<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission File Number 333-48821
IMPAC Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 23-2923682
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1950 North Ruby Street, Melrose Park, Illinois 60160
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (708) 344-9100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ ] YES [X] NO
Number of shares outstanding of common stock as of the close of business on
November 16, 1998:
Class Number of Shares Outstanding
- --------------------- ----------------------------
Series A Common Stock 196,245.5
Series B Common Stock 0
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income for the
Three Months Ended September 30, 1998 and 1997.................. 3
Unaudited Condensed Consolidated Statements of Income for the
Nine Months Ended September 30, 1998 and 1997................... 4
Unaudited Condensed Consolidated Balance Sheets as of December 31,
1997 and September 30, 1998..................................... 5
Unaudited Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997................... 6
Notes to Unaudited Condensed Consolidated Financial Statements.... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 18
PART II - OTHER INFORMATION 18
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1997 1998
-------- --------
<S> <C> <C>
Net sales $14,800 $53,957
Cost of goods sold 10,975 39,831
-------- --------
Gross profit 3,825 14,126
Selling, general and administrative expenses 1,986 7,623
-------- --------
Operating income 1,839 6,503
Other income (expense):
Interest income - 89
Interest expense (856) (3,672)
Other expense - (192)
Loss on sale of fixed assets - (45)
-------- --------
Income before income taxes 983 2,683
Income taxes (345) (1,239)
-------- --------
Net income $ 638 $ 1,444
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Net sales $ 40,206 $ 105,492
Cost of goods sold 29,174 80,565
----------------- -----------------
Gross profit 11,032 24,927
Selling, general and administrative expenses 5,613 16,705
----------------- -----------------
Operating income 5,419 8,222
Other income (expense):
Interest income - 161
Interest expense (2,446) (7,826)
Other expense - (192)
Loss on sale of fixed assets - (170)
----------------- -----------------
Income before income taxes and extraordinary item 2,973 195
Income taxes (1,043) (357)
----------------- -----------------
Income (loss) before extraordinary item 1,930 (162)
Extraordinary charge for early retirement of debt, net of tax
benefit of $368 - (552)
----------------- -----------------
Net income (loss) $ 1,930 $ (714)
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
----------------- -----------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash $ 194 $ 2,419
Trade accounts receivable, net 5,986 50,316
Other receivables 439 6,017
Inventories 6,957 24,479
Prepaid expenses 510 677
Deferred income taxes 661 2,466
Other current assets 156 162
----------------- -----------------
Total current assets 14,903 86,536
Long-term assets:
Property, plant and equipment, net 11,100 100,860
Goodwill 0 168,142
Deferred financing costs, net 1,024 9,468
Restricted cash 625 421
Other assets 641 2,289
----------------- -----------------
Total assets $ 28,293 $367,716
================= =================
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft $ 0 $ 5,345
Current maturities of long-term debt 0 9,410
Trade payables 5,098 20,276
Accrued expenses 1,925 29,583
----------------- -----------------
Total current liabilities 7,023 64,614
----------------- -----------------
Long-term debt 33,850 228,588
Deferred income taxes 1,307 9,009
----------------- -----------------
Total liabilities 42,180 302,211
----------------- -----------------
Shareholders' (deficit) equity:
Common stock, voting, $.001 par value; authorized 135,813 shares,
90,500 shares issued and outstanding at December 31, 1997 0 -
Common stock, nonvoting, $.001 par value; 9,500 shares authorized,
issued and outstanding at December 31, 1997 0 -
Common stock, series A, $.001 par value; 1,000,000 shares
authorized, 196,245.5 shares issued and outstanding at September
30, 1998 - 0
Common stock, series B, $.001 par value; 50,000 shares authorized,
0 shares issued and outstanding at September 30, 1998 - 0
Preferred stock, nonvoting, $.001 par value; 100,000 shares
authorized, issued and outstanding at December 31, 1997 0 -
Paid in capital 20,000 97,540
Notes receivable (35) 0
Carryover basis adjustment (37,142) (37,142)
Accumulated other comprehensive income - 2,531
Retained earnings 3,290 2,576
----------------- -----------------
Total shareholders' (deficit) equity (13,887) 65,505
----------------- -----------------
Total liabilities & shareholders' (deficit) equity $ 28,293 $367,716
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1998
------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 1,930 $ (714)
Adjustments to reconcile net income to net cash provided by
(used for) operating activities -
Extraordinary charge for early retirement of debt - 552
Depreciation and amortization 1,226 6,046
Loss on sale of fixed assets - 170
Deferred income taxes 57 (472)
Changes in assets and liabilities -
Trade accounts receivable, net 1,079 (13,977)
Inventories (544) (2,681)
Trade payables and bank overdraft 1,203 5,386
Other assets and liabilities (295) 5,761
------------------------
Net cash provided by operating activities 4,656 71
------------------------
Cash flows from investing activities:
Capital expenditures (3,830) (7,966)
Acquisition of AGI Incorporated, net of cash acquired (64,163)
Acquisition of Tinsley Robor plc, net of cash acquired - (161,194)
------------------------
Net cash used for investing activities (3,830) (233,323)
------------------------
Cash flows from financing activities:
Net change in borrowings under revolving credit line (3,496) 9,600
Repayment of long term debt (575) (29,850)
Proceeds from issuance of long term debt - 101,000
Proceeds from senior subordinated notes - 100,000
Proceeds from issuance of bonds 4,000 -
Change in capital leases - 536
(Increase) decrease in restricted cash (744) 204
Proceeds from issuance of common stock - 63,175
Change in deferred financing costs (12) (9,504)
------------------------
Net cash provided by (used for) financing activities (827) 235,161
------------------------
Effect of exchange rate differences on cash - 316
------------------------
(Decrease) increase in cash (1) 2,225
Cash, beginning of period 6 194
------------------------
Cash, end of period $ 5 $ 2,419
========================
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-(continued)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------
Supplemental Cash Flow Information: 1997 1998
----------------------------------
<S> <C> <C>
Interest paid $1,486 $ 6,617
Income taxes paid 2,198 (13)
Acquisition of AGI Incorporated-
Fair market value of assets acquired $103,529
Fair market value of liabilities assumed 24,945
Common stock issued 14,400
--------
Cash paid 64,184
Cash acquired 21
--------
Acquisition of AGI Incorporated, net of cash acquired $ 64,163
========
Acquisition of Tinsley Robor plc-
Fair market value of assets acquired $202,820
Fair market value of liabilities assumed 40,687
--------
Cash paid 162,133
Cash acquired 939
--------
Acquisition of Tinsley Robor plc, net of cash acquired $161,194
========
</TABLE>
7
<PAGE>
IMPAC GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
Note 1 - Basis of Presentation
In the opinion of IMPAC Group, Inc. ("IMPAC") and its consolidated subsidiaries
(together, the "Company"), the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and the changes in cash flows at September 30, 1998 and
for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the audited financial statements as of and for the year ended
December 31, 1997 of KFI Holding and AGI Incorporated ("AGI") and the audited
financial statements as of and for the year ended March 31, 1998 of Tinsley
Robor plc ("Tinsley") in the Company's Form S-4 Registration Statement (File No.
333-48821) as filed with the Securities and Exchange Commission.
Certain amounts appearing in the December 31, 1997 balance sheet of the Company
have been reclassified to conform with the current period reporting and changes
in the Company's debt arrangements described below.
Note 2 - Acquisitions
Acquisition of AGI Incorporated--
On March 12, 1998, KFI Holding Corporation acquired all of the common stock of
AGI for $69.0 million including $54.6 million of cash and $14.4 million of newly
issued common stock, plus acquisition costs. Upon consummation of this
acquisition, KFI Holding Corporation changed its name to "IMPAC Group, Inc."
Concurrently, the Company funded the retirement of $8.3 million of indebtedness
outstanding under AGI's credit facility immediately prior to the transaction.
The acquisition was funded by the proceeds from the issuance of $100.0 million
of 10 1/8% Senior Subordinated Notes and $4.6 million of new common stock.
This acquisition was accounted for as a purchase and, accordingly, the operating
results of AGI have been included in the Company's consolidated financial
statements from the date of acquisition. A summary of the Company's purchase
price allocation follows:
<TABLE>
<CAPTION>
<S> <C>
Receivables $ 11,555
Inventories 6,998
Deferred incomes taxes 1,501
Property, plant and equipment 40,550
Other assets 1,723
Trade payables and accrued expenses (11,799)
Long-term debt (7,640)
Deferred income taxes (5,505)
--------
Net assets acquired $ 37,383
========
</TABLE>
The excess of the purchase price over the fair market value of the net assets
acquired is being amortized over 40 years.
Acquisition of Tinsley Robor plc--
On September 11, 1998, the Company acquired substantially all of the common
stock of Tinsley for $139.6 million plus acquisition costs. Concurrently, the
Company funded the retirement of $18.5 million of indebtedness outstanding under
Tinsley's credit agreements immediately prior to the transaction. The
acquisition was funded through additional borrowings of $99.7 million under the
Company's Amended and Restated Multicurrency Credit Facility described in Note 4
below, $58.6 million in proceeds from the sale of common stock to the company's
existing stockholders or their affiliates and the issuance, in aggregate, of
(Pound Sterling)5.05 million of five year promissory notes having a dollar
equivalent value of $8.5 million under current exchange rates ("Loan Notes") to
former Tinsley shareholders. Tinsley is a supplier of printed packaging for the
music and multimedia market and has an established presence in the U.K. and
Europe.
8
<PAGE>
This acquisition was accounted for as a purchase and, accordingly, the operating
results of Tinsley have been included in the Company's consolidated financial
statements from the date of acquisition. A summary of the Company's preliminary
purchase price allocation follows:
<TABLE>
<CAPTION>
<S> <C>
Receivables $19,395
Inventories 7,843
Property, plant and equipment 45,550
Other assets 3,197
Trade payables and accrued expenses (23,337)
Long-term debt (14,985)
Deferred income taxes (2,365)
-------
Net assets acquired $35,298
=======
</TABLE>
The excess of the purchase price over the fair market value of the net assets
acquired is being amortized over 40 years.
Pro Forma for Acquisitions--
The following pro forma information presents certain operating data calculated
to reflect the acquisitions of AGI and Tinsley and the additional borrowings
incurred to fund those acquisitions as if they occurred as of the beginning of
the periods presented.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $81,701 $74,644 $207,563 $192,429
Net income (loss) 2,173 96 758 (6,232)
</TABLE>
This pro forma data does not purport to represent what actual operating results
would have been had the acquisitions been consummated on the dates indicated or
what such results will be for any future period.
Note 3 -- Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Raw materials $3,658 $ 8,330
Work in process and finished goods 1,530 16,149
------ -------
$6,957 $24,479
====== =======
</TABLE>
Note 4 -- Long-term Debt
On March 12, 1998, the Company completed the issuance of $100.0 million in
Senior Subordinated Notes (the "Senior Subordinated Notes"). The Senior
Subordinated Notes bear interest at 10 1/8% and mature March 15, 2008. The
Indenture governing the Senior Subordinated Notes contains certain covenants
that, among other things, limit the ability of the Company to incur additional
indebtedness, pay dividends, distributions or make investments or certain
restricted payments, enter into certain transactions with affiliates, dispose of
certain assets, incur liens securing subordinated indebtedness and engage in
mergers and consolidations. The Senior Subordinated Notes are general, unsecured
obligations of IMPAC and are guaranteed by all domestic subsidiaries of the
Company (the "Subsidiary Guarantors") (see Note 5). They will be senior to any
future subordinated debt of the Company. At September 30, 1998, the Company had
no indebtedness outstanding that was subordinated to the Senior Subordinated
Notes. The proceeds of the Senior Subordinated Notes were used to fund the
acquisition of AGI and to retire all outstanding indebtedness under the
Company's prior credit agreement. As a result of the refinancing, the Company
recorded an extraordinary charge of $552 (net of tax), reflecting the write-off
of deferred financing costs.
On March 12, 1998, the Company entered into a new five year credit facility
which provided for a $40.0 million revolving credit facility and a $13.0 million
letter of credit facility. On July 7, 1998, the Company entered into an Amended
and Restated Multicurrency Credit Facility (the "Facility") which
9
<PAGE>
became effective on the initial funding date of the Tinsley acquisition and
replaced the prior credit agreement. The Facility provides for up to $53.0
million of revolving credit borrowings (the "Revolver") with a $20 million
letter of credit subfacility under the Revolver (the "L/C Facility"). The
Facility also provides for $37.0 million of Term Loan A borrowings and $64.0
million of Term Loan B borrowings. The Facility also provides a guarantee to the
holders of the Loan Notes described below. Under the provisions of the Facility,
the aggregate amount of outstanding Term Loan A borrowings is limited by the
amount outstanding under the Loan Notes guarantee. Up to $8.5 million of
drawings under this guarantee to redeem the Loan Notes will be converted to
additional borrowings under Term Loan A and any drawings which, as a consequence
of currency fluctuations, exceed $8.5 million will be converted to additional
borrowings under the Revolver. Borrowings under the Facility rank senior to the
Senior Subordinated Notes and are guaranteed by the Subsidiary Guarantors on a
senior basis and are secured by substantially all of the assets of IMPAC and the
Subsidiary Guarantors. As of September 30, 1998, there were $9.6 million of
borrowings outstanding under the Revolver, $28.5 million of borrowings
outstanding under Term Loan A and $64.0 million of borrowings outstanding under
Term Loan B. The Company currently has $12.6 million in letters of credit
outstanding under the L/C Facility securing its industrial revenue bond ("IRB")
borrowings. The interest rate on the Facility is based on either the IBOR or
Base Rate plus the applicable margin. The interest rate on the L/C Facility is
based on the applicable IBOR margin. The Company currently pays a commitment fee
of 1/2 of 1% per annum on the amount of the available credit on the Revolver
over the amount outstanding, plus any outstanding letters of credit available.
The Revolver has a five and one-half year maturity. The Term Loan A and Term
Loan B provide for quarterly scheduled payments maturing in five and one-half
years and six and one-half years, respectively. The Company is required to make
mandatory prepayments on the term loans beginning in March, 2000 if the Company
generates excess cash flow, as defined.
The credit agreement governing the Facility (the "Credit Agreement") includes
covenants requiring the Company to maintain (i) maximum leverage ratios, (ii)
maximum senior leverage ratios, (iii) minimum interest coverage ratios, and (iv)
minimum fixed charge coverage ratios. The Credit Agreement also contains
covenants, among others, limiting additional indebtedness, liens, dividends,
restricted payments, guaranties, advances to affiliates, investments, mergers,
creation of subsidiaries, asset sales and dispositions.
In connection with the acquisition of Tinsley, the Company issued (Pound
Sterling)5.05 million of five year promissory notes having a dollar equivalent
value of $8.5 million under current exchange rates ("Loan Notes") to former
Tinsley shareholders. The Loan Notes rank senior to the Senior Subordinated
Notes and are guaranteed by Bank of America. Drawings under this guarantee will
be converted into borrowings under Term Loan A and the Revolver of the Credit
Facility.
In connection with the acquisition of AGI, the Company assumed $7.6 million of
variable rate IRB borrowings which mature on February 1, 2026. In connection
with the acquisition of Tinsley, the Company assumed $15.0 million of capital
leases.
Long-term debt as of December 31, 1997 and September 30, 1998, consisted of the
following:
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1998
----------------- ------------------
<S> <C> <C>
Bank borrowings $29,850 $102,062
Senior subordinated notes - 100,000
Industrial revenue bonds 4,000 11,640
Loan notes - 8,538
Capital leases - 15,758
----------------------------------------------
Total debt 33,850 237,998
Less-current maturities - 9,410
----------------------------------------------
Total long-term debt $33,850 $228,588
==============================================
</TABLE>
Note 5 - Non-guaranteeing Subsidiaries
Under the Indenture governing the Senior Subordinated Notes and under the Credit
Agreement governing the Facility, certain foreign subsidiaries of the Company
are not required to guarantee the Senior Subordinated Notes and the Facility.
Currently, none of Tinsley or its subsidiaries have guaranteed the Senior
Subordinated Notes or the Facility. However,the Company anticipates that Tinsley
and certain of its subsidiaries will deliver such guarantees prior to December
10, 1998, in accordance with the requirements of the Credit Agreement. Sales and
net income of Tinsley and its subsidiaries for the period from the date of
acquisition to September 30, 1998 were $6.6 million and $0.4 million,
respectively. The following is unaudited consolidated balance sheet data of
Tinsley and its subsidiaries as of September 30, 1998:
<TABLE>
<CAPTION>
September 30,
1998
-------------
<S> <C>
Cash $ 1,320
Trade accounts receivable, net 20,648
Inventories 3,530
Other current assets 7,309
-------------
Total current assets 32,807
Property, plant and equipment, net 46,067
Goodwill 127,718
Other assets 849
-------------
Total assets $207,441
=============
Trade payables and accrued expenses $ 20,623
Other current liabilities 12,076
-------------
Total current liabilities 32,699
Long-term liabilities 9,710
-------------
Total liabilities $ 42,409
=============
</TABLE>
Note 6 - New Stock Issuance
In connection with the acquisition of AGI on March 12, 1998, the Company (i)
exchanged 44,118 shares of new Common Stock, Series A for all previously issued
and outstanding shares of non-voting Common Stock, voting Common Stock and
Preferred Stock of KFI Holdings, (ii) issued 13,529 shares of new Common Stock,
Series A for $4.6 million, and (iii) issued 42,353 shares of new Common Stock,
Series A as partial consideration to former shareholders of AGI.
10
<PAGE>
In connection with the acquisition of Tinsley on September 11, 1998, the Company
issued 96,245.5 shares of new Common Stock, Series A to certain of the Company's
existing stockholders or their affiliates for $58.6 million.
Note 7 - Comprehensive Income
Prior to the acquisition of Tinsley, the Company had no amounts to report as
other comprehensive income pursuant to Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." The Company's comprehensive
income consisted of the following:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1998
------------------- -------------------
<S> <C> <C>
Net income (loss) $1,444 $ (714)
Foreign currency translation
adjustment 2,531 2,531
-------- --------
Comprehensive income $3,975 $ 1,817
======== ========
</TABLE>
11
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On March 12, 1998, KFI Holding completed its acquisition of AGI
Incorporated ("AGI") and the issuance of the Company's 10 1/8% Senior
Subordinated Notes due 2008 ("Senior Subordinated Notes"). Upon consummation of
these transactions KFI Holding changed its corporate name to "IMPAC Group, Inc."
("IMPAC"). On September 11, 1998, the Company acquired substantially all of the
outstanding capital stock (the "Tinsley Acquisition") of Tinsley Robor plc, a UK
public limited company ("Tinsley"). The Company funded the Tinsley Acquisition
through borrowings under the Amended and Restated Multicurrency Credit Facility
(the "Facility"), proceeds from the sale of common stock to the Company's
existing stockholders or their affiliates and the issuance of five year
promissory notes ("Loan Notes") to former Tinsley shareholders. References below
to the "Company" mean IMPAC Group, Inc. and its consolidated subsidiaries.
As a result of these transactions, the Company's consolidated financial
statements for the three month and nine month periods ended September 30, 1997
and 1998 are not comparable due to the inclusion in the consolidated financial
statements of AGI's and Tinsley's assets, liabilities and operating results from
the dates of acquisition. As such, the discussion and analysis of the results of
operations and financial condition for the three month and nine month periods
ended September 30, 1997 and 1998 are presented on a pro forma basis as if the
acquisitions of AGI and Tinsley and the borrowings incurred to fund those
acquisitions occurred as of the beginning of the periods presented.
IMPAC is a holding company with no material assets or operations other than
its investments in its subsidiaries. All of Klearfold and AGI and their direct
and indirect subsidiaries (the "Domestic Subsidiaries") are wholly-owned by
IMPAC and have guaranteed the Senior Subordinated Notes on a full,
unconditional, joint and several basis, subject to the subordination provisions
provided for in the related Indenture. Separate financial statements of the
Domestic Subsidiaries have not been presented in this Form 10-Q because
management has determined that such financial statements would not be material
to investors. Consolidated balance sheet data of Tinsley and its subsidiaries
has been presented in Note 5 to Notes to Unaudited Condensed Consolidated
Financial Statements.
Overview
IMPAC is a leading designer, manufacturer and marketer of high-end, value-
added specialty packaging for various consumer products markets including
entertainment, cosmetics and personal care in the United States and Europe.
Through its creative design work, specialized manufacturing techniques and
diverse printing capabilities, the Company offers innovative specialty packaging
solutions for customers that seek to differentiate their products in the
consumer marketplace. In addition, unlike most of its competitors, the Company
utilizes a broad range of paper, paperboard and transparent rigid plastic
materials for its products.
RESULTS OF OPERATIONS
Pro Forma Three Months Ended September 30, 1998 Compared to Pro Forma Three
Months Ended September 30, 1997
The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the three months ended September
30, 1997 (the "1997 period") and the three months ended September 30, 1998 (the
"1998 period") on a pro forma basis as if the acquisitions of AGI and Tinsley
and the borrowings incurred to fund those acquisitions occurred as of the
beginning of the periods presented.
<TABLE>
<CAPTION>
Pro Forma Three Months
Ended September 30,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Income Statement Data:
Net sales 100.0% 100.0%
Cost of goods sold 68.4% 71.8%
---------- ----------
Gross profit 31.6% 28.2%
Selling, general and administrative expenses 19.7% 19.4%
---------- ----------
Operating income 11.9% 8.8%
Interest expense, net 6.6% 7.2%
---------- ----------
Income before income taxes and extraordinary item 5.3% 1.6%
Income taxes 2.6% 1.2%
---------- ----------
Income before extraordinary item 2.7% 0.4%
========== ==========
</TABLE>
12
<PAGE>
Net Sales for the 1998 period were $74.6 million compared to $81.7 million for
the 1997 period, a decrease of 8.6%. This decrease was due largely to a $6.6
million decline in special video packaging due to strong 1997 sales related to
the successful releases of several popular titles by the Company's existing
customers along with a decrease in sales of music packaging to the Company's
European customers in 1998.
Gross Profit for the 1998 period was $21.0 million compared to $25.8 million for
the 1997 period, a decrease of 18.5%. The resulting decline in gross margin from
31.6% to 28.2% was primarily due to the decrease in sales of higher value-added
packaging products to the entertainment industry, as discussed above. Gross
margin was also negatively impacted by the less favorable absorption of fixed
costs due to the lower overall sales volume.
Selling, General and Administrative Expenses for the 1998 period were $14.5
million compared to $16.1 million for the 1997 period, a decrease of 10.1%. The
decrease in SG&A as a percentage of sales from 19.7% to 19.4% was due primarily
to reductions in anticipated payouts under various compensation programs tied to
sales and profitability partially offset by expenses associated with the
anticipated relocation and consolidation of certain of the Company's foreign
operations.
Operating Income for the 1998 period was $6.5 million compared to $9.7 million
for the 1997 period, a decrease of 32.5% due to the factors discussed above.
Net Interest Expense was $5.4 million for both the 1998 and 1997 periods.
Income Taxes for the 1998 period was a provision of $0.9 million compared to
$2.1 million for the 1997 period. The Company's effective tax rates for the
periods are not meaningful due to the effects of non-deductible goodwill
amortization of approximately $1.0 million in each period relative to the
amounts of income before income taxes.
Net Income for the 1998 period was $0.1 million compared to $2.2 million for the
1997 period due to the factors discussed above.
Pro Forma Nine Months Ended September 30, 1998 Compared to Pro Forma Nine Months
Ended September 30, 1997
The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the nine months ended September 30,
1997 (the "1997 period") and the nine months ended September 30, 1998 (the "1998
period") on a pro forma basis as if the acquisitions of AGI and Tinsley and the
borrowings incurred to fund those acquisitions occurred as of the beginning of
the periods presented.
<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended
September 30,
-----------------
1997 1998
------ ------
<S> <C> <C>
Income Statement Data:
Net sales 100.0% 100.0%
Cost of goods sold 70.2% 74.1%
------ ------
Gross profit 29.8% 25.9%
Selling, general and administrative expenses 20.5% 20.0%
------ ------
Operating income 9.3% 5.9%
Interest expense, net 7.7% 8.4%
------ ------
Income (loss) before income taxes and extraordinary item 1.6% (2.5%)
Income taxes 1.2% 0.4%
------ ------
Income (loss) before extraordinary item 0.4% (2.9%)
====== ======
</TABLE>
Net Sales for the 1998 period were $192.4 million compared to $207.6 million for
the 1997 period, a decrease of 7.3%. This decrease was due to a $15.1 million
decline in entertainment packaging and a $3.2 million decline in cosmetics
packaging partially offset by a $3.1 million increase in sales to other markets.
The entertainment packaging reduction was due to a decline in sales of special
video packaging due to
13
<PAGE>
strong 1997 sales related to the successful releases of several popular titles
by the Company's existing customers and a decrease in sales of standard music
packaging to the Company's European customers in 1998. This decline was
partially offset by stronger sales of special music packaging. The decrease in
cosmetics sales relates primarily to a decision by one of the Company's
significant cosmetics packaging customers to begin to manufacture certain of its
packaging internally and to softness in retail sales of one product line of
another significant cosmetics customer. Increased sales in other markets have
resulted from increases in sales in the personal care and food and beverage
markets.
Gross Profit for the 1998 period was $49.8 million compared to $61.8 million for
the 1997 period, a decrease of 19.5%. The resulting decline in gross margin from
29.8% to 25.9% was primarily due to the decrease in sales of higher value-added
packaging products to the entertainment industry, as discussed above. Gross
margin was also negatively impacted by the less favorable absorption of fixed
costs due to the lower overall sales volume, the start-up of the Company's
Grover, North Carolina facility, additional expenses associated with the start-
up of a new printing press and start-up costs associated with new packaging for
two significant customers. Additionally, the 1997 period benefited from a supply
contract termination settlement of $0.8 million and a favorable insurance
adjustment of $0.4 million.
Selling, General and Administrative Expenses for the 1998 period were $38.5
million compared to $42.5 million for the 1997 period, a decrease of 9.5%. The
decrease in SG&A as a percentage of sales from 20.5% to 20.0% was due primarily
to reductions in anticipated payouts under various compensation programs tied to
sales and profitability offset by start-up costs associated with the Company's
Grover, North Carolina facility and by expenses associated with the anticipated
relocation and consolidation of certain of the Company's foreign operations.
Operating Income for the 1998 period was $11.2 million compared to $19.2 million
for the 1997 period, a decrease of 41.7% due to the factors discussed above.
Net Interest Expense for the 1998 period was $16.1 million compared to $16.0
million for the 1997 period. The increase was due to the issuance of $4.0
million of Industrial Revenue Bonds in August, 1997.
Income Taxes for the 1998 period was a provision of $0.7 million compared to
$2.5 million for the 1997 period. The Company's effective tax rates for the
periods are not meaningful due to the effects of non-deductible goodwill
amortization of approximately $3.1 million in each period relative to the
amounts of income (loss) before income taxes.
Net Loss for the 1998 period was $6.3 million compared to net income of $0.7
million for the 1997 period due to the factors discussed above. The pro forma
loss for the 1998 period does not include an extraordinary charge of $0.7
million, net of tax, related to the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
On March 12, 1998, KFI Holding acquired all of the common stock of AGI for $69.0
million including $54.6 million of cash and $14.4 million of newly issued common
stock, plus acquisition costs. Concurrently, the Company funded the retirement
of $8.3 million of indebtedness outstanding under AGI's credit facility
immediately prior to the transaction. The acquisition was funded by the proceeds
(net of $4.7 million in debt issuance costs) from the issuance of $100.0 million
of 10 1/8% Senior Subordinated Notes and $4.6 million of new common stock. The
balance of the proceeds of the Senior Subordinated Notes were used to retire all
outstanding indebtedness of $29.9 million under KFI Holding's prior bank credit
agreement. At the same time, KFI Holding entered into a new five year credit
agreement which provided for a $40.0 million revolving credit facility and a
$13.0 million letter of credit facility.
On September 11, 1998, the Company acquired substantially all of the common
stock of Tinsley, for $139.6 million plus acquisition costs. Concurrently, the
Company funded the retirement of $18.5 million of indebtedness outstanding under
Tinsley's credit agreements. The acquisition was funded through borrowings of
$99.7 million under the Amended and Restated Multicurrency Credit Facility,
described below, $58.6 million in proceeds from the sale of common stock to the
Company's existing stockholders or their affiliates (the "New Common Equity")
and the issuance of (Pound Sterling) 5.05 million of five year promissory notes
having a dollar equivalent value of $8.5 million under current exchange rates
("Loan Notes") to former Tinsley shareholders. The Company is considering a new
preferred equity financing to replace a portion of the New Common Equity.
14
<PAGE>
On July 7, 1998, the Company entered into an Amended and Restated Multicurrency
Credit Facility (the "Facility") which became effective on the initial funding
date of the Tinsley acquisition and replaced the prior Credit Agreement. The
Facility provides for up to $53.0 million of revolving credit borrowings (the
"Revolver") with a $20 million letter of credit subfacility under the Revolver
(the "L/C Facility"). The Facility also provides for $37.0 million of Term Loan
A borrowings and $64.0 million of Term Loan B borrowings. The Facility also
provides a guarantee to the holders of the Loan Notes. Under the provisions of
the Facility, the aggregate amount of outstanding Term Loan A borrowings is
limited by the amount outstanding under the Loan Note guarantee. Up to $8.5
million of drawings under this guarantee to redeem the Loan Notes will be
converted to additional borrowings under Term Loan A and any drawings which, as
a consequence of currency fluctuations exceed $8.5 million will be converted to
additional borrowings under the Revolver. The Revolver has a five and one-half
year maturity, the Term Loan A has a five and one-half year maturity and the
Term Loan B has a six and one-half year maturity.
The Company's primary cash requirements historically have related to capital
expenditures, working capital and debt service. The Company has historically
funded these requirements through internally generated cash flow, borrowings
under bank credit arrangements and the issuance of industrial revenue bonds.
Net cash provided by operating activities for the nine months ended September
30, 1998 ("the 1998 period") was $0.1 million compared to $4.7 million for the
nine months ended September 30, 1997 ("the 1997 period"). Income from operations
before non-cash charges increased to $5.6 million from $3.2 million due to
increased depreciation and amortization partially offset by a decrease in income
from operations. In the 1998 period, income from operations before non-cash
charges of $5.6 million, the issuance of senior subordinated notes, a $0.5
million increase in capital leases, the issuance of common stock, $110.6 million
of borrowings under the Company's credit facility and $0.2 million of proceeds
from the Company's industrial revenue bonds were used to fund the acquisitions
of Tinsley Robor, plc and AGI Incorporated, the repayment of $29.9 million of
bank borrowings, $9.5 million of debt issuance costs, $8.0 million of capital
expenditures and a $5.5 million increase in working capital requirements. In the
1997 period, income from operations before non-cash charges of $3.2 million,
$3.3 million of net proceeds of an Industrial Revenue Bond issuance and $1.4
million increase in working capital requirements were used to fund a net
decrease of $4.1 million in outstanding borrowings under the Company's bank
credit facility and $3.8 million of capital expenditures. The Company expects to
spend approximately $6.5 million on capital projects on a combined basis during
the fourth quarter of 1998.
IMPAC is a holding company with no operations of its own. The Company's
ability to make required interest payments on the Senior Subordinated Notes
depends upon its ability to receive funds from its domestic and foreign
subsidiaries. The Company, at its discretion, controls the receipt of dividends
or other payments from its domestic and foreign subsidiaries, subject in the
case of certain foreign subsidiaries to limitations that may be imposed under
the laws of the applicable jurisdictions of organization. These limitations are
not considered to be material to the Company as a whole.
Since its acquisition of Tinsley, the Company is exposed to currency
exchange rate risk with respect to its net assets, transactions and the related
net income denominated in U.K. Pound Sterling, Dutch Guilders, Irish Punts, and
Austrian Schilings. Business activities in various currencies expose the Company
to the risk that the eventual net dollar cash inflows resulting from
transactions with foreign customers and suppliers denominated in foreign
currencies may be adversely affected by changes in currency exchange rates. The
Company is evaluating these risks and developing its hedging program.
ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. Statement No. 131 establishes standards for
reporting information about operating segments and related disclosures about
products and services, geographic areas and major customers in annual financial
statements and interim financial reports. The Company is currently evaluating
Statement No. 131 and plans to adopt the standard during the fourth quarter of
1998.
In March 1998 and April 1998, the AcSEC (Accounting Standards Executive
Committee) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" and SOP 98-5,
"Reporting on the Costs of Start-Up Activities," respectively. Both Statements
are effective for fiscal years beginning after December 15, 1998, and early
adoption is encouraged. SOP 98-1 provides guidance on accounting for the costs
of computer software developed or obtained for internal use. SOP 98-5 requires
that entities expense start-up costs and organization costs as they are
incurred. The Company is currently evaluating the new Statements and does not
expect the adoption of either to have a material effect on the results of
operations.
In February 1998, the FASB issued Statement No. 132, "Employers' Disclosures
about Pensions and other Postretirement Benefits" which is effective for fiscal
years beginning after December 15, 1997. Statement No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of these plans. The Company is currently
evaluating this new Statement and plans to adopt the standards during the year
ended December 31, 1998.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires that an entity
recognize all derivatives as either assets or liabilities in
15
<PAGE>
the statement of financial position and measure those instruments at fair value.
Due to the recent release and complexity of this new standard, an assessment of
the impact it will have on the financial position or results of operations has
not been completed.
YEAR 2000 ISSUES
General
- -------
As many computer systems and other equipment with embedded chips or processors
use only two digits to represent the year, they may be unable to accurately
process certain data during or after year 2000. This is commonly known as the
Year 2000 ("Y2K") issue. The Y2K issue can arise at any point in an entity's
supply, manufacturing, processing, distribution and financial chains.
IMPAC Group, Inc. and its wholly owned domestic subsidiaries, AGI and Klearfold,
are undertaking an initiative entitled IMPAC 2000 (the "Domestic Project").
While addressing the Y2K issue specifically, the Domestic Project is intended to
change the entire business systems infrastructure and make it Y2K compliant.
The Company believes that Tinsley has substantially addressed the Y2K issue,
with Tinsley's information technology ("IT") systems currently in compliance
with Y2K. With regard to non-IT issues, Tinsley has contacted vendors who have
provided assurances that the relevant systems are in compliance.
Projects
- --------
The Domestic Project is divided into 4 major areas -- Infrastructure Systems,
Applications Software, Manufacturing Equipment and External Stakeholders. At the
present time, the Infrastructure Systems portion of the project is believed to
be complete in so far as it pertains to Y2K. This includes personal computers,
local and wide area networks and telephony. In addition, desktop environments
have been standardized and all such applications are now believed to be Y2K
compliant. At present, the Applications Software at AGI and Klearfold are
different. These systems will be harmonized with the implementation of the
ORACLE Enterprise Resource Planning ("ERP") systems. The Company has retained an
outside consultant to assist in the integration of the business and systems
processes into an ORACLE ERP solution. The project is 50 percent complete, with
Y2K compliance being expected by mid 1999. A Y2K compliant patch of Klearfold's
application software is available and will be installed as a contingency plan in
the event of project delays in the ORACLE environment. A contingency plan for
the AGI Applications Software has not yet been developed. In addition to the
aforementioned, a comprehensive review of Manufacturing Equipment has been
completed and the Company believes that substantially all significant equipment
is Y2K compliant. In regards to its External Stakeholders, the Company is in the
process of contacting its material suppliers and Electronic Data Interfaces with
third party customers and vendors are in the process of review.
Tinsley implemented the SAGE accounting application and updated the IMPRINT
application in the second half of 1998. At present, a subsidiary operation in
Salzburg (Austria) has not implemented SAGE. However, the required time scale
for such an implementation is two calendar months.
Costs
- -----
The total cost associated with required modifications to business systems is not
expected to be material to the financial position of the Company. The estimated
cost of the Domestic Project is $6.5 million, of which $0.6 million was spent in
1997 and $2.8 million was spent in the nine months ended September 30, 1998. The
residual amount of $3.1 million is to be spent in the fourth quarter of 1998 and
in 1999. The Company will fund the Domestic Project, along with its other
capital expenditures, with internally generated cash flows along with additional
Revolver borrowings, as necessary.
Risks
- -----
The failure to correct a material Y2K problem could result in an interruption
in, or a failure of, certain normal business activities or operations. Such
failures could materially and adversely affect the results of operations,
liquidity and financial condition of the Company. Due to the general uncertainty
inherent with regards to Y2K issues, resulting in part from the uncertainty of
the Y2K readiness of third-party suppliers and customers, the Company is unable
to predict what consequences any Y2K failures would have on its results of
operations, liquidity or financial condition or on the most reasonably likely
worst case scenario. The domestic and foreign projects will continue to
significantly reduce the level of uncertainty about the Y2K problem and, in
particular, about the Y2K compliance and readiness of its material suppliers.
The Company believes that, with
16
<PAGE>
the implementation of the new business systems and completion of the projects
listed above as scheduled, the possibility of significant interruptions of
normal operations should be reduced.
EURO
The European Community is to introduce a common European monetary unit, called
the Euro, effective January 1, 1999. The UK, where Tinsley is headquartered, has
opted not to adopt the Euro. However, certain subsidiary operations are in
countries such as The Netherlands, the Republic of Ireland and Austria, which
are participating in its introduction. The new SAGE system implemented at
Tinsley is capable of handling multicurrency transactions, with the Euro being a
currency in its portfolio. The Company does not believe that the introduction of
the Euro will have a material adverse effect on the results of its operations.
See Liquidity and Capital Resources for further discussion of currency and
exchange rate issues.
FORWARD-LOOKING STATEMENTS/RISK FACTORS
This Form 10-Q may contain "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, including, but not limited to (i) statements regarding
drawings under the Loan Note guarantee, (ii) the Company's intention to adopt
the standards under each of the FASB and the AcSEC statements described above
under "Adoption of New Accounting Standards" (iii) the effect of the Company's
adoption of each of the new AcSEC and FASB statements, (iv) statements regarding
the Company's projects with respect to Y2K issues, (v) statements regarding the
delivery by certain of the Company's subsidiaries of guarantees with respect to
the Senior Subordinated Notes and the Facility, (vi) statements regarding a new
preferred equity financing, and (vii) statements regarding the effect of the
introduction of the Euro; and (viii) certain other statements identified or
qualified by words such as "likely", "will", "suggests", "may", "would",
"could", "should", "expects", "anticipates", "estimates", "plans", "projects",
"believes", or similar expressions (and variants of such words or expressions).
Investors are cautioned that forward-looking statements are inherently
uncertain. Actual performance and results of operations may differ materially
from those projected or suggested in the forward-looking statements due to
certain risks and uncertainties, including, without limitation, those described
below:
. In connection with the consummation of the acquisitions of AGI and
Tinsley, the Company incurred a significant amount of indebtedness
and, as a result, the Company is highly leveraged. The Company is
permitted to incur substantial additional indebtedness in the future.
. The Senior Subordinated Notes and the related subsidiary guarantees
(the "Subsidiary Guarantees") are subordinated in right of payment to
all current and future senior debt of the Company and the Subsidiary
Guarantors. The Senior Subordinated Notes indenture (the "Indenture")
permits the incurrence of substantial additional indebtedness,
including senior debt, by the Company and its subsidiaries in the
future.
. The Company has no prior history as a combined entity and its
operations have not previously been managed on a combined basis. Prior
to the combination of AGI and Klearfold in March 1998 and the
acquisition of Tinsley in September 1998, AGI, Klearfold and Tinsley
were operated as separate entities. The historical financial
statements and pro forma financial information presented in this Form
10-Q may not necessarily be indicative of the results that would have
been attained had the Company operated on a combined basis.
. The Company's packaging products are almost entirely targeted to
consumer products companies. Sales of consumer products are subject to
changing tastes and technologies that cannot be predicted.
. The markets for the Company's products may be affected by
technological change and new product introductions, among other
things. The Company's success will depend, in part, upon its continued
ability to manufacture products that meet changing customer needs,
successfully anticipate or respond to technological changes in
manufacturing processes on a cost-effective and timely basis and
enhance and expand its existing product offerings.
. The Company may in the future pursue selective acquisitions within the
specialty packaging industry. In the event that any such acquisition
were to occur, there can be no assurance that the Company's business,
financial condition and results of operations would not be materially
adversely affected.
. The past and present operations of the Company and the past and
present ownership and operations of real property by the Company are
subject to extensive and changing federal,
17
<PAGE>
state and local environmental laws and regulations pertaining to the
discharge of materials into the environment, the handling and
disposition of wastes, the recycling, composition and recycled content
of packaging, or otherwise relating to the protection of the
environment.
. The Company has entered into supply contracts with three key
customers. These contracts represented approximately 11% of the
Company's business in fiscal 1997. The supply contracts are generally
terminable for any material breach or events of insolvency. Three of
these contracts expire in 1999 and one expires in 2004. While the
Company believes that the contracts will be renewed, there can be no
assurance that these contracts will be renewed or the terms of such
renewal will be favorable. The loss of any of these contracts or the
renewal at materially worse terms could have a material adverse
affect on the Company.
. The Company's majority stockholder or its affiliates and certain
members of senior management own substantially all of the outstanding
voting stock of IMPAC, which is the sole stockholder of AGI, Klearfold
and Tinsley and, by virtue of such ownership, have the power to
control all matters submitted to stockholders of IMPAC and to elect
all directors of IMPAC and its subsidiaries, including AGI, Klearfold
and Tinsley.
. Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, the Senior Subordinated
Notes or the Subsidiary Guarantees, could be voided, or claims in
respect of the Senior Subordinated Notes or the Subsidiary Guarantees
could be subordinated to all other debts of the Company or any
Subsidiary Guarantor. In addition, the payment of interest and
principal by the Company or any Subsidiary Guarantor pursuant to the
Senior Subordinated Notes could be voided and required to be returned
to the person making such payment, or to a fund for the benefit of the
creditors of the Company or any Subsidiary Guarantor.
. Upon a change of control, as defined in the Indenture, the Company
will be required to offer to repurchase all outstanding Senior
Subordinated Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and liquidated damages, if any, to the
date of repurchase. 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 Subordinated Notes tendered or that
restrictions in the Facility will allow the Company to make such
required repurchases.
. There can be no assurance regarding the future development of a market
for any of the Senior Subordinated Notes, or the ability of holders of
any of the Senior Subordinated Notes to sell their Senior Subordinated
Notes, or the price at which such holders may be able to sell such
Senior Subordinated Notes.
. Under the terms of the Indenture certain foreign subsidiaries acquired
or created by the Company, including certain subsidiaries of Tinsley,
may not be required to deliver a guarantee with respect to the Senior
Subordinated Notes.
. A substantial portion of the Company's business is now conducted in
international markets. Political changes in international markets
and/or currency exchange rate fluctuations could materially adversely
affect the Company's business.
. The Company's ability to complete the Domestic Project, and to address
the Y2K issue in general, will depend on the availability of
resources, the Company's ability to discover and correct those
potential Y2K problems which could have a serious impact on specific
Company facilities and the ability of vendors to bring their computer
systems and other equipment into Y2K compliance.
Other risks and uncertainties are described in the Company's Registration
Statement on Form S-4 (File No. 333-48821) under the Securities Act of 1933, and
incorporated herein by reference.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosure requirements pursuant to Item 305 of Regulation S-K are
not yet effective for the Company. Such disclosures will be included in the
Company's filings commencing with its Annual Report on Form 10-K for the fiscal
year ending December 31, 1998, to the extent applicable. For further information
regarding qualitative disclosures about market risk, see Management's
Discussion and Analysis of Financial Condition and Results of Operations.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
NONE
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the acquisition of Tinsley on September 11, 1998,
the Company issued 96,245.5 shares of new common stock, Series A to certain of
the Company's existing stockholders or their affiliates, as set forth below.
Each of such sale was deemed to be exempt from the registration requirements of
the Securities Act of 1933, as amended, under Section 4(2) thereof as a
transaction not involving any public offering of such securities.
Heritage Fund I, L.P.
Heritage Fund II, L.P.
Richard Block
Donald W. Kosterka, as Trustee of the Donald Kosterka Trust dated 5/17/92
David Underwood
John McInerney
18
<PAGE>
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 9, 1998, the Company's stockholders consented to the
amendment of the Company's Amended and Restated By-laws. Such
stockholder action was consented to by the affirmative vote of the
holders of approximately 70,052 shares of the Company's Common Stock,
Series A.
ITEM 5: OTHER INFORMATION
Exchange of Outstanding Senior Notes
On September 3, 1998, the Company commenced an offer to exchange
$100.0 million in aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2008, Series B (the "Exchange Notes") that had
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of the Company's
outstanding 10 1/8% Senior Subordinated Notes due 2008 (the "Original
Notes"). This exchange was commenced in accordance with the terms of
the Registration Rights Agreement, dated as of March 12, 1998, between
the Company and the initial purchasers of the Original Notes. The
Original Notes were issued by the Company on March 12, 1998 in a
transaction exempt from the registration requirements of the
Securities Act by virtue of Rule 144A promulgated thereunder. The
Company completed the exchange offer in November, 1998.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
2.3 Stock Purchase Agreement, dated as of September 10, 1998,
by and among the Company, Heritage Fund I, L.P., Heritage
Fund II, L.P., Richard Block and certain other persons.
3.1 Amended and Restated Certificate of Incorporation of the
Company.*
3.3 Second Amended and Restated By-laws of the Company.
3.4 Amendment to Amended and Restated Certificate of
Incorporation of the Company, dated as of July 6, 1998.
10.60 First Amended and Restated Stockholder Agreement, dated as
of September 10, 1998, between the Company, certain Holding
stockholders, certain stockholders of AGI and certain other
persons.
27.1 Financial Data Schedule.
--------
*Incorporated by reference to the same numbered exhibit to the
Company's Registration Statement on Form S-4 (File No. 333-48821).
(B) Reports on Form 8-K
A report on Form 8-K was filed on October 27, 1998 announcing the
consummation of the acquisition of Tinsley Robor plc on September 11,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
IMPAC Group, Inc.
Date: November 16, 1998 By:___________________________
David C. Underwood
Chief Financial Officer
19
<PAGE>
EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of September 10,
1998, is by and among IMPAC Group, Inc., a Delaware corporation (the "Company");
and each of the Investors listed in column 1 of Schedule 1 hereto (the
"Investors", and each individually, an "Investor").
Concurrently with the execution and delivery of this Agreement, the
Company's subsidiary, IMPAC Europe PLC, an English public limited company
("IMPAC Europe") will complete the purchase (the "Acquisition") of a majority of
the outstanding share capital of Tinsley Robor plc, an English public limited
company ("Tinsley Robor"), pursuant to and in accordance with the Recommended
Cash Offer, dated July 22, 1997, made by BT Wolfensohn on behalf of IMPAC Europe
for the whole of the issued share capital of Tinsley Robor (the "Offer
Announcement").
The parties desire that the Investors, in exchange for the investments
described herein which are to be used to partially finance completion of the
Acquisition, receive certain shares of the Company's Series A Common Stock (as
defined herein).
Accordingly, subject to the terms and conditions herein and based upon the
respective representations and warranties set forth below, the parties hereto
hereby agree as follows:
1. Definitions.
1.1. Certain Defined Terms. As used in this Agreement, the following terms
have the following respective meanings:
"Affiliate" means, with respect to a specified Person, (i) any Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person and (ii)
any Person that is an officer, director, trustee, member or general partner of,
or serves in a similar capacity with respect to, the specified Person, or of
which the specified Person is an officer, director, trustee, member or general
partner, or with respect to which the specified Person serves in a similar
capacity or (iii) any Person who is a spouse, parent, sibling or lineal
descendant of such Person or any Person described in clauses (i) or (ii). For
purposes of this definition the term "control" when used with respect to a
Person means (a) the beneficial ownership (as defined in Rule 13d-d promulgated
under the Securities Exchange Act of 1934, as
<PAGE>
-2-
amended) of 50 percent or more of the voting interests in such Person, or (b)
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Amended and Restated Stockholder Agreement" means that certain First
Amended and Restated Stockholder Agreement of the Company in the form attached
hereto as Exhibit A, among the Company and each of its stockholders (after
giving effect to the purchase of shares described herein), dated as of March 12,
1998, and amended and restated as of the Closing Date, as amended and in effect
from time to time.
"BofA Credit Agreement" means the Amended and Restated Multicurrency Credit
Agreement, dated as of March 12, 1998, and as amended and restated as of July 7,
1998, by and among the Company, certain of its Subsidiaries, the Lenders
referred to therein, and Bank of America National Trust and Savings Association,
as Agent, Letter of Credit Issuing Bank and Swing Line Lender, as amended and in
effect from time to time.
"Equity Recapitalization Agreement" means the letter agreement in the form
attached hereto as Exhibit B, dated as of the Closing Date, among the Company
and each of its stockholders (after giving effect to the purchase of shares
described herein), with respect to a proposed equity recapitalization of the
Company.
"Existing Stockholder Agreement" means the Stockholder Agreement of the
Company, among the Company and each of its stockholders, dated as of March 12,
1998.
"Heritage Funds" means Heritage Fund I, L.P., and Heritage Fund II, L.P.,
together, each a Delaware limited partnership, and individually a "Heritage
Fund".
"Indebtedness", as applied to any Person, means (a) all indebtedness of
such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness of such Person for the deferred purchase price
of property or services represented by a note or other security, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of specific property), (d) all indebtedness of such Person
secured by a purchase money mortgage or other Lien to secure all or part of the
purchase price of property subject to such mortgage or other Lien, (e) all
obligations of such Person under leases that have been or must be, in accordance
with generally accepted accounting principles, recorded as capital leases in
respect of which such Person is liable as lessee, (f) any liability of such
Person in respect of banker's acceptances or letters of credit, and (g) all
indebtedness referred to in clauses (a), (b), (c), (d), (e), or (f) above that
is directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which such Person has otherwise assured a creditor against loss.
<PAGE>
-3-
"Lien" means any lien, claim, mortgage, security interest, charge,
encumbrance, or restriction on transfer of any kind.
"Other Agreement(s)" means the Amended and Restated Stockholder Agreement,
the Equity Recapitalization Agreement, and all of the other agreements,
instruments, certificates, and documents executed and delivered at the Closing
or otherwise in connection with this Agreement and/or in connection with the
transactions contemplated hereby, and when used with reference to any particular
Person, means all such agreements, instruments, certificates and other documents
executed and delivered by such Person.
"Person" means any natural person, entity, or association, including
without limitation any corporation, partnership, limited liability company,
government (or agency or subdivision thereof), trust, joint venture or sole or
joint proprietorship.
"Repurchase Agreement" means any Employment, Non-Competition and Stock
Repurchase Agreement, Agreement relating to Employment and Stock Ownership,
Stock Purchase Agreement or Stock Repurchase Agreement to which any stockholder
of the Company may from time to time be party, pursuant to which the Company
shall have any right or obligation to repurchase shares of the Company's capital
stock beneficially owned by such stockholder.
"Series A Common Stock" means the Company's Series A Common Stock, $0.001
par value per share.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of the capital stock of which shall at the time be owned by
such Person or by a Subsidiary of such Person, if the holders of the shares of
such class or classes of capital stock (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of at least a majority of the
directors (or persons performing similar functions) of the issuer thereof,
regardless of whether the right so to vote has been suspended by the happening
of such a contingency, or (b) are at the relevant time of reference entitled, as
such holders, to vote for the election of at least a majority of the directors
(or persons performing similar functions) of the issuer thereof, regardless of
whether the right so to vote exists by reason of the happening of a contingency.
<PAGE>
-4-
1.2. Terms Defined Elsewhere. The following terms are defined herein in
the sections identified below:
<TABLE>
<CAPTION>
Term Section Term Section
- ---- ------- ---- -------
<S> <C> <C> <C>
Acquisition Preamble Holding Preamble
Act 4.2(a) IMPAC Europe Preamble
Agreement Preamble Investor Preamble
By-Laws 2.5(a)(ii)(3)(B) Offer Announcement Preamble
Closing 2.3 Purchased Securities 2.1
Closing Date 2.3 Tinsley Robor Preamble
</TABLE>
2. Sale And Purchase of Purchased Securities.
2.1. Agreement to Sell and Purchase Purchased Securities. The Company
hereby agrees to issue and sell to each Investor, and, subject to all of the
terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, each Investor severally agrees to
purchase, the number of shares of Series A Common Stock indicated opposite the
name of such Investor on Schedule 1 hereto (the "Purchased Securities").
2.2. Purchase Price. The purchase price for the Purchased Securities will
be $608.60 per share.
2.3. Closing. The closing of the purchase and sale of the Purchased
Securities (the "Closing") will take place at the offices of Bingham Dana LLP,
150 Federal Street, Boston, Massachusetts 02110, simultaneously with the
execution and delivery of this Agreement, or at such other time, date, and place
as the Company and the Investors may agree (the date on which the Closing
actually occurs, the "Closing Date").
2.4. Use of Proceeds. The Company agrees that the net proceeds from the
sale of the Purchased Securities hereunder, after payment of all fees and
expenses incurred by the Company in connection with the sale of the Purchased
Securities and the other transactions contemplated hereby, will be contributed
and/or loaned by the Company to IMPAC Europe for use by it to finance the
Acquisition of shares of the capital stock of Tinsley Robor pursuant to and in
accordance with the Offer Announcement.
2.5. Conditions Precedent.
(a) The obligation of the Investors to purchase the Purchased Securities
at the Closing is subject to the fulfillment, or the waiver by each Investor, of
each of the following conditions on or before the Closing:
(i) The Company will deliver to each Investor one or more stock
certificates representing the Purchased Securities to be sold to and
purchased by such Investor
<PAGE>
-5-
pursuant to this Agreement, free and clear of all Liens, and registered in
such Investor's name (or if requested by such Investor, his, her or its
nominee) in the Company's records.
(ii) The Company will deliver to each Investor each of the following
documents:
(1) the Amended and Restated Stockholder Agreement and the Equity
Recapitalization Agreement, duly executed by the Company and each
stockholder of the Company other than such Investor;
(2) (A) a copy of its charter documents, certified as of a date not
more than ten business days before the Closing Date, by the Secretary of
State of the State of Delaware, (B) a certificate of the Secretary of State
of the State of Delaware, dated as of a date not more than ten business
days before the Closing Date, with respect to the legal existence, charter
documents on file with such Secretary of State, and good standing of the
Company in Delaware, and (C) a certificate of the Secretary of State or
equivalent official of the States of Illinois and North Carolina and the
Commonwealth of Pennsylvania, dated not more than ten business days before
the Closing Date, with respect to the qualification and good standing of
the Company in such jurisdiction; and
(3) a certificate of its Secretary, dated the Closing Date,
certifying (A) the absence of any amendments to its charter documents (or
proceedings therefor) since the date of the certificate referred to in
Section 2.5(a)(ii)(2)(B) above, (B) an attached copy of the Company's
Amended and Restated By-Laws, (C) the resolutions of its board of directors
with respect to the transactions hereby contemplated or otherwise to be
effected at the Closing, and (D) the incumbency of its officers and
directors.
(iii) The representations and warranties of the Company contained in
Section 3 shall be true on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the
Closing.
(iv) The conditions precedent set forth in Section 5.02 of the BofA Credit
Agreement to the making of the initial "Credit Extensions" thereunder,
other than the condition precedent set forth in Section 5.02(f) thereof
requiring completion of the "Equity Investment" referred to therein, shall
have been either fulfilled or waived in accordance with the BofA Credit
Agreement.
(v) The Offer under and as defined in the Offer Announcement shall have
become or been declared unconditional in all respects.
(b) The obligation of the Company to sell the Purchased Securities at the
Closing is subject to the fulfillment, or the waiver by the Company, of each of
the following conditions on or before the Closing:
<PAGE>
-6-
(i) Each Investor will pay for the Purchased Securities set forth opposite
such Purchaser's name in Schedule 1 hereto by payment to the Company or its
nominee of the aggregate purchase price therefor by wire transfer of
immediately available funds to an account designated in writing by the
Company prior to the Closing Date.
(ii) Each Investor will deliver to the Company the Amended and Restated
Stockholder Agreement and the Equity Recapitalization Agreement duly
executed by such Investor.
(iii) The representations and warranties of each Investor contained in
Section 4 shall be true on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the
Closing.
(iv) The conditions precedent set forth in Section 5.02 of the BofA Credit
Agreement to the making of the initial "Credit Extensions" thereunder,
other than the condition precedent set forth in Section 5.02(f) thereof
requiring completion of the "Equity Investment" referred to therein, shall
have been either fulfilled or waived in accordance with the BofA Credit
Agreement.
(v) The Offer under and as defined in the Offer Announcement shall have
become or been declared unconditional in all respects.
3. Representations and Warranties of the Company.
In order to induce the Investors to enter into this Agreement and to
purchase the Purchased Securities, the Company hereby represents and warrants to
each of the Investors, both as of the date hereof and as of the Closing Date
(immediately prior to the Closing hereunder), as follows, subject in each case
to such exceptions as are specifically contemplated by this Agreement, or as are
set forth in the Schedules hereto:
3.1. Incorporation; Authority. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as now conducted.
3.2. Authorization and Enforceability. The Company has all requisite power
and full legal right and authority (including due approval of its Board of
Directors) to enter into this Agreement, to perform all of its agreements and
obligations under this Agreement in accordance with its terms, and to consummate
the transactions contemplated hereby. This Agreement has been, or upon
execution and delivery as contemplated hereby, will be, duly executed and
delivered by the Company, and constitutes or will constitute its legal, valid,
and binding obligation, enforceable against it in accordance with
<PAGE>
-7-
its terms, except to the extent that (a) enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium, or similar
laws now or hereafter in effect relating to or limiting creditors' rights
generally, and (b) the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar Person before which any proceeding
therefor may be brought.
3.3. Capitalization.
(a) Immediately after the Closing, after giving effect to the sale and
purchase of the Purchased Securities provided for in this Agreement, the
authorized and outstanding capital stock of the Company will be as set forth in
Schedule 2 hereto, and all such outstanding shares of capital stock will be
owned (of record and beneficially) by the Persons and in the amounts there
indicated. All such outstanding shares of capital stock will be duly authorized,
validly issued, fully paid, and nonassessable.
(b) Except as set forth in the Equity Recapitalization Agreement and in the
Repurchase Agreements, the Company does not have, is not bound by, and has no
obligation to grant or enter into, any (i) outstanding subscriptions, options,
warrants, calls, commitments, or agreements of any character calling for it to
issue, deliver, or sell, or cause to be issued, delivered, or sold, any shares
of its capital stock or any other equity security, or any securities convertible
into, exchangeable for, or representing the right to subscribe for, purchase, or
otherwise acquire any shares of its capital stock or any other equity security,
and (ii) outstanding obligations, contractual or otherwise, to repurchase,
redeem, or otherwise acquire any shares of capital stock or other equity
securities of the Company.
(c) Except for the Existing Stockholder Agreement, the Amended and Restated
Stockholder Agreement and the Equity Recapitalization Agreement, the Company is
not a party to or bound by, and has no knowledge of, any agreement or instrument
relating to the voting of any of its securities, and is not a party to or bound
by any agreement or instrument under which any Person has the right to require
it to effect, or to include any securities held by such Person in, any
registration under the Act.
3.4. Lawful Issuance. The Purchased Securities have been offered and at the
Closing will be issued and sold in compliance with all applicable provisions of
the Securities Act and the rules and regulations thereunder, and all applicable
state securities laws and the rules and regulations thereunder.
3.5. Governmental Consents. No consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery by the Company of this Agreement, or
for the consummation by the Company of the transactions contemplated hereby.
<PAGE>
-8-
4. Representations and Warranties of the Investors.
In order to induce the Company to enter into this Agreement and to issue
and sell its securities as contemplated hereby, each of the Investors severally
and not jointly represents and warrants to the Company, as of the date hereof
and as of the Closing Date, as follows:
4.1. Authorization and Enforceability. Such Investor, if a legal entity,
has all requisite power and full legal right and authority and if a natural
person, has the legal capacity, competence and power, to enter into this
Agreement and each of the Other Agreements to which such Investor is a party, to
perform all of his, her or its agreements and obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
This Agreement and each of such Other Agreements has been duly executed and
delivered by such Investor and constitutes his, her or its legal, valid, and
binding obligation, enforceable against him, her or it, as the case may be, in
accordance with its respective terms, except to the extent that (a) enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or limiting
creditors' rights generally, and (b) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar Person before which
any proceeding therefor may be brought.
4.2. Investment Representations.
(a) Such Investor represents that the Purchased Securities to be acquired
by him, her or it as contemplated hereby shall be acquired for his, her or its
own account, for investment, and not with a view to the distribution thereof.
Such Investor understands that the Purchased Securities have not been registered
under the Securities Act of 1933, as amended (the "Act"), on the ground that the
offer and sale of the Purchased Securities to him, her or it are exempt from the
registration requirements of the Act under Section 4(2) thereof as a transaction
not involving any public offering of such securities. Such Investor understands
that the Company's reliance on such exemption is predicated in part on the
representations of such Investor contained herein.
(b) Such Investor is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Act and has such knowledge and experience in
financial and business matters that he, she or it is capable of evaluating the
merits and risks of the transactions contemplated under this Agreement. Such
Investor's financial condition is such that he, she or it is able to bear all
economic risks of investment in the Purchased Securities, including a complete
loss of the investment therein. Such Investor acknowledges that the Company has
provided such Investor with adequate access to financial and other information
concerning the Company as requested, and such Investor has had the opportunity
to ask questions of and receive answers from the Company concerning the
transactions contemplated by this Agreement and to obtain therefrom any
additional information necessary to make an informed decision regarding an
investment in
<PAGE>
-9-
the Company. Such Investor believes that he, she or it has received all the
information such Investor considers necessary or appropriate for deciding
whether to purchase the Purchased Securities. Such Investor is acquiring the
Purchased Securities solely for investment purposes, with no present intention
of distributing or (other than to the limited extent set forth in the Equity
Recapitalization Agreement) reselling any of the Purchased Securities or any
interest therein. Such Investor resides (in the case of an individual) or has
its principal place of business (in the case of any other entity) in the
jurisdiction set forth opposite such Investor's name on Schedule 1 hereto.
(c) Such Investor understands that he, she or it must bear the economic
risk of his, her or its investment in the Purchased Securities to be acquired by
him, her or it hereunder for an indefinite period of time because such Purchased
Securities have not been registered under the Act, and therefore cannot be sold
unless they are subsequently registered under the Act or an exemption from such
registration is available. Such Investor agrees that he, she or it shall not
offer to sell or otherwise transfer any of the Purchased Securities, in addition
to and without limiting any restrictions or requirements in the Amended and
Restated Stockholder Agreement, except after the Company has received an opinion
of counsel, reasonably acceptable to the Company in form and substance, that
such offer, sale, and/or transfer is not in violation of the registration
requirements of the Act or other applicable law.
(d) Such Investor acknowledges and agrees that each certificate
representing the Purchased Securities acquired by him, her or it hereunder shall
bear a restrictive legend substantially in the following form:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended. No transfer, sale, or other
disposition of these securities may be made unless a registration statement
with respect to these shares has become effective under said act, or the
issuer has been furnished with an opinion of counsel, satisfactory to the
issuer in form and substance, that such registration is not required."
(e) Such Investor acknowledges and agrees that the Company shall make a
notation regarding the restrictions on transfer of the Purchased Securities
acquired by such Investor hereunder in the stock books of the Company, and any
purported transfer of such Purchased Securities shall be reflected in the stock
books of the Company only if and when transferred in compliance with all of the
terms and conditions of this Agreement.
(f) Such Investor acknowledges and agrees that, before the issuance of any
Purchased Securities to him, her or it pursuant to this Agreement, he, she or,
as the case may be, it shall execute and deliver the Amended and Restated
Stockholder Agreement, pursuant to which the Purchased Securities to be issued
to such Investor pursuant to this Agreement shall be subject to the restrictions
set forth therein, including without limitation certain restrictions on the
voting and transfer of such securities.
<PAGE>
-10-
4.3. Governmental Consents. No consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery by such Investor of this Agreement
and each of the Other Agreements to which such Investor is party, or for the
consummation by such Investor of the transactions contemplated hereby and
thereby.
4.4. Repurchase Agreements. Each Investor who is, as of the date hereof,
party to a Repurchase Agreement hereby confirms that the Purchased Securities
acquired or to be acquired by such Investor pursuant to this Agreement
constitute and shall constitute "Shares" under and as defined in such Repurchase
Agreement for all purposes thereof.
5. Register and Transfer of Shares.
(a) Register of Shares. The Company shall keep at its principal office a
register in which shall be recorded the names and addresses of the record
holders of shares of Series A Common Stock, and all transfers of such shares.
References to the "holder" or "holder of record" of any shares of Series A
Common Stock shall mean the holder thereof unless the holder shall have
presented stock certificates evidencing such shares of Series A Common Stock to
the Company for transfer, and the transferee shall have been entered in said
register as a subsequent holder, in which case such terms shall mean such
subsequent holder. The ownership of any shares of the Series A Common Stock
shall be proven by such register and the Company may conclusively rely upon such
register.
(b) Transfer of Shares. Upon surrender at such office of any certificate
representing shares of Series A Common Stock for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the holder of such certificate or such holder's attorney duly authorized in
writing, then subject to compliance with the applicable provisions of this
Agreement, the Amended and Restated Stockholder Agreement, and applicable
securities laws, the Company shall issue, at its expense, one or more new
certificates, in such denomination or denominations as may be requested, for the
transferred shares of Series A Common Stock, and registered as the presenting
holder may have requested. The Company shall pay shipping and insurance charges,
from and to each holder's principal office, upon any transfer pursuant to this
section.
(c) Replacement of Certificates. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any certificate representing any shares of Series A Common Stock, and, in the
case of any such loss, theft, or destruction, upon delivery of an indemnity bond
in such reasonable amount as the Company may determine (or, in the case of any
such security held by Heritage or any other institutional holder, of an
unsecured indemnity agreement from such holder reasonably satisfactory to the
Company), or, in the case of any such mutilation, upon the surrender of such
certificate to the Company at its principal office for cancellation, the
Company, at its own expense, shall execute and deliver, in lieu thereof, a new
certificate of like tenor. Any lost, stolen, destroyed, or mutilated certificate
in lieu of which any
<PAGE>
-11-
such new certificate has been so executed and delivered by the Company shall not
be deemed to be outstanding for any purpose.
6. Confidential Information.
Each of the Investors shall maintain the confidentiality of all
confidential, sensitive, or proprietary information of the Company and/or any of
its Subsidiaries and/or any of the other stockholders of the Company, including
without limitation with respect to their respective businesses, finances,
affairs and technology, which shall be and remain the exclusive property of the
Company or such Subsidiary or such stockholder, as the case may be, and unless
previously authorized in writing by the Company or such stockholder, and except
with respect to information that has otherwise become public through no action
or omission on the part of any such Investor, shall not disclose any such
information to any third party or use it for any purpose, other than in the
discharge of any such Investor's respective employment responsibilities (if any)
in the ordinary course of the Company's or any of its Subsidiaries' business.
Notwithstanding the foregoing, if any of the Investors is required by law
or regulation to disclose any confidential, sensitive, or proprietary
information of the Company and/or any of its Subsidiaries and/or any of the
other stockholders of the Company, such Investor will provide the Company or
such stockholder, as the case may be, with prompt notice of such disclosure
obligation, so that the Company or such stockholder may seek a protective order
or take other appropriate action and/or waive compliance with this Section 6 to
the extent of such required disclosure. In the absence of such a waiver, if any
Investor is, in the opinion of his or its counsel, compelled to disclose any
such information upon pain of liability for contempt or other censure or
penalty, such Investor may disclose such information to the relevant court or
other tribunal or governmental authority without liability hereunder, but
notwithstanding such disclosure, such information shall remain confidential
under this Section 6 after such disclosure.
7. General.
7.1. Co-operation. Each of the parties hereto agrees to use his, her or its
commercially reasonable efforts to fulfill the conditions precedent to the
effectiveness of this Agreement. Each of the parties shall cooperate with the
others and use commercially reasonable efforts to prepare all necessary
documentation, to effect all necessary filings, and to obtain all necessary
permits, consents, approvals, and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement. Each party shall have the right to review and approve in advance
all descriptions of or with respect to it that appear in any filing with any
governmental body made in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, the parties shall act reasonably
and as promptly as practicable.
7.2. Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or otherwise made
in writing
<PAGE>
-12-
in connection with the transactions contemplated hereby shall be deemed
material, and, notwithstanding any investigation by the Company or any of the
Investors, as the case may be, shall be deemed to have been relied on by them,
and shall survive the Closing and the consummation of the transactions
contemplated hereby.
7.3. Expenses. Except as expressly provided otherwise in this Agreement,
each of the parties shall be responsible for and shall pay his, her or its own
expenses in connection with the negotiation and preparation of this Agreement
and the consummation of the transactions contemplated hereby.
7.4. Benefits of Agreement; No Assignments; No Third-Party Beneficiaries.
(a) This Agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, and permitted assigns.
(b) No party shall assign any rights or delegate any obligations hereunder
without the consent of the other parties, and any attempt to do so shall be
void.
(c) Nothing in this Agreement is intended to or shall confer any rights or
remedies on any Person other than the parties hereto and their respective heirs,
successors, and permitted assigns.
7.5. Notices. All notices, requests, payments, instructions, or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have previously furnished to the sending party in accordance with this section):
(a) If to the Company, to or in care of:
IMPAC Group, Inc.
1950 North Ruby Street
Melrose Park, Illinois 60160-1178
Attention: Richard Block and David Underwood
Telecopier No. (708) 344-9113
and in each case with copies to the other addresses specified in
paragraphs (b) - (e) below.
<PAGE>
-13-
(b) If to either of the Heritage Funds, to or in care of:
Heritage Partners Management Company, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attention: Michael F. Gilligan, Managing Director
Telecopier No. (617) 439-0689
with a copy sent at the same time and by the same means to:
David L. Engel, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier No. (617) 951-8736
(c) If to any Investor identified on the signature pages hereto as a
Klearfold Investor, to or in care of:
Klearfold, Inc.
364 Valley Road
Warrington, Pennsylvania 18976
Attention: H. Scott Herrin
Telecopier No. (215) 343-0491
with a copy sent at the same time and by the same means to:
Richard Braemer, Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Telecopier No.: (215) 864-8999
(d) If to any Investor identified on the signature pages hereto as an AGI
Investor, to such Investor in care of:
AGI Incorporated
1950 North Ruby Street
Melrose Park, Illinois 60160-1178
Attention: Richard Block and David Underwood
Telecopier No. (708) 344-9113
<PAGE>
-14-
with copies sent at the same time and by the same means to:
Linda Chaplik Harris, Esq.
Sonnenschein Nath & Rosenthal
Suite 8000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Telecopier No. (312) 876-7934
7.6. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. In pleading or proving this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
7.7. Captions. The captions of sections or subsections of this Agreement
are for reference only and shall not affect the interpretation or construction
of this Agreement.
7.8. Equitable Relief. Each of the parties hereby acknowledges that any
breach by it of its obligations under this Agreement would cause substantial and
irreparable damage to the other parties, and that money damages would be an
inadequate remedy therefor, and accordingly, acknowledges and agrees that each
of the other parties shall be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations (in
addition to all other rights and remedies to which such party may be entitled in
respect of any such breach).
7.9. Construction. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
7.10. Waivers. No waiver of any breach or default hereunder shall be valid
unless in a writing signed by the waiving party. No failure or other delay by
any party exercising any right, power, or privilege hereunder shall be or
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
7.11. Further Assurances. From time to time on and after the Closing Date,
each party hereto shall promptly execute and deliver all such further
instruments and other documents, and shall promptly take all such further
actions, as any other party hereto may reasonably request in order more
effectively to effect or confirm the transactions hereby contemplated and to
carry out the purposes of this Agreement.
7.12. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto, the Other Agreements, and the other agreements, instruments,
certificates and documents referred to herein and/or therein as having been or
to be
<PAGE>
-15-
executed and delivered in connection with the transactions contemplated hereby
and thereby, contains the entire understanding and agreement among the parties,
and supersedes any prior understandings or agreements among them, or between or
among any of them, with respect to the subject matter hereof.
7.13. Governing Law. This Agreement shall to the maximum lawful extent be
governed by and interpreted and construed in accordance with the internal laws
of the State of Delaware, as applied to contracts under seal made, and entirely
to be performed, within Delaware, and without reference to principles of
conflicts or choice of law.
<PAGE>
Signature page 1 of 2 for Stock Purchase Agreement
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement to the others as an agreement under seal as of the date first above
written.
IMPAC GROUP, INC.
By /s/ Signature Unintelligible
------------------------------
Name:
Title:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P.,
its general partner
By /s/ Signature Unintelligible
------------------------------
Name:
Title:
HERITAGE FUND II, L.P.
By: HF Partners II, L.L.C.,
its general partner
By /s/ Signature Unintelligible
------------------------------
Name:
Title:
AGI INVESTORS:
/s/ Signature Unintelligible
--------------------------------
Richard Block
<PAGE>
Signature page 2 of 2 for Stock Purchase Agreement
Signature Unintelligible
--------------------------------
David Underwood
Signature Unintelligible
--------------------------------
Donald W. Kosterka, as Trustee of
the Donald Kosterka Trust dated 5/17/92
KLEARFOLD INVESTORS
Signature Unintelligible
--------------------------------
John McInerney
<PAGE>
Schedule 1
-------- -
Investors
---------
<TABLE>
<CAPTION>
Investors Number of Shares Total Purchase Price Jurisdiction
- --------- ------------------------ -------------------- ------------
of Series A Common Stock
------------------------
<S> <C> <C> <C>
Heritage Fund I, L.P. 18,074.27 $11,000,000 Massachusetts
Heritage Fund II, L.P. 72,297.08 $44,000,000 Massachusetts
Richard Block 4,929.35 $ 3,000,000 Connecticut
Donald W. Kosterka, as Trustee 492.94 $ 300,000
of the Donald Kosterka Trust
dated 5/17/92
David Underwood 246.47 $ 150,000 Illinois
John McInerney 205.39 $ 125,000 Pennsylvania
</TABLE>
<PAGE>
IMPAC GROUP, INC.
-----------------
SECOND AMENDED AND RESTATED BY - LAWS
-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Article I. - General....................................................... 1
1.1. Offices........................................................ 1
1.2. Seal........................................................... 1
1.3. Fiscal Year.................................................... 1
Article II. - Stockholders................................................. 1
2.1. Place of Meetings.............................................. 1
2.2. Annual Meeting................................................. 1
2.3. Quorum......................................................... 2
2.4. Right to Vote; Proxies......................................... 2
2.5. Voting......................................................... 2
2.6. Notice of Annual Meetings...................................... 3
2.7. Stockholders' List............................................. 3
2.8. Special Meetings............................................... 3
2.9. Notice of Special Meetings..................................... 3
2.10. Inspectors..................................................... 4
2.11. Stockholders' Consent in Lieu of Meeting....................... 4
Article III. - Directors................................................... 5
3.1. Number of Directors............................................ 5
3.2. Change in Number of Directors; Vacancies....................... 5
3.3. Resignation.................................................... 6
3.4. Removal........................................................ 6
3.5. Place of Meetings and Books.................................... 6
3.6. General Powers................................................. 6
3.7. Committees..................................................... 6
3.8. Powers Denied to Committees.................................... 7
3.9. Expenses and Compensation of Directors......................... 7
3.10. Annual Meeting................................................. 7
3.11. Regular Meetings............................................... 8
3.12. Special Meetings............................................... 8
3.13. Quorum......................................................... 8
3.14. Telephonic Participation in Meetings........................... 8
3.15. Action by Consent.............................................. 9
Article IV. - Officers..................................................... 9
4.1. Selection; Statutory Officers.................................. 9
4.2. Additional Officers............................................ 9
4.3. Terms of Office................................................ 9
4.4. Compensation of Officers....................................... 9
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
4.5. Chairman of the Board.......................................... 9
4.6. President...................................................... 9
4.7. Executive Vice Presidents and Vice Presidents.................. 10
4.8. Treasurer...................................................... 10
4.9. Secretary...................................................... 10
4.10. Assistant Secretary............................................ 11
4.11. Assistant Treasurer............................................ 11
4.12. Subordinate Officers........................................... 11
Article V. - Stock......................................................... 11
5.1. Stock.......................................................... 11
5.2. Fractional Share Interests..................................... 12
5.3. Transfers of Stock............................................. 12
5.4. Record Date.................................................... 13
5.5. Transfer Agent and Registrar................................... 13
5.6. Dividends...................................................... 13
5.7. Lost, Stolen or Destroyed Certificates......................... 14
5.8. Inspection of Books............................................ 14
Article VI. - Miscellaneous Management Provisions.......................... 14
6.1. Checks, Drafts and Notes....................................... 14
6.2. Notices........................................................ 14
6.3. Conflict of Interest........................................... 15
6.4. Voting of Securities owned by this Corporation................. 16
Article VII. - Indemnification............................................. 16
7.1. Right to Indemnification....................................... 16
7.2. Right of Indemnitee to Bring Suit.............................. 17
7.3. Non-Exclusivity of Rights...................................... 18
7.4. Insurance...................................................... 18
7.5. Indemnification of Employees and Agents of the Corporation..... 18
Article VIII. - Amendments................................................. 18
8.1. Amendments..................................................... 18
Article 9. -
9.1. Definition.....................................................
9.2. Restrictions on Transfer.......................................
9.3. Obligation to Sell in Approved Sale............................
9.4. Co-Sale Rights in a Majority Sale Event........................
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C>
9.5. Right of Corporation to Repurchase Shares Upon Termination of
Employment.....................................................
9.6. Transfers of B Shares in Breach of this Article 9..............
9.7. Restrictive Legend.............................................
9.8. Notices........................................................
</TABLE>
<PAGE>
EXHIBIT 3.3
IMPAC GROUP, INC.
-----------------
SECOND AMENDED AND RESTATED BY - LAWS
-------------------------------------
Notwithstanding any provision of Articles 1 through 8 of these by-laws to
the contrary, Articles 1 through 8 of these by-laws shall be subject to, and in
the case of any conflict or inconsistency, shall be controlled and overridden
by, the terms of that certain First Amended and Restated Stockholder Agreement
dated as of March 12, 1998, and amended and restated as of September 10, 1998,
by and among the Corporation and its stockholders (as amended and in effect from
time to time, the "Stockholder Agreement"), and by the terms of the Other
Agreements as defined therein. Notwithstanding anything to the contrary stated
therein, the Stockholder Agreement shall be subject to, and in the case of any
conflict or inconsistency, shall be controlled and overridden by, the terms of
Article 9 of these by-laws.
Article I - General.
-------------------
1.1. Offices. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware. 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.
1.2. Seal. The seal of the Corporation, if any, shall be in the form of a
circle and shall have inscribed thereon the name of the Corporation, the year of
its organization and the words "Corporate Seal, Delaware".
1.3. Fiscal Year. The fiscal year of the Corporation shall be the period
from January 1 through December 31.
Article - Stockholders.
----------------------
2.1. Place of Meetings. All meetings of the stockholders shall be held
wherever the Board of Directors shall from time to time determine, upon notice
as hereinafter provided.
2.2. Annual Meeting. The annual meeting of the stockholders shall be held
each year on such date and at such time as the Board of Directors may determine.
At each annual meeting the stockholders
<PAGE>
-2-
entitled to vote shall elect a Board of Directors in accordance with the
provisions of Section 3.1 of the Stockholder Agreement applicable at the time of
such meeting and they may transact such other corporate business as may properly
be brought before the meeting. At the annual meeting any business may be
transacted, irrespective of whether the notice calling such meeting shall have
contained a reference thereto, except where notice is required by law, the
Corporation's Restated Certificate of Incorporation (as amended and in effect
from time to time, the "Certificate of Incorporation"), or these by-laws.
2.3. Quorum. At all meetings of the stockholders the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business except as otherwise provided by law, by the
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have power to adjourn the meeting from time to time without
notice other than announcement at the meeting until the requisite amount of
voting stock shall be present. 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. At such adjourned meeting, at which the
requisite amount of voting stock shall be represented, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
2.4. Right to Vote; Proxies. Each holder of a share or shares of capital
stock of the Corporation having the right to vote at any meeting shall be
entitled to one vote for each such share of stock held by him. Any stockholder
entitled to vote at any meeting of stockholders may vote either in person or by
proxy, but no proxy which is dated more than three years prior to the meeting at
which it is offered shall confer the right to vote thereat unless the proxy
provides that it shall be effective for a longer period. A proxy may be granted
by a writing executed by the stockholder or his authorized officer, director,
employee or agent or by transmission or authorization of transmission of a
telegram, cablegram, or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, subject to the conditions set
forth in Section 212 of the Delaware General Corporation Law, as it may be
amended from time to time (the "Delaware GCL").
<PAGE>
-3-
2.5. Voting. At all meetings of stockholders, except as otherwise
expressly provided for by law, the Certificate of Incorporation, these by-laws
or binding agreement among the stockholders, (a) in all matters other than the
election of directors, the affirmative vote of a majority of shares present in
person or represented by proxy at the meeting and entitled to vote on such
matter shall be the act of the stockholders, and (b) directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Except
as otherwise expressly provided by law, the Certificate of Incorporation, these
by-laws, or binding agreement among the stockholders, at all meetings of
stockholders the voting shall be by voice vote, but any stockholder qualified to
vote on the matter in question may demand a stock vote, by shares of stock, upon
such question, whereupon such stock vote shall be taken by ballot, each of which
shall state the name of the stockholder voting and the number of shares voted by
him, and, if such ballot be cast by a proxy, it shall also state the name of the
proxy.
2.6. Notice of Annual Meetings. Written notice of the annual meeting of
the stockholders shall be mailed to each stockholder entitled to vote thereat at
such address as appears on the stock books of the Corporation at least ten (10)
days (and not more than sixty (60) days) prior to the meeting. It shall be the
duty of every stockholder to furnish to the Secretary of the Corporation or to
the transfer agent, if any, of the class of stock owned by him, his post-office
address and to notify said Secretary or transfer agent of any change therein.
2.7. Stockholders' List. A complete list of the stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order and showing
the address of each stockholder, and the number of shares registered in the name
of each stockholder, shall be prepared by the Secretary and filed 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, at least ten days before such meeting, and
shall at all times during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder for a
purpose germane to the meeting.
2.8 Special Meetings. Special meetings of the stockholders for any
purpose or purposes, unless otherwise provided by law, the Certificate of
Incorporation, these by-laws, or binding agreement among the stockholders, may
be called by (a) the Board of Directors, (b) the President, (c) the Majority
Klearfold Holders (as defined in the Stockholder Agreement), (d) the Majority
AGI Holders (as defined in the
<PAGE>
-4-
Stockholder Agreement), or (e) the Majority Heritage Holders (as defined in the
Stockholder Agreement).
2.9. Notice of Special Meetings. Written notice of a special meeting of
stockholders, stating the time and place and object thereof shall be mailed,
postage prepaid, not less than ten (10) nor more than sixty (60) days before
such meeting, to each stockholder entitled to vote thereat, at such address as
appears on the books of the Corporation, and, if such special meeting is called
pursuant to clauses (c)-(e) of (S)2.8 of these by-laws, also to the Corporation.
No business may be transacted at such meeting except that referred to in said
notice, or in a supplemental notice given also in compliance with the provisions
hereof, or such other business as may be germane or supplementary to that stated
in said notice or notices.
2.10. Inspectors.
(a) One or more inspectors may be appointed by the Board of Directors
before or at any meeting of stockholders, or, if no such appointment shall
have been made, the presiding officer may make such appointment at the
meeting. At the meeting for which the inspector or inspectors are
appointed, he or they shall open and close the polls, receive and take
charge of the proxies and ballots, and decide all questions touching on the
qualifications of voters, the validity of proxies and the acceptance and
rejection of votes. If any inspector previously appointed shall fail to
attend or refuse or be unable to serve, the presiding officer shall appoint
an inspector in his place.
(b) At any time at which the Corporation has a class of voting stock
that is (i) listed on a national securities exchange, (ii) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association, or (iii) held of record by more than 2,000
stockholders, the provisions of Section 231 of the Delaware GCL with
respect to inspectors of election and voting procedures shall apply, in
lieu of the provisions of paragraph (a) of this (S)2.10.
2.11. Stockholders' Consent in Lieu of Meeting. Unless otherwise provided
in the Certificate of Incorporation, any action required by law 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
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding
<PAGE>
-5-
stock having not less than the minimum number of votes (in total numbers and by
class and by Type of shares, within the meaning of the Stockholder Agreement),
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 and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, or its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this (S)2.11 to the
Corporation, written consents signed by a sufficient number of stockholders to
take action under this (S)2.11 are delivered to the Corporation in the manner
required by this (S)2.11. The Corporation shall give prompt notice of the taking
of action without a meeting by less than unanimous written consent to those
stockholders who have not consented in writing.
Article III - Directors.
-----------------------
3.1. Number of Directors; Vacancies. The property and business of the
Corporation shall be managed by or under the direction of a board (the "Board of
Directors" or "Board") comprising eleven (11) directors, unless such number
shall have been increased pursuant to and in accordance with Sections 3.1(b),
3.1(c) or 3.1(e) of the Stockholder Agreement. Directors need not be
stockholders, residents of Delaware or citizens of the United States. The
directors shall be elected at the annual meeting of the stockholders in
accordance with the provisions of Section 3.1 of the Stockholder Agreement
applicable at the time of such meeting, and each director shall be elected to
serve until his successor shall be elected and shall qualify or until his
earlier resignation or removal; provided that in the event of failure to hold
such meeting or to hold such election at such meeting, such election may be held
at any special meeting of the stockholders called for that purpose or by
stockholders' written consent or consents in lieu of a meeting, in each case in
accordance with the provisions of Section 3.1 of the Stockholder Agreement
applicable either (a) at the time of such special meeting, or (b) on the date
upon which written consents signed by a sufficient number of stockholders to
take action are delivered to the Corporation, as the case may be. If the office
of any director becomes vacant by reason of death, resignation,
disqualification, removal, or otherwise, such director's replacement shall
<PAGE>
-6-
be designated and elected in accordance with the provisions of Section 3.1(d) of
the Stockholder Agreement.
3.2. Change in Number of Directors. The number of directors may be
increased in accordance with Sections 3.1(b), 3.1(c) or 3.1(e) of the
Stockholder Agreement, and may otherwise only be changed by an amendment to
these by-laws adopted in writing in accordance with Section 8.1 hereof. If the
number of directors is increased by an amendment to these by-laws adopted in
writing in accordance with Section 8.1 hereof, then, unless otherwise specified
in such amendment, the additional directors may be elected at the annual meeting
of the stockholders, at a special meeting of the stockholders called for that
purpose, or by written consent of the stockholders holding a majority of the
shares of the Corporation's capital stock entitled to vote for such directors.
3.3. Resignation. Any director of this Corporation may resign at any time
by giving written notice to the President or the Secretary of the Corporation.
Such resignation shall take effect at the time specified therein, at the time of
receipt if no time is specified therein and at the time of acceptance if the
effectiveness of such resignation is conditioned upon its acceptance. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
3.4. Removal. Any director shall be removed, with or without cause, by
action of the stockholders in accordance with Section 3.1(d) of the Stockholder
Agreement if so instructed or requested by the stockholder or stockholders
entitled to designate such director or a replacement for such director pursuant
to Section 3.1(d) of the Stockholder Agreement, provided that written notice of
such removal shall be given to such director and to the President or the
Secretary of the Corporation.
3.5. Place of Meetings and Books. The Board of Directors may hold their
meetings and keep the books of the Corporation outside the State of Delaware, at
such places as they may from time to time determine.
3.6. General Powers. In addition to the powers and authority expressly
conferred upon them by these by-laws, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law or by the Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
<PAGE>
-7-
3.7. Committees. The Board of Directors may designate one or more
committees by resolution or resolutions passed by unanimous consent of the whole
Board of Directors; such committee or committees shall consist of one or more
directors of the Corporation, and to the extent provided in the resolution or
resolutions designating them, shall have and may exercise specific powers of the
Board of Directors in the management of the business and affairs of the
Corporation to the extent permitted by law and shall have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. 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. The act of a
majority of the members of such committee shall be the act of the committee.
Such committee may meet at stated times or on notice to all members of such
committee by any of their own number. Vacancies in the membership of any such
committee shall be filled by the Board of Directors at a regular meeting or at a
special meeting called for that purpose. Any committee shall keep regular
minutes of its proceedings and report the same to the Board of Directors as may
be required by the Board.
3.8. Powers Denied to Committees. Committees of the Board of Directors
shall not, in any event, have any power or authority to amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares adopted by the
Board of Directors as provided in Section 151(a) of the Delaware GCL, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopt an agreement of merger or consolidation, recommend to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution or to amend the by-laws of the
Corporation. Further, no committee of the Board of Directors shall have the
power or authority to declare a dividend, to authorize the issuance of stock or
to adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware GCL, unless the resolution or resolutions of the whole Board of
Directors designating such committee expressly so provides.
3.9. Expenses and Compensation of Directors. The Board of Directors, acting
on the recommendation of the President, shall have the
<PAGE>
-8-
power to fix the compensation, if any, to be paid to directors and members of
committees of the Board. Directors shall be reimbursed their expenses, if any,
of attendance at each meeting of the Board or committee of the Board.
3.10. Annual Meeting. The newly elected Board of Directors may meet at such
place and time as shall be fixed and announced by the presiding officer at the
annual meeting of stockholders, for the purpose of organization or otherwise,
and no further 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, or they may meet at such place and time as shall be stated in a notice
given to such directors two (2) days prior to such meeting, or as shall be fixed
by the consent in writing of all the directors.
3.11. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board.
3.12. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board or the President on at least forty-eight
(48) hours notice to each of the directors, or such shorter period of time
before the meeting as will nonetheless be sufficient for the convenient assembly
of all of the directors; special meetings of the Board of Directors shall be
called by the Secretary in like manner and on like notice, on the written
request of two or more directors.
3.13. Quorum. Unless otherwise required pursuant to the Stockholder
Agreement, at all meetings of the Board of Directors, one less than the then-
applicable aggregate number of directors shall be necessary and sufficient to
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 permitted
or provided by law, by the Certificate of Incorporation, or by these by-laws. If
at any meeting of the Board of Directors there shall be less than a quorum
present, such meeting shall be adjourned and each of the directors notified by
telephone and written telecommunication of the date and time of which such
meeting is to be reconvened, which shall be not less than forty-eight (48) hours
following the time of the originally-scheduled meeting of the Board of
Directors, and at such reconvened meeting the quorum of the Board of Directors
shall constitute one-half of the then-applicable aggregate number of directors,
rounded up, if necessary, to the next whole number, provided that, if at the
time of such meeting the Board of Directors is constituted pursuant to
<PAGE>
-9-
and in accordance with the provisions of Section 3.1(b) of the Stockholder
Agreement, then, in order to constitute a quorum, the number of Heritage I
Directors and Heritage II Directors (as defined in the Stockholder Agreement)
present at any such meeting (including any such reconvened meeting) must exceed
the number of Non-Heritage Directors (as defined in the Stockholder Agreement)
so present.
3.14. Telephonic Participation in Meetings. Members of the Board of
Directors or any committee designated by the Board may participate in a meeting
of the Board of Directors or such 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 participation in a meeting pursuant to this
(S)3.14 shall constitute presence in person at such meeting.
3.15. Action by Consent. Unless otherwise restricted by law, the
Certificate of Incorporation or these by-laws, 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 written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
committee.
Article IV. - Officers.
----------------------
4.1. Selection; Statutory Officers. The officers of the Corporation shall
be chosen by the Board of Directors, based on the recommendation of the
President (other than with respect to the office of President). There shall be a
President, a Secretary and a Treasurer, and there may be one or more Executive
Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries,
and one or more Assistant Treasurers, as the Board of Directors may elect. Any
number of offices may be held by the same person. None of said officers need be
a director.
4.2. Additional Officers. The Board of Directors based on the
recommendation of the President 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 based on the recommendation of the President.
4.3. Terms of Office. Each officer of the Corporation shall hold office
until his successor is chosen and qualified, or until his earlier resignation or
removal. Any officer elected or appointed by the Board of Directors may be
removed at any time by the Board of Directors, based on
<PAGE>
-10-
the recommendation of the President (other than with respect to the office of
President).
4.4. Compensation of Officers. The Board of Directors, based on the
recommendation of the President (other than with respect to the office of
President), shall have power to fix the compensation of all officers of the
Corporation, and may authorize the President to fix the compensation of
subordinate officers.
4.5. President. The President shall be the chief executive officer of the
Corporation and shall preside at all meetings of stockholders and all meetings
of the Board of Directors. Under the supervision of the Board of Directors, the
President shall have the general control and management of the business and
affairs of the Corporation, subject, however, to the right of the Board of
Directors to confer any specific power, except such as may be by statute or
contract exclusively conferred on the President, upon any other officer or
officers of the Corporation. The President shall perform and do all acts and
things incident to the position of President of the Corporation, and such other
duties as may be assigned to him from time to time by the Board of Directors.
4.6. Executive Vice Presidents and Vice Presidents. The Executive Vice
Presidents and Vice Presidents shall perform such of the duties of the President
on behalf of the Corporation as may be respectively assigned to them from time
to time by the Board of Directors or by the President. The Board of Directors
may, upon recommendation of the President, designate any Vice President as an
Executive Vice President.
4.7. Treasurer. The Treasurer shall be the Chief Financial Officer and
shall have the care and custody of all the funds and securities of the
Corporation which may come into his hands as Treasurer, and the power and
authority to endorse checks, drafts and other instruments for the payment of
money for deposit or collection when necessary or proper and to deposit the same
to the credit of the Corporation in such bank or banks or depository as the
Board of Directors, or the President may designate, and he may endorse all
commercial documents requiring endorsements for or on behalf of the Corporation.
He may sign all receipts and vouchers for the payments made to the Corporation.
He shall render an account of his transactions to the Board of Directors as
often as the Board shall require the same. He shall enter regularly in the books
to be kept by him for that purpose full and adequate account of all moneys
received or paid on account of the Corporation. He shall perform all acts
incident to the position of Treasurer of a corporation, subject to the control
of the Board of Directors and the President. He shall, when requested pursuant
to a
<PAGE>
-11-
vote of the Board of Directors, give a bond to the Corporation to secure the
faithful performance of his duties, the expense of which bond shall be borne by
the Corporation. In the absence or inability to act of the President, the
Treasurer shall have and possess all of the power and discharge all of the
duties of the President, subject to the control of the Board of Directors.
4.8. Secretary. The Secretary shall keep the minutes of all meetings of
the Board of Directors and of the stockholders; he shall attend to the giving
and serving of all notices of the Corporation. Except as otherwise ordered by
the Board of Directors, he shall attest the seal of the Corporation upon all
contracts and instruments executed under such seal and shall affix the seal of
the Corporation thereto, and may affix the seal of the Corporation to
certificates of shares of capital stock of the Corporation. He shall have charge
of the stock certificate book, transfer book and stock ledger, and such other
books and papers as the Board of Directors may direct. He shall, in general,
perform all of the duties of the Secretary of a corporation, subject to the
control of the Board of Directors and the President.
4.9. Assistant Secretary. The Board of Directors, based on the
recommendation of the President, or the President and any one other officer of
the Corporation, acting jointly, may appoint or remove one or more Assistant
Secretaries of the Corporation. Any Assistant Secretary upon his appointment
shall perform such duties of the Secretary, and also any and all such other
duties, as any of the Board, the President, the Treasurer, or the Secretary may
designate.
4.10. Assistant Treasurer. The Board of Directors, based on the
recommendation of the President, or the President and any one other officer of
the Corporation, acting jointly, may appoint or remove one or more Assistant
Treasurers of the Corporation. Any Assistant Treasurer upon his appointment
shall perform such of the duties of the Treasurer, and also any and all such
other duties, as any of the Board, the President, the Treasurer, or the
Secretary may designate.
4.11. Subordinate Officers. The Board of Directors, based on the
recommendation of the President, may select such subordinate officers of the
Corporation as it may deem desirable. Each such officer shall hold office for
such period, have such authority, and perform such duties as the Board of
Directors may prescribe. The Board of Directors may authorize the President to
appoint and remove subordinate officers and to prescribe the powers and duties
thereof.
<PAGE>
-12-
Article V. - Stock.
------------------
5.1. Stock. Each stockholder shall be entitled to a certificate or
certificates of stock of the Corporation in such form as the Board of Directors
may from time to time prescribe. The certificates of stock of the Corporation
shall be numbered and shall be entered in the books of the Corporation as they
are issued. They shall certify the holder's name and number and class of shares
and shall be signed by both of (a) either the President or a Vice President, and
(b) any one of the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. The corporate seal of the Corporation may, but is not
required to, be affixed to such certificate. If such certificate is
countersigned (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee, the
signature of the officers of the Corporation and the corporate seal may be
facsimiles. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on, any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature shall have been used thereon had not
so ceased to be such officer or officers of the Corporation.
5.2. Fractional Share Interests. The Corporation may, but shall not be
required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (a) arrange for the disposition of fractional
interests by those entitled thereto, (b) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (c) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the Corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the Corporation and the proceeds thereof distributed to the
<PAGE>
-13-
holders of scrip or warrants, or subject to any other conditions which the Board
of Directors may impose.
5.3. Transfers of Stock. Subject to any transfer restrictions then in
force, the shares of stock of the Corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives and upon such transfer the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers or to such other person as the
directors may designate by whom they shall be cancelled and new certificates
shall thereupon be issued. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof save as expressly provided by the laws of
Delaware.
5.4. Record Date. For the purpose of determining the stockholders entitled
to notice of or to vote at any meeting of stockholders 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 the
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) days nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
such record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at any 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.
<PAGE>
-14-
5.5. Transfer Agent and Registrar. The Board of Directors may appoint one
or more transfer agents or transfer clerks and one or more registrars and may
require all certificates of stock to bear the signature or signatures of any of
them.
5.6. Dividends.
(a) Power to Declare. 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 capital stock, subject to the provisions of the Certificate of
Incorporation and the laws of Delaware.
(b) Reserves. 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 Board of Directors from time to time, in its absolute
discretion, thinks 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 purpose as the Board shall think
conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve in the manner in which it was created.
5.7. Lost, Stolen or Destroyed Certificates. No certificates for shares of
stock of the Corporation shall be issued in place of any certificate alleged to
have been lost, stolen or destroyed, except upon production of such evidence of
the loss, theft or destruction and upon indemnification of the Corporation and
its agents to such extent and in such manner as the Board of Directors may from
time to time prescribe.
5.8. Inspection of Books. The stockholders of the Corporation, by a
majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors or by a resolution of the
stockholders.
<PAGE>
-15-
Article VI. - Miscellaneous Management Provisions.
--------------------------------------------------
6.1. Checks, Drafts and Notes. All checks, drafts or orders for the payment
of money, and all notes and acceptances of the Corporation, shall be signed by
such officer or officers, agent or agents as the Board of Directors may
designate.
6.2. Notices.
(a) All notices, requests, payments, instructions, or other documents
to be given to directors or officers may, and all notices, requests,
payments, instructions, or other documents to be given to stockholders
shall, be in writing or by written telecommunication, and shall be deemed
to have been duly given if (i) delivered personally (effective upon
delivery), (ii) mailed by registered or certified mail, return receipt
requested, postage prepaid (effective five (5) business days after
dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or
(iv) sent by telecopier followed within 24 hours by confirmation by one of
the foregoing methods (effective upon receipt of the telecopy in complete,
readable form), addressed, if to the Corporation or to a director or
officer of the Corporation, to the Corporation's then principal executive
office, or if to any stockholder, to such stockholder at his or its address
as it appears in the stock records of the Corporation (or to such other
address as the recipient party may have furnished to the sending party for
the purpose of receiving notices). Notice to directors or officers may also
be given orally, by telephone or in person.
(b) Whenever any notice is required to be given under the provisions
of law, of the Certificate of Incorporation or of these by-laws, a written
waiver of notice, signed by the person or persons entitled to said notice,
whether before or after the time stated therein for the meeting or action
to which such notice relates, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or convened.
6.3. Conflict of Interest. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
<PAGE>
-16-
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorized the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (a) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, thereof which authorized the contract or
transaction and the Board or such committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested directors or committee members, even though the disinterested
directors or committee members constitute less than a quorum; or (b) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders of the Corporation
entitled to vote thereon, and the contract or transaction as specifically
approved in good faith by vote of such stockholders; or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a duly-authorized committee
thereof or the stockholders. Interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes the contract or transaction.
6.4. Voting of Securities owned by this Corporation. Subject always to the
specific directions, if any, of the Board of Directors, (i) any shares or other
securities issued by any other corporation and owned or controlled by this
Corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this Corporation, if he is present at such
meeting, or in his absence by the Treasurer of this Corporation, if he is
present at such meeting, and (ii) whenever, in the judgment of the President, it
is desirable for this Corporation to execute a proxy or written consent in
respect of any shares or other securities issued by any other corporation and
owned by this Corporation, such proxy or consent shall be executed in the name
of this Corporation by the President, without the necessity of any authorization
by the Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of this Corporation shall have full right, power and authority to vote
the shares or other securities issued by such other corporation and owned by
this Corporation the same as such shares or other securities might be voted by
this Corporation.
<PAGE>
-17-
Article VII. - Indemnification.
7.1. Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of being or having been a director or officer of the
Corporation or serving or having served at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (an "Indemnitee"), whether the basis of such
proceeding is alleged action or failure to act in an official capacity as a
director, trustee, officer, employee or agent or in any other capacity while
serving as a director, trustee, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than permitted
prior thereto) (as used in this Article 7, the "Delaware Law"), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith and such indemnification
shall continue as to an Indemnitee who has ceased to be a director, trustee,
officer, employee or agent and shall inure to the benefit of the Indemnitee's
heirs, executors and administrators; provided, however, that, except as provided
in (S)7.2 hereof with respect to Proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in
connection with a Proceeding (or part thereof) initiated by such Indemnitee only
if such Proceeding (or part thereof) was authorized by the Board of Directors.
The right to indemnification conferred in this Article 7 shall be a contract
right and shall include the right to be paid by the Corporation the expenses
(including attorneys' fees) incurred in defending any such Proceeding in advance
of its final disposition (an "Advancement of Expenses"); provided, however,
that, if the Delaware Law so requires, an Advancement of Expenses incurred by an
Indemnitee shall be made only upon delivery to the Corporation of an undertaking
(an "Undertaking"), by or on behalf of such Indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "Final Adjudication") that such
Indemnitee is not entitled to be indemnified for such expenses under this
Article 7 or otherwise.
<PAGE>
-18-
7.2. Right of Indemnitee to Bring Suit. If a claim under (S)7.1 hereof is
not paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
Advancement of Expenses, in which case the applicable period shall be twenty
days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the Indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the Indemnitee to
enforce a right to an Advancement of Expenses) it shall be a defense that, and
(ii) in any suit by the Corporation to recover an Advancement of Expenses
pursuant to the terms of an Undertaking the Corporation shall be entitled to
recover such expenses upon a Final Adjudication that, the Indemnitee has not met
the applicable standard of conduct set forth in the Delaware Law. Neither the
failure of the Corporation (including the Board of Directors, its independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the Delaware Law, nor an actual determination by the
Corporation (including the Board of Directors, its independent legal counsel, or
its stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such Advancement of Expenses, under this
Article 7 or otherwise shall be on the Corporation.
7.3. Non-Exclusivity of Rights. The rights to indemnification and to the
Advancement of Expenses conferred in this Article 7 shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
7.4. Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or
<PAGE>
-19-
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under this Article 7 or under the Delaware Law.
7.5. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the Advancement of Expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article 7 with respect to the indemnification and Advancement
of Expenses of directors and officers of the Corporation.
Article VIII. - Amendments.
8.1. Amendments. The by-laws of the Corporation may be altered, amended or
repealed only with the written consent of the Majority Heritage Holders, the
Majority AGI Holders, and the Majority Klearfold Holders (each as defined in the
Stockholder Agreement), provided, however, that (a) the consent of the Majority
Klearfold Holders shall not be required for any such alteration or amendment
which either (i) increases or reduces the number of directors under Section 3.1
hereof to conform to any amendment of the Stockholder Agreement requiring such
increase or reduction, where the consent of the Majority Klearfold Holders to
such amendment of the Stockholder Agreement is not required by the terms
thereof, or (ii) arises from the creation and issuance of shares of Series B
Common Stock in connection with the conversion of options for the purchase of
shares of Tinsley Robor plc into options for the purchase of shares of Series B
Common Stock, and of shares of preferred stock and warrants for the purchase of
shares of Series A Common Stock pursuant to the Equity Recapitalization
Agreement (as defined in the Stockholder Agreement), so long as any such
alteration or amendment does not restrict any rights of any of the Klearfold
Management Stockholders (as defined in the Stockholder Agreement) or grant any
additional rights to any other existing Stockholders (as defined in the
Stockholder Agreement), and (b) any amendment to the provisions of Article 9
shall require the consent of the holders of at least three-quarters of all
shares of the Corporation's Series B Common Stock calculated on a Fully-Diluted
Basis (as defined in Section 9.1 below).
Article IX. - Class B Common Stock; Repurchase Rights.
9.1. Definitions. The following defined terms when used in this Article 9
shall have the meaning set forth in this (S)9.1:
<PAGE>
-20-
"Act" means the Securities Act of 1933, as amended.
"Affiliate" shall mean any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this definition
"control" shall have the meaning presently specified for that word in Rule 405
promulgated by the Securities and Exchange Commission under the Act. With
respect to any Person who is a limited partnership, Affiliate shall also mean
any general or limited partner of such limited partnership, or any Person which
is a general partner in a general partner of such limited partnership. With
respect to any individual, Affiliate shall also mean such a Person's spouse and
lineal descendants and their respective Affiliates.
"B Shares" means all shares of Series B Common Stock.
"Board" means the Corporation's Board of Directors.
"Charter" means the Corporation's Amended and Restated Certificate of
Incorporation and all amendments thereto.
"Common Stock" means the Series A Common Stock and Series B Common Stock,
collectively.
"Effective Date" means September 10, 1998.
"Fair Market Value" means, as of any date, the fair market value of the
entire common stock equity of the Corporation (without premium for control or
discounts for minority interests, restrictions on transfer or lack of voting
rights), as determined as of such date in good faith by the Board, or, if
greater, the value placed upon the entire common stock equity of the Corporation
in the most recently received arm's length, unsolicited offer to purchase the
entire common stock equity of the Corporation received by the Board from any
Person who is not an Affiliate of the Corporation within the thirty (30) day
period prior to such date. In determining Fair Market Value in good faith, the
Board shall act promptly to correct any manifest error notified to it in
writing.
"Family Members" means, with respect to any Person, any Related Person or
Family Trust of such Person.
"Family Trust" means, with respect to any Person, any trust created for the
benefit of such Person and/or one or more of such Person's Related Persons, and
controlled by such Person.
<PAGE>
-21-
"Fully Diluted Basis" shall mean, with respect to any calculation to be
made at any time pursuant to this Article 9 or with respect to the amendment of
this Article 9 pursuant to Section 8.1 above, that such calculation shall be
made by treating as outstanding all shares of Common Stock issuable upon
exercise of all outstanding warrants, options, and/or other rights to acquire
shares of Common Stock, but excluding any such warrants, options, and/or other
rights (or any portions thereof) as are not then capable of being exercised or
capable of being exercised thereafter on account of the Majority Sale Event with
respect to which such calculation is being made.
"Majority Sale Event" shall mean any transaction pursuant to which a
majority of the outstanding shares of Common Stock (on a Fully Diluted Basis)
are sold to a purchaser who is not an Affiliate of the Corporation and, as a
result of such transaction, 80% or more (on a Fully Diluted Basis) of the shares
of Common Stock held by management immediately prior to such transaction cease
to be owned by management immediately following such transaction.
"Management" shall mean any present or former director, officer or employee
of the Corporation or any of its Subsidiaries (including any Permitted
Transferee of such persons within the meaning of (S)9.2).
"Market Value Per Share" means, with respect to any date, the quotient
obtained by dividing (a) the sum of (i) the Fair Market Value of the Corporation
as of such date, plus (ii) an amount equal to the aggregate consideration which
would then be payable to the Corporation, assuming the exercise at such time of
all then outstanding and exercisable warrants, options, or convertible
securities pursuant to which the Corporation would, upon exercise, then be
obligated to issue Common Stock, other than warrants or options the strike or
exercise price of which at such time is greater than the Market Value Per Share
determined without including any then outstanding and exercisable warrants or
options, by (b) the sum of (i) the number of shares of Common Stock then
outstanding, plus (ii) the number of shares of Common Stock then issuable upon
exercise of all then outstanding and exercisable warrants, options, or
convertible securities pursuant to which the Corporation would, upon exercise,
then be obligated to issue Common Stock, other than warrants or options the
strike or exercise price of which at such time is greater than the Market Value
Per Share determined without including any then outstanding and exercisable
warrants or options.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated
<PAGE>
-22-
organization, or any government, governmental department or agency or political
subdivision thereof.
"Personal Representative" means the successor or legal representative
(including without limitation, a guardian, executor, administrator or
conservator) of a dead or incompetent Person.
"Related Persons" means any Person's parents, spouse, children and
grandchildren.
"Series A Common Stock" means the Series A Common Stock, $0.001 par value
per share of the Corporation, and any shares (other than shares of Series B
Common Stock) into which such common stock may hereafter be converted or
exchanged.
"Series B Common Stock" means the Series B Common Stock, $0.001 par value
per share of the Corporation, and any shares (other than shares of Series A
Common Stock) into which such common stock may hereafter be converted or
exchanged.
"Series B Holder" means any holder, as of the relevant time of reference,
of any of the B Shares.
9.2. Restrictions on Transfer.
No Series B Holder may sell, assign, pledge, or otherwise dispose of or
transfer, either voluntarily, involuntarily, by operation of law, or otherwise
(a "Transfer"; or to effect any such Transfer, to "Transfer") either
voluntarily, involuntarily, by operation of law or otherwise any B Shares or any
interest in B Shares, except any Transfer:
(a) to the Corporation;
(b) to such Series B Holder's Family Members, provided that such Series B
Holder retains exclusive voting control over the Transferred B Shares;
(c) to such Series B Holder's Personal Representative;
(d) if the B Shares to be Transferred are Heritage Securities, as defined
in the Stockholder Agreement, (i) to either Heritage Fund I, L.P., a
Delaware limited partnership ("Heritage I"), or Heritage Fund II,
L.P., a Delaware limited partnership ("Heritage II"; together with
Heritage I, the "Heritage
<PAGE>
-23-
Funds"), (ii) to a successor entity of any holder of any of the
Heritage Securities, as a result of a merger, consolidation, or sale
of all or substantially all of the assets of such holder, and (iii) by
Heritage I, to the extent required pursuant to the terms of the First
Amended and Restated Agreement of Limited Partnership of Heritage I
dated as of December 14, 1994, or by Heritage II, to the extent
required pursuant to the terms of the Agreement of Limited Partnership
of Heritage II dated as of January 28, 1997, as in effect on the
Effective Date, provided that each of such limited partnership
agreements may be further amended from time to time after the
Effective Date in accordance with their respective terms, but that
notwithstanding any such amendment, a Transfer of Heritage Securities
by a Heritage Fund will be permitted under this (S)9.2(d) only to the
extent that such Transfer would have been required pursuant to the
terms of such Heritage Fund's limited partnership agreement as in
effect on the Effective Date; or
(e) pursuant to an Approved Sale (as defined in (S)9.3 below) or Majority
Sale Event;
provided, however, that in the case of any such Transfer described in clauses
(b), (c) or (d) above, the restrictions contained in this (S)9.2 shall continue
to be applicable to the Transferred B Shares after such Transfer, and no such
Transfer shall be permitted unless the transferee of such B Shares shall first
have executed and delivered to the Corporation an instrument confirming such
transferee's acknowledgment of the transfer restrictions set forth herein, in
form and substance acceptable to the Corporation which, if such Transfer is
otherwise in compliance with this (S)9.2, shall be accepted in writing by the
Corporation (such duly signed instrument, upon acceptance in writing by the
Corporation, being referred to herein as an "Effective Instrument of
Accession"). Any transferee of B Shares permitted by any of clauses (b), (c) or
(d) of this (S)9.2 who is a party to an Effective Instrument of Accession is
referred to herein as "Permitted Transferee".
9.3. Obligation to Sell in Approved Sale. If, pursuant to the requirements
(if any) of applicable law, the Charter or the Stockholder Agreement, the Board
at any time approves the sale, disposition or transfer (an "Approved Sale") of
the Corporation or its business, whether by merger, consolidation, sale of all
or substantially all of the assets or capital stock of the Corporation and/or
one or more of its Subsidiaries, or otherwise, and if stockholders owning such
number of shares of issued and outstanding Common Stock as is required to
approve such transaction
<PAGE>
-24-
(whether by applicable law, contract or otherwise, whichever number is highest
(such holders being called the "Required Stockholders")) have approved or agreed
to such transaction (or have provided notice to the Series B Holders that the
foregoing conditions will be met), then:
(a) each Series B Holder shall cooperate fully in any Approved Sale and
shall not take any action that is prejudicial to or inconsistent with
such Approved Sale; and
(b) each Series B Holder (i) shall vote or cause to be voted all B Shares
that are owned by such Series B Holder or over which such Series B
Holder has voting control to approve the terms of any such Approved
Sale and such matters ancillary thereto as may be necessary or
appropriate, in the judgment of the Board or the Required
Stockholders, to effect such Approved Sale, (ii) hereby irrevocably
waives and relinquishes, to the fullest extent permitted by applicable
law, all rights to object to or dissent from such Approved Sale
(including, without limitation, any appraisal or similar rights), and
agrees to raise no objections against, such Approved Sale, and (iii)
with respect to any Approved Sale structured as a sale of stock, (A)
shall sell all of such Series B Holder's B Shares on the terms and
conditions applicable to all other holders of Common Stock in the
Approved Sale (including, without limitation, the per share price of
Common Stock (which shall not include any compensation paid for
services to holders of Common Stock) and the execution of all
agreements relating thereto, which agreements may contain
representations, warranties, indemnification obligations, covenants
and releases, and (B) upon the Corporation's request, shall deliver
the certificates representing all B Shares owned or controlled by such
Series B Holder (duly endorsed, or accompanied by duly executed
instruments of transfer) in escrow (pending receipt of the purchase
price therefor) to the Corporation's counsel in such sale.
If any Series B Holder becomes obligated to sell any B Shares under this
(S)9.3 and fails to deliver such B Shares in accordance herewith, the purchaser
of such B Shares may, at its option, in addition to all other remedies it may
have, send to such Series B Holder the purchase price for such B Shares.
Thereupon, the Corporation upon written notice to such Series B Holder shall (x)
cancel on its books the certificate or certificates representing the B Shares to
be sold, and (y) issue, in lieu thereof, in the name of such purchaser a new
certificate or certificates representing such
<PAGE>
-25-
B Shares, and thereupon all of such Series B Holder's rights in and to such B
Shares shall terminate.
9.4. Co-Sale Rights in a Majority Sale Event. In the event of a proposed
Majority Sale Event, the Corporation shall cause each Series B Holder to receive
a notice of such Majority Sale Event (a "Sale Notice") setting forth the per-
share price to be paid for shares of Common Stock (which shall exclude any
compensation paid for services to holders of Common Stock) and the terms of such
transaction, including the maximum number of Shares of Common Stock which the
prospective purchaser is willing to buy. Each Series B Holder shall have the
right to participate in the proposed Majority Sale Event by delivering a written
notice of his, her or its election to the Corporation within 15 days from the
date of such Sale Notice and otherwise complying with this (S)9.4. If any Series
B Holder elects to participate in such sale, such Series B Holder shall be
entitled to sell in the proposed Majority Sale Event that number of B Shares
bearing the same proportion (rounded to the nearest whole share) to the maximum
number of Shares of Common Stock which the prospective purchaser is willing to
buy in such Majority Sale Event as such Series B Holder's aggregate holdings of
B Shares (calculated on a Fully Diluted Basis) then bears to the total number of
shares of Common Stock of all holders of Common Stock (on a Fully Diluted Basis)
who have elected to participate in such Majority Sale Event. Any Series B
Holder's right to participate in a Majority Sale Event shall be exercised by
tender to the Corporation (which shall act as agent for purposes of such
Majority Sale Event) of the maximum number of shares of Common Stock which such
Series B Holder may sell in accordance with the terms of this (S)9.4, endorsed
and in transferable form, free and clear of all liens, claims, security
interests and other encumbrances. If a Series B Holder tenders to the
Corporation certificates representing more B Shares than the number of B Shares
which such Series B Holder may sell pursuant to the terms of this (S)9.4, then
the Corporation shall return to such Series B Holder certificates representing
such excess B Shares. As a further condition to the participation in any
Majority Sale Event, any participating Series B Holder shall be required to sign
all agreements and provide such representations, warranties and indemnities as
are applicable generally to all stockholders of the Corporation selling stock in
such Majority Sale Event.
9.5. Right of Corporation to Repurchase B Shares Upon Termination of
Employment. At such time as (a) any Series B Holder employed by the Corporation
or any of its Subsidiaries ceases to be so employed for any reason, or (b) any
Series B Holder who is a Director of the Corporation or any of its Subsidiaries,
and is not otherwise employed
<PAGE>
-26-
by the Corporation or any of its Subsidiaries, ceases to hold office as a
Director of the Corporation or any such Subsidiary, as applicable, for any
reason, then the Corporation (or its designee) shall have the right to
repurchase all B Shares then owned by such Series B Holder and his or her
Permitted Transferees, at a price equal to the Fair Market Value of such B
Shares as of the last day of the month ending immediately prior to the date of
termination of such Series B Holder's employment or directorship, as applicable.
The Corporation may exercise this right at any time within 180 days after the
date of termination of such Series B Holder's employment or directorship by
providing such Series B Holder with written notice of the Corporation's election
(which notice shall set forth the Fair Market Value of the B Shares and the
closing date for such repurchase, which date shall be not more than 30 days
following the date of such notice). The closing of such repurchase shall take
place at the office of the Corporation or any of its Subsidiaries at which such
Series B Holder regularly provided services. At such closing, such Series B
Holder shall deliver to the Corporation, upon receipt of the purchase price
(which shall be payable by cashier's check or wire transfer of same day funds),
stock certificates representing the B Shares being transferred (the "Repurchase
B Shares") duly endorsed to the Corporation, free and clear of all liens and
encumbrances of every kind, together with a stock transfer agreement signed by
such Series B Holder, and if applicable, any Permitted Transferees, satisfactory
to the Corporation and pursuant to which such Series B Holder and/or Permitted
Transferees, as the case may be, represents, warrants and agrees, among other
things, that he or she is the sole owner of the Repurchase B Shares, that such
Repurchase B Shares are owned by such Series B Holder and/or Permitted
Transferee, as the case may be, free and clear of all liens and encumbrances of
every kind, that such Series B Holder and/or Permitted Transferee is authorized
to Transfer the Repurchase B Shares as required by this (S)9.4, that such
transfer does not violate any agreement, court order or the like to which such
Series B Holder and/or Permitted Transferee, as the case may be, is subject,
that such Series B Holder and/or Permitted Transferee has no claims against the
Corporation, any of its Subsidiaries or any of their respective officers,
directors, employees, stockholders and agents in his or her capacity as a
stockholder, and that such Series B Holder and/or Permitted Transferee agrees
not to assert any such claims against the Corporation, any of its Subsidiaries
or any of their respective officers, directors, employees, stockholders and
agents after the consummation of such repurchase transaction.
9.6. Other Rights of Corporation to Repurchase B Shares. In the event that
(a) any Series B Holder is also the holder of any shares of Series A Common
Stock, and (b) such Series B Holder is Transferring all
-26-
<PAGE>
-27-
or any portion of such Series B Holder's shares of Series A Common Stock,
subject to and in accordance with any restriction on such Transfer imposed from
time to time by the Stockholder Agreement or any other agreement or instrument
restricting such holder's ability to Transfer such shares, but such Series B
Holder is not entitled to Transfer any of such Series B Holder's B Shares in
such Transaction as a result of the restrictions on transfer set forth in this
Article 9, then the Corporation (or its designee) shall have the right to
repurchase a Pro Rata Amount (as defined below) of the B Shares then owned by
such Series B Holder and his, her or its Permitted Transferees, as applicable,
at a price equal to the Fair Market Value of such B Shares as of the date of the
proposed Transfer of such Series B Holder's shares of Series A Common Stock. As
used in this (S)9.6, a "Pro Rata Amount" shall mean that number of B Shares as
bears the same proportion to the total number of B Shares held by a Series B
Holder as the number of shares of Series A Common Stock proposed to be
transferred by such Series B Holder bears to the total number of shares of
Series A Common Stock held by such Series B Holder.
9.7. Transfers of B Shares in Breach of By-Laws. Any attempted or purported
Transfer of B Shares (or interests therein) in breach of this Article 9 shall be
wholly void. Effective immediately upon the date of any such attempted or
purported Transfer of B Shares (a) no dividend or distribution of any kind shall
be paid by the Corporation in respect of such B Shares (all rights to any such
payment being hereby irrevocably waived and relinquished by each Series B
Holder, for both such Series B Holder and any purported transferee), (b) the
voting rights of such B Shares shall terminate, and (c) neither a Series B
Holder nor a purported transferee shall be entitled to any rights in respect of
such B Shares unless and until such attempted or purported Transfer in breach of
this Agreement has been rescinded.
9.7. Restrictive Legend. So long as any B Shares are subject to the
provisions of this Article 9, all certificates representing such B Shares shall
have imprinted on them a restrictive legend in substantially the following form:
"The securities represented by this certificate are subject to the terms of
the By-Laws of the Corporation, which contain certain restrictive
provisions relating to the voting and transfer of the securities
represented hereby and certain rights of the Corporation to repurchase such
securities. A copy of the By-Laws is on file and may be inspected for any
proper purpose at the Corporation's principal executive office."
<PAGE>
any alteration or amendment of any provision of these by-laws that grants
any rights to, or restricts any rights of, any of the Tinsley Management
Holders, whether individually or collectively, shall be effective if, and only
if, it is approved in writing by the Majority Tinsley Holders (or if no Tinsley
Holder Securities are then outstanding, by the Tinsley Management Stockholders)
as well as by the parties referred to above, (b)
<PAGE>
EXHIBIT 3.4
AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF IMPAC GROUP, INC.
-----------------------------------
IMPAC Group, Inc. (the "Company") is a company organized and existing under
and by virtue of the Delaware General Corporation Law. Pursuant to the
provisions of Section 242 of the Delaware General Corporation Law, the Company
adopts the following Amendment to its Amended and Restated Certificate of
Incorporation. The original Certificate of Incorporation of the Company was
filed with the Delaware Secretary of State on May 9, 1996, as amended and
restated by the Amended and Restated Certificate of Incorporation dated as of
May 21, 1996 and the Amended and Restated Certificate of Incorporation dated as
of March 11, 1998 (the "Original Certificate of Incorporation").
This Amendment to Amended and Restated Certificate of Incorporation, which
amends Article 4, Section 1 of the Original Certificate of Incorporation in its
entirety, was duly adopted as of July 6, 1998 in accordance with the provisions
of Sections 228 and 242 of the Delaware General Corporation Law.
Effective on July 6, 1998, the Original Certificate of Incorporation is
hereby further amended by deleting Article 4, Section 1 thereof in its entirety
and substituting in lieu thereof Article 4, Section 1 below:
ARTICLE 4
STOCK
Section 1. Number of Shares. The total number of shares of all classes of
stock that the Company shall have authority to issue is 1,000,000, consisting
solely of 1,000,000 shares of common stock, $0.001 par value per share ("Series
A Common Stock").
<PAGE>
-2-
IN WITNESS WHEREOF, I have hereunto set my hand as of July 6, 1998.
IMPAC GROUP, INC.
/s/ Richard Block
-----------------
Name: Richard Block
Title: President & Chief Executive
Officer
<PAGE>
EXHIBIT 10.60
FIRST AMENDED AND RESTATED
STOCKHOLDER AGREEMENT
This First Amended and Restated Stockholder Agreement (this "Agreement"),
dated as of March 12, 1998 and amended and restated as of September 10, 1998, is
by and among IMPAC Group, Inc., a Delaware corporation, formerly known as KFI
Holding Corporation ("Holding"); Heritage Fund I L.P., a Delaware limited
partnership ("Heritage I"); Heritage Fund II, L.P., a Delaware limited
partnership ("Heritage II"; together with Heritage I, the "Heritage Funds");
Melvin B. Herrin and H. Scott Herrin, each of whom is an individual; Matthew H.
Kamens, not individually but as trustee under an Indenture of Trust of Melvin B.
Herrin dated June 4, 1996 (the "Herrin Family Trust"); Arthur S. Keyser, not
individually but as trustee under an Irrevocable Deed of Trust dated August 12,
1992, f/b/o H. Scott Herrin (the "Scott Trust") (collectively, Melvin B. Herrin,
H. Scott Herrin, the Herrin Family Trust and the Scott Trust are sometimes
referred to herein as the "Herrin Stockholders"); each of the stockholders of
Holding named on Schedule 1 hereto (the "Klearfold Managers", and together with
the Herrin Stockholders, collectively, the "Klearfold Management Stockholders");
each of the stockholders of Holding and other Persons named on Schedule 2 hereto
(the "AGI Management Stockholders"); and each other Person who becomes a party
to this Agreement by executing and delivering to Holding an Instrument of
Accession in the form of the attached Exhibit A which is subsequently accepted
in writing by Holding (an "Instrument of Accession"). Each of the parties to
this Agreement other than Holding is sometimes referred to herein as a
"Stockholder", and all of them, collectively, are sometimes referred to herein
as the "Stockholders." Capitalized terms used herein and not defined on their
first use shall have the meanings set forth in Section 8 below.
WHEREAS, certain of the Stockholders entered into a Stockholder Agreement
with the Company, dated as of March 12, 1998 (the "Original Stockholder
Agreement"), pursuant to which certain rights and obligations were established
with respect to the outstanding capital stock of Holding and with respect to the
internal affairs of Holding; and
WHEREAS, in connection with the issuance of certain additional shares of
capital stock of Holding pursuant to a Stock Purchase Agreement dated as of
September 10, 1998 (the "Stock Purchase Agreement"), among the Company, the
Heritage Funds and certain other Stockholders, the parties desire to amend and
restate the Original Stockholder Agreement;
NOW, THEREFORE, the parties hereto hereby agree to amend and restate the
Original Stockholder Agreement in its entirety to read as follows:
<PAGE>
-2-
1. Restrictions on Transfer of Securities.
1.1. Transfer. No Stockholder shall sell, assign, pledge, or otherwise
dispose of or transfer any Securities or any interest (legal, beneficial, or
otherwise) in any Securities (a "Transfer"; or to effect any such Transfer, to
"Transfer"), either voluntarily, involuntarily, by operation of law, or
otherwise, except any Transfer:
(a) pursuant to and in accordance with the provisions of Section 1.4
hereof, or the provisions of those certain Employment, Non-Competition and Stock
Repurchase Agreements, Agreements relating to Employment and Stock Ownership, or
Stock Purchase or Stock Repurchase Agreements entered into by each of the
Stockholders who is a natural person and by each natural person whose Family
Trust is a Stockholder, as amended and in effect from time to time (each, a
"Repurchase Agreement"), relating to the repurchase of Securities by Holding or
the purchase of Securities by any "Co-Managers", as defined in any such
Repurchase Agreement;
(b) in the case of any Stockholder who is a natural person, to (i) such
Stockholder's Family Members, provided that such Stockholder retains exclusive
voting control over the Transferred Securities, and (ii) such Stockholder's
Personal Representative, and in the case of any Stockholder which is a Family
Trust, to (A) the individual for whom, or for the benefit of whose Related
Persons, such Family Trust was created, and (B) the Family Members of such
individual, provided that, in the case of any transfer pursuant to clauses (A)
or (B) such individual retains exclusive voting control over the Transferred
Securities, and (C) such individual's Personal Representative;
(c) at any time prior to June 7, 2002, to any Person, provided that (i)
such Transfer shall have been previously approved in writing by Stockholders
holding a majority of the Securities then outstanding, other than the Securities
held by the Stockholder proposing such Transfer and any Affiliate or Family
Member of such Stockholder, provided further that each of the Heritage Funds and
any transferee of a Heritage Fund pursuant to Section 1.1(f) below shall be
deemed to be an Affiliate of each Heritage Fund for purposes of this Section
1.1(c)(i), and (ii) such Transfer, if a Transfer of Heritage Securities not
otherwise permitted under Section 1.1(f) below, shall be subject to the
provisions of Section 1.4 hereof;
(d) pursuant to a Public Offering or an Approved Sale;
(e) in the case of any Herrin Stockholder, to another Herrin Stockholder;
in the case of any Block Stockholder, to another Block Stockholder; and in the
case of any Tinsley Management Stockholder, to another Tinsley Management
Stockholder;
(f) in the case of any Heritage Securities, (i) to either of the Heritage
Funds, (ii) to a successor entity of any Heritage Holder, as a result of a
merger, consolidation, or sale of all or substantially all of the assets of such
Heritage Holder, (iii) by Heritage I, to the extent required pursuant to the
terms of the First Amended and Restated Agreement of Limited Partnership of
Heritage I dated as of December 14, 1994, as in effect on the AGI Closing
<PAGE>
-3-
Date, or by Heritage II, to the extent required pursuant to the terms of the
Agreement of Limited Partnership of Heritage II dated as of January 28, 1997, as
in effect on the Tinsley Closing Date (it being understood and agreed that each
of such limited partnership agreements may be further amended from time to time
after such dates in accordance with their respective terms, but that
notwithstanding any such amendment, a Transfer of Heritage Securities by a
Heritage Fund will be permitted under this Section 1.1(f)(iii) only to the
extent that such Transfer would have been required pursuant to the terms of such
Heritage Fund's limited partnership agreement as in effect on the date referred
to above), and (iv) to Holding pursuant to and in accordance with the terms of
the letter agreement regarding equity recapitalization dated as of September 10,
1998 (the "Equity Recapitalization Agreement"), by and among Holding and each of
the Stockholders, provided that the aggregate number of shares of Common Stock
to be transferred by the Heritage Funds together pursuant to this Section
1.1(f)(iv) shall not exceed 49,294 (as such number may be adjusted by way of
stock dividend, stock split, or combination or division of shares); or
(g) from and after June 7, 2002, to any Person, provided that the
Transferring Stockholder shall first have complied with all of the provisions of
Sections 1.2 and 1.3 below;
provided that, if such Securities are shares of Series B Common Stock, then any
Transfer of such Securities shall be subject to the applicable provisions of
Holding's By-Laws, as in effect from time to time, and not of this Section 1.1,
and provided, further, in the case of any Transfer described in Sections 1.1(a)
1.1(g) above other than a Transfer to Holding or pursuant to a Public Offering
or an Approved Sale, that (x) the restrictions contained in this Section 1 shall
continue to be applicable to the Transferred Securities after such Transfer, and
(y) the Transferee of such Securities shall either already be a party hereto or
shall first have executed and delivered to Holding an Instrument of Accession
which, if such Transfer is otherwise in compliance with this Section 1.1, shall
be accepted in writing by Holding.
1.2. First Refusal Rights.
(a) At least 30 days prior to any Transfer proposed to be made pursuant to
Section 1.1(g) hereof, the Transferring Stockholder (the "Transferring
Stockholder") shall deliver a written notice (the "Transfer Offer Notice") to
Holding and, if the Securities proposed to be transferred are AGI Holder
Securities, Klearfold Holder Securities, Tinsley Holder Securities or Heritage
Securities, to each of the Stockholders holding Securities of the Type to be
Transferred (collectively, the "Non-Transferring Same-Type Stockholders") in
accordance with the provisions of Section 9(b) hereof. The Transfer Offer
Notice shall disclose in reasonable detail the number of Securities of each Type
that are proposed to be Transferred, the proposed terms and conditions of the
Transfer (including without limitation the consideration to be paid for such
Securities and any deferred payment terms), and the identity of the proposed
Transferee(s). If the Securities proposed to be transferred are AGI Holder
Securities, Klearfold Holder Securities, Tinsley Holder Securities or Heritage
Securities, each of the Non-Transferring Same-Type Stockholders may elect to
purchase any or all of the Securities of the Type proposed to be Transferred, as
specified in the Transfer Offer Notice, at the price and on the terms specified
therein (provided, that each such Non-Transferring Same-Type Stockholder
<PAGE>
-4-
shall have the option to substitute for any non-cash consideration proposed to
be received in respect of such proposed Transfer, cash in the amount of the fair
market value thereof), by delivering written notice of such election to the
Transferring Stockholder and Holding within 30 days after the delivery of such
Transfer Offer Notice (the "Initial Stockholder Election Period"). If one or
more of such Non-Transferring Same-Type Stockholders duly elect to purchase all
of the Securities of any such Type so offered, the Transfer of such Securities
shall be consummated 30 days after the expiration of the Initial Stockholder
Election Period, or such earlier date as agreed upon by the Non-Transferring
Same-Type Stockholders who will be purchasing not less than a majority of the
Securities to be Transferred, provided that written notice of such earlier date
is delivered not later than ten (10) days prior to such date to the Transferring
Stockholder, Holding and each of the other Non-Transferring Same-Type
Stockholders electing to purchase any of such Securities pursuant to this
Section 1.2(a). If the Non-Transferring Same-Type Stockholders oversubscribe for
the Securities of any such Type being offered, each Non-Transferring Same-Type
Stockholder electing to purchase such Securities shall be entitled to purchase
from the Transferring Stockholder a pro rata portion (based upon the respective
numbers of shares of such Type of Securities then held by each of the
participating Non-Transferring Same-Type Stockholders (calculated on a Fully
Diluted Basis)) of the Securities of such Type being offered.
(b) If either (i) the Securities proposed to be transferred are AGI Holder
Securities, Klearfold Holder Securities, Tinsley Holder Securities or Heritage
Securities and the Non-Transferring Same-Type Stockholders do not duly elect to
purchase all of such Securities within the Initial Stockholder Election Period
in accordance with Section 1.2(a) hereof then within fifteen (15) days of the
expiration of the Initial Stockholder Election Period, or (ii) the Securities
proposed to be transferred are Other Stockholder Securities, then within thirty
(30) days after the delivery of the Transfer Offer Notice (such period of
fifteen or thirty days pursuant to clauses (i) or (ii) above, as applicable,
being referred to herein as the "Holding Election Period"), Holding may elect to
purchase any or all of the Securities specified in the Transfer Offer Notice, at
the price and on the terms specified therein, but excluding any such Securities
which Non-Transferring Same-Type Stockholders shall have elected to purchase
pursuant to Section 1.2(a) hereof, to the extent applicable (provided, that
Holding shall have the option to substitute for any non-cash consideration
proposed to be received in respect of such proposed Transfer, cash in the amount
of the fair market value thereof), by delivering written notice of such election
to the Transferring Stockholder within the applicable Holding Election Period.
If Holding, alone or in combination with the Non-Transferring Same-Type
Stockholders, duly elects to purchase all of the Securities so offered, the
Transfer of such Securities shall be consummated not less than ten (10) nor more
than thirty (30) days after the expiration of the applicable Holding Election
Period. The date of the consummation shall be determined by a majority vote of
the Board of Directors of Holding, on the date it elects to purchase such
Securities, and Holding shall promptly, but not less than ten (10) days prior to
the proposed date of consummation, provide notice thereof to the Non-
Transferring Same-Type Stockholders, if any, which elected to purchase any of
the Securities proposed to be Transferred pursuant to Section 1.2(a) hereof.
<PAGE>
-5-
(c) If Holding and/or, to the extent applicable, the Non-Transferring Same-
Type Stockholders do not duly elect to purchase all of the Securities being
offered within the applicable Holding Election Period, and/or the Initial
Stockholder Election Period, respectively, the Transferring Stockholder shall
within fifteen (15) days after the end of the applicable Holding Election Period
deliver a further Transfer Offer Notice as to such Securities, in the same form
and substance as the first Transfer Offer Notice delivered pursuant to Section
1.2(a) hereof or, in the case of a proposed sale by an Other Stockholder,
Section 1.2(b) hereof, above, to each of the Stockholders other than the Non-
Transferring Same-Type Stockholders (if any) entitled to receive such first
Transfer Offer Notice (collectively, such other Stockholders being referred to
herein as the "Other Non-Transferring Stockholders") in accordance with the
provisions of Section 9(b) hereof specifying, in addition, the number of
Securities which the Non-Transferring Same-Type Stockholders and Holding have
elected to purchase in accordance with Sections 1.2(a) and 1.2(b) hereof, and
the number of Securities remaining to be purchased (the "Remaining Securities").
Each of the Other Non-Transferring Stockholders may elect to purchase all of the
Remaining Securities specified in the further Transfer Offer Notice delivered to
them (but collectively, not more nor less than all of the Remaining Securities),
at the price and on the terms specified therein (provided, that each such Other
Non-Transferring Stockholder shall have the option to substitute for any non-
cash consideration proposed to be received in respect of such proposed Transfer,
cash in the amount of the fair market value thereof), by delivering written
notice of such election to the Transferring Stockholder within 15 days after the
delivery of such Transfer Offer Notice (the "Second Stockholder Election
Period"). If one or more of such Other Non-Transferring Stockholders duly elect
to purchase all of the Securities so offered, the Transfer of such Securities
shall be consummated 30 days after the expiration of the Second Stockholder
Election Period, or such earlier date as agreed upon by the Other Non-
Transferring Stockholders who or which will, collectively, be purchasing not
less than a majority of the Securities so offered, provided that written notice
of such earlier date is provided not later than ten (10) days prior thereto to
the Transferring Stockholder, Holding, and each of the other Stockholders who or
which shall have elected to purchase Securities pursuant to this Section 1.2. If
the Other Non-Transferring Stockholders oversubscribe for the Securities being
offered, each Other Non-Transferring Stockholder electing to purchase such
Securities shall be entitled to purchase from the Transferring Stockholder a pro
rata portion (based upon the respective numbers of Securities then held by each
of the participating Other Non-Transferring Stockholders (calculated on a Fully
Diluted Basis)) of the Securities being offered.
(d) In the event that, collectively, Holding, the Non-Transferring Same-
Type Stockholders and the Other Non-Transferring Stockholders fail to purchase
all of the Securities specified in any Transfer Offer Notice in accordance with
Sections 1.2(a), (b) and (c) hereof, the elections to so purchase pursuant to
those sections shall be void and of no further effect, and the Transferring
Stockholder may, within 90 days after the expiration of the Second Stockholder
Election Period, complete the Transfer of such Securities for such consideration
and on such other terms as are no more favorable to the Transferees than the
terms offered to the Non-Transferring Same-Type Stockholders and the Other Non-
Transferring Stockholders in their respective Transfer Offer Notices, provided,
that no such Transfer may be completed except in compliance with Section 1.3, if
applicable, and further provided, that each of such
<PAGE>
-6-
Transferees shall have executed and delivered to Holding an Instrument of
Accession as a condition precedent to such Transfer. If the Transferring
Stockholder fails to consummate such Transfer within the 90-day period after the
expiration of the Second Stockholder Election Period, any subsequent proposed
Transfer of such Securities shall be once again subject to all of the provisions
of Section 1.1 above.
(e) In the event that non-cash consideration is proposed to be received in
respect of any proposed Transfer by a Transferring Stockholder, the Initial
Stockholder Election Period (or, if the Transferring Stockholder is an Other
Stockholder, the Holding Election Period) shall be extended by the period of
time necessary to determine the fair market value of such non-cash
consideration.
1.3. General Co-Sale Rights. In the event that, collectively, Holding, the
Non-Transferring Same-Type Stockholders and the Other Non-Transferring
Stockholders fail to purchase all of the Securities specified in any Transfer
Offer Notice delivered by a Transferring Stockholder who immediately prior to
giving effect to the Transfer described in such Transfer Offer Notice holds at
least five percent (5%) of the total number of outstanding shares of Common
Stock, on a Fully Diluted Basis, each of the Non-Transferring Same-Type
Stockholders and the Other Non-Transferring Stockholders (collectively, the Non-
Transferring Stockholders") may elect to participate in the contemplated
Transfer of Securities by delivering written notice to the Transferring
Stockholder before the lapse of 15 days after expiration of the Second
Stockholder Election Period. If any of such Non-Transferring Stockholders
elects to participate in such sale, the Transferring Stockholder and each of
such participating Non-Transferring Stockholders shall be entitled to sell in
the proposed Transfer a number of Securities equal to the product of (x) a
fraction, the numerator of which is the number of Securities (calculated on a
Fully Diluted Basis) held by such Person, and the denominator of which is the
aggregate number of Securities (calculated on a Fully Diluted Basis) owned by
the Transferring Stockholder and such participating Non-Transferring
Stockholders, multiplied by (y) the number of Securities to be Transferred in
the contemplated Transfer.
(For example: If the notice from the Transferring Stockholder contemplated
a Transfer of 100 shares of Common Stock by the Transferring Stockholder,
and the Transferring Stockholder at such time owns 300 shares of Common
Stock, and if one Non-Transferring Stockholder elects to participate in
such sale pursuant to this Section 1.3 and such Non-Transferring
Stockholder owns 200 shares of Common Stock (calculated on a Fully Diluted
Basis), such Transferring Stockholder would be entitled to sell 60 shares
of Common Stock (300/500 x 100 shares) and such Non-Transferring
Stockholder would be entitled to sell 40 shares of Common Stock (200/500 x
100 shares).)
The Transferring Stockholder shall use all commercially reasonable efforts to
obtain the agreement of the prospective Transferee(s) to the participation of
the Non-Transferring Stockholders in any proposed sale, and in any event shall
not Transfer any Securities to the prospective Transferee(s) if the prospective
Transferee(s) declines to allow the participation of the Non-Transferring
Stockholders on the terms specified herein. The Transferring
<PAGE>
-7-
Stockholder may, within 90 days after the expiration of the Second Stockholder
Election Period, complete the Transfer of such Securities (i) with respect to
which the Transferring Stockholder has duly given a Transfer Offer Notice, (ii)
with respect to which neither the Company nor any of the Non-Transferring
Stockholders has duly exercised its rights to acquire such Securities pursuant
to Section 1.2 hereof, and (iii) as constitute the excess of the Securities
described in the applicable Transfer Offer Notice over the aggregate amount of
Securities as to which Non-Transferring Stockholders have duly elected to sell
in such proposed sale pursuant to and in accordance with this Section 1.3, for
such consideration and on such other terms as are no more favorable to the
Transferring Stockholder than the terms offered to the Non-Transferring
Stockholders in the applicable Transfer Offer Notice; provided, that each of
such Transferees shall have executed and delivered to Holding an Instrument of
Accession as a condition precedent to such Transfer. If the Transferring
Stockholder fails to consummate such Transfer within the 90-day period after the
expiration of the Second Stockholder Election Period, any subsequent proposed
Transfer of such Securities shall be once again subject to all of the provisions
of Section 1.1 above.
1.4. Co-Sale Rights of Klearfold Management Holders. In the event that, at
any time prior to June 7, 2002, the Heritage Holders shall have elected to
Transfer more than five percent (5%) of the total amount of Heritage Securities
then held by the Heritage Holders, and such Transfer has been approved in
writing by Stockholders holding a majority of the Securities then outstanding
(other than Securities then held by the Heritage Holders and their Affiliates)
pursuant to and in accordance with Section 1.1(c) hereof, but such Transfer (a)
has not been approved by the Majority Klearfold Holders, then the Herrin
Stockholders may elect to participate in the contemplated Transfer of Heritage
Securities and Transfer a proportionate percentage of their Klearfold Holder
Securities, by delivery of a written notice (a "Klearfold Co-Sale Notice") from
the Herrin Stockholders to Holding, the Heritage Holders, the AGI Management
Stockholders and the Tinsley Management Stockholders within 15 days after the
date of such approval, and/or (b) has not been approved by the Majority Tinsley
Holders, then the Tinsley Management Stockholders may elect to participate in
the contemplated Transfer of Heritage Securities and Transfer a proportionate
percentage of their Tinsley Holder Securities, by delivery of a written notice
(a "Tinsley Co-Sale Notice") from the Tinsley Management Stockholders to
Holding, the Heritage Holders, the AGI Management Stockholders and the Klearfold
Management Stockholders, also within 15 days after the date of such approval.
Upon delivery of a Klearfold Co-Sale Notice or Tinsley Co-Sale Notice (each, a
"Co-Sale Notice") the provisions of Section 1.3 shall apply, mutatis mutandis,
to the participation by the Herrin Stockholders and/or Tinsley Management
Stockholders, as the case may be, who shall have elected to participate in the
contemplated Transfer (together, all such Herrin Stockholders and Tinsley
Management Stockholders participating in a contemplated Transfer under this
Section 1.4, the "Co-Selling Stockholders"), as participating Non-Transferring
Stockholders, in the proposed Transfer by the Heritage Holders, as Transferring
Stockholders. Notwithstanding the foregoing, simultaneously with, and as a
condition to, any participation by any Co-selling Stockholders in any proposed
Transfer by the Heritage Holders, such Co-Selling Stockholders and the Heritage
Holders, pro rata in accordance with the respective number of shares of Common
Stock then held by each of them, shall offer to the AGI Management Stockholders
the opportunity to acquire up to a maximum number of the
<PAGE>
-8-
Klearfold Holder Securities, Tinsley Holder Securities and Heritage Securities
to be Transferred (collectively, the "Co-Sale Securities") equal to the greater
of (a) the aggregate number of Co-Sale Securities proposed to be Transferred by
the Co-Selling Stockholders, and (b) that number of Co-Sale Securities, the
acquisition of which by the AGI Management Stockholders would ensure the
ownership by the AGI Management Stockholders, collectively, of fifty percent
(50%) plus one of the then outstanding shares of Common Stock. Any such purchase
of Co-Sale Securities shall be at the same price and on the same terms specified
for the proposed Transfer by the Heritage Holders (provided, that each AGI
Management Stockholder electing to acquire any Co-Sale Securities shall have the
option to substitute for any non-cash consideration proposed to be received in
respect of such proposed Transfer, cash in the amount of the fair market value
thereof based on an appraisal by an Independent Appraiser). If the AGI
Management Stockholders wish to exercise their right to acquire any Co-Sale
Securities, the Majority AGI Holders shall so indicate by written notice to
Holding, the Heritage Holders and, in the event of a delivery of a Klearfold Co-
Sale Notice, the Klearfold Management Stockholders, and/or, in the event of a
delivery of a Tinsley Co-Sale Notice, the Tinsley Management Stockholders, in
each case within 30 days of the date of such Co-Sale Notice (or such longer
period, not to exceed 60 days after the effective date of delivery of such Co-
Sale Notice, as may be required to determine the value of non-cash
consideration, if non-cash consideration is proposed to be received in respect
of such proposed Transfer). Unless such notice shall have been timely delivered,
the Klearfold Management Stockholders and Tinsley Management Stockholders shall
be free to participate fully in the proposed Transfer by the Heritage Holders in
accordance with the first sentence of this Section 1.4, provided that no such
Transfer shall be completed until after the end of the period during which a Co-
Sale Notice may be delivered. If such notice is delivered within such 30-day
period, the proposed Transfer by the Heritage Holders shall be delayed for such
period, not to exceed six (6) months from the date of the first Co-Sale Notice,
as shall be reasonably necessary to permit those AGI Management Stockholders who
so wish to acquire any such Co-Sale Securities pursuant to this Section 1.4.
1.5. Closings.
(a) In the event of any exercise by any of the Non-Transferring
Stockholders of their first-refusal rights under Section 1.2 hereof, the
Transferring Stockholder shall Transfer to each such Non-Transferring
Stockholder the Securities to be purchased by such Non-Transferring Stockholder
at a closing to be held at 10:00 a.m. at Holding's principal executive offices
on the date specified in accordance with the applicable provisions of Section
1.2 hereof. At such closing, the Transferring Stockholder shall deliver to each
such Non-Transferring Stockholder the certificate(s) representing the Securities
to be purchased by such Non-Transferring Stockholder (properly endorsed or
accompanied by duly executed stock powers or assignments, with signature(s)
guaranteed or similar appropriate documentation of authority to transfer), free
and clear of Liens, against payment therefor as provided herein by certified or
bank check payable to the Transferring Stockholder, or by wire transfer to an
account designated by the Transferring Stockholder.
<PAGE>
-9-
(b) In the event of any exercise by any of the Non-Transferring
Stockholders of their co-sale rights under Sections 1.3 or 1.4 hereof, the
closing of the sale of the Securities to be sold by such Non-Transferring
Stockholders pursuant to such rights shall take place at the same date, time,
and place at which the Transferring Stockholder is to consummate his or its
Transfer of Securities to the prospective Transferee. At such closing, the
Transferring Stockholder and each of the Non-Transferring Stockholders shall
deliver the certificate(s) representing the respective Securities to be sold by
him or it (properly endorsed or accompanied by duly executed stock powers or
assignments, with signature(s) guaranteed or similar appropriate documentation
of authority to transfer), free and clear of Liens, against payment therefor as
provided herein by certified or bank check payable to him or it, or by wire
transfer to an account designated by him or it.
(c) In the event of any exercise by any of the AGI Management Stockholders
of their rights under Section 1.4 hereof, the Transferring Klearfold Management
Stockholders and Heritage Holders shall Transfer to each such AGI Management
Stockholder the Co-Sale Securities to be purchased by such AGI Management
Stockholder at a closing to be held at the same date, time, and place, subject
to the provisions of Section 1.4 above, as that at which the Transferring
Heritage Holders are to consummate the Transfer of their Securities to their
prospective Transferee pursuant to Section 1.1(c). At such closing, the
Transferring Klearfold Management Stockholders and Heritage Holders shall
deliver to each such AGI Management Stockholder the certificate(s) representing
the Co-Sale Securities to be purchased by such AGI Management Stockholder
(properly endorsed or accompanied by duly executed stock powers or assignments,
with signature(s) guaranteed or similar appropriate documentation of authority
to transfer), free and clear of Liens, against payment therefor as provided
herein by certified or bank check payable to the applicable Transferring
Klearfold Management Stockholder or Heritage Holder, as the case may be, or by
wire transfer to an account designated by such Stockholder.
1.6. Transfers of Securities in Breach of this Agreement. Any attempted or
purported Transfer of Securities in breach of this Agreement shall be wholly
void, and commencing immediately upon the date of such attempted or purported
Transfer (a) no dividend or distribution of any kind shall be paid by Holding in
respect of such Securities (all rights to any such payment being hereby
irrevocably waived and relinquished by the Stockholder attempting such transfer
or purporting so to Transfer Securities, for both himself or itself and any
purported Transferee), (b) the voting rights of such Securities, if any, shall
terminate, and (c) neither the Stockholder attempting such transfer or
purporting so to Transfer Securities nor the purported Transferee shall be
entitled to any rights in respect of such Securities unless and until such
attempted or purported Transfer in breach of this Agreement has been rescinded.
1.7. Other Holder Co-Sale Rights. Notwithstanding anything to the contrary
stated herein, each of the Stockholders hereby agrees to honor and comply with
any co-sale rights granted to any other holder of any Securities or options or
warrants to acquire Securities with respect to the Transfer of such other
holder's Securities or options or warrants, as the case may be, including any
such rights under employee stock incentive or option plan or any other
<PAGE>
-10-
agreement with Holding granting co-sale rights to any such holder, provided that
such other holder's co-sale rights are no more extensive or favorable than the
rights of Non-Transferring Stockholders under Section 1.3 hereof.
2. Sale of Holding.
2.1 Approved Sale. If at any time Holding's Board of Directors approves the
sale of Holding or its business, whether by merger, consolidation, sale of all
or substantially all of the assets or capital stock of Holding and/or one or
more of its Subsidiaries, or otherwise, and (a) if on or after March 12, 2000,
such approval was made in accordance with Section 3.2 and was permitted pursuant
to Section 2.2(a), and (b) if prior to March 12, 2000, each of the Majority AGI
Holders, the Majority Heritage Holders and the Majority Klearfold Holders have
consented to such sale pursuant to and in accordance with Section 3.3 (any such
proposed sale, or any sale to one or more AGI Prospective Purchasers (as defined
in Section 2.2(a)(vii) below) pursuant to and in accordance with Section 2.2, an
"Approved Sale"), then:
(i) Holding and each of the Stockholders shall cooperate fully in any
Approved Sale and shall not take any action that is prejudicial to or
inconsistent with such Approved Sale.
(ii) Each Stockholder (A) shall vote or cause to be voted all
Securities having voting rights that are owned by such Stockholder or over
which such Stockholder has voting control to approve the terms of any such
Approved Sale and such matters ancillary thereto as may be necessary or
appropriate, in the judgment of the Board of Directors of Holding, to
effect such Approved Sale, (B) hereby irrevocably waives and relinquishes,
to the fullest extent permitted by applicable law, all rights to object to
or dissent from such Approved Sale (including without limitation any
appraisal or similar rights), and agrees to raise no objections against,
such Approved Sale, (C) with respect to any Approved Sale structured as a
sale of stock, shall sell all of such Stockholder's Securities on the terms
and conditions approved by the Board of Directors of Holding, and (D) upon
Holding's request, shall deliver the certificates representing all
Securities owned or controlled by such Stockholder (duly endorsed, or
accompanied by duly executed instruments of transfer) in escrow (pending
receipt of the purchase price therefor) to Holding's counsel in such sale.
(iii) Holding shall cause its officers, employees, agents,
contractors, and other Persons under its control to cooperate in any
Approved Sale and not to take any action that might impede any such sale.
Without limiting the generality of the foregoing, any resignation of any
office of Holding prior to closing of any Approved Sale by a director or
executive officer of Holding shall be a breach of this Section 2.1(iii).
Pending the completion of any Approved Sale, Holding shall operate only in
the ordinary course and shall use all commercially reasonable efforts to
maintain all existing business relationships in good standing.
2.2. Right of First Refusal.
<PAGE>
-11-
(a) Right of First Refusal. If at any time on or after March 12, 2000,
Holding's Board of Directors wishes to approve the sale of Holding or its
business, whether by merger, consolidation, sale of all or substantially all of
the assets or capital stock of Holding and/or one or more of its Subsidiaries,
or otherwise (any such sale, "Qualified Proposed Sale"), whether pursuant to the
terms of a bona fide offer to purchase Holding or its business received by
Holding from a third party not Affiliated to any Stockholder (a "Purchase
Offer"), or, subject to the limitations set forth in Section 2.2(b) below,
pursuant to a decision by a majority of the members of the Board to offer
Holding or its business for sale (a "Sale Decision"), the Board shall not
recommend approval or approve any such Qualified Proposed Sale unless such
recommendation or approval is made in accordance with Section 3.2 and Holding
has complied in full with the terms of this Section 2.2(a).
(i) Immediately following any Sale Decision or the receipt by Holding
of any Purchase Offer, Holding shall provide written notice thereof (a
"Sale Notice") to the AGI Prospective Purchasers, setting forth in such
Sale Notice in reasonable detail the nature and the proposed terms and
conditions of the Qualified Proposed Sale, including, without limitation,
the aggregate consideration to be paid (the "Offer Price"), whether such
Sale Notice is being delivered pursuant to a Sale Decision or with respect
to a Purchase Offer and, in the case of any Purchase Offer, the identity of
the proposed purchaser, details of any deferred payment terms and other
details as to the structure of the proposed consideration, together with a
copy of the Purchase Offer if in writing.
(ii) By delivery of written notice (an "AGI Purchase Notice") to
Holding within 30 days of the effective date of delivery of the Sale Notice
(or such longer period, not to exceed 60 days after the effective date of
delivery of the Sale Notice, as may be required to determine the value of
non-cash consideration, if non-cash consideration is proposed to be
received in respect of such Qualified Proposed Sale), the AGI Prospective
Purchasers may elect to purchase the following (in any such case, the
"Items To Be Sold"): (A) all of the assets, stock or other properties
described in the Sale Notice, at the Offer Price and on the other terms
specified therein; (B) if the Qualified Proposed Sale described in the Sale
Notice is a purchase and sale of all or substantially all of the capital
stock of Holding, all of the shares of capital stock proposed to be sold
pursuant to such Qualified Proposed Sale, other than such shares then owned
by the AGI Prospective Purchasers, at a price per share equivalent to the
price per share which the holders of such capital stock would have received
in the Qualified Proposed Sale described in the applicable Sale Notice and
on the other terms specified therein; or (C) if the Qualified Proposed Sale
described in the Sale Notice is a purchase and sale of all or substantially
all the assets of Holding, at the AGI Prospective Purchasers' discretion,
all of the shares of Holding's capital stock, other than such shares then
owned by the AGI Prospective Purchasers, at a price per share equivalent to
the distribution per share which the holders of Holding's capital stock
(other than the AGI Prospective Purchasers) would have received in the
event that Holding had paid out the purchase price, net of expenses and
taxes incurred in connection with such transaction, for all or
substantially all of its assets as a distribution
<PAGE>
-12-
on its capital stock; provided, however, that if non-cash consideration is
proposed to be received in any such case, the AGI Prospective Purchasers
shall have the right to pay cash in the amount of the fair market value
thereof pursuant to an appraisal obtained by them from an Independent
Appraiser; and any such appraisal shall be included with the applicable AGI
Purchase Notice.
(iii) If (x) the AGI Prospective Purchasers do not timely deliver an
AGI Purchase Notice in accordance with paragraph (ii) above, or (y) the AGI
Prospective Purchasers do deliver an AGI Purchase Notice in accordance with
paragraph (ii) above, but fail to consummate an AGI Purchase (as defined
below) pursuant to and in accordance with Section 2.2(a)(vi) below, then
Holding shall be free, in the case of clause (x), for a period of five (5)
months from the last date upon which an AGI Purchase Notice might have been
timely delivered pursuant to paragraph (ii) above, and in the case of
clause (y), for a period of 12 months from the applicable AGI Purchase
Termination Date (such period, as determined under clause (x) or clause (y)
above, the "Board Sale Period") to pursue and complete the Qualified
Proposed Sale, and such sale completed in accordance herewith shall be an
"Approved Sale" hereunder, subject to the terms and conditions set forth in
Sections 2.1 and 2.3 hereof. Holding shall notify the AGI Prospective
Purchasers if at any time during a Board Sale Period the fair market value
of the aggregate consideration being offered (with any non-cash
consideration being valued on the same basis as employed in the appraisal,
if any, obtained by the AGI Prospective Purchasers pursuant to paragraph
(ii) above, and if no such appraisal shall have been obtained, as valued in
accordance with an appraisal obtained by Holding from an Independent
Appraiser reasonably acceptable to the AGI Prospective Purchasers) shall be
less than 92.5% of the Offer Price. At any such time during a Board Sale
Period, or if the Qualified Proposed Sale has not been consummated within
the applicable Board Sale Period and Holding's Board of Directors
determines at the end of such period, subject to the limitations of Section
2.2(b), that it wishes to continue to pursue a Qualified Proposed Sale,
then and in either such case Holding shall provide written notice thereof
to the AGI Prospective Purchasers (a "Second Sale Notice"), setting forth
in such Second Sale Notice the information described in paragraph (i) above
with respect to the terms and conditions of the Qualified Proposed Sale as
then proposed, together with any appraisal obtained by Holding of any non-
cash consideration offered in such Qualified Proposed Sale. If the AGI
Prospective Purchasers elect to purchase the Items To Be Sold as described
in such Second Sale Notice, then they shall so notify Holding by written
notice (also an "AGI Purchase Notice") within 30 days of the effective date
of delivery of the Second Sale Notice.
(iv) If an AGI Purchase Notice shall have been duly and timely
delivered in accordance with paragraphs (ii) or (iii), then the purchase of
the Items To Be Sold (the "AGI Purchase") shall be consummated, unless
otherwise agreed by the AGI Prospective Purchasers, on a pro rata basis
based upon the ratio which the number of shares of AGI Holder Securities
then held by each such electing AGI Prospective Purchaser bears to the
total of AGI Holder Securities held by all of the AGI Prospective
<PAGE>
-13-
Purchasers who have elected to participate in such purchase (in all cases
calculated on a Fully Diluted Basis). The AGI Purchase shall be consummated
on the terms, as to price and other conditions, referred to in paragraph
(ii) above and such Purchase shall be an "Approved Sale" hereunder, subject
to the terms and conditions set forth in Sections 2.1 and 2.3 hereof. A
legally-binding and enforceable agreement to complete the AGI Purchase on
such terms within a period not to exceed 30 days after the date of such
agreement and without a financing contingency (an "AGI Purchase Contract")
shall have been entered into on the later of (x) if the Qualified Proposed
Sale were pursuant to a Purchase Offer, the date which the prospective
purchaser proposed to consummate such purchase as described in such
Purchase Offer, or (y) the date five (5) months following the date of the
applicable AGI Purchase Notice, subject in each case to the AGI Prospective
Purchasers' compliance with the provisions of paragraph (v) below.
(v) From and after the delivery of an AGI Purchase Notice, the AGI
Prospective Purchasers shall use their best efforts to inform Holding's
Board of Directors as to their progress or lack thereof in procuring
financing for the completion of the AGI Purchase. Without limiting the
foregoing general obligation, (x) within 60 days of the delivery of the AGI
Purchase Notice, the AGI Prospective Purchasers shall have delivered to
Holding's Board of Directors reasonably detailed expressions of interest
from one or more financing sources regarding financing in the amounts
necessary to complete the AGI Purchase and pay the AGI Prospective
Purchasers' related expenses, and (y) within 120 days of the delivery of
the AGI Purchase Notice, the AGI Prospective Purchasers shall have
delivered to Holding's Board of Directors letter(s) of intent from one or
more reasonably reputable financing sources setting forth reasonably
detailed proposals for the provision to the AGI Prospective Purchasers of
financing in such amounts as shall then be necessary to complete the AGI
Purchase and pay the AGI Prospective Purchasers' related expenses, together
with a reasonably complete draft of an AGI Purchase Contract. In any event,
the AGI Prospective Purchasers shall deliver to Holding's Board of
Directors copies of all such expressions of interest and letters of intent
and copies of the first and last drafts of financing documentation and of
any proposed AGI Purchase Contract, as soon as such documents are received
by such AGI Prospective Purchasers. So long as the AGI Prospective
Purchasers are complying with the provisions of this Section 2.2(a)(v),
Holding and each of the Stockholders other than the AGI Prospective
Purchasers agree to act with respect to the proposed AGI Purchase in
accordance with the provisions of Section 2.1, and such AGI Purchase shall
be deemed to be an Approved Sale hereunder. Holding and each of such other
Stockholders agree to treat as confidential all information regarding the
proposed AGI Purchase pursuant to this Section 2.2(a)(v).
(vi) If (A) at any time following delivery of an AGI Purchase Notice
pursuant to paragraphs (ii) or (iii) above and prior to entering into an
AGI Purchase Contract, (x) the AGI Prospective Purchasers determine in good
faith (provided that if requested in good faith by any director of Holding,
the AGI Prospective Purchasers shall within ten (10) days after such
request send written notice to Holding's Board of Directors of their
<PAGE>
-14-
determination as to such matters), that the AGI Prospective Purchasers will
either (1) not be able to enter into an AGI Purchase Contract within the
period specified in paragraph (iv) above, or (2) not be able to complete an
AGI Purchase on the terms required by this Section 2.2(a), or (y) the AGI
Prospective Purchasers elect not to proceed with an AGI Purchase, or (B)
the AGI Prospective Purchasers shall have breached or been unable to comply
with the requirements of paragraphs (iv) and/or (v) above, or (C) the AGI
Prospective Purchasers have not, within ten (10) days of being requested to
do so by any director of Holding, delivered to Holding a written
determination as described in clause (A)(x) above, then, in the case of
clause (A) above, the AGI Prospective Purchasers shall immediately so
notify Holding's Board of Directors in writing, and in any such case the
rights of the AGI Prospective Purchasers to pursue an AGI Purchase pursuant
to this Section 2.2(a) shall thereupon terminate, and thereafter the AGI
Prospective Purchasers shall only be entitled to pursue an AGI Purchase
pursuant to and in accordance with Section 2.2(b) below.
(vii) The term "AGI Prospective Purchasers" means Richard Block,
individually, together with his Family Members and Family Trusts. No AGI
Prospective Purchaser may assign any or all of his or its rights to deliver
an AGI Purchase Notice, to pursue an AGI Purchase, or to complete an AGI
Purchase under this Section 2.2(a) without the prior written consent of
Holding, provided that if the proposed assignee is an entity under the
control of ("control", for purposes of this Section 2.2(a)(vii), includes
Richard Block holding a senior executive position with, or membership of
the board of, such entity) or majority-owned by an AGI Prospective
Purchaser, then such consent shall not be unreasonably withheld or delayed.
(b) Subsequent Purchase Rights. In the event that an AGI Purchase Notice
(other than an Exempt Purchase Notice, as defined below) shall have been
delivered in accordance with Sections 2.2(a)(ii) or 2.2(a)(iii) above, and the
period for the AGI Prospective Purchasers to pursue an AGI Purchase pursuant
thereto shall have terminated pursuant to and in accordance with Section
2.2(a)(vi) above (the date of such termination, the "AGI Purchase Termination
Date"), then the AGI Prospective Purchasers shall have the right to deliver not
more than one additional AGI Purchase Notice with respect to any Sale Notices
delivered prior to June 7, 2002, provided that this limitation shall not apply
to limit the AGI Prospective Purchasers' right to deliver AGI Purchase Notices
which are Exempt Purchase Notices under clause (B) of the definition thereof,
and provided further that any AGI Purchase Notice otherwise permitted to be
delivered hereunder and which becomes an Exempt Purchase Notice under clause (A)
of the definition thereof shall not be considered to be an additional AGI
Purchase Notice for purposes of this limitation. If, in response to any Sale
Notice delivered prior to June 7, 2002, the AGI Prospective Purchasers shall
have delivered an AGI Purchase Notice which was not an Exempt Purchase Notice,
then the AGI Prospective Purchasers shall have no right to deliver an AGI
Purchase Notice in response to a Sale Notice delivered after June 7, 2002,
unless such AGI Purchase Notice would be an Exempt Purchase Notice under clause
(B) of the definition thereof, and would be delivered in connection with a Sale
Notice originally delivered prior to June 7, 2002. If the first AGI Purchase
Notice which is not an Exempt Purchase Notice is delivered in response to a Sale
Notice delivered after June 7, 2002,
<PAGE>
-15-
then, except with respect to Exempt Purchase Notices described in clause (B) of
the definition thereof, no other AGI Purchase Notice may be provided under this
Agreement. Notwithstanding anything herein to the contrary, (i) to the extent
that two AGI Purchase Notices shall have been delivered in response to Sale
Notices with respect to Qualified Proposed Sales, other than Exempt Purchase
Notices under clause (B) of the definition thereof, no further AGI Purchase
Notices may be delivered, and (ii) Exempt Purchase Notices under clause (B) of
the definition thereof may be delivered at any time, including after June 7,
2002, to the extent that any such Exempt Purchase Notice relates to a Sale
Notice with respect to which the AGI Prospective Purchasers originally had the
right to deliver an AGI Purchase Notice under the other terms of this Section
2.2(b).
As used herein, the term "Exempt Purchase Notice" means (A) any AGI
Purchase Notice delivered in response to a Sale Decision, if no Qualified
Proposed Sale is consummated either pursuant to such AGI Purchase Notice or
during the applicable Board Sale Period thereafter, or (B) any AGI Purchase
Notice delivered during a Board Sale Period in response to a Second Sale Notice
disclosing an Offer Price which is less than 92.5% of the Offer Price disclosed
in the Sale Notice delivered prior to the commencement of such Board Sale
Period.
In the event that a further AGI Purchase Notice is permitted to be
delivered in accordance with the foregoing provisions of this Section 2.2(b),
the provisions of Section 2.2(a) shall apply to such AGI Purchase Notice and to
the rights and obligations of Holding and the AGI Prospective Purchasers arising
therefrom, except that the period by which an AGI Purchase Contract is to have
been entered into pursuant to Section 2.2(a)(iv)(y) shall be reduced from six
(6) months (or seven (7), as the case may be) to four (4) months (or five (5),
as the case may be), and the periods of 60 and 120 days specified in Section
2.2(a)(v) shall each be reduced by 30 days to 30 and 90 days, respectively.
Subject to the foregoing limitations, Holding shall comply with the provisions
of Section 2.2(a) with respect to any and all Qualified Proposed Sales,
including the requirement to deliver to the AGI Prospective Purchasers Sale
Notices with respect thereto, from and after March 12, 2000, provided, however,
that in the event that a Sale Notice resulting from a Sale Decision has been
delivered and no Qualified Proposed Sale has been consummated within a period of
six months (if no AGI Purchase Notice was delivered in connection therewith) or,
in all other cases, twelve (12) consecutive months following such delivery (as
such period may have been extended to permit the valuation of any proposed non-
cash consideration), then Holding may not deliver another Sale Notice resulting
from a Sale Decision for a period after the end of such 6- or 12-month period,
as the case may be (as so extended), equal to the lesser of (A) six (6) months,
or (B) the period to June 7, 2002 (provided that, for the avoidance of doubt,
this provision shall not limit Holding's obligation to deliver Sale Notices with
respect to Purchase Offers received by Holding).
(c) Delay in Completion of Purchase. If a "Change of Control", as such term
is defined in the Indenture, would occur as a result of an exercise of the AGI
Proposed Purchasers' rights under this Section 2.2, then the closing of the
transaction which would otherwise result in such Change of Control may be
delayed, at the option of the AGI Prospective Purchasers, for a period not to
exceed ninety (90) days beyond the end of the
<PAGE>
-16-
period(s) required for the completion thereof under the applicable sections
above, notwithstanding any provisions to the contrary in such sections.
2.3. Received Consideration. The obligations of the Stockholders with
respect to any Approved Sale are subject to the satisfaction of the condition
that upon the consummation of such sale, all of the holders of Common Stock
shall receive the same forms and amounts of consideration per share outstanding,
or if any holders are given an option as to the form and amount of consideration
to be received per share, all holders shall be given the same option.
3. Voting.
3.1. Board of Directors.
(a) Subject to the provisions of Sections 3.1(b) - (e) hereof, in any and
all elections of directors of Holding, AGI, Klearfold, and any other Domestic
Subsidiary of Holding existing from time to time (whether at a meeting or by
written consent in lieu of a meeting), each Stockholder shall vote or cause to
be voted all Securities having voting rights that are owned by such Stockholder
or over which such Stockholder has voting control, and/or, as relevant, shall
use such Stockholder's best efforts to cause such Stockholder's designees as
directors to vote so as to fix the number of directors of Holding at eleven, to
cause such Stockholder's designees as directors of Holding to so act as to
ensure that Holding, in its capacity as stockholder of AGI, Klearfold, and any
other such Domestic Subsidiary, fixes the number of directors of each of AGI,
Klearfold, and any other such Domestic Subsidiary at eleven, and, in each case,
to nominate and elect, or use its best efforts to cause to be nominated and
elected, such directors of each of Holding, AGI, Klearfold, and any other such
Domestic Subsidiary, respectively, as follows:
(i) Three individuals (the "AGI Directors") designated as follows: (A)
if Richard Block is both chief executive officer of Holding and holds at
least 75% (on a Fully Diluted Basis) of the number of shares of Common
Stock issued to him pursuant to the Investment Agreement, as adjusted for
splits, combinations, and other recapitalizations from and after the date
thereof, then Richard Block and two individuals designated by Richard
Block; (B) if Richard Block is both chief executive officer of Holding and
holds at least 50% but less than 75% (on a Fully Diluted Basis) of the
numbers of shares of Common Stock issued to him pursuant to the Investment
Agreement, as adjusted for splits, combinations and other recapitalizations
from and after the date thereof, then Richard Block, one individual
designated by Richard Block, and one individual designated by the holders
of a majority of the then outstanding AGI Holder Securities who are then
employed by Holding or its Subsidiaries (the "Majority AGI Employee
Holders"); (C) if Richard Block is both chief executive officer of Holding
and holds less than 50% (on a Fully Diluted Basis) of the numbers of shares
of Common Stock issued to him pursuant to the Investment Agreement, as
adjusted for splits, combinations and other recapitalizations from and
after the date thereof, then Richard Block and two individuals designated
by the Majority AGI Employee Holders; (D) if Richard Block is not chief
executive officer of Holding and holds at least 50%
<PAGE>
-17-
(on a Fully Diluted Basis) of the numbers of shares of Common Stock issued
to him pursuant to the Investment Agreement, as adjusted for splits,
combinations and other recapitalizations from and after the date thereof,
then one individual designated by Richard Block and two individuals
designated by the Majority AGI Employee Holders; and (E) if Richard Block
is not chief executive officer of Holding and holds less than 50% (on a
Fully Diluted Basis) of the number of shares of Common Stock issued to him
pursuant to the Investment Agreement, as adjusted for splits, combinations
and other recapitalizations from and after the date thereof, then three
individuals designated by the Majority AGI Employee Holders;
(ii) Two individuals (the "Heritage I Directors") designated by the
Majority Heritage I Holders;
(iii) Two individuals (the "Heritage II Directors") designated by the
Majority Heritage II Holders;
(iv) Two individuals (the "Klearfold Directors") designated by the
Majority Herrin Holders; and
(v) Two individuals (the "Tinsley Directors") designated by the
Majority Tinsley Holders or, if no Tinsley Holder Securities are then
outstanding, designated by the Tinsley Management Stockholders.
and a quorum of the Board of Directors of each of Holding, AGI, Klearfold and
any other Domestic Subsidiary of Holding existing from time to time, shall
consist of ten directors, provided, however that in the event a quorum is not
present at any meeting of the Board of Directors of any such Person, such
meeting shall be adjourned and each director notified by telephone and written
telecommunication of the date and time at which such meeting is to be
reconvened, which shall be not less than 48 hours following the time of the
originally-scheduled meeting of the Board of Directors, and at such reconvened
meeting the quorum of the Board of Directors shall consist of six directors.
(b) Notwithstanding the foregoing Section 3.1(a) and Section 3.1(c) below,
upon delivery of a written notice from the Majority Heritage Holders to Holding
(a "Board Control Notice"), and thereafter until the withdrawal by the Majority
Heritage Holders of such Board Control Notice, each Stockholder shall vote or
cause to be voted all Securities having voting rights that are owned by such
Stockholder or over which such Stockholder has voting control, and/or, as
relevant, shall use such Stockholder's best efforts to cause such Stockholder's
designees as directors to vote, so as to fix the number of directors of Holding
at fifteen, and to nominate and elect such fifteen directors as follows:
(i) Four individuals designated by the Majority Heritage I Holders
(also being referred to herein as "Heritage I Directors");
<PAGE>
-18-
(ii) Four individuals designated by the Majority Heritage II Holders
(also being referred to herein as "Heritage II Directors"); and
(iii) Seven individuals designated as follows: three designated in
accordance with Section 3.1(a)(i), also being referred to herein as "AGI
Directors"; two designated in accordance with Section 3.1(a)(iv), also
being referred to herein as "Klearfold Directors"; and two designated in
accordance with Section 3.1(a)(v), also being referred to herein as
"Tinsley Directors"; and all such individuals being referred to herein as
the "Non-Heritage Directors".
and each of the Stockholders will use its best efforts to cause Holding so to
act as to make conforming changes to the Boards of Directors of AGI, Klearfold
and each other Domestic Subsidiary of Holding existing at such time, and each of
the Stockholders shall vote or cause to be voted all Securities having voting
rights that are owned by such Stockholder or over which such Stockholder has
voting control in favor of all matters recommended for approval by the
Stockholders by any Board of Directors elected pursuant to this Section 3.1(b).
Upon its receipt of a Board Control Notice, Holding shall notify each of the
Stockholders (other than the Heritage Holders) thereof, provided that the
failure to deliver any such notification, or any such Stockholder's failure to
receive any such notification, shall not limit the effectiveness of this Section
3.1(b). While the Boards of Directors of Holding, AGI, Klearfold, and any other
Domestic Subsidiary are constituted in accordance with this Section 3.1(b) a
quorum of each of such Boards of Directors shall consist of thirteen directors,
provided, however that in the event a quorum is not present at any meeting of
the Board of Directors of any such company, such meeting shall be adjourned and
each director notified by telephone and written telecommunication of the date
and time at which such meeting is to be reconvened, which shall be not less than
48 hours following the time of the originally-scheduled meeting of the Board of
Directors, and at such reconvened meeting the quorum of the Board of Directors
shall consist of eight directors, provided, further, that in order to constitute
a quorum, the aggregate number of Heritage I Directors and Heritage II Directors
present at any such meeting (including any such reconvened meeting) shall exceed
the number of Non-Heritage Directors so present.
(c) Subject to the provisions of Sections 3.1(b) and (d) hereof, in the
event that Scott Herrin's employment with Holding and its Subsidiaries is
terminated either (A) by Scott Herrin with Good Reason, at any time after
January 1, 1999, pursuant to clause (i) of the definition of Good Reason in his
Employment, Non-Competition and Stock Repurchase Agreement with Holding, dated
as of March 12, 1998, or (B) pursuant to Section 4(f) of such Agreement, then
and thereafter each Stockholder shall vote or cause to be voted all Securities
having voting rights that are owned by such Stockholder or over which such
Stockholder has voting control, and/or, as relevant, shall use such
Stockholder's best efforts to cause such Stockholder's designees as directors to
vote, so as to fix the number of directors of Holding at thirteen, and to
nominate and elect such thirteen directors as follows:
(i) Eleven individuals designated in accordance with Sections
3.1(a)(i) - (v) hereof;
<PAGE>
-19-
(ii) One individual, who shall for the purposes hereof also be
referred to herein as an "AGI Director", designated by Richard Block, so
long as Richard Block is chief executive officer of Holding, and otherwise
by the Majority AGI Employee Holders, and approved by the Majority Heritage
Holders in their sole discretion (such approval not to be unreasonably
withheld or delayed) but who shall not be an Affiliate or Related Party of
any AGI Stockholder or any Heritage Holder, nor an employee or officer of
Holding or any of its Subsidiaries; and
(iii) One individual, who shall for the purposes hereof also be
referred to herein as a "Heritage Director", designated by the Majority
Heritage Holders, and approved by Richard Block, in his sole discretion, so
long as Richard Block is chief executive officer of Holding, and otherwise
by the Majority AGI Employee Holders, in their sole discretion (such
approval, in either such case, not to be unreasonably withheld or delayed)
but who shall not be an Affiliate or Related Party of any AGI Stockholder
or any Heritage Holder, nor an employee or officer of Holding or any of its
Subsidiaries.
and each of the Stockholders will use its best efforts to cause Holding so to
act as to make conforming changes to the Boards of Directors of AGI, Klearfold
and each other Domestic Subsidiary of Holding existing at such time, and each of
the Stockholders shall vote or cause to be voted all Securities having voting
rights that are owned by such Stockholder or over which such Stockholder has
voting control in favor of all matters recommended for approval by the
Stockholders by any Board of Directors elected pursuant to this Section 3.1(c).
Holding shall notify each of the Stockholders (other than the Herrin
Stockholders) of the occurrence of a termination of Scott Herrin's employment
with Holding as described above in this Section 3.1(c), provided that the
failure to deliver any such notice, or any such Stockholder's failure to receive
any such notice, shall not limit the effectiveness of this Section 3.1(c). While
the Boards of Directors of Holding, AGI, Klearfold, and any other Domestic
Subsidiary of Holding are constituted in accordance with this Section 3.1(c), a
quorum of each of such Boards of Directors shall consist of twelve directors,
provided, however that in the event a quorum is not present at any meeting of
the Board of Directors of any such company, such meeting shall be adjourned and
each director notified by telephone and written telecommunication of the date
and time at which such meeting is to be reconvened, which shall be not less than
48 hours following the time of the originally-scheduled meeting of the Board of
Directors, and at such reconvened meeting the quorum of the Board of Directors
shall consist of seven directors.
(d) If any vacancy shall occur in any of the Boards of Directors of
Holding, AGI Klearfold or any other Domestic Subsidiary of Holding, whether as a
result of the death, disability, resignation, or removal of any director or
otherwise, such director's replacement shall be designated by the Person or
Persons who, pursuant to subsection (a), (b) or (c) of Section 3.1 hereof, as
the case may be, originally designated such director (unless such subsection
(a), (b) or (c) as the case may be, is not at the time of designation of such
replacement director the operative section governing the election of directors
hereunder). Each
<PAGE>
-20-
Person entitled to designate a director or a replacement for a director pursuant
to this Section 3 shall also be entitled to instruct the Stockholders to remove
such director with or without cause and upon such instruction the Stockholders
shall act to remove such director, whereupon the Person(s) initiating such
removal shall be entitled, subject to the approvals required by Sections
3.1(c)(ii) or 3.1(c)(iii) above, if applicable, to designate a replacement for
any director so removed. Each Stockholder hereby agrees to vote or cause to be
voted all Securities having voting rights that are owned by such Stockholder or
over which such Stockholder has voting control, and shall use such Stockholder's
best efforts to cause such Stockholder's designees as directors to vote, so as
to comply with this Section 3.1(d).
(e) If at any time Holding or any of its Subsidiaries acquires all or
substantially all of the assets or capital stock of any Person for aggregate
consideration in excess of $10,000,000, then the Stockholders holding a majority
of the then outstanding shares of Common Stock may act to amend this Section
3.1, and any corresponding provision of Holding's or any of its Subsidiaries'
by-laws, so as to permit an increase in the number of directors required hereby
(but not, in any event, to decrease such number), provided that the additional
directors elected pursuant to any such increase may not be selected by any
existing Stockholder with the right (either individually or collectively with
other Stockholders) to designate directors under this Section 3.1 as in effect
immediately prior to such amendment, or by any Affiliate of any such
Stockholder.
(f) Each Stockholder agrees to use such Stockholder's best efforts to cause
such Stockholder's designees as directors pursuant to this Section 3.1 to
approve the directors designated by each other Stockholder pursuant to this
Section 3.1, in order to ensure that each such director is and remains a
"Continuing Director" under and as defined in the Indenture.
3.2. Consent to Certain Actions.
(a) Each of the Stockholders hereby irrevocably agrees that such
Stockholders will not vote or permit to be voted any Securities having voting
right that are owned by such Stockholder or over which such Stockholder has
voting control, and shall use such Stockholder's best efforts to cause such
Stockholder's designees as directors not to vote, in favor of any action
referred to in Schedule 4 that has not been approved by the Majority Heritage
Holders, provided, that approval (by written consent or by affirmative vote at a
meeting of the Board of Directors) by one director of Holding who was designated
as such by the Majority Heritage I Holders pursuant to any of Sections 3.1(a),
(b) or (c) above, as the case may be, or by one director of Holding who was
designated as such by the Majority Heritage II Holders pursuant to any of such
subsections, shall constitute due consent of the Majority Heritage Holders for
purposes of this Section 3.2. Notwithstanding the foregoing or anything stated
in Schedule 4 hereto, no such approval shall be required for Holding or any of
its Subsidiaries to perform any of their respective obligations under this
Agreement, the Stock Purchase Agreement, any Repurchase Agreement, Holding's By-
Laws, or any employee stock incentive or option plan or any other agreement to
which the Company is a party or otherwise board approved by the Board of
Directors of Holding prior to the Tinsley Closing Date, or approved by the Board
of Directors of Holding after the Tinsley Closing Date in accordance
<PAGE>
-21-
with the provisions hereof, nor shall any such approval be required in order for
any party hereto, or to any of the above agreements (other than Holding), or any
person having rights under any of the above documents (other than Holding), to
exercise any right or benefit provided to such party therein.
(b) Holding and each of the Stockholders hereby agree with each Stockholder
who is an employee of Holding or any of its Subsidiaries, or party to an
Employment Agreement with Holding or any of its Subsidiaries, that any wanton
and willful breach by any such employee Stockholder of the foregoing provisions
of this Section 3.2 shall constitute grounds for termination for "Cause" of such
Stockholder's employment by Holding or any such Subsidiary, notwithstanding
anything to the contrary stated in such Stockholder's Employment Agreement, but
shall not otherwise create any personal liability for any breach by such
Stockholder of the foregoing provisions of this Section 3.2.
3.3 Consent to Sale. Until March 12, 2000, and subject to the provisions of
Section 2.3 hereof, each of the Stockholders hereby irrevocably agrees that such
Stockholder shall not vote or permit to be voted any Securities having voting
rights that are owned by such Stockholder or over which such Stockholder has
voting control, and shall use such Stockholder's best efforts to cause such
Stockholder's designees as directors not to vote, in favor of any sale of
Holding or its business (whether by merger, consolidation, sale of all or
substantially all of the assets or capital stock of Holding and/or one or more
of its Subsidiaries, or otherwise), if the proposed sale has not been previously
approved in writing by the Majority AGI Holders, the Majority Heritage Holders
and the Majority Klearfold Holders.
3.4. Proxy. Each Stockholder hereby irrevocably appoints Holding as such
Stockholder's true and lawful proxy and attorney-in-fact, with full power of
substitution, to vote or cause to be voted all Securities having voting rights
that are owned by such Stockholder or over which such Stockholder has voting
control to effectuate the agreements of such Stockholder set forth in this
Agreement in the event of any breach by such Stockholder of its obligations
under this Agreement. The proxies and powers granted by each Stockholder
pursuant to this Section 3.4 are coupled with an interest and are given to
secure the performance of such Stockholder's duties under this Agreement. Such
proxies shall be irrevocable for so long as this Agreement remains in effect and
shall survive the death, incompetence, and/or disability of any Stockholder who
is an individual and the merger, liquidation, dissolution, and/or winding-up of
any Stockholder that is not an individual.
3.5. Action by Stockholders. Each Stockholder further agrees that such
Stockholder shall not vote or permit to be voted any Securities having voting
rights that are owned by such Stockholder or over which such Stockholder has
voting control, or take any other action as a stockholder of Holding, to
circumvent the voting arrangements set forth in this Section 3. Without limiting
the generality of the foregoing, each Stockholder agrees not to commence,
maintain, or participate in any legal action or proceeding (including without
limitation any stockholder's derivative suit) challenging any action or
transaction duly approved by Holding's Board of Directors in accordance with the
terms of this Agreement.
<PAGE>
-22-
4. Preemptive Rights.
4.1. Grant of Rights. Subject to the final sentence of this Section 4.1, if
Holding or any of its Subsidiaries authorizes the issuance or sale of any shares
of any class of capital stock or other securities on or prior to June 7, 2002,
Holding shall (or shall cause such Subsidiary to) first offer to sell to each
Stockholder a portion of such securities equal to the quotient (expressed as a
percentage) of (i) the number of shares of Common Stock held by such Stockholder
(calculated on a Fully Diluted Basis), divided by (ii) the number of shares of
Common Stock then outstanding (calculated on a Fully Diluted Basis). Each
Stockholder who is an "accredited investor", as defined in Rule 501 of the
regulations promulgated by the Securities and Exchange Commission under the Act
shall be entitled to purchase all or part of such stock or securities at the
same price and on the same terms (including any deferred payment terms) as such
stock or securities are to be offered to any other Persons, provided, that each
such Stockholder shall have the option to substitute for any non-cash
consideration proposed to be received in respect of such proposed issuance or
sale, cash in the amount of the fair market value thereof. Notwithstanding the
foregoing, the provisions of this Section 4.1 shall not apply to the issuance or
sale of any shares of capital stock by any of Holding's Subsidiaries to Holding
or to any of its wholly owned Subsidiaries, or to the issuance of shares of
Common Stock (a) pursuant to a Public Sale, (b) as consideration for the
acquisition of all or any substantial portion of the assets or all or any
portion of the capital stock of any Person, provided, for the avoidance of
doubt, that the issuance or sale by Holding or any of its Subsidiaries of any
shares of any class of capital stock or other securities to generate cash
funding of the consideration for any such acquisition shall be subject to the
provisions of the first sentence of this Section 4.1, (c) pursuant to a
management stock option plan or employee incentive plan approved by the Board of
Directors, (d) to, or pursuant to warrants or options issued to, consultants to,
vendors to, or joint venture partners of Holding or its Subsidiaries, in each
case as approved by the Board of Directors, or (e) as a dividend in respect of
the outstanding shares of Common Stock.
4.2. Stockholders' Exercise of Right. Each Stockholder entitled to exercise
purchase rights under Section 4.1 above must exercise such purchase rights
within 30 days after the effective date of delivery to such Stockholder of
written notice from Holding or its Subsidiary, as the case may be, describing in
reasonable detail the stock or other securities being offered, the purchase
price thereof, the payment terms, and such Stockholder's allotted portion
thereof, as determined in accordance with Section 4.1 hereof. If all of such
stock or other securities are not fully subscribed for by the Stockholders
within such 30-day period, the stock or securities that are not so subscribed
for shall be re-offered to the Stockholders purchasing their full allotments
upon the terms set forth in this Section 4, except that (i) such Stockholders
must exercise their purchase rights with respect to such re-offered securities
within ten (10) days after receipt of such re-offer, and (ii) unless such
Stockholders so agree, each such Stockholder shall be offered and shall be
entitled to purchase pursuant to this Section 4.2 a portion of the re-offered
securities equal to the quotient (expressed as a percentage) of (x) the number
of shares of Common Stock held by such Stockholder (calculated on a Fully
<PAGE>
-23-
Diluted Basis), divided by (y) the number of shares of Common Stock (calculated
on a Fully Diluted Basis) then held by the Stockholders receiving such re-offer.
4.3. Holding's Exercise of Rights. Upon the expiration of the offer and re-
offer (if any) periods described above, Holding or its Subsidiary, as the case
may be, shall be free to sell any stock or other securities that the
Stockholders have not elected to purchase during the ninety (90) days following
such expiration, on terms and conditions no more favorable to the purchasers
thereof than those offered to the Stockholders. Any stock or other securities
offered or sold by Holding or such Subsidiary after such 90-day period and prior
to June 7, 2002 must be re-offered to all of the Stockholders pursuant to the
terms of this Section 4.
5. Restrictive Legend. So long as any Securities are subject to the
provisions hereof, all certificates representing such Securities shall have
imprinted on them a restrictive legend in the form required by Section 5 of the
Original Stockholder Agreement, or in substantially the following form:
"The securities represented by this certificate are subject to the terms of
a certain First Amended and Restated Stockholder Agreement, dated as of
March 12, 1998, and amended and restated as of September 10, 1998, among
the registered holder of this certificate (or such holder's predecessor-in-
interest), the issuer of this certificate, and certain others. The First
Amended and Restated Stockholder Agreement contains certain restrictive
provisions relating to the voting and transfer of the securities
represented hereby. A copy of the First Amended and Restated Stockholder
Agreement is on file and may be inspected for any proper purpose at the
issuer's principal executive office."
6. Registration Rights.
6.1. Definitions. As used in this Section 6:
"Commission" means the Securities and Exchange Commission.
"Holders" means the Stockholders and all Persons to whom any Registrable
Securities are transferred in accordance with the provisions of this Agreement,
and "Holder" means any one of the Stockholders; provided, in the cases of any
elections to be made by, and any notices or other communications to be made by
or to, any Holder pursuant to this Section 6, that such elections, notices, or
other communications shall be made by or to the Majority Heritage I Holders, in
the case of any Holder who is a Heritage I Holder, by or to the Majority
Heritage II Holders, in the case of any Holder who is a Heritage II Holder, by
or to the Majority Klearfold Holders, in the case of any Holder who is a
Klearfold Management Stockholder, by or to the Majority AGI Holders, in the case
of any Holder who is an AGI Management Stockholder, or by or to the Majority
Tinsley Holders, in the case of any Holder who is a Tinsley Management
Stockholder.
<PAGE>
-24-
"Majority Demanding Holder(s)" means the Demanding Holder or Demanding
Holders, as the case may be, as defined in Section 6.2(a)(i) below, holding a
majority of the Registrable Securities held by the Demanding Holders.
"Registered" and "registration" (regardless of whether capitalized) refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering by the
Commission of effectiveness of such registration statement.
"Registrable Securities" means the shares of Common Stock issued pursuant
to the Investment Agreement, together with all shares of Common Stock issued to
Stockholders as a result of any exercise of pre-emptive rights pursuant to
Section 4 hereof, and includes any shares of capital stock and other securities
of Holding issued or issuable with respect to any of the foregoing shares of
Common Stock by way of a stock dividend, stock split, combination or division of
shares, recapitalization, merger, consolidation, reorganization, or the like,
and any shares of capital stock and other securities of Holding into which any
of the foregoing shares of capital stock and other securities of Holding are
(directly or indirectly) converted or for which any of the foregoing shares of
capital stock and other securities of Holding are (directly or indirectly)
exchanged, in each case regardless of subsequent transfers of such shares of
capital stock or other securities of Holding. Securities shall cease to be
Registrable Securities when (i) they have been sold pursuant to an effective
registration statement under the Securities Act, or distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act, or any other exemption from the registration requirements of the
Securities Act under which the transferee receives securities that are not
"restricted securities" within the meaning of that term as defined in Rule
144(a)(3), or (ii) when they may be resold under Rule 144(k) (or other similar
exemption from registration) without volume limitation.
"Underwriters' Maximum Number" means, with respect to an underwritten
registration, that number of securities to which such registration should be
limited, in the reasonable written opinion of the managing underwriters of such
registration in the light of marketing factors.
6.2. Demand Registrations.
(a) Request for Demand Registration. Subject to the limitations set forth
in the following paragraphs of this Section 6.2:
(i) The Holders of either (A) not less than a majority of all of the
Heritage Securities at any time outstanding, or (B) at least twenty percent
(20%) (on a Fully Diluted Basis) of the amount of Registrable Securities
outstanding on the AGI Closing Date, as adjusted from time to time for splits,
combinations and other recapitalizations (in either such case, the "Demanding
Holders"), may at any time give to Holding a written request for the
registration (a "Demand Registration") by Holding under the Securities Act of
all or any part of the Registrable Securities held by such Demanding Holders.
Within five business days after
<PAGE>
-25-
the receipt by Holding of any such written request, Holding shall give written
notice of such request to all Holders of Registrable Securities.
(ii) After the receipt of a written request for a Demand Registration,
(A) Holding shall be obligated to include in such Demand Registration all of the
Registrable Securities with respect to which Holding shall receive the written
requests of the Holders thereof for inclusion in such Demand Registration,
within 20 days after the date on which Holding shall have given to all Holders a
written notice of registration request pursuant to Section 6.2(a)(i) of this
Agreement, and (B) Holding shall use its best efforts in good faith to effect
promptly the registration of all such Registrable Securities. All written
requests made by Holders of Registrable Securities pursuant to this Section
6.2(a)(ii) shall specify the number of Registrable Securities to be registered
and shall also specify the intended method of disposition thereof. Such method
of disposition shall, in any case, be an underwritten offering unless Holding,
the Majority Heritage Holders, or, if different, the Majority Demanding Holders,
mutually consent otherwise, none of which consents shall be unreasonably
withheld or delayed.
(b) Limitations on Demand Registrations.
(i) Holding shall not be obligated to effect more than three (3)
Demand Registrations pursuant to Section 6.2(a) of this Agreement.
(ii) Holding shall not be obligated to effect any Demand Registration
of any Registrable Securities pursuant to Section 6.2(a) hereof before the
earlier to occur of (A) June 7, 2002, and (B) six months following the
consummation of Holding's initial public offering of shares of Common Stock
registered in an effective registration statement under the Securities Act.
(iii) Any registration initiated as a Demand Registration pursuant to
Section 6.2(a) hereof shall not count as a Demand Registration for purposes of
the limitation set forth in Section 6.2(b)(i) of this Agreement unless such
registration has become effective and at least 75% of the Registrable Securities
of the Demanding Holders requested to be included in such registration have
actually been sold.
(iv) Holding shall not be obligated to effect any Demand Registration
during the period commencing on the date falling 90 days prior to Holding's
estimated date of filing of, and ending on the date 180 days following the
effective date of, any registration statement pertaining to any registration
initiated by Holding, for the account of Holding and/or stockholders other than
Holders (other than with respect to securities registered solely in connection
with acquisitions, employee benefit plans, and the like); provided, however,
that Holding shall use its best efforts in good faith to cause any such
registration statement to be filed and to become effective as expeditiously as
shall be reasonably possible.
(v) Holding shall not be obligated to effect any Demand Registration
for any 120-day period following receipt of any written request for
registration, if in the good faith judgment of the Board of Directors of
Holding, or of the managing underwriter of such
<PAGE>
-26-
offering if (A) such managing underwriter was selected pursuant to Section
6.2(d) hereof by the consent of the Majority Demanding Holders, and (B) Holding
has not withheld its approval of any managing underwriter proposed by the
Majority Demanding Holders in connection with such Demand Registration, the
filing of any registration statement during such 120-day period would adversely
affect a material proposed or pending acquisition, merger, or similar corporate
event to which Holding is or expects to be party.
(c) Priority in Demand Registrations. If the managing underwriters in any
Demand Registration advise Holding in writing that the number of securities
proposed to be included in such registration exceeds the Underwriters' Maximum
Number, then: (i) if (x) such registration would not be the first registration
of Common Stock by Holding under the Securities Act (other than with respect to
securities registered solely in connection with acquisitions, employee benefit
plans, and the like) or (y) such registration is the first such registration,
but Holding does not desire to sell shares on its own behalf pursuant thereto,
then (A) Holding shall be obligated to include in such registration that number
of Securities duly requested by the Holders thereof to be included in such
registration as does not exceed the Underwriters' Maximum Number, and such
number of Securities shall be allocated pro rata among such Holders on the basis
of the number of Securities held by each such Holder; (B) if the Underwriters'
Maximum Number exceeds the number of Securities duly requested to be included in
such registration, then Holding shall be entitled to include in such
registration that number of securities as shall have been duly requested by
Holding to be included in such registration for the account of Holding and that
is not greater than such excess; and (C) if the Underwriters' Maximum Number
exceeds the sum of the number of Registrable Securities that are to be included
in such registration pursuant to the foregoing clauses (A) and (B), then Holding
may include in such registration that number of other securities that Persons
other than Holders and Holding have requested be included in such registration
and which is not greater than such excess; and (ii) if (x) such registration
would be the first registration of Common Stock by Holding under the Securities
Act (other than with respect to securities registered solely in connection with
acquisitions, employee benefit plans, and the like) and (y) Holding desires to
sell shares on its own behalf pursuant thereto, then (A) Holding shall be
entitled to include in such registration that number of securities as shall have
been authorized to be included by its Board of Directors for its own account, up
to the Underwriter's Maximum Number; (B) if the Underwriters' Maximum Number
exceeds the number of Securities Holding proposes to offer and sell for its own
account in such registration, then Holding shall be obligated to include in such
registration that number of Securities duly requested by the Holders thereof to
be included in such registration that is not greater than such excess, and such
number of Securities shall be allocated pro rata among such Holders on the basis
of the number of Securities held by each such Holder; and (C) if the
Underwriters' Maximum Number exceeds the sum of the number of Securities that
are to be included in such registration pursuant to subclauses (A) and (B) of
this clause (ii), then Holding may include in such registration that number of
other securities that Persons other than Holders and Holding have requested be
included in such registration and which is not greater than such excess. Neither
Holding nor any of its other securityholders shall be entitled to include any
securities in any underwritten Demand Registration initiated pursuant to Section
6.2(x)(i)(A) unless Holding or such securityholders (as the case may be) agree
in writing to sell such securities on
<PAGE>
-27-
the same terms and conditions as apply to the Heritage Securities to be included
in such Demand Registration.
(d) Selection of Underwriters. If any Demand Registration is an
underwritten offering, the investment bankers and managing underwriters in such
registration shall be selected by Holding, subject to the approval of the
Majority Demanding Holders, which approval shall not be unreasonably withheld or
delayed. If the Majority Demanding Holders reasonably disapprove of such
investment bankers or underwriters, such Holders shall use their best efforts to
select another investment banker or underwriter reasonably acceptable to Holding
(Holding's approval thereof not to be unreasonably withheld or delayed), and
shall continue such process until such investment bankers or underwriters have
been selected.
6.3. Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) Holding proposes to register any
of its securities under the Securities Act, for Holding's own account and/or for
the account of any of its security holders (each such registration not withdrawn
or abandoned prior to the effective date thereof, a "Piggyback Registration"),
Holding shall give written notice of such proposal to each of the Holders not
later than the earlier to occur of (A) the tenth day following the receipt by
Holding of notice of exercise of any registration rights by any Persons, and (B)
30 days prior to the anticipated filing date of such Piggyback Registration.
Notwithstanding the foregoing, Holding shall not be obligated to give such
notice to Holders with respect to, or to include any Registrable Securities in,
any registration statement on Form S-8 or similar limited-purpose form of
registration statement effected solely to implement an employee benefit plan, or
any registration statement on Form S-4 or similar limited-purpose form of
registration statement effected solely to implement an acquisition.
(ii) Subject to the provisions contained in paragraph (b) of this
Section 6.3 and in the last sentence of this clause (ii): (A) Holding shall be
obligated to include in each Piggyback Registration all Registrable Securities
with respect to which Holding receives, within 20 days after the date on which
Holding shall have given written notice of such Piggyback Registration to
Holders pursuant to Section 6.3(a)(i) hereof, the written requests of such
Holders for inclusion in such Piggyback Registration, and (B) Holding shall use
its best efforts in good faith to effect promptly the registration of all such
Registrable Securities. Holders shall be permitted to withdraw all or any part
of their Registrable Securities from any Piggyback Registration at any time
prior to the effective date of such Piggyback Registration.
(b) Priority in Piggyback Registrations. If a Piggyback Registration is an
underwritten registration, and the managing underwriters thereof give written
advice to Holding of an Underwriters' Maximum Number, then: (i) Holding shall be
entitled to include in such registration that number of securities which
<PAGE>
-28-
Holding proposes to offer and sell for its own account in such registration and
which does not exceed the Underwriters' Maximum Number; (ii) if the
Underwriters' Maximum Number exceeds the number of securities which Holding
proposes to offer and sell for its own account in such registration, then
Holding will be obligated and required to include in such registration that
number of Registrable Securities requested by the Holders thereof to be included
in such registration and which does not exceed such excess and such Registrable
Securities shall be allocated pro rata among the Holders thereof on the basis of
the number of Registrable Securities requested to be included therein by each
such Holder; and (iii) if the Underwriters' Maximum Number exceeds the sum of
the number of Registrable Securities which Holding shall be required to include
in such registration pursuant to clause (ii) and the number of securities which
Holding proposes to offer and sell for its own account in such registration,
then Holding may include in such registration that number of other securities
which Persons other than the Holders shall have requested be included in such
registration and which is not greater than such excess.
(c) Selection of Underwriters. In any Piggyback Registration, Holding
shall (unless Holding shall otherwise agree) have the right to select the
investment bankers and managing underwriters in such registration.
6.4. Lockup Agreements.
(a) Restrictions on Public Offering by Holders of Registrable Securities.
If, in connection with any Public Offering, Holding or, if such Public Offering
is pursuant to an underwritten registration, the managing underwriters thereof
so request, each Holder of Registrable Securities, whether or not any of their
Registrable Securities are included in any such Public Offering, shall not,
without the prior written consent of Holding or (if applicable) such
underwriters, effect any Public Offering or other distribution of any equity
securities of Holding, including any sale pursuant to Rule 144, during the seven
days prior to, and during the 180-day period commencing on, the date of such
Public Offering, except in each case in connection with such Public Offering;
provided that each officer, director and other Affiliate of Holding or any of
its Subsidiaries who holds any equity securities of Holding shall enter into
similar agreements, and provided, further, that to the extent that any such
officer, director, or other Affiliate is released (in whole or in part) from
such lock-up agreement prior to its scheduled termination date, each Holder
bound by a similar lock-up agreement shall have a proportionate percentage of
its securities released from such lock-up agreement.
(b) Restrictions on Public Offering by Holding. Holding shall not effect
any Public offering or other distribution of shares of its capital stock or
other equity securities, or securities exercisable or exchangeable for, or
convertible into, such capital stock or other equity securities, during the
period commencing on the seventh day prior to, and ending on the 180th day
following, the effective date of any underwritten registration, except in
connection with any such registration.
6.5. Registration Procedures. If (and on each occasion that) Holding
becomes obligated to effect any registration of any Registrable Securities
hereunder, Holding shall use its best efforts in good faith to effect promptly
the registration of such Registrable Securities under the Securities Act and to
permit the public offering and sale of such Registrable
<PAGE>
-29-
Securities in accordance with the Holders' intended methods of disposition
thereof, and, in connection therewith, Holding as expeditiously as possible
shall:
(a) prepare and file with the Commission as soon as is practicable, and in
any event within 120 days after a proper request therefor made in accordance
with Section 6.2(a) hereof, a registration statement with respect to such
Registrable Securities, and use its best efforts to cause such registration
statement to become and remain effective as provided in this Agreement;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus included in such registration
statement as may be necessary or advisable to comply in all material respects
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement or as may be necessary to keep
such registration statement effective and current, but for no longer than nine
months subsequent to the effective date of such registration;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus), and such other
documents as any such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities held by such seller;
(d) use its best efforts (i) to list the Registrable Securities to be
registered in such registration on each securities exchange or quotation system
on which similar securities of Holding are then listed (or if none, then at a
minimum on the automated quotations system of the National Association of
Securities Dealers, Inc.), and (ii) to register and qualify the Registrable
Securities covered by such registration statement under such securities or Blue
Sky laws of such jurisdictions as any Holder may reasonably request and do any
and all such other acts and things as may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities held by such seller; provided, however, that Holding
shall not be required in connection with such Blue Sky registration or
qualification to qualify generally to do business, subject itself to taxation,
or file a general consent to service of process in any such jurisdiction;
(e) furnish to each prospective seller and each underwriter a signed
counterpart, addressed to such prospective seller, of (i) an opinion of counsel
for Holding, dated the effective date of the registration statement, and (ii) a
"comfort" letter signed by the independent public accountants who have certified
Holding's financial statements included in the registration statement, covering
substantially the same matters with respect to the registration statement (and
the prospectus included therein) and (in the case of the comfort letter, with
respect to events subsequent to the date of the financial statements), as are
customarily covered (at the time of such registration) in opinions of issuer's
counsel and in comfort letters delivered to the underwriters in underwritten
public offerings of securities;
<PAGE>
-30-
(f) notify each prospective seller of Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which such
prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, Holding will promptly
prepare (and, when completed, give notice to each prospective seller of
Registrable Securities) a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading; provided
that upon such notification by Holding, each prospective seller of such
Registrable Securities will not offer or sell such Registrable Securities until
Holding has notified such seller that it has prepared a supplement or amendment
to such prospectus and delivered copies of such supplement or amendment to such
prospective seller;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into all such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Heritage Securities to be registered (in the case of a Demand
Registration) or the Registrable Securities to be registered (in the case of a
Piggyback Registration) or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities
(including, without limitation, effecting a stock split or a combination of
shares);
(i) make available for inspection on a confidential basis by any Holder,
any underwriter participating in any disposition pursuant to such registration
statement, or any attorney, accountant, or other agent retained by any such
Holder or underwriter (in each case after reasonable prior notice), all
financial and other records, pertinent corporate documents, and properties of
Holding, and cause Holding's and its respective Subsidiaries' officers,
directors, employees, and independent accountants to supply on a confidential
basis all information reasonably requested by any such Holder, underwriter,
attorney, accountant, or agent in connection with such registration statement;
but in each case only to the extent reasonably required in order to permit such
Holder, underwriter, attorney, accountant, or agent to conduct an investigation
sufficient to establish a "due diligence" defense in accordance with the
Securities Act and the rules, regulations, and case law thereunder;
(j) permit any Holder who, in his or its sole and exclusive judgment,
might be deemed to be an underwriter or a controlling person of Holding within
the meaning of Section 15 of the Securities Act, to participate in the
preparation of such registration statement and to permit the insertion therein
of material, furnished to Holding in writing, which in the reasonable judgment
of such Holder and his or its counsel should be included, subject to the
omission of such portions, if any, of such furnished material that Holding and
its counsel in good faith may determine was unreasonably furnished;
<PAGE>
-31-
(k) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such Registration Statement for sale in
any jurisdiction, use its best efforts promptly to obtain the withdrawal of such
order;
(l) if requested by the managing underwriter or underwriters or any Holder
in connection with any sale pursuant to a registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information relating to such underwriting as the managing underwriter or
underwriters or such Holder reasonably requests to be included therein, subject
to the omission of such portions, if any, of such material that Holding and its
counsel in good faith may determine was unreasonably furnished, and make all
required filings of such prospectus supplement or post-effective amendment as
soon as practicable after being notified of the matters incorporated in such
prospectus supplement or post-effective amendment;
(m) cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be sold under such registration statement, and enable
such Registrable Securities to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or such holders may
request;
(n) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
within the United States and having jurisdiction over Holding as may reasonably
be necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Securities; and
(o) otherwise comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders (as contemplated
by Section 11(a) under the Securities Act) an earnings statement satisfying the
provisions of Rule 158 under the Securities Act no later than ninety (90) days
after the end of the twelve month period beginning with the first month of
Holding's first fiscal quarter commencing after the effective date of such
registration statement, which statement shall cover said twelve month period.
6.6. Cooperation by Prospective Sellers, Etc.
(a) Each prospective seller of Registrable Securities shall furnish to
Holding in writing such information as Holding may reasonably require from such
seller, and otherwise reasonably cooperate with Holding in connection with any
registration statement with respect to such Registrable Securities.
(b) The failure of any prospective seller of Registrable Securities to
furnish any information or documents in accordance with any provision contained
in this Section 6 shall
<PAGE>
-32-
not affect the obligations of Holding under this Section 6 to any remaining
sellers who furnish such information and documents unless in the reasonable
opinion of counsel to Holding or the underwriters, such failure impairs or may
impair the viability of the offering or the legality of the registration
statement or the underlying offering.
(c) Each Holder of Registrable Securities included in any registration
statement shall not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from Holding to such Holder to suspend sales to
permit Holding to correct or update such registration statement or prospectus
(which Holding shall do as promptly as is practicable); but the obligations of
Holding with respect to maintaining any registration statement current and
effective shall be extended by a period of days equal to the aggregate period
any such suspensions are in effect.
(d) At the end of any period during which Holding is obligated to keep any
registration statement current and effective as provided by Section 6.5 hereof
(and any extensions thereof required by the preceding paragraph (c) of this
Section 6.6), the Holders of Registrable Securities included in such
registration statement shall discontinue sales of shares pursuant to such
registration statement upon notice from Holding to such Holders of its intention
to remove from registration the shares covered by such registration statement
which remain unsold, and such Holders shall notify Holding of the number of
shares registered that remain unsold promptly after receipt of such notice from
Holding.
6.7. Registration Expenses.
(a) Holding shall be responsible for and shall pay all costs and expenses
incurred or sustained in connection with or arising out of each registration
pursuant to this Section 6, including, without limitation, all registration and
filing fees, fees and expenses of compliance with securities or Blue Sky laws
(including reasonable fees and disbursements of counsel for the underwriters in
connection with the Blue Sky qualification of Registrable Securities), printing
expenses, messenger, telephone, and delivery expenses, fees and disbursements of
counsel for Holding, reasonable fees and disbursements of one counsel
representing the Holders of Heritage Securities and one counsel representing the
Holders of other Registrable Securities, fees and disbursements of all
independent certified public accountants (including the expenses relating to the
preparation and delivery of any special audit or comfort letters required by or
incident to such registration), and fees and disbursements of underwriters
(excluding underwriting discounts and commissions), the reasonable fees and
expenses of any special experts retained by Holding on its own initiative or at
the request of the managing underwriters in connection with such registration,
and fees and expenses of all (if any) other Persons retained by Holding (all
such costs and expenses, collectively, "Registration Expenses"). Holding shall,
in any case, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange or quotation system on which similar securities of
Holding are then listed.
<PAGE>
-33-
(b) Holding shall not bear the cost of nor pay for any stock transfer
taxes imposed in respect of the transfer of any Registrable Securities to any
purchaser thereof by any Holder of Registrable Securities in connection with any
registration of Registrable Securities pursuant to this Section 6.
(c) To the extent that Registration Expenses incident to any registration
are, under the terms of this Section 6, not required to be paid by Holding, each
Holder of Registrable Securities included in such registration shall pay all
Registration Expenses that are clearly solely attributable to the registration
of such Holder's Registrable Securities so included in such registration, and
all other Registration Expenses not so attributable to one Holder shall be borne
and paid by all sellers of securities included in such registration pro rata in
proportion to the number of securities so included by each such seller.
6.8. Indemnification.
(a) Indemnification by Holding. Holding shall indemnify each Holder
joining in a registration and each underwriter of the securities so registered,
the officers, directors, and partners of each such Person and each Person who
controls (within the meaning of the Securities Act) any of the foregoing, and
their respective successors and assigns, against any and all Damages to which
such Person is or may become subject arising out of or based on any untrue
statement (or alleged untrue statement) of any material fact contained in any
prospectus, offering circular or other document incident to any registration,
qualification or compliance (or in any related registration statement,
notification or the like) or any omission (or alleged omission) to state therein
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by Holding of any rule or
regulation promulgated under the Securities Act applicable to Holding and
relating to any action or inaction required of Holding in connection with any
such registration, qualification, or compliance; provided, however, that Holding
shall not be liable in any such case to the extent that any such Damages arise
out of or are based on any untrue statement or omission based upon written
information furnished to Holding in an instrument duly executed by such Holder,
underwriter, officer, director, partner, or controlling person and stated to be
specifically for use in such prospectus, offering circular, or other document.
(b) Indemnification by Each Holder. Each Holder requesting or joining in a
registration shall indemnify each underwriter of the securities so registered,
Holding and its officers and directors and each person, if any, who controls
(within the meaning of the Securities Act) any of the foregoing, and their
respective successors and assigns, against any and all Damages to which such
Person is or may become subject arising out of or based on any untrue statement
(or alleged untrue statement) of any material fact contained in any prospectus,
offering circular, or other document incident to any registration, qualification
or compliance (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein any material fact
required to be stated therein or necessary to make the statement therein not
misleading, but only if and to the extent that such statement or omission was
made in reliance upon written information furnished to such underwriter or
Holding in an instrument duly executed by such Holder and stated to be
specifically for use in
<PAGE>
-34-
such prospectus, offering circular, or other document (or related registration
statement, notification, or the like) or any amendment or supplement thereto;
and provided further that each Holder's liability with respect to any particular
registration shall be limited to an amount equal to the net cash proceeds
received by such Holder from the Registrable Securities sold by such Holder in
such registration.
(c) Indemnification Proceedings. Each party entitled to indemnification
pursuant to this Section 6.8 (the "indemnified party") shall give notice to the
party required to provide indemnification pursuant to this Section 6.8 (the
"indemnifying party") promptly after such indemnified party acquires actual
knowledge of any claim as to which indemnity may be sought, and shall permit the
indemnifying party (at its expense) to assume the defense of any claim or any
litigation resulting therefrom; provided that counsel for the indemnifying
party, who shall conduct the defense of such claim or litigation, must be
acceptable to the indemnified party, and the indemnified party may participate
in such defense at such party's expense; and provided, further, that the failure
by any indemnified party to give notice as provided in this paragraph (c) shall
not relieve any indemnifying party of its obligations under this Section 6.8
except if and to the extent that such failure results in a failure of actual
notice to the indemnifying party and such indemnifying party is actually
prejudiced solely as a result of such failure to give notice. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. The reimbursement required
by this Section 6.8 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred,
and may be conditioned upon an undertaking by the indemnified party to reimburse
the indemnifying party in the event the indemnified party is finally determined
by a court of competent jurisdiction not to be entitled to indemnification.
6.9. Contribution in Lieu of Indemnification. If the indemnification
provided for in Section 6.8 hereof is unavailable to a party that would have
been an indemnified party in respect of any Damages referred to therein, then
each party that would have been an indemnifying party thereunder shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and such
indemnified party, respectively, in connection with the statements or omissions
which resulted in such Damages. Relative fault 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 indemnifying party or such indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Holding and each
Holder of Registrable Securities agree that it would not be just and equitable
if contribution pursuant to this Section 6.9 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above in this Section 6.9. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the
<PAGE>
-35-
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6.10. Rule 144 Requirements; Form S-3 Registrations. From time to time
after the earlier to occur of (a) the ninetieth day following the date on which
there shall first become effective a registration statement filed by Holding
under the Securities Act, or (b) the date on which Holding shall register a
class of securities under Section 12 of the Exchange Act, Holding shall make
every effort in good faith to take all steps necessary to ensure that Holding
will be eligible to register securities on Form S-3 (or any comparable or
successor form adopted by the Commission) as soon thereafter as possible (it
being acknowledged that certain aspects of eligibility to use Form S-3, e.g.,
the aggregate market value of Holding's securities held by non-affiliates, are
beyond Holding's control), and to make publicly available and available to the
Holders, pursuant to Rule 144 of the Commission under the Securities Act, such
current public information as shall be necessary to enable the Holders of
Registrable Securities to make sales of Registrable Securities pursuant to that
Rule. Holding shall furnish to the Holders, upon request at any time after the
undertaking of Holding in the preceding sentence shall have first become
effective, a written statement signed by Holding, addressed to each Holder,
describing briefly the action Holding has taken or proposes to take to comply
with the current public information requirements of Rule 144. Upon receipt of a
certificate certifying (i) that such Holder has held such Purchased Securities
for a period of not less than two (2) years (or such lesser period after which
the exemption from registration pursuant to which Rule 144(k) may be available),
and (ii) that such Holder has not been an affiliate (as defined in Rule 144) of
Holding during the preceding three months, Holding shall, at the request of any
Holder of Purchased Securities, remove from the stock certificates representing
such Purchased Securities any restrictive legend (or portion thereof) relating
to the registration provisions of the Securities Act. After (and for so long as)
Holding qualifies for the use of Form S-3, then, subject to the provisions of
Sections 6.2(b)(iv) and (v) of this Agreement, any Holder or Holders of
Registrable Securities with an aggregate fair market value of $1,000,000 or
more, shall have the right to require Holding to register Registrable Securities
with not less than such aggregate fair market value on Form S-3, provided, that
Holding shall not be obligated to effect such a registration more frequently
than once in any six-month period.
6.11. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration pursuant to this Section 6 unless
such Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled, under the
provisions hereof, to approve such arrangements, and (b) completes and executes
all questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements, and other documents reasonably required by the terms of
such underwriting arrangements. Any Holder of Registrable Securities to be
included in any underwritten registration shall be entitled at any time to
withdraw such Registrable Securities from such registration prior to its
effective date in the event that such Holder disapproves of any of the terms of
the related underwriting agreement.
7. Life Insurance. Holding shall maintain and name itself as the
beneficiary of (i) one or more insurance policies on the life of Richard Block
and each other Stockholder who is
<PAGE>
-36-
also an executive employee of Holding and who has the right under a Repurchase
Agreement to require the repurchase by Holding of his shares of Common Stock
upon his death, and (ii) one or more insurance policies on the lives of Melvin
B. Herrin and H. Scott Herrin, payable upon the later of the deaths of such two
individuals. The amount of such insurance under such policies shall be as set
forth on Schedule 7 hereto. Holding shall have the right to obtain insurance
upon the lives of other Stockholders, in such amounts and upon such terms as
Holding may deem appropriate. Once obtained, any such life insurance (including
the policies referred to in clauses (i) and (ii) above) shall be maintained;
provided, however, that Holding's obligation to obtain or maintain any such
insurance shall be limited, in each instance, to Holding's attempting in good
faith to obtain and maintain such insurance at standard rates; if such insurance
is unavailable at standard rates, Holding shall have the discretion not to
obtain or maintain such insurance, or to obtain or maintain less than that
provided for on Schedule 7 hereto. Holding may, but shall not be required to,
increase or decrease the amount of insurance coverage from that described on
Schedule 7 hereto commensurate with changes in its equity valuation as
reasonably determined from time to time by its Board of Directors. Holding shall
direct each insurance company that has issued a policy pursuant to this Section
7 to send duplicate premium notices to the insured. In the event that Holding
fails to pay any premium due on any such policy it has obtained, the insured may
pay the premium and shall be reimbursed by Holding.
8. Definitions. As used in this Agreement, the following terms have the
following respective meanings:
"Affiliate" means, with respect to a specified Person, (i) any Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person and (ii)
any Person that is an officer, director, trustee, member or general partner of,
or serves in a similar capacity with respect to, the specified Person, or of
which the specified Person is an officer, director, trustee, member or general
partner, or with respect to which the specified Person serves in a similar
capacity or (iii) any Person who is a spouse, parent, sibling or lineal
descendant of such Person or any Person described in clauses (i) or (ii). For
purposes of this definition the term "control" when used with respect to a
Person means (a) the beneficial ownership (as defined in Rule 13d-d promulgated
under the Securities and Exchange Act of 1934, as amended) of 50 percent or more
of the voting interests in such Person, or (b) the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGI" means AGI Incorporated, an Illinois corporation and the surviving
corporation of the Merger under and as defined in the Merger Agreement.
"AGI Closing Date" means March 12, 1998.
"AGI Holder Securities" means the shares of capital stock of Holding
originally issued and sold pursuant to the Investment Agreement and the Stock
Purchase Agreement to AGI Management Stockholders, any shares of capital stock
or other securities of Holding
<PAGE>
-37-
transferred in accordance with this Agreement or issued from time to time after
the AGI Closing Date to any of the AGI Management Stockholders, and any shares
of capital stock issued to any of the AGI Management Stockholders as a result of
any exercise of pre-emptive rights pursuant to Section 4 hereof, and includes
any shares of capital stock and other securities of Holding issued or issuable
with respect to any of the foregoing shares of capital stock or other securities
of Holding by way of a stock dividend, stock split, combination or division of
shares, recapitalization, merger, consolidation, reorganization, or the like,
and any shares of capital stock or other securities of Holding into which any of
the foregoing shares of capital stock or other securities of Holding are
(directly or indirectly) converted or for which any of the foregoing shares of
capital stock or other securities are (directly or indirectly) exchanged, in
each case regardless of subsequent transfers of such shares of capital stock or
other securities of Holding; provided, that shares of capital stock and other
securities of Holding shall cease to be AGI Holder Securities when transferred
(i) to Holding, (ii) pursuant to a Public Sale, or (iii) to any Heritage Holder,
Klearfold Management Stockholder, Tinsley Management Stockholder or Other
Stockholder.
"Block Stockholders" means, collectively, (i) Richard Block, (ii) Freya
Block, as Trustee of the Richard A. Block Family Trust u/t/a/d 4/1/94, and (iii)
any direct or indirect transferee of Securities from either of them pursuant to
and in accordance with Section 1.1(b) hereof.
"Common Stock" means, collectively, the Series A Common Stock and the
Series B Common Stock.
"Domestic Subsidiary" means any Subsidiary of Holding or any of its
Subsidiaries organized under the laws of the United States of America, any of
its States or the District of Columbia, provided, however, that so long as KF-
Delaware carries on no business activities other than the holding of title to
certain intellectual properties, the use of which is licensed to Klearfold, KF-
Delaware shall not be deemed for the purposes of this Agreement to be a Domestic
Subsidiary.
"Employment Agreement" means any Employment, Non-Competition and Stock
Repurchase Agreement, Agreement with respect to Employment and Stock Ownership,
Employment Agreement, Service Agreement or other similar agreement with respect
to the provisions of services to Holding or any of its Subsidiaries or between
any of Holding or any of its Subsidiaries and any of their employees.
"Family Members" means, with respect to any individual, any Related Person
or Family Trust of such individual.
"Family Trust" means, with respect to any individual, any trust created for
the benefit of such individual and/or one or more of such individual's Related
Persons, and controlled by such individual.
<PAGE>
-38-
"Fully Diluted Basis" means, with respect to any calculation to be made at
any time pursuant to this Agreement, that such calculation shall be made by
treating as outstanding all shares of Common Stock issuable upon exercise of all
outstanding warrants, options, and/or other rights to acquire shares of Common
Stock, but excluding any such warrants, options, and/or other rights (or any
portions thereof) as are not capable of being exercised then or thereafter in
accordance with the respective terms thereof.
"Heritage Holders" means, collectively, the holders, as of the relevant
time of reference, of any of the Heritage Securities, and "Heritage Holder"
means any one of the Heritage Holders.
"Heritage I Holders" means, collectively, the holders, as of the relevant
time of reference, of any of the Heritage I Securities, and "Heritage I Holder "
means any one of the Heritage I Holders.
"Heritage II Holders" means, collectively, the holders, as of the relevant
time of reference, of any of the Heritage II Securities, and "Heritage II
Holder" means any one of the Heritage II Holders.
"Heritage Securities" means the Heritage I Securities and the Heritage II
Securities, collectively.
"Heritage I Securities" means the shares of capital stock and other
securities of Holding issued and sold to Heritage I pursuant to the Investment
Agreement and the Stock Purchase Agreement, any shares of capital stock and
other securities of Holding issued or transferred to Heritage I or any permitted
Transferee of Heritage I (other than Heritage II) pursuant to Section 1.1(f)
hereof, and any shares of capital stock issued to Heritage I or any such
permitted Transferee as a result of any exercise of pre-emptive rights pursuant
to Section 4 hereof, and includes any shares of capital stock and other
securities of Holding issued or issuable with respect to any of the foregoing
shares of capital stock or other securities of Holding by way of a stock
dividend, stock split, combination or division of shares, recapitalization,
merger, consolidation, reorganization, or the like, and any shares of capital
stock and other securities of Holding into which any of the foregoing shares of
capital stock and other securities of Holding are (directly or indirectly)
converted or for which any of the foregoing shares of capital stock and other
securities of Holding are (directly or indirectly) exchanged, in each case
regardless of subsequent transfers of such shares of capital stock or other
securities of Holding; provided, that shares of capital stock and other
securities of Holding shall cease to be Heritage I Securities when transferred
(i) to Holding, (ii) pursuant to a Public Sale, (iii) to Heritage II, or (iv) to
any of the Non-Heritage Holders.
"Heritage II Securities" means the shares of capital stock and other
securities of Holding issued and sold to Heritage II pursuant to the Stock
Purchase Agreement, any shares of capital stock and other securities of Holding
issued or transferred to Heritage II or any permitted Transferee of Heritage II
(other than Heritage I) pursuant to Section 1.1(f) hereof, and any shares of
capital stock issued to Heritage II or any such permitted Transferee as a
<PAGE>
-39-
result of any exercise of pre-emptive rights pursuant to Section 4 hereof, and
includes any shares of capital stock and other securities of Holding issued or
issuable with respect to any of the foregoing shares of capital stock or other
securities of Holding by way of a stock dividend, stock split, combination or
division of shares, recapitalization, merger, consolidation, reorganization, or
the like, and any shares of capital stock and other securities of Holding into
which any of the foregoing shares of capital stock and other securities of
Holding are (directly or indirectly) converted or for which any of the foregoing
shares of capital stock and other securities of Holding are (directly or
indirectly) exchanged, in each case regardless of subsequent transfers of such
shares of capital stock or other securities of Holding; provided, that shares of
capital stock and other securities of Holding shall cease to be Heritage II
Securities when transferred (i) to Holding, (ii) pursuant to a Public Sale,
(iii) to Heritage I, or (iv) to any of the Non-Heritage Holders.
"Indenture" means the Indenture dated of even date herewith between Holding
and State Street Bank and Trust Company, as trustee.
"Independent Appraiser" shall mean an investment banking or accounting firm
or independent appraiser of nationally recognized status and at least ten years
of experience in evaluating businesses similar to those of Holding and its
Subsidiaries, and which is not an Affiliate of Holding, any of its Subsidiaries,
or any Stockholder.
"Investment Agreement" means that certain Investment Agreement dated as of
February 19, 1998, by and among the AGI Management Stockholders, the Klearfold
Management Stockholders, Heritage, Holding and certain other persons named
therein.
"KF-Delaware" means KF-Delaware, Inc. a Delaware corporation.
"Klearfold" means Klearfold, Inc., a Pennsylvania corporation.
"Klearfold Holder Securities" means the shares of capital stock of Holding
originally issued and sold pursuant to the Investment Agreement and Stock
Purchase Agreement to the Klearfold Management Stockholders, any shares of
capital stock or other securities of Holding transferred in accordance with this
Agreement or issued from time to time after the AGI Closing Date to any of the
Klearfold Management Stockholders, and any shares of capital stock issued to any
of the Klearfold Management Stockholders as a result of any exercise of pre-
emptive rights pursuant to Section 4 hereof, and includes any shares of capital
stock and other securities of Holding issued or issuable with respect to any of
the foregoing shares of capital stock or other securities of Holding by way of a
stock dividend, stock split, combination or division of shares,
recapitalization, merger, consolidation, reorganization, or the like, and any
shares of capital stock or other securities of Holding into which any of the
foregoing shares of capital stock or other securities of Holding are (directly
or indirectly) converted or for which any of the foregoing shares of capital
stock or other securities are (directly or indirectly) exchanged, in each case
regardless of subsequent transfers of such shares of capital stock or other
securities of Holding; provided, that shares of capital stock and other
securities of Holding shall cease to be Klearfold Holder Securities when
transferred (i) to
<PAGE>
-40-
Holding, (ii) pursuant to a Public Sale, or (iii) to any Heritage Holder, AGI
Management Stockholder, Tinsley Management Stockholder or Other Stockholder.
"Lien" means any lien, claim, mortgage, security interest, charge,
encumbrance, or restriction on transfer of any kind.
"Majority AGI Holders" means the holders, as of the relevant time of
reference, of at least a majority of the AGI Holder Securities.
"Majority Heritage Holder" means the holder, as of the relevant time of
reference, of at least a majority of the Heritage Securities.
"Majority Heritage I Holders" means the holders, as of the relevant time of
reference, of at least a majority of the Heritage I Securities.
"Majority Heritage II Holders" means the holders, as of the relevant time
of reference, of at least a majority of the Heritage II Securities.
"Majority Herrin Holders" means the holders, as of the relevant time of
reference, of at least a majority of the Securities then held by the Herrin
Stockholders.
"Majority Klearfold Holders" means the holders, as of the relevant time of
reference, of at least a majority of the Klearfold Holder Securities.
"Majority Non-Heritage Holders" means the holders, as of the relevant time
of reference, of at least a majority of the Non-Heritage Securities.
"Majority Tinsley Holders" means the Holders, as of the relevant time of
reference, of at least a majority of the Tinsley Holder Securities.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
February 19, 1998 by and among Holding, AGI, AGI Acquisition Corporation and
certain stockholders of AGI.
"Non-AGI Holder Securities" means the Heritage Securities, the Klearfold
Holder Securities, the Tinsley Holder Securities and the Other Stockholder
Securities.
"Non-Heritage Holders" means, collectively, the holders, as of the relevant
time of reference, of the Non-Heritage Securities, and "Non-Heritage Holder"
means any one of the Non-Heritage Holders.
"Non-Heritage Securities" means the AGI Holder Securities, the Klearfold
Holder Securities, the Tinsley Holder Securities and the Other Stockholder
Securities.
"Other Agreements" has the same meaning herein as the Investment Agreement.
<PAGE>
-41-
"Other Stockholder Securities" means shares of capital stock of Holding
originally issued and sold to any Stockholder other than an AGI Management
Stockholder, Klearfold Management Stockholder, Tinsley Management Stockholder or
Heritage Holder (any such Stockholder, an "Other Stockholder"), any shares of
capital stock or other securities of Holding transferred in accordance with this
Agreement or issued from time to time after the AGI Closing Date to any of the
Other Stockholders, and any shares of capital stock issued to any of the Other
Stockholders as a result of any exercise of pre-emptive rights pursuant to
Section 4 hereof, and includes any shares of capital stock and other securities
of Holding issued or issuable with respect to any of the foregoing shares of
capital stock or other securities of Holding by way of a stock dividend, stock
split, combination or division of shares, recapitalization, merger,
consolidation, reorganization, or the like, and any shares of capital stock or
other securities of Holding into which any of the foregoing shares of capital
stock or other securities of Holding are (directly or indirectly) converted or
for which any of the foregoing shares of capital stock or other securities are
(directly or indirectly) exchanged, in each case regardless of subsequent
transfers of such shares of capital stock or other securities of Holding;
provided, that shares of capital stock and other securities of Holding shall
cease to be Other Stockholder Securities when transferred (i) to Holding, (ii)
pursuant to a Public Sale, or (iii) to any Heritage Holder, Klearfold Management
Stockholder, AGI Management Stockholder or Tinsley Management Stockholder.
"Person" means any natural person, entity, or association, including
without limitation any corporation, partnership, limited liability company,
government (or agency or subdivision thereof), trust, joint venture or sole or
joint proprietorship.
"Personal Representative" means the successor or legal representative
(including without limitation, a guardian, executor, administrator or
conservator) of a dead or incompetent Stockholder.
"Public Offering" means any sale of shares of Common Stock to the public
pursuant to a public offering registered under the Securities Act.
"Public Sale" means any Public Offering or any sale of shares of Common
Stock to the public through a broker or market-maker pursuant to the provisions
of Rule 144 (or any successor rule) adopted under the Securities Act.
"Qualified Public Offering" means an underwritten Public Offering, pursuant
to an effective registration statement under the Securities Act, covering the
offer and sale of shares of Common Stock in which an aggregate of not less than
$25,000,000 of gross proceeds from such Public Offering are received by Holding
and/or one or more of the selling stockholders for its and/or his account, as
the case may be.
"Related Persons" means, with respect to any individual, such individual's
parents, spouse, children, and grandchildren.
<PAGE>
-42-
"Securities" means all shares of the capital stock or other securities of
Holding, including without limitation the Heritage Securities and the Non-
Heritage Securities, and all options, warrants, and other rights to acquire
shares of the capital stock or other securities of Holding (including without
limitation upon the conversion or exchange of other securities or instruments).
"Series A Common Stock" means the Series A Common Stock, $0.001 par value
per share, of Holding.
"Series B Common Stock" means the Series B Common Stock, $0.001 par value
per share, of Holding.
"Stockholders" means, collectively, all of the Persons except Holding who
are parties to this Agreement as of the relevant time of reference, and
"Stockholder" means any one of the Stockholders.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of the capital stock of which shall at the time be owned by
such Person or by a Subsidiary of such Person, if the holders of the shares of
such class or classes of capital stock (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of at least a majority of the
directors (or persons performing similar functions) of the issuer thereof,
regardless of whether the right so to vote has been suspended by the happening
of such a contingency, or (b) are at the relevant time of reference entitled, as
such holders, to vote for the election of at least a majority of the directors
(or persons performing similar functions) of the issuer thereof, regardless of
whether the right so to vote exists by reason of the happening of a contingency.
"Tinsley Closing Date" means September 10, 1998.
"Tinsley Holder Securities" means any shares of capital stock or other
securities of Holding transferred in accordance with this Agreement or issued
from time to time after the Tinsley Closing Date to any of the Tinsley
Management Stockholders, and any shares of capital stock issued to any of the
Tinsley Management Stockholders as a result of any exercise of pre-emptive
rights pursuant to Section 4 hereof, and includes any shares of capital stock
and other securities of Holding issued or issuable with respect to any of the
foregoing shares of capital stock or other securities of Holding by way of a
stock dividend, stock split, combination or division of shares,
recapitalization, merger, consolidation, reorganization, or the like, and any
shares of capital stock or other securities of Holding into which any of the
foregoing shares of capital stock or other securities of Holding are (directly
or indirectly) converted or for which any of the foregoing shares of capital
stock or other securities are (directly or indirectly) exchanged, in each case
regardless of subsequent transfers of such shares of capital stock or other
securities of Holding; provided, that shares of capital stock and other
securities of Holding shall cease to be Tinsley Holder Securities when
transferred (i) to Holding, (ii) pursuant to a Public Sale, or (iii) to any
Heritage Holder, AGI Management Stockholder, Klearfold Management Stockholder or
Other Stockholder.
<PAGE>
-43-
"Tinsley Management Stockholders" means M. Shaun Lawson, Lee Newbon, and
each other individual who may become a party hereto by the delivery of an
Instrument of Accession identifying himself or herself as a "Tinsley Management
Stockholder".
"Type" means, as to any Securities, whether such Securities are AGI Holder
Securities, Klearfold Holder Securities, Tinsley Holder Securities, Heritage
Securities or Other Stockholder Securities.
"vote" as a noun, means any vote, resolution, or action by written consent,
as the case may be, and as a verb, means to adopt or cast any vote or resolution
or to take any action by written consent, as the case may be.
9. Miscellaneous.
(a) Benefits of Agreement; No Assignments; No Third-Party Beneficiaries.
(i) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective heirs, successors, and permitted
assigns.
(ii) No party shall assign any rights or delegate any obligations
hereunder without the consent of the other parties, and any attempt to do
so shall be void; provided, that the rights hereunder of the several
parties other than Holding shall also inure to the benefit of any Person
other than Holding to whom Securities are transferred in accordance with
all of the provisions of this Agreement, except any such Person to whom
such securities were transferred pursuant to a Public Sale.
(iii) Nothing in this Agreement is intended to or shall confer any
rights or remedies on any Person other than the parties hereto, their
respective heirs and successors, and permitted transferees of the
securities issued pursuant to this Agreement, as referred to in Section
9(a)(ii) hereof.
(b) Notices. All notices, requests, payments, instructions, or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have furnished to the sending party for the purpose pursuant to this section).
Any reference in this Agreement to the "effectiveness" or the "effective date"
of a notice or other communication means the date as of which such notice or
other communication is effective as determined in accordance with this Section
9(b).
<PAGE>
-44-
(A) If to any Heritage Holder, in care of:
Heritage Partners Management Company, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attention: Michael F. Gilligan, Managing Director
Telecopier No. (617) 439-0689
with a copy sent at the same time and by the same means to:
David L. Engel, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier No. (617) 951-8736
(B) If to any of the Klearfold Management Stockholders, in care of:
Klearfold, Inc.
364 Valley Road
Warrington, Pennsylvania 18976
Attention: H. Scott Herrin
Telecopier No. (215) 343-0484
with a copy sent at the same time and by the same means to
Richard J. Braemer, Esq.
Ballard Spahr Andrews & Ingersoll LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Telecopier No. (215) 864-8999
(C) If to any of the AGI Management Stockholders, or to the AGI
Prospective Purchasers, in care of:
AGI Incorporated
1950 North Ruby Street
Melrose Park, Illinois 60160-1178
Attention: Richard Block and David Underwood
Telecopier No. (708) 344-9113
<PAGE>
-45-
with a copy sent at the same time and by the same means to:
Linda Chaplik Harris, Esq.
Sonnenschein Nath & Rosenthal
Suite 8000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Telecopier No. (312) 876-7934
(D) If to any of the Tinsley Management Stockholders, in care of:
Tinsley Robor Limited
Drayton House
Drayton
Chichester
West Sussex P020 6EW
ENGLAND
Attention: Lee Newbon and Shaun Lawson
Telecopier No. (011-44) (0)-124-377-4567
with a copy sent at the same time and by the same means to:
Richard Kennett, Esq.
Laytons
Carmelite
50 Victoria Embankment
Blackfriars
London E4Y OLS
ENGLAND
Telecopier No.: (011-44) (0)-171-330-9999
(E) If to Holding, to:
IMPAC Group, Inc.
1950 North Ruby Street
Melrose Park, Illinois 60160-1178
Attention: Richard Block and David Underwood
Telecopier No. (708) 344-9113
with copies sent at the same time and by the same means to each
of the Persons (including counsel) listed under clauses (A) - (D)
above.
<PAGE>
-46-
(F) If to any other party to this Agreement, to the most recent
address of such party reflected in the register referred to in Section 7 of
the Investment Agreement, or to such address as such Person may have
furnished to the sending party for such purpose pursuant to this section.
(c) Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same agreement.
In pleading or proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
(d) Captions. The captions of sections or subsections of this Agreement
are for reference only and shall not affect the interpretation or construction
of this Agreement.
(e) Equitable Relief. Each of the parties hereby acknowledges that any
breach by it of its obligations under this Agreement would cause substantial and
irreparable damage to the other parties, and that money damages would be an
inadequate remedy therefor, and accordingly, acknowledges and agrees that each
of the other parties shall be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations (in
addition to all other rights and remedies to which such party may be entitled in
respect of any such breach).
(f) Construction. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
(g) Waivers. No waiver of any breach or default hereunder shall be valid
unless in a writing signed by the waiving party. No failure or other delay by
any party exercising any right, power, or privilege hereunder shall be or
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
(h) Further Assurances. From time to time, each party hereto shall
promptly execute and deliver all such further instruments and other documents,
and shall promptly take all such further actions, as any other party hereto may
reasonably request in order more effectively to effect or confirm the
transactions hereby contemplated and to carry out the purposes of this
Agreement.
(i) Entire Agreement. This Agreement, together with the Merger Agreement,
the Other Agreements and the Stock Purchase Agreement, contains the entire
understanding and agreement among the parties, and supersedes any prior
understandings or agreements among them, or between or among any of them, with
respect to the subject matter hereof.
(j) Governing Law. This Agreement shall to the maximum lawful extent be
governed by and interpreted and construed in accordance with the internal laws
of the State of
<PAGE>
-47-
Delaware, as applied to contracts under seal made, and entirely to be performed,
within Delaware, and without reference to principles of conflicts or choice of
law.
(k) Termination. This Agreement may be terminated by written agreement of
all of the parties, and shall automatically terminate upon and concurrently with
the sale to a third party of all or substantially all of Holding's assets or
capital stock, or of all or substantially all of the assets or capital stock of
any Subsidiary or Subsidiaries that constitute all or substantially all of the
assets of Holding (whether pursuant to a merger, consolidation, or otherwise) in
accordance with the terms hereof and the distribution of the net proceeds of
such sale (after payment of creditors of Holding has been made or provided for)
to the stockholders of Holding. Unless earlier terminated in accordance with the
provisions of the preceding sentence, all provisions of this Agreement other
than Sections 6 through 9 hereof shall automatically terminate upon and
concurrently with the closing of an Approved Sale or a Qualified Public
Offering. Any termination of this Agreement shall not affect the rights or
obligations of any party arising, or based on actions or omissions occurring,
before such termination.
(l) Amendment and Waiver. Except as expressly set forth in Section 3.1(e)
above, any modification, amendment, or waiver of any provision of this Agreement
shall be effective if, and only if, it is approved in writing by each of (i) the
Majority Heritage Holders, (ii) the Majority AGI Holders, and (iii) the Majority
Klearfold Holders, provided, however, that (A) any modification, amendment or
waiver of any provision of this Agreement that grants any rights to, or
restricts any rights of, any of the Tinsley Management Holders, whether
individually or collectively, shall be effective if, and only if, it is approved
in writing by the Majority Tinsley Holders (or if no Tinsley Holder Securities
are then outstanding, by the Tinsley Management Stockholders) as well as by the
parties referred to in clauses (i) (iii) above, and (B) the consent of the
Majority Klearfold Holders shall not be required for any such modification or
amendment which either (x) increases or reduces the number of directors under
Section 3.1 hereof, or reallocates the right to designate such directors, so
long as the rights of the Majority Herrin Holders under such Section 3.1 are not
thereby modified or amended, or (y) arises from the creation and issuance of
shares of Series B Common Stock in connection with the conversion of options for
the purchase of shares of Tinsley Robor plc into options for the purchase of
shares of Series B Common Stock, and of shares of preferred stock and warrants
for the purchase of shares of Series A Common Stock pursuant to the Equity
Recapitalization Agreement, so long as any such modification or amendment does
not restrict any rights of any of the Klearfold Management Stockholders, whether
individually, collectively or in the capacity of any of them as Herrin
Stockholders, or grant any additional rights to any other existing Stockholders.
(m) No Rights to Employment. Nothing contained in this Agreement shall
confer on any Stockholder a right to employment or continued employment with
Holding or any of its Subsidiaries, or to employment in the same position or on
the same terms as those currently in effect.
<PAGE>
Signature Page to the Stockholder Agreement
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement to the others as an agreement under seal as of September 10, 1998.
IMPAC GROUP, INC.
By /s/ Richard Block
----------------------------
Name:
Title:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P.,
its general partner
By /s/ Signature unintelligible
----------------------------
Name:
Title:
HERITAGE FUND II, L.P.
By: HF Partners II, L.L.C.,
its general partner
By /s/ Signature unintelligible
----------------------------
Name:
Title:
KFI MANAGEMENT STOCKHOLDERS:
/s/ Melvin B. Herrin
-------------------------------
Melvin B. Herrin
<PAGE>
Signature Page to the Stockholder Agreement
/s/ H. Scott Herrin
-----------------------------------
H. Scott Herrin
/s/ Matthew H. Kamens
-----------------------------------
Matthew H. Kamens, not individually
but as trustee under an Indenture
of Trust of Melvin B. Herrin dated
June 4, 1996
/s/ Arthur S. Keyser
-----------------------------------
Arthur S. Keyser, not individually
but as trustee under an Indenture
of Trust dated August 12, 1992
f/b/o H. Scott Herrin
/s/ Daniel Santry
-----------------------------------
Daniel Santry
/s/ Craig Wilson
-----------------------------------
Craig Wilson
/s/ Robert Eliason
-----------------------------------
Robert Eliason
/s/ John McInerney
-----------------------------------
John McInerney
/s/ Steven Frazier
-----------------------------------
Steven Frazier
<PAGE>
Signature Page to the Stockholder Agreement
/s/ Richard Mazurek
-------------------------------
Richard Mazurek
-------------------------------
AGI MANAGEMENT STOCKHOLDERS:
/s/ Richard Block
-------------------------------
Richard Block
/s/ James Oppenheimer
-------------------------------
James Oppenheimer
/s/ Richard Oppenheimer
-------------------------------
Richard Oppenheimer
/s/ David Underwood
-------------------------------
David Underwood
/s/ Dean Henkel
-------------------------------
Dean Henkel
/s/ John Maranov
-------------------------------
John Maranov
<PAGE>
Signature Page to the Stockholder Agreement
/s/ Gary Mankoff
-------------------------------
Gary Mankoff
-------------------------------
/s/ Donald W. Kosterka
-------------------------------
Donald W. Kosterka, as Trustee
of the Donald Kosterka Trust
dated 5/17/92
/s/ David Horowitz
-------------------------------
David Horowitz
/s/ Zenas Block
-------------------------------
Zenas Block
/s/ Dennis McGuin
-------------------------------
Dennis McGuin
/s/ Mary Frances Griffin
-------------------------------
Mary Frances Griffin
/s/ Freya Block
-------------------------------
Freya Block, as Trustee of the
Richard A. Block Family Trust
u/t/a dated 4/1/94
<PAGE>
Signature Page to the Stockholder Agreement
TINSLEY MANAGEMENT STOCKHOLDERS:
-------------------------------
M. Shaun Lawson
-------------------------------
Lee Newbon
<PAGE>
EXHIBIT A
Instrument of Accession
to
Amended and Restated
Stockholder Agreement
The undersigned, ____________________, in order to become the owner or
holder of certain securities of IMPAC Group, Inc., a Delaware corporation
("Holding"), hereby agrees to become [an] [Heritage] [AGI Management] [Klearfold
Management] [Tinsley Management] [Other] Stockholder party to that certain
Amended and Restated Stockholder Agreement, dated as of March 12, 1998, and
amended and restated as of September 10, 1998 (the "Stockholder Agreement"), a
copy of which is attached. This Instrument of Accession shall be effective and
shall become a part of the Stockholder Agreement upon acceptance by Holding.
Executed under seal as of the date set forth below under the laws of the
State of Delaware.
Dated_________________ _________________________________________
(signature)
Print Name:______________________________
Address: ______________________________
______________________________
______________________________
ACCEPTED:
IMPAC Group, Inc.
By_______________________
Name:
Title:
<PAGE>
Schedule 1
Klearfold Management Stockholders
---------------------------------
1. Daniel Santry
2. Robert Eliason
3. Richard Mazurek
4. Craig Wilson
5. Steve Frazier
6. John McInerney
7. H. Scott Herrin
8. Melvin Herrin
<PAGE>
Schedule 2
AGI Management Stockholders
---------------------------
1. Richard Block
2. James Oppenheimer
3. Richard Oppenheimer
4. Gary Mankoff
5. Donald W. Kosterka, as Trustee of the Donald
Kosterka Trust dated 5/17/92
6. John Maranov
7. David Horowitz
8. Zenas Block
9. Dean Henkel
10. Dennis McGuin
11. Mary Frances Griffin
12. Freya Block, as Trustee of the Richard A. Block
Family Trust u/t/a dated 4/1/94
<PAGE>
Schedule 3
Tinsley Management Stockholders
-------------------------------
1. M. Shaun Lawson
2. Lee Newbon
<PAGE>
Schedule 4
Certain Actions Requiring Consent
---------------------------------
(a) the establishment or material modification of the annual budget of
Holding and its Subsidiaries with respect to revenues, expenses, cash flow,
acquisitions and dispositions of capital assets, and other capital expenditures;
(b) the establishment of any pension plan, employee stock incentive or
option plan, or other group benefit plan for any officers, directors, or
employees of Holding or any of its Subsidiaries, or any modification to any such
plan materially increasing the liability of Holding or any of its Subsidiaries
thereunder, or materially increasing the scope of or eligibility under such
plan;
(c) except as provided in the annual budget approved pursuant to clause (a)
above: (i) the entering into by Holding or any of its Subsidiaries in any fiscal
year of operating leases that call in the aggregate for total payments of more
than $750,000 per year, (ii) the purchasing, leasing as lessee, licensing as
licensee, or other making by Holding or any of its Subsidiaries of any capital
expenditure in excess of $250,000 in any instance, or in excess of $750,000 in
the aggregate in any fiscal year, or (iii) the sale, leasing as lessor,
licensing as licensor, or other disposition of any material portion of the
intellectual properties of Holding or any of its Subsidiaries, or (other than
sales of inventory in the ordinary course of business consistent with past
practice) of any assets or properties of Holding or any of its Subsidiaries
having a value of more than $500,000 in any instance or more than $1,000,000 in
the aggregate in any fiscal year; or the making of any commitment for any of the
foregoing;
(d) the issuance, sale by Holding, or purchase, or the redemption,
repurchase (other than a repurchase not initiated by Holding pursuant to and in
accordance with any Repurchase Agreement, Holding's By-Laws, any other agreement
by Holding to repurchase any of its Securities, or any employee stock incentive
or stock option plan, in each case as previously approved by the Board of
Directors of Holding), or determination whether to exercise elective repurchase
rights with respect to, any capital stock or other securities of Holding or any
of its Subsidiaries (including without limitation options, warrants, and other
rights to acquire any such stock or other securities) or the selection by
Holding or any of its Subsidiaries of any appraiser in connection with any
valuation of any such stock or other securities, whether in connection with any
such repurchase or otherwise;
(e) the declaration, setting aside, or payment of any dividends or other
distributions in respect of the capital stock or other securities of Holding or
its Subsidiaries, other than the payment of dividends in respect of shares of
preferred stock in kind in accordance with the terms of such preferred stock or
to Holding by any of its Subsidiaries;
(f) (i) the incurrence by Holding or any of its Subsidiaries of any
indebtedness for borrowed money, or the entry by Holding or any of its
Subsidiaries into any agreement,
<PAGE>
instrument, obligation, commitment, or understanding relating thereto, including
without limitation the establishment of a line of credit at any bank or other
financial institution, or (ii) any amendment or modification of Holding's credit
arrangements with Bank of America, N.T. & S.A., as Agent, or the Indenture or
the Senior Subordinated Notes outstanding thereunder, or any other agreement or
arrangement previously approved hereunder pursuant to which Holding or any of
its Subsidiaries incurs indebtedness for borrowed money;
(g) the giving by Holding or any of its Subsidiaries of any guaranties or
indemnities in connection with the debt or other obligations of any Person
(other than Holding or any such Subsidiary), if as a result thereof the
aggregate liability of Holding and its Subsidiaries under all such guaranties
and indemnities would exceed $100,000 at any time;
(h) the settlement of any litigation, arbitration, lawsuit or other legal
proceeding involving a claim against Holding or any of its Subsidiaries (other
than any such claim by either of the Heritage Funds or any of their Affiliates)
for any amount in excess of $250,000;
(i) any action to effect the voluntary, or which would precipitate an
involuntary, dissolution, liquidation, or winding-up of Holding or any of its
Subsidiaries;
(j) the establishment of any material new business or any material change
to the business plan of Holding or any of its Subsidiaries;
(k) the approval of any Approved Sale pursuant to Section 2.1(a), the
approval of or recommendation to approve any Qualified Proposed Sale, or the
entering into or consummation of any merger or consolidation of Holding or any
of its Subsidiaries with or into any other Person (other than any merger into
Holding or any such Subsidiary, so long as (i) Holding or such Subsidiary is the
survivor of such merger, and (ii) in the case of a merger into Holding, at least
a majority of both the capital stock and the voting shares of Holding
outstanding immediately following such merger are held by Persons holding a
majority of such capital stock and voting shares, respectively, immediately
prior to such merger);
(l) unless otherwise permitted without the Majority Heritage Holders'
consent pursuant to paragraph (c) of this Schedule 4, the acquisition by Holding
or any of its Subsidiaries of any stock or indebtedness of, or (other than in
the ordinary course of business) any obligations or liabilities of, or the
acquisition by Holding or any of its Subsidiaries of all or a substantial
portion of the properties or assets of, or the making by Holding or any of its
Subsidiaries of any loans, advances (other than advances to employees in the
ordinary course of business), capital contributions, or investments (other than
in the ordinary course of business) in, any Person (other than any such
transaction among Holding and/or any of its Subsidiaries), or the entry by
Holding or any of its Subsidiaries into any partnership or joint venture;
(m) (i) the entering into by Holding or any of its Subsidiaries of any
transaction with any Affiliate (other than Holding or any such Subsidiary) on
terms less favorable to Holding or such Subsidiary, or more favorable to such
Affiliate, than would have been obtainable on an
<PAGE>
arms-length basis in the ordinary course of business, or (ii) the making of any
payment (whether in cash, securities, or other property) to or for the benefit
of any Affiliate (other than Holding or any of its Subsidiaries) of Holding or
any of its Subsidiaries in respect of any indebtedness owed by, or other
obligation of, Holding or any of its Subsidiaries to such Affiliate, in each
case other than (A) the reasonable compensation and reimbursement for out-of-
pocket expenses of any member of the Board of Directors of Holding or any of its
Subsidiaries who is not an employee, officer, or stockholder of Holding or its
Subsidiaries, (B) the reasonable costs and expenses associated with any rights
of board or executive committee attendance or observation or inspection and
lodging expenses related thereto, or (C) any increases in the compensation of
any employee of Holding or any of its Subsidiaries in the ordinary course of
business or pursuant to and in accordance with such employee's employment
agreement with Holding or such Subsidiary as in effect on September 10, 1998;
(n) the appointment or termination of the Chairman of the Board of
Directors, President, Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer (or Persons holding equivalent positions) of Holding, or the
establishment or modification of any bonus plan or incentive compensation
payable to any of such officers of Holding or its Subsidiaries;
(o) the appointment and retention of auditors for Holding and its
Subsidiaries;
(p) the retaining or compensating by Holding or any of its Subsidiaries of
any investment banker or similar advisor or consultant; or
(q) the entering into by Holding or any of its Subsidiaries of any
agreement obliging, committing or binding the Company or any such Subsidiary to
do any thing or to take any action referred to in paragraphs (a) (p) of this
Schedule 4, and any amendment or modification to any such agreement.
<PAGE>
Schedule 7
Insurance Policies
------------------
<TABLE>
<CAPTION>
Name Amount of Policy
---- ----------------
<S> <C>
Richard Block $10,000,000
Dean Henkel $ 2,000,000
James Oppenheimer $ 2,000,000
Richard Oppenheimer $ 2,000,000
David Underwood $ 2,000,000
</TABLE>
The following people shall have an insurance policy, if any, in an amount
to be determined from time to time:
Melvin Herrin
H. Scott Herrin
Robert Eliason
Craig Wilson
Daniel Santry
Steven Frazier
Richard Mazurek
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,419
<SECURITIES> 0
<RECEIVABLES> 51,951
<ALLOWANCES> 1,635
<INVENTORY> 24,479
<CURRENT-ASSETS> 86,536
<PP&E> 122,924
<DEPRECIATION> 22,063
<TOTAL-ASSETS> 367,716
<CURRENT-LIABILITIES> 68,005
<BONDS> 225,197
0
0
<COMMON> 0
<OTHER-SE> 65,505
<TOTAL-LIABILITY-AND-EQUITY> 367,716
<SALES> 105,492
<TOTAL-REVENUES> 105,492
<CGS> 85,565
<TOTAL-COSTS> 85,565
<OTHER-EXPENSES> 16,705
<LOSS-PROVISION> 124
<INTEREST-EXPENSE> 7,665
<INCOME-PRETAX> 195
<INCOME-TAX> 357
<INCOME-CONTINUING> (162)
<DISCONTINUED> 0
<EXTRAORDINARY> (552)
<CHANGES> 0
<NET-INCOME> (714)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
