraph 32 hereof, any interference with
Tenant's use of the Leased Premises, (xii) market or economic changes or
(xiii) any other cause, whether similar or dissimilar to the foregoing, any
present or future Law to the contrary notwithstanding.
(c) The obligations of Tenant hereunder shall be separate and
independent covenants and agreements, all Monetary Obligations shall continue
to be payable in all events (or, in lieu thereof, Tenant shall pay amounts
equal thereto), and the obligations of Tenant hereunder shall continue
unaffected unless the requirement to pay or perform the same shall have been
terminated pursuant to an express provision of this Lease. All Rent payable
by Tenant hereunder shall constitute "rent" for all purposes (including
Section 502(b)(6) of the Bankruptcy Code).
-11-
<PAGE>
(d) Except as otherwise expressly provided herein, Tenant shall have
no right and hereby waives all rights which it may have under any Law (i) to
quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.
9. PAYMENT OF IMPOSITIONS.
(a) Tenant shall, before interest or penalties are due thereon, pay
and discharge all taxes (including real and personal property, franchise,
sales, gross receipts and rent taxes), all charges for any easement or
agreement maintained for the benefit of any of the Leased Premises, all
assessments and levies, all permit, inspection and license fees, all rents
and charges for water, sewer, utility and communication services relating to
any of the Leased Premises, all ground rents (other than any ground rent
payable under any ground lease executed after the date hereof) and all other
public charges whether of a like or different nature, even if unforeseen or
extraordinary, imposed upon or assessed against (i) Tenant, (ii) Tenant's
possessory interest in the Leased Premises, (iii) any of the Leased Premises,
(iv) Landlord as a result of or arising in respect of the acquisition,
ownership, occupancy, leasing, use, possession or sale of any of the Leased
Premises, any activity conducted on any of the Leased Premises, or the Rent,
or (v) any Lender by reason of any Note, Mortgage, Assignment or other
document evidencing or securing a Loan and which (as to this clause (v))
Landlord is obligated to pay (collectively, the "IMPOSITIONS"); provided,
that nothing herein shall obligate Tenant to pay (A) income, excess profits
or other taxes of Landlord (or Lender) which are determined on the basis of
Landlord's (or Lender's) net income or net worth (unless such taxes are in
lieu of or a substitute for any other tax, assessment or other charge upon or
with respect to the Leased Premises which, if it were in effect, would be
payable by Tenant under the provisions hereof or by the terms of such tax,
assessment or other charge), (B) any estate, inheritance, succession, gift or
similar tax imposed on Landlord or (C) any capital gains tax imposed on
Landlord in connection with the sale of the Leased Premises to any Person or
otherwise. If any Imposition may be paid in installments without interest or
penalty, Tenant shall have the option to pay such Imposition in installments;
in such event, Tenant shall be liable only for those installments which
accrue or become due and payable during the Term. Tenant shall prepare and
file all tax reports required by governmental authorities which relate to the
Impositions. Tenant shall deliver to Landlord (1) copies of all settlements
and notices pertaining to the Impositions which may be issued by any
governmental authority within ten (10) days after Tenant's receipt thereof,
(2) receipts for payment of all taxes required to be paid by Tenant hereunder
within thirty (30) days after the due date thereof and (3) receipts for
payment of all other Impositions within thirty (30) days after Landlord's
request therefor.
(b) Landlord shall have the right at any time after occurrence and
during the continuance of an Event of Default to require Tenant to pay to
Landlord an additional monthly sum (each an "ESCROW PAYMENT") sufficient to
pay the Escrow Charges (as hereinafter defined) as they become due. As used
herein, "ESCROW CHARGES" shall mean real estate taxes on the Leased Premises
or payments in lieu thereof and premiums on any insurance required by this
Lease. Landlord shall in good faith determine the amount of the Escrow
Charges and of each Escrow Payment. The Escrow Payments may be commingled
with other funds of Landlord or other Persons and no interest thereon shall
be due or payable to Tenant. Landlord shall apply the Escrow Payments to the
payment of the Escrow Charges in such order or priority as Landlord shall
determine or as required by law. If at any time the Escrow Payments
theretofore paid to Landlord shall be insufficient for the payment of the
Escrow Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
-12-
<PAGE>
10. COMPLIANCE WITH LAWS AND EASEMENT AGREEMENTS; ENVIRONMENTAL MATTERS.
(a) Tenant shall, at its expense, comply with and conform to, and
cause any other Person occupying any part of the Leased Premises to comply
with and conform to, all Insurance Requirements and Legal Requirements
(including all applicable Environmental Laws). Tenant shall not at any time
(i) cause, permit or suffer to occur any Environmental Violation or (ii)
permit any sublessee, assignee or other Person occupying the Leased Premises
under or through Tenant to cause, permit or suffer to occur any Environmental
Violation.
(b) Tenant, at its sole cost and expense, will at all times promptly
and faithfully abide by, discharge and perform all of the covenants,
conditions and agreements contained in any Easement Agreement on the part of
Landlord or the occupier to be kept and performed thereunder. Neither
Landlord nor Tenant shall alter, modify, amend or terminate any Easement
Agreement, give any consent or approval thereunder, or enter into any new
Easement Agreement without, in each case, the prior written consent of the
other party, which consent shall not be unreasonably withheld, delayed or
conditioned. In the event that Tenant desires to alter, modify, amend or
terminate any Easement Agreement or enter into any new Easement Agreement
which, in each case, Tenant believes in good faith to be beneficial to the
continued use and/or operation of Leased Premises, Tenant shall give Landlord
written notice thereof and, in connection therewith, Landlord agrees to
reasonably cooperate with Tenant (including execution of any such agreement,
if required), at no cost to Landlord.
(c) If (i) at any time, in the opinion of Landlord or Lender, a
reasonable basis exists to believe that an Environmental Violation exists,
(ii) this Lease shall be terminated or canceled or otherwise expire pursuant
to the terms hereof (including, without limitation, pursuant to the
provisions of Article 18 or 23 hereof) and Tenant shall not acquire the
Leased Premises upon the occurrence of any such event, (iii) any Lender shall
so require (pursuant to the terms of the applicable Loan documents), (iv)
Landlord shall sell or transfer its interest in the Leased Premises pursuant
to Section 21(g) hereof or (v) Tenant shall exercise its rights under
Paragraph 37 hereof, then upon prior written notice from Landlord, Tenant
shall permit such persons as Landlord may designate ("SITE REVIEWERS") to
visit the Leased Premises (or the Abandonment Premises, as applicable) and
perform, as agents of Tenant, environmental site investigations and
assessments ("SITE ASSESSMENTS") on the Leased Premises (or the Abandonment
Premises, as applicable) for the purpose of determining whether there exists
on the Leased Premises (or the Abandonment Premises, as applicable) any
Environmental Violation or any condition which could result in any
Environmental Violation. Such Site Assessments may include both above and
below the ground testing for Environmental Violations and such other tests as
may be necessary, in the opinion of the Site Reviewers, to conduct the Site
Assessments. Tenant shall supply to the Site Reviewers such historical and
operational information regarding the Leased Premises (or the Abandonment
Premises, as applicable) as may be reasonably requested by the Site Reviewers
to facilitate the Site Assessments, and shall make available for meetings
with the Site Reviewers appropriate personnel having knowledge of such
matters. The cost of performing and reporting Site Assessments shall be paid
by Tenant, except that with respect to clauses (i) and (iii) above, if no
Environmental Violation is discovered at the Leased Premises, then the cost
of performing and reporting such Site Assessments shall be paid by Landlord
and with respect to clause (iv) above, the cost of performing and reporting
such Site Assessments shall be paid by Landlord.
(d) If an Environmental Violation occurs or is found to exist and,
in Landlord's reasonable judgment, the cost of remediation of the same is
likely to exceed $50,000, Tenant shall provide to Landlord, within thirty
(30) days after Landlord's request therefor, adequate financial assurances
that Tenant will effect such remediation in accordance with applicable
Environmental Laws.
-13-
<PAGE>
(e) Notwithstanding any other provision of this Lease, if an
Environmental Violation occurs or is found to exist and the Term would
otherwise terminate or expire, then, at the option of Landlord, the Term
shall be automatically extended beyond the date of termination or expiration
and this Lease shall remain in full force and effect beyond such date until
the earlier to occur of (i) the completion of all remedial action in
accordance with applicable Environmental Laws or (ii) the date specified in a
written notice from Landlord to Tenant terminating this Lease.
(f) If Tenant fails to comply with any requirement of any
Environmental Law in connection with any Environmental Violation which occurs
or is found to exist within thirty (30) days of Tenant's notice thereof or
fails to commence to cure any such non-compliance within such thirty (30) day
period (or, in each case, within such shorter period as may be required under
applicable Law) and thereafter diligently pursue such cure to completion,
Landlord shall have the right (but no obligation) to take any and all actions
as Landlord shall deem necessary or advisable in order to cure such
Environmental Violation.
(g) Tenant shall notify Landlord promptly after becoming aware of
any Environmental Violation (or alleged Environmental Violation) or
noncompliance with any of the covenants contained in this Paragraph 10 and
shall forward to Landlord promptly upon receipt thereof copies of all orders,
reports, notices, permits, applications or other communications relating to
any such violation or noncompliance.
(h) [Intentionally deleted].
11. LIENS; RECORDING.
(a) Tenant shall not, directly or indirectly, create or permit to be
created or to remain and shall promptly discharge or remove any lien, levy or
encumbrance on any of the Leased Premises or on any Rent or any other sums
payable by Tenant under this Lease, other than any Mortgage or Assignment,
the Permitted Encumbrances and any mortgage, lien, encumbrance or other
charge created by or resulting solely from any act or omission of Landlord.
NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE
HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND
THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE
LEASED PREMISES. LANDLORD MAY AT ANY REASONABLE TIME POST ANY NOTICES ON THE
LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD.
(b) Tenant shall execute, deliver and record, file or register
(collectively, "RECORD") all such instruments as may be required or permitted
by any present or future Law in order to evidence the respective interests of
Landlord and Tenant in any of the Leased Premises, and shall cause a
memorandum of this Lease substantially in the form of EXHIBIT H annexed
hereto (or, if such a memorandum cannot be recorded, this Lease), and any
supplement hereto or thereto, to be recorded in such manner and in such
places as may be required or permitted by any present or future Law in order
to protect the validity and priority of this Lease.
12. MAINTENANCE AND REPAIR.
(a) Tenant shall at all times maintain each Related Premises and the
Adjoining Property in as good repair and appearance as each is in on the date
hereof, reasonable wear and tear excepted, and fit to be used for their
intended use in accordance with the better of
-14-
<PAGE>
the practices generally recognized as then acceptable by other companies in
its industry or observed by Tenant with respect to the other real properties
owned or operated by it, and, in the case of the Equipment, in as good
mechanical condition as it was on the later of the date hereof or the date of
its installation, except for ordinary wear and tear. Tenant shall take every
other action necessary or appropriate for the preservation and safety of each
Related Premises. Tenant shall promptly make all Alterations of every kind
and nature, whether foreseen or unforeseen, which may be required to comply
with the foregoing requirements of this Paragraph 12(a). Landlord shall not
be required to make any Alteration, whether foreseen or unforeseen, or to
maintain any of the Related Premises or Adjoining Property in any way, and
Tenant hereby expressly waives any right which may be provided for in any Law
now or hereafter in effect to make Alterations at the expense of Landlord or
to require Landlord to make Alterations. Any Alteration made by Tenant
pursuant to this Paragraph 12 shall be made in conformity with the provisions
of Paragraph 13.
(b) If any Improvement, now or hereafter constructed, shall (i)
encroach upon any setback or any property, street or right-of-way adjoining
any of the Leased Premises, (ii) violate the provisions of any restrictive
covenant affecting any of the Leased Premises, (iii) hinder or obstruct any
easement or right-of-way to which any of the Leased Premises is subject or
(iv) impair the rights of others in, to or under any of the foregoing, Tenant
shall, promptly after receiving notice or otherwise acquiring knowledge
thereof, either (A) obtain from all necessary parties waivers or settlements
of all claims, liabilities and damages resulting from each such encroachment,
violation, hindrance, obstruction or impairment, whether the same shall
affect Landlord, Tenant or both, or (B) take such action as shall be
necessary to remove all such encroachments, hindrances or obstructions and to
end all such violations or impairments, including, if necessary, making
Alterations.
13. ALTERATIONS AND IMPROVEMENTS.
(a) Tenant shall have the right, without having obtained the prior
written consent of Landlord and Lender, to make (i) Alterations or a series
of related Alterations that, as to any such Alterations or series of related
Alterations, do not cost in excess of $250,000 for any one Related Premises
(or $1,500,000 in the aggregate) and (ii) to install Equipment in the
Improvements or accessions to the Equipment that, as to such Equipment or
accessions, do not cost in excess of $250,000 for any one Related Premises
(or $1,500,000 in the aggregate), so long as at the time of construction or
installation of any such Equipment or Alterations no Event of Default exists
and the value and utility of the Leased Premises is not diminished thereby.
If the cost of any Alterations, series of related Alterations, Equipment or
accessions thereto is in excess of $250,000 for any one Related Premises (or
$1,500,000 in the aggregate), the prior written approval of Landlord and
Lender shall be required, such approval not to be unreasonably withheld,
delayed or conditioned. Tenant shall not construct upon the Land any
additional buildings without having first obtained the prior written consent
of Landlord and Lender, which consent shall not be unreasonably withheld,
delayed or conditioned.
(b) If Tenant makes any Alterations pursuant to this Paragraph 13 or
Paragraph 36 hereof or as required by Paragraph 12 or 17 hereof (such
Alterations and actions being hereinafter collectively referred to as
"WORK"), then (i) the market value of the Leased Premises or any Related
Premises shall not be materially lessened by any such Work or its usefulness
impaired, (ii) all such Work shall be performed by Tenant in a good and
workmanlike manner, (iii) all such Work shall be expeditiously completed in
compliance with all Legal Requirements, (iv) all such Work shall comply with
the requirements of all insurance policies required to be maintained by
Tenant hereunder, (v) if any such Work involves the replacement of Equipment
or parts thereto, all replacement Equipment or parts shall have a value and
useful life equal to the greater of (A) the value and useful life on the date
hereof of the Equipment being replaced or (B) the value and useful life of
the Equipment being replaced immediately prior to
-15-
<PAGE>
the occurrence of the event which required its replacement (assuming such
Replaced Equipment was then in the condition required by this Lease), (vi)
Tenant shall promptly discharge or remove all liens filed against any of the
Leased Premises arising out of such Work, (vii) Tenant shall procure and pay
for all permits and licenses required in connection with any such Work,
(viii) all such Work shall be the property of Landlord and shall be subject
to this Lease, and Tenant shall execute and deliver to Landlord any document
requested by Landlord evidencing the assignment to Landlord of all estate,
right, title and interest (other than the leasehold estate created hereby) of
Tenant or any other Person thereto or therein, and (ix) Tenant shall comply,
to the extent requested by Landlord or required by this Lease, with the
provisions of Paragraphs 12(a) and 19(a), whether or not such Work involves
restoration of the Leased Premises.
14. PERMITTED CONTESTS. Notwithstanding any other provision of this
Lease, Tenant shall not be required to (a) pay any Imposition, (b) discharge
or remove any lien referred to in Paragraph 11 or 13 or (c) take any action
with respect to any encroachment, violation, hindrance, obstruction or
impairment referred to in Paragraph 12(b) (such non-compliance with the terms
hereof being hereinafter referred to collectively as "PERMITTED VIOLATIONS"),
so long as at the time of such non-compliance no Event of Default exists and
so long as Tenant shall contest, in good faith, the existence, amount or
validity thereof, the amount of the damages caused thereby, or the extent of
its or Landlord's liability therefor by appropriate proceedings which shall
operate during the pendency thereof to prevent or stay (i) the collection of,
or other realization upon, the Permitted Violation so contested, (ii) the
sale, forfeiture or loss of any of the Leased Premises or any Rent to satisfy
or to pay any damages caused by any Permitted Violation, (iii) any
interference with the use or occupancy of any of the Leased Premises, (iv)
any interference with the payment of any Rent, or (v) the cancellation or
increase in the rate of any insurance policy or a statement by the carrier
that coverage will be denied. Tenant shall provide Landlord security which
is satisfactory, in Landlord's reasonable judgment, to assure that such
Permitted Violation is corrected, including all Costs, interest and penalties
that may be incurred or become due in connection therewith. While any
proceedings which comply with the requirements of this Paragraph 14 are
pending and the required security is held by Landlord, Landlord shall not
have the right to correct any Permitted Violation thereby being contested
unless Landlord is required by law to correct such Permitted Violation and
Tenant's contest does not prevent or stay such requirement as to Landlord.
Each such contest shall be promptly and diligently prosecuted by Tenant to a
final conclusion, except that Tenant, so long as the conditions of this
Paragraph 14 are at all times complied with, has the right to attempt to
settle or compromise such contest through negotiations. Tenant shall pay any
and all losses, judgments, decrees and Costs in connection with any such
contest and shall, promptly after the final determination of such contest,
fully pay and discharge the amounts which shall be levied, assessed, charged
or imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interest and Costs thereof or in
connection therewith, and perform all acts the performance of which shall be
ordered or decreed as a result thereof. No such contest shall subject
Landlord to the risk of any civil or criminal liability.
15. INDEMNIFICATION.
(a) Tenant shall pay, protect, indemnify, defend, save and hold
harmless Landlord, Lender and all other Persons described in Paragraph 30
(a), (b) and (c) and the Persons identified parenthetically in Paragraph 30
(d) (each of the foregoing, an "INDEMNITEE") from and against any and all
liabilities, losses, damages, penalties, Costs (including reasonable
attorneys' fees and costs), causes of action, suits, claims, demands or
judgments of any nature whatsoever, howsoever caused, without regard to the
form of action and whether based on strict liability, negligence or any other
theory of recovery at law or in equity, arising from (i) any matter
pertaining to the acquisition (or the negotiations leading thereto),
ownership, leasing, use, non-use, occupancy, operation, management,
condition, design, construction, maintenance, repair or restoration of any
of the Leased Premises or Adjoining
-16-
<PAGE>
Property, except to the extent caused by the gross negligence or willful
misconduct of Landlord, (ii) any casualty in any manner arising from any of
the Leased Premises or Adjoining Property, whether or not Indemnitee has or
should have knowledge or notice of any defect or condition causing or
contributing to said casualty, (iii) any violation by Tenant of any provision
of this Lease or the Mortgage or Assignment, or any contract or agreement to
which Tenant is a party, any Legal Requirement, or any Permitted Encumbrance,
or any encumbrance consented to by Tenant, (iv) any alleged, threatened or
actual Environmental Violation, including (A) liability for response costs
and for costs of removal and remedial action incurred by the United States
Government, any state or local governmental unit or any other Person, or
damages from injury to or destruction or loss of natural resources, including
the reasonable costs of assessing such injury, destruction or loss, incurred
pursuant to Section 107 of CERCLA, or any successor section or act or
provision of any similar state or local Law, (B) liability for costs and
expenses of abatement, correction or clean-up, fines, damages, response costs
or penalties which arise from the provisions of any of the other
Environmental Laws and (C) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying
on of a dangerous activity, except to the extent caused by the gross
negligence or willful misconduct of Landlord.
(b) In case any action or proceeding is brought against any
Indemnitee by reason of any such claim, (i) Tenant may, except in the event
of a conflict of interest between Tenant and any such Indemnitee or during
the continuance of an Event of Default, retain its own counsel and defend
such action (it being understood that Landlord may employ counsel of its
choice to monitor the defense of any such action) and (ii) such Indemnitee
shall notify Tenant to resist or defend such action or proceeding by
retaining counsel reasonably satisfactory to such Indemnitee, and such
Indemnitee will cooperate and assist in the defense of such action or
proceeding if reasonably requested to do so by Tenant. In the event of a
conflict of interest or dispute or during the continuance of an Event of
Default, Landlord shall have the right to select counsel, and the reasonable
cost of such counsel shall be paid by Tenant.
(c) The obligations of Tenant under this Paragraph 15 shall survive
any termination, expiration or rejection in bankruptcy of this Lease.
16. INSURANCE.
(a) Tenant shall maintain the following insurance on or in
connection with the Leased Premises:
(i) Insurance against physical loss or damage to the
Improvements and Equipment as provided under a standard "All Risk" property
policy including but not limited to flood (to the extent that a Related
Premises is in a flood zone) and earthquake coverage (to the extent a Related
Premises is in an earthquake zone) in amounts not less than the actual
replacement cost of the Improvements and Equipment. Such policies shall
contain "Replacement Cost" and "Agreed Amount" endorsements and shall contain
deductibles not more than $50,000 per occurrence.
(ii) Commercial General Liability Insurance (including but not
limited to Incidental Medical Malpractice and Host Liquor Liability) and
Business Automobile Liability Insurance (including Non-Owned and Hired
Automobile Liability) against claims for personal and bodily injury, death or
property damage occurring on, in or as a result of the use of the Leased
Premises, in an amount not less than $15,000,000 per occurrence/annual
aggregate and all other coverage extensions that are usual and customary for
properties of this size and type provided, however, that the Landlord shall
have the right to require such higher limits as may be reasonable and
customary for properties of this size and type.
-17-
<PAGE>
(iii) Worker's compensation insurance covering all persons
employed by Tenant in connection with any work done on or about any of the
Leased Premises for which claims for death, disease or bodily injury may be
asserted against Landlord, Tenant or any of the Leased Premises or, in lieu
of such Worker's Compensation Insurance, a program of self-insurance
complying with the rules, regulations and requirements of the appropriate
agency of the State or States in which the Leased Premises are located.
(iv) Comprehensive Boiler and Machinery Insurance on any of the
Equipment or any other equipment on or in the Leased Premises in an amount
not less than $15,000,000 per accident for damage to property. Such policies
shall include at least $2,500,000 per incidence for Off-Premises Service
Interruption, Expediting Expenses, Ammonia Contamination, and Hazardous
Materials Clean-up Expense and may contain a deductible not to exceed $50,000.
(v) Business Interruption and Extra Expense Insurance at limits
to cover 100% of losses and/or expenses incurred over the period of indemnity
not less than one year from time of loss. Such insurance shall name Landlord
as loss payee solely with respect to Rent payable to or for the benefit of
the Landlord under this Lease.
(vi) During any period in which substantial Alterations at any
Related Premises are being undertaken, builder's risk insurance covering the
total completed value including any "soft costs" with respect to the
Improvements being altered or repaired (on a completed value, non-reporting
basis), replacement cost of work performed and equipment, supplies and
materials furnished in connection with such construction or repair of
Improvements or Equipment, together with such "soft cost" endorsements and
such other endorsements as Landlord may reasonably require and general
liability, worker's compensation and automobile liability insurance with
respect to the Improvements being constructed, altered or repaired.
(vii) Such other insurance (or other terms with respect to any
insurance required pursuant to this Paragraph 16, including without
limitation amounts of coverage, deductibles, form of mortgagee clause) on or
in connection with any of the Leased Premises as Landlord or Lender may
reasonably require, which at the time is usual and commonly obtained in
connection with properties similar in type of building size, use and location
to the Leased Premises.
(b) The insurance required by Paragraph 16(a) shall be written by
companies which have a Best's rating of A:X or above and are admitted in, and
approved to write insurance policies by, the State Insurance Department for
the states in which the Leased Premises are located. The insurance policies
(i) shall be for such terms as Landlord may reasonably approve and (ii) shall
be in amounts sufficient at all times to satisfy any coinsurance requirements
thereof. The insurance referred to in Paragraphs 16(a)(i), 16(a)(iv) and
16(a)(vi) shall name Landlord as Owner and Lender as loss payee and Tenant as
its interest may appear. The insurance referred to in Paragraph 16(a)(ii)
shall name Landlord and Lender as additional insureds, and the insurance
referred to in Paragraph 16(a)(v) shall name Landlord as insured and Lender
and Landlord as loss payee. If said insurance or any part thereof shall
expire, be withdrawn, become void, voidable, unreliable or unsafe for any
reason, including a breach of any condition thereof by Tenant or the failure
or impairment of the capital of any insurer, or if for any other reason
whatsoever said insurance shall become reasonably unsatisfactory to Landlord,
Tenant shall immediately obtain new or additional insurance reasonably
satisfactory to Landlord.
(c) Each insurance policy referred to in clauses (i), (iv), (v) and
(vi) of Paragraph 16(a) shall contain standard non-contributory mortgagee
clauses in favor of and reasonably acceptable to Lender. Each policy
required by any provision of Paragraph 16(a), except clause (iii) thereof,
shall provide that it may not be canceled except after sixty (60) days'
-18-
<PAGE>
prior notice to Landlord and Lender. Each such policy shall also provide
that any loss otherwise payable thereunder shall be payable notwithstanding
(i) any act or omission of Landlord or Tenant which might, absent such
provision, result in a forfeiture of all or a part of such insurance payment,
(ii) the occupation or use of any of the Leased Premises for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage, Note, Assignment or other document evidencing or
securing the Loan upon the happening of an event of default therein or (iv)
any change in title to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for the
insurance required by Paragraph 16(a), shall renew or replace each policy and
deliver to Landlord evidence of the payment of the full premium therefor or
installment then due at least thirty (30) days prior to the expiration date
of such policy, and shall promptly deliver to Landlord all original
certificates of insurance.
(e) Anything in this Paragraph 16 to the contrary notwithstanding,
any insurance which Tenant is required to obtain pursuant to Paragraph 16(a)
may be carried under a "blanket" or umbrella policy or policies covering
other properties or liabilities of Tenant, provided that such "blanket" or
umbrella policy or policies otherwise comply with the provisions of this
Paragraph 16 and provided further that Tenant shall provide to Landlord a
"Statement of Values" which shall be reviewed annually and amended as
necessary based on "Replacement Cost Valuations". The original or a
certified copy of each such "blanket" or umbrella policy shall promptly be
delivered to Landlord.
(f) Tenant shall have the replacement cost and insurable value of
the Improvements and Equipment determined from time to time as required by
the replacement cost and agreed amount endorsements and shall deliver to
Landlord the new replacement cost and agreed amount endorsement or
certificate evidencing such endorsement promptly upon Tenant's receipt
thereof.
(g) Tenant shall promptly comply with and conform to (i) all
provisions of each insurance policy required by this Paragraph 16 and (ii)
all requirements of the insurers thereunder applicable to Landlord, Tenant or
any of the Leased Premises or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration or repair of any of the Leased
Premises, even if such compliance necessitates Alterations or results in
interference with the use or enjoyment of any of the Leased Premises.
(h) Tenant shall not carry separate insurance concurrent in form or
contributing in the event of a Casualty with that required in this Paragraph
16 unless (i) Landlord and Lender are included therein as named insureds,
with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16. Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord the original policies or certified copies therefor.
(i) All policies shall contain effective waivers by the carrier
against all claims for insurance premiums against Landlord and shall contain
full waivers of subrogation against the Landlord and Tenant.
(j) All proceeds of any insurance required under Paragraph 16(a)
shall be payable as follows:
(i) Except for proceeds payable to a Person other than
Landlord, Tenant or Lender, all proceeds of insurance required under clauses
(ii), (iv), (v) and (vii) of Paragraph 16(a) and proceeds attributable to the
general liability coverage provisions of Builder's
-19-
<PAGE>
Risk insurance under clause (vi) of Paragraph 16(a) shall be payable to
Landlord or, if required by the Mortgage, to Lender.
(ii) Proceeds of insurance required under clause (i) of
Paragraph 16(a) and proceeds attributable to Builder's Risk insurance (other
than its general liability coverage provisions) under clause (vi) of
Paragraph 16(a) shall be payable by Landlord (or Lender) and applied as set
forth in Paragraph 17. Tenant shall apply the Net Award to restoration of
the Leased Premises in accordance with the applicable provisions of this
Lease.
17. CASUALTY AND CONDEMNATION.
(a) If any Casualty to any of the Related Premises occurs, Tenant
shall give Landlord and Lender immediate notice thereof. So long as no Event
of Default shall have occurred and be continuing, Tenant is hereby authorized
to adjust, collect and compromise all claims under any of the insurance
policies required by Paragraph 16(a) (except public liability insurance
claims payable to a Person other than Tenant, Landlord or Lender) and to
execute and deliver on behalf of Landlord all necessary proofs of loss,
receipts, vouchers and releases required by the insurers and Landlord shall
have the right to join with Tenant therein. Any final adjustment, settlement
or compromise of any such claim shall be subject to the prior written
approval of Landlord (not to be unreasonably withheld, delayed or
conditioned) and Landlord shall have the right to prosecute or contest, or to
require Tenant to prosecute or contest, any such claim, adjustment,
settlement or compromise. If an Event of Default shall have occurred and be
continuing, Tenant shall not be entitled to adjust, collect or compromise any
such claim or to participate with Landlord in any adjustment, collection and
compromise of the Net Award payable in connection with a Casualty. Tenant
agrees to sign, upon the request of Landlord, all such proofs of loss,
receipts, vouchers and releases reasonably requested by Landlord. Each
insurer is hereby authorized and directed to make payment under said policies
(subject to the provisions of Paragraph 17(c) and Paragraph 19 hereof)
directly to Landlord or, if required by the Mortgage, to Lender instead of to
Landlord and Tenant jointly. The rights of Landlord under this Paragraph
17(a) shall be extended to Lender if and to the extent that any Mortgage so
provides.
(b) Tenant, immediately upon receiving a Condemnation Notice, shall
notify Landlord and Lender thereof. So long as no Event of Default shall
have occurred and be continuing, Tenant is authorized to collect, settle and
compromise the amount of any Net Award and Landlord shall have the right to
join with Tenant herein. If an Event of Default exists, Landlord shall be
authorized to collect, settle and compromise the amount of any Net Award and
Tenant shall not be entitled to participate with Landlord in any Condemnation
proceeding or negotiations under threat thereof or to contest the
Condemnation or the amount of the Net Award therefor. No agreement with any
condemnor in settlement or under threat of any Condemnation shall be made by
Tenant without the written consent of Landlord (not to be unreasonably
withheld, delayed or conditioned). Subject to the provisions of this
Paragraph 17(b), Tenant hereby irrevocably assigns to Landlord any award or
payment to which Tenant is or may be entitled by reason of any Condemnation,
whether the same shall be paid or payable for Tenant's leasehold interest
hereunder or otherwise; but nothing in this Lease shall impair Tenant's right
to any award or payment on account of Tenant's trade fixtures, equipment or
other tangible property which is not part of the Equipment, moving expenses
or loss of business, if available, to the extent that and so long as (i)
Tenant shall have the right to make, and does make, a separate claim therefor
against the condemnor and (ii) such claim does not in any way reduce either
the amount of the award otherwise payable to Landlord for the Condemnation of
Landlord's fee interest in the Leased Premises or the amount of the award (if
any) otherwise payable for the Condemnation of Tenant's leasehold interest
hereunder. The rights of Landlord under this Paragraph 17(b) shall also be
extended to Lender if and to the extent that any Mortgage so provides.
-20-
<PAGE>
(c) If any Partial Casualty (whether or not insured against) or
Partial Condemnation shall occur to any Related Premises, this Lease shall
continue, notwithstanding such event, and there shall be no abatement or
reduction of any Monetary Obligations; provided that, to the extent Landlord
receives the proceeds of any business interruption insurance, Tenant shall be
entitled to an appropriate reduction or total abatement of Basic Rent, as
applicable. Promptly after such Partial Casualty or Partial Condemnation,
Tenant, as required in Paragraph 12(a), shall commence and diligently
continue to restore the Leased Premises as nearly as possible to their value,
condition and character immediately prior to such event (assuming the Leased
Premises to have been in the condition required by this Lease). So long as
no Event of Default shall have occurred and be continuing, any Net Award up
to and including $250,000 per Related Premises shall be paid by Landlord to
Tenant and Tenant shall restore the Leased Premises in accordance with the
requirements of Paragraph 13(b) of this Lease. Any Net Award in excess of
$250,000 per Related Premises shall (unless such Casualty resulting in the
Net Award is a Termination Event) be made available by Landlord (or Lender if
the terms of the Mortgage require disbursement to Lender, to be held and
disbursed in accordance with the provisions of Paragraph 19 hereof) to Tenant
for the restoration of any of the Leased Premises pursuant to and in
accordance with and subject to the provisions of Paragraph 19 hereof. If any
Casualty or Condemnation which is not a Partial Casualty or Partial
Condemnation shall occur, Tenant shall comply with the terms and conditions
of Paragraph 18.
18. TERMINATION EVENTS.
(a) If (i) all of any Related Premises shall be taken by a
Taking or (ii) any substantial portion of any Related Premises shall be taken by
a Taking or all or any substantial portion of any Related Premises shall be
totally damaged or destroyed by a Casualty and, in any such case, Tenant elects
(instead of restoring the Related Premises) to send a notice to Landlord that
certifies and covenants to Landlord that it will forever abandon operations at
the Related Premises, (any one or all of the Related Premises described in the
above clauses (i) and (ii) above being hereinafter referred to as the "AFFECTED
PREMISES" and each of the events described in the above clauses (i) and (ii)
shall hereinafter be referred to as a "TERMINATION EVENT"), then (x) in the case
of (i) above, Tenant shall be obligated, within thirty (30) days after Tenant
receives a Condemnation Notice and (y) in the case of (ii) above, Tenant shall
have the option, within thirty (30) days after Tenant receives a Condemnation
Notice or thirty (30) days after the Casualty, as the case may be, to give to
Landlord written notice (a "TERMINATION NOTICE") of the Tenant's option to
terminate this Lease as to the Affected Premises in the form described in
Paragraph 18(b).
(b) A Termination Notice shall contain (i) notice of Tenant's
intention to terminate this Lease as to the Affected Premises on the first Basic
Rent Payment Date which occurs at least thirty (30) days after the date of the
Termination Notice (the "TERMINATION DATE"), (ii) a binding and irrevocable
offer of Tenant to pay the Termination Amount and (iii) if the Termination Event
is an event described in Paragraph 18(a)(ii), the certification and covenant
described therein and a certified resolution of the Board of Directors of Tenant
authorizing the same.
(c) If Landlord shall reject such offer to terminate this Lease
as to the Affected Premises by written notice to Tenant (a "REJECTION"), which
Rejection must contain the written consent of Lender if a Lender exists, not
later than thirty (30) days following the date Landlord receives the Termination
Notice, then this Lease shall terminate as to the Affected Premises on the
Termination Date; provided that, if Tenant has not satisfied all Monetary
Obligations and all other obligations and liabilities under this Lease which
have arisen as to the Affected Premises (collectively, "REMAINING OBLIGATIONS")
on or prior to the Termination Date, then Landlord may, at its option, extend
the date on which this Lease may terminate as to the Affected Premises to a date
which is no later than the date on which Tenant has satisfied all
-21-
<PAGE>
Remaining Obligations. Upon such termination (i) all obligations of Tenant
hereunder as to the Affected Premises shall terminate except for any Surviving
Obligations, (ii) Tenant shall immediately vacate and shall have no further
right, title or interest in or to any of the Affected Premises and (iii) the
Net Award shall be retained by Landlord. Notwithstanding anything to the
contrary hereinabove contained, if Tenant shall have received a Rejection and,
on the date when this Lease would otherwise terminate as provided above,
Landlord, through no fault of its own, shall not have received the full amount
of the Net Award payable by reason of the applicable Termination Event, then
the date on which this Lease is to terminate automatically shall be extended to
date of the receipt by Landlord of the full amount of the Net Award provided
that, if Tenant has not satisfied all Remaining Obligations on such date, then
Landlord may, at its option, extend the date on which this Lease may terminate
to a date which is no later than the date on which Tenant has satisfied all
such Remaining Obligations.
(d) Unless Tenant shall have received a Rejection not later than
the thirtieth (30th) day following the date Landlord receives the Termination
Notice, Landlord shall be conclusively presumed to have accepted such offer. If
such offer is accepted by Landlord then, on the Termination Date, Tenant shall
pay to Landlord the Termination Amount and all Remaining Obligations and, if
requested by Tenant, Landlord shall convey to Tenant or its designee, together
with the Net Award, the Affected Premises or the remaining portion thereof, if
any, all in accordance with Paragraph 20.
(e) In the event of the termination of this Lease as to the
Affected Premises as hereinabove provided, this Lease shall remain in full force
and effect as to the Remaining Premises; provided, that the Basic Rent for the
Remaining Premises to be paid after such termination shall be the Basic Rent
otherwise payable hereunder with respect to the Leased Premises multiplied by a
percentage equal to the sum of the percentages set forth on EXHIBIT "F" for the
Remaining Premises.
19. RESTORATION.
(a) Landlord (or Lender if required by any Mortgage) shall hold
any Net Award in excess of $250,000 in a fund (the "RESTORATION FUND") and
disburse amounts from the Restoration Fund only in accordance with the following
conditions:
(i) prior to commencement of restoration, (A) the architects,
contracts, contractors, plans and specifications for the restoration shall have
been approved by Landlord, which approval shall not be unreasonably withheld,
delayed or conditioned, (B) Landlord and Lender shall be provided with
mechanics' lien insurance (if available) and (C) if permitted by applicable Law,
appropriate waivers of mechanics' and materialmen's liens shall have been filed;
(ii) at the time of any disbursement, no Event of Default shall
exist and no mechanics' or materialmen's liens shall have been filed against any
of the Leased Premises and remain undischarged;
(iii) disbursements shall be made from time to time in an
amount not exceeding the cost of the work completed since the last disbursement,
upon receipt of (A) reasonably satisfactory evidence, including architects'
certificates, of the stage of completion, the estimated total cost of completion
and performance of the work to date in a good and workmanlike manner in
accordance with the contracts, plans and specifications, (B) waivers of liens,
(C) contractors' and subcontractors' sworn statements as to completed work and
the cost thereof for which payment is requested, (D) a reasonably satisfactory
bring down of title insurance and (E) other reasonably satisfactory evidence of
cost and payment so that Landlord
-22-
<PAGE>
and Lender can verify that the amounts disbursed from time to time are
represented by work that is completed, in place and free and clear of
mechanics' and materialmen's lien claims;
(iv) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the president or a vice president of Tenant,
describing the work for which payment is requested, stating the cost incurred
in connection therewith, stating that Tenant has not previously received
payment for such work and, upon completion of the work, also stating that the
work has been fully completed and complies with the applicable requirements
of this Lease;
(v) Landlord may retain ten percent (10%) of the Restoration
Fund until the restoration is fully completed;
(vi) the Restoration Fund shall not be commingled with
Landlord's other funds and shall bear interest at a rate agreed to by
Landlord and Tenant; and
(vii) such other reasonable conditions as Landlord or Lender
may impose provided same are consistent with prudent commercial lending
practices in the area where the Affected Premises are located.
(b) Prior to commencement of restoration and at any time during
restoration, if the estimated cost of completing the restoration work free and
clear of all liens, as determined by Landlord, exceeds the amount of the Net
Award available for such restoration, the amount of such excess shall, upon
demand by Landlord, be paid by Tenant to Landlord to be added to the Restoration
Fund; provided, that if (i) Tenant shall provide evidence reasonably
satisfactory to Landlord as to the availability and earmarking of funds equal to
the amount of such excess for the purpose of completing such restoration and
(ii) Tenant's creditworthiness at the time in question is reasonably acceptable
to Landlord, then Tenant shall be permitted to hold such funds in its own
account for such purpose and to draw upon such funds as and when needed. Any
sum so added by Tenant which remains in the Restoration Fund upon completion of
restoration shall be refunded to Tenant. For purposes of determining the source
of funds with respect to the disposition of funds remaining after the completion
of restoration, the Net Award shall be deemed to be disbursed prior to any
amount added by Tenant. If any sum remains in the Restoration Fund after
completion of the restoration and any refund to Tenant pursuant to this
subparagraph (b), such remaining sum shall be paid to Tenant or, if required by
a Note or Mortgage, paid by Landlord to the Lender and, if so paid to the
Lender, Basic Rent hereunder shall be equitably adjusted to the extent of (and
to reflect any reduction in debt service as a result of) the reamortization, if
any, of the Loan.
20. PROCEDURES UPON PURCHASE.
(a) If the Leased Premises or any of the Related Premises are
purchased by Tenant pursuant to any provision of this Lease, Landlord need not
convey any better title thereto than that which was conveyed to Landlord, and
Tenant or its designee shall accept such title, subject, however, to the
Permitted Encumbrances and to all other liens, exceptions and restrictions on,
against or relating to any of the Leased Premises or the applicable Related
Premises and to all applicable Laws, but free of the lien of and security
interest created by any Mortgage or Assignment and liens, exceptions and
restrictions on, against or relating to the Leased Premises or the applicable
Related Premises which have been created by or resulted solely from acts of
Landlord after the date of this Lease, unless the same are Permitted
Encumbrances or customary utility easements benefiting the Leased Premises or
were created with the concurrence of Tenant.
-23-
<PAGE>
(b) Upon the date fixed for any such purchase of the Leased
Premises or any of the Related Premises pursuant to any provision of this
Lease (any such date the "PURCHASE DATE"), Tenant shall pay to Landlord, or
to any Person to whom Landlord directs payment, the Relevant Amount therefor
specified herein, in Federal Funds, less any credit of the Net Award received
and retained by Landlord or a Lender allowed against the Relevant Amount, and
Landlord shall deliver to Tenant (i) a special warranty deed which describes
the premises being conveyed and conveys the title thereto as provided in
Paragraph 20(a), (ii) such other instruments as shall be necessary to
transfer to Tenant or its designee any other property (or rights to any Net
Award not yet received by Landlord or a Lender) then required to be sold by
Landlord to Tenant pursuant to this Lease and (iii) any Net Award received by
Landlord, not credited to Tenant against the Relevant Amount and required to
be delivered by Landlord to Tenant pursuant to this Lease; provided, that if
any Monetary Obligations remain outstanding on such date, then Landlord may
deduct from the Net Award the amount of such Monetary Obligations. If on the
Purchase Date any Monetary Obligations remain outstanding and no Net Award is
payable to Tenant by Landlord or the amount of such Net Award is less than
the amount of the Monetary Obligations, then Tenant shall pay to Landlord on
the Purchase Date the amount of such Monetary Obligations. Upon the
completion of such purchase, this Lease and all obligations and liabilities
of Tenant hereunder with respect to the applicable Related Premises (but not
with respect to the Remaining Premises) shall terminate, except any Surviving
Obligations.
(c) If the completion of such purchase shall be delayed after
(i) the Termination Date or (ii) such other date scheduled for such purchase,
then (x) Rent shall continue to be due and payable until completion of such
purchase and (y) with respect to a purchase resulting from the occurrence of
an Event of Default, at Landlord's sole option, Fair Market Value shall be
redetermined and the Relevant Amount payable by Tenant pursuant to the
applicable provision of this Lease shall be adjusted to reflect such
redetermination.
(d) Any prepaid Monetary Obligations paid to Landlord shall be
prorated as of the Purchase Date, and the prorated unapplied balance shall be
deducted from the Relevant Amount due to Landlord; provided, that no
apportionment of any Impositions shall be made upon any such purchase.
21. ASSIGNMENT AND SUBLETTING; PROHIBITION AGAINST LEASEHOLD
FINANCING.
(a) Tenant shall have the right, upon thirty (30) days prior
written notice to Landlord and Lender, with no consent of Landlord or Lender
being required or necessary ("Preapproved Assignment") to assign this Lease,
whether by operation of law of otherwise, to any Person ("Preapproved
Assignee") that immediately following such assignment will have a publicly
traded unsecured senior debt rating of Baa2 or better from Moody's Investors
Services, Inc. or a rating of "BBB" or better from Standard & Poor's
Corporation and in the event all of such rating agencies cease to furnish
such ratings, then a comparable rating by any rating agency reasonably
acceptable to Landlord and Lender. Upon any assignment to a Preapproved
Assignee and compliance by the Preapproved Assignee with the provisions of
Paragraph 21(c), the Tenant shall be released from all of its rights
obligations and liabilities hereunder except for Surviving Obligations.
(b) If Tenant (or either of them) desires to assign this Lease
or its interest hereunder, whether by operation of law of otherwise (a
"Non-approved Assignment") to a Person who would not be a Preapproved
Assignee (a "Non-Preapproved Assignee"), then Tenant shall, not less than
thirty (30) days prior to the date on which it desires to make a
Non-Preapproved Assignment, submit to Landlord and Lender information
regarding the following with respect to the Non-Preapproved Assignee
(collectively, the "Review Criteria"): (A) credit; (B) capital structure
(e.g., debt to equity ratio and fixed charges coverage ratio), (C)
-24-
<PAGE>
management, (D) operating history, (E) proposed use of the Leased Premises
and (F) risk factors associated with the proposed use of the Leased Premises by
the Non-Preapproved Assignee, taking into account factors such as environmental
concerns, product liability and the like. Landlord (and Lender to the extent
required under the applicable Loan documents) shall review such information and
shall approve or disapprove the Non-Preapproved Assignee no later than the
fifteenth (15) day following receipt of all such information, and Landlord and
Lender shall be deemed to have acted reasonably in granting or withholding
consent if such grant or disapproval is based on their review of the Review
Criteria applying prudent business judgment.
(c) If Landlord or Lender withhold consent to the
Non-Preapproved Assignment in accordance with the provisions of Paragraph 21
(b) above and Tenant desires to complete the Non-Preapproved Assignment,
Tenant shall make a rejectable offer (the "Intended Assignment Offer") to
purchase the Leased Premises for a purchase price equal to the Offer Amount
and to consummate the purchase on the first Basic Rent Payment Date occurring
after the determination of Fair Market Value (the "Intended Assignment
Purchase Date"). Notwithstanding the foregoing, if the Intended Assignment
Offer is accepted by Landlord and the Non-Preapproved Assignment occurs on a
date (the "Assignment Date") that is prior to the Intended Assignment
Purchase Date, then, no later than the Assignment Date, Tenant shall deposit
in escrow with Landlord an amount (the "Deposit Amount") equal to one hundred
percent (100%) of the sum of the Acquisition Cost and any Prepayment Premium
in the form of cash or an irrevocable letter or credit issued by a bank, and
in form and substance, acceptable to Landlord. The Deposit Amount shall be
held by and invested by Landlord and the Deposit Amount, together with any
interest earned thereon, shall be applied on the Intended Assignment Purchase
Date to payment of the Offer Amount.
(d) If Landlord shall reject the Intended Assignment Offer by
notice to Tenant, such notice to contain the written consent of Lender to
such rejection, no later than the thirtieth (30th) day following receipt of
the Intended Assignment Offer by Landlord, then this Lease shall remain in
full force and effect and Landlord and Lender shall be deemed to have
consented to the Non-Preapproved Assignment. Nothing provided herein shall
constitute a waiver by Landlord of the obligation of Tenant to comply with
the requirements of this Paragraph 21 if a subsequent Non-Preapproved
Assignment arises. No rejection of the Intended Assignment Offer shall be
effective for any purpose unless consented to in writing by Lender.
(e) Unless Landlord shall have rejected the Intended Assignment
Offer by the foregoing notice to Tenant not later than the thirtieth (30th)
day following receipt of information described in the foregoing Paragraph
21(b), Landlord shall be conclusively presumed to have accepted the Intended
Assignment Offer. If the Intended Assignment Offer is accepted by Landlord,
Tenant shall pay to Landlord the Offer Amount (less the Deposit Amount and
interest thereon paid to Landlord) on the Intended Assignment Purchase Date
and, provided that no Rent or any other charge is due and unpaid under this
Lease as of the Intended Assignment Purchase Date and Tenant is otherwise in
compliance with the terms of this Lease, Landlord shall convey to Tenant the
Leased Premises in accordance with the provisions of Paragraph 20 of this
Lease.
(f) Tenant shall have the right, upon not less than thirty (30)
days prior written notice to Landlord and Lender, to enter into one or more
subleases that demise, in the aggregate, up to but not in excess of
twenty-five percent (25%) of the gross space in the Improvements with no
consent or approval of Landlord being required or necessary ("Preapproved
Sublet"). Other than pursuant to a Preapproved Sublet, no portion of the
Leased Premises shall be subleased during the Term to any other Person
without prior written consent of Landlord and Lender, which consent shall not
be unreasonably withheld or delayed, and which consent shall be granted or
withheld based on a review of the Review Criteria. Landlord and
-25-
<PAGE>
Lender shall be deemed to have acted reasonably in granting or withholding
consent if such grant or disapproval is based on their reasonable review of
the Review Criteria.
(g) If Tenant (or either of them) assigns all its rights and
interest under this Lease, the assignee under such assignment shall expressly
assume all the obligations of Tenant hereunder, actual or contingent,
including obligations of Tenant which may have arisen on or prior to the date
of such assignment, by a written instrument delivered to Landlord at the time
of such assignment. Each sublease of any of the Related Premises shall be
subject and subordinate to the provisions of this Lease. Except as provided
in Paragraph 21(a) above, no assignment or sublease shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as obligations of a principal and not as
obligations of a guarantor, as if no assignment or sublease had been made.
No assignment or sublease shall impose any additional obligations on Landlord
under this Lease.
(h) Tenant shall, within ten (10) days after the execution and
delivery of any assignment or sublease consented to by Landlord, deliver a
duplicate original copy thereof to Landlord which, in the event of an
assignment, shall be in recordable form.
(i) As security for performance of its obligations under this
Lease, Tenant hereby grants, conveys and assigns to Landlord all right, title
and interest of Tenant in and to all subleases now in existence or hereafter
entered into for any or all of the Leased Premises, any and all extensions,
modifications and renewals thereof and all rents, issues and profits
therefrom. Landlord hereby grants to Tenant a license to collect and enjoy
all rents and other sums of money payable under any sublease of any of the
Leased Premises, provided, however, that Landlord shall have the absolute
right at any time upon notice to Tenant and any subtenants or at any time
following the occurrence of an Event of Default to revoke said license and to
collect such rents and sums of money and to retain the same. Tenant shall
not consent to, cause or allow any modification or alteration of any of the
terms, conditions or covenants of any of the subleases or the termination
thereof, without the prior written approval of Landlord which consent shall
not be unreasonably withheld, conditioned or delayed except that any
modification, alteration, addition or termination shall be permitted without
the written approval of Landlord with respect to any Pre-Approved Sublet, so
long as the Review Criteria have not changed (and will not be changed, as a
result of any such modification, alteration, addition or termination) in any
material respect as to such Pre-Approved Sublet. Tenant shall not accept any
rents more than thirty (30) days in advance of the accrual thereof nor do nor
permit anything to be done, the doing of which, nor omit or refrain from
doing anything, the omission of which, will or could be a breach of or
default in the terms of any of the subleases.
(j) Tenant (or either of them) shall not have the power to
mortgage, pledge or otherwise encumber its interest under this Lease or any
sublease of any of the Related Premises, and any such mortgage, pledge or
encumbrance made in violation of this Paragraph 21 shall be void and of no
force and effect.
(k) Subject to the provisions of Paragraph 36 hereof, Landlord
may sell or transfer the Leased Premises at any time without Tenant's consent
to any third party (each a "THIRD PARTY PURCHASER"). In the event of any
such transfer, Tenant shall attorn to any Third Party Purchaser so long as
such Third Party Purchaser assumes Landlord's obligations under this Lease in
writing and provided that such Third Party Purchaser and Landlord notify
Tenant in writing of such transfer. At the request of Landlord, Tenant will
execute such documents confirming the agreement referred to above and such
other agreements as Landlord may reasonably request, provided that such
agreements do not increase the liabilities and obligations of Tenant
hereunder.
-26-
<PAGE>
22. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following (after
expiration of any applicable cure period as provided in Paragraph 22(b))
shall, at the sole option of Landlord, constitute an "EVENT OF DEFAULT"
under this Lease:
(i) a failure by Tenant (or either of them) to make any
payment of any Monetary Obligation, regardless of the reason for such
failure;
(ii) a failure by Tenant (or either of them) duly to
perform and observe, or a violation or breach of, any other provision hereof
not otherwise specifically mentioned in this Paragraph 22(a);
(iii) any representation or warranty made by Tenant (or
either of them) herein or in any certificate, demand or request made pursuant
hereto proves to be incorrect, now or hereafter, in any material respect;
(iv) a default beyond any applicable cure period or at
maturity by Tenant (or either of them) in any payment of principal or
interest on any obligations for borrowed money having an original principal
balance of $10,000,000 or more in the aggregate, or in the performance of any
other provision contained in any instrument under which any such obligation
is created or secured (including the breach of any covenant thereunder), (x)
if such payment is a payment at maturity or a final payment, or (y) if an
effect of such default is to cause such obligation to be declared due prior
to its stated maturity; provided that the foregoing shall not constitute an
Event of Default unless and until such obligee shall commence the exercise of
its remedies in connection therewith and Tenant shall not have, within thirty
(30) days thereafter (a) caused such obligation to be paid in full or (b)
cured such default or caused the original maturity date to be otherwise
reinstated;
(v) a default by Tenant (or either of them) beyond any
applicable cure period in the payment of rent under, or in the performance of
any other material provision of, any other lease or leases that have, in the
aggregate, rental obligations over the terms thereof of $10,000,000 or more
if the Landlord under any such lease or leases successfully completes the
exercise of any of its remedies thereunder;
(vi) [intentionally omitted],
(vii) Tenant (or either of them) shall (A) voluntarily be
adjudicated a bankrupt or insolvent, (B) seek or consent to the appointment
of a receiver or trustee for itself or for any of the Related Premises, (C)
file a petition seeking relief under the bankruptcy or other similar laws of
the United States, any state or any jurisdiction, (D) make a general
assignment for the benefit of creditors, or (E) be unable to pay its debts as
they mature;
(viii) a court shall enter an order, judgment or decree
appointing, without the consent of Tenant (or either of them), a receiver or
trustee for it or for any of the Related Premises or approving a petition
filed against Tenant (or either of them) which seeks relief under the
bankruptcy or other similar laws of the United States, any state or any
jurisdiction, and such order, judgment or decree shall remain undischarged or
unstayed sixty (60) days after it is entered;
(ix) Except as provided under Paragraph 37 hereof, any of
the Related Premises (a) shall have been abandoned or (b) shall have been
vacated; provided that, with respect to the 200 S. Jackson St. Premises, the
275 S. Jackson St. Premises or the 207 S. Jackson St. Premises, the foregoing
clause (b) shall not constitute an Event of Default if Tenant
-27-
<PAGE>
shall have given Landlord thirty (30) days prior notice of Tenant's intent to
vacate and shall have instituted appropriate security measures designed to
protect the applicable above Related Premises from theft and/or vandalism;
(x) Tenant (or either of them) shall be liquidated or
dissolved or shall begin proceedings towards its liquidation or dissolution;
(xi) the estate or interest of Tenant (or either of them)
in any of the Related Premises shall be levied upon or attached in any
proceeding and such estate or interest is about to be sold or transferred or
such process shall not be vacated or discharged within sixty (60) days after
it is made;
(xii) a failure by Tenant (or either of them) to perform or
observe, or a violation or breach of, or a misrepresentation by Tenant (or
either of them) under, any provision of any Assignment or any other document
between Tenant and Lender, if such failure, violation, breach or
misrepresentation gives rise to a default beyond any applicable cure period
with respect to any Loan; or
(xiii) Tenant shall fail to be in compliance with the
provisions of Exhibit G annexed hereto if an effect of such default is to
cause such underlying obligation to be declared due prior to its stated
maturity; provided that the foregoing shall not constitute an Event of
Default unless and until such obligee shall commence the exercise of its
remedies in connection therewith and Tenant shall not have, within thirty
(30) days thereafter (a) caused such underlying obligation to be paid in full
or (b) cured such default or caused the original maturity date to be
otherwise reinstated.
(b) No notice or cure period shall be required in any one or more
of the following events: (A) the occurrence of an Event of Default under
clause (i) (except as otherwise set forth below), (iii), (iv), (v), (vi),
(vii), (viii), (ix), (x), (xi), (xii) or (xiii) of Paragraph 22(a); (B) the
default consists of a failure to pay Basic Rent, a failure to provide any
insurance required by Paragraph 16 or an assignment or sublease entered into
in violation of Paragraph 21; or (C) the default is such that any delay in
the exercise of a remedy by Landlord could reasonably be expected to cause
irreparable harm to Landlord. If the default consists of the failure to pay
any Monetary Obligation under clause (i) of Paragraph 22(a), the applicable
cure period shall be three (3) days from the date on which notice is given,
but Landlord shall not be obligated to give notice of, or allow any cure
period for, any such default more than twice within any consecutive twelve
(12) month period. If the default consists of a default under clause (ii) of
Paragraph 22(a), other than the events specified in clauses (B) and (C) of
the first sentence of this Paragraph 22(b), the applicable cure period shall
be thirty (30) days from the date on which notice is given or, if the default
cannot be cured within such thirty (30) day period and delay in the exercise
of a remedy would not (in Landlord's reasonable judgment) cause any
irreparable harm to Landlord or any of the Leased Premises, the cure period
shall be extended for the period required to cure the default; provided that
Tenant shall commence to cure the default within the said thirty-day period
and shall actively, diligently and in good faith proceed with and continue
the curing of the default until it shall be fully cured.
-28-
<PAGE>
23. REMEDIES AND DAMAGES UPON DEFAULT.
(a) If an Event of Default shall have occurred and is continuing,
Landlord shall have the right, at its sole option, then or at any time
thereafter, to exercise its remedies and to collect damages from Tenant in
accordance with this Paragraph 23, subject in all events to applicable Law,
without demand upon or notice to Tenant except as otherwise provided in
Paragraph 22(b) and this Paragraph 23.
(i) Landlord may give Tenant notice of Landlord's intention
to terminate this Lease on a date specified in such notice. Upon such date,
this Lease, the estate hereby granted and all rights of Tenant hereunder
shall expire and terminate. Upon such termination, Tenant shall immediately
surrender and deliver possession of the Leased Premises to Landlord in
accordance with Paragraph 26. If Tenant does not so surrender and deliver
possession of all of the Leased Premises, Landlord may re-enter and repossess
any of the Leased Premises not surrendered, with or without legal process, by
peaceably entering any of the Leased Premises and changing locks or by
summary proceedings, ejectment or any other lawful means or procedure. Upon
or at any time after taking possession of any of the Leased Premises,
Landlord may, by peaceable means or legal process, remove any Persons or
property therefrom. Landlord shall be under no liability for or by reason of
any such entry, repossession or removal. Notwithstanding such entry or
repossession, Landlord may (A) exercise the remedy set forth in and collect
the damages permitted by Paragraph 23(a)(iii) or (B) collect the damages set
forth in Paragraph 23(b)(i) or 23(b)(ii).
(ii) After repossession of any of the Leased Premises
pursuant to clause (i) above, Landlord shall have the right to relet any of
the Leased Premises to such tenant or tenants, for such term or terms, for
such rent, on such conditions and for such uses as Landlord in its sole
discretion may determine, and collect and receive any rents payable by reason
of such reletting. Landlord may make such Alterations in connection with
such reletting as it may deem advisable in its sole discretion.
Notwithstanding any such reletting, Landlord may collect the damages set
forth in Paragraph 23(b)(ii).
(iii) Landlord may, upon notice to Tenant, require Tenant to
make an irrevocable offer to terminate this Lease in its entirety for an
amount (the "DEFAULT TERMINATION AMOUNT") specified in the next sentence.
The "Default Termination Amount" shall be the greatest of (A) the Fair Market
Value of the Leased Premises or (B) the sum of the Acquisition Cost and
Prepayment Premium which Landlord will be required to pay in prepaying any
Loan with proceeds of the Default Termination Amount or (C) an amount equal
to the Present Value of the entire Basic Rent from the date of such purchase
to the date on which the then Term would expire, assuming that the Term has
been extended for all extension periods, if any, provided for in this Lease.
Upon such notice to Tenant, Tenant shall be deemed to have made such offer
and shall, if requested by Landlord, within ten (10) days following such
request, deposit with Landlord as payment against the Default Termination
Amount the amount described in (B) above, Landlord and Tenant shall promptly
commence to determine Fair Market Value. Within thirty (30) days after the
Fair Market Value Date, Landlord shall accept or reject such offer. If
Landlord accepts such offer then, on the tenth (10th) business day after such
acceptance, Tenant shall pay to Landlord the Default Termination Amount and,
at the request of Tenant, Landlord will convey the Leased Premises to Tenant
or its designee in accordance with Paragraph 20. Any rejection by Landlord of
such offer shall have no effect on any other remedy Landlord may have under
this Lease.
(iv) Landlord may declare by notice to Tenant the entire
Basic Rent (in the amount of Basic Rent then in effect) for the remainder of
the then current Term to be immediately due and payable. Tenant shall
immediately pay to Landlord all such Basic Rent discounted to its Present
Value, all accrued Rent then due and unpaid, all other Monetary
-29-
<PAGE>
Obligations which are then due and unpaid and all Monetary Obligations which
arise or become due by reason of such Event of Default (including any Costs
of Landlord). Upon receipt by Landlord of all such accelerated Basic Rent
and Monetary Obligations, this Lease shall remain in full force and effect
and Tenant shall have the right to possession of the Leased Premises from the
date of such receipt by Landlord to the end of the Term, and subject to all
the provisions of this Lease, including the obligation to pay all increases
in Basic Rent and all Monetary Obligations that subsequently become due,
except that (A) no Basic Rent which has been prepaid hereunder shall be due
thereafter during the said Term, (B) Tenant shall have no option to extend or
renew the Term.
(b) The following constitute damages to which Landlord shall be
entitled if Landlord exercises its remedies under Paragraph 23(a)(i) or
23(a)(ii):
(i) If Landlord exercises its remedy under Paragraph
23(a)(i) but not its remedy under Paragraph 23(a)(ii) (or attempts to
exercise such remedy and is unsuccessful in reletting the Leased Premises)
then, upon written demand from Landlord, Tenant shall pay to Landlord, as
liquidated and agreed final damages for Tenant's default and in lieu of all
current damages beyond the date of such demand (it being agreed that it would
be impracticable or extremely difficult to fix the actual damages), an amount
equal to the Present Value of the excess, if any, of (A) all Basic Rent from
the date of such demand to the date on which the Term is scheduled to expire
hereunder in the absence of any earlier termination, re-entry or repossession
over (B) the then fair market rental value of the Leased Premises for the
same period. Tenant shall also pay to Landlord all of Landlord's Costs in
connection with the repossession of the Leased Premises and any attempted
reletting thereof, including all customary brokerage commissions, ,
reasonable attorneys' fees and expenses, reasonable employees' expenses, and
reasonable costs of Alterations and expenses in preparation for reletting.
(ii) If Landlord exercises its remedy under Paragraph
23(a)(i) or its remedies under Paragraph 23(a)(i) and 23(a)(ii), then Tenant
shall, until the end of what would have been the Term in the absence of the
termination of the Lease, and whether or not any of the Leased Premises shall
have been relet, be liable to Landlord for, and shall pay to Landlord, as
liquidated and agreed current damages on the date on which the same are due
and payable under the terms of this Lease all Monetary Obligations which
would be payable under this Lease by Tenant in the absence of such
termination less the net proceeds, if any, of any reletting pursuant to
Paragraph 23(a)(ii), after deducting from such proceeds all of Landlord's
Costs (including the items listed in the last sentence of Paragraph 23(b)(i)
hereof) incurred in connection with such repossessing and reletting;
provided, that if Landlord has not relet the Leased Premises, such Costs of
Landlord shall be considered to be Monetary Obligations payable by Tenant.
Tenant shall be and remain liable for all sums aforesaid, and Landlord may
recover such damages from Tenant and institute and maintain successive
actions or legal proceedings against Tenant for the recovery of such damages.
Nothing herein contained shall be deemed to require Landlord to wait to
begin such action or other legal proceedings until the date when the Term
would have expired by its own terms had there been no such Event of Default.
(c) Notwithstanding anything to the contrary herein contained, in
lieu of or in addition to any of the foregoing remedies and damages, Landlord
may exercise any remedies and collect any damages available to it at law or
in equity. If Landlord is unable to obtain full satisfaction pursuant to the
exercise of any remedy, it may pursue any other remedy which it has hereunder
or at law or in equity.
(d) Landlord shall not be required to mitigate any of its damages
hereunder unless required to by applicable Laws of the State. If any Law
shall limit the amount of any damages provided for herein to an amount which
is less than the amount agreed to herein, Landlord shall be entitled to the
maximum amount available under such Laws.
-30-
<PAGE>
(e) No termination of this Lease, repossession or reletting of any
of the Leased Premises, exercise of any remedy or collection of any damages
pursuant to this Paragraph 23 shall relieve Tenant of any Surviving
Obligations.
(f) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD
HEREUNDER, TENANT, TO THE FULLEST EXTENT PERMITTED BY THE LAWS OF THE STATE,
(i) WAIVES THE SERVICE OF ANY ADDITIONAL NOTICE WHICH MAY BE REQUIRED BY ANY
APPLICABLE LAW AND (ii) WAIVES ANY RIGHT TO A TRIAL BY JURY.
(g) Upon the occurrence and during the continuance of any Event of
Default, Landlord shall have the right (but no obligation) to perform any act
required of Tenant hereunder and, if performance of such act requires that
Landlord enter the Leased Premises, Landlord may enter the Leased Premises
for such purpose.
(h) No failure of Landlord (i) to insist at any time upon the
strict performance of any provision of this Lease or (ii) to exercise any
option, right, power or remedy contained in this Lease shall be construed as
a waiver, modification or relinquishment thereof. A receipt by Landlord of
any sum in satisfaction of any Monetary Obligation with knowledge of the
breach of any provision hereof shall not be deemed a waiver of such breach,
and no waiver by Landlord of any provision hereof shall be deemed to have
been made unless expressed in a writing signed by Landlord.
(i) Tenant hereby waives and surrenders, for itself and all those
claiming under it, including creditors of all kinds, (i) any right and
privilege which it or any of them may have under any present or future Law to
redeem any of the Leased Premises or to have a continuance of this Lease
after termination of this Lease or of Tenant's right of occupancy or
possession pursuant to any court order or any provision hereof, and (ii) the
benefits of any present or future Law which exempts property from liability
for debt or for distress for rent, except to the extent Landlord shall have
executed a landlord's waiver with respect to such property.
(j) Except as otherwise provided herein, all remedies are
cumulative and concurrent and no remedy is exclusive of any other remedy.
Each remedy may be exercised at any time an Event of Default has occurred and
is continuing and may be exercised from time to time. No remedy shall be
exhausted by any exercise thereof.
24. NOTICES. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or
permitted to be given pursuant to the provisions of this Lease shall be in
writing and shall be deemed to have been given and received for all purposes
when delivered in person or by Federal Express or other reliable 24-hour
delivery service or five (5) business days after being deposited in the
United States mail, by registered or certified mail, return receipt
requested, postage prepaid, addressed to the other party at its address
stated above or when delivery is refused. A copy of any notice given by
Landlord to Tenant shall simultaneously be given by Landlord to Liner
Yankelevitz Sunshine Weinhart Riley & Regenstreif LLP, Attention: Mitchell C.
Regenstreif, Esq. A copy of any notice given by Tenant to Landlord shall
simultaneously be given by Tenant to Reed Smith Shaw & McClay LLP, 2500 One
Liberty Place, Philadelphia, PA 19103, Attention: Chairman, Real Estate
Department. For the purposes of this Paragraph, any party may substitute
another address stated above (or substituted by a previous notice) for its
address by giving fifteen (15) days' notice of the new address to the other
party, in the manner provided above.
25. ESTOPPEL CERTIFICATE. At any time upon not less than ten (10)
days' prior written request by either Landlord or Tenant (the "REQUESTING
PARTY") to the other party (the
-31-
<PAGE>
"RESPONDING PARTY"), the Responding Party shall deliver to the Requesting
Party a statement in writing, executed by an authorized officer of the
Responding Party having sufficient knowledge of this Lease and the Leased
Premises, certifying (a) that, except as otherwise specified, this Lease is
unmodified and in full force and effect, (b) the dates to which Basic Rent,
Additional Rent and all other Monetary Obligations have been paid, (c) that,
to the knowledge of the signer of such certificate and except as otherwise
specified, no default by either Landlord or Tenant exists hereunder, (d) such
other matters as the Requesting Party may reasonably request, and (e) if
Tenant is the Responding Party that, except as otherwise specified, there
are no proceedings pending or, to the knowledge of the signer, threatened,
against Tenant before or by an court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant. Any such statements by the Responding
Party may be relied upon by the Requesting Party, any Person whom the
Requesting Party notifies the Responding Party in its request for the
Certificate is an intended recipient or beneficiary of the Certificate, any
Lender or their assignees and by any prospective purchaser or mortgagee of
any of the Leased Premises.
26. SURRENDER. Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises to
Landlord in the same condition in which the Leased Premises was at the
commencement of this Lease, except as repaired, rebuilt, restored, altered,
replaced or added to as permitted or required by any provision of this Lease,
and except for ordinary wear and tear. Upon such surrender, Tenant shall (a)
remove from the Leased Premises all property which is owned by Tenant or
third parties other than Landlord and (b) repair any damage caused by such
removal. Property not so removed shall become the property of Landlord, and
Landlord may thereafter cause such property to be removed from the Leased
Premises. The cost of removing and disposing of such property and repairing
any damage to any of the Leased Premises caused by such removal shall be paid
by Tenant to Landlord upon demand. Landlord shall not in any manner or to
any extent be obligated to reimburse Tenant for any such property which
becomes the property of Landlord pursuant to this Paragraph 26.
27. NO MERGER OF TITLE. There shall be no merger of the leasehold
estate created by this Lease with the fee estate in any of the Leased
Premises by reason of the fact that the same Person may acquire or hold or
own, directly or indirectly, (a) the leasehold estate created hereby or any
part thereof or interest therein and (b) the fee estate in any of the Leased
Premises or any part thereof or interest therein, unless and until all
Persons having any interest in the interests described in (a) and (b) above
which are sought to be merged shall join in a written instrument effecting
such merger and shall duly record the same.
28. BOOKS AND RECORDS.
(a) Tenant shall keep adequate records and books of account with
respect to the finances and business of Tenant generally and with respect to
the Leased Premises, in accordance with generally accepted accounting
principles ("GAAP") consistently applied, and shall permit Landlord and
Lender by their respective agents, accountants and attorneys, upon reasonable
prior written notice to Tenant, to visit and inspect the Leased Premises and
examine (and make copies of) the records and books of account and to discuss
the finances and business with the officers of Tenant, at such reasonable
times as may be requested by Landlord. Upon the request of Lender or
Landlord (either telephonically or in writing), Tenant shall provide the
requesting party with copies of any information to which such party would be
entitled in the course of a personal visit.
(b) Tenant shall deliver to Landlord and to Lender within ninety
(90) days of the close of each fiscal year, annual audited "consolidating"
financial statements of Tenant prepared by nationally recognized independent
certified public accountants. Tenant shall
-32-
<PAGE>
also furnish to Landlord within forty-five (45) days after the end of each of
the three remaining quarters unaudited financial statements and all other
quarterly reports of Tenant, certified by Tenant's chief financial officer,
and all filings, if any, of Form 10-K, Form 10-Q and other required filings
with the Securities and Exchange Commission pursuant to the provisions of the
Securities Exchange Act of 1934, as amended, or any other Law. All financial
statements of Tenant shall be prepared in accordance with GAAP consistently
applied. All annual financial statements shall be accompanied (i) by an
opinion of said accountants stating that (A) there are no qualifications as
to the scope of the audit and (B) the audit was performed in accordance with
GAAP and (ii) by the affidavit of the president or a vice president of
Tenant, dated within five (5) days of the delivery of such statement, stating
that (C) the affiant knows of no Event of Default, or event which, upon
notice or the passage of time or both, would become an Event of Default which
has occurred and is continuing hereunder or, if any such event has occurred
and is continuing, specifying the nature and period of existence thereof and
what action Tenant has taken or proposes to take with respect thereto and (D)
except as otherwise specified in such affidavit, that Tenant has fulfilled
all of its obligations under this Lease which are required to be fulfilled on
or prior to the date of such affidavit.
29. DETERMINATION OF VALUE.
(a) Whenever a determination of Fair Market Value is required
pursuant to any provision of this Lease, such Fair Market Value shall be
determined in accordance with the following procedure:
(i) Landlord and Tenant shall endeavor to agree upon such
Fair Market Value within thirty (30) days after the date (the "APPLICABLE
INITIAL DATE") on which (A) Tenant provides Landlord with notice of its
intention to terminate this Lease and purchase the Leased Premises under
Paragraph 21(c), (B) Landlord provides Tenant with notice of its intention
to redetermine Fair Market Value pursuant to Paragraph 20(c) or (C) Landlord
provides Tenant with notice of Landlord's intention to require Tenant to make
an offer to purchase the Leased Premises pursuant to Paragraph 23(a)(iii) or
the Abandonment Premises under Paragraph 37(g). Upon reaching such
agreement, the parties shall execute an agreement setting forth the amount of
such Fair Market Value.
(ii) If the parties shall not have signed such agreement
within twenty (20) days after the Applicable Initial Date, Tenant shall
within forty (40) days after the Applicable Initial Date select an appraiser
and notify Landlord in writing of the name, address and qualifications of
such appraiser. Within ten (10) days following Landlord's receipt of Tenant's
notice of the appraiser selected by Tenant, Landlord shall select an
appraiser and notify Tenant of the name, address and qualifications of such
appraiser. Such two appraisers shall endeavor to agree upon Fair Market
Value based on a written appraisal made by each of them as of the Relevant
Date (and given to Landlord by Tenant). If such two appraisers shall agree
upon a Fair Market Value, the amount of such Fair Market Value as so agreed
shall be binding and conclusive upon Landlord and Tenant.
(iii) If such two appraisers shall be unable to agree upon a
Fair Market Value within fifteen (15) days after the selection of an
appraiser by Landlord, then such appraisers shall advise Landlord and Tenant
of their respective determination of Fair Market Value and shall select a
third appraiser to make the determination of Fair Market Value. The
selection of the third appraiser shall be binding and conclusive upon
Landlord and Tenant.
(iv) If such two appraisers shall be unable to agree upon the
designation of a third appraiser within ten (10) days after the expiration of
the fifteen (15) day period referred to in clause (iii) above, or if such
third appraiser does not make a determination of Fair Market Value within
fifteen (15) days after his selection, then such third appraiser or a
-33-
<PAGE>
substituted third appraiser, as applicable, shall, at the request of either
party hereto, be appointed by the President or Chairman of the American
Arbitration Association in Chicago, Illinois. The determination of Fair
Market Value made by the third appraiser appointed pursuant hereto shall be
made within fifteen (15) days after such appointment.
(v) If a third appraiser is selected, Fair Market Value
shall be the average of the determination of Fair Market Value made by the
third appraiser and the determination of Fair Market Value made by the
appraiser (selected pursuant to Paragraph 29(a)(ii) hereof) whose
determination of Fair Market Value is nearest to that of the third appraiser.
Such average shall be binding and conclusive upon Landlord and Tenant.
(vi) All appraisers selected or appointed pursuant to this
Paragraph 29(a) shall (A) be independent qualified MAI appraisers (B) have no
right, power or authority to alter or modify the provisions of this Lease,
(C) utilize the definition of Fair Market Value hereinabove set forth above,
and (D) be registered in the State if the State provides for or requires such
registration.
(vii) The Cost of the procedure described in this Paragraph
29(a) above shall be borne by Tenant.
(b) If, by virtue of any delay, Fair Market Value is not
determined by the expiration or termination of the then current Term, then
the date on which the Term would otherwise expire or terminate shall be
extended with respect to the Leased Premises or the Affected Premises, as
applicable, to the date specified for termination in the particular provision
of this Lease pursuant to which the determination of Fair Market Value is
being made.
(c) In determining Fair Market Value as defined in clause (b) of
the definition of Fair Market Value, the appraisers shall add (i) the present
value of the Rent for the remaining Term (assuming the Term has been extended
only for any exercised extension periods) using a discount rate (which may be
determined by an investment banker retained by each appraiser) based on the
creditworthiness of Tenant and (ii) the present value of the Leased Premises
as of the end of such Term (having assumed the Term has been extended for all
extension periods provided herein). The appraisers shall further assume that
no default then exists under the Lease, that Tenant has complied (and will
comply) with all provisions of the Lease, and that Tenant has not violated
(and will not violate) any of the Covenants.
30. NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be enforced only against the Leased
Premises and the rents, issues and profits derived therefrom, and not against
any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or
any general partner of Landlord, any of its general partners or shareholders
(or any legal representative, heir, estate, successor or assign of any
thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of its general partners, either directly or
through Landlord or its general partners or any predecessor or successor
partnership or corporation or their shareholders, officers, directors,
employees or agents (or other entity), or (d) any other Person (including
Carey Property Advisors, Carey Fiduciary Advisors, Inc., W. P. Carey & Co.,
Inc., W. P. Carey Incorporated and any Person affiliated with any of the
foregoing, or any director, officer, employee or agent of any thereof).
31. FINANCING.
(a) Tenant agrees to pay, within ten (10) days following written
request from Landlord, all reasonable costs and expenses incurred by Landlord
in connection
-34-
<PAGE>
with the purchase and leasing of the Leased Premises and the financing of the
initial Loan (excluding "points" or commitment fees), including, without
limitation, expenses of Landlord's and Lender's counsel, the cost of
appraisals, environmental reports, title insurance, premiums and costs, and
survey costs and expenses (not to exceed, with respect to Lender's legal fees
and expenses, $25,000 in the aggregate).
(b) Tenant agrees to pay, within three (3) business days of
written demand thereof, any cost, charge or expense (other than the principal
of the Note and interest thereon at the contract rate of interest specified
therein) imposed upon Landlord by Lender pursuant to the Note, the Mortgage
or the Assignment which caused by any act or omission of Tenant and which is
not otherwise reimbursed by Tenant to Landlord pursuant to any other
provision of this Lease.
(c) If Landlord desires to obtain or refinance any Loan, Tenant
shall negotiate in good faith with Landlord concerning any request made by
any Lender or proposed Lender for changes or modifications in this Lease so
long as the same do not materially adversely affect any right, benefit or
privilege of Tenant under this Lease or materially increase Tenant's
obligations under this Lease. In particular, Tenant shall agree, upon
request of Landlord, to supply any such Lender with such notices and
information as Tenant is required to give to Landlord hereunder and to impart
the rights of Landlord hereunder to any such Lender and to consent to such
financing if such consent is requested by such Lender. Tenant shall provide
any other consent or statement and shall execute any and all other documents
that such Lender reasonably requires in connection with such financing,
including any environmental indemnity agreement and subordination,
non-disturbance and attornment agreement, so long as the same (i) with
respect to any financing other than the with the initial Lender, are at no
cost to Tenant, (ii) do not materially adversely affect any right, benefit
or privilege of Tenant under this Lease and (iii) do not increase any of
Tenant's monetary obligations or materially increase any of Tenant's
non-monetary obligations under this Lease. Such subordination,
nondisturbance and attornment agreement shall be in form and substance
reasonably satisfactory to Tenant and Lender and may require Tenant to
confirm that (a) Lender and its assigns will not be liable for any
misrepresentation, act or omission of Landlord and (b) Lender and its assigns
will not be subject to any counterclaim, demand or offsets which Tenant may
have against Landlord.
32. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. This Lease and
Tenant's interest hereunder shall be subordinate to any Mortgage or other
security instrument hereafter placed upon the Leased Premises by Landlord,
and to any and all advances made or to be made thereunder, to the interest
thereon, and all renewals, replacements and extensions thereof, provided that
any such Mortgage or other security instrument (or a separate instrument of
subordination, non-disturbance and attornment in recordable form duly
executed by the holder of any such Mortgage or other security instrument
executed and delivered to Tenant) shall provide for the recognition of this
Lease and all Tenant's rights hereunder unless and until an Event of Default
exists beyond any applicable notice and cure period and Landlord shall have
the right to terminate this Lease pursuant to any applicable provision
hereof. Landlord covenants that so long as Tenant shall have paid all Basic
Rent then due and payable and no other Event of Default shall have occurred
and then be continuing hereunder, Landlord shall timely pay the debt service
payments due Lender in connection with the Loan; provided that, the foregoing
shall not obligate Landlord to make any payment to Lender during the pendency
of any good faith dispute between Landlord and Lender.
33. FINANCIAL COVENANTS. Tenants hereby covenants and agrees to comply
with all the covenants and agreements described in EXHIBIT "G" hereto.
34. TAX TREATMENT; REPORTING. Landlord and Tenant each acknowledge
that each shall treat this transaction as a true lease for state law purposes
and shall report this
-35-
<PAGE>
transaction as a Lease for Federal income tax purposes. For Federal income
tax purposes each shall report this Lease as a true lease with Landlord as
the owner of the Leased Premises and Equipment and Tenant as the lessee of
such Leased Premises and Equipment including: (1) treating Landlord as the
owner of the property eligible to claim depreciation deductions under Section
167 or 168 of the Internal Revenue Code of 1986 (the "CODE") with respect to
the Leased Premises and Equipment, (2) Tenant reporting its Rent payments as
rent expense under Section 162 of the Code, and (3) Landlord reporting the
Rent payments as rental income.
35. RIGHT OF FIRST REFUSAL.
(a) Except as otherwise provided in Paragraph 35(g), and provided
an Event of Default does not then exist, if Landlord shall enter into a
contract (the "SALE CONTRACT") for the sale of the entire Leased Premises
with a Third Party Purchaser, such Sale Contract shall be conditioned upon
Tenant's failure to exercise its right under this Paragraph 35(a), then
promptly following the execution thereof, Landlord shall give written notice
to Tenant, together with a copy of the executed Sale Contract.
(b) For a period of thirty (30) days following receipt of such
notice, Tenant shall have the right and option, exercisable by written notice
to Landlord given within said thirty (30) day period, to elect to purchase
the Leased Premises at the purchase price and upon all the terms and
conditions set forth in the Sale Contract, except that no contingencies
contained in such Sale Contract as to environmental assessments, engineering
studies, inspection of the Leased Premises, sale of other property, state of
the title to or encumbrances on the Leased Premises, or any other condition
or contingency to the Third Party Purchaser's obligation to purchase the
Leased Premises which pertains to the condition of the Leased Premises (other
than any such condition caused or permitted by Landlord in violation of this
Lease), the Third Party Purchaser's ability to take certain action or any
other factor beyond the control of Landlord, shall apply to Tenant's
obligation to purchase the Leased Premises under this Paragraph 35, and
Tenant shall be obligated to purchase the Leased Premises without any such
condition or contingency.
(c) If at the expiration of the aforesaid thirty (30) day period
Tenant shall have failed to exercise the aforesaid option, Landlord may sell
the Leased Premises to such Third Party Purchaser upon the terms set forth in
such contract.
(d) Except as otherwise specifically provided herein, the closing
date for any purchase of the Leased Premises by Tenant pursuant to this
Paragraph 35 shall be the later to occur of (i) ninety (90) days after the
date of Tenant's notice to Landlord of its intention to purchase the Leased
Premises upon the terms of a Sale Contract with a Third Party Purchaser but
no later than the expiration date of the date of this Lease or (ii) the
closing date provided in such Sale Contract. At such closing Landlord shall
convey the Leased Premises to Tenant in accordance with, and Tenant shall pay
to Landlord the purchase price and other consideration set forth in, the
applicable Sale Contract.
(e) Tenant shall have the right to exercise the foregoing right of
first refusal upon each proposed sale of the Leased Premises prior to the
expiration of this Lease. IF THE TERM OF THIS LEASE SHALL TERMINATE OR
EXPIRE, SUCH RIGHTS OF FIRST REFUSAL GRANTED PURSUANT TO THIS PARAGRAPH 35
SHALL TERMINATE AND BE NULL AND VOID AND OF NO FURTHER FORCE AND EFFECT. IN
SUCH EVENT TENANT SHALL EXECUTE A QUITCLAIM DEED AND SUCH OTHER DOCUMENTS AS
LANDLORD SHALL REASONABLY REQUEST EVIDENCING THE TERMINATION OF ITS RIGHT OF
FIRST REFUSAL.
-36-
<PAGE>
(f) If Tenant does not exercise its right of first refusal to
purchase the Leased Premises and the Leased Premises are transferred to a
Third Party Purchaser, Tenant will attorn to any Third Party Purchaser as
Landlord hereunder so long as such Third Party Purchaser assumes in writing
the obligations of Landlord under this Lease and such Third Party Purchaser
and Landlord notify Tenant in writing of such transfer. At the request of
Landlord, Tenant will execute such documents confirming the agreement
referred to above and such other agreements as Landlord may reasonably
request, provided that such agreements do not increase the liabilities and
obligations of Tenant hereunder.
(g) Tenant's right of first refusal set forth in the provisions of
this Paragraph 35 shall not be exercisable upon the occurrence of, or
prohibit (but shall continue in effect after), (i) any mortgaging, subjection
to deed of trust or other hypothecation of Landlord's interest in the Leased
Premises, (ii) any sale of the Leased Premises pursuant to a private power of
sale under or judicial foreclosure of any Mortgage or other security
instrument or device to which Landlord's interest in the Leased Premises is
now or hereafter subject, (iii) any transfer of Landlord's interest in the
Leased Premises to a Lender, beneficiary under deed of trust or other holder
of a security interest therein or their designees by deed in lieu of
foreclosure, (iv) any transfer of the Leased Premises to any governmental or
quasi-governmental agency with power of condemnation, (v) any transfer of the
Leased Premises to any affiliate of Landlord, Corporate Property Associates
12, W. P. Carey & Co., Inc. or Carey Diversified L. L. C. or (vi) any sale of
all or substantially all of Landlord's assets.
36. BARABOO PREMISES EXPANSION.
(a) Should Tenant, at any time during the period prior to the
tenth (10th) anniversary of the Commencement Date, desire to expand the
Baraboo Premises (an "EXPANSION"), which Expansion shall consist of the
construction of permanent improvements not readily removable from the Baraboo
Premises without causing material damage to the Baraboo Premises, then,
provided that (i) no Event of Default shall have occurred and be continuing,
(ii) there shall have been no adverse change in the financial condition of
Tenant and (iii) Basic Rent is increased by an amount provided for in
subparagraph (d)(i) below, Landlord shall (A) pay the cost of such Expansion
if the cost thereof is $2,500,000 or less and (B) not unreasonably withhold
its consent to pay the cost of such Expansion to the extent the cost thereof
is in excess of $2,500,000 if Landlord is satisfied with the creditworthiness
and management of Tenant.
(b) To the extent that the terms of the Mortgage or any other
document encumbering any of the Leased Premises shall require the consent of
Lender and/or the holder or holders of any encumbrance on any of the Leased
Premises (the "ENCUMBRANCERS") to the Expansion or to the financing thereof
by Landlord, the rights and obligations of Landlord and Tenant under
Paragraph 12 and this Paragraph 36 are expressly conditioned upon Tenant's
obtaining, prior to the commencement of any construction, the Encumbrancers'
written consent to such construction and to such financing. Landlord agrees
to reasonably cooperate with Tenant, at Tenant's sole cost and expense, with
respect to obtaining such consent.
(c) Should Landlord not agree to finance or otherwise reimburse
Tenant for the costs of the Expansion, or should Landlord and Tenant be
unable in good faith to agree upon the terms of the modification of this
Lease, Tenant shall, subject to the provisions of Paragraph 13 of this Lease
and any required Lender consent, have the right to construct the Expansion at
Tenant's sole cost and expense. In any event, the construction of the
Expansion shall be performed in accordance with the provisions of Paragraph
12 hereof and the Expansion shall be the property of Landlord and part of the
Leased Premises subject to all of the terms and conditions of this Lease.
-37-
<PAGE>
(d) Should Landlord agree to finance or otherwise reimburse Tenant
for the costs of such Expansion, Landlord and Tenant shall enter into good
faith negotiations regarding the execution and delivery of a written
agreement of modification of this Lease, which agreement shall provide for
the following:
(i) an increase in the annual Basic Rent payable during the
Amortization Period (as hereinafter defined) equal to the greater of (A) an
amount sufficient to amortize the cost of such Expansion over a period (the
"AMORTIZATION PERIOD") which shall be equal to the remainder of the then
current Term (exclusive of any Renewal Term not yet exercised) at a rate of
interest equal to the ten (10) year Treasury Rate plus 300 basis points, and
(B) a rate of return to Landlord on Landlord's equity investment in the
Leased Premises equal to that enjoyed by Landlord hereunder immediately prior
to such proposed increase in Basic Rent and upon such other terms as shall be
agreed upon between Landlord and Tenant, but which other terms shall be no
less favorable to Landlord than the prevailing terms for first unsecured
loans for borrowers with credit ratings equivalent to that of Tenant's at
that time; and
(ii) such other changes and amendments to this Lease as may
be necessary and appropriate in view of such payment of the costs of such
Expansion by Landlord to Tenant.
(e) Tenant shall pay all Costs incurred by Landlord in connection
with any such modification to this Lease and such financing, including
closing costs, brokerage fees, taxes, recording charges and legal fees and
expenses.
(f) Nothing contained in this Paragraph 36 shall be construed to
modify Paragraphs 11 and 12 hereof and the provisions of Paragraph 11 and 12
shall apply to all Alterations made or constructed hereunder, including the
requirement for Landlord's consent to Alterations.
37. ECONOMIC ABANDONMENT.
(a) Provided that an Event of Default shall not have occurred and then
be continuing, Tenant shall have the right at any time after the fifth (5)
year of the Term (but in no event earlier than January 1, 2003) to terminate
this Lease with respect to one of the Related Premises that Tenant shall have
determined shall not be used for at least seven (7) years in its business
operations (such Related Premises, an "ABANDONMENT PREMISES"). In the event
Tenant elects to exercise such right, Tenant shall give notice (the
"ABANDONMENT NOTICE") to Landlord (with a copy to Lender) of its intention so
to terminate this Lease as to the Abandonment Premises, no later than three
(3) months prior to the date (the "ABANDONMENT DATE") of such intended
termination, which notice shall specify the Abandonment Date and shall
contain (a) an irrevocable offer of Tenant to terminate this Lease as to the
Abandonment Premises on the Abandonment Date for the Abandonment Offer Amount
(as defined below) and (b) a certificate of Tenant (i) stating that the
Abandonment Premises are no longer economic for Tenant's continued use and
occupancy in its business operations, (ii) specifying in reasonable detail
the reasons therefor and (iii) certifying that Tenant then intends to abandon
its operations at the Abandonment Premises for at least seven (7) years,
which certificate shall be conclusively binding upon Landlord and Tenant, and
(c) a resolution of the Board of Directors of Tenant (and each of them)
authorizing such notice.
(b) Tenant may exercise its rights under this Paragraph 37 only one
time and only with respect to one of the Related Premises.
(c) The "Abandonment Offer Amount" shall be the sum of (A) 110% of
the Acquisition Costs with respect to the Abandonment Premises determined in
accordance with the
-38-
<PAGE>
percentage allocations specified in Exhibit "F" attached hereto and made a
part hereof and (B) any Prepayment Premium which Landlord will be required to
pay in prepayment of any Loan with proceeds of the Abandonment Offer Amount.
(d) Landlord shall accept or reject such offer by notice to Tenant
given not later than ninety (90) days prior to the Abandonment Date. If
Landlord shall reject such offer, which rejection shall not be valid unless
accompanied by the written consent thereto by Lender, if any, then upon (i)
payment of all Rent and any other sums due and unpaid hereunder as of the
Abandonment Date and (ii) compliance by Tenant with all other obligations and
liabilities under the Lease which have arisen on or prior to the Abandonment
Date, this Lease shall terminate as to the Abandonment Premises on the
Abandonment Date and Tenant shall immediately vacate and have no further
rights, title or interest in or to any of the Abandonment Premises.
(e) After the Abandonment Date, whether or not Landlord shall have
accepted or rejected Tenant's offer, the terms of this Lease will remain in
full force and effect with respect to the remaining Related Premises except
that the Basic Rent will be that percentage of the then Basic Rent which is
allocated to the remaining Related Premises as set forth in EXHIBIT "F"
attached hereto and made a part hereof.
(f) Unless Landlord shall have rejected such offer by the foregoing
notice to Tenant not later than the thirtieth (30th) day prior to the
Abandonment Date, Landlord shall be conclusively presumed to have accepted
such offer. If such offer is accepted by Landlord, Tenant shall pay to
Landlord the Abandonment Offer Amount on the Abandonment Date and, provided
an Event of Default does not exist hereunder, at the request of Tenant,
Landlord shall convey to Tenant the Abandonment Premises in accordance with
the provisions of Paragraph 20.
(g) Landlord shall have the right, at Landlord's sole option, to treat
any vacating or abandonment of the Abandonment Premises which is prohibited
pursuant to Paragraph 22 (a) hereof as constituting an election by Tenant of
its rights under this Paragraph 37 and as a irrevocable offer of Tenant to
purchase the Abandonment Premises at the price and upon the terms hereinabove
more specifically provided.
38. MISCELLANEOUS.
(a) The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or
to be used in determining the intent of the parties or otherwise interpreting
this Lease.
(b) As used in this Lease, the singular shall include the plural
and any gender shall include all genders as the context requires and the
following words and phrases shall have the following meanings: (i)
"including" shall mean "including without limitation"; (ii) "provisions"
shall mean "provisions, terms, agreements, covenants and/or conditions";
(iii) "lien" shall mean "lien, charge, encumbrance, title retention
agreement, pledge, security interest, mortgage and/or deed of trust"; (iv)
"obligation" shall mean "obligation, duty, agreement, liability, covenant
and/or condition"; (v) "any of the Leased Premises" shall mean "the Leased
Premises or any part thereof or interest therein"; (vi) "any of the Land"
shall mean "the Land or any part thereof or interest therein"; (vii) "any of
the Improvements" shall mean "the Improvements or any part thereof or
interest therein"; (viii) "any of the Equipment" shall mean "the Equipment or
any part thereof or interest therein"; and (ix) "any of the Adjoining
Property" shall mean "the Adjoining Property or any part thereof or interest
therein".
(c) Any act which Landlord is permitted to perform under this
Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Except as otherwise specifically
provided herein, Landlord shall have
-39-
<PAGE>
the right, at its sole option, to withhold its consent whenever such consent
is required under this Lease for any reason or no reason. Time is of the
essence with respect to the performance by Tenant of its obligations under
this Lease.
(d) Landlord shall in no event be construed for any purpose to be
a partner, joint venturer or associate of Tenant or of any subtenant,
operator, concessionaire or licensee of Tenant with respect to any of the
Leased Premises or otherwise in the conduct of their respective businesses.
(e) This Lease and any documents which may be executed by Tenant
on or about the effective date hereof at Landlord's request constitute the
entire agreement between the parties and supersede all prior understandings
and agreements, whether written or oral, between the parties hereto relating
to the Leased Premises and the transactions provided for herein. Landlord
and Tenant are business entities having substantial experience with the
subject matter of this Lease and have each fully participated in the
negotiation and drafting of this Lease. Accordingly, this Lease shall be
construed without regard to the rule that ambiguities in a document are to be
construed against the drafter.
(f) This Lease may be modified, amended, discharged or waived only
by an agreement in writing signed by the party against whom enforcement of
any such modification, amendment, discharge or waiver is sought.
(g) The covenants of this Lease shall run with the land and shall
be binding upon, and shall inure to the benefit of, Landlord and Tenant and
their respective successors and assigns and all present and subsequent
encumbrancers and subtenants of any of the Leased Premises. If there is more
than one Tenant, the obligations of each shall be joint and several.
(h) Notwithstanding any provision in this Lease to the contrary,
all Surviving Obligations of Tenant shall survive the expiration or
termination of this Lease with respect to any Related Premises.
(i) If any one or more of the provisions contained in this Lease
shall for any reason be held to be invalid, illegal or unenforceable in any
respect under the Laws of the State, then such provisions shall be given no
force or effect and shall be severed from the remaining terms and provisions
of this Lease, and such invalidity, illegality or unenforceability shall not
affect any other provision of this Lease, but this Lease shall be construed
as if such invalid, illegal or unenforceable provision had never been
contained herein.
(j) All exhibits attached hereto are incorporated herein as if
fully set forth.
(k) This Lease shall be governed by and construed and enforced in
accordance with the Laws of the State.
-40-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed under seal as of the day and year first above written.
LANDLORD:
PRINT (WI) QRS 12-40, INC.,
a Wisconsin corporation
By: /s/ Anne Coolidge
---------------------------
Title: Second Vice President
------------------------
ATTEST: TENANT:
PERRY GRAPHIC COMMUNICATIONS,
INC., a Delaware corporation
By: /s/ Kenneth R. Dorff By: /s/ Thomas Bressan
-------------------------- ---------------------------
Title: Assistant Secretary Title: Secretary
----------------------- ------------------------
JUDD'S, INCORPORATED,
a Maryland corporation
By: /s/ Kenneth R. Dorff By: /s/ Thomas Bressan
-------------------------- ---------------------------
Title: Assistant Secretary Title: Secretary
----------------------- ------------------------
-41-
<PAGE>
Lease Agreement by and between Print (WI) QRS 12-40, Inc., Perry Graphic
Communications, Inc. and Judd's Incorporated dated as of December 16, 1997.
- ------------------------------------------------------------------------------
EXHIBITS A-C, F and G OMITTED IN ACCORDANCE WITH
ITEM 601(b)(2) OF REGULATION S-K
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request, provided however that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished.
<PAGE>
EXHIBIT D
BASIC RENT PAYMENTS
1. BASIC RENT. Subject to the adjustments provided for in Paragraph 2
below, Basic Rent payable in respect of the Term shall be $1,888,875 per
annum, payable quarterly in advance on each Basic Rent Payment Date, in equal
installments of $472,218.75 each.
2. EFFECTIVE DATES OF RENT INCREASES.
(a) Basic Rent shall be increased as set forth in the succeeding
sentence, commencing on the fifth (5th) anniversary of the date (the "FIRST
FULL BASIC RENT PAYMENT DATE"), on which the first full quarterly installment
of Basic Rent shall be due and payable. As of the fifth (5th) anniversary of
the First Full Basic Rent Payment Date and thereafter on the tenth (10th) on
the fifteenth (15th), and, if the initial Term is extended, twentieth (20th),
twenty-fifth (25th) and thirtieth (30th) anniversaries of the First Full
Basic Rent Payment Date, Basic Rent shall be increased by ten percent (10%)
over the Basic Rent in effect immediately preceding each of the foregoing
dates (each such date being hereinafter referred to as the "BASIC RENT
ADJUSTMENT DATE").
(a) Effective as of a given Basic Rent Adjustment Date, Basic Rent
payable under this Lease until the next succeeding Basic Rent Adjustment Date
shall be the Basic Rent in effect after the adjustment provided for as of
such Basic Rent Adjustment Date.
(b) Notice of the new annual Basic Rent shall be delivered to
Tenant on or before the tenth (10th) day preceding each Basic Rent Adjustment
Date, but any failure to do so by Landlord shall not be or be deemed to be a
waiver by Landlord of Landlord's rights to collect such sums. Tenant shall
pay to Landlord, within ten (10) days after a notice of the new annual Basic
Rent is delivered to Tenant, all amounts due from Tenant, but unpaid,
because notice of the stated amount as set forth above was not delivered to
Tenant at least ten (10) days preceding the Basic Rent Adjustment Date in
question.
<PAGE>
EXHIBIT E
ACQUISITION COST
Baraboo Premises $ 9,787,267
161 N. Jackson St. Premises $ 4,831,689
575 W. Madison St. Premises $ 2,849,457
200 S. Jackson St. Premises;
207 S. Jackson St. Premises; and
275 S. Jackson St. Premises $ 1,641,535
TOTAL $19,109,948
-----------
<PAGE>
EXHIBIT H
MEMORANDUM OF LEASE
<PAGE>
RECORDED AT THE REQUEST OF
AND WHEN RECORDED MAIL TO:
Ruth S. Perfido, Esq.
Reed Smith Shaw & McClay
375 Park Avenue
17th Floor
New York, NY 10152
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, made as of December __, 1997, between PRINT
(WI) QRS 12-40, INC., a Wisconsin corporation ("Landlord") having an
address c/o W.P. Carey & Co., Inc., 50 Rockefeller Plaza, Second Floor, New
York,New York 10020, and PERRY GRAPHIC COMMUNICATIONS, INC., a Delaware
corporation and JUDD'S INCORPORATED, a Maryland corporation (collectively,
"Tenant"), each having an address at 575 W. Madison Street, Waterloo,
Wisconsin 53594.
1. LEASE. Landlord has demised and let to Tenant pursuant to the terms
and conditions of a Lease Agreement dated as of the date hereof (the "Lease"),
the terms and conditions of which are incorporated herein as though set forth
in full, certain real property located in the County of Sauk, State of
Wisconsin, described in Exhibit "A-1" attached hereto and certain real
property located in the County of Jefferson, State of Wisconsin, described in
Exhibit "A-2" attached hereto (collectively, the "Leased Premises").
2. ORIGINAL TERM. Under the terms of the Lease, Tenant shall have and
hold the Leased Premises, together with the tenements, hereditaments,
appurtenances and easements thereunto belonging, at the rental and upon the
terms and conditions therein stated, for an original term (the "Term")
commencing as of December __, 1997 and ending on November 30, 2017.
3. RENEWAL TERM(S). Under the terms of the Lease, the Term may be
extended, at Tenant's option, for three (3) separate and additional periods
of five (5) years each after the expiration of the initial Term (each such
additional five-year period is hereinafter referred to as "Renewal Term");
provided that Tenant notifies Landlord in writing, at least eighteen (18)
months prior to expiration of the initial Term and each Renewal Term, as
applicable, that Tenant elects to exercise its renewal option as of the end
of such then current Term. Each Renewal Term shall be subject to all the terms
and conditions of the Lease as if the Term originally included the Renewal
Term.
4. TENANT'S RIGHT OF FIRST REFUSAL TO PURCHASE. Tenant has a right of
first refusal to purchase the Leased Premises, upon and subject to the terms
and conditions more particularly set forth in Paragraph 35 of the Lease.
5. NO RESPONSIBILITY FOR LIENS. NOTICE IS HEREBY GIVEN THAT LANDLORD
SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO TENANT, OR TO ANYONE HOLDING ANY OF THE LEASED PREMISES THROUGH
OR UNDER TENANT, AND THAT NO
<PAGE>
MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL
ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED
PREMISES.
6. PURPOSE AND INTENTION. This Memorandum of Lease is executed for the
purpose of recordation in the Office of the Registrar of Deeds in Sauk
County, Wisconsin and in Jefferson County, Wisconsin, in order to give notice
of all of the terms, provisions and conditions of the Lease and is not
intended, and shall not be construed, to define, limit or modify the Lease.
The leasehold estate created and conveyed hereby with respect to the Leased
Premises is intended to be one of the same estate as was created with respect
to the Leased Premises by the Lease and is further intended to be governed in
all respects solely by the Lease and all of the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Lease as of the day and year first above written.
LANDLORD:
PRINT (WI) QRS 12-40, INC.
a Wisconsin corporation
By:
--------------------------
Its:
--------------------------
TENANT:
PERRY GRAPHIC COMMUNICATIONS, INC.
a Delaware corporation
By:
--------------------------
Its:
--------------------------
JUDD'S INCORPORATED,
a Maryland corporation
By:
--------------------------
Its:
--------------------------
-2-
<PAGE>
EXHIBIT 10.2
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
CREDIT AGREEMENT
$75,000,000
among
PERRY GRAPHIC COMMUNICATIONS, INC.,
SHENANDOAH VALLEY PRESS, INC.,
AND PORT CITY PRESS, INC.,
as Borrowers,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF,
as Lenders,
and
BT COMMERCIAL CORPORATION,
as Agent.
DATED AS OF DECEMBER 16, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE 1. DEFINITIONS......................................................2
1.1. General Definitions..............................................2
1.2. Accounting Terms and Determinations.............................21
1.3. Other Terms; Headings...........................................22
ARTICLE 2. LOANS...........................................................22
2.1. Term Loan Facility..............................................22
2.2. Revolving Credit Commitments....................................23
2.3. Borrowing of Revolving Loans....................................24
2.4. Disbursement of Revolving Loans.................................25
2.5. Notices of Borrowing............................................25
2.6. Same Day Settlement of Lender Advances..........................25
2.7. Periodic Settlement of Agent Advances and Repayments............26
2.8. Sharing of Payments.............................................26
2.9. Defaulting Lenders..............................................26
2.10. Extension of Expiration Date....................................27
ARTICLE 3. LETTERS OF CREDIT...............................................27
3.1. Issuance of Letters of Credit...................................27
3.2. Terms of Letters of Credit......................................28
3.3. Request for Issuance............................................28
3.4. Lenders' Participation..........................................28
3.5. Payment of Amounts Drawn Under Letters of Credit................28
3.6. Payment by Lenders..............................................29
3.7. Nature of Issuing Bank's Duties.................................29
3.8. Obligations Absolute............................................29
3.9. Agent's Execution of Applications and Other Issuing Bank
Documentation; Reliance on Credit Agreement by Issuing Bank....29
3.10. Additional Payments.............................................29
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS............30
4.1. Interest on Prime Rate Loans....................................30
4.2. Interest on Eurodollar Rate Loans...............................30
4.3. Unused Line Fee.................................................31
4.4. Letter of Credit Fees...........................................31
4.5. Interest After Event of Default.................................31
4.6. Expenses; Fees..................................................31
4.7. Mandatory Payment; Reduction of Commitments.....................31
4.8. Maintenance of Loan Account; Statements of Account..............33
4.9. Payment Procedures..............................................33
4.10. Collection of Accounts..........................................33
4.11. Application of Payments.........................................33
4.12. Calculations....................................................34
4.13. Special Provisions Relating to Eurodollar Rate Loans............34
4.14. Indemnification in Certain Events...............................36
4.15. Taxes...........................................................37
i
<PAGE>
4.16. Affected Lenders................................................39
ARTICLE 5. CONDITIONS PRECEDENT............................................40
5.1. Conditions to Initial Loans and Letters of Credit...............40
5.2. Conditions Precedent to All Loans and Letters of Credit.........44
ARTICLE 6. REPRESENTATIONS AND WARRANTIES..................................45
6.1. Organization and Qualification..................................45
6.2. Authority.......................................................45
6.3. Enforceability..................................................45
6.4. No Conflict.....................................................45
6.5. Consents and Filings............................................45
6.6. Government Regulation...........................................45
6.7. Solvency........................................................46
6.8. Rights in Collateral; Priority of Liens.........................46
6.9. Financial Data..................................................46
6.10. Locations of Offices, Records and Inventory.....................46
6.11. Subsidiaries; Ownership of Stock................................47
6.12. No Judgments or Litigation......................................47
6.13. No Defaults.....................................................47
6.14. Labor Matters...................................................47
6.15. Compliance with Law.............................................47
6.16. ERISA...........................................................47
6.17. Compliance with Environmental Laws..............................47
6.18. Intellectual Property...........................................48
6.19. Licenses and Permits; Business Restrictions.....................48
6.20. Taxes and Tax Returns...........................................48
6.21. Material Contracts..............................................48
6.22. No Other Indebtedness...........................................48
6.23. Title to Property...............................................49
6.24. Affiliate Transactions..........................................49
6.25. Accuracy and Completeness of Information........................49
6.26. No Change.......................................................49
6.27. Special Purpose Corporation.....................................49
ARTICLE 7. AFFIRMATIVE COVENANTS...........................................49
7.1. Financial Reporting.............................................49
7.2. Collateral Reporting............................................51
7.3. Notification Requirements.......................................51
7.4. Corporate Existence.............................................52
7.5. Books and Records; Inspections..................................53
7.6. Insurance.......................................................53
7.7. Casualty Loss...................................................53
7.8. Taxes...........................................................54
7.9. Compliance With Laws............................................54
7.10. Use of Proceeds.................................................54
7.11. Fiscal Year.....................................................54
7.12. Maintenance of Property.........................................54
7.13. ERISA Documents.................................................54
7.14. Further Assurances..............................................54
7.15. Environmental and Other Matters.................................55
ii
<PAGE>
7.16. Security Interests..............................................56
7.17. Trademarks......................................................56
7.18. Dividends on Preferred Stock....................................56
ARTICLE 8. NEGATIVE COVENANTS..............................................56
8.1. Minimum EBITDA..................................................56
8.2. Consolidated Fixed Charge Coverage Ratio........................58
8.3. Interest Coverage Ratio.........................................58
8.4. Current Ratio...................................................59
8.5. Debt Ratio......................................................59
8.6. Capital Expenditures............................................60
8.7. Additional Indebtedness.........................................60
8.8. Liens...........................................................61
8.9. Contingent Obligations..........................................62
8.10. Sale of Assets..................................................62
8.11. Restricted Payments.............................................62
8.12. Investments.....................................................63
8.13. Affiliate Transactions..........................................64
8.14. Additional Bank Accounts........................................64
8.15. Excess Cash.....................................................64
8.16. No Corporate Changes............................................64
8.17. No Prohibited Transactions Under ERISA..........................65
8.18. Material Amendments of Material Contracts; Etc..................65
8.19. Additional Negative Pledges.....................................65
8.20. Additional Subsidiaries; Partnerships, Joint Ventures...........66
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES..................................66
9.1. Events of Default...............................................66
9.2. Acceleration and Cash Collateralization.........................67
9.3. Rescission of Acceleration......................................67
9.4. Remedies........................................................68
9.5. Right of Setoff.................................................68
9.6. License for Use of Software and Other Intellectual Property.....68
9.7. No Marshalling; Deficiencies; Remedies Cumulative...............68
ARTICLE 10. THE AGENT.......................................................69
10.1. Appointment of Agent............................................69
10.2. Nature of Duties of Agent.......................................69
10.3. Lack of Reliance on Agent.......................................69
10.4. Certain Rights of the Agent.....................................69
10.5. Reliance by Agent...............................................69
10.6. Indemnification of Agent........................................69
10.7. The Agent in its Individual Capacity............................70
iii
<PAGE>
10.8. Successor Agent.................................................70
10.9. Collateral Matters..............................................70
10.10. Actions with Respect to Defaults................................71
ARTICLE 11. MISCELLANEOUS...................................................71
11.1. GOVERNING LAW...................................................71
11.2. SUBMISSION TO JURISDICTION......................................71
11.3. SERVICE OF PROCESS..............................................71
11.4. JURY TRIAL......................................................72
11.5. LIMITATION OF LIABILITY.........................................72
11.6. Delays..........................................................72
11.7. Notices.........................................................72
11.8. Assignments and Participations..................................73
11.9. Confidentiality.................................................74
11.10. Indemnification; Reimbursement of Expenses of Collection........74
11.11. Amendments and Waivers..........................................74
11.12. Counterparts; Inconsistencies and Effectiveness.................75
11.13. Severability....................................................75
11.14. Independence of Covenants.......................................75
11.15. Survival........................................................75
11.16. Maximum Rate....................................................76
11.17. Entire Agreement; Successors and Assigns........................76
iv
<PAGE>
ANNEXES
Annex I - List of Lenders and Commitment Amounts
EXHIBITS
Exhibit-A-1 - Form of Revolving Note
Exhibit A-2 - Form of Term Note
Exhibit-B - Form of Amended and Restated Security Agreement
Exhibit C - Form of Amended and Restated Pledge Agreement
Exhibit D - Form of Amended and Restated Holdings Guarantee
Exhibit E - Form of Cross Guarantee
Exhibit F - Form of Judd's Guarantee
Exhibit G - Form of Lockbox Agreement
Exhibit H - Form of Compliance Certificate
Exhibit I - Form of Borrowing Base Certificate
Exhibit J - Form of Notice of Borrowing
Exhibit K - Form of Notice of Continuation
Exhibit L - Form of Notice of Conversion
Exhibit M - Form of Letter of Credit Request
Exhibit N - Form of Assignment and Assumption Agreement
Exhibit O - Form of Collateral Access Agreement
Exhibit-P - Form of Mortgage
Exhibit Q - Form of Opinion of Brobeck, Phleger & Harrison
Exhibit R - Form of Opinion of Quarles & Brady
Exhibit S - Form of Opinion of Borrowers' Maryland, Virginia, D.C.
Counsel
Exhibit T - Form of Judd's Merger Certificate
Exhibit U - Form of Intercompany Note
SCHEDULES
Schedule A - Closing Document List
Schedule B - Disclosure Schedule
v
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated for identification
purposes as of December 16, 1997, and is among PERRY GRAPHIC COMMUNICATIONS,
INC. (formerly known as "Perry Printing Corporation" and "PPC Acquisitions,
Inc."), a Delaware corporation ("Perry"), SHENANDOAH VALLEY PRESS, INC., a
Virginia corporation ("Shenandoah"), PORT CITY PRESS, INC., a Maryland
corporation ("Port City" and, together with Perry and Shenandoah, each a
"Borrower" and, collectively, the "Borrowers"), each financial institution
identified on Annex I (together with its successors and assigns, a "Lender"),
and BT COMMERCIAL CORPORATION acting as agent for the Lenders (in such
capacity, together with any successors in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, Perry is party to that certain Credit Agreement dated as of
April 28, 1995 with the Lenders party thereto (the "Existing Lenders") and BT
Commercial Corporation as agent for such Lenders (in such capacity, the
"Existing Agent") (as amended to the date hereof, the "Existing Credit
Agreement"), under which the Existing Lenders have made Term Loans (as
defined in the Existing Credit Agreement, hereinafter the "Existing Term
Loans") evidenced by the Term Notes (as defined in the Existing Credit
Agreement, hereinafter the "Existing Term Notes") and have made Revolving
Loans (as defined in the Existing Credit Agreement, hereinafter the "Existing
Revolving Loans", and together with the Existing Term Loans collectively the
"Existing Loans") evidenced by the Revolving Notes (as defined in the
Existing Credit Agreement, hereinafter the "Existing Revolving Notes" and
together with the Existing Term Notes collectively the "Existing Notes" and
individually an "Existing Note");
WHEREAS, the Obligations (as defined in the Existing Credit Agreement,
hereinafter the "Existing Obligations") of Perry under the Existing Notes and
the other Credit Documents (as defined in the Existing Credit Agreement,
hereinafter the "Existing Credit Documents") are secured by the Collateral
(as defined in the Existing Credit Agreement, hereinafter the "Existing
Collateral") and are guaranteed or supported or otherwise benefited by the
Existing Credit Documents;
WHEREAS, Perry is a wholly owned subsidiary of PPC Holdings, Inc., a
Delaware corporation ("Holdings"), and immediately prior to the effectiveness
hereof (i) Naomi Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Holdings, will merge with and into Judd's, Incorporated, a
Maryland corporation ("Judd's"), with Judd's being the surviving corporation,
pursuant to the Merger Agreement (as hereinafter defined), and (ii) Holdings
will change its name to "Perry-Judd's Incorporated";
WHEREAS, Shenandoah and Port City are wholly owned subsidiaries of
Judd's;
WHEREAS, the Borrowers have requested that the Lenders amend and restate
the Existing Credit Agreement to make loans and other financial
accommodations available to the Borrowers for purposes of refinancing certain
existing indebtedness and for other general corporate purposes permitted
hereunder, including future acquisitions, and that, in connection therewith,
the Agent act as agent for the Lenders;
WHEREAS, the Lenders are willing to make loans and other financial
accommodations available to the Borrowers, and the Agent is willing to act as
agent in connection therewith, in each case on the terms and subject to the
conditions set forth herein; and
WHEREAS, The parties hereto intend that (a) the Existing Obligations
shall continue to exist under, and to be evidenced by, this Agreement and the
Notes (as hereinafter defined) issued hereunder, (b) the Existing Advances
shall be Advances under and as defined in this Agreement and the Notes and
1
<PAGE>
(c) the Existing Collateral shall continue to secure the Existing Obligations
as well as the other Obligations of the Borrowers under this Agreement and
the Notes and other Credit Documents hereunder.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1. DEFINITIONS
1.1. GENERAL DEFINITIONS
ACCOUNTS is defined in the Security Agreement (SEE Exhibit B).
ADJUSTED EURODOLLAR RATE means, with respect to each Interest Period for any
Eurodollar Rate Loan, the rate obtained by dividing (i) the Eurodollar Rate
for such Interest Period by (ii) a percentage equal to 1 minus the stated
maximum rate (stated as a decimal) of all reserves, if any, required to be
maintained against "Eurocurrency liabilities" as specified in Regulation D of
the Board of Governors of the Federal Reserve System (or against any other
category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Lender to United States residents).
AFFILIATE of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director or
officer of such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and
policies of a business.
AGENT is defined in the preamble and shall include any successor appointed
pursuant to Section 10.8.
AGENT ADVANCE is defined in Section 2.3.
ANNUALIZED EBITDA means (i) as of the end of each of the first three Test
Periods, EBITDA for the number of Test Periods then ended multiplied by the
quotient of four divided by such number of Test Periods, and (ii) as of the
end of each Test Period thereafter, EBITDA for the period of four consecutive
Fiscal Quarters then ended.
APPLICABLE EURODOLLAR RATE MARGIN means with respect to Revolving Loans,
2.25% per annum, and with respect to Term Loans, 2.50% per annum; PROVIDED
that if the Debt Ratio for the applicable period ending with the then most
recently ended Fiscal Quarter (as shown on the quarterly Compliance
Certificate delivered pursuant to Section 7.1) is within the ranges set out
below and no Default or Event
2
<PAGE>
of Default exists as of the end of such Fiscal Quarter (as shown on such
Compliance Certificate or otherwise), the Applicable Eurodollar Rate Margin
shall be the per annum rate set out beneath the applicable type of Loan and
opposite the applicable range below:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Debt Ratio Term Loans Revolving Loans
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.75 : 1.0
but GREATER THAN 3.25 : 1.0 2.25% 2.00%
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.25 : 1.0
but GREATHER THAN 2.75 : 1.0 2.00% 1.75%
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 2.75 : 1.0 1.75% 1.50%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
In the event of the delivery of a Compliance Certificate showing an increase
or decrease in the Debt Ratio which requires a change in the Applicable
Eurodollar Rate Margin, the change in the Applicable Eurodollar Rate Margin
shall be effective from the first day of the calendar month immediately
following receipt of the Compliance Certificate (PROVIDED that the Compliance
Certificate is received by the Agent no later than 3:00 P.M. New York City
time at least one (1) Business Day prior to the first day of such calendar
month) until the next such date on which the Applicable Eurodollar Margin
Rate is subject to change following the delivery of (or failure to deliver) a
Compliance Certificate showing an increase or decrease in the Debt Ratio
which requires a change in the Applicable Eurodollar Rate Margin. The
failure to deliver any Compliance Certificate by the date required hereunder
(after giving effect to any applicable grace period) shall automatically
cause the Applicable Eurodollar Rate Margin to be the maximum per annum rate
described above, effective as of the first day of the calendar month
immediately following the date on which the delivery of the Compliance
Certificate was otherwise required.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
APPLICABLE PRIME RATE MARGIN means with respect to Revolving Loans, 0.75% per
annum, and with respect to Term Loans, 1.0% per annum; PROVIDED that if the
Debt Ratio for the applicable period ending with the then most recently ended
Fiscal Quarter (as shown on the quarterly Compliance Certificate delivered
pursuant to Section 7.1) is within the ranges set out below and no Default or
Event of Default exists as of the end of such Fiscal Quarter (as shown on
such Compliance Certificate or otherwise), the Applicable Prime Rate Margin
shall be the per annum rate set out beneath the applicable type of Loan and
opposite the applicable range below:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Debt Ratio Term Loans Revolving Loans
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.75 : 1.0
but GREATER THAN 3.25 : 1.0 0.75% 0.50%
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.25 : 1.0
but GREATER THAN 2.75 : 1.0 0.50% 0.25%
- ----------------------------------------------------------------------------
LESS THAN OR EQUAL TO 2.75 : 1.0 0.25% 0%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
3
<PAGE>
In the event of the delivery of a Compliance Certificate showing an increase
or decrease in the Debt Ratio which requires a change in the Applicable Prime
Rate Margin, the change in the Applicable Prime Rate Margin shall be
effective from the first day of the calendar month immediately following
receipt of the Compliance Certificate (PROVIDED that the Compliance
Certificate is received by the Agent no later than 3:00 P.M. New York City
time at least one (1) Business Day prior to the first day of such calendar
month) until the next such date on which the Applicable Prime Rate Margin is
subject to change following the delivery of (or failure to deliver) a
Compliance Certificate showing an increase or decrease in the Debt Ratio
which requires a change in the Applicable Prime Rate Margin. The failure to
deliver any Compliance Certificate by the date required hereunder (after
giving effect to any applicable grace period) shall automatically cause the
Applicable Prime Rate Margin to be the maximum per annum rate described
above, effective as of the first day of the calendar month immediately
following the date on which the delivery of the Compliance Certificate was
otherwise required.
ASSIGNMENT AND ASSUMPTION AGREEMENT is defined in Section 11.8.
AUDITORS means a nationally recognized firm of independent public accountants
selected by the Borrowers and satisfactory to the Agent in its sole
discretion. For purposes of this Credit Agreement, the firm of Deloitte &
Touche LLP shall be deemed to be satisfactory to the Agent.
BANKRUPTCY CODE means Title 11 of the U.S. Code (11 U.S.C. Sections 101 et
seq.), as amended from time to time, and any successor statute.
BENEFIT PLAN means a "defined benefit plan" (as defined in Section 3(35) of
ERISA) for which any Borrower, any Subsidiary of any Borrower or any ERISA
Affiliate has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
BORROWER and BORROWERS are defined in the preamble.
BORROWING means (i) each Borrowing (as defined in the Existing Credit
Agreement) outstanding on the Closing Date and (ii) a borrowing of Revolving
Loans or Term Loans of the same type on the same day.
BORROWING BASE means, with respect to any Borrower, the sum of:
(A) eighty-five percent (85%) (or such lesser percentage as the
Agent may determine from time to time in the exercise of its Permitted
Discretion) of Eligible Accounts Receivable of such Borrower, PLUS
(B) sixty percent (60%) (or such lesser percentage as the Agent may
determine from time to time in the exercise of its Permitted Discretion)
of Eligible Inventory of such Borrower (PROVIDED that the aggregate
amount added to the Borrowing Base for all Borrowers pursuant to this
clause (B) may not exceed $20,000,000), MINUS
(C) the aggregate amount of any reserves established by the Agent
under Section 2.2(b).
BORROWING BASE CERTIFICATE means, with respect to any Borrower, a certificate
of such Borrower concerning the Borrowing Base of such Borrower provided
under Section 7.2 and substantially in the form of Exhibit I.
BUSINESS DAY means any day that is not a Saturday, Sunday or a day on which
commercial banks in New York City are required or permitted by law to be
closed. When used in connection with Eurodollar
4
<PAGE>
Rate Loans, this definition will also exclude any day on which commercial
banks are not open for dealing in U.S. dollar deposits in the London
(England, U.K.) interbank market.
CAPITAL EXPENDITURES for a period means, the sum of all expenditures
capitalized for financial statement purposes in accordance with GAAP (whether
payable in cash or other property or accrued as a liability), including the
capitalized portion of capital leases and that portion of Investments
allocable to property, plant or equipment (but excluding any cash
expenditures subsequently financed during such period or any cash
expenditures for which firm financing commitments or firm commitments for
operating leases have been received during such period to the extent such
cash expenditures are actually financed). Capital Expenditures shall exclude
proceeds of a Casualty Loss applied to the repair or replacement of the
property affected by the Casualty Loss.
CASH EQUIVALENTS means any of the following, so long as the Agent has a
perfected security interest therein: (i) securities issued, guarantied or
insured by the United States or any of its agencies and having maturities of
not more than one year; (ii) certificates of deposit or bankers' acceptances
having maturities of not more than one year issued by (a) the Agent, (b) any
Lender or (c) a U.S. federal or state chartered commercial bank of recognized
standing whose capital and unimpaired surplus is in excess of $200,000,000
and whose short-term commercial paper rating, or that of its parent holding
company, is at least A-1 or the equivalent by Standard & Poor's Corporation
("S&P") and at least P-1 or the equivalent by Moody's Investors Services,
Inc. ("Moody's"); (iii) 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 the highest
rating from either S&P or Moody's; (iv) certificates of deposit maturing
within one year of the date of acquisition thereof in an amount less than or
equal to $100,000 in the aggregate issued by any bank insured by the Federal
Deposit Insurance Corporation; (v) eurodollar time deposits having a maturity
of less than one year purchased directly from any Lender (whether such
deposit is with such Lender (or its Affiliates) or any other Lender (or its
Affiliates)); (vi) commercial paper rated at least A-1 by S&P or P-1 by
Moody's and, in either case, having a tenor of not more than one year; and
(vii) money market funds invested in one or more of the foregoing.
CASUALTY LOSS is defined in Section 7.7.
CHANGE OF CONTROL means the occurrence of one or more of the following events
(whether or not approved by the Board of Directors of any Borrower or
Holdings): (i) any direct or indirect sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of any Borrower, Judd's or Holdings to any
person or entity or group of persons or entities acting in concert (a
"Group") for purposes of Section 13(d) of the Exchange Act, together with any
Affiliates thereof; (ii) the approval by the holders of the capital stock of
any Borrower, Judd's or Holdings of any plan of liquidation; (iii) the
acquisition in one or more transactions of "beneficial ownership" (within the
meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act whether or not
applicable), by any Person (other than any Permitted Holder) or Group
(excluding Permitted Holders) together with its or their Affiliates, in
either case, of any securities of any Borrower, Judd's or Holdings such that,
as a result of such acquisition, such Person or Group either; (A)
beneficially owns (as set forth above), directly or indirectly, at least
thirty-five percent (35%) or more of the combined voting power of any
Borrower's, Judd's' or Holdings' then outstanding Voting Stock or (B)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of the Board of Directors of any Borrower, Judd's or Holdings; (iv)
the Milhous Parties, together, cease (A) to own sufficient shares of the
capital stock of Holdings to elect a majority of the Board of Directors or
(B) to control a majority of the Board of Directors of Holdings; (v) (A)
Holdings shall fail to own (directly or through a wholly owned Subsidiary)
less than one hundred percent (100%) of the combined voting power of any
Borrower's then outstanding Voting Stock (other than as a result of the sale
of Voting Stock of any Borrower pursuant to
5
<PAGE>
an initial public offering), or (B) Holdings shall fail to own (directly or
through a wholly owned Subsidiary) sufficient shares of the capital stock of
any Borrower to elect a majority of the Board of Directors of such Borrower,
or (C) Holdings shall fail to control a majority of the Board of Directors of
any Borrower; (vi) the Milhous Parties, together, cease to beneficially own
(as set forth above), directly or indirectly, at least fifty-one percent
(51%) of the combined voting power of Holdings' then outstanding Voting
Stock; or (vii) any "Change of Control" as defined in the Senior Subordinated
Note Indenture. VOTING STOCK means any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock of any class or kind ordinarily (without regard to the occurrence of
any contingency) having the power to vote for the election of directors.
CLOSING DATE means the date, if any, prior to January 31, 1998 on which the
conditions set forth in Sections 5.1 and 5.2 have been satisfied or waived
and the initial Loans are made.
CLOSING DOCUMENT LIST is defined in Section 5.1.
CODE is defined in Section 1.3.
COLLATERAL means the Accounts, Inventory, Equipment (as defined in the
Security Agreement), Intangibles (as defined in the Security Agreement),
Mortgaged Properties and other property identified as security for any of the
Obligations under the Collateral Documents. The foregoing to the contrary
notwithstanding, the Collateral shall not include any Excluded Property.
COLLATERAL ACCESS AGREEMENT means any landlord waiver, mortgagee waiver,
bailee letter or any similar acknowledgment agreement of any warehouseman or
processor in possession of Inventory, substantially in the form of Exhibit O.
COLLATERAL DOCUMENTS means the Security Agreement, the Pledge Agreement, the
Mortgages and all other contracts, instruments and other documents pursuant
to which Liens are now or hereafter granted to the Agent to secure the
Obligations.
COLLECTION ACCOUNT is defined in Section 4.10.
COLLECTIONS means all cash, funds, checks, notes, instruments and any other
form of remittance tendered by account debtors in payment of Accounts.
COMMITMENT of a Lender means its Term Commitment and Revolving Credit
Commitment, in each case then in effect.
COMPLIANCE DATE means any of the following: (i) the date of any Notice of
Borrowing, Notice of Conversion, Notice of Continuance, Letter of Credit
Request or Compliance Certificate; (ii) the date of any Borrowing,
continuation or conversion of any Borrowing or issuance of any Letter of
Credit; and (iii) any other date on which any Borrower certifies or is deemed
to certify compliance with this Credit Agreement.
CONCENTRATION ACCOUNT is defined in Section 4.10.
CONSOLIDATED FIXED CHARGES means for any period the sum of (i) Interest
Expense for such period, (ii) all expenditures after December 31, 1996 paid
in cash by all Credit Parties for Capital Expenditures for such period, (iii)
the scheduled principal amounts (including the principal portion of rentals
payable under capital leases) of all Indebtedness (but excluding repayments
of Revolving Loans which do not permanently reduce the Commitments) of all
Credit Parties payable for such period and (iv) dividends of all Credit
Parties that are paid in cash for such period.
6
<PAGE>
CONTINGENT OBLIGATION means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another, except
endorsements in the ordinary course of business.
COVERED TAXES is defined in Section 4.15.
CREDIT AGREEMENT means this Credit Agreement, as the same may be modified,
amended, extended, restated, amended and restated and supplemented from time
to time.
CREDIT DOCUMENTS means, collectively, this Credit Agreement, the Term Notes,
the Revolving Notes, the Letters of Credit, the Guarantees, each of the
Collateral Documents and all other documents, agreements, instruments,
opinions and certificates now or hereafter executed and delivered in
connection herewith or therewith, as modified, amended, extended, restated or
supplemented from time to time.
CREDIT PARTIES means, collectively, Holdings, Judd's, each Borrower, Judd &
Detweiler, Mount Jackson and any other parties to the Credit Documents
(except the Lenders, the Agent and issuers of opinions).
CROSS GUARANTEE means the Guarantee executed in favor of the Agent pursuant
to Section 5.1(a), substantially in the form of Exhibit E.
DEBT RATIO means the ratio determined pursuant to Section 8.5.
DEFAULT means an event, condition or default which with the giving of notice,
the passage of time or both would be an Event of Default.
DEFAULTING LENDER is defined in Section 2.9.
DISBURSEMENT ACCOUNT means, with respect to each Borrower, the operating
account of such Borrower maintained with the Disbursement Account Bank or,
with respect to Port City and Shenandoah, such other bank or other financial
institution as may be acceptable to the Agent.
DISBURSEMENT ACCOUNT BANK means Bankers Trust Company.
DOLLARS OR $ means United States dollars.
DOMESTIC LENDING OFFICE means, with respect to any Lender, the office of such
Lender specified as its "Domestic Lending Office" opposite its name on Annex
I hereto, as such annex may be amended from time to time.
EBITDA for a period means the consolidated net income of the Credit Parties
(excluding extraordinary items) for the period (a) PLUS all Interest Expense,
Tax Expense, depreciation and amortization (including amortization of any
goodwill or other intangibles) for the period, (b) LESS gains or PLUS losses
attributable to any fixed asset sales in the period and (c) PLUS OR MINUS any
other non-cash charges which have been subtracted or added in calculating
consolidated net income for the period.
ELIGIBLE ACCOUNTS RECEIVABLE means, with respect to each Borrower, Accounts
of such Borrower deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base for such Borrower. In determining the amount to be so included, the
face amount of such Accounts shall be reduced by the amount of all returns,
discounts, deductions, claims, credits, charges, or other allowances. Unless
otherwise approved in writing by the Agent, an Account shall not be an
Eligible Account Receivable if:
(a) it arises out of a sale made by a Borrower to an Affiliate; or
7
<PAGE>
(b) its payment terms are longer than 30 days from date of invoice,
except that up to $5,000,000 of Accounts with payment terms in excess of 30
days but not more than 90 days may be included in Eligible Accounts
Receivable to the extent otherwise constituting an Eligible Account
Receivable; or
(c) it is unpaid (i) more than 60 days after the original payment due
date or (ii) more than 120 days after date of invoice; or
(d) it is owed by an account debtor with respect to which fifty percent
(50%) or more of the Accounts owed by that account debtor and its Affiliates
are ineligible under clause (c) above; or
(e) when aggregated with all other Accounts of an account debtor due to
any Borrower, the Account exceeds: (1) ten percent (10%); or (2) in the case
of Accounts with respect to which J.C. Penney Corporation is the account
debtor, twenty percent (20%); or (3) in the case of Accounts with respect to
which Time Inc. (including its Affiliates) is the account debtor, twenty-five
percent (25%); or (4) in the case of Accounts with respect to which The
McGraw-Hill Companies (including its Affiliates) is the account debtor,
fifteen percent (15%), in each case in face value of all Accounts of the
Borrowers then outstanding, to the extent of such excess, unless supported by
an irrevocable letter of credit satisfactory to the Agent (as to form,
substance and issuer) and which, after the occurrence and during the
continuance of an Event of Default, has been assigned to and is directly
drawable by the Agent; or
(f) the account debtor for the Account is a creditor of any Borrower,
has or has asserted a right of setoff, has disputed its liability or made any
claim with respect to the Account or any other Account which has not been
resolved, to the extent of the amount owed by any Borrower to the account
debtor, the amount of such actual or asserted right of setoff, or the amount
of such dispute or claim, as the case may be; or
(g) the account debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief
has been entered by a court having jurisdiction in the premises in respect to
the account debtor in an involuntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, or if any other petition or other
application for relief under the federal bankruptcy laws has been filed by or
against the account debtor, or if the account debtor has filed a certificate
of dissolution under applicable state law or shall be liquidated, dissolved
or wound-up, or shall authorize or commence any action or proceeding for
dissolution, winding-up or liquidation, or if the account debtor has failed,
suspended business, declared itself to be insolvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for it
or for all or a significant portion of its assets or affairs; or
(h) it is not payable in Dollars or the account debtor for the Account
is located outside the continental United States, unless the Account is
supported by an irrevocable letter of credit satisfactory to the Agent (as to
form, substance and issuer) and which, after the occurrence and during the
continuance of an Event of Default, has been assigned to and is directly
drawable by the Agent; or
(i) other than with respect to sales to the Boy Scouts of America, the
sale to the account debtor is on a bill-and-hold, guarantied sale,
sale-and-return, sale on approval or consignment basis or made pursuant to
any other written agreement providing for repurchase or return; or
(j) the Agent determines by its own credit analysis that collection of
the Account is uncertain or the Account may not be paid; or
8
<PAGE>
(k) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable Borrower
duly assigns its rights to payment of such Account to the Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sections 3727 et
seq.); or
(l) other than with respect to sales to the Boy Scouts of America, the
goods giving rise to such Account have not been shipped and delivered to and
accepted by the account debtor, the services giving rise to such Account have
not been performed and accepted, or the Account otherwise does not represent
a final sale or earned amounts, or an invoice with respect to the sale has
not been issued to the account debtor within 10 days of the sale; or
(m) it does not comply with all Requirements of Law, including without
limitation the Federal Consumer Credit Protection Act, the Federal Truth in
Lending Act and Regulation Z of the Board of Governors of the Federal Reserve
System; or
(n) it is subject to any adverse security deposit, progress payment or
other similar advance made by or for the benefit of the applicable account
debtor; or
(o) it is not subject to a valid and perfected first priority Lien in
favor of the Agent or does not otherwise conform to the representations and
warranties contained in the Credit Documents.
ELIGIBLE INVENTORY means, with respect to any Borrower, the aggregate amount
of Inventory of such Borrower deemed by the Agent in the exercise of its
Permitted Discretion to be eligible for inclusion in the calculation of the
Borrowing Base for such Borrower. In determining the amount to be so
included, Inventory shall be valued at the lower of cost or market on a basis
consistent with Perry's current and historical accounting practices. Unless
otherwise approved in writing by the Agent, an item of Inventory shall not be
included in Eligible Inventory of any Borrower if:
(a) it is not owned solely by such Borrower or such Borrower does not
have good and marketable title thereto; or
(b) it is not located in the United States; or
(c) it is not located on property owned or leased by such Borrower or
in a contract warehouse, subject to a Collateral Access Agreement executed by
the mortgagee, lessor or the contract warehouseman, as the case may be, and
segregated or otherwise separately identifiable from goods of others, if any,
stored on the premises or prepaid and in-transit to one or more of such
locations from such Borrower's vendor pursuant to purchase documents that
vest title in such Borrower upon shipment of the goods at point of shipment;
or
(d) it is not subject to a valid and perfected first priority Lien in
favor of the Agent except, with respect to Inventory stored at sites
described in clause (c) above, for Liens for unpaid rent or normal and
customary warehousing charges; or
(e) it consists of goods returned or rejected by such Borrower's
customers or goods in transit to third parties (other than to warehouse sites
covered by a Collateral Access Agreement); or
(f) it is not first-quality finished goods or work-in-process or raw
materials consisting solely of paper, is obsolete or slow moving, or does not
otherwise conform to the representations and warranties contained in the
Credit Documents; or
9
<PAGE>
(g) it is prepaid Inventory in transit otherwise eligible for inclusion
in Eligible Inventory which, when aggregated with all other Inventory in
transit included in Eligible Inventory, would cause the total value of
Inventory in transit included in Eligible Inventory to exceed $1,000,000.
EMPLOYMENT AGREEMENTS is defined in Section 5.1(h).
ENVIRONMENTAL LAWS means all federal, state, local laws, statutes,
ordinances, regulations, rules, judgments, orders, notice requirements,
decrees, guidelines, policies or Requirements of Law relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface, flora, fauna or
subsurface strata), including, without limitation, those relating to
emissions, discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Material.
ENVIRONMENTAL REPORTS means (i) the Phase I Environmental Site Assessment
Reports prepared by Dames & Moore relating to real property at 1300 Sauk
Avenue, Baraboo, Wisconsin, 161 North Jackson Street, Waterloo, Wisconsin and
575 West Madison Street, Waterloo, Wisconsin and (ii) the reports of Harding
Lawson relating to the Mortgaged Properties.
EQUITY ISSUANCE DOCUMENTS means and includes the documents and agreements
(including, without limitation, any certificates of designation) related to
the Holdings Equity Issuance.
ERISA means the Employee Retirement Income Security Act of 1974, 29 U.S.C.
Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with any Borrower
or any of its Subsidiaries under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code.
EURODOLLAR LENDING OFFICE means, with respect to any Lender, the office of
such Lender specified as its "Eurodollar Lending Office" opposite its name on
Annex I, as such annex may be amended from time to time (or, if no such
office is specified, its Domestic Lending Office), or such other office or
Affiliate of such Lender as such Lender may from time to time specify in
writing to the Borrowers and the Agent.
EURODOLLAR RATE means, with respect to the Interest Period for each
Eurodollar Rate Loan comprising part of the same Borrowing, an interest rate
per annum equal to the rate (rounded upward to the nearest whole multiple of
one-sixteenth (1/16) of one percent (1%) per annum, if such rate is not such
a multiple) of the offered quotation, if any, to first class banks in the
Eurodollar market by Bankers Trust Company for U.S. dollar deposits of
amounts in immediately available funds comparable to the principal amount of
the Eurodollar Rate Loan for which the Eurodollar Rate is being determined
with maturities comparable to the Interest Period for which such Eurodollar
Rate will apply as of approximately 10:00 A.M. New York City time two (2)
Business Days prior to the commencement of such Interest Period.
EURODOLLAR RATE LOAN means a Revolving Loan or Term Loan that bears interest
as provided in Section 4.2.
EVENT OF DEFAULT is defined in Article 9.
"EXCHANGE NOTE INDENTURE" means an indenture among Holdings, the Senior
Subordinated Note Guarantors, and the trustee under the Holdings Senior
Subordinated Note Indenture, the terms, conditions and other provisions of
which (other than the date thereof) are identical to the Holdings
10
<PAGE>
Senior Subordinated Note Indenture, subject to any changes therein which are
approved by the Majority Lenders.
"EXCHANGE NOTES" means notes issued by Holdings pursuant to the Exchange Note
Indenture in exchange for the Holdings Senior Subordinated Notes, in an
aggregate principal amount not to exceed the aggregate principal amount of
the Holdings Senior Subordinated Notes for which such notes are exchanged,
and the terms, conditions and other provisions of which notes (other than the
date thereof and the transfer restrictions contained therein) are identical
to the Holdings Senior Subordinated Notes issued on the Closing Date, subject
to any changes therein which are approved by the Majority Lenders.
EXCESS CASH FLOW for any Fiscal Year means EBITDA for that year MINUS (or
PLUS) any increases (or decreases) in Working Capital MINUS the sum of the
following items for that year: (i) Interest Expense, (ii) income taxes paid
in cash by the Credit Parties, (iii) permitted principal payments on or
mandatory redemptions of Indebtedness (other than repayments of Revolving
Loans in the ordinary course of business which do not permanently reduce the
Commitments), (iv) permitted Capital Expenditures by the Credit Parties paid
in cash, and (v) the aggregate amount of cash dividends paid by the Borrowers
pursuant to Sections 8.11(a)(iii), (iv) and (v).
EXCLUDED PROPERTY means (a) that portion of each Borrower's governmental
licenses or permits that if included in the Collateral, would violate, in any
material respect, any mandatory requirements of applicable law prohibiting
the creation of a security interest therein, and (b) if subject to Liens
pursuant to the Sale\Leaseback Documents, the interest of any Borrower in and
to equipment leased pursuant to such Sale\Leaseback Documents, together with
related accessions and attachments.
EXCLUDED SUBSIDIARY means a Subsidiary of Holdings that is acquired (or
formed to acquire assets) after the Closing Date pursuant to a transaction
that constitutes a Permitted Acquisition of Excluded Subsidiary (as defined
in the Holdings Guarantee).
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
EXISTING AGENT is defined in the Recitals.
EXISTING CREDIT AGREEMENT is defined in the Recitals.
EXISTING CREDIT DOCUMENTS is defined in the Recitals.
EXISTING COLLATERAL is defined in the Recitals.
EXISTING LENDERS is defined in the Recitals.
EXISTING LOANS is defined in the Recitals.
EXISTING NOTES is defined in the Recitals.
EXISTING OBLIGATIONS is defined in the Recitals.
EXISTING REVOLVING LOANS is defined in the Recitals.
EXISTING REVOLVING NOTES is defined in the Recitals.
EXISTING TERM LOANS is defined in the Recitals.
EXISTING TERM NOTES is defined in the Recitals.
11
<PAGE>
EXPENSES means all reasonable costs and expenses of the Agent (exclusive of
general overhead including compensation of its employees other than
reimbursement of collateral examination expenses) incurred in connection with
the Credit Documents and the transactions contemplated therein, including,
without limitation, (i) the reasonable costs of conducting record searches,
examining collateral, opening bank accounts and lockboxes, depositing checks,
receiving and transferring funds (including charges for checks for which
there are insufficient funds), and other out-of-pocket costs of
administration and enforcement of the rights of the Lenders under the Credit
Documents, (ii) the reasonable fees and expenses of legal counsel and
paralegals (including the allocated cost of internal counsel and paralegals),
accountants, appraisers and other consultants, experts or advisors retained
by the Agent, (iii) reasonable fees and expenses (exclusive of the processing
and recordation fee) incurred in connection with the assignments of or sales
of participations in the Loans, (iv) the actual cost of title insurance
premiums, real estate survey costs, fees and taxes in connection with the
filing of financing statements, and (v) the reasonable costs of preparing and
recording Collateral Documents, releases of Collateral, and waivers,
amendments, and terminations of any of the Credit Documents.
EXPIRATION DATE means December 15, 2002.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such
day on such transactions received by the Agent from three Federal Funds
brokers of recognized standing selected by it.
FEE LETTER means the letter dated October 16, 1997 between the Borrowers and
BT Commercial Corporation providing for the payment of certain fees in
connection with this Credit Agreement.
FEES means, collectively, the Unused Line Fee, the Letter of Credit Fees, the
Issuing Bank Fees and the other fees provided in the Fee Letter.
FINANCIAL STATEMENTS means the consolidated and consolidating balance sheets,
statements of operations, statements of cash flows and statements of changes
in shareholder's equity of Holdings and the other Credit Parties for the
period specified (including any footnotes thereto), prepared in accordance
with GAAP and consistently with prior practices, except to the extent of
changes required by GAAP occurring after the Closing Date, and except, in the
case of unaudited financial statements, for the lack of footnotes and that
they are subject to normal audit adjustments.
FISCAL PERIOD means any of the monthly periods used by the Borrowers in the
financial reports prepared for use by their respective Boards of Directors
and senior management.
FISCAL QUARTER means any of the four periods consisting of three consecutive
Fiscal Periods which make up a Fiscal Year.
FISCAL YEAR means the fiscal year of the Borrowers ending on December 31 of
each calendar year.
FOREIGN LENDER means any Lender organized under the laws of a jurisdiction
outside of the United States.
FUNDED DEBT means any obligation payable more than one year from the date of
determination thereof, which under GAAP is shown on the balance sheet as a
liability, including Revolving Loans and
12
<PAGE>
obligations under capital leases, but excluding items customarily reflected
below current liabilities, such as deferred federal taxes on income and other
reserves.
FUNDING BANK is defined in Section 4.14.
GAAP means generally accepted accounting principles in the United States as
in effect from time to time.
GOVERNING DOCUMENTS means the certificates or articles of incorporation,
by-laws and other organizational or governing documents of any Person.
GOVERNMENTAL AUTHORITY means any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
GUARANTEES means the Holdings Guarantee, the Cross Guarantee and the Judd's
Guarantee.
HAZARDOUS MATERIALS means (i) any chemical, material or substance (whether
solid, liquid or gas) at any time defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "infectious waste," "toxic
substances" or any other formulations intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
"TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws; (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources; (iv) any flammable substances
or explosives; (v) any radioactive materials; (vi) asbestos in any form;
(vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x)
radon.
HIGHEST LAWFUL RATE means, at any given time during which any Obligations
shall be outstanding hereunder, the maximum nonusurious interest rate that at
any time or from time to time may be contracted for, taken, reserved, charged
or received on the Obligations, under the laws of the State of California (or
the law of any other jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Credit Agreement and the other
Credit Documents), or under applicable federal laws which may presently or
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than under California (or such other jurisdiction's) law, in any case
after taking into account, to the extent permitted by applicable law, any and
all relevant payments or charges under this Credit Agreement and any other
Credit Documents executed in connection herewith, and any available
exemptions, exceptions and exclusions.
HOLDINGS means Perry-Judd's Incorporated (formerly known as PPC Holdings,
Inc.), a Delaware corporation.
HOLDINGS EQUITY ISSUANCE means the issuance by Holdings of common stock in
connection with the Judd's Merger.
HOLDINGS GUARANTEE means the Amended and Restated Guarantee executed by
Holdings in favor of the Agent pursuant to Section 5.1(a), substantially in
the form of Exhibit D.
HOLDINGS SENIOR SUBORDINATED NOTES means Holdings' 10 5/8% Senior
Subordinated Notes due 2007 issued on or prior to the Closing Date in the
aggregate principal amount of $115,000,000 and any
13
<PAGE>
Exchange Notes issued in exchange therefor pursuant to the Exchange Note
Indenture, in each case, as the same may be amended, supplemented or
otherwise modified from time to time.
HOLDINGS SENIOR SUBORDINATED NOTE DOCUMENTS means the Holdings Senior
Subordinated Note Indenture, the Holdings Senior Subordinated Notes, the
Subsidiary Subordinated Note Guaranties and the Senior Subordinated Note
Registration Rights Agreement.
HOLDINGS SENIOR SUBORDINATED NOTE INDENTURE means (i) the Indenture dated as
of December 16, 1997 among Holdings, the Senior Subordinated Note Guarantors
and U.S. Trust Company of California, N.A., as Trustee, pursuant to which the
Holdings Senior Subordinated Notes were issued, and (ii) if any Exchange
Notes are issued, the Exchange Note Indenture, in each case, as the same may
be amended, supplemented or otherwise modified from time to time.
HOLDINGS SERIES A PREFERRED STOCK means Series A Preferred Stock of Holdings,
par value $.001 per share, the dividends with respect to which are payable
solely in additional shares of such Series A Preferred Stock.
INDEBTEDNESS of a Person means (a) indebtedness for borrowed money or for the
deferred purchase price of property or services (other than current
liabilities incurred in connection with the purchase of goods or services in
the ordinary course of business and payable in accordance with customary
practices, provided all or any portion of the liabilities are not (i) due
more than twelve months after the incurrence thereof or (ii) evidenced by a
note, bond, debenture or similar instrument), whether on open account or
evidenced by a note, bond, debenture or similar instrument, (b) obligations
under capital leases, (c) reimbursement obligations for letters of credit,
banker's acceptances or other credit accommodations, (d) liabilities, as
determined by the Agent, under any Interest Rate Agreement, (e) Contingent
Obligations and (f) obligations secured by any Lien on that Person's
property, even if that Person has not assumed such obligations, except such
obligations that are secured by involuntary Liens.
INSOLVENCY EVENT means, with respect to any Person, the occurrence of any of
the following: (a) such Person shall be adjudicated insolvent or bankrupt, or
shall generally fail to pay or admit in writing its inability to pay its
debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with its creditors, (c)
such Person shall make a general assignment for the benefit of its creditors,
or consent to or acquiesce in the appointment of a receiver, trustee,
custodian or liquidator for a substantial portion of its property, assets or
business, (d) such Person shall file a voluntary petition under any
bankruptcy, insolvency or similar law, or (e) such Person, or a substantial
portion of its property, assets or business shall become the subject of an
involuntary proceeding or petition for its dissolution, reorganization, or
the appointment of a receiver, trustee, custodian or liquidator or shall
become subject to any writ, judgment, warrant of attachment, execution or
similar process involving $500,000, or more, and any such proceeding,
petition, writ, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded within 45 days after
commencement, filing or levy, as the case may be, or any order for relief
shall be entered in any such proceeding.
INTEREST EXPENSE means the consolidated expense of the Credit Parties for
interest on Indebtedness, including, without limitation, amortization of
original issue discount, incurrence fees (to the extent included in interest
expense), the interest portion of any deferred payment obligation and the
interest component of any capital lease obligation.
INTEREST PERIOD means for any Eurodollar Rate Loan the period commencing on
the date of such Borrowing and ending on the last day of the period selected
by the Borrower thereof pursuant to the provisions below. The duration of
each such Interest Period shall be one, two, three or, subject to
14
<PAGE>
availability by all Lenders, six months, in each case as the applicable
Borrower may, in an appropriate Notice of Borrowing, Notice of Continuation
or Notice of Conversion, select; PROVIDED, HOWEVER, that no Borrower may
select any Interest Period that ends after the Expiration Date. Whenever the
last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur
on the next succeeding Business Day, PROVIDED that if such extension would
cause the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the next
preceding Business Day.
INTEREST RATE AGREEMENT means any interest rate protection or hedge
agreement, including, without limitation, interest rate future, option, swap,
and cap agreements.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, amendments
thereto, successor statutes, and regulations or guidance promulgated
thereunder.
INTERNAL REVENUE SERVICE or IRS means the United States Internal Revenue
Service and any successor agency.
INVENTORY is defined in the Security Agreement (SEE Exhibit B).
INVESTMENT means all expenditures made and all liabilities incurred
(including Contingent Obligations) for or in connection with the acquisition
of stock, other equity interests or Indebtedness of a Person, loans,
advances, or capital contributions of cash, assets or other property to a
Person, or acquisition of substantially all the assets of a Person. In
determining the aggregate amount of Investments outstanding at any particular
time, (i) a guaranty shall be valued at not less than the principal amount
guaranteed and outstanding; (ii) returns of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution) shall be deducted; (iii) earnings, whether as dividends,
interest or otherwise, shall NOT be deducted; and (iv) decreases in the
market value shall NOT be deducted and increases in the market value shall
NOT be included.
ISSUING BANK means Bankers Trust Company or any Lender, Affiliate of any
Lender or, if none of the foregoing are capable of issuing Letters of Credit,
such other financial institution acceptable to the Agent and the Borrowers
which may at any time issue or be requested to issue a Letter of Credit for
the account of any Borrower (or for the joint account of any Borrower and the
Agent or any Lender) under this Credit Agreement. If there is more than one
Issuing Bank, all references to "the Issuing Bank" shall be deemed to refer
to each Issuing Bank or to all Issuing Banks, as the context requires.
ISSUING BANK FEES is defined in Section 4.4.
JUDD & DETWEILER means Judd & Detweiler, Inc., a District of Columbia
corporation.
JUDD'S means Judd's, Incorporated, a Maryland corporation.
JUDD'S CERTIFICATE OF MERGER means the Certificate of Merger, in
substantially the form of Exhibit T, to be filed with the Secretary of State
of the State of Maryland.
JUDD'S GUARANTEE means the Guarantee executed by Judd's in favor of the Agent
pursuant to Section 5.1(a), substantially in the form of Exhibit F.
JUDD'S MERGER means the merger of Naomi with and into Judd's pursuant to the
Judd's Merger Agreement and the Judd's Certificate of Merger, with Judd's
being the surviving corporation.
JUDD'S MERGER AGREEMENT means the Plan and Agreement of Merger dated as of
October 17, 1997 by and among Holdings, Naomi and Judd's.
15
<PAGE>
LETTER OF CREDIT FEES is defined in Section 4.4.
LETTER OF CREDIT OBLIGATIONS means the sum of (i) the aggregate undrawn
amount of all Letters of Credit outstanding, PLUS (ii) the aggregate amount
of all drawings under Letters of Credit for which the applicable Borrower has
not reimbursed the Issuing Bank, PLUS (iii) without duplication of amounts
included in clause (ii), the aggregate amount of all payments made by the
Lenders to the Issuing Bank for participations in Letters of Credit for which
the applicable Borrower has not reimbursed the Lenders.
LETTER OF CREDIT REQUEST is defined in Section 3.3.
LETTERS OF CREDIT means all letters of credit issued for the account of any
Borrower under Article 3 and all amendments, renewals, extensions or
replacements thereof.
LIEN means any lien, claim, charge, pledge, security interest, assignment,
hypothecation, deed of trust, mortgage, lease, conditional sale, retention of
title, or other preferential arrangement having substantially the same
economic effect as any of the foregoing, whether voluntary or imposed by law.
LOAN or LOANS means one or more of the Revolving Loans or Term Loans or any
combination thereof.
LOAN ACCOUNT is defined in Section 4.8.
LOCKBOXES, LOCKBOX AGREEMENTS, and LOCKBOX BANK are defined in Section 4.10.
MAJORITY LENDERS means those Lenders owed or holding in the aggregate more
than fifty percent (50%) of the total Commitments or if the Commitments are
terminated, more than fifty percent (50%) of the Loans and Letter of Credit
Obligations then outstanding.
MANAGEMENT AGREEMENT means the Management Agreement dated as of April 28,
1995 between PPC Acquisitions, Inc. and Novamil Corporation, as amended from
time to time to the extent permitted hereunder.
MATERIAL ADVERSE EFFECT means (i) a material adverse effect on the business,
prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of any Borrower and its Subsidiaries,
taken as a whole, (ii) a material impairment of any Credit Party's ability to
perform its obligations under the Credit Documents to which it is a party or
of the Agent or the Lenders to enforce the Obligations or realize upon the
Collateral, or (iii) a material adverse effect on the value of the Collateral
or the amount which the Agent or the Lenders would be likely to receive
(after giving consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral.
MATERIAL CONTRACT means any contract or other arrangement to which any Credit
Party is a party (other than the Credit Documents) the breach,
nonperformance, cancellation of which, or failure to renew would or
reasonably could be expected to have a Material Adverse Effect, and shall
include, without limitation, the Related Documents and the Sale\Leaseback
Documents.
MILHOUS PARTY means Robert E. Milhous, Paul B. Milhous, the Robert E. Milhous
Trust and the Paul B. Milhous Trust or any of them.
MORTGAGED PROPERTIES means (i) the Real Property comprising the premises
commonly known as: (a) 1500-1520 Eckington Place, Northeast Washington, D.C.,
20002-2164; (b) 1 Shenandoah Valley Drive, Strasbourg, VA 22657; (c)
Greenwood Road, Baltimore, MD; and (d) Route 730, Shenandoah, VA; and (ii)
any other Real Property now or hereafter subject to a Mortgage.
16
<PAGE>
MORTGAGES means the mortgages and/or deeds of trust executed pursuant to
Section 5.1(a), substantially in the form of Exhibit P, and any other
mortgage, leasehold mortgage, deed of trust or leasehold deed of trust
securing the obligations hereunder, in each case as amended, supplemented or
otherwise modified from time to time.
MOUNT JACKSON means Mount Jackson Press, Inc., a Virginia corporation.
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which any Borrower, any of its Subsidiaries or any
ERISA Affiliate has contributed within the past six years or with respect to
which any Borrower or any of its Subsidiaries may incur any liability.
NAOMI means Naomi Acquisition Corp., a Maryland corporation.
NON-COMPETITION AGREEMENT means the Non-Competition Agreement dated August 5,
1993 by and among Robert E. Milhous, Paul B. Milhous and TCA Holdings Corp.
NORTHSTAR means Northstar Print Group, Inc., a Wisconsin corporation.
NOTE CONVERSION means the conversion of that certain promissory note
(including accrued and unpaid interest) of Holdings dated May 2, 1995 and
issued in favor of Ropamil Limited Partnership in the original principal
amount of $6,500,000 into 95,000 shares of Holdings Series A Preferred Stock.
NOTE CONVERSION DOCUMENTS means the Exchange Agreement dated as of December
16, 1997 between Holdings and Ropamil Limited Partnership.
NOTES means one or more of the Revolving Notes or Term Notes or any
combination thereof.
NOTICE OF BORROWING is defined in Section 2.3.
NOTICE OF CONTINUATION is defined in Section 4.13(a).
NOTICE OF CONVERSION is defined in Section 4.13(b).
OBLIGATIONS means the unpaid principal and interest hereunder (including
interest accruing on or after the occurrence of an Insolvency Event, whether
or not an allowed claim), reimbursement obligations under Letters of Credit,
Fees, Expenses and all other obligations and liabilities of any Credit Party
to the Agent, the Issuing Bank or to the Lenders under this Credit Agreement,
the Revolving Notes, the Term Notes or any other Credit Document.
OLD PERRY means Perry Printing Corporation, a Wisconsin corporation.
OTHER TAXES is defined in Section 4.15(b).
PAUL B. MILHOUS TRUST means the Amendment and Restatement in total of the
Paul Ballard Milhous Trust dated September 24, 1982, as amended.
PERMITTED DISCRETION means the Agent's good faith judgment based upon any
factor that is reasonable from the perspective of a secured lender and which
it believes in good faith: (i) will or reasonably could be expected to
adversely affect the value of the Collateral, the enforceability or priority
of the Agent's Liens thereon or the amount which the Agent and the Lenders
would be likely to receive (after giving consideration to delays in payment
and costs of enforcement) in the liquidation of such Collateral; (ii)
suggests that any collateral report or financial information delivered to the
Agent by any Person on behalf of any Borrower is incomplete, inaccurate or
misleading in any material respect; (iii) materially
17
<PAGE>
increases the likelihood of a bankruptcy, reorganization or other insolvency
proceeding involving any Borrower or any of the Borrowers' Subsidiaries or
any of the Collateral, or (iv) creates or reasonably could be expected to
create a Default or Event of Default. In exercising such judgment, the Agent
may consider such factors already included in or tested by the definition of
Eligible Accounts Receivable or Eligible Inventory, as well as any of the
following: (i) the financial and business climate of the Borrowers' industry
and general macroeconomic conditions, (ii) changes in collection history and
dilution with respect to the Accounts, (iii) changes in demand for, and
pricing of, Inventory, (iv) changes in any concentration of risk with respect
to Accounts or Inventory, and (v) any other factors that adversely change the
credit risk of lending to any Borrower on the security of the Accounts or the
Inventory. The burden of establishing lack of good faith shall be on the
Borrowers.
PERMITTED HOLDER means any Milhous Party, and any individual who is an
executive officer of any Borrower on the Closing Date or any Person
controlled by a Permitted Holder.
PERMITTED MORTGAGE ENCUMBRANCE shall mean, with respect to any property
constituting a Mortgaged Property, such exceptions to title as are set forth
in the title insurance policy or title commitment delivered with respect
thereto, all of which exceptions must be reasonably acceptable to the Agent.
PERRY ACQUISITION means the acquisition by Perry and its Subsidiaries of
substantially all the assets of Old Perry and certain real property and
related assets owned by Northstar and used by Old Perry in its business.
PERSON means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, institution,
entity, party or government (including any division, agency or department
thereof), and its successors, heirs and assigns. PLAN means any employee
benefit plan, program or arrangement maintained or contributed to by any
Borrower or any of its Subsidiaries, or with respect to which any of them may
incur liability.
PLEDGE AGREEMENT means the Amended and Restated Pledge Agreement executed in
favor of the Agent pursuant to Section 5.1(a), substantially in the form of
Exhibit C.
PRIME LENDING RATE means the rate which Bankers Trust Company announces as
its prime lending rate from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the
Lenders may make commercial loans or other loans at rates of interest at,
above or below the Prime Lending Rate.
PRIME RATE LOAN means a Revolving Loan or Term Loan that bears interest as
provided in Section 4.1.
PROPORTIONATE SHARE of a Lender means a fraction, expressed as a decimal,
obtained by dividing its Commitment by the total Commitments of all the
Lenders or, if the Commitments are terminated, by dividing its then
outstanding Loans and/or Letter of Credit participations by the aggregate
Loans and/or Letter of Credit Obligations then outstanding.
PURCHASE MONEY LIENS is defined in Section 8.7.
REAL PROPERTY means all real property owned or leased by any Borrower or any
of their Subsidiaries, together with all fixtures, improvements and other
structures thereon.
REAL PROPERTY LEASES is defined in Section 5.1(h).
REAL PROPERTY SALE\LEASEBACK DOCUMENTS is defined in Section 5.1(g).
18
<PAGE>
REDUCED RATE is defined in Section 4.15(e).
REGISTER is defined in Section 11.8.
RELATED DOCUMENTS means the Judd's Merger Agreement, the Holdings Senior
Subordinated Note Documents, the Note Conversion Documents and the Real
Property Sale\Leaseback Documents.
REPORTABLE EVENT means any of the events described in Section 4043(b) of
ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of thirty (30) days notice to the Pension Benefit Guaranty
Corporation is waived under applicable regulations. REQUIREMENT OF LAW means
(a) the Governing Documents of a Person, (b) any applicable law, treaty, rule
or regulation or determination of an arbitrator, court or other Governmental
Authority, or (c) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval
binding on a Person or any of its property.
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
REVOLVING CREDIT COMMITMENT of a Lender means its commitment to make
Revolving Loans and to participate in Letters of Credit, up to the amount set
forth opposite its name on Annex I, as such annex may be amended from time to
time, under the heading "Revolving Credit Commitment," as such amount may be
reduced from time to time.
REVOLVING LOANS means (i) each Existing Revolving Loan converted to a
Revolving Loan pursuant to Section 2.2 and (ii) each loan by a Lender to a
Borrower pursuant to Section 2.2.
REVOLVING NOTE means a promissory note of a Borrower payable to the order of
any Lender, substantially in the form of Exhibit A-1, as amended,
supplemented or otherwise modified from time to time.
ROBERT E. MILHOUS TRUST means the Third Amendment and Restatement in total of
the Robert E. Milhous Trust dated March 11, 1988, as amended.
SALE\LEASEBACK DOCUMENTS means the Real Property Sale\Leaseback Documents and
the documents and agreements relating to any other sale\leaseback of real or
personal property to which any Credit Party is a party.
SCHEDULED TERM LOAN INSTALLMENT is defined in Section 2.1.
SECURITY AGREEMENT means the Amended and Restated Security Agreement executed
in favor of the Agent pursuant to Section 5.1(a), substantially in the form
of Exhibit B.
SENIOR SUBORDINATED NOTE GUARANTORS means Perry, Judd's, Shenandoah Valley,
Port City, Judd & Detweiler and Mount Jackson.
SENIOR SUBORDINATED NOTE REGISTRATION RIGHTS AGREEMENT means the Registration
Rights Agreement as defined in the Holdings Senior Subordinated Note
Indenture.
SERIES A PREFERRED STOCK means the Series A Preferred Stock of Perry, par
value $0.001 per share.
SERIES B PREFERRED STOCK means the Series B Preferred Stock of Perry, par
value $0.001 per share.
19
<PAGE>
SERIES C PREFERRED STOCK means the Series C Preferred Stock of Perry, par
value $0.001 per share.
SERIES D PREFERRED STOCK means the Series D Preferred Stock of Perry, par
value $0.001 per share.
SETTLEMENT DATE is defined in Section 2.7.
SHAREHOLDER AGREEMENTS is defined in Section 5.1(h).
SUBSIDIARY of a Person means a corporation, partnership or other entity in
which that Person directly or indirectly owns or controls the shares of stock
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or appoint other managers of such corporation,
partnership or other entity.
SUBSIDIARY SUBORDINATED NOTE GUARANTY means a guaranty on substantially the
terms as set forth in Articles Eleven and Twelve of the Holdings Senior
Subordinated Note Indenture.
SYNDICATION DATE means the earlier of (x) the date which is ninety (90) days
after the Closing Date and (y) the date on which the Agent notifies the
Borrowers that the primary syndication of the Commitments and Loans has been
completed, as determined by the Agent in its sole discretion, which notice
shall be promptly given.
TAX EXPENSE means, for any period, charges for taxes accrued during such
period by the Credit Parties on a consolidated basis, determined in
conformity with GAAP.
TAX SHARING AGREEMENT is defined in Section 5.1(h).
TAX TRANSFEREE is defined in Section 4.15(a).
TAXES is defined in Section 4.15(a).
TERM COMMITMENT is defined in Section 2.1.
TERM LOAN REPAYMENT DATE means each of the 60 dates on which an installment
of the Term Loans is scheduled to be made, the first of which is to occur on
January 30, 1998 and each subsequent one of which is to occur on the last
Business Day of each calendar month thereafter; PROVIDED that the last one
shall occur on the Expiration Date.
TERM LOANS means (i) each Existing Term Loan converted to a Term Loan
pursuant to Section 2.1 and (ii) each loan by a Lender to a Borrower pursuant
to Section 2.1.
TERM NOTE means a promissory note of a Borrower payable to the order of any
Lender, substantially in the form of Exhibit A-2.
TERMINATION EVENT means (i) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower, any of the
Borrowers' Subsidiaries or any ERISA Affiliate from a Benefit Plan during a
plan year in which it was a "substantial employer" (as defined in Section
4001(a)(2) of ERISA); (iii) the providing of notice of intent to terminate a
Benefit Plan in a distress termination (as described in Section 4041(c) of
ERISA); (iv) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any event
or condition (a) which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Benefit Plan or Multiemployer Plan, or (b) that may result in termination of
a Multiemployer Plan pursuant to Section 4041A of ERISA; or
20
<PAGE>
(vi) the partial or complete withdrawal within the meaning of Sections 4203
and 4205 of ERISA, of any Borrower, any of the Borrowers' Subsidiaries or any
ERISA Affiliate from a Multiemployer Plan.
TEST PERIOD means for any determination made under Section 8.2, 8.3 or 8.5
the four consecutive Fiscal Quarters of the Borrowers then last ended;
PROVIDED, HOWEVER, that for the first Fiscal Year following the Closing Date,
the Test Period shall be (i) for the last day of the first Fiscal Quarter
following the Closing Date, the Fiscal Quarter of the Borrowers then ended,
(ii) for the last day of the second Fiscal Quarter following the Closing
Date, the two consecutive Fiscal Quarters of the Borrowers then ended, and
(iii) for the last day of the third Fiscal Quarter following the Closing
Date, the three consecutive Fiscal Quarters of the Borrowers then ended.
TYPE means, in reference to a Revolving Loan or Term Loan, that it is a
Eurodollar Rate Loan or a Prime Rate Loan.
UNUSED LINE FEE is defined in Section 4.3.
WORKING CAPITAL means, with respect to Credit Parties on a consolidated
basis, consolidated current assets MINUS consolidated current liabilities
(which for purposes of this definition shall exclude all Funded Debt of the
Credit Parties).
1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise defined or
specified herein, all accounting terms used in this Credit Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to the Agent on or
before the Closing Date. All accounting determinations for purposes of
determining compliance with Sections 8.1 through 8.6 shall be made in
accordance with GAAP as in effect on the Closing Date and applied on a basis
consistent in all material respects with the audited Financial Statements
delivered to the Agent on or before the Closing Date. If any changes in
accounting principles from those used in the preparation of the Financial
Statements referred to in this Credit Agreement are hereafter occasioned by
the promulgation of rules, regulations, pronouncements, or opinions of, or
required by, the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions), or there shall occur any change in the Borrower's or
any of its Subsidiaries' fiscal periods permitted hereunder and, as a result
of any such changes, there shall result a change in the method of calculating
any of the financial covenants, negative covenants, standards, or other terms
or conditions found in this Agreement, then the parties hereto agree to enter
into negotiations in order to amend such provisions and the definition of
"GAAP" set forth in SECTION 1.1 so as to equitably reflect such changes with
the desired result that the criteria for evaluating the financial condition
of the Borrowers and their Subsidiaries shall be the same after such changes
as if such changes had not been made.
1.3. OTHER TERMS; HEADINGS. Terms used herein that are defined in the
Uniform Commercial Code in effect in the State of California (the "Code")
shall have the meanings given in the Code. Each of the words "hereof,"
"herein," and "hereunder" refer to this Credit Agreement as a whole. An
Event of Default shall "continue" or be "continuing" until such Event of
Default has been waived in accordance with Section 11.11. References to
Articles, Sections, Annexes, Schedules, and Exhibits are internal references
to this Credit Agreement, and to its attachments, unless otherwise specified.
The headings and the Table of Contents are for convenience only and shall
not affect the meaning or construction of any provision of this Credit
Agreement. References herein to "Holdings and its Subsidiaries" shall
exclude any Excluded Subsidiary.
21
<PAGE>
ARTICLE 2. LOANS
2.1. TERM LOAN FACILITY
(a) AMOUNTS OF TERM LOANS. (i) Subject to the terms and conditions
set forth in this Credit Agreement, (A) each Lender severally agrees to make
(1) to Perry on the Closing Date (but not thereafter) a term loan in an
amount not to exceed such Lender's Proportionate Share of $20,000,000 (less,
in the case of each Existing Lender, the aggregate principal amount of
Existing Term Loans of such Lender converted to Term Loans pursuant to clause
(B) below), (2) to Shenandoah on the Closing Date (but not thereafter) a term
loan in an amount not to exceed such Lender's Proportionate Share of
$8,000,000, and (3) to Port City on the Closing Date (but not thereafter) a
term loan in an amount not to exceed such Lender's Proportionate Share of
$2,000,000, and (B) each Existing Lender agrees that all Existing Term Loans
of such Existing Lender (up to an amount not to exceed such Existing Lender's
Proportionate Share of $20,000,000, with the principal amount of any excess
being referred to herein as "Excess Existing Term Loans") shall be converted
for all purposes hereof and of the other Credit Documents to a Term Loan made
to Perry hereunder on the Closing Date (each Lender's obligation to make Term
Loans (and, if applicable, to convert Existing Term Loans) in such amounts
being referred to herein as its "Term Commitment," which obligation (and Term
Commitment) shall be zero after the making of the Term Loans on the Closing
Date). The Term Loans made (or converted) on the Closing Date shall be made
as Prime Rate Loans.
(ii) All Term Loans shall be made by the Lenders simultaneously
and proportionately to their respective Proportionate Shares, it being
understood that the Lenders' respective Term Commitments are several and not
joint and that no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Term Loan hereunder nor shall
the Term Commitment of any Lender be increased or decreased as a result of
the failure by any other Lender to perform its obligation to make any Term
Loan hereunder.
(iii) The Term Loans, when repaid or prepaid, whether by voluntary
or mandatory prepayment, in accordance with the terms hereof, may not be
reborrowed.
(b) TERM NOTES AND SCHEDULED TERM LOAN INSTALLMENTS. (i) Each
Borrower shall execute and deliver to each Lender on the Closing Date a Term
Note, in the principal amount of that Lender's Term Loan to such Borrower.
(ii) Each Borrower shall repay the principal amount of the Term
Loans made to such Borrower on the Closing Date in installments (each a
"Scheduled Term Loan Installment" and collectively, the "Scheduled Term Loan
Installments") on each Term Loan Repayment Date in an installment amount set
forth below for such Borrower with respect to such Term Loan Repayment Date:
<TABLE>
<CAPTION>
Term Loan Perry Shenandoah Port City
Repayment Dates Installment Amount Installment Amount Installment Amount
- --------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
First to Twelfth.............. $ 111,111.11 $ 44,444.44 $ 11,111.11
Thirteenth to Twenty-Fourth... $ 222,222.22 $ 88,888.89 $ 22,222.22
Twenty-Fifth to Sixtieth...... $ 333,333.33 $ 133,333.33 $ 33,333.33
</TABLE>
22
<PAGE>
The Terms Loans shall be repaid in full on the Expiration Date and,
notwithstanding the foregoing, the Scheduled Term Loan Installments due on
the Expiration Date shall be in the amount necessary to repay the Term Loans
in full.
2.2. REVOLVING CREDIT COMMITMENTS
(a) Subject to the terms and conditions set forth in this Credit
Agreement, on and after the Closing Date and to and excluding the Expiration
Date, (A) each Lender severally agrees to make loans to the Borrowers in an
aggregate principal amount outstanding not to exceed at any time such
Lender's Proportionate Share of THE LESSER OF (x) the total Revolving Credit
Commitments (which shall not exceed $45,000,000) and (y) the sum of the
Borrowing Bases of the Borrowers, minus, in each case, the then outstanding
Letter of Credit Obligations (PROVIDED that the aggregate amount of Revolving
Loans outstanding to any Borrower at any time shall not exceed the Borrowing
Base for such Borrower at such time, MINUS, the then outstanding Letter of
Credit Obligations of such Borrower), and (B) each Existing Lender and the
Borrowers agree that the sum of all Existing Revolving Loans of such Lender
PLUS the aggregate principal amount, if any, of all Excess Existing Term
Loans of such Lender shall be converted for all purposes hereof and of the
other Credit Documents to a Revolving Loan made by such Lender to Perry
hereunder on the Closing Date (all Loans so converted under this Section
2.2(a) being referred to in this Section 2.2(a) as "Converted Revolving
Loans"). In addition to the foregoing, each Lender and the Borrowers agree
that on the Closing Date each Lender that is not an Existing Lender (a "New
Lender") shall pay to the Agent for the account of the Existing Lenders an
amount equal to such New Lender's Proportionate Share of such Converted
Revolving Loans (and such amounts shall be Revolving Loans made by such New
Lender to Perry on the Closing Date) and the Agent shall distribute such
amounts to the Existing Lenders as payments in respect of Converted Revolving
Loans, or permit Existing Lenders to deduct such amounts from Revolving Loans
to be made to Perry on the Closing Date, in each case so that after giving
effect to all such distributions and deductions each Lender hereunder has
made Revolving Loans to Perry in an amount equal to such Lender's
Proportionate Share of the aggregate principal amount of all Revolving Loans
outstanding to Perry hereunder. The Revolving Loans made (or converted) on
the Closing Date shall be made as Prime Rate Loans.
(b) The Agent may, but shall not be obligated to, rely on each
Borrowing Base Certificate and any other schedules or reports in determining
the eligibility of Accounts and Inventory. The Agent, in the exercise of its
Permitted Discretion, may (i) establish and increase or decrease reserves
against Eligible Accounts Receivable and Eligible Inventory, (ii) reduce the
advance rates provided for in the definition of "Borrowing Base," or restore
such advance rates to any level equal to or below the advance rates in effect
as of the date of this Credit Agreement, and (iii) impose additional
restrictions (or eliminate the same) to the standards of eligibility set
forth in the definitions of "Eligible Accounts Receivable" and "Eligible
Inventory."
2.3. BORROWING OF REVOLVING LOANS. It is contemplated that Revolving
Loans will be made available to each Borrower directly by the Lenders
("Lender Advances") and, in the circumstances described in Section 2.3(b),
from the Agent acting on behalf of the Lenders ("Agent Advances").
(a) LENDER ADVANCES OF REVOLVING LOANS. Subject to the determination
by the Agent and the Lenders that the conditions for borrowing contained in
Section 5.2 are satisfied, upon notice, in accordance with Section 2.5, from
any Borrower to the Agent ("Notice of Borrowing") received by the Agent
before 1:00 P.M. New York City time on a Business Day, Lender Advances of
Revolving Loans shall be made to the extent of each Lender's Proportionate
Share of the requested Borrowing. The Notice of Borrowing shall specify
whether the requested Borrowing is of Prime Rate Loans or Eurodollar Rate
Loans.
23
<PAGE>
(b) AGENT ADVANCES OF REVOLVING LOANS. In addition to the provisions
of clause (a) above, the Agent is authorized by the Lenders, but is not
obligated, to make Agent Advances (i) upon a Notice of Borrowing received by
the Agent before 2:00 P.M. New York City time on a Business Day, or (ii) upon
advice received by the Agent on a Business Day from the Disbursement Account
Bank of the face amount of checks drawn on the Disbursement Account of a
Borrower, which have been or will be presented for payment on that day, MINUS
the amount of funds then available in the Disbursement Account of such
Borrower. All Agent Advances shall be Prime Rate Loans. Except during the
period provided in Section 2.3(b)(y), Agent Advances to or for the account of
any Borrower will not at any time exceed the amount available for borrowing
by such Borrower under Section 2.2(a). Agent Advances will be subject to
periodic settlement with the Lenders under Section 2.7. Agent Advances may
be made only in the following circumstances:
(x) For administrative convenience, the Agent may, but is not obligated
to, make Agent Advances in reliance upon a Borrower's actual or deemed
representations under Section 5.2 that the conditions for borrowing are
satisfied.
(y) If the conditions for borrowing under Section 5.2 cannot be
fulfilled, a Borrower shall in its Notice of Borrowing or otherwise give
immediate notice thereof to the Agent, with a copy to each of the Lenders,
and the Agent may, but is not obligated to, continue to make Agent Advances
for twenty (20) Business Days from the date the Agent first receives such
notice, or until sooner instructed by the Majority Lenders to cease. Once
notice is given with respect to an event causing the conditions not to be
fulfilled, no additional notice with respect to that event will be
effective to commence a new period under this Section 2.3(b)(y). All Agent
Advances made pursuant to this clause (y) shall be due and payable within
one Business Day of demand.
2.4. DISBURSEMENT OF REVOLVING LOANS. The proceeds of Revolving
Loans shall be transmitted by the Agent (x) upon advice received by the
Agent from the Disbursement Account Bank, as described in Section 2.3(b),
directly to the Disbursement Account indicated in such advice, (y) in the
circumstances described in Section 3.5, directly to the Issuing Bank and (z)
in all other circumstances, as requested by the applicable Borrower in its
Notice of Borrowing.
2.5. NOTICES OF BORROWING. Notices of Borrowing may be given under
this Section by telephone or facsimile transmission, and, if by telephone,
promptly confirmed in writing substantially in the form of Exhibit J. Each
Borrower shall specify in each Notice of Borrowing given by it whether the
conditions for the requested borrowing are satisfied. A Borrower may request
one or more borrowings of Prime Rate Loans by a Notice of Borrowing given not
later than 1:00 P.M. New York City time on the same Business Day as the
proposed Borrowing. Notice of Borrowing for Eurodollar Rate Loans shall be
given not later than 1:00 P.M. New York City time on the third Business Day
prior to the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Revolving Loans
of the same Type and, if such Borrowing is to consist of Eurodollar Rate
Loans, shall be in an aggregate amount for all Lenders of not less than
$1,000,000 or an integral multiple of $100,000 in excess thereof. The right
of any Borrower to choose Eurodollar Rate Loans is subject to the provisions
of Section 4.13. Once given, a Notice of Borrowing that requests a Lender
Advance is irrevocable by and binding on the Borrower giving such Notice of
Borrowing. Each Borrower shall provide, from time to time, to the Agent a
list, with specimen signatures, of officers of such Borrower authorized to
request Revolving Loans and the Agent is entitled to rely upon such list
until it is replaced by such Borrower.
2.6. SAME DAY SETTLEMENT OF LENDER ADVANCES. The Agent shall give
each Lender prompt notice by telephone or facsimile transmission of a Notice of
Borrowing that requests Lender Advances of Revolving Loans. No later than
3:00 P.M. New York City time on the date of the proposed
24
<PAGE>
Borrowing, each Lender shall make available to the Agent at the Agent's
address its Proportionate Share of such Borrowing in immediately available
funds. Unless the Agent receives contrary written notice prior to the date
of any such Borrowing of Revolving Loans, it is entitled to assume that each
Lender will make available its Proportionate Share of the Borrowing and in
reliance upon that assumption, but without any obligation to do so, may
advance such Proportionate Share on behalf of the Lender.
25
<PAGE>
2.7. PERIODIC SETTLEMENT OF AGENT ADVANCES AND REPAYMENTS
(a) THE SETTLEMENT DATE. The amount of each Lender's Proportionate
Share of Loans shall be computed weekly (or more frequently in the Agent's
discretion) and shall be adjusted upward or downward based on all Loans
(including Agent Advances) and repayments received by the Agent as of 5:00
P.M. New York City time on the last Business Day of the period specified by
the Agent (such date, the "Settlement Date").
(b) SUMMARY STATEMENTS; SETTLEMENTS OF PRINCIPAL. The Agent shall
deliver to each of the Lenders promptly after the Settlement Date a summary
statement of the amount of outstanding Revolving Loans (including Agent
Advances) for the period and the amount of repayments received for the
period. As reflected on the summary statement: (i) the Agent shall transfer
to each Lender its Proportionate Share of repayments; and (ii) each Lender
shall transfer to the Agent, or the Agent shall transfer to each Lender, such
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Loans made by each Lender shall be equal to such
Lender's Proportionate Share of the aggregate amount of Loans outstanding as
of such Settlement Date. If the summary statement requires transfers to be
made to the Agent by the Lenders and is received prior to 12:00 Noon New York
City time on a Business Day, such transfers shall be made in immediately
available funds no later than 3:00 P.M. New York City time that day; and, if
received after 12:00 Noon New York City time, then no later than 3:00 P.M.
New York City time on the next Business Day. The obligation of each Lender to
transfer such funds is irrevocable, unconditional and without recourse to or
warranty by the Agent.
(c) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on the
Loans (including Agent Advances) together with the amount of the Unused Line
Fee, shall be allocated by the Agent to each Lender in accordance with the
Proportionate Share of Loans actually advanced by and repaid to each Lender,
and shall accrue from and including the date such Loans are so advanced and
to but excluding the date such Loans are either repaid by the applicable
Borrower or actually settled under this Section. Promptly after the end of
each month, the Agent shall distribute to each Lender its Proportionate Share
of the interest and Unused Line Fee accrued during and paid with respect to
that month. The Agent shall distribute interest on Eurodollar Rate Loans
promptly after it is received.
2.8. SHARING OF PAYMENTS. If any Lender obtains any payment in
excess of its Proportionate Share of payments on account of the Loans or
Letter of Credit Obligations, it will immediately purchase from the other
Lenders portions of their Loans and Letter of Credit participations
sufficient to cause that Lender to share the excess payment ratably with all
the other Lenders.
2.9. DEFAULTING LENDERS
(a) A Lender who fails to pay the Agent its Proportionate Share of any
Revolving Loans (including Agent Advances) made available by the Agent on such
Lender's behalf, or who fails to pay any other amount owing by it to the Agent,
is a "Defaulting Lender." The Agent may recover all such amounts owing by a
Defaulting Lender on demand. If the Defaulting Lender does not pay such amounts
on the Agent's demand, the Agent shall promptly notify the Borrower for whose
account such Revolving Loans were made and such Borrower shall pay such amounts
within five Business Days. In addition, the Defaulting Lender or such Borrower,
as the case may be, shall pay the Agent interest on such amount for each day
from the date it was made available by the Agent to such Borrower to the date it
is recovered by the Agent at a rate PER ANNUM equal to (x) the Federal Funds
Rate, if paid by the Defaulting Lender, or (y) the then applicable rate of
interest calculated under Section 4.1, if paid by such Borrower; PLUS, in each
case, the Expenses and losses, if any, incurred as a result of the Defaulting
Lender's failure to perform its obligations. Any payment by a Borrower to repay
an advance made by the Agent on behalf of a Defaulting Lender shall, as between
such Borrower and the Agent, serve to
26
<PAGE>
repay the applicable advance to the extent of the amount paid, but as between
such Borrower and the Defaulting Lender shall not serve to relieve the
Defaulting Lender of the consequences of such breach.
(b) The failure of any Lender to fund its Proportionate Share of any
Revolving Loan (including Agent Advances) shall not relieve any other Lender
of its obligation to fund its Proportionate Share of such Revolving Loan.
Conversely, no Lender shall be responsible for the failure of another Lender
to fund its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a Defaulting Lender
any payments made by a Borrower to the Agent for the Defaulting Lender's
benefit; nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by the Agent and no Event of Default or Default shall
result from, and no Borrower shall be considered not to be in compliance with
this Agreement, the Notes, the Loan Documents, or any other document as a
result of, the non-payment of such amounts. The Agent may hold and, in its
discretion, re-lend to the Borrowers the amount of all such payments received
or retained by it for the account of such Defaulting Lender. For purposes of
voting or consenting to matters with respect to the Credit Documents and
determining Proportionate Shares (and only for such purposes), such
Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitment (and, if applicable, such Lender's outstanding Loans and Letter of
Credit participations) shall be deemed to be zero (-0-). This section shall
remain effective with respect to such Lender until (x) the Obligations under
this Credit Agreement shall have been declared or shall have become
immediately due and payable or (y) the Majority Lenders, the Agent and the
Borrowers shall have waived such Lender's default in writing. The operation
of this Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the performance by any
Borrower of its duties and obligations hereunder.
(d) The Agent shall, upon written request of any Borrower, notify the
Lenders of the failure by a Defaulting Lender to perform its obligation to
make a Loan required to be made by such Defaulting Lender hereunder and any
Lender (other than such Defaulting Lender) may, if it desires, assume, in
such proportion as the Majority Lenders (calculated without inclusion of the
Defaulting Lender) may agree, the obligation of the Defaulting Lender or
Lenders to make Loans, but no Lender shall be obligated to do so.
2.10. EXTENSION OF EXPIRATION DATE. The Expiration Date may be
extended (if so extended, the "Extended Expiration Date"), upon the mutual
agreement of the Borrowers, the Agent and the Lenders, in their respective
sole discretion, for successive additional one-year periods, subject to
satisfaction of the following conditions: (i) the Borrowers shall have
delivered a written request to the Agent and the Lenders not later than 90
days prior to the Expiration Date, in the case of the initial extension
request, or the then current Extended Expiration Date, in the case of any
subsequent extension request, and (ii) not later than the Expiration Date, in
the case of an initial extension request, or the then current Extended
Expiration Date, in the case of any subsequent extension request, the
Borrowers, the Agent and the Lenders shall have entered into a written
agreement evidencing the agreement of all parties to such extension upon
terms and conditions then satisfactory to the Borrowers, the Agent and the
Lenders in their respective sole discretion.
ARTICLE 3. LETTERS OF CREDIT
3.1. ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and
conditions set forth in this Credit Agreement, the Agent may from time to
time cause the Issuing Bank to issue Letters of Credit hereunder at the
request of any Borrower and for such Borrower's account, as more specifically
described below. The Agent shall not be obligated to cause the Issuing Bank
to issue any Letter of Credit for the account of any Borrower if:
27
<PAGE>
(a) Issuance of the requested Letter of Credit (i) would cause the
Letter of Credit Obligations then outstanding to exceed $5,000,000 or (ii)
would cause the sum of all Revolving Loans PLUS the Letter of Credit
Obligations then outstanding hereunder to exceed the total Revolving Credit
Commitments then in effect or (iii) would cause the sum of the Revolving
Loans PLUS the Letter of Credit Obligations then outstanding to such Borrower
to exceed the Borrowing Base then in effect for such Borrower or (iv) would
cause the Letter of Credit Obligations then outstanding with respect to
documentary Letters of Credit to exceed $3,000,000 or (v) would cause the
Letter of Credit Obligations then outstanding with respect to standby Letters
of Credit to exceed $2,000,000; or
(b) Issuance of the Letter of Credit is enjoined, restrained or
prohibited by any Governmental Authority, Requirement of Law or any request
or directive of any Governmental Authority (whether or not having the force
of law) or would impose upon the Agent or the Issuing Bank any material
restriction, reserve, capital requirement, loss, cost or expense (for which
the Agent or the Issuing Bank is not otherwise compensated) not in effect or
known as of the Closing Date; or
(c) A default of any Lender's obligations to fund under Section 3.6
exists, or such Lender is a Defaulting Lender, unless the Agent and the
Issuing Bank have entered into satisfactory arrangements with the Borrowers
to eliminate the Issuing Bank's risk with respect to such Lender, including
cash collateralization of such Lender's Proportionate Share of the Letter of
Credit Obligations.
3.2. TERMS OF LETTERS OF CREDIT. The proposed amount, terms and
conditions, and form of each Letter of Credit (and of any drafts or
acceptances thereunder) shall be subject to approval by the Agent and the
Issuing Bank. The term of each standby Letter of Credit shall not exceed 360
days, but may be subject to annual renewal. The term of each documentary
Letter of Credit shall not exceed 120 days. No standby Letter of Credit
shall have an expiry date later than five (5) Business Days prior to the
Expiration Date and no documentary Letter of Credit shall have an expiry date
later than 60 days prior to the Expiration Date.
3.3. REQUEST FOR ISSUANCE. A request for issuance of a Letter of
Credit in the form of Exhibit M (a "Letter of Credit Request") may be given
in writing or electronically and, if requested by the Agent, promptly
confirmed in writing. A Letter of Credit Request must be received by the
Agent no later than 1:00 P.M. New York City time at least five (5) Business
Days (or such shorter period as may be agreed to by the Issuing Bank) in
advance of the proposed date of issuance.
3.4. LENDERS' PARTICIPATION. Immediately upon issuance or amendment
of any Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without
recourse or warranty, an undivided interest and participation in all rights
and obligations under such Letter of Credit (other than fees and other
amounts owing to the Issuing Bank) in accordance with such Lender's
Proportionate Share.
3.5. PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. Upon
notice from the Issuing Bank of any drawing under any Letter of Credit, the
Agent which shall notify the Borrower for whose account such Letter of Credit
was issued of such drawing not later than 11:00 A.M. New York City time on
the Business Day immediately prior to the date on which the Issuing Bank
intends to honor such drawing. Such Borrower will be deemed to have
concurrently given a Notice of Borrowing to the Agent for Revolving Loans to
be made as Prime Rate Loans in the amount of and at the time of such drawing.
The proceeds of such Revolving Loans shall be applied directly by the Agent
to reimburse the Issuing Bank for the amount of such drawing.
3.6. PAYMENT BY LENDERS. If Revolving Loans are not made in an
amount sufficient to reimburse the Issuing Bank in full for the amount of any
draw, the Agent shall promptly notify each Lender of the unreimbursed amount of
such drawing and of such Lender's respective participation
28
<PAGE>
therein. Each Lender shall make available to the Agent, for the account of
the Issuing Bank, the amount of its participation in immediately available
funds not later than 1:00 P.M. New York City time on the next Business Day.
If any Lender fails to make available to the Agent the amount of such
Lender's participation, the Issuing Bank shall be entitled to recover such
amount on demand from such Lender together with interest at the Federal Funds
Rate for the first three Business Days and thereafter at the Prime Lending
Rate. For each Letter of Credit, the Agent shall promptly distribute to each
Lender which has funded the amount of its participation its Proportionate
Share of all payments subsequently received by the Agent from the applicable
Borrower in reimbursement of honored drawings thereunder.
3.7. NATURE OF ISSUING BANK'S DUTIES. In determining whether to pay
under any Letter of Credit, the Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit. As among the Borrowers, the
Issuing Bank and each other Lender, the Borrowers assume all risks of the
acts and omissions of the Issuing Bank, or misuse of the Letters of Credit by
the respective beneficiaries of such Letters of Credit. Any action taken or
omitted to be taken by the Issuing Bank under or in connection with any
Letter of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for the Issuing Bank any liability to
any Borrower, the Agent or any Lender.
3.8. OBLIGATIONS ABSOLUTE. The obligations of each Borrower to
reimburse the Issuing Bank for drawings honored under the Letters of Credit
issued for the account of such Borrower and the obligations of the Lenders
under Section 3.6 shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Credit Agreement under all
circumstances including, without limitation, the fact that a Default or an
Event of Default shall have occurred and be continuing.
3.9. AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
DOCUMENTATION; RELIANCE ON CREDIT AGREEMENT BY ISSUING BANK. The Agent
shall be authorized to execute, deliver and perform on behalf of the Lenders
such letter of credit applications, shipping indemnities, letter of credit
modifications and consents and other undertakings for the benefit of the
Issuing Bank as may be reasonably necessary or appropriate in connection with
the issuance or modification of Letters of Credit requested by any Borrower
hereunder. The Lenders, the Agent and each Borrower all expressly agree that
the terms of this Article 3 and various other provisions of this Credit
Agreement identifying the Issuing Bank are also intended to benefit the
Issuing Bank and the Issuing Bank shall be entitled to enforce the provisions
hereof which are for its benefit.
3.10. ADDITIONAL PAYMENTS. If by reason of (a) any change in any
Requirement of Law or any change in the interpretation or application by any
Governmental Authority of any Requirement of Law or (b) compliance by the
Issuing Bank or any Lender with any direction, request or requirement
(whether or not having the force of law) of any Governmental Authority or
monetary authority including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System as from time to time in effect
(and any successor thereto):
(i) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letters of Credit issued by
the Issuing Bank or participations therein purchased by any Lender; or
(ii) there shall be imposed on the Issuing Bank or any Lender any other
condition regarding this subsection 3.10, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to the Issuing Bank or any Lender of issuing, making or maintaining any Letter
of Credit or of purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by such Issuing Bank or any
29
<PAGE>
Lender, then, and in any such case, the Issuing Bank or such Lender may, at
any time within a reasonable period after the additional cost is incurred or
the amount received is reduced, notify the Borrowers, and each Borrower shall
pay on demand such amounts as the Issuing Bank or such Lender may specify to
be necessary to compensate the Issuing Bank or such Lender for such
additional cost or reduced receipt, together with interest on such amount
from 10 days after the date of such demand until payment in full thereof at a
rate equal at all times to the Prime Lending Rate PER ANNUM. The
determination by the Issuing Bank or any Lender, as the case may be, of any
amount due pursuant to this Section, as set forth in a certificate setting
forth the calculation thereof in reasonable detail, shall, in the absence of
manifest or demonstrable error, be final and conclusive and binding on all of
the parties hereto.
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS
4.1. INTEREST ON PRIME RATE LOANS. Each Borrower shall pay to the
Lenders on the first Business Day of each month interest on Prime Rate Loans
outstanding to such Borrower, calculated monthly in arrears at an interest
rate PER ANNUM equal to the Prime Lending Rate PLUS (i) with respect to
Revolving Loans consisting of Prime Rate Loans, and with respect to Letter of
Credit Obligations described in clause (ii) of the definition thereof, the
Applicable Prime Rate Margin for Revolving Loans and (ii) with respect to
Term Loans consisting of Prime Rate Loans, the Applicable Prime Rate Margin
for Term Loans on the average net balances owing to the Agent and the Lenders
at the close of business each day during such month for Revolving Loans and
Term Loans, as the case may be. The rate hereunder shall change each day the
Prime Lending Rate or the Applicable Prime Rate Margin changes.
4.2. INTEREST ON EURODOLLAR RATE LOANS. Interest on Eurodollar
Rate Loans shall be payable on the last day of each Interest Period with
respect to such Eurodollar Rate Loans (and, in the case of any Eurodollar
Rate Loan with an Interest Period of longer than three months, on each
three-month anniversary of the commencement of that Interest Period), at the
date of conversion of such Eurodollar Rate Loans (or a portion thereof) to a
Prime Rate Loan and at maturity of such Eurodollar Rate Loans at an interest
rate per annum equal during the Interest Period for such Eurodollar Rate
Loans to the Adjusted Eurodollar Rate for the Interest Period in effect for
such Eurodollar Rate Loans PLUS (i) with respect to Revolving Loans
consisting of Eurodollar Rate Loans, the Applicable Eurodollar Rate Margin
for Revolving Loans and (ii) with respect to Term Loans consisting of
Eurodollar Rate Loans, the Applicable Eurodollar Rate Margin for Term Loans.
The rate applicable pursuant to this Section 4.02 shall change each day the
Applicable Eurodollar Rate Margin changes. After maturity of such Eurodollar
Rate Loans (whether by acceleration or otherwise), interest shall be payable
upon demand. The Agent upon determining the Adjusted Eurodollar Rate for any
Interest Period shall promptly notify the applicable Borrower and the Lenders
by telephone (confirmed promptly in writing) or in writing thereof. Each
determination by the Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest or demonstrable error.
4.3. UNUSED LINE FEE. The Borrowers shall pay to the Lenders on the
first Business Day of each month and on the Expiration Date a fee equal to
0.5% PER ANNUM calculated monthly in arrears on the average unused portion of
the total Revolving Credit Commitments at the close of business each day
during such month or occurring prior to the Expiration Date (the "Unused Line
Fee").
4.4. LETTER OF CREDIT FEES
(a) Each Borrower shall pay to the Lenders on the first Business Day of
each month a fee (the "Letter of Credit Fees"), in an amount equal to (i) the
rate PER ANNUM equal to the Applicable Eurodollar Rate Margin of the daily
weighted average amount of Letter of Credit Obligations relating to standby
Letters of Credit outstanding for the account of such Borrower during the
immediately preceding month, (ii) an opening fee equal to 0.125% of the initial
face amount of each documentary Letter of
30
<PAGE>
Credit issued for the account of such Borrower during the immediately
preceding month, (iii) a negotiation fee equal to 0.125% of the amount drawn
under each documentary Letter of Credit issued for the account of such
Borrower during the immediately preceding month and (iv) a guaranty fee equal
to 0.125% of the daily weighted average of the maximum amount available to be
drawn under each documentary Letter of Credit guaranteed for the account of
such Borrower hereunder and outstanding during the immediately preceding
month. The rate applicable pursuant to this Section 4.4(a) shall change each
day the Applicable Eurodollar Rate Margin changes. Notwithstanding the
foregoing, Letter of Credit Fees on Letter of Credit Obligations outstanding
after the occurrence and during the continuance of an Event of Default shall
be payable on demand at a rate equal to the rate at which the Letter of
Credit Fees are charged pursuant to the first sentence of this Section
4.4(a), PLUS 2% PER ANNUM.
(b) Each Borrower shall also pay the customary charges, fees and
expenses of the Issuing Bank for the issuance, administration and negotiation
of each Letter of Credit for the account of such Borrower and the Agent shall
be entitled to charge to the Loan Account such fees, charges and expenses of
the Issuing Bank (in each case, the "Issuing Bank Fees"). Each determination
by the Agent of Letter of Credit Fees, Issuing Bank Fees and other fees,
charges and expenses under this Section shall be conclusive and binding for
all purposes, absent manifest or demonstrable error.
4.5. INTEREST AFTER EVENT OF DEFAULT. From the date of occurrence of
an Event of Default until the earlier of (i) the date all Obligations (other
than non-contingent Obligations for which no demand has been made) have been
paid and satisfied in full or (ii) the date such Event of Default is waived,
the Borrowers shall be obligated to pay to the Lenders interest on the Loans
and on the Letter of Credit Obligations calculated at rates PER ANNUM equal
to the rates in effect under Section 4.1 PLUS in each case 2% PER ANNUM.
4.6. EXPENSES; FEES. The Borrowers shall reimburse the Agent's
Expenses promptly upon demand and pay the fees provided in the Fee Letter in
accordance therewith.
4.7. MANDATORY PAYMENT; REDUCTION OF COMMITMENTS.
(a) MANDATORY PAYMENT. (i) Except during the period described in
Section 2.3(b)(y) (but at no other time unless consented to by all
Lenders), the aggregate balance of Revolving Loans and all Letter of Credit
Obligations outstanding at any time to any Borrower in excess of the
Borrowing Base then in effect for such Borrower shall be immediately due
and payable without the necessity of any demand.
(ii) On March 31 of each year commencing March 31, 1999, the
Borrowers shall make a mandatory prepayment of Term Loans in an aggregate
amount equal to the lesser of (i) 75% of Excess Cash Flow determined for
the then most recently ended Fiscal Year and (ii) $10,000,000.
(iii) If Holdings or any of its Subsidiaries shall receive the
proceeds of any payment pursuant to Section 3.4(c) of the Judd's Merger
Agreement, one hundred percent (100%) of such amount shall be immediately
paid to the Agent to be applied to prepay the Revolving Loans outstanding
to each Borrower ratably.
(iv) (A) If any Borrower, Judd's or Holdings shall receive proceeds
from the issuance of any debt securities (exclusive of Indebtedness
permitted to be incurred pursuant to Section 8.7 of this Agreement,
Indebtedness of Holdings incurred to refinance or replace Indebtedness of
Holdings existing as of the Closing Date to the extent not prohibited under
the Credit Documents and Indebtedness of Holdings permitted by Section
4(b)(5) of the Holdings Guarantee), the Borrowers immediately shall pay an
amount equal to one hundred percent (100%) of the net cash proceeds
31
<PAGE>
therefrom to the Agent to be applied first to prepay the Term Loans until
paid in full and then to repay the outstanding Revolving Loans; and (B) if
any Borrower, Judd's or Holdings shall receive proceeds from the issuance
of any equity securities (exclusive of the Holdings Equity Issuance, equity
issuances of Holdings made to refinance or replace Indebtedness or equity
of Holdings existing as of the Closing Date to the extent so used, and
equity issuances made to employees of any Borrower or its Subsidiaries),
the Borrowers immediately shall pay an amount equal to fifty percent (50%)
of the net cash proceeds therefrom to the Agent to be applied first to
prepay the Term Loans until paid in full and then to repay the outstanding
Revolving Loans.
(v) If any Borrower or any Subsidiary of any Borrower shall receive
proceeds from the consummation of any asset sales permitted under Section
8.10(iv) or not permitted under this Credit Agreement, the Borrowers
immediately shall pay an amount equal to one hundred percent (100%) of the
net cash proceeds (including any net cash proceeds received from any
Investment made in connection with such sale) therefrom to the Agent to be
applied first to prepay the Term Loans until paid in full and then to repay
the outstanding Revolving Loans.
All prepayments of Term Loans pursuant to this Section shall be applied,
without premium or penalty (other than applicable costs under Section 4.13),
to the Scheduled Term Loan Installments in inverse order of maturity. All
repayments of Revolving Loans pursuant to this Section may (subject to the
terms and conditions of this Credit Agreement) be reborrowed. All
prepayments and repayments pursuant to this Section 4.7 shall be made by each
Borrower ratably based on the aggregate principal amount of the Term Loans or
Revolving Loans, as the case may be, outstanding to such Borrower in relation
to the aggregate principal amount of the Term Loans or Revolving Loans, as
the case may be, outstanding to all Borrowers.
(b) VOLUNTARY REDUCTION OF COMMITMENTS; PREPAYMENTS. (i) On the
Expiration Date, any Commitment of each Lender shall automatically reduce
to zero and may not be reinstated. Any Borrower may reduce or terminate
the Revolving Credit Commitments ratably among the Lenders at any time and
from time to time in whole or in part. Each such reduction must be in an
aggregate amount for all the Lenders of not less than $5,000,000 (and in
increments of $1,000,000 thereafter). If the Term Loans have been paid in
full and any Borrower seeks to reduce Revolving Credit Commitments to an
aggregate amount less than $5,000,000, then the Commitments shall be
reduced to zero and this Credit Agreement shall be terminated. Once
reduced, no portion of the Commitments may be reinstated.
(ii) Any Borrower may, upon two Business Days notice to Agent stating
the proposed date and aggregate principal amount of the prepayment, and if
such notice is given such Borrower shall, prepay the outstanding principal
amounts of the Term Loan owing by such Borrower comprising part of the same
Borrowing in whole or ratably in part, in an amount not less than $500,000
and incremental multiples of $100,000 in excess thereof, together with
accrued interest to the date of such prepayment on the principal amount
prepaid. Such voluntary repayments will be applied to Scheduled Term Loan
Installments of such Borrower in inverse order of maturity.
4.8. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT. The Agent
shall maintain an account on its books in the name of each Borrower (each a
"Loan Account") in which such Borrower will be charged with all loans and
advances made by the Lenders to such Borrower or for such Borrower's account,
including the Term Loans, the Revolving Loans, and all Letter of Credit
Obligations, the Fees, the Expenses and any other Obligations of such
Borrower. The Loan Account of each Borrower will be credited with all
payments received by the Agent from such Borrower or for such Borrower's
account, including all amounts received in the Concentration Account from any
Lockbox Bank. The Agent shall send each Borrower a monthly statement
reflecting the activity in the Loan
32
<PAGE>
Account of such Borrower. Absent manifest or demonstrable error, each
monthly statement shall be an account stated and shall be final, conclusive
and binding on each Borrower.
4.9. PAYMENT PROCEDURES. Each Borrower hereby authorizes the
Agent to charge the Loan Account of such Borrower with the amount of all
interest, Fees and Expenses and other payments to be made hereunder and under
the other Credit Documents. Each Borrower's obligations to the Agent and the
Lenders with respect to such payments shall be discharged by the Agent's
charging the Loan Account of such Borrower as provided herein (but only to
the extent of funds actually received by the Agent).
4.10. COLLECTION OF ACCOUNTS. Each Borrower shall at all times
maintain lockboxes (the "Lockboxes") and shall instruct all account debtors
on the Accounts of such Borrower to remit all Collections to such Lockboxes.
Each Borrower, the Agent and financial institutions selected by such Borrower
and acceptable to the Agent (the "Lockbox Banks") shall enter into agreements
substantially in the form of Exhibit G (the "Lockbox Agreements"), which
among other things shall provide for the opening of an account for the
deposit of Collections (a "Collection Account") at a Lockbox Bank. All
Collections and other amounts received by any Borrower from any account
debtor, in addition to all other cash received from any other source, shall
upon receipt be deposited into a Collection Account. Termination of such
arrangements shall also be subject to approval by the Agent. Upon the terms
and subject to the conditions set forth in the Lockbox Agreements, all
available amounts held in each Collection Account of a Borrower shall be
wired each Business Day into an account (the "Concentration Account")
maintained by the Agent at Bankers Trust Company for such Borrower.
4.11. APPLICATION OF PAYMENTS. All amounts received in the
Concentration Account of a Borrower from the Lockbox Banks shall be credited
to the Loan Account of such Borrower. Except as provided in Section 9.5,
after the occurrence of an Event of Default, and until it is waived, all
amounts received by the Agent from the Lockbox Banks, from liquidation of
Collateral or otherwise, shall be applied in the following order: FIRST, to
the payment of any Fees, Expenses or other Obligations due and payable to the
Agent under any of the Credit Documents, including Agent Advances and any
other amounts advanced by the Agent on behalf of the Lenders; SECOND, to the
payment of any Fees, expenses or other Obligations due and payable to the
Issuing Bank under any of the Credit Documents; THIRD, to the ratable payment
of any Fees, expenses or other Obligations due and payable to the Lenders
under any of the Credit Documents other than those Obligations specifically
referred to in this Section; FOURTH, to the ratable payment of interest due
on the Loans; and, FIFTH, to the ratable payment of principal due on the
Loans.
4.12. CALCULATIONS. All calculations of (i) interest hereunder
and (ii) Fees, including, without limitation, Unused Line Fees and Letter of
Credit Fees, shall be made by the Agent, on the basis of a year of 360 days
for the actual number of days elapsed (including the first day but excluding
the last day) occurring in the period for which such interest or Fees are
payable. Each determination by the Agent of an interest rate, Fee or other
payment hereunder shall be conclusive and binding for all purposes, absent
manifest or demonstrable error.
4.13. SPECIAL PROVISIONS RELATING TO EURODOLLAR RATE LOANS.
(a) CONTINUATION. With respect to any Borrowing by a Borrower consisting
of Eurodollar Rate Loans, such Borrower may (so long as no Default under Section
9.1(a) or Event of Default has occurred and is continuing), subject to the
provisions of Section 4.13(c), elect to maintain such Borrowing or any portion
thereof as consisting of Eurodollar Rate Loans by selecting a new Interest
Period for such Borrowing, which new Interest Period shall commence on the last
day of the immediately preceding Interest Period. Each selection of a new
Interest Period shall be made by notice given not later than 1:00 P.M. New York
City time on the third Business Day prior to the date of any such continuation
33
<PAGE>
relating to Eurodollar Rate Loans, by such Borrower to the Agent. Such
notice by such Borrower of a continuation (a "Notice of Continuation") shall
be by telephone or facsimile transmission, and if by telephone, promptly
confirmed in writing substantially in the form of Exhibit K, in each case
specifying (i) the date of such continuation, (ii) the Type of Loans
(including whether Revolving Loans or Term Loans) subject to such
continuation, (iii) the aggregate amount of Loans subject to such
continuation and (iv) the duration of the selected Interest Period. Such
Borrower may elect to maintain more than one Borrowing consisting of
Eurodollar Rate Loans by combining such Borrowings into one Borrowing and
selecting a new Interest Period pursuant to this Section 4.13(a); PROVIDED,
HOWEVER, that each of the Borrowings so combined shall consist of Revolving
Loans or Term Loans having Interest Periods ending on the same date. If any
Borrower shall fail to select a new Interest Period for any Borrowing
consisting of Eurodollar Rate Loans in accordance with this Section 4.13(a),
such Loans will automatically, on the last day of the then existing Interest
Period therefore, convert into Prime Rate Loans. The Agent shall give each
Lender prompt notice by telephone or facsimile transmission of each Notice of
Continuation. In the event any Borrowing is continued by a Borrower as a
Eurodollar Rate Loan while a Default exists and such Default matures into an
Event of Default, then, at such time, such Borrowing, at the option of the
Agent, shall convert into a Prime Rate Loan and such Borrower shall be
obligated to pay all amounts required under this Section 4.13 resulting from
such conversion.
(b) CONVERSION. Each Borrower may on any Business Day (so long as no
Default under Section 9.1(a) or Event of Default has occurred and is
continuing), upon notice (each such notice, a "Notice of Conversion") given
to the Agent, and subject to the provisions of Section 4.13(c), convert the
entire amount of or a portion of all Loans of one Type owing by such Borrower
and comprising the same Borrowing into Loans of another Type; PROVIDED,
HOWEVER, that any conversion of any Eurodollar Rate Loans into Loans of
another Type shall be made on, and only on, the last day of an Interest
Period for such Eurodollar Rate Loans and, upon conversion of any Prime Rate
Loans owing by such Borrower into Loans of another Type, such Borrower shall
pay accrued interest to the date of conversion on the principal amount
converted. Each such Notice of Conversion shall be given not later than 1:00
P.M. New York City time on the Business Day prior to the date of any proposed
conversion into Prime Rate Loans and on the third Business Day prior to the
date of any proposed conversion into Eurodollar Rate Loans. Subject to the
restrictions specified above, each Notice of Conversion shall be by telephone
or facsimile transmission, and if by telephone, promptly confirmed in writing
substantially in the form of Exhibit L, in each case specifying (i) the
requested date of such conversion, (ii) the Type of Loans (including whether
Revolving Loans or Term Loans) to be converted, (iii) the portion of such
Type of Loan to be converted, (iv) the Type of Loan such Loans are to be
converted into and (v) if such conversion is into Eurodollar Rate Loans, the
duration of the Interest Period of such Loan. Each conversion shall be in an
aggregate amount for the Loans of all Lenders of not less than $1,000,000 or
an integral multiple of $100,000 in excess thereof. Each Borrower may elect
to convert the entire amount of or a portion of all Loans of one Type owing
by such Borrower and comprising more than one Borrowing into Loans of another
Type by combining such Borrowings into one Borrowing consisting of Revolving
Loans or Term Loans of another Type; PROVIDED, HOWEVER, that if the
Borrowings so combined consist of Eurodollar Rate Loans, such Loans, once
combined, shall have Interest Periods ending on the same date. In the event
any Borrowing is converted by a Borrower into a Eurodollar Rate Loan while a
Default exists and such Default matures into an Event of Default, then, at
such time, such Borrowing, at the option of the Agent, shall immediately
convert into a Prime Rate Loan and such Borrower shall be obligated to pay
all amounts required under this Section 4.13 resulting from such conversion.
(c) CERTAIN LIMITATIONS ON EURODOLLAR RATE LOANS. The right of each
Borrower to maintain, select, continue or convert Eurodollar Rate Loans shall
be limited as follows:
34
<PAGE>
(i) If the Agent is advised by Bankers Trust Company that it is
not offering U.S. dollar deposits (in the applicable amounts) in the London
interbank market, or the Agent determines that adequate and fair means do
not otherwise exist for ascertaining the Eurodollar Rate for Eurodollar
Rate Loans comprising any requested Borrowing, continuation or conversion,
the right of each Borrower to select or maintain Eurodollar Rate Loans for
such Borrowing or any subsequent Borrowing shall be suspended until the
Agent shall notify the Borrowers and the Lenders that the circumstances
causing such suspension no longer exists, and each Loan comprising such
Borrowing shall be made as a Prime Rate Loan.
(ii) If the Lenders holding 67% or more of the total Commitments
shall, at least one Business Day before the date of any requested
Borrowing, continuation or conversion, notify the Agent that the Eurodollar
Rate for Loans comprising such Borrowing will not adequately reflect the
cost to such Lenders of making or funding their respective Loans for such
Borrowing, the right of the Borrowers to select Eurodollar Rate Loans for
such Borrowing shall be suspended until the Agent shall notify the
Borrowers and the Lenders that the circumstances causing such suspension no
longer exist, and each Loan comprising such Borrowing shall be made as a
Prime Rate Loan.
(iii) If at any time any Lender determines (which determination
shall, absent manifest error, be conclusive and binding on all parties)
that the making, continuation or conversion of any Loan as a Eurodollar
Rate Loan has become unlawful or impermissible by reason of compliance by
that Lender with any new, or change in the interpretation of any existing,
law, governmental rule, regulation or order of any Governmental Authority
(whether or not having the force of law or resulting in costs or
penalties), then, and in any such event, such Lender may give notice of
that determination in writing, to the Borrowers and the Agent and the Agent
shall promptly transmit the notice to each other Lender. Until such Lender
gives notice otherwise, the right of the Borrowers to select Eurodollar
Rate Loans from that Lender shall be suspended and each Eurodollar Rate
Loan outstanding from that Lender shall automatically and immediately
convert to a Prime Rate Loan.
(iv) The right of each Borrower to select Eurodollar Rate Loans
for any Borrowing is suspended until the fifth Business Day following the
Syndication Date.
(v) There shall not be outstanding at any one time more than an
aggregate of nine (9) Borrowings of Loans which consist of Eurodollar Rate
Loans.
(vi) No Agent Advance shall be made as a Eurodollar Rate Loan.
(d) COMPENSATION. (i) Each Notice of Continuation and Notice of
Conversion given by any Borrower shall be irrevocable by and binding on
such Borrower. In the case of any Borrowing, continuation or conversion
that the related Notice of Borrowing, Notice of Continuation or Notice of
Conversion specifies is to be comprised of Eurodollar Rate Loans, the
Borrower giving such notice shall indemnify each Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to
fulfill, on or before the date for such Borrowing, continuation or
conversion specified in such Notice of Borrowing, Notice of Continuation or
Notice of Conversion, the applicable conditions set forth in Article 5,
including, without limitation, any loss, cost or expense incurred by reason
of the liquidation or re-employment of deposits or other funds acquired by
such Lender to fund the Loan to be made by such Lender as part of such
Borrowing, continuation or conversion.
(ii) If any payment of principal of, or conversion or continuation
of, any Eurodollar Rate Loan is made other than on the last day of the
Interest Period for such Loan as a result of a payment, prepayment
(including as a result of an assignment by one Lender to a new Lender
occurring prior to the Syndication Date, but not as a result of any such
assignment occurring thereafter), conversion
35
<PAGE>
or continuation of such Loan or acceleration of the maturity of the
Revolving Notes or Term Notes pursuant to Article 9 or for any other
reason, the Borrower owing such Loan shall, upon demand by any Lender
(with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender
for any additional losses, costs or expenses which it incurs as a result
of such payment, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such
Loan.
(iii) Calculation of all amounts payable to a Lender under this
Section 4.13(d) shall be made as though such Lender elected to fund all
Eurodollar Rate Loans by purchasing U.S. dollar deposits in its Eurodollar
Lending Office's interbank eurodollar market.
4.14. INDEMNIFICATION IN CERTAIN EVENTS. If after the Closing
Date, either (i) any change in or in the interpretation of any law or
regulation is introduced, including, without limitation, with respect to
reserve requirements, applicable to the Agent, to any of the Lenders, or to
Bankers Trust Company, BT Delaware or any other banking or financial
institution from whom any of the Lenders borrows funds or obtains credit (a
"Funding Bank"), or (ii) the Agent, a Funding Bank or any of the Lenders
complies with any future guideline or request from any central bank or other
Governmental Authority or (iii) the Agent, a Funding Bank or any of the
Lenders determines that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation
or administration thereof has or would have the effect described below, or
the Agent, a Funding Bank or any of the Lenders complies with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, and in the case of
any event set forth in this clause (iii), such adoption, change or compliance
has or would have the direct or indirect effect of reducing the rate of
return on any of the Lenders' capital as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Agent's or
such Funding Bank's or Lender's policies as the case may be with respect to
capital adequacy) by an amount deemed by such Lender to be material, and any
of the foregoing events described in clauses (i), (ii) or (iii) increases the
cost to the Agent, the Issuing Bank or any of the Lenders of (A) funding or
maintaining the total Commitments or (B) issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation therein,
or reduces the amount receivable in respect thereof by the Agent, the Issuing
Bank or any Lender, then the Borrowers shall upon demand by the Agent, pay to
the Agent, for the account of each applicable Lender or, as applicable, the
Issuing Bank or a Funding Bank, additional amounts sufficient to indemnify
the Lenders against such increase in cost or reduction in amount receivable.
A certificate as to the amount of such increased cost and setting forth in
reasonable detail the calculation thereof shall be submitted to the Borrowers
by the Agent, or the applicable Lender, Issuing Bank or Funding Bank, and
shall be conclusive absent manifest or demonstrable error.
4.15. TAXES. (a) Any and all payments by any Borrower hereunder, under
the Term Loans, the Revolving Loans or under the Letters of Credit to or for the
benefit of any Lender, the Issuing Bank or the Agent shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings and penalties, interests and all
other liabilities with respect thereto ("Taxes"), excluding, (i) in the case of
each such Lender, the Issuing Bank or the Agent, taxes imposed on its net income
(including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on it by the jurisdiction under the laws of which such
Lender, the Issuing Bank or the Agent (as the case may be) is organized or any
political subdivision thereof, (ii) in the case of each Lender, taxes imposed on
its net income (including, without limitation, any taxes imposed on branch
profits), and franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable
36
<PAGE>
Lending Office or any political subdivision thereof, (iii) in the case of
each such Lender, the Issuing Bank and the Agent, any Taxes that are in
effect and that would apply to a payment to such Lender, the Issuing Bank or
Agent, as applicable, as of the Closing Date, and (iv) if any Person acquires
any interest in this Credit Agreement, any Loan or Letter of Credit pursuant
to the provisions hereof, or a Foreign Lender or the Agent changes the office
in which the Borrowing is made, accounted for or booked (any such person, or
such Foreign Lender or the Agent in that event, being referred to as a "Tax
Transferee"), any Taxes to the extent that they are in effect and would apply
to a payment to such Tax Transferee as of the date of the acquisition of such
interest or change in office, as the case may be (all such nonexcluded Taxes
being hereinafter referred to as "Covered Taxes"). If any Borrower shall be
required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder, under any Loan or under any Letter of Credit to or for the
benefit of any Lender, the Issuing Bank or the Agent or any Tax Transferee,
(A) the sum payable shall be increased as may be necessary so that after
making all required deductions of Covered Taxes (including deductions of
Covered Taxes applicable to additional sums payable under this Section 4.15)
such Lender, the Issuing Bank, the Agent or such Tax Transferee, as the case
may be, receives an amount equal to the sum it would have received had no
such deductions been made, (B) such Borrower shall make such deductions and
(C) such Borrower shall pay the full amount so deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or future
stamp, documentary, excise, privilege, intangible or similar levies that
arise at any time or from time to time (i) from any payment made under any
and all Credit Documents, (ii) from the transfer of the rights of the Lender
under any Credit Documents to any transferee, or (iii) from the execution or
delivery by any Borrower of, or from the filing or recording or maintenance
of, or otherwise with respect to the exercise by the Agent or the Lenders of
their rights under, any and all Credit Documents (hereinafter referred to as
"Other Taxes").
(c) Each Borrower will indemnify each Lender, the Issuing Bank, the
Agent, and any Tax Transferee for the full amount of (i) Covered Taxes
imposed on or with respect to amounts payable hereunder, (ii) Other Taxes,
and (iii) any Taxes (other than Covered Taxes imposed by any jurisdiction on
amounts payable under this Section 4.15) paid by such Lender, the Issuing
Bank or the Agent or such Tax Transferee, as the case may be, and any
liability (including penalties, interest and reasonable expenses) arising
solely therefrom or with respect thereto. Payment of this indemnification
shall be made by a Borrower within 15 days from the date such Lender, the
Issuing Bank or the Agent or Tax Transferee makes written demand therefor to
such Borrower certifying and setting forth in reasonable detail the
calculation thereof as to the amount and type of such Taxes. Any such
certificate submitted by the Lender, the Issuing Bank or Agent or Tax
Transferee in good faith to any Borrower shall, absent manifest or
demonstrable error, be final, conclusive and binding on all parties.
(d) Within 30 days after the date of any payment of Covered Taxes or
Other Taxes, the Borrower making such payment will furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof.
(e) On or before the Closing Date, each Foreign Lender shall deliver to
the Agent and the Borrowers (i) two valid, duly completed copies of IRS Form
1001 or 4224 or successor applicable form, as the case may be, and any other
required form, certifying in each case that such Foreign Lender is entitled to
receive payments under this Credit Agreement or the Loans payable to it without
deduction or withholding of any United States federal income taxes or with such
withholding imposed at a reduced rate (the "Reduced Rate"), and (ii) a valid,
duly completed IRS Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding tax. Each
such Foreign Lender shall also deliver to the Agent and the Borrowers two
further copies of said Form 1001 or 4224 and W-8 or W-9, or successor applicable
forms, or other manner of required
37
<PAGE>
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from a required withholding of United
States federal income tax or entitlement to having such withholding imposed
at the Reduced Rate or after the occurrence of any event requiring a change
in the most recent form previously delivered by it to the Borrowers and the
Agent, and such extensions or renewals thereof as may reasonably be requested
by any Borrower and the Agent, certifying (i) in the case of a Form 1001 or
4224 that such Foreign Lender is entitled to receive payments under this
Credit Agreement or the Notes payable to it without deduction or withholding
of any United States federal income taxes, unless in any such case any change
in a tax treaty to which the United States is a party, or any change in law
or regulation of the United States or official interpretation thereof has
occurred after the Closing Date and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable
or that would prevent such Foreign Lender from duly completing and delivering
any such form with respect to it, and such Foreign Lender advises the
Borrowers and the Agent that it is not capable of receiving payments without
any deduction or withholding at the Reduced Rate, or (ii) in the case of a
Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(f) If a Tax Transferee that is organized under the laws of a
jurisdiction outside of the United States acquires an interest in this Credit
Agreement or any Loan or a Foreign Lender changes the office through which
Loans are made, accounted for or booked, the transferor, or the applicable
Foreign Lender, in the case of a change of office, shall cause such Tax
Transferee to agree that, on or prior to the effective date of such
acquisition or change, as the case may be, it will deliver to the Borrowers
and the Agent (i) two valid, duly completed copies of IRS Form 1001 or 4224
or successor applicable form, as the case may be, and any other required
form, certifying in each case that such Tax Transferee is entitled to receive
payments under this Credit Agreement and the Notes payable to it without
deduction or withholding of United States federal income tax or with such
withholding imposed at a Reduced Rate; and (ii) a valid, duly completed IRS
Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax. Each Tax
Transferee that delivers to the Borrowers and the Agent a Form 1001 or 4224,
and Form W-8 or W-9 and any other required form, pursuant to the next
preceding sentence, further undertakes to deliver two further copies of the
said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of required certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or otherwise is required
to be resubmitted as a condition to obtaining an exemption from a required
withholding of United States federal income tax or entitlement to having such
withholding imposed at the Reduced Rate or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrowers and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrowers and the Agent, certifying (i) in the
case of a Form 1001 or 4224 that such Tax Transferee is entitled to receive
payments under this Credit Agreement without deduction or withholding of any
United States federal income taxes or with such withholding imposed at the
Reduced Rate, unless any change in treaty, law or regulation or official
interpretation thereof has occurred after the effective date of such
acquisition or change and prior to the date on which any such delivery would
otherwise be required that renders all such forms inapplicable or that would
prevent such Tax Transferee from duly completing and delivering any such form
with respect to it, and such Tax Transferee advises the Borrowers and the
Agent that it is not capable of receiving payments (a) without any deduction
or withholding of United States federal income tax or (b) with such
withholding at the Reduced Rate, as the case may be, or (ii) in the case of a
Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(g) If any Taxes for which any Borrower would be required to make
payment under this Section 4.15 are imposed, the Lender, the Issuing Bank or
the Agent, as the case may be, shall use its reasonable best efforts to avoid
or reduce such Taxes by taking any appropriate action (including, without
limitation, assigning its rights hereunder to a related entity or a different
office) which would
38
<PAGE>
not in the sole opinion of such Lender, the Issuing Bank or Agent be
otherwise disadvantageous to such Lender, the Issuing Bank or Agent, as the
case may be. If and when receipt by any Lender, the Issuing Bank or the
Agent of any Taxes paid by any Borrower hereunder results in an excess
payment or credit to such Lender, the Issuing Bank or the Agent, as the case
may be, on account of such Taxes, then such Lender, the Issuing Bank or the
Agent, as the case may be, shall refund such excess to such Borrower.
(h) Without prejudice to the survival of any other agreement of any
Borrower hereunder, the agreements and obligations of the Borrowers contained
in this Section 4.15 shall survive the payment in full of the Obligations.
4.16. AFFECTED LENDERS. If any Borrower is obligated to pay to any
Lender any amount under Sections 3.10, 4.14 or 4.15 hereof or if any Lender
is a Defaulting Lender, such Borrower may, if no Default or Event of Default
then exists, replace such Lender with another lender acceptable to the Agent,
and such Lender hereby agrees to be so replaced subject to the following:
(a) The Obligations of each Borrower hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the date
of incurrence of such increase or additional costs through the date such
Lender is replaced hereunder) shall be paid in full to such Lender
concurrently with such replacement;
(b) If such replacement is a result of increased costs under Sections
3.10, 4.14 or 4.15, the replacement lender shall be a bank or other financial
institution that is not subject to such increased costs which caused the
Borrower's election to replace any Lender hereunder, and each such
replacement lender shall execute and deliver to the Agent such documentation
satisfactory to the Agent pursuant to which such replacement lender is to
become a party hereto, conforming to the provisions of Section 11.8 hereof,
with total Commitments equal to that of the Lender being replaced and shall
make Revolving Loans and Term Loans in the aggregate principal amount equal
to the aggregate outstanding principal amount of the Revolving Loans and Term
Loans of the Lender being replaced;
(c) Upon such execution of such documents referred to in clause (b) and
repayment of the amounts referred to in clause (a), the replacement lender
shall be a "Lender" with Commitments as specified hereinabove and the Lender
being replaced shall cease to be a "Lender" hereunder, except with respect to
indemnification provisions under this Credit Agreement, which shall survive
as to such replaced Lender;
(d) The Agent shall reasonably cooperate in effectuating the
replacement of any Lender under this Section 4.16, but at no time shall the
Agent be obligated to initiate any such replacement;
(e) Any Lender replaced under this Section 4.16 shall be replaced at
the Borrowers' sole cost and expense and at no cost or expense to the Agent
or any of the Lenders; and
(f) If any Borrower proposes to replace any Lender pursuant to this
Section 4.16 because the Lender seeks reimbursement under either Section
3.10, 4.14 or 4.15, then it must also replace any other Lender or
proportionately replace the Commitments and Loans of all Lenders who seeks
similar levels of reimbursement (as a percentage of such Lender's
Commitments) under such Sections.
ARTICLE 5. CONDITIONS PRECEDENT
5.1. CONDITIONS TO INITIAL LOANS AND LETTERS OF CREDIT. The
obligation of each Lender to fund (or convert) its Proportionate Share of the
Term Loans and the initial Revolving Loans, and the
39
<PAGE>
obligation of the Agent to cause the Issuing Bank to issue the initial
Letters of Credit, is subject to the satisfaction or waiver of the following
conditions precedent:
(a) CLOSING DOCUMENT LIST. The Agent and the Lenders shall have
received each of the agreements, opinions, reports, approvals, consents,
certificates and other documents set forth on the Closing Document List
attached hereto as Schedule A (the "Closing Document List").
(b) MATERIAL ADVERSE CHANGE. (i) No change, occurrence, event or
development or event involving a prospective change that is reasonably likely
to have a Material Adverse Effect shall have occurred and be continuing, and
(ii) there shall not have occurred a substantial impairment of the financial
markets generally that is reasonably likely to materially and adversely
affect the transactions contemplated hereby, in each case as reasonably
determined by the Agent and each Lender in its sole discretion, and the Agent
shall have received a certificate from a responsible officer of each of the
Borrowers certifying the foregoing.
(c) FEES AND EXPENSES; CERTAIN EXISTING OBLIGATIONS. (i) All Fees and
Expenses payable to the Agent and Lenders by the Credit Parties on or before
the Closing Date shall have been paid, (ii) all Existing Loans shall have
been converted to Prime Rate Loans (and, by its execution hereof, Perry
directs such conversion) and Perry shall have paid (A) all unpaid accrued
interest on the Existing Loans, (B) all unpaid accrued fees, expenses and
other amounts payable by Perry under the Existing Credit Agreement and (iii)
all existing Judd's credit facilities and other debt obligations (including
those set forth on Schedule B, Part 5.1(c)) shall have been terminated, all
principal, interest, fees and other amounts owing thereunder shall be paid in
full concurrently with the funding of the initial Loans hereunder and all
Liens securing the obligations under such credit facilities and other debt
obligations shall have been unconditionally released subject only to such
payment, in each case in a manner satisfactory to the Agent.
(d) JUDD'S MERGER. The Judd's Merger shall have been consummated
strictly in accordance with the terms of the Judd's Merger Agreement, without
any waiver or amendment not consented to in writing by the Agent and the
Lenders of any term, provision or condition set forth therein, and in
compliance with all applicable laws. The Merger Agreement shall be in full
force and effect and shall not have been terminated. The Agent shall have
received copies of all agreements relating to the Judd's Merger, all of which
shall be satisfactory to the Agent.
(e) EQUITY FINANCING; NOTE CONVERSION. On or prior to the Closing
Date, (i) Holdings shall have received net cash proceeds of at least
$4,000,000 from the Holdings Equity Issuance, (ii) Holdings shall have
contributed such proceeds to Naomi as a common equity contribution, (iii)
Holdings shall have consummated the Note Conversion and (iv) the Agent and
the Lenders shall have received true and correct copies of the Equity
Issuance Documents and the Note Conversion Documents and all of the terms and
conditions of the Equity Issuance Documents and the Note Conversion Documents
shall be in form and substance reasonably satisfactory to the Agent and the
Majority Lenders.
(f) HOLDINGS DEBT ISSUANCE. On or prior to the Closing Date, (i)
Holdings shall have received aggregate gross cash proceeds of at least
$115,000,000 from the issuance of the Holdings Senior Subordinated Notes and
(ii) the Agent and the Lenders shall have received true and correct copies of
the Holdings Senior Subordinated Note Documents and all of the terms and
conditions of the Holdings Senior Subordinated Note Documents shall be in
form and substance reasonably satisfactory to the Agent and the Majority
Lenders.
(g) REAL PROPERTY SALE\LEASEBACK. On or prior to the Closing Date, Perry
shall have received net cash proceeds of at least $17,000,000 from the sale and
leaseback of all real property of Perry Realty Co., Inc. (or from the sale of
the capital stock of Perry Realty Co., Inc.), and the Lenders shall have
received true and correct copies of the documents and agreements related to such
sale and leaseback (or
40
<PAGE>
such sale of capital stock) (the "Real Property Sale\Leaseback Documents")
and all of the terms and conditions of such documents and agreements shall be
in form and substance reasonably satisfactory to the Agent and the Majority
Lenders. By its execution hereof, each Existing Lender consents to the
release by the Agent of the Liens under the Existing Credit Documents with
respect to the Existing Collateral to the extent required or otherwise
reasonably requested in connection with such real property sale\leaseback (or
such sale of capital stock) and to the execution by the Agent of such
documents, agreements and instruments (including reconveyance and UCC release
and amendment documents) as may be requested in connection therewith.
(h) SHAREHOLDERS' AGREEMENTS; EMPLOYMENT AGREEMENTS; TAX SHARING
AGREEMENT; REAL PROPERTY LEASES. On or prior to the Closing Date, there
shall have been made available to the Agent a copy, certified as true and
correct by an appropriate officer of the applicable Borrower, of:
(i) all agreements entered into by any Borrower or Holdings
governing the terms and relative rights of their respective capital stock
and any agreements entered into by shareholders relating to any such entity
with respect to their capital stock (collectively, the "Shareholders'
Agreements"); and
(ii) any employment agreements entered into by any Borrower or
Holdings (collectively, the "Employment Agreements"); and
(iii) the Tax Sharing Agreement among Holdings and the other
Credit Parties providing, among other things, for an allocation for the
payment of U.S. income taxes on a basis no less favorable to any Credit
Party than such Credit Party would be obligated to pay on a stand-alone
basis; and
(iv) the real property leases with respect to all real property
leased by any Credit Party (collectively, the "Real Property Leases");
all of which Shareholders' Agreements, Employment Agreements, Tax Sharing
Agreement and Property Leases shall be in form and substance satisfactory to
the Agent.
(i) INSURANCE. The Agent shall have received and approved evidence of
insurance coverage in amount and scope, and all insurance carriers shall have
delivered endorsements in form and substance satisfactory to the Agent (x)
naming the Agent as loss payee with respect to all casualty coverages for
Holdings and its subsidiaries and containing other customary loss payable
provisions and (y) naming the Agent as additional insured for all general
liability coverages.
(j) CONSENT LETTER. On the Closing Date, the Agent shall have received
a letter from CT Corporation System presently located at 818 West Seventh
Street, Los Angeles, California 90017, indicating its consent to its
appointment by each Credit Party as their agent to receive service of process
as specified in the Credit Documents.
(k) PERFECTION OF LIENS. The Liens and all other security interests in
favor of the Agent, for the benefit of the Lenders, shall have been duly
perfected and shall constitute first and prior Liens (or the Mortgages, UCC-1
Financing Statements and other instruments, documents and agreements, if any,
necessary to cause such perfection shall have been duly executed and
delivered to the Agent and all arrangements for the recordation thereof,
including the payment of fees and taxes in connection therewith shall be
satisfactory to the Agent), except with respect to the real property located
at 1500-1520 Eckington Place Northeast, Washington, D.C. and as otherwise
permitted in the Credit Documents.
41
<PAGE>
(l) CASH MANAGEMENT. The Credit Parties shall have established cash
management systems on terms and conditions satisfactory to the Agent.
(m) UNUSED AVAILABILITY. On the Closing Date (giving effect to the
Judd's Merger), the Borrowers shall have unused borrowing availability, cash
or Cash Equivalents, or any combination thereof, of not less than $25,000,000
in the aggregate.
(n) CAPITALIZATION AND CORPORATE STRUCTURE. The capital and corporate
structure of Holdings, Judd's and each Borrower and its Subsidiaries after
giving effect to the Judd's Merger shall be satisfactory to the Agent and the
Lenders in all respects.
(o) CONSENTS AND APPROVALS. Except for (i) consents or authorizations
which have been obtained or filings which have been made, and which in either
case are in full force and effect or (ii) in the case of clause (C) only,
consents or authorizations the failure to obtain or filings the failure to
make could not reasonably be expected to have a Material Adverse Effect, no
consent or authorization of, filing with or other act by or in respect of,
any Governmental Authority or any other Person is required in connection with
(A) the Borrowings hereunder, (B) the grant of the Liens pursuant to the
Credit Documents, (C) the consummation of the Judd's Merger or the continuing
operations of each Borrower and its Subsidiaries following the Judd's Merger
or (D) with the execution, delivery, performance, validity or enforceability
of this Credit Agreement, the Term Notes, the Revolving Notes, the Letters of
Credit, the other Credit Documents or the Judd's Merger Documents.
(p) LITIGATION. There shall be no pending or, to the best knowledge of
each Borrower, threatened litigation, proceeding, inquiry or other action
seeking an injunction or other restraining order, damages or other relief (i)
with respect to the Judd's Merger, the Judd's Merger Documents, the
transactions contemplated by this Credit Agreement and the Credit Documents
or (ii) against any Credit Party with respect to the Credit Parties' other
business activities.
(q) BALANCE SHEET. The Agent and the Lenders shall have received a
satisfactory unaudited pro forma condensed, combined balance sheet of
Holdings and its Subsidiaries as of September 30, 1997, after giving effect
to the Judd's Merger.
(r) FINANCIAL STATEMENTS. The Agent, the Issuing Bank and the Lenders
shall have received and approved (i) the audited Financial Statements for
Judd's and its Subsidiaries for the fiscal year ended December 31, 1996,
along with an unqualified opinion of Stoy, Mallone and Company, P.C. and for
Holdings and its Subsidiaries for the fiscal year ended December 31, 1996,
along with an unqualified opinion of Deloitte & Touche LLP, (ii) the
unaudited Financial Statements for Judd's and its Subsidiaries and for
Holdings and its Subsidiaries, in each case for the nine month period ended
September 30, 1997, and (iii) consolidated financial statement forecasts
prepared by management of the Borrowers, including Financial Statements for
the period from January 1, 1998 through December 31, 2002 after giving effect
to the Judd's Merger.
(s) SOLVENCY. The Agent shall have received a certificate of the chief
financial officer of Holdings and an opinion of Houlihan, Lokey, Howard &
Zukin or another valuation firm reasonably satisfactory to the Agent, in form
and substance reasonably acceptable to the Agent, attesting that, on a pro
forma basis assuming the consummation of the Judd's Merger and the
transactions contemplated by this Credit Agreement and the Credit Documents,
both before and after such consummation, Holdings and its Subsidiaries on a
consolidated basis shall not be (i) insolvent or rendered insolvent, (ii)
left with an unreasonably small capital with which to engage in its business
or (iii) have incurred debts beyond its ability to pay as such debts mature.
42
<PAGE>
(t) EXISTING INDEBTEDNESS. The terms and conditions of any
Indebtedness (including, without limitation, maturities, interest rates,
prepayment and redemption requirements, covenants, defaults, remedies,
security provisions and subordination provisions) of any Credit Party to
remain outstanding after the date hereof shall be satisfactory to the Agent
and each of the Lenders in all respects, and the Agent and each of the
Lenders shall be satisfied that the Credit Parties are not subject to any
material contractual obligations or other restrictions that would be violated
by the transactions contemplated by this Credit Agreement, the other Credit
Documents or the Judd's Merger Documents.
(u) TITLE INSURANCE. The Agent and the Lenders shall have received
mortgagee title insurance policies (or marked commitments to issue the same)
for the Mortgaged Properties (except 1500-1520 Eckington Place Northeast,
Washington, D.C.) issued by First American Title Insurance Company to the
Agent (each a "Mortgage Policy" and, collectively, the "Mortgaged Policies")
in amounts satisfactory to the Agent assuring the Agent that the Mortgages on
such Mortgaged Properties are (or will be when recorded) valid and
enforceable first priority mortgage liens on such Mortgaged Properties free
and clear of all defects and encumbrances except Permitted Mortgage
Encumbrances, and the Mortgage Policies shall otherwise be in form and
substance reasonably satisfactory to the Agent.
(v) ENVIRONMENTAL REPORTS. The Agent shall have received environment
audit reports (including, without limitation, the Environmental Reports) in
scope and substance satisfactory to the Agent concerning the properties and
business of the Borrowers and their Subsidiaries.
(w) CONTINUITY OF CONTRACTS; COMPLIANCE. The Lenders shall have
received satisfactory evidence that Judd's material leases and material
contracts with customers and vendors shall continue in full force and effect
or be renewed for the benefit of Judd's on and after the Closing Date on the
same substantive terms as existed on September 30, 1997. Each Credit Party
shall be in compliance with all existing instruments, indentures and other
agreements to which it is a party.
(x) OPINIONS OF COUNSEL. The Agent and the Lenders shall have received
originally executed copies of one or more favorable written opinions of
Brobeck, Phleger & Harrison LLP, counsel to the Borrowers, substantially in
the form of Exhibit Q, Quarles & Brady, local Wisconsin counsel to the
Borrowers, substantially in the form of Exhibit R and Nixon, Hargrave, Devans
& Doyle LLP, local Maryland, Virginia and Washington, D.C. counsel to the
Borrowers, substantially in the form of Exhibit S, in each case covering such
matters as shall be reasonably requested by the Agent and the Lenders. In
addition, the Agent, the Issuing Bank and the Lenders shall be entitled to
rely on all opinions issued in connection with the Judd's Merger.
(y) ADDITIONAL DOCUMENTS. The Credit Parties shall have executed and
delivered to the Agent and the Lenders all other documents consistent
herewith which the Agent determines are reasonably necessary to consummate
the transactions contemplated hereby.
5.2. CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The
obligation of each Lender to fund its Proportionate Share of any requested
Loan or of the Agent to cause the Issuing Bank to issue any requested Letter
of Credit is subject to the conditions precedent set forth below. Each
Notice of Borrowing and each Letter of Credit Request shall constitute a
representation and warranty that such conditions are satisfied.
(a) All representations and warranties of any Credit Party contained in
this Credit Agreement and the other Credit Documents shall be true and
correct in all material respects on and as of the date of such Notice of
Borrowing or Letter of Credit Request or issuance of a check drawn against or
request for transfer from the Disbursement Account, as if then made, other
than representations and warranties that relate solely to an earlier date;
43
<PAGE>
(b) No Default or Event of Default shall have occurred, or would result
from the making of the requested Loan or the issuance of the requested Letter
of Credit, which has not been waived; and
(c) No event has occurred which has had or reasonably could be expected
to have a Material Adverse Effect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Credit Agreement
and to make the Loans and other financial accommodations described herein,
and to induce the Issuing Bank to issue Letters of Credit, each Borrower
hereby represents and warrants to the Agent, the Lenders and the Issuing Bank
that, as of each Compliance Date, the following are true, correct and
complete (giving effect to the Judd's Merger). Such representations and
warranties, and all other representations and warranties made by any Borrower
in any other Credit Document, shall survive the execution and delivery of the
Credit Documents.
6.1. ORGANIZATION AND QUALIFICATION. Holdings and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, (ii) has the
power and authority to own its properties and assets and to transact the
businesses in which it presently is, or proposes to be, engaged and (iii) is
duly qualified and is authorized to do business and is in good standing in
each jurisdiction where it currently is, or proposes to be, engaged in
business. Schedule B, Part 6.1 lists all jurisdictions in which Holdings and
its Subsidiaries are qualified to do business as foreign corporations.
6.2. AUTHORITY. Holdings and each of its Subsidiaries has the
requisite corporate power and authority to execute, deliver and perform each
of the Credit Documents and Related Documents to which it is a party. All
corporate action necessary for the execution, delivery and performance of any
of the Credit Documents and Related Documents has been taken.
6.3. ENFORCEABILITY. This Credit Agreement, each Credit Document
and each Related Document is the legal, valid and binding obligation of each
Credit Party which is a party thereto, enforceable in accordance with its
terms.
6.4. NO CONFLICT. The execution, delivery and performance of each
Credit Document and each Related Document by the Credit Parties and the
consummation of the Judd's Merger are not in contravention of any Requirement
of Law or any material indenture, contract, lease, agreement, instrument or
other commitment to which it is a party or by which it or any of its
properties are bound and will not, except as contemplated herein, result in
the imposition of any Liens upon any of its properties.
6.5. CONSENTS AND FILINGS. No consent, authorization, permit or
filing is required in connection with the execution, delivery and performance
of this Credit Agreement or any Credit Document or any Related Document, or
the continuing operations of any Credit Party and the consummation of the
Judd's Merger, except (i) those that have been obtained or made, (ii) filings
necessary to create, perfect or retain the perfection of Liens against the
Collateral, and (iii) in the case of the continuing operations of each Credit
Party, those which the failure to obtain would not have a Material Adverse
Effect.
6.6. GOVERNMENT REGULATION. Neither Holdings nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940, or any other Requirement of Law that limits its ability to
incur indebtedness or its ability to consummate the transactions contemplated in
this Credit
44
<PAGE>
Agreement and the other Credit Documents.
45
<PAGE>
6.7. SOLVENCY. The fair saleable value of the assets of each
Borrower exceeds all its probable liabilities, including those to be incurred
pursuant to this Credit Agreement and the other Credit Documents. Each
Borrower (i) does not have unreasonably small capital in relation to the
business in which it is or proposes to be engaged and (ii) has not incurred,
and does not believe that it will incur, after giving effect to the
transactions contemplated by this Credit Agreement, debts beyond its ability
to pay as such debts become due.
6.8. RIGHTS IN COLLATERAL; PRIORITY OF LIENS. Each Credit Party
has good and marketable title to all property consisting of Collateral, free
and clear of any and all Liens in favor of third parties other than Liens
permitted hereunder. The security interests granted pursuant to the Credit
Documents (other than the Mortgages) constitute valid and enforceable first,
prior and perfected Liens on the Collateral, to the extent such Liens can be
perfected by the filing of financing statements, in favor of the Agent for
the benefit of the Lenders. The Mortgages create, as security for the
secured obligations described therein, a valid and enforceable perfected
security interest in and mortgage lien on all of the Mortgaged Properties in
favor of the Agent for the benefit of the Lenders, superior to and prior to
the rights of all third Persons (except for Permitted Mortgage Encumbrances
related thereto) and subject to no other Liens (other than Liens permitted
under Section 8.8).
6.9. FINANCIAL DATA. Each of Holdings and Judd's has provided to
the Agent and each of the Lenders complete and accurate copies of annual
audited financial statements of such Person and its Subsidiaries for the
fiscal year ended December 31, 1996 and unaudited financial statements of
such Person and its Subsidiaries for the nine month period ended September
30, 1997. Such financial statements and all Financial Statements at any time
delivered pursuant to this Credit Agreement have been prepared in accordance
with GAAP consistently applied throughout the periods involved and fairly
present the respective consolidated financial positions, results of
operations and cash flows of such Person and its Subsidiaries for each of the
periods covered. In addition, the Borrowers have delivered to the Agent and
the Lenders certain projected consolidated financial data of the Borrowers
including forecasted balance sheets and income statements and statements of
cash flows for Fiscal Years 1997 through 2002 which take into consideration
the Judd's Merger and the other transactions contemplated by this Credit
Agreement and which have been made in good faith and the Borrowers have no
reason to believe such projections and the assumptions upon which they are
based are not reasonable. Except as set forth on Schedule B, Part 6.9, no
Credit Party has any material Contingent Obligation, contingent liability or
liability for taxes, long-term leases or commitments (other than those
incurred in the ordinary course of business or otherwise, in each case in
compliance with this Credit Agreement), which is not reflected in the most
recent Financial Statements delivered to the Lenders pursuant to this Credit
Agreement.
6.10. LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The Federal
Employee Identification Number and the address of the principal place of
business and chief executive office of each Credit Party is set forth on
Schedule B, Part 6.10. The books and records of each Credit Party, and all its
chattel paper and records of Accounts, are maintained exclusively at such
locations. There is no jurisdiction in which any Credit Party has any
Collateral (except for vehicles and Inventory in transit to the Borrowers or for
processing) other than those jurisdictions identified on Schedule B, Part 6.10.
The value of the Collateral (except for vehicles and Inventory in transit to the
Borrowers or for processing) of the Credit Parties in each jurisdiction (other
than Wisconsin, Maryland, Virginia and the District of Columbia) identified on
Schedule B, Part 6.10 does not exceed $100,000. A complete list of the legal
name and address of each warehouse at which Inventory is stored is set forth on
Schedule B, Part 6.10. None of the receipts received and to be received by any
Borrower from any warehouseman state that the
46
<PAGE>
Inventory covered thereby is to be delivered to bearer or to the order of a
named person or to a named person and such named person's assigns.
6.11. SUBSIDIARIES; OWNERSHIP OF STOCK. The only direct or
indirect Subsidiaries of any Borrower are those listed on Schedule B, Part
6.11. Each Credit Party is the record and beneficial owner of all of the
shares of capital stock of each of the Subsidiaries listed as Subsidiaries of
such Credit Party on Schedule B, Part 6.11. There are no proxies,
irrevocable or otherwise, with respect to such shares, and no equity
securities of any of such Subsidiaries are or may become required to be
issued by reason of any options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of any capital stock
of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any such Subsidiary is or may become
bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All of such shares so
owned by any Credit Party are owned by such Credit Party free and clear of
any Liens.
6.12. NO JUDGMENTS OR LITIGATION. Except as set forth on Schedule B,
Part 6.12 no judgments, orders, writs or decrees are outstanding against any
Credit Party nor is there now pending or, to the best of each Borrower's
knowledge after diligent inquiry, threatened, any litigation, contested
claim, investigation, arbitration, or governmental proceeding by or against
any Credit Party which reasonably could be expected to have a Material
Adverse Effect or which purports to affect the legality, validity or
enforceability of this Credit Agreement or any other Credit Document or
Related Document.
6.13. NO DEFAULTS. Neither Holdings nor any of its Subsidiaries is in
default under any term of any Material Contract and all Material Contracts
are in full force and effect. Except as set forth on Schedule B, Part 6.13,
none of the Borrowers know of any material dispute regarding any such
Material Contract.
6.14. LABOR MATTERS. Schedule B, Part 6.14 accurately sets forth
all labor contracts to which Holdings or any of its Subsidiaries is a party
and their dates of expiration. There are no existing or threatened strikes,
lockouts or other disputes relating to any collective bargaining or similar
agreement to which any Credit Party is a party which reasonably could be
expected to have a Material Adverse Effect.
6.15. COMPLIANCE WITH LAW. Neither Holdings nor any of its
Subsidiaries has violated or failed to comply with any Requirement of Law,
including, without limitation, ERISA and environmental laws, except such
instances of violation or noncompliance as reasonably could not, individually
or in the aggregate, be expected to have a Material Adverse Effect.
6.16. ERISA. None of Holdings, any of its Subsidiaries or any ERISA
Affiliate maintains or contributes to any Plan, other than those listed on
Schedule B, Part 6.16. Holdings, each of its Subsidiaries and each ERISA
Affiliate have fulfilled all contribution obligations for each Plan
(including obligations related to the minimum funding standards of ERISA and
the Internal Revenue Code). No Termination Event has occurred nor has any
other event occurred that may result in a Termination Event. None of
Holdings or its Subsidiaries, any ERISA Affiliate, or any fiduciary of any
Plan is subject to any direct or indirect liability with respect to any Plan
under any Requirement of Law or agreement. None of Holdings or its
Subsidiaries or any ERISA Affiliate is required to provide security to any
Plan under Section 401(a)(29) of the Internal Revenue Code.
6.17. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on
Schedule B, Part 6.17, (i) no Credit Party is the subject of a judicial or
administrative proceeding or investigation relating to the violation of any
Environmental Law, or asserting potential liability arising from the disposal by
any Person of any Hazardous Material; (ii) no Credit Party has filed or received
any notice under any
47
<PAGE>
Environmental Law of treatment, storage, disposal, spill or release or
threatened release at any other location of any Hazardous Material generated,
used, stored, treated, transported or released by or on behalf of any Credit
Party which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect; and (iii) no Credit Party has knowledge of
any contingent liability for any release of any Hazardous Material.
6.18. INTELLECTUAL PROPERTY. Each Borrower possesses such assets,
licenses, patents, patent applications, copyrights, service marks, trademarks
and trade names as are necessary to continue to conduct its present and
proposed business activities.
6.19. LICENSES AND PERMITS; BUSINESS RESTRICTIONS. Each of
Holdings and its Subsidiaries has obtained and holds in full force and
effect, all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary for the operation of its business as presently
conducted and as proposed to be conducted. The Non-Competition Agreement
will not restrict Holdings or Perry from operating the business purchased
from Old Perry pursuant to the Perry Acquisition substantially in the manner
conducted by Old Perry immediately prior to the consummation of the Perry
Acquisition.
6.20. TAXES AND TAX RETURNS.
(a) Except as set forth on Schedule B, Part 6.20, Holdings and each of
its Subsidiaries has timely filed, without request for extension, all income
tax returns it is required to file. The information filed is complete and
accurate in all material respects. All deductions taken in such income tax
returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP.
(b) All taxes, assessments, fees and other governmental charges for
periods beginning prior to the date hereof, have been timely paid and neither
Holdings nor any of its Subsidiaries has any liability for taxes in excess of
the amounts so paid or reserves so established.
(c) Except as set forth in Schedule B, Part 6.20, no deficiencies for
taxes have been claimed, proposed or assessed by any taxing or other
Governmental Authority against Holdings or any of its Subsidiaries and no tax
liens have been filed. Except as set forth in Schedule B, Part 6.20, there
are no pending or threatened audits, investigations or claims for or relating
to any liability for taxes and there are no matters under discussion with any
Governmental Authority which could result in a material additional liability
for taxes. Except as set forth in Schedule B, Part 6.20, no extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to any Borrower or any of the
Borrowers' Subsidiaries.
(d) Except as set forth on Schedule B, Part 6.20, neither Holdings nor
any of its Subsidiaries has any obligation under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
6.21. MATERIAL CONTRACTS. Schedule B, Part 6.21, contains a true,
correct and complete list of all the Material Contracts currently in effect
on the date hereof.
6.22. NO OTHER INDEBTEDNESS. The Credit Parties have no Indebtedness
other than the Indebtedness that is permitted by Section 8.7.
6.23. TITLE TO PROPERTY. Each Credit Party has (i) good and
marketable fee simple title to or valid leasehold interests in all of its Real
Property and (ii) good and marketable title to all of its other
48
<PAGE>
property (including, without limitation, all real and other property in each
case as reflected in the Financial Statements delivered to the Agent
hereunder), other than, with respect to properties described in clause (ii)
above, properties disposed of in the ordinary course of business or in any
manner otherwise permitted under this Credit Agreement since the date of the
most recent audited consolidated balance sheet of the Credit Parties, as
applicable, and in each case subject to no Liens other than those Liens that
are permitted by Section 8.8.
6.24. AFFILIATE TRANSACTIONS. Except as set forth in Schedule B,
Part 6.24, no Credit Party is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of such Credit
Party is a party except (i) pursuant to the reasonable requirements of such
Credit Party's business and (ii) upon fair and reasonable terms no less
favorable to such Credit Party than it could obtain in a comparable
arm's-length transaction with an unaffiliated Person.
6.25. ACCURACY AND COMPLETENESS OF INFORMATION. All factual
information furnished by or on behalf of Holdings or any of its Subsidiaries
in writing to the Agent, any Lender, or the Auditors for purposes of or in
connection with this Credit Agreement or any Credit Documents, or any
transaction contemplated hereby or thereby is or will be true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary
to make such information not misleading at such time.
6.26. NO CHANGE. There has been no development or event nor any
prospective development or event, which has had or reasonably could be
expected to have a Material Adverse Effect.
6.27. SPECIAL PURPOSE CORPORATION. Holdings was formed to effect
the Perry Acquisition and, except as permitted by the Holdings Guarantee, has
no significant assets (other than the common stock of the other Credit
Parties and the Series C and Series D Preferred Stock) or liabilities (other
than liabilities under the Credit Documents to which it is a party, the
Holdings Senior Subordinated Notes and ordinary course administrative and
legal expenses).
ARTICLE 7. AFFIRMATIVE COVENANTS
Until termination of this Credit Agreement and payment and satisfaction
of all Obligations due hereunder:
7.1. FINANCIAL REPORTING. Each Borrower shall timely deliver to
each Lender the following information:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not later
than 90 days after each Fiscal Year end: (i) annual audited Financial
Statements; (ii) a comparison in reasonable detail to the prior year audited
Financial Statements; (iii) (A) the Auditors' opinion, which shall be
unqualified as to going concern and scope of audit and shall state that such
consolidated financial statements present fairly the financial position of
the Credit Parties as at the dates indicated and the results of their
operations and cash flows for the periods indicated in conformity with GAAP
consistently applied and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards, (B) "Management
Letter" and (C) a statement indicating that the Auditors have not obtained
knowledge of the existence of any Default or Event of Default during their
audit; (iv) a narrative discussion of each Borrower's consolidated financial
condition and results of operations and the consolidated liquidity and
capital resources for such Fiscal Year, prepared by the chief financial
officer of Holdings; and (v) a compliance certificate substantially in the
form of Exhibit H with an attached schedule of calculations demonstrating
compliance with the Article 8 financial covenants.
49
<PAGE>
(b) PROJECTIONS. Not later than 45 days after each Fiscal Year end,
consolidated and consolidating projections of the financial condition of
Holdings and the other Credit Parties and results of operations for the next
three years, containing projected consolidating balance sheets, statements of
operations, statements of cash flows and statements of changes in
shareholders equity on a monthly basis for the first of the three years,
quarterly for the second, and annually for the third.
(c) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but not
later than 60 days after the end of each Fiscal Quarter: (i) Financial
Statements as of the Fiscal Quarter then ended, and for the Fiscal Year to
date; (ii) a comparison in reasonable detail to the Financial Statements for
the corresponding periods of the prior Fiscal Year; (iii) the certification
of the chief executive officer or chief financial officer of Holdings that
such Financial Statements have been prepared in accordance with GAAP; (iv) a
narrative discussion of each Borrower's consolidated financial condition and
results of operations and the consolidated liquidity and capital resources
for such Fiscal Quarter and Fiscal Year to date, prepared by the chief
financial officer of Holdings; and (v) a compliance certificate substantially
in the form of Exhibit H with an attached schedule of calculations
demonstrating compliance with the Article 8 financial covenants.
(d) PERIOD FINANCIAL STATEMENTS. As soon as available, but not later
than 45 days after the end of each Fiscal Period: (i) Financial Statements as
of the Fiscal Period then ended, and for the Fiscal Year to date; (ii) a
comparison in reasonable detail to the Financial Statements for the
corresponding periods of the prior Fiscal Year; (iii) the certification of
the chief executive officer or chief financial officer of Holdings that such
Financial Statements have been prepared in accordance with GAAP; and (iv) a
compliance certificate substantially in the form of Exhibit H with an
attached schedule of calculations demonstrating compliance with the Article 8
financial covenants.
(e) PERIOD COMPARISON TO PRIOR PROJECTIONS. As soon as available, but
not later than 30 days after the end of each of the first twelve Fiscal
Periods, and 45 days after the end of each Fiscal Period, a comparison of
actual results of operations, cash flow and capital expenditures for the
Credit Parties for such Fiscal Period and for the period from the beginning
of the current Fiscal Year through the end of such Fiscal Period with amounts
previously projected for those periods (see Section 7.1(b)) and with actual
results for corresponding periods in the previous Fiscal Year.
(f) SECURITIES REPORTS. Promptly after the sending or filing thereof,
but not later than 5 days thereafter, copies of all proxy statements,
financial statements and reports that any Credit Party sends to its
stockholders generally, and copies of all regular, periodic and special
reports, and all registration statements, that any Credit Party files with
the Securities and Exchange Commission or any governmental authority that may
be substituted therefor, or with any national securities exchange.
(g) EXCESS CASH FLOW CERTIFICATES. Simultaneously with the making of
the prepayment of Excess Cash Flow required by Section 4.7(a)(ii) (or if no
prepayment is required, as soon as practicable and in any event prior to
March 31 of each year), the Borrowers shall deliver, or cause to be
delivered, to each Lender a certificate of the chief financial officer of
Holdings certifying that the determination of the Excess Cash Flow prepayment
has been made in accordance with the provisions of this Credit Agreement and
setting forth in reasonable detail the computations as to the determination
of Excess Cash Flow for the relevant period together with all financial
statements or other information (not previously delivered to the Lenders)
underlying such computations or referred to in such certificate.
(h) PURCHASE PRICE ADJUSTMENT. Within 2 Business Days after receipt
thereof, all schedules, exhibits or other instruments or documents evidencing
the calculation of the Adjustment Amount (as defined in the Judd's Merger
Agreement).
50
<PAGE>
7.2. COLLATERAL REPORTING. Each Borrower shall timely deliver to
the Agent the following certificates and reports:
(a) BORROWING BASE CERTIFICATES. Monthly, within 10 Business Days after
the last Business day of each month (or, if and for so long as the aggregate
amount that remains available to be borrowed by the Borrowers in accordance
with Section 2.2(a) is less than $10,000,000, weekly, before 12:00 Noon, New
York City time, on the second Business Day of each week), and at any other
time reasonably requested by the Agent, a Borrowing Base Certificate, which
shall: (i) be completed substantially in the form of Exhibit I, detailing
such Borrower's Eligible Accounts Receivable and Eligible Inventory as of
each Friday of the immediately preceding week and as of the last day of each
month, as applicable (or as of such other date as the Agent may request);
(ii) be prepared by or under the supervision of such Borrower's chief
executive officer or chief financial officer and certified by such officer
subject only to adjustment upon completion of the normal year-end audit of
physical inventory; and (iii) include such additional schedules and other
information as the Agent may reasonably request.
(b) APPRAISALS. When requested by the Agent (which request will not be
made more frequently than twice per year unless an Event of Default has
occurred and is continuing), a report of Inventory, based upon a physical
count, which shall describe such Borrower's Inventory by category and by item
(in reasonable detail) and report the then appraised value (at lower of cost
or market) of such Inventory, and a report of Equipment which shall describe
such Borrower's Equipment (in reasonable detail) and report the then
appraised value (at lower of cost or market) of such Equipment.
(c) FURTHER ASSURANCES. When requested by the Agent, any further
information regarding the Collateral, business affairs and financial
condition of any Credit Party.
7.3. NOTIFICATION REQUIREMENTS. Each Borrower shall timely give the
Agent and each of the Lenders the following notices:
(a) NOTICE OF DEFAULTS. Promptly, and in any event within two (2)
Business Days after becoming aware of the occurrence of a Default or Event of
Default, a certificate of the chief executive officer or chief financial
officer of such Borrower specifying the nature thereof and such Borrower's
proposed response thereto, each in reasonable detail.
(b) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event within
five (5) Business Days after such Borrower becomes aware of (i) any
proceeding being instituted or threatened to be instituted by or against any
Credit Party in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign), (ii)
any order, judgment or decree in excess of $250,000 being entered against any
Credit Party or any of their respective properties or assets or (iii) any
actual or prospective change, development or event which has had or
reasonably could be expected to have a Material Adverse Effect, a written
statement describing such proceeding, order, judgment, decree, change,
development or event and any action being taken with respect thereto by such
Borrower or any such Subsidiary.
(c) ERISA NOTICES. (i) Promptly, and in any event within ten (10)
Business Days after such Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a Termination Event has occurred, a
written statement of the chief financial officer of such Borrower describing
such Termination Event and any action that is being taking with respect thereto
by such Borrower, any such Subsidiary or ERISA Affiliate, and any action taken
or threatened by the Internal Revenue Service, Department of Labor or Pension
Benefit Guaranty Corporation. Such Borrower, such Subsidiary and the ERISA
Affiliate shall be deemed to know all facts known by the administrator of any
Benefit Plan of which it is the plan sponsor; (ii) promptly, and in any event
within three (3) Business Days after the filing thereof with the Internal
Revenue Service, a copy of each funding waiver request
51
<PAGE>
filed with respect to any Benefit Plan and all communications received by any
Credit Party or any ERISA Affiliate with respect to such request; and (iii)
promptly, and in any event within three (3) Business Days after receipt by
any Credit Party or any ERISA Affiliate, of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice.
(d) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES. Promptly, and in any
event within ten (10) Business Days after receipt by any Credit Party of any
notice, complaint or order alleging actual or prospective violation of any
Environmental Law, health or safety Requirement of Law or alleging
responsibility for costs of a cleanup, together with a copy of such notice,
complaint, or order and a written statement describing any action being taken
with respect thereto by such Credit Party.
(e) MATERIAL CONTRACTS. Promptly, and in any event within ten (10)
Business Days after any Material Contract is terminated (other than in
accordance with their stated maturity) or amended or any new Material
Contract is entered into, a written statement describing such event, with
copies of amendments or new Material Contracts, and, if appropriate, an
explanation of any actions being taken with respect thereto.
(f) COLLATERAL MATTERS. At least thirty (30) Business Days prior
written notice to the Agent of any change in the location of any Collateral,
the name of any Credit Party or in the location of the chief executive office
or place of business of any Credit Party from the locations specified in
Schedule B, Part 6.10. At least twenty (20) Business Days prior to any such
change, the Borrowers shall cause to be executed and delivered to the Agent
any financing statements and such other documents reasonably deemed necessary
by the Agent to preserve and protect the Agent's Lien (and the priority
thereof) on the Collateral. Prior to the date of any such change, the
Borrowers shall cause to be executed and delivered to the Agent any
Collateral Access Agreements or other documents reasonably required by the
Agent, all in form and substance satisfactory to the Agent. To the extent
that the Credit Parties timely comply with the provisions set forth in this
Section, Schedule B, Part 6.10 automatically shall be deemed to be amended to
include such new jurisdictions or to reflect a change in the location of
their chief executive offices, as applicable.
7.4. CORPORATE EXISTENCE. Each Borrower shall, and shall cause
each of its Subsidiaries to, (i) maintain its corporate existence (except
that any Borrower's solvent Subsidiaries may merge with each other and with
such Borrower and a solvent Borrower may merge with another solvent Borrower,
provided the Agent receives five (5) Business Days prior written notice
thereof and a Borrower is the surviving corporation), (ii) maintain in full
force and effect all material licenses, bonds, franchises, leases, trademarks
and qualifications to do business, and all patents, contracts and other
rights necessary to the profitable conduct of their businesses, (iii)
continue in, and limit their operations to, the same general lines of
business conducted by such Person immediately prior to the Closing Date and,
subject to the Agent's satisfaction of compliance with the Non-Competition
Agreement (if then in effect), businesses ancillary thereto, and (iv) comply
with all material Requirements of Law.
7.5. BOOKS AND RECORDS; INSPECTIONS. Each Borrower agrees to
maintain, and to cause each of its Subsidiaries to maintain, books and
records pertaining to the Collateral in such detail, form and scope as is
consistent with good business practice. Each Borrower agrees that the Agent
or its agents may enter upon the premises of such Borrower or any of its
Subsidiaries at any time and from time to time, during normal business hours
and upon reasonable notice under the circumstances, and at any time at all on
and after the occurrence of an Event of Default which has not otherwise been
waived by the Agent or the Lenders, as applicable, for the purposes of (i)
inspecting and verifying the Collateral, (ii) inspecting and/or copying (at
such Borrower's expense) any and all records pertaining thereto, and (iii)
discussing the affairs, finances and business of such Borrower with any
officers, employees and directors of such Borrower or with the Auditors.
52
<PAGE>
7.6. INSURANCE. Each Borrower agrees to maintain (or to cause to
be maintained on its behalf), and to cause each of its Subsidiaries to
maintain (or to cause to be maintained on its behalf), public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on the Collateral under such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All policies covering the Collateral are
to name the Agent as an additional insured and the loss payee in case of
loss, and are to contain such other provisions as the Agent may reasonably
require to fully protect the Agent's interest in the Collateral and to any
payments to be made under such policies.
7.7. CASUALTY LOSS. Each Borrower shall provide written notice to
the Agent and the Lenders of the occurrence of any of the following events
within five (5) Business Days after the occurrence of such event: any asset
or property owned or used by any Credit Party is (i) damaged or destroyed, or
suffers any material loss, or (ii) condemned, confiscated or otherwise taken,
in whole or in part, or the use thereof is otherwise diminished so as to
render impracticable or unreasonable the use of such asset or property for
the purposes for which such asset or property were used immediately prior to
such condemnation, confiscation or taking, by exercise of the powers of
condemnation or eminent domain or otherwise, and in any such case the amount
of the damage, destruction, loss or diminution in value is in excess of
$1,000,000 (collectively, a "Casualty Loss"). Each Borrower diligently shall
file and prosecute its claim or claims for any award or payment in connection
with a Casualty Loss. In the event of a Casualty Loss, the Borrowers shall
pay to the Agent, promptly upon receipt thereof, any and all insurance
proceeds and payments received by any Credit Party on account of damage,
destruction, loss, condemnation or eminent domain proceedings. The Agent
may, in the exercise of its reasonable judgment, either (a) apply the of
proceeds realized from Casualty Losses to payment of accrued and unpaid
interest or outstanding principal under the Loans or (b) pay such proceeds to
the applicable Credit Party to be used to repair, replace or rebuild the
asset or property or portion thereof that was the subject of the Casualty
Loss. After the occurrence and during the continuance of an Event of
Default, (i) no settlement on account of any such Casualty Loss shall be made
without the consent of the Majority Lenders and (ii) the Agent may
participate in any such proceedings and each Borrower shall deliver to the
Agent such documents as may be requested by the Agent to permit such
participation and shall consult with the Agent, its attorneys and agents in
the making and prosecution of such claim or claims. Each Borrower hereby
irrevocably authorizes and appoints the Agent its attorney-in-fact, after the
occurrence and continuance of an Event of Default, to collect and receive for
any such award or payment and to file and prosecute such claim or claims,
which power of attorney shall be irrevocable and shall be deemed to be
coupled with an interest, and each Borrower shall, upon demand of the Agent,
make, execute and deliver any and all assignments and other instruments
sufficient for the purpose of assigning any such award or payment to the
Agent for the benefit of the Lenders, free and clear of any encumbrances of
any kind or nature whatsoever.
7.8. TAXES. Each Borrower agrees to pay, when due, and to cause
each of its Subsidiaries to pay when due, all taxes lawfully levied or
assessed against such Borrower, any of its Subsidiaries or any of the
Collateral before any penalty or interest accrues thereon; PROVIDED, HOWEVER,
that, unless such taxes have become a federal tax or ERISA Lien on any of the
assets of such Borrower or any of its Subsidiaries, no such tax need be paid
if the same is being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and if an adequate reserve or
other appropriate provision shall have been made therefor as required in
order to be in conformity with GAAP.
7.9. COMPLIANCE WITH LAWS. Each Borrower agrees to comply, and to
cause each of its Subsidiaries to comply, with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of its
business or its assets generally, unless such Borrower contests any such
Requirements of Law in a reasonable manner and in good faith.
53
<PAGE>
7.10. USE OF PROCEEDS. The Term Loans and up to $11,000,000 of initial
Revolving Loans made to the Borrowers hereunder shall be available for use by
the Borrowers solely to repay existing Indebtedness of the Borrowers and
their Subsidiaries and to pay the costs and expenses related to the Judd's
Merger and the Credit Documents which are due and payable on the Closing
Date, including without limitation the Fees and Expenses due on the Closing
Date pursuant to Article 4; and the proceeds of any subsequent Revolving
Loans made hereunder shall be used by the Borrowers consistent herewith for
their general corporate purposes. No Borrower shall use any portion of the
proceeds of any such Loans for the purpose of purchasing or carrying any
"margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) in any manner which violates the provisions of
Regulation G, T, U or X of said Board of Governors or for any other purpose
in violation of any applicable statute or regulation, or of the terms and
conditions of this Credit Agreement.
7.11. FISCAL YEAR. Each Borrower agrees to maintain its fiscal year as
a year ending December 31.
7.12. MAINTENANCE OF PROPERTY. Each Borrower agrees to keep, and to
cause each of its Subsidiaries to keep, all property useful and necessary to
their respective businesses in good working order and condition (ordinary
wear and tear excepted) in accordance with their past operating practices and
not to commit or suffer any material waste with respect to any of their
properties.
7.13. ERISA DOCUMENTS. Each Borrower will cause to be delivered to the
Agent, upon the Agent's request, each of the following: (i) a copy of each
Plan (or, where any such plan is not in writing, complete description
thereof) (and if applicable, related trust agreements or other funding
instruments) and all amendments thereto, all written interpretations thereof
and written descriptions thereof that have been distributed to employees or
former employees of such Borrower or its Subsidiaries; (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to
each Benefit Plan; (iii) for the three most recent plan years, Annual Reports
on Form 5500 Series required to be filed with any governmental agency for
each Benefit Plan; (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans,
with the aggregate amount of the most recent annual contributions required to
be made by such Borrower or any ERISA Affiliate to each such plan and copies
of the collective bargaining agreements requiring such contributions; (vi)
any information that has been provided to such Borrower or any ERISA
Affiliate regarding withdrawal liability under any Multiemployer Plan; and
(vii) the aggregate amount of the most recent annual payments made to former
employees of such Borrower or any ERISA Affiliate under any Retiree Health
Plan.
7.14. FURTHER ASSURANCES. Each Borrower shall take, and shall cause
each of its Subsidiaries to take, all such further actions and execute all
such further documents and instruments as the Agent at any time reasonably
may determine in its sole discretion to be necessary or desirable to further
carry out and consummate the transactions contemplated by the Credit
Documents, to cause the execution, delivery and performance of the Credit
Documents to be duly authorized and to perfect or protect the Liens (and the
priority status thereof) of the Agent on the Collateral. Without limiting
the generality of the foregoing, in the event Judd & Detweiler has not sold
the real property located at 1500-1520 Eckington Place Northeast, Washington,
D.C., on or before August 15, 1998, the Borrowers shall, and shall cause Judd
& Detweiler to, take all actions to cause the Mortgage with respect to such
real property to be recorded as a first priority lien thereon and to obtain a
policy of title insurance with respect thereto in favor of the Agent in
amount and with endorsements satisfactory to the Agent, all of the foregoing
at the Borrowers' sole cost and expense. In addition, the Borrowers shall
use commercially reasonable efforts to obtain Collateral Access Agreements
from each landlord, warehouseman, bailee and each other Person as may be
reasonably requested by the Agent or the Required Lenders and, in the event
any such
54
<PAGE>
Collateral Access Agreement is not received on or prior to April 1,
1998, the Agent may establish such reserves as it deems necessary in the
exercise of its Permitted Discretion.
7.15. ENVIRONMENTAL AND OTHER MATTERS. (a) Each Borrower and its
Subsidiaries will conduct their businesses so as to comply in all material
respects with all applicable Environmental Laws, in all jurisdictions in
which any of them is doing business, including, without limitation,
compliance in all material respects with the terms and conditions of all
permits and governmental authorizations, except to the extent that such
Borrower or any of such Subsidiaries is contesting, in good faith by
appropriate legal proceedings, any such Environmental Law or interpretation
thereof or application thereof; PROVIDED, FURTHER, that such Borrower and
each of such Subsidiaries shall comply in all material respects with the
applicable order of any court or other governmental agency relating to such
Environmental Laws unless such Borrower or such Subsidiaries shall currently
be prosecuting an appeal or proceedings for review and shall have secured a
stay of enforcement or execution or other arrangement postponing enforcement
or execution pending such appeal or proceedings for review. If any Borrower
or any of the Borrowers' Subsidiaries shall (a) receive written notice that
any material violation of any Environmental Law may have been committed or is
about to be committed by such Borrower or any of its Subsidiaries, (b)
receive written notice that any administrative or judicial complaint or order
has been filed or is about to be filed against such Borrower or any of its
Subsidiaries alleging material violations of any Environmental Law, or
requiring such Borrower or any of its Subsidiaries to take any action in
connection with the release of toxic or hazardous substances into the
environment or (c) receive any written notice from a federal, state, or local
governmental agency or private party alleging that such Borrower or any of
its Subsidiaries may be liable or responsible for material costs associated
with a response to or cleanup of a release of a toxic or hazardous substance
into the environment or any damages caused thereby, such Borrower shall
provide the Agent and the Lenders with a copy of such notice within ten (10)
days after the receipt thereof by such Borrower or any of its Subsidiaries.
Within ten (10) days after any Borrower learns of the enactment or
promulgation of any federal, state or local Environmental Law, which
reasonably could be expected to have a Material Adverse Effect, such Borrower
shall provide the Agent and the Lenders with notice thereof. Each Borrower
shall promptly take all reasonable actions necessary to prevent the
imposition of any Liens on any of its properties arising out of or related to
any environmental matters. At the written request of the Agent (which
request will not be made more frequently than once per year unless (i) the
Agent receives a notice under Section 7.3(d) or (ii) an Event of Default has
occurred and is continuing), which request shall include a reasonably
specific statement of the basis thereof, and at the sole cost and expense of
such Borrower, such Borrower shall retain an environmental consulting firm,
satisfactory to the Agent in its commercially reasonable judgment, to conduct
an environmental review, audit or investigation of the specific items as
requested by the Agent relating to the properties of such Borrower and its
Subsidiaries located in the United States and provide to the Agent and each
Lender a copy of any reports delivered in connection therewith. At the
request of the Agent, each Borrower shall provide the Agent with any
additional information relating to environmental matters and any potential
related liability resulting therefrom as the Agent may reasonably request.
(b) For purposes of this Section 7.15, "material" means any noncompliance
or basis of liability that reasonably would be expected to subject any Borrower
or any of its Subsidiaries to liability in excess of $100,000.
7.16. SECURITY INTERESTS. Each Borrower will, and will cause each of
its Subsidiaries to, defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein, other than claims
relating to Liens permitted by the Credit Documents. Each Borrower agrees to,
and will cause each of its Subsidiaries to, comply with the requirements of all
state and federal laws in order to grant to the Agent and the Lenders valid and
perfected first priority security
55
<PAGE>
interests in the Collateral, subject to Liens permitted under Section 8.8.
If, after request by the Agent to any Borrower or any of its Subsidiaries to
execute and deliver one or more financing statements, such Borrower or such
Subsidiary fails timely to do so, the Agent is hereby authorized by such
Borrower and each of its Subsidiaries to file any financing statements
covering the Collateral whether or not such Borrower's or such Subsidiary's
signature appears thereon. Each Borrower agrees to, and will cause each of
its Subsidiaries to, do whatever the Agent reasonably may request, from time
to time, by way of: filing notices of liens, financing statements, and
amendments, renewals and continuations thereof; cooperating with Agent's
representatives; keeping stock records; paying claims which could, if unpaid,
become a Lien on the Collateral; and performing such further acts as the
Agent reasonably may require in order to effect the purposes of this Credit
Agreement and the other Credit Documents. Any and all fees, costs and
Expenses incurred by the Agent in connection with the foregoing shall be paid
by the Borrowers. If same are not promptly paid by the Borrowers, the Agent
may pay same on the Borrowers' behalf, and the amount thereof shall be an
Obligation of the Borrowers and due to the Agent on demand.
7.17. TRADEMARKS. Each Borrower shall do and cause to be done all
things necessary to preserve and keep in full force and effect all of its and
its Subsidiaries' material registrations of trademarks, service marks and other
marks, trade names or other trade rights.
7.18. DIVIDENDS ON PREFERRED STOCK. Perry shall make, to the maximum
extent permitted thereunder, all dividend payments on the Series B Preferred
Stock or the Series C Preferred Stock, as the case may be, through the issuance
of additional Series D Preferred Stock rather than in cash.
ARTICLE 8. NEGATIVE COVENANTS
Until termination of this Credit Agreement and payment and satisfaction of
all Obligations due hereunder, the Credit Parties shall comply with, and, where
required, each Borrower shall cause each of its Subsidiaries to comply with, the
following covenants:
8.1. MINIMUM EBITDA. The Credit Parties shall have EBITDA for each
Test Period ending on the last day of any Fiscal Quarter set forth below of not
less than the amount set forth below:
Fiscal Quarter Amount
-------------- ------
1st Quarter - 1998 $5,500,000
2nd Quarter - 1998 $12,000,000
3rd Quarter - 1998 $19,500,000
4th Quarter - 1998 $28,000,000
1st Quarter - 1999 $28,500,000
2nd Quarter - 1999 $29,000,000
3rd Quarter - 1999 $29,500,000
4th Quarter - 1999 $30,000,000
1st Quarter - 2000 $30,500,000
2nd Quarter - 2000 $31,000,000
56
<PAGE>
3rd Quarter - 2000 $31,500,000
4th Quarter - 2000 $32,000,000
1st Quarter - 2001 $32,500,000
2nd Quarter - 2001 $33,000,000
3rd Quarter - 2001 $33,500,000
4th Quarter - 2001 $34,000,000
1st Quarter - 2002 $34,500,000
2nd Quarter - 2002 $35,000,000
3rd Quarter - 2002 $35,500,000
4th Quarter - 2002
and thereafter $36,500,000
57
<PAGE>
8.2. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Credit Parties
shall maintain a ratio of EBITDA to Consolidated Fixed Charges for any Test
Period ending on the last day of any Fiscal Quarter set forth below of not less
than the ratio set forth below:
Fiscal Quarter Ratio
-------------- -----
1st Quarter - 1998 .90 to 1.0
2nd Quarter - 1998 1.0 to 1.0
3rd Quarter - 1998 1.10 to 1.0
4th Quarter - 1998
and thereafter 1.20 to 1.0
8.3. INTEREST COVERAGE RATIO. The Credit Parties shall maintain for each
Fiscal Quarter a ratio of EBITDA to Interest Expense for any Test Period
ending on the last day of any Fiscal Quarter set forth below of not less than
the ratio set forth below:
Fiscal Quarter Ratio
-------------- -----
1st Quarter - 1998 1.60 to 1.0
2nd Quarter - 1998 1.70 to 1.0
3rd Quarter - 1998 1.80 to 1.0
4th Quarter - 1998 2.0 to 1.0
1st Quarter - 1999 2.10 to 1.0
2nd Quarter - 1999 2.20 to 1.0
3rd Quarter - 1999 2.30 to 1.0
4th Quarter - 1999 2.40 to 1.0
1st Quarter - 2000 2.50 to 1.0
2nd Quarter - 2000 2.60 to 1.0
3rd Quarter - 2000 2.70 to 1.0
4th Quarter - 2000
and thereafter 2.75 to 1.0
8.4. CURRENT RATIO. The Credit Parties shall maintain for each Fiscal
Quarter a ratio of consolidated current assets to consolidated current
liabilities (which for purposes of this Section shall exclude the full
outstanding balance of the Revolving Loans and the current portion of long
term debt) of not less than 1.50 to 1.0.
8.5. DEBT RATIO. The Credit Parties shall maintain for each Fiscal
Quarter a ratio of Funded Debt to Annualized EBITDA of not more than the ratio
set forth below:
Fiscal Quarter Ratio
-------------- -----
58
<PAGE>
1st Quarter - 1998 6.00 to 1.0
2nd Quarter - 1998 5.70 to 1.0
3rd Quarter - 1998 5.30 to 1.0
4th Quarter - 1998 4.80 to 1.0
1st Quarter - 1999 4.60 to 1.0
2nd Quarter - 1999 4.50 to 1.0
3rd Quarter - 1999 4.25 to 1.0
4th Quarter - 1999 4.00 to 1.0
1st Quarter - 2000 3.80 to 1.0
2nd Quarter - 2000 3.70 to 1.0
3rd Quarter - 2000 3.60 to 1.0
4th Quarter - 2000 3.60 to 1.0
1st Quarter - 2001 3.50 to 1.0
2nd Quarter - 2001 3.40 to 1.0
3rd Quarter - 2001 3.20 to 1.0
4th Quarter - 2001 3.00 to 1.0
1st Quarter - 2002 2.80 to 1.0
2nd Quarter - 2002 2.70 to 1.0
3rd Quarter - 2002 2.60 to 1.0
4th Quarter - 2002
and thereafter 2.50 to 1.0
59
<PAGE>
8.6. CAPITAL EXPENDITURES. The Credit Parties shall not make payments for
Capital Expenditures during any Fiscal Year set forth below in an aggregate
amount in excess of the amount set forth below:
Fiscal Year Amount
------------------------------ ------
1998 and thereafter until such
time as the outstanding
aggregate principal amount of
the Term Loans is $15,000,000
or less $7,500,000
from and after such time as the
outstanding aggregate principal
amount of the Term Loans is
$15,000,000 or less $10,000,000
The Credit Parties shall not make any Capital Expenditures that are not directly
related to the business permitted by Section 7.4.
8.7. ADDITIONAL INDEBTEDNESS. Neither any Borrower nor any of the
Borrowers' Subsidiaries shall directly or indirectly incur, create, assume or
suffer to exist any Indebtedness other than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness under Interest Rate Agreements entered into in the
ordinary course of business;
(c) Indebtedness described on Schedule B, Part 8.7, and any refinancing of
such Indebtedness, so long as the aggregate principal amount of the Indebtedness
so refinanced shall not be increased and the refinancing shall be on terms and
conditions no more restrictive than the terms and conditions of the Indebtedness
to be refinanced;
(d) Indebtedness (including capital leases) secured by purchase money
liens on equipment acquired after the date of this Credit Agreement not to
exceed $2,500,000 in the aggregate outstanding at any one time ("Purchase Money
Liens") so long as such Indebtedness shall be on terms and conditions reasonably
satisfactory to the Agent, each Purchase Money Lien shall attach only to the
property to be acquired, a description shall have been furnished to the Agent
for any item of equipment for which the purchase price is greater than $100,000,
and the debt incurred shall not exceed ninety percent (90%) of the purchase
price of the item or items of equipment purchased or acquired;
(e) (i) Other Indebtedness incurred to finance capital expenditures which
is subject to firm commitments for subsequent refinancing pursuant to
obligations not constituting Indebtedness; and (ii) other Indebtedness in an
amount not to exceed $4,000,000 in the aggregate outstanding at any time;
(f) any Borrower and any of the Borrowers' Affiliates that has executed
a Guarantee may guarantee the obligations of Holdings in respect of the Holdings
Senior Subordinated Notes pursuant to a Subsidiary Subordinated Note Guaranty;
and
(g) Indebtedness arising from intercompany loans from any Borrower to any
other Borrower, PROVIDED, that (i) all such Indebtedness shall be evidenced by a
promissory note executed by
60
<PAGE>
the Borrower receiving such intercompany loans, substantially in the form of
Exhibit U, (ii) such Indebtedness shall be subordinated in right of payment
to the Obligations when due and payable and (iii) the promissory notes
evidencing such Indebtedness shall be pledged to the Agent, for the benefit
of the Lenders, pursuant to the Pledge Agreement.
8.8. LIENS. Neither any Borrower nor any of the Borrowers'
Subsidiaries shall directly or indirectly create, incur, assume, or suffer to
exist any Lien on any of its property now owned or hereafter acquired except:
(a) Liens granted to the Lenders under the Credit Documents;
(b) Liens listed on Schedule B, Part 8.8;
(c) Purchase Money Liens;
(d) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, or landlords, liens for taxes, assessments or other
governmental charges, and other similar Liens arising by operation of law for
amounts that are not yet due and payable or which are being diligently contested
in good faith by the applicable Borrower, so long as the Agent has been notified
thereof and adequate reserves are maintained by such Borrower for their payment;
(e) Attachment or judgment Liens not to exceed an aggregate of $500,000,
excluding amounts (i) bonded to the reasonable satisfaction of the Agent or (ii)
covered by insurance to the reasonable satisfaction of the Agent;
(f) Liens for taxes, assessments or other governmental charges not yet due
and payable or which are being diligently contested in good faith by the
applicable Borrower by appropriate proceedings, PROVIDED that in any such case
an adequate reserve is being maintained by such Borrower for the payment of
same;
(g) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance,
not to exceed an aggregate of $250,000;
(h) Deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary course
of business not to exceed an aggregate of $250,000;
(i) Permitted Mortgage Encumbrances;
(j) Easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of any Borrower or any of the Borrowers' Subsidiaries;
(k) bankers' liens or rights of recoupment or offset arising in connection
with investments in Cash Equivalents; and
(l) Extensions and renewals of any of the foregoing so long as the
aggregate amount of extended or renewed Liens are not increased and are on terms
and conditions no more restrictive than the terms and conditions of the Liens
extended or renewed.
8.9. CONTINGENT OBLIGATIONS. Neither any Borrower nor any of the
Borrowers' Subsidiaries shall directly or indirectly incur, assume, or suffer to
exist any Contingent Obligation, excluding
61
<PAGE>
indemnities given in connection with the sale of inventory or other asset
dispositions permitted hereunder, Contingent Obligations created under the
Credit Documents in favor of the Agent, the Lenders or the Issuing Bank, and
Contingent Obligations of any Borrower for Indebtedness of such Borrower
permitted to be incurred under Section 8.7 except for the Indebtedness
referred to in Section 8.7(f).
8.10. SALE OF ASSETS. Each Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, sell, lease, assign,
transfer or otherwise dispose of any assets other than (i) sales by each
Borrower of Inventory in the ordinary course of business, (ii) sales by the
Credit Parties of individual items of Collateral with a book value of less than
$1,500,000 in the aggregate during any Fiscal Year, (iii) sales by each Credit
Party of obsolete or worn out property disposed of in the ordinary course of
business, (iv) other dispositions of assets by the Credit Parties, PROVIDED that
(a) such dispositions are for fair value, (b) not less than 85% of the aggregate
consideration is paid in full in cash at the time of disposition and is used to
repay the Loans as required by this Credit Agreement, and (c) the aggregate
amount of all such dispositions for all Credit Parties does not exceed
$3,000,000 in the aggregate for any Fiscal Year, and (v) the sale of equipment
by any Borrower to the extent that such equipment is exchanged for credit
against the purchase price of similar replacement equipment or the proceeds of
such sale are applied within 60 days of such sale to the purchase price of such
replacement equipment; PROVIDED, HOWEVER, that the exceptions contained in
clauses (i) through (vi) of this Section shall not apply to any sale, lease,
assignment, transfer or other disposition of the Mortgaged Properties;
8.11. RESTRICTED PAYMENTS. Each Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend (other than dividends payable solely in
common stock of such Borrower or, with respect to Perry, in Series B Preferred
Stock or Series C Preferred Stock as to which the dividends are payable only in
shares of Series D Preferred Stock until the Obligations have been paid in full)
on, or make any payment (including by way of offset) on account of, or set apart
assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class of
capital stock of such Borrower or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of such Borrower or any of its Subsidiaries,
except that:
(i) any Subsidiary may declare and pay dividends to the Borrower that
is its corporate parent or any other Subsidiary of such Borrower;
(ii) Perry may pay cash dividends to Holdings and Shenandoah and Port
City may pay cash dividends from time to time to Judd's in each case with
respect to their common stock and in an aggregate amount sufficient to
permit Holdings to make interest payments with respect to the Holdings
Senior Subordinated Notes, but only to the extent permitted by the
subordination provisions contained in the Holdings Senior Subordinated Note
Documents or otherwise as approved in writing by Majority Lenders and
Holdings may make such payments; PROVIDED that nothing in this clause (ii)
shall be deemed to permit any voluntary prepayment with respect to, or
redemption or defeasance of, any such Holdings Senior Subordinated Note;
(iii) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Perry may pay dividends on the Series
B Preferred Stock in an amount not to exceed $812,500 PER ANNUM;
(iv) so long as no Default or Event of Default is continuing or would
result therefrom, Perry may pay cash dividends to Holdings and Shenandoah
and Port City may pay cash dividends to
62
<PAGE>
Judd's, in each case for administrative expenses of Holdings and Judd's
incurred in the ordinary course of business and solely attributable to
business activities relating to the Borrowers and their Subsidiaries and
not any Excluded Subsidiary, so long as such dividends are applied promptly
to pay such administrative expenses and that in any event do not exceed in
the aggregate $150,000 in any fiscal year of Holdings;
(v) so long as no Default or Event of Default is continuing or would
result therefrom, Perry may pay cash dividends to Holdings and Shenandoah
and Port City may pay cash dividends to Judd's, in each case in the amount
and to the extent such proceeds are promptly used by Holdings to make
payments in respect of repurchased shares of Holdings common stock from
employees or any partnership through which they indirectly own such shares,
who retire or terminate employment; PROVIDED that such payments shall not
exceed in the aggregate $350,000 in any year; and
(vi) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Perry may use not more than 25% of
the net cash proceeds in excess of $30,000,000 from a public offering of
Perry's common stock (or from a public offering of Holdings' common stock
which excess proceeds have been contributed to Perry as common equity) to
redeem Series B, Series C or Series D Preferred Stock in such order as
their interests may appear;
(b) make any optional payment or prepayment on or redemption (including,
without limitation, by making payments to a sinking or analogous fund), offer to
purchase or repurchase of, or defease, any Indebtedness (other than Indebtedness
pursuant to this Credit Agreement and other than any refinancing of Indebtedness
permitted under the Credit Documents); PROVIDED that any Subsidiary of a
Borrower may make payments on account of Indebtedness owing to such Borrower or
any other Subsidiary of such Borrower; or
(c) make any payment (whether for fees, as compensation for services or
otherwise) to the Milhous Parties or any of their Affiliates after the Closing
Date, except that:
(i) the Borrowers may make annual compensation payments to Paul B.
Milhous and Robert E. Milhous or any of their Affiliates of not more than
$500,000 in the aggregate, which amount may be increased each year by 10%
of the prior year's permitted amount; and
(ii) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Perry may make payments to Novamil
Corporation under the Management Agreement of not more than $750,000 in any
year, plus any cost of living increases provided for in the Management
Agreement.
8.12. INVESTMENTS. Each Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, make any Investment in any Person,
whether in cash, securities, or other property of any kind including, without
limitation, any Subsidiary or Affiliate of such Borrower, other than:
(a) Advances or loans by each Borrower made in the ordinary course of
business to employees or other Persons not to exceed $100,000 outstanding at any
one time to any one Person and $500,000 in the aggregate outstanding at any one
time;
(b) Loans, investments and advances in existence as of the date hereof and
described on Schedule B, Part 8.12;
(c) Cash Equivalents;
63
<PAGE>
(d) Deposits with financial institutions, disclosed in Schedule B, Part
8.14, and which are insured by the Federal Deposit Insurance Corporation
("FDIC") or a similar federal insurance program; PROVIDED, HOWEVER, that each
Borrower may, in the ordinary course of its business, maintain in its
disbursement accounts from time to time amounts in excess of then applicable
FDIC or other program insurance limits;
(e) Investments resulting from the performance by any Borrower of its
obligations under permitted Contingent Obligations;
(f) Investments of any Borrower received in connection with asset sales
permitted under Section 8.10(iv);
(g) Investments of any Borrower in respect of accounts receivable that
have become delinquent, including securities of the account debtor received by
such Borrower or its Subsidiaries in connection with a plan of reorganization of
the Indebtedness of such account debtor;
(h) Investments arising from intercompany loans permitted by Section
8.7(g); and
(i) Such other Investments of any Borrower as the Agent and the Majority
Lenders may approve in writing in their sole discretion.
8.13. AFFILIATE TRANSACTIONS. Except for transactions permitted under
Section 8.11(c) and 8.7(g), each Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, enter into any transaction with,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to, any Subsidiary or Affiliate of any Borrower, except
pursuant to the reasonable requirements of such Borrower's or such Subsidiary's
business, as the case may be, and upon fair and reasonable terms no less
favorable to such Borrower or such Subsidiary than could be obtained in a
comparable arm's-length transaction with an unaffiliated Person.
8.14. ADDITIONAL BANK ACCOUNTS. Each Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, open, maintain or
otherwise have any checking, savings or other accounts at any bank or other
financial institution, or any other account where money is or may be deposited
or maintained with any Person, other than the Disbursement Account and the
accounts set forth on Schedule B, Part 8.14.
8.15. EXCESS CASH. Each Borrower shall not, and shall not permit its
Subsidiaries to, directly or indirectly, maintain in the aggregate in all
deposit accounts of such Borrower and its Subsidiaries (other than the
Disbursement Account and payroll accounts), total cash balances and Investments
permitted by Sections 8.12(c), (d) and (e), in excess of $1,500,000 at any time
during which any Revolving Loans bearing interest at the Prime Rate are
outstanding hereunder or on any date when any Interest Period applicable to
Revolving Loans that are Eurodollar Rate Loans ends.
8.16. NO CORPORATE CHANGES. Each Borrower will not, and shall not
permit any of its Subsidiaries to (except, in each case, as permitted under
Section 7.4 hereof), directly or indirectly, merge, consolidate or otherwise
alter, modify or amend such Borrower's or such Subsidiary's Governing Documents
(including, without limitation, by filing any certificate of designation with
respect to any preferred stock or otherwise creating any new preferred stock),
structure, status or existence, or liquidate or dissolve itself (or suffer any
liquidation or dissolution).
64
<PAGE>
8.17. NO PROHIBITED TRANSACTIONS UNDER ERISA. Each Borrower will
not, and shall not permit any of its Subsidiaries to, directly or indirectly:
(a) Engage, or permit any Subsidiary to engage, in any prohibited
transaction which is reasonably likely to result in a civil penalty or excise
tax described in Sections 406 of ERISA or 4975 of the Internal Revenue Code for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the DOL;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the Internal
Revenue Code), whether or not waived;
(c) fail, or permit any Subsidiary to fail, to pay timely required
contributions or annual installments due with respect to any waived funding
deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary to terminate, any Benefit Plan
where such event would result in any liability of any Borrower, any of its
Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary to fail, to make any required
contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary to fail, to pay any required
installment or any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary to amend, a Plan resulting in an
increase in current liability for the plan year such that any of any Borrower,
any of its Subsidiaries or any ERISA Affiliate is required to provide security
to such Plan under Section 401(a)(29) of the Internal Revenue Code; or
(h) withdraw, or permit any Subsidiary to withdraw, from any Multiemployer
Plan where such withdrawal is reasonably likely to result in any liability of
any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of any Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000.
8.18. MATERIAL AMENDMENTS OF MATERIAL CONTRACTS; ETC. Each Borrower will
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
without the prior written consent of the Agent and the Majority Lenders, amend,
modify, cancel or terminate or permit the amendment, modification, cancellation
or termination (other than at its stated maturity) of (i) any of the Material
Contracts (other than the Holdings Senior Subordinated Note Documents and the
Sale\Leaseback Documents) if the effect thereof would or reasonably could be
expected to have a Material Adverse Effect, (ii) any Tax Sharing Agreement,
(iii) the Management Agreement, (iv) any Real Property Lease, (v) any of the
Sale\Leaseback Documents or (vi) any of the Holdings Senior Subordinated Note
Documents.
8.19. ADDITIONAL NEGATIVE PLEDGES. Except for restrictions actually
imposed by the secured parties with respect to the Purchase Money Liens on the
creation of Liens on the assets subject to such Liens, each Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective, or permit any of its
Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, (i) any prohibition or restriction (including
any agreement to provide equal and ratable security to any other Person in the
event a Lien is granted to or for the benefit of the Agent and the Lenders) on
the creation or existence of
65
<PAGE>
any Lien upon the assets of any Borrower or its Subsidiaries or (ii) any
contractual obligation which may restrict or inhibit the Agent's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof
after the occurrence of an Event of Default.
8.20. ADDITIONAL SUBSIDIARIES; PARTNERSHIPS, JOINT VENTURES. Each
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, form or acquire any new Subsidiaries or become a partner in any
partnership or a party to any joint venture.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES
9.1. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) FAILURE TO PAY. Any Borrower shall fail to pay (i) any interest,
Fees, Expenses or other Obligation (other than principal) within three (3)
Business Days of when due, whether at stated maturity, by acceleration or
otherwise or (ii) any principal when due, whether at stated maturity, by
acceleration or otherwise.
(b) BREACH OF CERTAIN COVENANTS. (i) Any Borrower shall fail to perform
or observe any term, covenant, or agreement contained in Sections 7.3, 7.10 or
7.18 or Article 8 of this Agreement or (ii) Holdings shall fail to perform or
observe any term, covenant or agreement contained in Section 4(b) of the
Holdings Guarantee or (iii) Judd's shall fail to perform or observe any term,
covenant or agreement contained in Section 4 of the Judd's Guarantee.
(c) OTHER DEFAULTS. (i) Any Borrower shall fail to comply with any
provisions contained in any Material Contract or fail to perform or observe any
term, covenant, or agreement contained in Sections 7.1 or 7.2 (other than
Section 7.2(a)) if such failure shall remain unremedied for ten days after such
failure or (ii) any Borrower shall fail to perform or observe any term,
covenant, or agreement contained in Section 7.2(a) if such failure shall remain
unremedied for two days after such failure or (iii) obligations in excess of
$500,000 under any Sale\Leaseback Documents shall have been declared due and
payable or any lessor thereunder shall have commenced (or given notice of its
intention to commence) the exercise of any remedies thereunder.
(d) CREDIT DOCUMENTS. Any Credit Party shall fail to perform or observe
any term, covenant, or agreement contained in this Credit Agreement or any other
Credit Document (other than a default under subsection (a), (b) or (c) of this
Section 9.1) if such failure shall remain unremedied for thirty days after the
earlier of (i) the date such Credit Party obtains knowledge of such failure or
(ii) the date such Credit Party receives notice from the Agent or any Lender of
such failure.
(e) BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty
made or deemed to be made by any Credit Party in this Credit Agreement or in any
other Credit Document (and in any statement or certificate given under this
Credit Agreement or any other Credit Document), shall be false or misleading in
any material respect when made or deemed to be made.
(f) DISSOLUTION. Any Credit Party shall dissolve, wind up or otherwise
cease its business.
(g) INSOLVENCY EVENT. Any Credit Party shall become the subject of an
Insolvency Event.
(h) CHANGE OF CONTROL. A Change of Control or a Triggering Event (as
defined in the certificate of designation relating to the Series A Preferred
Stock) shall occur or a Person or Persons (other than
66
<PAGE>
the Agent) shall acquire, directly or indirectly, a Lien on any of the
capital stock of Judd's, any Borrower or any of their Subsidiaries.
(i) CROSS DEFAULT. A default or event of default shall occur (and
continue beyond any applicable grace period) under any Holdings Senior
Subordinated Note Document or any other note, agreement or instrument evidencing
any other Indebtedness of any Credit Party, which default or event of default
permits the acceleration of its maturity, PROVIDED THAT the aggregate principal
amount of all such Indebtedness for which the default or event of default has
occurred exceeds $500,000.
(j) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS; SECURITY. Any
covenant, agreement or obligation of any Credit Party contained in or evidenced
by any of the Credit Documents shall cease to be enforceable, or shall be
determined to be unenforceable, in accordance with its terms; any Credit Party
shall deny or disaffirm its obligations under any of the Credit Documents or any
Liens granted in connection therewith; or, any Liens granted in any of the
Collateral shall be determined to be void, voidable, invalid or unperfected, or
are subordinated or not given the priority contemplated by this Credit Agreement
or the applicable Credit Document.
(k) JUDGMENTS. One or more judgments or decrees shall be entered against
any Credit Party involving in the aggregate a liability (not paid or fully
covered by insurance satisfactory to the Agent) of $500,000 or more and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof.
9.2. ACCELERATION AND CASH COLLATERALIZATION. Upon the occurrence and
during the continuance of an Event of Default, the Agent may take any or all
of the following actions, without prejudice to the rights of the Agent or any
Lender to enforce its claims against any Borrower:
(a) ACCELERATION. Upon the written request of the Majority Lenders, and
by delivery of written notice to the Borrowers from the Agent, all Obligations
shall be declared to be immediately due and payable (except with respect to any
Event of Default set forth in Section 9.1(g), in which case all Obligations
shall automatically become immediately due and payable without the necessity of
any request of the Majority Lenders or notice or other demand to any Borrower)
without presentment, demand, protest or any other action or obligation of the
Agent or any Lender.
(b) TERMINATION OF COMMITMENTS. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrowers from the Agent, the
Commitments shall be immediately terminated and, at all times thereafter, all
Revolving Loans made by any Lender pursuant to this Credit Agreement shall be at
such Lender's sole discretion, unless such Event of Default is waived in
accordance with Section 11.11.
(c) CASH COLLATERALIZATION. On demand of the Agent or the Majority
Lenders each Borrower shall immediately deposit with the Agent for each Letter
of Credit then outstanding for the account of such Borrower, cash or Cash
Equivalents in an amount equal to 105% of the greatest amount drawable
thereunder.
9.3. RESCISSION OF ACCELERATION. After acceleration of the maturity of
the Loans, if each Borrower pays all accrued interest and all principal due
(other than by reason of the acceleration) and all Defaults and Events of
Default are otherwise remedied or waived in accordance with Section 11.11, the
Majority Lenders may elect in their sole discretion, to rescind the acceleration
and return any cash collateral. (This Section is intended only to bind all of
the Lenders to a decision of the Majority Lenders and not to confer any right on
the Borrowers, even if the described conditions for the Majority Lenders'
election may be met.)
67
<PAGE>
9.4. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, the Agent may, in addition to exercising any other rights now
or hereafter existing under applicable law or any Credit Document, do any or all
of the following:
(a) remove all documents, instruments, files and records (including the
copying of any computer records) relating to the Accounts or use (at the expense
of the Borrowers) such supplies or space of any Borrower at such Borrower's
place of business necessary to properly administer and collect the Accounts
thereon;
(b) accelerate or extend the time of payment, compromise, issue credits,
or bring suit on the Accounts (in the name of any Borrower or the Lenders) and
otherwise administer and collect the Accounts;
(c) sell, assign and deliver the Accounts and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise; and
(d) foreclose the security interests created pursuant to the Credit
Documents by any available procedure, or take possession of any or all of the
Collateral without judicial process and enter any premises where any Collateral
may be located for the purpose of taking possession of or removing the same.
Any Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is hereby expressly waived by each Borrower. If notice
of intended disposition of any Collateral is required by law, it is agreed that
ten (10) days notice shall constitute reasonable notification. Each Borrower
will assemble the Collateral and make it available to the Agent at such
locations as the Agent may specify, whether at the premises of such Borrower or
elsewhere, and will make available to the Agent the premises and facilities of
such Borrower for the purpose of the Agent's taking possession of, removing or
putting the Collateral in saleable form.
9.5. RIGHT OF SETOFF. In addition to and not in limitation of all
rights of offset that any Lender or the Issuing Bank may have under applicable
law, upon the occurrence of any Event of Default, and whether or not any Lender
or the Issuing Bank has made any demand or the Obligations of any Credit Party
have matured, each Lender and the Issuing Bank shall have the right to
appropriate and apply to the payment of the Obligations of such Credit Party all
deposits and other obligations then or thereafter owing by such Lender or the
Issuing Bank to such Credit Party. Each Lender or the Issuing Bank exercising
such rights shall notify the Agent thereof and any amount received as a result
of the exercise of such rights shall be shared in accordance with Section 2.8.
9.6. LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY. Unless
expressly prohibited by the licensor thereof, if any, the Agent is hereby
granted a license to use all computer software programs, data bases, processes
and materials used by any Borrower in connection with its businesses or in
connection with the Collateral. The Agent agrees not to use any such license
prior to the occurrence of an Event of Default.
9.7. NO MARSHALLING; DEFICIENCIES; REMEDIES CUMULATIVE. The net cash
proceeds resulting from the Agent's exercise of any of the foregoing rights to
liquidate all or substantially all of the Collateral (after deducting all of the
Agent's Expenses related thereto) shall be applied by the Agent to the payment
of the Borrowers' Obligations to the Agent and the Lenders, whether due or to
become due, in such order as the Agent may elect. Each Borrower shall remain
liable to the Agent and the Lenders for any deficiencies, and the Agent and the
Lenders in turn agree to remit to the Borrowers or their respective successors
or assigns, any surplus resulting therefrom. The foregoing remedies are not
68
<PAGE>
intended to be exhaustive and the full or partial exercise of any of them shall
not preclude the full or partial exercise of any other available remedy under
the Credit Agreement, under any other Credit Document, at equity or at law.
ARTICLE 10. THE AGENT
10.1. APPOINTMENT OF AGENT (a) Each Lender and the Issuing Bank (by its
acceptance of the benefits hereof) hereby designates BT Commercial Corporation
as its Agent and irrevocably authorizes the Agent to take action on its behalf
under the Credit Documents, to exercise the powers and perform the duties
described therein, and to exercise such other powers reasonably incidental
thereto. The Agent may perform any of its duties through its agents or
employees.
(b) Other than the Borrowers' rights under Section 10.8, this Article 10
is for the benefit of the Agent, the Lenders and the Issuing Bank only. The
Agent shall act only for the Lenders and the Issuing Bank and assumes no
obligation to or agency or trust relationship with any Credit Party.
10.2. NATURE OF DUTIES OF AGENT. The Agent has no duties or
responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The
duties of the Agent shall be mechanical and administrative in nature. The Agent
shall not have a fiduciary relationship to any Lender or any participant of any
Lender.
10.3. LACK OF RELIANCE ON AGENT. Independently and without reliance
upon the Agent, each Lender has made and shall continue to make its own
independent investigation and analysis of the content and validity of the Credit
Documents or of the performance and creditworthiness of the Credit Parties
thereunder. The Agent assumes no responsibility and undertakes no obligation to
make inquiry with respect to such matters, unless specifically requested to do
so in writing by a Lender.
10.4. CERTAIN RIGHTS OF THE AGENT. The Agent may request instructions
from the Majority Lenders at any time. If the Agent requests instructions from
the Majority Lenders with respect to any action or inaction, the Agent shall be
entitled to await instructions from the Majority Lenders before such action or
inaction. No Lender shall have any right of action based upon the Agent's
action or inaction in response to instructions from the Majority Lenders.
10.5. RELIANCE BY AGENT. The Agent may rely upon written or telephonic
communication it believes to be genuine and to have been signed, sent or made by
the proper person. The Agent may obtain the advice of legal counsel (including,
for matters concerning any Borrower, counsel for such Borrower), independent
public accountants and other experts selected by it and shall have no liability
for action or inaction in good faith based upon such advice.
10.6. INDEMNIFICATION OF AGENT. TO the extent the Agent is not
reimbursed and indemnified by the Borrowers, each Lender will reimburse and
indemnify the Agent, to the extent of its Proportionate Share, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder or
otherwise relating to the Credit Documents, unless resulting from the Agent's
gross negligence or willful misconduct.
10.7. THE AGENT IN ITS INDIVIDUAL CAPACITY. In its individual capacity,
the Agent shall have the same rights and powers hereunder as any other Lender
and may exercise them as though it was not
69
<PAGE>
performing the duties specified herein. The terms "Lenders," "Majority
Lenders," or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, acquire equity interests
in, and generally engage in any kind of banking, trust, financial advisory or
other business with any Borrower or any Affiliate of any Borrower as if it
were not performing the duties specified herein, and may accept fees and
other consideration from any Borrower for services in connection with this
Credit Agreement and otherwise without having to account for the same to the
Lenders.
10.8. SUCCESSOR AGENT
(a) The Agent may, upon five Business Days' notice to the Lenders and the
Borrowers, resign by giving written notice thereof to the Lenders and the
Borrowers. The Agent's resignation shall be effective upon the appointment of a
successor Agent. Any such resignation shall be deemed to be a resignation of
Bankers Trust Company as Issuing Bank.
(b) Upon receipt of the Agent's resignation, the Majority Lenders may
appoint a successor Agent. Unless an Event of Default shall have occurred and
be continuing at the time of such appointment, the successor Agent shall be
subject to approval by the Borrowers, which approval shall not to be
unreasonably withheld and shall be delivered to the Majority Lenders within five
Business Days after the Borrower's receipt of notice of a proposed successor
Agent. If a successor Agent has not accepted its appointment within fifteen
Business Days, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent.
(c) Upon its acceptance of the agency hereunder, a successor Agent shall
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 this Credit Agreement. The retiring Agent shall
continue to have the benefit of this Article 10 for any action or inaction while
it was Agent.
10.9. COLLATERAL MATTERS.
(a) Each Lender authorizes and directs the Agent to enter into the
Collateral Documents for the benefit of the Lenders. Except as otherwise set
forth herein, any action or exercise of powers by the Majority Lenders under the
Credit Documents, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. Prior to an
Event of Default, without notice to or consent from any Lender, the Agent may
take any action necessary or advisable to perfect and maintain the perfection of
the Liens upon the Collateral.
(b) The Agent is authorized to release any Lien granted to or held by the
Agent upon any Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations, (ii) upon receipt of the proceeds of
sales of the Collateral permitted hereunder or (iii) if the release can be and
is approved by the Majority Lenders. The Agent may request and the Lenders will
provide confirmation of the Agent's authority to release particular types or
items of Collateral.
(c) The Agent shall have no obligation to assure that the Collateral
exists or is owned by any Borrower or any of the Borrowers' Subsidiaries, that
such Collateral is cared for, protected or insured, or that the Liens in the
Collateral have been created, perfected, or have any particular priority. With
respect to the Collateral, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders, and it shall have no duty or liability
whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
10.10. ACTIONS WITH RESPECT TO DEFAULTS. In addition to the Agent's
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a
70
<PAGE>
Default or Event of Default as shall be directed by the Majority Lenders.
Until the Agent shall have received such directions, the Agent may act (or
not act) as it deems advisable and in the best interests of the Lenders.
ARTICLE 11. MISCELLANEOUS
11.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY DISPUTE ARISING OUT
OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OF THE CREDIT DOCUMENTS,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE LAWS AND DECISIONS OF THE STATE OF CALIFORNIA.
11.2. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG ANY BORROWER AND
THE LENDERS OR THE ISSUING BANKS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE
AND FEDERAL COURTS LOCATED IN LOS ANGELES, CALIFORNIA, AND THE COURTS TO WHICH
AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT, ON BEHALF
OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TO PROCEED AGAINST ANY BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY
SELECTED BY THE AGENT IN GOOD FAITH TO ENABLE THE AGENT TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT.
EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN WHICH THE AGENT HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
11.3. SERVICE OF PROCESS. EACH BORROWER HEREBY IRREVOCABLY
DESIGNATES CT CORPORATION SYSTEM, 818 WEST SEVENTH STREET, LOS ANGELES,
CALIFORNIA 90017 AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH BORROWER TO
RECEIVE, FOR AND ON BEHALF OF SUCH BORROWER, SERVICE OF PROCESS IN THE STATE OF
CALIFORNIA IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO SUCH BORROWER, BUT FAILURE OF SUCH BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
11.4. JURY TRIAL. EACH BORROWER, THE AGENT AND THE LENDERS AND THE
ISSUING BANKS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY
DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
11.5. LIMITATION OF LIABILITY. NEITHER THE AGENT NOR ANY LENDER OR
ISSUING BANK SHALL HAVE ANY LIABILITY TO ANY BORROWER (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY BORROWER IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS CREDIT AGREEMENT, THE EXISTING CREDIT AGREEMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE
AGENT OR ANY SUCH
71
<PAGE>
LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6. DELAYS. No delay or omission of the Agent or the Lenders to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof.
11.7. NOTICES. Except as otherwise provided herein, all notices, demands
required to be in writing and correspondences hereunder shall be in writing and
sent by certified or registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, if to the Agent or any of the
Lenders, then to BT Commercial Corporation, 300 South Grand Avenue, Los Angeles,
California 90071 and if to any Borrower, then to Perry at 575 W. Madison Street,
Waterloo, Wisconsin 53594, with copies to Milhous Group, 2424 North Federal,
Suite 456, Boca Raton, Florida 33431, Milhous Group, 1172B Nicole Court,
Glendora, California 91740 and Brobeck, Phleger & Harrison, 550 South Hope
Street, Los Angeles, California 90071, Attention: John Francis Hilson, Esq. or
by facsimile transmission, promptly confirmed in writing sent by first class
mail, if to the Agent, or any of the Lenders, at (213) 620-8394, and if to any
Borrower at (414) 478-1511, with copies to (407) 362-8770, (909) 599-2390 and
(213) 239-1324. All such notices and correspondence shall be deemed given
(i) if sent by certified or registered mail, three Business Days after being
postmarked, (ii) if sent by overnight delivery service, when received at the
above stated addresses or when delivery is refused and (iii) if sent by telex or
facsimile transmission, when receipt of such transmission is acknowledged.
72
<PAGE>
11.8. ASSIGNMENTS AND PARTICIPATIONS.
(a) BORROWER ASSIGNMENT. No Borrower shall assign this Credit Agreement,
or any rights or obligations hereunder, without the prior written consent of the
Agent and the Lenders.
(b) LENDER ASSIGNMENTS. Each Lender may assign to one or more banks or
other financial institutions all or a ratable portion of all its rights and
obligations under this Credit Agreement, the Notes and the other Credit
Documents, with the consent of the Agent and the consent of the Borrowers (which
shall not be unreasonably withheld), and upon execution and delivery to the
Agent, for its acceptance and recording in the Register (as defined below), of
an agreement in substantially the form of Exhibit N (an "Assignment and
Assumption Agreement"), together with surrender of any Note or Notes subject to
such assignment and a processing and recordation fee of $2,500. No such
assignment shall be for less than $5,000,000 of the Commitments and Term Loans
unless it is to another Lender. (This Section does not apply to branches and
Affiliates of a Lender, it being understood that a Lender may make, carry or
transfer Loans at or for the account of any of its branch offices or Affiliates
without consent of the Borrowers, the Agent or any other Lender.)
(c) AGENT'S REGISTER. The Agent shall maintain a register of the names
and addresses of the Lenders, their Commitments, and the principal amount of
their Loans (the "Register"). The Agent shall also maintain a copy of each
Assignment and Assumption Agreement delivered to and accepted by it and modify
the Register to give effect to each Assignment and Assumption Agreement. Upon
its receipt of each Assignment and Assumption Agreement and surrender of the
affected Note or Notes, the Agent will give prompt notice thereof to the
Borrowers and deliver to the Borrowers a copy of the Assignment and Assumption
Agreement and the surrendered Note or Notes. Within five Business Days after
its receipt of such notice, each Borrower shall execute and deliver to the Agent
a new Note or Notes to the order of the assignee in the amount of the
Commitment, Commitments or Loans, as the case may be, assumed by it and to the
assignor in the amount of the Commitment, Commitments or Loans, as the case may
be, retained by it, if any. Such new Note or Notes shall re-evidence the
Indebtedness outstanding under the surrendered Note or Notes and shall be dated
as of the Closing Date. The Agent shall be entitled to rely upon the Register
exclusively for purposes of identifying the Lenders hereunder.
(d) LENDER PARTICIPATIONS. Each Lender may sell participations (without
the consent of the Agent, any Borrower or any other Lender) to one or more
parties in or to all or a ratable portion of all its rights and obligations
under this Credit Agreement, the Notes and the other Credit Documents.
Notwithstanding a Lender's sale of a participation interest, its obligations
hereunder shall remain unchanged. Each Borrower, the Agent, and the other
Lenders shall continue to deal solely and directly with such Lender. No
participant shall have rights to approve any amendment or waiver of this Credit
Agreement except to the extent such amendment or waiver would (i) increase the
Commitment of the Lender from whom the participant purchased its participation
interest; (ii) reduce the principal of, or rate or amount of interest on the
Loans subject to such participation, (iii) postpone any date fixed for any
payment of principal of, or interest on, the Loans subject to the participation
interest, and (iv) release any guarantor of the Obligations or all or a
substantial portion of the Collateral, other than when otherwise permitted
hereunder.
73
<PAGE>
11.9. CONFIDENTIALITY. Each Lender agrees that it will not disclose
without the prior consent of a Borrower any information with respect to such
Borrower or any of its Subsidiaries which is furnished pursuant to this Credit
Agreement and which is designated by such Borrower to the Lenders in writing as
confidential, PROVIDED, THAT any Lender may disclose any such information (a) to
its employees, auditors, counsel or its parent or holding company or any
Subsidiary of such parent or holding company, or to another Lender if the
disclosing Lender or such disclosing Lender's holding or parent company in its
sole discretion determines that any such party should have access to such
information, (b) as has become generally available to the public, (c) as may be
required or appropriate in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over such Lender,
(d) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (e) in order to comply with any Requirement
of Law, and (f) to any prospective or actual transferee or participant in
connection with any contemplated transfer or participation of any of the Notes
or Commitments or any interest therein by such Lender so long as, in connection
therewith, either such prospective or actual transferee has agreed in writing in
favor of the applicable Borrower to acquire any information regarding such
Borrower or the other Credit Parties subject to the terms of this Section 11.9
or such Lender obtains a confidentiality agreement from such prospective or
actual transferee or participant containing substantially the terms of this
Section 11.9.
11.10. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF COLLECTION. Each
Borrower hereby indemnifies and agrees to defend and hold harmless the Agent,
the Issuing Bank and each of the Lenders and their respective directors,
officers, agents, employees and counsel from and against any and all losses,
claims, damages, liabilities, deficiencies, judgments or expenses incurred by
any of them (except to the extent that it is finally judicially determined to
have resulted from their own gross negligence or willful misconduct) arising out
of or by reason of (a) any litigations, investigations, claims or proceedings
which arise out of or are in any way related to (i) this Credit Agreement, the
existing Credit Agreement or the transactions contemplated hereby or thereby,
including, without limitation, the Perry Acquisition or the Judd's Merger,
(ii) the issuance of the Letters of Credit, (iii) the failure of the Issuing
Bank to honor a drawing under any Letter of Credit, as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, (iv) any actual or proposed use by
any Borrower of the proceeds of the Loans or (v) the Agent's or the Lenders'
entering into this Credit Agreement, the existing Credit Agreement, the other
Credit Documents, the other Existing Credit Documents or any other agreements
and documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the reasonable fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(b) any remedial or other action taken by any Borrower or any of its
Subsidiaries in connection with compliance by any Borrower or any of its
Subsidiaries, or any of their respective properties, with any federal, state or
local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines. In addition, each Borrower shall, upon
demand, pay to the Agent and any Lender all costs and expenses (including the
reasonable fees and disbursements of counsel and other professionals) paid or
incurred by the Agent or such Lender in (i) enforcing or defending its rights
under or in respect of this Credit Agreement, the Existing Credit Agreement, the
other Credit Documents, the other Existing Credit Documents or any other
document or instrument now or hereafter executed and delivered in connection
herewith, (ii) in collecting the Loans, (iii) in foreclosing or otherwise
collecting upon the Collateral or any part thereof and (iv) obtaining any legal,
accounting or other advice in connection with any of the foregoing items (i)
through (iii).
11.11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Credit Agreement, any part of Schedule B, or any other Credit Document
shall be effective unless in writing and signed by the Majority Lenders (or by
the Agent on their behalf), except that:
74
<PAGE>
(a) the consent of all the Lenders is required to (i) increase the
Commitments, (ii) reduce the principal of, or interest on, the Notes, any Letter
of Credit reimbursement obligations or any Fees hereunder (other than Fees that
are exclusively for the account of the Agent or the Issuing Bank),
(iii) postpone any date fixed for any payment in respect of principal of, or
interest on, the Notes, any Letter of Credit Reimbursement Obligations or any
Fees hereunder, (iv) change the percentage of the Commitments, or any minimum
requirement necessary for the Lenders or the Majority Lenders to take any action
hereunder, (v) amend or waive this Section 11.11(a), or change the definition of
Majority Lenders, (vi) amend or waive Section 2.3(b)(y) or (vii) except as
otherwise expressly provided in this Credit Agreement, and other than in
connection with the financing, refinancing, sale or other disposition of any
asset of any Borrower permitted (including by means of amendment or waiver)
under this Credit Agreement, release any Liens in favor of the Lenders on any of
the Collateral; and
(b) the consent of the Agent or the Issuing Bank, as the case may be,
shall be required for any amendment, waiver or consent affecting the rights or
duties of the Agent or the Issuing Bank under any Credit Document, in addition
to the consent of the Lenders otherwise required by this Section.
No consent of any Borrower shall be required for any amendment, modification or
waiver of the provisions of Article 10 (other than Section 10.8). Each Borrower
and the Lenders hereby authorize the Agent to modify this Credit Agreement by
unilaterally amending or supplementing Annex I to reflect assignments of the
Commitments. Notwithstanding the foregoing, the Borrowers may amend Schedule B,
Parts 6.1, 6.10, 6.14 and 8.14, without the consent of the Majority Lenders;
PROVIDED that, no amendment to any such Schedule shall be permitted to cure any
Default or Event of Default which would otherwise have existed in the absence of
such amendment.
11.12. COUNTERPARTS; INCONSISTENCIES AND EFFECTIVENESS. This Credit
Agreement and any waiver or amendment hereto may be executed in any number of
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. This Credit
Agreement and each of the other Credit Documents shall be construed to the
extent reasonable to be consistent one with the other, but to the extent that
the terms and conditions of this Credit Agreement are actually inconsistent
with the terms and conditions of any other Credit Document, this Credit
Agreement shall govern. This Credit Agreement shall become effective on the
date on which all of the parties hereto shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to
the Agent pursuant to Section 11.7 or, in the case of the Lenders, shall have
given to the Agent written, telecopied or telex notice (actually received) at
such office that the same has been signed and mailed to it.
11.13. SEVERABILITY. In case any provision in or obligation under
this Credit Agreement or the Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby.
11.14. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken or condition exists.
11.15. SURVIVAL. All agreements, representations and warranties made
herein shall survive the execution and delivery of this Credit Agreement, the
Notes and the other Credit Documents, the making of the Loans and issuance of
Letters of Credit hereunder. Notwithstanding anything in this Credit Agreement,
any other Credit Document or implied by law to the contrary, all indemnities set
forth herein, including, without limitation, in Sections 3.10, 4.6, 4.13, 4.14,
4.15, 10.6 and 11.10, shall survive the payment of the Obligations and the
termination of this Credit Agreement.
75
<PAGE>
11.16. MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Credit Agreement or in any other Credit Document,
each Borrower, the Agent and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to any Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance any
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrowers. All sums paid or agreed to be paid
to the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other Indebtedness of the Borrowers to the Agent or any Lender,
to the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness, until
payment in full thereof, so that the actual rate of interest on account of all
such Indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such Indebtedness. The terms and provisions of this Section shall
control every other provision of this Credit Agreement and all agreements among
the Borrowers, the Agent and the Lenders.
11.17. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit Agreement
and the other Credit Documents constitute the entire agreement among the
Borrowers, the Agent, and the Lenders, supersedes any prior agreements among
them, and shall bind and benefit the Borrowers, and the Lenders and their
respective successors and permitted assigns.
[SIGNATURE PAGE FOLLOWS]
76
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWERS:
PERRY GRAPHIC COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Thomas Bressan
---------------------------------------------------------
Title: Secretary
SHENANDOAH VALLEY PRESS, INC.
By: /s/ Thomas Bressan
---------------------------------------------------------
Title: Secretary
PORT CITY PRESS, INC.
By: /s/ Thomas Bressan
---------------------------------------------------------
Title: Secretary
AGENT:
BT COMMERCIAL CORPORATION,
As Agent
By: /s/ Mark Funk
---------------------------------------------------------
Vice President
S-1
<PAGE>
LENDERS:
BT COMMERCIAL CORPORATION
By: /s/ Mark Funk
---------------------------------------------------------
Vice President
S-2
<PAGE>
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ William Shiao
---------------------------------------------------------
William Shiao
Title: Assistant Vice President
S-3
<PAGE>
LASALLE NATIONAL BANK
By: /s/ Christopher S. Clifford
---------------------------------------------------------
Title: Senior Vice-President
---------------------------------------------------------
S-4
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: /s/ Anne E. Carbone
---------------------------------------------------------
Anne E. Carbone
Title: Senior Vice President
S-5
<PAGE>
BANKBOSTON, N.A.
By: /s/ Neil Hesler
---------------------------------------------------------
Neil Hesler
Title: Vice President
S-6
<PAGE>
BANK OF AMERICA, NT & SA
By: /s/ Ron Benishay
---------------------------------------------------------
Title: Vice-President
---------------------------------------------------------
S-7
<PAGE>
Amended and Restated Credit Agreement among Perry Graphic
Communications, Inc., Shenandoah Valley Press, Inc., and Port City Press,
Inc., the Lenders (as defined therein) and BT Commercial Corporation as Agent
dated as of December 16, 1997.
- -------------------------------------------------------------------------------
ALL EXHIBITS OMITTED IN ACCORDANCE WITH ITEM 601(b)(2) OF REGULATION S-K
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished.
<PAGE>
EXHIBIT 10.3
PPC HOLDINGS, INC.
1995 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests of
PPC Holdings, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However,
any or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by
the Board at any time. The Board may also at any time terminate the
functions of the Committee and reassume all powers and authority previously
delegated to the Committee.
B. The Plan Administrator shall have full power and
authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding Options as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any Option or shares issued thereunder.
C. The Plan Administrator is hereby expressly authorized and
empowered to grant special performance-based Options under the Plan, pursuant
to which the option shares are to vest in installments over the Optionee's
period of continued Service, subject to acceleration in whole or in part upon
the Corporation's attainment of one or more financial milestones established
by the Plan Administrator.
<PAGE>
III. ELIGIBILITY
A. Employees (including officers) and consultants who
provide services to the Corporation or its Subsidiaries shall be eligible to
receive Options under the Plan.
B. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive Options under the Plan,
the time or times when such Options are to be granted, the number of shares
to be covered by each such grant, the time or times at which each Option is
to become exercisable, the Service requirement for vesting in the shares
subject to the Option, the performance milestones necessary for accelerated
vesting of those shares and the maximum term for which the Option is to
remain outstanding. All Options granted under the Plan shall be
Non-Statutory Options.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall
not exceed 28,000 shares.
B. Shares of Common Stock subject to outstanding Options
shall be available for subsequent issuance under the Plan to the extent those
Options expire or terminate for any reason prior to exercise in full. Any
unvested shares issued under the Plan which are repurchased by the
Corporation shall also be available for subsequent issuance under the Plan.
C. Should any change be made to the outstanding Common Stock
by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding
Common Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
Option in order to prevent the dilution or enlargement of benefits thereunder
and (iii) the minimum price to be paid in cash upon a repurchase of any
Option or shares of Common Stock by the Corporation. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.
In no event, however, shall any such adjustments be made in connection with
the conversion of one or more outstanding shares of the Corporation's
preferred stock into shares of Common Stock.
2
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each Option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price shall be $0.01 per share.
2. The exercise price shall become immediately due upon
exercise of the Option and shall be payable in cash or check made payable to
the Corporation.
B. EXERCISABILITY/VESTING AND TERM OF OPTIONS. Unless
determined otherwise by the Plan Administrator at the time of grant, each
Option shall be immediately exercisable for all the option shares, but those
shares shall be subject to the following vesting schedule: ten percent (10%)
of the option shares shall vest upon the Optionee's completion of each
calendar year of Service through December 31 of the first five calendar years
of service, commencing with December 31 of the calendar year of the option
grant; an additional fifteen percent (15%) of the option shares shall vest
upon the Optionee's completion of each of the next two (2) calendar years of
Service; and the remaining option shares shall vest upon the Optionee's
continuation in Service through December 31 of the eighth calendar year of
service. Accelerated vesting in the option shares shall occur upon the
Corporation's attainment of the performance milestones which the Plan
Administrator pre-determines for each of the first five (5) calendar years
during the Service vesting period. For each calendar year the applicable
performance milestones are attained, ten percent (10%) of the option shares
shall vest on an accelerated basis. Such ten percent (10%) installments
shall be accelerated in the reverse order in which those installments would
otherwise vest under the Service schedule so that the last installments
otherwise to vest under Service vesting shall be the first to accelerate upon
the Corporation's attainment of the performance milestones. In no event,
however, shall any additional vesting occur, either on a normal Service basis
or on an accelerated basis, after the Optionee ceases to remain in Service
for any reason.
Each Option shall have a maximum term of eighteen (18) years,
measured from the grant date. To the extent the Optionee vests in one or
more option shares prior to his or her cessation of Service, the Option shall
remain exercisable for those vested shares for the entire eighteen (18)-year
term of the Option, whether or not the Optionee continues in Service.
3
<PAGE>
C. EFFECT OF TERMINATION OF SERVICE. The following
provisions shall govern the exercise of any Options held by the Optionee at
the time of cessation of Service:
(i) Upon the Optionee's cessation of Service for
any reason, all outstanding Options held by the Optionee, to the
extent not exercisable for vested shares, shall terminate and cease to
be outstanding on the date of such cessation of Service.
(ii) Should the Optionee die or incur a Permanent
Disability after completion of one (1) year of Service, then all
shares subject to outstanding Options held by the Optionee shall
automatically vest in their entirety.
(iii) Should the Optionee die while holding
one or more outstanding Options, then the personal representative of
the Optionee's estate or the person or persons to whom the Option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise each
such Option.
(iv) Under no circumstances, however, shall any
such Option be exercisable after the specified expiration of the
option term.
(v) During the post-Service exercise period, the
Option may not be exercised in the aggregate for more than the number
of vested shares for which the Option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the
option term, the Option shall terminate and cease to be outstanding
for any vested shares for which the Option has not been exercised.
D. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime
of the Optionee, the Option shall be exercisable only by the Optionee and
shall not be assignable or transferable other than (i) by will or by the laws
of descent and distribution following the Optionee's death or (ii) pursuant
to the terms of a Qualified Domestic Relations Order. An Option assigned in
connection with a Qualified Domestic Relations Order may only be exercised by
the person or persons who acquire a proprietary interest in the Option
pursuant to such order. The terms applicable to the assigned Option (or
portion thereof) shall be the same as those in effect for the Option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
E. WITHHOLDING. The Corporation's obligation to deliver
shares of Common Stock upon the exercise of an Option shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
4
<PAGE>
F. STOCKHOLDER RIGHTS. The holder of an Option shall have
no stockholder rights with respect to the shares subject to the Option until
such person shall have exercised the Option, paid the exercise price and
become a holder of record of the purchased shares.
G. REPURCHASE RIGHTS. The Corporation shall retain the
following repurchase rights with respect to all outstanding Options and
shares of Common Stock held by each Optionee at the time of his or her
cessation of Service for any reason:
1. The Corporation shall have a ninety (90)-day period,
measured from the date of the Optionee's cessation of Service, in which to
repurchase, at the exercise price per share, any unvested shares at the time
held by the Optionee. The payment of the repurchase price and all other
terms of the repurchase right shall be set forth in the agreement evidencing
such right.
2. To the extent the Option is exercisable for vested shares
at the time of the Optionee's cessation of Service or the Optionee holds
vested shares issued under the Plan, the Corporation shall have a ninety
(90)-day period measured from the date of such cessation from Service in
which to repurchase the Option or the vested shares for a repurchase price
equal to:
a. for each vested share subject to an outstanding Option,
the excess of the Fair Market Value per share of Common Stock (determined as
of the date of the Optionee's cessation of Service) over the exercise price
payable per share, and
b. for each vested share acquired pursuant to the exercise
of an Option granted under the Plan, the Fair Market Value per share of
Common Stock (determined as of the date of the Optionee's cessation of
Service).
The payment of the repurchase price and all other terms of the repurchase
right shall be set forth in the agreement evidencing such right.
Notwithstanding the foregoing, in the event that (i) a
Subsequent Value Event is consummated within six (6) months after the date of
a Class A Termination, and (ii) such Subsequent Value Event evidences a
Subsequent Value in excess of the Fair Market Value per share determined
pursuant to paragraph 2, above, then such repurchase price per share shall be
increased by an amount equal to such excess, and paid in accordance with the
provisions set forth in the agreement evidencing the repurchase right.
The right of the Corporation to repurchase an Option (to the
extent exercisable for vested shares) and vested shares issued under the Plan
shall lapse upon the EARLIEST to occur: (a) the expiration of the ninety
(90)-day period measured from the date of the Optionee's cessation of
Service, in accordance with paragraph 2. above, (b) the first date on
5
<PAGE>
which shares of the Common Stock are held of record by more than five hundred
(500) persons, (c) a determination is made by the Board that a public market
exists for the outstanding shares of Common Stock or (d) a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Common Stock in the
aggregate net amount of at least Thirty Million Dollars ($30,000,000).
H. MANDATORY REPURCHASE. Notwithstanding any other
provision of this Plan, in the event a Subsequent Value Event does not occur
prior to January 1, 2014, then the Corporation shall repurchase all
outstanding Options and all shares of Common Stock issued and outstanding
under the Plan (without regard to vesting), other than any shares sold or
transferred to a third party prior to January 1, 2014 in a transaction in
which the Corporation did not exercise its right of first refusal described
in Paragraph I.J. below. The price per share shall be determined in
accordance with the pricing guidelines in Paragraph I.G. above, but with the
Fair Market Value per share of Common Stock determined as of December 31,
2013.
I. PAYMENT UPON REPURCHASE. The price payable for any
Options or shares repurchased by the Corporation pursuant to the provisions
of Paragraphs I.G., and I.H. shall be, in the sole discretion of the
Corporation, paid as follows:
a. in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness); or
b. if the repurchase price exceeds Twenty-Five Dollars
($25.00) per share (subject to adjustment in accordance with Article One,
Section IV.C), the Corporation may elect to pay such repurchase price as
follows: (i) Twenty-Five Dollars ($25.00) (or as otherwise adjusted), in
cash or cash equivalents and (ii) its Promissory Note in an original
principal amount equal to the balance of the repurchase price.
J. FIRST REFUSAL RIGHTS. The Corporation shall have a right
of first refusal with respect to any proposed disposition by the Optionee (or
any successor in interest) of any shares of Common Stock issued under the
Plan. Such right of first refusal shall lapse upon the EARLIEST to occur: (a)
the first date on which shares of the Common Stock are held of record by more
than five hundred (500) persons, (b) a determination is made by the Board
that a public market exists for the outstanding shares of Common Stock or (c)
a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate net amount of at least Thirty Million Dollars
($30,000,000).
II. CORPORATE TRANSACTION
6
<PAGE>
A. In the event of any Corporate Transaction, each
outstanding Option under the Plan shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
B. All outstanding repurchase rights under the Plan shall
automatically lapse upon the consummation of the Corporate Transaction,
except to the extent one or more of those rights are expressly assigned to
the successor corporation (or parent thereof) in connection with such
Corporate Transaction.
C. Each Option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in the consummation of such
Corporate Transaction, had the Option been exercised immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to (i)
the number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding Option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same.
D. The grant of Options under the Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
7
<PAGE>
ARTICLE THREE
MISCELLANEOUS
I. ADDITIONAL AUTHORITY
The Plan Administrator shall have the discretion, exercisable either
at the time an Option is granted or at any time while the Option remains
outstanding, to permit that Option to be exercised, during the post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such Option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the Option had the
Optionee continued in Service.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the
Board, but no Option granted under the Plan may be exercised until the Plan
is approved by the Corporation's stockholders. If such stockholder approval
is not obtained within twelve (12) months after the date of the Board's
adoption of the Plan, then all Options previously granted under the Plan
shall terminate and cease to be outstanding, and no further Options shall be
granted. Subject to such limitation, the Plan Administrator may grant
Options under the Plan at any time after the effective date of the Plan and
before the date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the earliest to occur of
(i) the expiration of the twenty (20)-year period measured from the date the
Plan is adopted by the Board, (ii) the termination of all outstanding Options
in connection with a Corporate Transaction or (iii) the repurchase by the
Corporation of all outstanding Options pursuant to Section I.H of Article
Two. Upon a clause (i) termination, all Options and unvested shares
outstanding under the Plan shall continue to have full force and effect in
accordance with the provisions of the documents evidencing such Options or
the issued shares.
III. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment
or modification shall, without the consent of the Optionees, adversely affect
their rights and obligations under their outstanding Options. In addition,
the Board shall not, without the approval of the Corporation's stockholders,
(i) increase the maximum number of shares issuable under the Plan, except for
permissible adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Plan
participants.
8
<PAGE>
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
V. REGULATORY APPROVALS
The implementation of the Plan, the granting of any Option hereunder
and the issuance of any shares of Common Stock upon the exercise of any Option
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
Options granted under it and the shares of Common Stock issued pursuant to it.
VI. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Subsidiary
employing or retaining the Optionee) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate the Optionee's Service at any time for
any reason, with or without cause.
9
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CLASS A TERMINATION shall mean: (i) the termination of
Service which occurs by reason of: (A) involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct or (B) resignation or
retirement after the third anniversary of commencement of Service; (ii)
death; or (iii) Permanent Disability.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to exercise one or more administrative
functions under the Plan.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(a) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(b) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. CORPORATION shall mean PPC Holdings, Inc., a Delaware
corporation.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides
or otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method
of performance.
A-1
<PAGE>
J. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
K. FAIR MARKET VALUE of a share of Common Stock, at any
applicable date, shall be calculated on a consolidated basis for the
Corporation and its Subsidiaries, in accordance with generally accepted
accounting principles, by dividing (i)(A) earnings before interest, taxes,
depreciation and amortization ("EBITDA"), for the twelve (12)-month period
ending as of the end of the most recent fiscal period for which financial
statements have been prepared, times 5.2, less (B) funded debt, including
without limitation indebtedness for borrowed money and capitalized leases,
less (C) the Redemption Price (as such term is defined in the Certificate of
Designation of Perry Printing Corporation (formerly PPC Acquisitions, Inc.),
a Delaware corporation and a wholly-owned Subsidiary of the Corporation,
dated as of April 26, 1995 (the "Certificate") of the issued and outstanding
Preferred Stock (as defined in the Certificate), by (ii) the total number of
shares of Common Stock then outstanding, assuming the conversion of all
outstanding securities convertible into Common Stock and the exercise of all
outstanding securities exercisable for shares of Common Stock.
L. MISCONDUCT shall mean any willful breach or habitual neglect
of the Optionee's material employment duties to Corporation (or any
Subsidiary); the Optionee's chronic alcoholism or addiction to narcotics
(whether lawful or otherwise); or any criminal conviction for fraud,
embezzlement, misappropriation of assets, malicious mischief, any act of
moral turpitude or any felony. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Subsidiary) may consider as grounds for the dismissal or discharge of the
Optionee or any other person in the Service of the Corporation (or any
Subsidiary).
M. 1933 ACT shall mean the Securities Act of 1933, as amended.
N. NON-STATUTORY OPTION shall mean an Option not intended to
satisfy the requirements of Code Section 422.
O. OPTION shall mean any option granted under the Plan.
P. OPTIONEE shall mean any person to whom an Option is granted
under the Plan.
Q. PERMANENT DISABILITY shall mean the inability of the Optionee
to fulfill substantially all of his or her normal duties and responsibilities
in Service for an aggregate of one hundred eighty (180) days during any
period of two hundred forty (240) consecutive days, or an aggregate of two
hundred seventy (270) days during any period of three hundred sixty-five
(365) consecutive days, by reason of any physical or mental disability as
determined by a medical doctor acceptable to the Board and confirmed in
writing by such doctor, which confirmation shall be submitted to the Board.
A-2
<PAGE>
R. PLAN shall mean the Corporation's 1995 Stock Option Plan, as
set forth in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the
Committee, to the extent the Committee is at the time responsible for the
administration of the Plan.
T. PRIME RATE shall mean the variable rate of interest per
annum announced from time to time by Bankers Trust Company as its "prime
rate" or "reference rate."
U. PROMISSORY NOTE shall mean a variable rate promissory note
issued by the Corporation payable in equal annual principal installments over
a five (5)-year period with simple interest equal to the Prime Rate in effect
from time to time, payable annually with the principal installments;
PROVIDED, HOWEVER, that such interest rate shall not be in excess of the
maximum rate permitted by law.
V. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic
Relations Order.
W. SERVICE shall mean the provision of services to the
Corporation (or any Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant, except to the
extent otherwise specifically provided in the documents evidencing the Option
grant.
X. SUBSEQUENT VALUE shall mean (i) with respect to a sale of
Common Stock, the purchase price per share at which the Common Stock was
sold, (ii) with respect to an exchange of Common Stock or a merger, the value
per share of the securities or other consideration received in exchange for
the Common Stock, as of the date of such exchange, as determined in the good
faith business judgment of the Board, (iii) with respect to a public offering
of Common Stock, the net proceeds per share received by the Corporation, and
(iv) with respect to a sale of assets of the Corporation, (A) the Adjusted
Book Value divided by (B) the total number of shares of Common Stock then
outstanding. "Adjusted Book Value" means the book net worth of the
Corporation, determined in accordance with generally accepted accounting
principles, immediately after the consummation of such sale of assets.
Y. SUBSEQUENT VALUE EVENT shall mean (i) a sale by stockholders
of the Corporation of more than fifty percent (50%) of the outstanding Common
Stock to a non-affiliated third party, (ii) an exchange by stockholders of
the Corporation of more than fifty percent (50%) of the outstanding Common
Stock for securities of a non-affiliated third party, (iii) a merger as a
result of which more than fifty percent (50%) of the combined voting power of
the outstanding voting securities of the surviving or resulting entity shall
be owned by one or more non-affiliated third parties, (iv) a firm commitment
underwritten public offering, pursuant to an effective registration
A-3
<PAGE>
under the 1933 Act, covering the offer and sale of the Common Stock in the
aggregate net amount of at least Thirty Million Dollars ($30,000,000), or (v)
a sale of substantially all of the assets of the Corporation.
Z. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
A-4
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of April 28,
1995, by and between PPC ACQUISITIONS, INC., a Delaware corporation (the
"Corporation"), and CRAIG A. HUTCHISON, an individual (the "Executive").
RECITALS
WHEREAS, the Corporation is engaged in business as a long run
magazine and catalog full service heatset web offset printer (the "Business");
WHEREAS, the Corporation desires to employ the Executive as the
president of the Corporation, to serve as the executive manager of the
Business with such authority and obligations as set forth herein, and the
Executive desires to provide such management services to the Corporation, on
the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants set forth
in this Agreement and other good and valuable consideration, the receipt of
which is hereby acknowledged, the Corporation and the Executive hereby agree
as follows:
1. TERM OF EMPLOYMENT. The Corporation hereby employs the
Executive for an initial term of three (3) years, commencing on the date
first above set forth and ending on the third anniversary thereof (the
"Initial Term"), and continuing thereafter for successive one (1) year
periods (each, a "Term Extension"); provided, however, that the Executive may
terminate this Agreement as of the end of the Initial Term or any Term
Extension by providing written notice thereof to the Corporation not less
than six (6) months prior to the end of such Initial Term or Term Extension
(an "Executive Non-Extension"); provided further, that in no event shall
there be more than five (5) Term Extensions. The Initial Term together with
any and all Term Extensions is referred to herein as the "Term."
Notwithstanding the foregoing, this Agreement may be sooner terminated as
provided herein.
2. DUTIES AND OBLIGATIONS OF THE EXECUTIVE.
a. DUTIES. During the Term, the Executive shall hold the
title of "President and Chief Executive Officer" of the Corporation, shall
serve as the executive manager of the Business, and as such shall have
responsibility for and authority over the day-to-day operations and
management of the Business (subject to the supervision, control and direction
of the board of directors of the Corporation (the "Board of Directors")).
The duties assigned to the Executive hereunder shall be consistent with the
duties which would be expected of the chief executive officer of companies of
like size and scope.
b. METHOD OF PERFORMING DUTIES. The Executive shall devote
his full time, attention and efforts exclusively to the Business and shall
faithfully, industriously, and to the best of his ability, experience and
talents render the services required of him hereunder. The Executive shall
render such services at the principal office of the Corporation located at
Waterloo, Wisconsin, or at such other location as determined by the Board of
Directors;
<PAGE>
PROVIDED, HOWEVER, that the Executive shall travel outside of the State of
Wisconsin from time to time as may be reasonably necessary for the
performance of his services hereunder.
3. COMPENSATION.
a. SALARY; SEVERANCE PAY. In consideration of the
Executive's services to the Corporation hereunder, the Corporation shall pay
to the Executive a salary at an annual rate of Two Hundred Thirty-Five
Thousand Dollars ($235,000) ("Salary"). The Salary shall be payable
semi-monthly in accordance with the standard policies of the Corporation in
existence from time to time, subject to federal, state and local wage
deductions and any other deductions required by law. The Salary shall be
subject to annual upward adjustments in the sole discretion of the Board of
Directors.
Except as specifically provided in this Section 3(a), the
Executive shall not be entitled to any severance payment or other benefits in
the event of the termination of this Agreement. In the event that this
Agreement is terminated pursuant to Section 4(a)(3), 4(a)(4) or 4(c) below,
the Executive shall be entitled to severance pay ("Severance Pay") equal to
the aggregate Salary which would have been payable to the Executive during
the period commencing on the effective date of termination and ending one (1)
year thereafter. Any Severance Pay payable to the Executive by the
Corporation pursuant to this Section 3(a) shall be payable in accordance with
the provisions set forth above with respect to the payment of Salary by the
Corporation, and shall be subject to federal, state and local wage deductions
and any other deductions required by law; PROVIDED, HOWEVER, that if such
effective date shall be subsequent to the expiration of the fourth (4th) Term
Extension, it shall be assumed for purposes of this Section 3(a) that the
Executive would have been entitled to Salary at the rate in effect on the
effective date of termination during such one-year period after such date
notwithstanding the expiration of the fifth (5th) Term Extension. The
Executive shall not be entitled to any Severance Pay or other benefits
following termination of this Agreement pursuant to an Executive
Non-Extension.
b. INCENTIVE COMPENSATION. As additional consideration
for the Executive's services hereunder, the Executive shall be entitled to
participate in the Corporation's Executive Long Term Incentive Compensation
Plan (as may be adopted and in effect from time to time).
c. BENEFITS. In addition to the other compensation
payable to the Executive pursuant to this Section 3, the Executive shall be
entitled to: (1) all employee benefits provided by the Corporation to other
senior management personnel of the Corporation; and (2) payment of monthly
membership dues incurred by the Executive in connection with the Executive's
membership at one (1) country club of his choice; provided, however, that the
aggregate amount of such dues shall not exceed $10,000 in any twelve (12)
month period.
d. REIMBURSEMENT OF EXPENSES. The Executive shall be
reimbursed by the Corporation for all travel and out-of-pocket expenses
reasonably incurred by him for the purpose of and in connection with the
performance of his services hereunder. Such reimbursement shall be made upon
presentation of vouchers or other statements itemizing such expenses in
reasonable detail consistent with the Corporation's policies.
- 2 -
<PAGE>
e. VACATION. The Executive shall be entitled to four
(4) weeks of paid vacation each year during the Term.
4. TERMINATION.
a. TERMINATION NOT FOR CAUSE. This Agreement shall
terminate and the obligations and covenants of the parties hereunder shall be
of no further force and effect, except those obligations which shall survive
the termination of this Agreement as set forth in Section 16 below, upon the
occurrence of any of the following events:
(1) Thirty (30) days after written notice is
delivered to the Executive in the event of the permanent disability of the
Executive (as defined hereinafter);
(2) The death of the Executive;
(3) Thirty (30) days after written notice of
termination is delivered by the Corporation to the Executive for any reason
whatsoever, other than pursuant to Section 4(b) below or clauses (1) and (2)
of this Section 4(a); or
(4) Upon the expiration of the fifth (5th) Term
Extension.
b. TERMINATION FOR CAUSE. This Agreement shall terminate
and the obligations and covenants of the parties hereunder shall be of no
further force and effect, except those obligations which shall survive this
Agreement as set forth in Section 16 below, immediately upon delivery by the
Corporation to the Executive of written notice specifying the basis for
termination in the event of the occurrence of any basis for termination for
cause, as hereinafter defined.
c. TERMINATION BY THE EXECUTIVE FOR GOOD CAUSE. Subject
to the provisions of Section 16 below, the Executive shall have the right to
terminate this Agreement for good cause, as hereinafter defined.
d. GOOD CAUSE. "Good cause" means (1) the material breach
of this Agreement by the Corporation, if such breach is not cured by the
Corporation within thirty (30) days after the Executive has provided written
notice thereof to the Corporation specifying the nature of such breach; (2)
the relocation of the Executive's place of employment to a state other than
Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio or Wisconsin, provided
such relocation is effected without the Executive's consent; (3) at any time
during the Term, the Executive shall fail to be a member of the Board of
Directors or the board of directors of PPC Holdings, Inc., a Delaware
corporation ("Holdings"); or (4) the failure of Holdings to adopt a stock
option plan for the benefit of certain management employees of the
Corporation before January 1, 1996, pursuant to which, and subject to the
conditions therein, the Executive will be granted options to acquire 8,750
shares of Holdings Common Stock at an exercise price of $0.01 per share; such
stock option plan will provide that not less than ten percent (10%) of the
options will vest at each of the five (5) fiscal year-ends after the date of
grant of the options, and that if financial performance goals established by
the board of directors of Holdings are met in each of such
- 3 -
<PAGE>
fiscal years, one hundred percent (100%) of the options will be vested as of
the end of such five (5)-year period.
e. PERMANENT DISABILITY. "Permanent disability" means the
inability of the Executive to fulfill substantially all of his normal duties
and responsibilities hereunder for an aggregate of one hundred eighty (180)
days during any period of two hundred and forty (240) consecutive days, or an
aggregate of two hundred seventy (270) days during any period of three
hundred sixty-five (365) consecutive days, by reason of any physical or
mental disability as determined by a medical doctor acceptable to the Board
of Directors and confirmed in writing by such doctor, which confirmation
shall be submitted to the Board of Directors.
f. TERMINATION FOR CAUSE. "Termination for cause" means
termination of the Executive's employment as a result of:
(1) the Executive's willful breach or habitual
neglect of the Executive's material duties hereunder;
(2) the Executive's chronic alcoholism or addiction
to narcotics (whether lawful or otherwise);
(3) the Executive's criminal conviction for fraud,
embezzlement, misappropriation of assets, malicious mischief, any act of
moral turpitude or any felony; or
(4) any other material breach of this Agreement by
the Executive, which breach is described in a written notice from the Board
of Directors specifying the nature of such breach.
5. CONFIDENTIAL AND PROPRIETARY INFORMATION.
a. DEFINITION OF CONFIDENTIAL AND PROPRIETARY INFORMATION.
The Executive hereby acknowledges that during the Term, the Executive shall
or may make use of, acquire, create, develop or add to certain confidential
and/or proprietary information regarding the Corporation and/or the Business
(whether in existence prior to, as of or after the Effective Date,
collectively, "Proprietary Information"), which Proprietary Information shall
include, without limitation, all of the following materials and information
(whether or not reduced to writing and whether or not patentable or protected
by copyright): inventions, processes, formulae, programs, technical data,
"know-how," procedures, manuals, confidential reports and communications,
marketing methods, product sales or cost information, new product ideas or
improvements, research and development programs, identities or lists of
suppliers, vendors or customers, financial information of the Corporation of
any nature whatsoever, or any other confidential or proprietary information
relating to the Corporation and/or the Business. The parties hereto agree
that the failure of any Proprietary Information to be marked or otherwise
labelled as confidential or proprietary information shall not affect its
status as Proprietary Information.
b. USE. The Executive shall not, directly or indirectly,
disclose, divulge, reveal, report, publish, transfer or otherwise
communicate, or use for his own benefit
- 4 -
<PAGE>
or the benefit of any other person, partnership, firm, corporation or other
entity, or use to the detriment of the Corporation, or misuse in any way, any
Proprietary Information. The Executive and the Corporation each hereby
stipulate that, as between them, all Proprietary Information acquired or
made, developed or conceived of in whole or in part by the Executive
constitutes important, material and confidential and/or proprietary
information of the Corporation, constitutes unique and valuable information,
and affects the successful conduct of the business of the Corporation and its
goodwill, and that the Corporation shall be entitled to recover its damages,
in addition to any injunctive remedy available under Section 9 below, for any
breach of this Section 5.
c. OWNERSHIP.
(1) IN GENERAL. The Executive hereby acknowledges
and agrees that all right, title and interest in and to any Proprietary
Information shall be and shall remain the exclusive property of the
Corporation, and that any Proprietary Information which the Executive
acquires from the Corporation was received in confidence and as a fiduciary
of the Corporation. Without limiting the foregoing, the Executive hereby
assigns to the Corporation any and all right, title and interest which the
Executive may have in all Proprietary Information (including without
limitation all inventions, trade secrets, patents, copyrights and all other
rights in connection therewith) made, developed or conceived of in whole or
in part by the Executive during the Term. The Executive further agrees to
execute and deliver any and all instruments, and to do all other things
reasonably requested by the Corporation, both during and after the Term, in
order to vest more fully in the Corporation all ownership rights in such
Proprietary Information. All equipment, notebooks, documents, memoranda,
reports, files, samples, books, correspondence, lists, other written and
graphic records, and the like, in any way relating to any Proprietary
Information or the business of the Corporation or its activities, which the
Executive shall prepare, use, construct, observe, process, or control
(collectively, "Materials") shall be and shall remain the Corporation's
exclusive property, and the Executive hereby agrees to deliver all Materials,
together with any and all copies thereof, promptly to the Corporation upon
the termination of this Agreement for any reason.
(2) WORK MADE FOR HIRE. Without limiting any
other provision set forth in this Agreement, if any Proprietary Information
or Materials are protected by copyright and are deemed in any way to fall
within the definition of "work made for hire," as such term is defined in 17
U.S.C. Section 101, or any successor provision thereof, such work shall be
considered a "work made for hire," the copyright of which shall be owned
solely, completely and exclusively by the Corporation. Without limiting any
other provision set forth in this Agreement, if any Proprietary Information
or Materials are protected by copyright and are not considered to be included
in the categories of works covered by the "work made for hire" definition
contained in 17 U.S.C. Section 101, or any successor provision thereof, such
items shall be deemed to be assigned and transferred completely and
exclusively to the Corporation by virtue of the Executive's execution of this
Agreement.
(6) NON-COMPETITION.
(a) RESTRICTIONS. In consideration of the retention of
the Executive as an employee of the Corporation and the benefits to be
provided hereunder, from the date hereof
- 5 -
<PAGE>
until one (1) year after the date of termination of this Agreement pursuant
to Section 1 or 4(b) above or (2) for so long as any Severance Pay shall be
payable after a termination of this Agreement pursuant to Section 4(a)(3)
above, the Executive shall not, directly or indirectly, engage in any
business activity (as a principal, agent, employee, shareholder, officer,
director, partner, security holder, creditor, consultant or otherwise),
competitive with the Business or the Corporation's other activities, except
as previously approved by the Board of Directors in writing. During the
Term, the Executive shall not, directly or indirectly, or by action in
concert with others, induce or influence, or seek to induce or influence, any
person who is engaged by the Corporation (as an agent, employee, consultant,
or otherwise) to terminate such engagement with the Corporation; provided,
however, that nothing contained in this Agreement shall be deemed to limit
the authority of the Executive to terminate employees of the Corporation in
connection with the exercise of the Executive's duties under this Agreement.
Notwithstanding any provision to the contrary set forth in this Agreement,
the Corporation hereby acknowledges and agrees that the restrictions set
forth in this Section 6 shall not apply in the event that this Agreement is
terminated by the Executive for good cause in accordance with the terms set
forth in Section 4(c) above.
(b) INTERPRETATION OF COVENANTS. Nothing contained in this
Section 6 shall be deemed a waiver of the Executive's obligations under
Section 5, and in the event of any conflict or inconsistency between the
provisions of this Section 6 and Section 5 above, the provisions of Section 5
shall control.
7. REASONABLENESS OF RESTRICTIONS. THE EXECUTIVE HAS
CAREFULLY READ AND CONSIDERED THE PROVISIONS OF SECTIONS 5 AND 6 HEREOF AND,
HAVING DONE SO, HEREBY AGREES THAT THE RESTRICTIONS SET FORTH IN SUCH
SECTIONS ARE FAIR AND REASONABLE AND ARE REASONABLY REQUIRED FOR THE
PROTECTION OF THE INTERESTS OF THE CORPORATION AND ITS BUSINESS.
8. INDEMNIFICATION. The Corporation shall indemnify, defend
and hold harmless the Executive from and against all losses, liabilities,
damages, costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and costs related thereto) which the
Executive may suffer or incur in any threatened, pending or completed action,
suit or proceeding by reason of the performance of his services under this
Agreement or as a member of the Board of Directors if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reason to believe his conduct was unlawful; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the Executive shall have been adjudged to be liable to the Corporation
unless and only to the extent that a court of applicable jurisdiction shall
have determined that despite the adjudication of liability but in view of all
of the circumstances of the case, the Executive is fairly and reasonably
entitled to indemnity for such expenses which such court shall determine to
be proper.
9. INJUNCTIVE RELIEF.
a. REGARDING EMPLOYMENT DUTIES IN GENERAL. The parties
hereby acknowledge and agree that the services to be performed under the
terms of this Agreement are
- 6 -
<PAGE>
of a special, unique, unusual, extraordinary and intellectual character that
gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law. The parties therefore
expressly agree that the Corporation, in addition to any other rights or
remedies that the Corporation may possess, shall be entitled to injunctive
and other equitable relief (other than an injunction to compel the Executive
to perform for the Corporation the services required under this Agreement) to
prevent or remedy a breach of this Agreement by the Executive.
b. REGARDING CONFIDENTIALITY AND NON-COMPETITION . The
Executive acknowledges and agrees that the Corporation shall suffer
irreparable harm in the event that the Executive breaches any of his
obligations under Sections 5 and 6 hereof, and that monetary damages shall be
inadequate to compensate the Corporation for any such breach. Accordingly,
the Executive agrees that in the event of any breach or threatened breach by
the Executive of any of the provisions of Sections 5 and 6 hereof, the
Corporation shall be entitled to a temporary restraining order, preliminary
injunction and permanent injunction in order to prevent or restrain any such
breach or threatened breach by the Executive, or by any or all of the
Executive's agents, representatives or other persons directly or indirectly
acting for, on behalf of or with the Executive.
c. NO LIMITATION OF REMEDIES. Notwithstanding the
provisions set forth in Sections 9(a) and 9(b) above or any other provision
contained in this Agreement, the parties hereby agree that no remedy
conferred by any of the specific provisions of this Agreement, including,
without limitation, this Section 9, is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on
and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and legal representatives. Notwithstanding the
foregoing, neither party shall assign this Agreement without the prior
written consent of the other party.
11. GOVERNING LAW. This Agreement shall be construed under and
in accordance with, and governed in all respects by, the laws of the State of
Wisconsin (without giving effect to principles of conflicts of law).
12. WAIVER. The failure of any party to insist on strict
compliance with any of the terms, covenants, or conditions of this Agreement
by any other party shall not be deemed a waiver of that term, covenant or
condition, nor shall any waiver or relinquishment of any right or power at
any one time or times be deemed a waiver or relinquishment of that right or
power for all or any other times.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be deemed to have been
given five (5) days after it is placed in the United States mail, registered
or certified, postage prepaid, return receipt requested, or upon receipt if
personally delivered, or the next business day if transmitted by
telefacsimile (which telefacsimile shall be followed by a copy thereof placed
in the United States
- 7 -
<PAGE>
mail, registered or certified, postage prepaid, return receipt requested, no
later than the next business day after transmission thereof), addressed to
the parties as follows:
To the Executive:
Craig A. Hutchison
18 Chautauqua Trail
Madison, Wisconsin 53719
To the Corporation:
PPC Acquisitions, Inc.
1172-B Nicole Court
Glendora, California 91740
Attention: Chairman of the Board
Any party may change its above address for notices upon written notice to the
other party in accordance with this Section.
14. INTEGRATION. This Agreement constitutes the entire
agreement of the parties hereto with respect to the retention of the
Executive by the Corporation, and supersedes any and all prior and
contemporaneous agreements, whether oral or in writing, between the parties
hereto with respect to the subject matter hereof.
15. AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented except by written agreement of the parties hereto.
16. SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. The rights and
obligations of the parties hereto pursuant to Sections 3, 5, 6, 8 and 9
hereof, including the obligation of the Corporation to pay any and all
compensation described under Section 3 above earned, or to reimburse the
Executive for expenses described in Section 3(d), as of the effective date of
termination of this Agreement, shall survive the termination of this
Agreement.
17. SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions shall nevertheless continue in full force without
being impaired or invalidated in any way. If any court of competent
jurisdiction holds any provision of this Agreement to be invalid, void or
unenforceable with respect to any state, region or locality, such provision
shall nevertheless continue in full force and effect in all other states,
regions and localities to which such provision applies.
18. HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
- 8 -
<PAGE>
20. ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce the terms of this Agreement, the prevailing party shall
be entitled to recover all reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Agreement as of the date first above written.
PPC ACQUISITIONS, INC.,
a Delaware corporation
By: /S/ ROBERT E. MILHOUS
------------------------------------------
Name:
Title:
/S/ CRAIG A. HUTCHISON
---------------------------------------------
CRAIG A. HUTCHISON
- 9 -
<PAGE>
EXHIBIT 10.5
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT ("Agreement") is made as of the 1st day of
July, 1996, by and among PPC HOLDINGS, INC., a Delaware corporation (the
"Company"), ROBERT E. MILHOUS, as Trustee of the Robert E. Milhous Trust
dated March 11, 1988, as amended ("REM Trustee"), PAUL B. MILHOUS, as Trustee
of the Paul Ballard Milhous Trust dated September 24, 1982, as amended ("PBM
Trustee" and, together with "REM Trustee," the "Trustees"), and each of the
undersigned stockholders (each, an "Investor Stockholder" and, together with
the Trustees, the "Stockholders").
RECITALS
WHEREAS, the Stockholders are the holders of certain of the outstanding
shares of common stock of the Company ("Shares") as set forth on SCHEDULE A
attached hereto (which schedule will be amended from time to time to reflect
changes in ownership of the Shares); and
WHEREAS, the parties hereto have determined that it is in the best
interest of the Stockholders and the Company to restrict the transfer of the
Shares of the Investor Stockholders and to provide a mechanism for certain
transfers of the Shares to take place; and
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements and covenants contained herein, the parties agree as
follows:
1. RESTRICTIONS ON TRANSFER. Except as provided in Paragraph 4, no
Investor Stockholder shall transfer, sell, assign, hypothecate, encumber or
alienate ("transfer") any of the Shares without having provided the Trustees
and the Company the rights of first refusal specified herein. Except as
provided in Paragraph 6, no Trustee shall transfer, sell, assign,
hypothecate, encumber or alienate ("transfer") any of the Shares without
having provided the Investor Stockholders with the parallel exit rights
specified in Paragraph 6. No transfer of any Shares in violation hereof
shall be recorded on the books of the Company and any such transfer shall be
void and of no effect.
2. INSPECTION OF AGREEMENT. A copy of this Agreement duly executed by
each of the Stockholders and the Company shall be delivered to the Secretary
of the Company, maintained by the Secretary at the principal executive office
of the Company, and made available for inspection to any person requesting to
see it.
3. LEGEND ON CERTIFICATES. Each Stockholder agrees to present the
certificates representing the Shares presently owned or hereafter acquired by
him to the Secretary of the Company and to cause the Secretary to place the
following legend on the certificates in a prominent manner:
<PAGE>
The transfer, sale, assignment, hypothecation, encumbrance, or
alienation of the Shares represented by this Certificate is restricted
by a Stockholders Agreement among this Company and certain of its
stockholders, dated July 1, 1996, and the Shares, or any interest in
them, may only be transferred in accordance with the terms of the
Stockholders Agreement. A copy of the Stockholders Agreement is
available for inspection during normal business hours at the principal
executive office of the Company. All of the terms and provisions of
the Stockholders Agreement are incorporated by reference and made a
part of this Certificate.
4. PERMISSIBLE TRANSFERS. Each Investor Stockholder may transfer
Shares, or any portion thereof, without consideration to his spouse, children
or other descendants, or to a trust for the benefit of such Investor
Stockholder, his spouse, children or other descendants, provided that such
Investor Stockholder shall be the trustee of such trusts and the deemed owner
of said Shares for purposes of Internal Revenue Code ("Code")
Section 1361(c)(2), or any successor statute ("Permitted Transferees"). Each
Permitted Transferee shall be bound by all terms of this Agreement, as
provided in Paragraph 7 of this Agreement.
5. RIGHTS OF FIRST REFUSAL. An Investor Stockholder may transfer any
of his Shares, or any right, title or interest therein, pursuant to the
following steps:
(a) The Stockholder shall give written notice (the "Sale Notice")
to the Company and the other Stockholders of his intention to transfer the
Shares. The Sale Notice shall identify the proposed transferee and specify
the number of Shares to be transferred, the price per share, and the terms of
payment.
(b) The Trustees shall have the first option to purchase the Shares
referred to in the Sale Notice at the price and on the same terms and
conditions specified in the Sale Notice. Within thirty (30) days after
delivery of the Sale Notice to the Trustees, the Trustees shall give written
notice to the Company and the other Stockholders regarding the number of
Shares to be purchased by the Trustees. Except as otherwise agreed by the
Trustees, the Trustees shall purchase such Shares in proportion to their
relative existing stockholdings.
(c) If the Trustees do not elect to purchase the Shares referred to
in the Sale Notice, the Company shall have the option to purchase all of the
Shares referred to in the Sale Notice (other than those Shares to be
purchased by the Trustees) at the price and on the same terms and conditions
specified in the Sale Notice. Within forty-five (45) days after delivery of
the Sale Notice to the Company, the Company shall give written notice to the
Stockholders regarding the number of Shares to be purchased by the Company.
(d) If the Trustees and/or the Company elect to purchase all of the
Shares set forth in the Sale Notice, the Trustees and/or the Company, as
applicable, shall purchase all such Shares at the price and on the same terms
and conditions specified in the Sale Notice.
-2-
<PAGE>
(e) If the Trustees and/or the Company do not elect to purchase all
of the Shares set forth in the Sale Notice, such Shares, but not less than
all of such Shares referred to in the Sale Notice, may be transferred at any
time prior to the ninetieth (90th) day after the date of the Sale Notice to
the transferee identified in the Sale Notice on the terms and conditions
specified in the Sale Notice. No transfer of Shares shall be made after the
end of such ninety (90) day period, nor shall any change in the terms and
conditions of transfer be permitted, without the selling Investor Stockholder
first giving to the Company and the other Stockholders a new Sale Notice in
compliance with the requirements of this Paragraph.
6. PARALLEL EXIT RIGHT.
(a) If at any time prior to the termination of this Agreement,
either or both of the Trustees and/or any Affiliate (for purposes of this
Agreement, the term "Affiliate" shall have the meaning defined in Rule 405 of
the Securities Act of 1933, as amended (the "Securities Act")) of either of
the Trustees (collectively, together with the Trustees, the "Milhous
Affiliates") propose to sell or exchange (in a business combination or
otherwise) any of their Shares to any third party (a "Buyer"), other than a
Milhous Affiliate or other than pursuant to a registration statement under
the Securities Act, the Milhous Affiliates shall so notify the Investor
Stockholders, describing in such notification (the "Parallel Exit Notice")
(i) the name and address of the Buyer, (ii) the price per Share and the form
of consideration which the Buyer proposes to pay for the transferred Shares,
(iii) the terms of any additional consideration to be provided to the Milhous
Affiliates including, without limitation, any noncompetition or consulting
agreement (the "Additional Consideration"), and (iv) the method of payment
and other terms and conditions of the proposed sale or exchange.
(b) The Milhous Affiliates shall provide as part of the proposed
sale or exchange, and each Investor Stockholder hereby agrees, that each
Investor Stockholder shall participate therein (the "Parallel Exit Right"),
PRO RATA in proportion to the respective numbers of Shares owned by the
Milhous Affiliates, each Investor Stockholder and each other person who
exercises any right or has an obligation to participate with the Milhous
Affiliates in the sale or exchange, on the same terms and subject to the same
conditions (including but not limited to obligations with respect to
indemnification) as the sale or exchange by the Milhous Affiliates; provided,
however, that, for purposes of determining the consideration to be paid for
each Share of the Investor Stockholders, the aggregate consideration to be
paid for the transferred Shares shall be deemed to include (i) the price per
Share to be paid therefor and (ii) the Additional Consideration allocated
ratably among the transferred Shares.
(c) The sale or exchange of the Shares resulting from the Parallel
Exit Right shall take place at the principal offices of the Company on the
twentieth (20th) business day following the date of delivery of the Parallel
Exit Notice or at such other place, on such other date, or both, as the
Milhous Affiliates and the Buyer shall agree upon in writing (the "Closing
Date"). On the Closing Date, each Stockholder shall deliver the
certificate(s) representing the applicable number of Shares to be transferred
by him to the Buyer in proper form for transfer with appropriate stock powers
executed in blank attached and with all documentary or transfer tax stamps
affixed, against payment of the considerations therefor by a wire transfer of
funds to the respective bank accounts designated by the Milhous Affiliates
and each Investor Stockholder
-3-
<PAGE>
or by certified or official bank check or checks. By delivering such
certificate(s), the Milhous Affiliates and the Investor Stockholders each
shall be deemed to represent that the Buyer will receive good title to the
respective securities transferred by them represented by such certificates
and instruments, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements and voting trusts.
(d) Upon consummation of the sale or exchange, the transferred
Shares shall no longer be subject to the provisions of this Agreement.
7. RIGHTS AND OBLIGATIONS OF TRANSFEREE. Except as otherwise expressly
provided in this Agreement, each transferee or any subsequent transferee of
Shares (or any right, title or interest in such Shares) shall hold such
Shares (or right, title or interest in such Shares) subject to all of the
provisions of this Agreement applicable to the transferor of such Shares (or
his predecessor in interest) and shall make no further transfers except as
provided in this Agreement. In addition, each Permitted Transferee shall
succeed to the rights that his respective transferor held under this
Agreement as if the subject Shares were still held by such transferor.
8. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
occurrence of any one of the following events:
(a) July 1, 2016;
(b) The written agreement of the Stockholders to that effect; or
(c) The bankruptcy, receivership, or dissolution of the Company.
9. ALTERATIONS OR AMENDMENTS. This Agreement may be altered or amended
in whole or in part at any time, by filing with this Agreement a written
instrument setting forth the changes signed by the Company and each of the
Stockholders.
10. NOTICES. Any and all notices or other communications required or
permitted by this Agreement or by law to be served on, given to, or delivered
to any party hereto by any other party to this Agreement shall be in writing
and shall be deemed duly served, given, or delivered when personally
delivered to the party or to an officer of the party, or in lieu of such
personal delivery, on the third day after deposit in the United States Mail,
registered or certified, return receipt requested, addressed to a Stockholder
at the address then appearing for him on the books and records of the Company
or to the Company at its principal executive office.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and, except as restricted above
with regard to transfers, each of their heirs, executors, administrators,
successors and assigns.
12. SEVERABILITY. Should any provisions or portion of this Agreement be
held unenforceable and invalid for any reason, the remaining provisions and
portions of this Agreement shall continue in full force and effect.
-4-
<PAGE>
13. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Delaware.
14. ENFORCEMENT. In the event of any breach of any covenant in, or any
other default under, this Agreement, any Stockholder may proceed to protect
and enforce his rights by suit in equity or action at law, whether for the
specific performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the exercise of
any power granted in this Agreement, or to enforce any other legal or
equitable right of such Stockholder, or to take any one or more of such
actions. In the event any party hereto brings such an action against any
other party, the prevailing party in such dispute shall be entitled to
recover from the other party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation reasonable fees and expenses of attorneys and
accountants. None of the rights, powers or remedies conferred upon any party
hereto shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to every other right, power or remedy,
whether conferred hereby or now or hereafter available at law, in equity, by
statute or otherwise. Except as expressly provided in this Agreement, no
course of dealing between the Company and any Stockholder or between any
Stockholders, and no delay in exercising any such right, power or remedy
conferred hereby or now or hereafter existing at law, in equity, by statute
or otherwise, shall operate as a waiver of, or otherwise prejudice, any such
right, power or remedy.
15. ENTIRE AGREEMENT. This instrument constitutes the entire Agreement
of the parties hereto respecting the sale and purchase of the Shares and
correctly sets forth the rights, duties, and obligations of each to the other
in relation thereto as of its date. Any prior agreements, promises,
negotiations, or representations concerning its subject matter not expressly
set forth in this Agreement are of no force or effect.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above set forth.
PPC HOLDINGS, INC.,
a Delaware corporation
By /s/ Paul B. Milhous
------------------------------------
Name:
Title:
/s/ Robert E. Milhous
------------------------------------
ROBERT E. MILHOUS, as Trustee
of the Robert E. Milhous Trust
dated March 11, 1988, as amended
/s/ Paul B. Milhous
------------------------------------
PAUL B. MILHOUS, as Trustee
of the Paul Ballard Milhous Trust
dated September 24, 1982, as amended
INVESTOR STOCKHOLDERS:
/s/ Jerry L. Pesiach
----------------------------------
JERRY L. PESIACH
/s/ Thomas V. Bressan
----------------------------------
THOMAS V. BRESSAN
-6-
<PAGE>
Stockholders Agreement by and among the stockholders of the Company
named therein dated as of the 1st day of July, 1996.
- -------------------------------------------------------------------------------
Schedule A Omitted In Accordance
With Item 601(b)(2) of Regulation S-K
-------------------------------------
Schedule A Issued and Oustanding Common Stock of the Stockholders
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished.
<PAGE>
EXHIBIT 10.6
PPC HOLDINGS, INC.
AMENDED AND RESTATED
CO-SALE AGREEMENT
This Amended and Restated Co-Sale Agreement (the "Agreement") is made
as of December 30, 1996, by and among PPC Holdings, Inc., a Delaware
corporation, (the "Company"), Robert E. Milhous, as trustee of the Robert E.
Milhous Trust, dated March 11, 1988, as amended (the "REM Trust"), Paul B.
Milhous as trustee of the Paul Ballard Milhous Trust, dated September 24,
1982, as amended (the "PBM Trust" and the REM Trust, individually, a "Trust"
and, collectively, the "Trusts"), and each of the undersigned stockholders
(each, a "Management Stockholder," and collectively, together with the REM
Trust and the PBM Trust, the "Stockholders").
RECITALS
A. The Stockholders' current ownership of the Company's outstanding
common stock (the "Stock") is set forth on SCHEDULE A attached hereto (which
schedule will be amended from time to time to reflect additional issuances of,
and changes in ownership of, the Stock). The Stockholders wish to enter into
this Agreement for their mutual benefit.
B. The purpose of this Agreement is to establish a mechanism for the
transfer of Stock now or hereafter held by the Management Stockholders in
connection with certain transfers of Stock by the REM Trust, the PBM Trust
and/or their affiliates.
AGREEMENT
Now, therefore, in view of the foregoing recitals and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. TAKE-ALONG RIGHT
(a) If at any time prior to the termination of this Agreement, the REM
Trust, the PBM Trust and/or any Affiliate (for purposes of this Agreement,
the term "Affiliate" shall have meaning defined in Rule 405 of the Securities
Act of 1933, as amended (the "Securities Act")) of the REM Trust or the PBM
Trust (collectively, together with the REM Trust and the Paul E. Trust, the
"Milhous Affiliates") propose to sell or exchange (in a business combination
or otherwise) all of their shares of Stock in a bona fide arms-length
transaction to any third party (a "100% Buyer"), other than a Milhous
Affiliate, the Milhous Affiliates shall have the right (the "Take-Along
Right") to require all of the Management Stockholders to sell or exchange all
of the Stock then beneficially owned by them to such 100% Buyer on the same
terms and subject to the same conditions as the sale or exchange by the
Milhous Affiliates. To exercise the Take-Along Right, the Milhous Affiliates
shall give written notice thereof (a "Take-Along Notice") to the Management
Stockholders. The Take-Along Notice shall state (i) the name and address of
the 100% Buyer, (ii) the price per share and the form of consideration which
the 100% Buyer proposes to pay for the purchased stock and (iii) the method
of payment and other terms and conditions of the proposed transfer.
<PAGE>
The exercise of the Take-Along Right and the purchase and sale of the
Stock resulting from the exercise of the Take-Along Right shall take place at
the principal offices of the Company on the twentieth (20th) business day
following the date of delivery of the Take-Along Notice, or at such other
place, on such other date, or both, as the Milhous Affiliates and the 100%
Buyer shall agree upon in writing (the "Closing Date"). On the Closing Date,
each Management Stockholder shall deliver the certificate(s) representing all
of the Stock owned by him to the 100% Buyer in proper form for transfer with
appropriate stock powers executed in blank attached and with all documentary
or transfer tax stamps affixed, against payment of the purchase price
therefor by a wire transfer of funds to the respective bank accounts
designated by the Milhous Affiliates and each Management Stockholder or by
certified or official bank check or checks. By delivering such
certificate(s), each of the Milhous Affiliates and the Management
Stockholders shall be deemed to represent that the 100% Buyer will receive
good title to the securities transferred by them represented by such
certificates and instruments, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements and
voting trusts.
2. TAG-ALONG RIGHT
If, at any time prior to the termination of this Agreement, the Milhous
Affiliates propose to sell in one transaction or in any of a series of
transactions to a single purchaser (including such purchaser's Affiliates, a
"Control Buyer"), other than a Milhous Affiliate or other than pursuant to a
registration statement under the Securities Act or pursuant to Rule 144
thereunder, shares of Stock which, together with all other shares of Stock
sold or to be sold to such Control Buyer in such transaction or series of
transactions, equals or exceeds fifty percent (50%) of the outstanding Stock
of the Company on a fully diluted basis, the Milhous Affiliates shall so
notify the Management Stockholders, describing in such notification the
material terms of such proposed sale. Each Management Stockholder shall have
the option, exercisable by written notice to the Milhous Affiliates within
ten (10) business days after the Milhous Affiliates notify the Management
Stockholders of their intention to effect such a sale, to require the Milhous
Affiliates to provide as part of their proposed sale that each electing
Management Stockholder (each, a "Tag-Along Seller") be given the right to
participate, PRO RATA in proportion to the respective numbers of shares of
Stock owned by the Milhous Affiliates, the Tag-Along Sellers and any other
stockholders of the Company who exercise a right or have an obligation to
participate with the Milhous Affiliates in such a sale, in such transaction
or series of transactions on the same terms and conditions (including but not
limited to obligations with respect to indemnification) as the Milhous
Affiliates, and, if such option is exercised by any Tag-Along Seller, the
Milhous Affiliates shall not proceed with such sale unless the Tag-Along
Sellers are given the right so to participate.
3. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the first to occur of:
(a) STOCKHOLDER VOTE. The written agreement of all of the Stockholders;
(b) BANKRUPTCY. The bankruptcy or insolvency of the Company;
2.
<PAGE>
(c) STOCKHOLDER. At such time as only the Milhous Affiliates remain as
Stockholders, the Stock of the Management Stockholders and any other
stockholders having been purchased by the Company or the Milhous Affiliates;
and
(d) QUALIFIED PUBLIC OFFERING. Upon the completion by the Company of a
"Qualified Public Offering" which shall mean a firm commitment underwritten
public offering of shares of common stock (i) which is registered under the
Securities Act on Form S-1 (or successor form for the registration of the
sale of securities without qualification as to the size of the issuer or
offering, type of purchaser, or any limitation on the availability of audited
financial statements of the issuer) and (ii) resulting in proceeds to the
Company, net of expenses, discounts and commissions, of not less that $30
million.
4. LEGEND
(a) Each certificate representing shares of Stock now or hereafter
owned by a Stockholder or issued to any person in connection with a transfer
pursuant hereunder shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST
TO THE SHARES), THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF
THE CORPORATION. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE
CORPORATION'S PRINCIPAL CORPORATE OFFICES."
(b) Each Stockholder agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 4(a) above to enforce
the provisions of this Agreement and the Company agrees to promptly do so.
The legend shall be removed upon termination of this Agreement.
5. OWNERSHIP
Each Stockholder represents and warrants that he is the sole legal and
beneficial owner of the shares of Stock subject to this Agreement and that no
other person has any interest (other than any security interest granted in
connection with a purchase money financing of the acquisition of such shares
that has been provided or approved by the Company, or a community property or
marital property interest) in such shares.
6. SPECIFIC PERFORMANCE
The parties hereby declare that it is impossible to measure in money
the damages that will accrue to a Stockholder or his estate by reason of a
failure to perform any of the
3.
<PAGE>
obligations under or other breach of, this Agreement. Therefore, any
Stockholder or his personal representative shall be entitled to specific
enforcement of the provisions of this Agreement, and any person (including
each Stockholder and the Company) against whom an action for specific
performance is brought hereby waives the claim or defense therein that there
exists an adequate remedy at law to redress the nonperformance or other
breach of this Agreement.
7. EXECUTION OF DOCUMENTS MAY BE CONDITION TO TRANSFER
Any transferee or assignee (other than the Company), by gift, sale, or
otherwise, must, as a condition to such transfer or gift, execute such
documents as may be reasonably requested by the Company in order to confirm
the agreement of such donee, assignee, purchaser, or successor in interest to
be bound by all the terms, provisions and conditions of this Agreement as
though an original signatory hereto, and to assume any and all obligations of
the transferor or assignor hereof. Any shares of Stock transferred or
assigned to the Company shall, upon such transfer or assignment, cease to be
subject to the terms, provisions and conditions of this Agreement.
8. ENTIRE AGREEMENT
This instrument evidences the entire agreement of the parties
concerning the matters covered herein, and supersedes all prior oral or
written agreements or other understandings including, without limitation,
that certain Co-Sale Agreement dated as of April 28, 1995, by and among the
Company, the Trusts and Craig A. Hutchison.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
10. AMENDMENT
This Agreement may be amended only by written agreement signed by
all of the Stockholders; provided that, with the written consent of the
Company, additional stockholders may become parties hereto as Management
Stockholders by executing a counterpart hereof; provided further that
SCHEDULE A attached hereto may be amended from time to time by the Company to
reflect additional issuances of Stock, changes in the ownership of the Stock
and the addition of new Management Stockholders. The Company shall provide
notice to each of the Stockholders with regard to any such additional parties
and any such amendments to SCHEDULE A.
11. NOTICES
Any and all notices, designations, consents, offers, acceptances,
and any other communications provided for herein shall be given in writing
which shall be addressed and delivered or sent either by first class mail or
hand delivery, in the case of the Company, to its
4.
<PAGE>
principal office, and in the case of any Stockholder, to his address
appearing in the current records of the Company or to such other address as
may be designated by him.
12. AGREEMENT TO PERFORM NECESSARY ACTS
Each party agrees to perform any further acts and to execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement.
13. INVALID PROVISION
The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions, and this Agreement
shall be construed in all respects as if the invalid or unenforceable
provision were omitted.
14. HEIRS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of
the parties, their heirs, legal representatives, personal representatives,
beneficiaries, successors, and assigns. Notwithstanding the preceding
sentence, the rights of the Stockholders hereunder are only assignable in
accordance with Section 7 hereof. Each Stockholder hereby directs his
personal representative to perform this Agreement and to execute all
documents necessary to effect the purposes of this Agreement. The failure of
any Stockholder to execute a will shall not affect the rights or obligations
of any Stockholder, the estate of any Stockholder, or the Company under this
Agreement. Except as expressly contemplated hereby, no third party
(including without limitation any stockholder of the Company who, for any
reason, is not a party hereto) shall be entitled to enforce any term,
covenant or condition of this Agreement or have any rights hereunder.
15. ATTORNEYS' FEES
In the event any action is instituted by any party against another
for the purpose of determining or enforcing his or its rights under this
Agreement, the prevailing party shall be entitled to recover from the other
party all costs in connection with the action, including reasonable
attorneys' fees, as determined by the Court.
16. 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.
5.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the Agreement
on the date specified above.
PPC HOLDINGS, INC.
By: /s/ Robert E. Milhous
--------------------------------
Name: Robert E. Milhous
Title: Chairman of the Board
/s/ Robert E. Milhous
------------------------------------
ROBERT E. MILHOUS, as Trustee of the
Robert E. Milhous Trust dated March 11,
1988, as amended
/s/ Paul B. Milhous
------------------------------------
PAUL B. MILHOUS, as Trustee of the Paul
Ballard Milhous Trust dated September 24,
1982, as amended
MANAGEMENT STOCKHOLDERS:
/s/ Craig A. Hutchison
------------------------------------
CRAIG A. HUTCHISON
------------------------------------
LAWRENCE F. CELEY
/s/ Lawrence Cole
------------------------------------
LAWRENCE COLE
/s/ Timothy M. Smith
------------------------------------
TIMOTHY M. SMITH
/s/ Bradley J. Hoffman
------------------------------------
BRADLEY J. HOFFMAN
/s/ Walter Edwards
------------------------------------
WALTER EDWARDS
6.
<PAGE>
Amended and Restated Co-Sale Agreement by and among the stockholders of
the Company named therein dated as of December 30, 1996.
- -------------------------------------------------------------------------------
SCHEDULE A OMITTED IN ACCORDANCE
WITH ITEM 601(b)(2) OF REGULATION S-K
Schedule A Issued and Outstanding Common Stock of the Stockholders
Perry-Judd's Incorporated will furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request; provided, however, that Perry-Judd's Incorporated may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
schedule or exhibit so furnished.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
Perry Graphic Communications, Inc.* Delaware
Judd's, Incorporated* Maryland
Shenandoah Valley Press, Inc.** Virginia
Port City Press, Inc.** Maryland
Mount Jackson Press, Inc.** Virginia
Judd & Detweiler, Inc.** District of Columbia
- ----------------------
* Wholly-owned by Registrant
** Wholly-owned by Judd's, Incorporated
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Perry-Judd's
Incorporated on Form S-4 of our report on the consolidated financial
statements of PPC Holdings, Inc. and Predecessor subsidiary dated
November 14, 1997, appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
headings "Summary Historical and Pro Forma Financial Data", "Selected
Historical and Pro Forma Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 28, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Perry-Judd's
Incorporated on Form S-4 of our report dated February 4, 1997, on the
consolidated financial statements of Judd's, Incorporated and Subsidiaries for
the years ended December 31, 1995 and 1996, appearing in the Prospectus which
is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Historical
and Pro Forma Financial Data", "Selected Historical and Pro Forma Financial
Data" and "Experts" in such Prospectus.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
January 29, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996, AND UNAUDITED
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE
NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 2,183 83
<SECURITIES> 0 0
<RECEIVABLES> 19,829 26,935
<ALLOWANCES> 320 257
<INVENTORY> 10,551 9,777
<CURRENT-ASSETS> 34,944 42,544
<PP&E> 74,538 73,287
<DEPRECIATION> 9,494 13,924
<TOTAL-ASSETS> 104,281 105,502
<CURRENT-LIABILITIES> 27,638 35,888
<BONDS> 46,039 40,996
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 15,531 13,656
<TOTAL-LIABILITY-AND-EQUITY> 104,281 105,502
<SALES> 138,511 105,611
<TOTAL-REVENUES> 138,511 105,611
<CGS> 113,185 86,676
<TOTAL-COSTS> 132,003 102,212
<OTHER-EXPENSES> 6,590 5,133
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,946 4,417
<INCOME-PRETAX> (82) (1,734)
<INCOME-TAX> 4 (625)
<INCOME-CONTINUING> (86) (1,109)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,084) (1,875)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
