<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 March 31, 2000
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. [X] YES [_] NO
Number of shares of Series A Common Stock, $0.001 par value per share (the
"Series A Common Stock") and Series B Common Stock, $0.001 par value per share
(the "Series B Common Stock" and, together with the Series A Common Stock, the
"Common Stock") outstanding as of the close of business on May 5, 2000:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
- ----- ----------------------------
<S> <C>
Series A Common Stock.............................. 168,335
Series B Common Stock.............................. 4,500
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 March 31, 1999 and 2000............................... 3
Unaudited Condensed Consolidated Balance Sheets as of December 31,
1999 and
March 31, 2000..................................................... 4
Unaudited Condensed Consolidated Statement of Shareholders' Equity
for the
Three Months Ended March 31, 2000.................................. 5
Unaudited Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 2000......................... 6
Notes to Unaudited Condensed Consolidated Financial Statements...... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 17
PART II--OTHER INFORMATION................................................ 18
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1999 and 2000
(In thousands)
<TABLE>
<CAPTION>
1999 2000
------- -------
<S> <C> <C>
Net sales.................................................... $64,191 $75,694
Cost of goods sold........................................... 47,267 55,969
------- -------
Gross profit................................................. 16,924 19,725
Selling, general and administrative expenses................. 13,554 15,933
------- -------
Operating income............................................. 3,370 3,792
Other expense (income):
Interest expense, net...................................... 5,594 6,278
Other expense (income), net................................ 28 (33)
------- -------
Income (loss) before income taxes............................ (2,252) (2,453)
Income taxes (benefit)....................................... (483) (701)
------- -------
Net income (loss)............................................ $(1,769) $(1,752)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
ASSETS ------------ -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash................................................ $ 4,535 $ 1,070
Trade accounts receivable, net of allowances of
$2,125 in 1999 and $2,339 in 2000.................. 56,929 45,659
Other receivables................................... 3,675 3,306
Inventories......................................... 25,614 27,503
Deferred income taxes............................... 5,243 5,254
Prepaids and other current assets................... 2,676 2,543
-------- --------
Total current assets.............................. 98,672 85,335
-------- --------
Long-term assets:
Property, plant and equipment, net.................. 117,444 120,532
Goodwill, net....................................... 164,339 164,241
Deferred financing costs, net....................... 10,045 9,781
Other assets........................................ 3,562 3,582
-------- --------
Total assets...................................... $394,062 $383,471
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt................ $ 10,264 $ 11,497
Trade payables...................................... 28,005 22,888
Accrued expenses.................................... 35,930 29,220
-------- --------
Total current liabilities......................... 74,199 63,605
-------- --------
Long-term debt........................................ 245,695 250,124
Deferred income taxes................................. 10,034 9,710
Other noncurrent liabilities.......................... 226 222
-------- --------
Total liabilities................................. 330,154 323,661
-------- --------
Mandatorily redeemable preferred stock................ 17,337 18,088
-------- --------
Shareholders' equity:
Common stock, series A, $.001 par value; 1,000,000
shares authorized, 166,692 and 168,335 shares
issued and outstanding at December 31, 1999
and March 31, 2000, respectively................... 0 0
Common stock, series B, $.001 par value; 100,000
shares authorized, 4,500 shares issued and
outstanding at December 31, 1999 and March 31,
2000............................................... 0 0
Paid in capital..................................... 82,689 83,689
Warrants outstanding................................ 4,207 4,207
Carryover basis adjustment.......................... (37,143) (37,143)
Accumulated other comprehensive income.............. (9,334) (12,678)
Retained earnings................................... 6,152 3,647
-------- --------
Total shareholders' equity........................ 46,571 41,722
-------- --------
Total liabilities & shareholders' equity.......... $394,062 $383,471
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months ended March 31, 2000
(in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
-------------- Accumulated
Number Carryover Other
Comprehensive of Paid-in Warrants Basis Comprehensive Retained
Income Shares Amount Capital Outstanding Adjustment Income Earnings Total
------------- ------- ------ ------- ----------- ---------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1999................... 171,192 $-- $82,689 $4,207 $(37,143) $ (9,334) $ 6,152 $46,571
Issuance of common
stock.................. 1,643 -- 1,000 -- -- -- -- 1,000
Accretion of mandatorily
redeemable preferred
stock.................. -- -- -- -- -- -- (753) (753)
Foreign currency
translation adjustment. $(3,344) -- -- -- -- -- (3,344) -- (3,344)
Net income (loss)....... (1,752) -- -- -- -- -- -- (1,752) (1,752)
-------
Comprehensive income
(loss)................. $(5,096) -- -- -- -- -- -- -- --
======= ------- ---- ------- ------ -------- -------- ------- -------
Balance at March 31,
2000................... 172,835 $-- $83,689 $4,207 $(37,143) $(12,678) $ 3,647 $41,722
======= ==== ======= ====== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 2000
(In thousands)
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ (1,769) $ (1,752)
Adjustments to reconcile net income (loss) to net cash
provided by operating
activities--
Depreciation and amortization.......................... 4,677 5,087
Amortization of goodwill............................... 1,018 1,118
Loss on sale of fixed assets........................... 28 49
Deferred income taxes.................................. (1,080) (335)
Changes in assets and liabilities--
Trade accounts receivable, net....................... 2,005 11,609
Inventories.......................................... 118 (1,395)
Trade payables....................................... 1,605 (5,223)
Other assets and liabilities......................... (3,700) (6,474)
-------- --------
Net cash provided by operating activities.......... 2,902 2,684
-------- --------
Cash flows from investing activities:
Capital expenditures..................................... (4,735) (5,423)
Acquisition of subsidiary................................ -- (6,317)
-------- --------
Net cash used for investing activities............. (4,735) (11,740)
-------- --------
Cash flows from financing activities:
Net change in borrowings under revolving credit line..... 8,705 4,370
Repayment of long-term debt.............................. (253) (254)
Proceeds from issuance of long-term debt................. -- 3,250
Decrease in capital leases............................... (1,317) (1,394)
Decrease in restricted cash.............................. (3) (3)
Repurchase of common stock............................... (18,806) --
Proceeds from issuance of preferred stock and stock
warrants................................................ 18,881 --
Change in deferred financing costs....................... (771) (173)
-------- --------
Net cash provided by financing activities.......... 6,436 5,796
-------- --------
Effect of exchange rate differences on cash................ (484) (205)
-------- --------
Increase (decrease) in cash................................ 4,119 (3,465)
Cash, beginning of period.................................. 4,239 4,535
-------- --------
Cash, end of period........................................ $ 8,358 $ 1,070
======== ========
Supplemental Cash Flow Information:
Interest paid............................................ $ 7,764 $ 7,396
Income taxes paid........................................ 659 2,869
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Note 1--Basis of Presentation
The interim unaudited condensed consolidated financial statements presented
herein include the accounts of IMPAC Group, Inc. ("IMPAC") and all of its
domestic and foreign wholly-owned subsidiaries (together, the "Company"). All
intercompany transactions have been eliminated in consolidation.
These interim condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements are presented on a basis consistent with the audited financial
statements and 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 March 31, 2000 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, 1999 in the Company's Form 10-K as filed with the SEC.
Certain amounts appearing in prior year's financial statements have been
reclassified to conform with the current period presentation.
Note 2--Acquisitions
Acquisition of Atlantic Packaging Corporation--
On January 10, 2000, the Company acquired all of the common stock of
Atlantic Packaging Corporation ("Atlantic") for approximately $7.2 million
plus acquisition costs. The acquisition was funded through $3.3 million of
additional subordinated indebtedness with a related party, $2.9 million of
additional revolver borrowings under the Company's Amended and Restated
Multicurrency Credit Facility and the issuance of $1.0 million of Series A
Common Stock to the former Atlantic shareholders. Atlantic, based in Norwich,
Connecticut, provides high-end decorative corrugated packaging for various
consumer products.
Accounting for Acquisitions--
The acquisitions of Atlantic and Thamesdown Colour Limited ("Thamesdown"),
which was acquired on November 2, 1999, have been accounted for as purchases
and, accordingly, their operating results have been included in the Company's
consolidated financial statements from the dates of acquisition. Unaudited
proforma financial information for the three months ended March 31, 1999
calculated to reflect the acquisitions of Atlantic and Thamesdown have not
been presented herein as management believes these acquisitions are not
material, both individually and in the aggregate, to the Company's financial
position or results of operations taken as a whole.
7
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 3--Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------------ ---------
<S> <C> <C>
Raw materials...................................... $ 9,188 $11,527
Work in process and finished goods................. 16,426 15,976
------- -------
$25,614 $27,503
======= =======
</TABLE>
During the fourth quarter of 1999, the Company retroactively changed its
method of pricing the paper component of inventories for AGI from LIFO to
FIFO. The change in method was made (a) to minimize the effect of accounting
estimates used in computing interim financial information, (b) to provide for
a better matching of expenses with revenues, (c) to ensure consistency across
the Company which, apart from the paper component of inventory at AGI, was on
FIFO and (d) to facilitate better comparability to peer companies.
The financial statements for the three months ended March 31, 1999 have
been retroactively restated for this change, which increased previously
reported net income by $25.
Note 4--Segment Information
The Company operates in one business segment, providing specialty printing
and packaging for various consumer products markets. The following table
presents sales and other financial information for each geographic region as
of and for the three months ended March 31, 1999 and 2000:
<TABLE>
<CAPTION>
1999 2000
------------------------------ -------------------------------
Operating Identifiable Operating Identifiable
Geographic Regions Sales Income Assets Sales Income Assets
- ------------------ ------- --------- ------------ ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States........... $35,381 $2,636 $141,582 $45,111 $2,801 $165,962
Europe.................. 28,810 1,311 211,248 30,706 2,214 207,043
------- ------ -------- ------- ------ --------
Total geographic
segments............... 64,191 3,947 352,830 75,817 5,015 373,005
Elimination of sales.... -- -- -- (123) -- --
Unallocated corporate
expense................ -- (577) -- -- (1,223) --
Corporate assets........ -- -- 10,661 -- -- 10,466
------- ------ -------- ------- ------ --------
Consolidated totals... $64,191 $3,370 $363,491 $75,694 $3,792 $383,471
======= ====== ======== ======= ====== ========
</TABLE>
Note 5--Guarantors and Financial Information
The following unaudited condensed consolidating financial information is
presented for purposes of complying with the reporting requirements of the
subsidiaries of IMPAC that have guaranteed IMPAC's obligations with respect to
the Senior Subordinated Notes (the "Subsidiary Guarantors"). The Subsidiary
Guarantors are directly or indirectly wholly owned subsidiaries of IMPAC and
have fully and unconditionally guaranteed the 10 1/8% Senior Subordinated
Notes due 2008 (the "Senior Subordinated Notes") on a joint and several basis.
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. Separate financial
statements and other disclosures with respect to the Subsidiary Guarantors are
not presented because the Company believes that such financial statements and
other information would not provide additional information that is material to
investors. The unaudited condensed consolidating financial information
presents unaudited condensed consolidating financial statements as of March
31, 2000 and for the three months ended March 31, 2000 of:
8
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(a) IMPAC on a parent company only basis ("IMPAC Parent"), carrying its
investments in subsidiaries under the equity method;
(b) the Subsidiary Guarantors, which include IMPAC's domestic
subsidiaries AGI Incorporated, Klearfold, Inc., KF-International,
Inc., KF-Delaware, Inc., and Atlantic Packaging LLC and IMPAC's
foreign subsidiaries IMPAC Europe Holdings Limited, Levelprompt
Limited, IMPAC Europe Limited, James Upton Limited, Tinsley Robor
Labels Limited, IMPAC Creative Packaging Limited, Sonicon Limited,
Tophurst Properties Limited and Printing Resources Limited,
carrying its investments in subsidiaries under the equity method;
(c) the subsidiaries of IMPAC that have not guaranteed IMPAC's
obligations with respect to the Senior Subordinated Notes, which
include IMPAC's foreign subsidiaries Van de Steeg Packaging B.V.,
James Upton Holding B.V., James Upton B.V., James Upton GmbH, Music
Print B.V. and Thamesdown Colour Limited (together, the "Non-
Guarantor Subsidiaries");
(d) elimination entries necessary to consolidate IMPAC Parent and its
subsidiaries; and
(e) IMPAC on a consolidated basis ("IMPAC Consolidated").
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $ -- $60,400 $15,612 $(318) $75,694
Cost of goods sold...... -- 44,498 11,789 (318) 55,969
------- ------- ------- ----- -------
Gross profit............ -- 15,902 3,823 -- 19,725
Selling, general and
administrative
expenses............... 1,223 12,452 2,258 -- 15,933
------- ------- ------- ----- -------
Operating income........ (1,223) 3,450 1,565 -- 3,792
Equity earnings in
subsidiaries........... 374 (642) -- 268 --
Interest expense, net... 1,061 4,673 511 -- 6,245
------- ------- ------- ----- -------
Income (loss) before
income taxes........... (2,658) (581) 1,054 (268) (2,453)
Income taxes (benefit).. (906) (22) 227 -- (701)
------- ------- ------- ----- -------
Net income (loss)....... $(1,752) $ (559) $ 827 $(268) $(1,752)
======= ======= ======= ===== =======
</TABLE>
9
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash.................. $ 847 $ 223 $ -- $ -- $ 1,070
Trade accounts
receivable, net...... -- 37,007 8,652 -- 45,659
Intercompany
receivables.......... 15,328 36,037 6,438 (57,803) --
Inventories........... -- 24,846 2,657 -- 27,503
Other current assets.. 245 9,656 1,202 -- 11,103
-------- -------- ------- --------- --------
Total current
assets............. 16,420 107,769 18,949 (57,803) 85,335
-------- -------- ------- --------- --------
Property, plant and
equipment, net....... -- 93,839 26,693 -- 120,532
Goodwill, net......... -- 135,992 28,249 -- 164,241
Intercompany
receivables.......... 169,928 14,469 -- (184,397) --
Investment in
subsidiaries......... 125,326 41,912 -- (167,238) --
Other assets.......... 9,374 3,980 9 -- 13,363
-------- -------- ------- --------- --------
Total assets........ $321,048 $397,961 $73,900 $(409,438) $383,471
======== ======== ======= ========= ========
Current liabilities:
Current maturities of
long-term debt....... $ 6,641 $ 2,927 $ 1,929 $ -- $ 11,497
Trade payables........ -- 19,732 3,156 -- 22,888
Intercompany payables. -- 32,663 39,609 (72,272) --
Accrued expenses...... 394 23,194 5,632 -- 29,220
-------- -------- ------- --------- --------
Total current
liabilities........ 7,035 78,516 50,326 (72,272) 63,605
-------- -------- ------- --------- --------
Long-term debt.......... 223,370 23,475 3,279 -- 250,124
Other noncurrent
liabilities............ -- 9,638 294 -- 9,932
Intercompany debt....... -- 169,928 -- (169,928) --
-------- -------- ------- --------- --------
Total liabilities... 230,405 281,557 53,899 (242,200) 323,661
-------- -------- ------- --------- --------
Mandatorily redeemable
preferred stock........ 18,088 -- -- -- 18,088
-------- -------- ------- --------- --------
Total shareholders'
equity................. 72,555 116,404 20,001 (167,238) 41,722
-------- -------- ------- --------- --------
Total liabilities and
shareholders' equity... $321,048 $397,961 $73,900 $(409,438) $383,471
======== ======== ======= ========= ========
</TABLE>
10
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided by
(used for) operating
activities........... $(4,601) $ 7,843 $ (558) $-- $ 2,684
------- ------- ------- ---- --------
Cash flows from
investing activities:
Capital expenditures.. -- (4,666) (757) -- (5,423)
Acquisition of
subsidiary........... (6,484) 167 -- -- (6,317)
------- ------- ------- ---- --------
Net cash used for
investing activities. (6,484) (4,499) (757) -- (11,740)
------- ------- ------- ---- --------
Cash flows from
financing activities:
Net change in
borrowings under
revolving credit
line................. 4,370 -- -- -- 4,370
Proceeds from issuance
of long-term debt.... 3,250 -- -- -- 3,250
Loans and advances
(to) from related
parties.............. 6,005 (3,282) (2,723) -- --
Other financing
activities........... (427) (835) (562) -- (1,824)
------- ------- ------- ---- --------
Net cash provided by
financing activities. 13,330 (4,249) (3,285) -- 5,796
------- ------- ------- ---- --------
Effect of exchange rate
differences on cash.... (1,682) (844) 2,321 (205)
------- ------- ------- ---- --------
Increase (decrease) in
cash................... 563 (1,749) (2,279) -- (3,465)
Cash, beginning of
period................. 284 1,972 2,279 -- 4,535
------- ------- ------- ---- --------
Cash, end of period..... $ 847 $ 223 $ -- $-- $ 1,070
======= ======= ======= ==== ========
</TABLE>
Note 6--Subsequent Events
On April 3, 2000, the Company acquired certain assets and liabilities of
Commercial Lithographing Company ("Commercial Litho") for $10.5 million plus
acquisition costs. The acquisition was funded through the issuance of $11.0
million of subordinated indebtedness with Bank of America, N.A. Commercial
Litho, based in Louisville, Kentucky, provides high-end commercial printing
services to various companies in the entertainment and other consumer products
markets.
On April 24, 2000, Westvaco Corporation ("Westvaco") entered into a
definitive purchase agreement to acquire all outstanding common stock and
equivalents of the Company for approximately $204 million. In addition,
Westvaco intends to refinance substantially all of the Company's debt and
redeem all preferred stock as soon as practicable after the acquisition
closes, which is subject to customary closing conditions and is expected to be
completed by mid-2000. This transaction constitutes a Change of Control under
and as defined by the terms of the Indenture for the Senior Subordinated
Notes.
On April 14, 2000 and April 27, 2000, the Company sold both of its interest
rate swaps for aggregate proceeds of $2.8 million.
11
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
IMPAC Group, Inc. ("IMPAC", and, collectively with its consolidated
subsidiaries, the "Company") is an international designer, manufacturer and
marketer of high-end, value-added specialty printing and packaging for various
consumer products markets including entertainment, cosmetics and personal
care. 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 retail marketplace. In addition, the Company offers its products using a
unique blend of materials including paper, paperboard and transparent rigid
plastic materials.
IMPAC was formed in March, 1998, when KFI Holding Corporation ("KFI"), the
parent company of Klearfold, Inc. ("Klearfold"), completed both its
acquisition of AGI Incorporated ("AGI") and also the issuance of the Company's
10 1/8% Senior Subordinated Notes due 2008 ("Senior Subordinated Notes"). Upon
completion of these transactions, the Company changed its name to IMPAC Group,
Inc. AGI is a supplier of standard and specialty printed packaging in the
United States for the entertainment, cosmetics and personal care industries.
Klearfold is a supplier of innovative display packaging using specialty
windowed folding cartons that combine rigid plastic film with paperboard for
the cosmetics, personal care and other consumer products industries.
Subsequently, in September 1998, IMPAC expanded into the international
packaging market when it acquired the capital stock of Tinsley Robor plc
(together with its subsidiaries, "Tinsley"). Tinsley is a supplier of standard
and specialty printed packaging for the European music, multimedia and DVD
markets through its plants located in the U.K., Ireland, Austria and The
Netherlands.
IMPAC further expanded its operations through several "tuck-in"
acquisitions, including the acquisitions of Music Print B.V. ("Music Print")
in November, 1998, Thamesdown Colour Limited ("Thamesdown") in November, 1999,
Atlantic Packaging Corporation ("Atlantic") in January, 2000 and Commercial
Lithographing Company ("Commercial Litho") in April, 2000. Music Print
supplies printed packaging to the music and multimedia markets in The
Netherlands, Thamesdown provides high-end commercial printing services in the
U.K., Atlantic manufactures high-end decorative corrugated packaging in
Norwich, Connecticut, and Commerical Litho provides high-end commercial
printing services in Louisville, Kentucky.
IMPAC is a holding company with no material assets or operations other than
its investments in its direct and indirect wholly owned subsidiaries. All of
the Company's domestic subsidiaries and certain foreign subsidiaries of the
Company have guaranteed the Senior Subordinated Notes on a full,
unconditional, joint and several basis, subject to the subordination
provisions in the related Indenture (the "Subsidiary Guarantors"). Separate
financial statements and other disclosures of the Subsidiary Guarantors have
not been presented in this Form 10-Q because the Company believes that such
financial statements and other information would not provide additional
information that is material to investors. However, the condensed
consolidating financial information of IMPAC, the Subsidiary Guarantors and
the subsidiaries of IMPAC that have not provided guarantees on the Senior
Subordinated Notes have been presented in Note 5 of the Unaudited Condensed
Consolidated Financial Statements for purposes of complying with the reporting
requirements.
12
<PAGE>
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999
The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the three months ended March 31,
1999 (the "1999 period") and 2000 (the "2000 period"). The unaudited income
statement data for the three months ended March 31, 2000 includes the results
of Thamesdown for the entire period and the results of Atlantic from the date
of acquisition.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 2000
--------- ---------
<S> <C> <C>
Income Statement Data:
Net sales........................................... 100.0% 100.0%
Cost of goods sold.................................. 73.6% 73.9%
--------- ---------
Gross profit........................................ 26.4% 26.1%
Selling, general and administrative expenses........ 21.1% 21.0%
--------- ---------
Operating income.................................... 5.2% 5.0%
Interest expense, net............................... 8.7% 8.3%
--------- ---------
Income (loss) before income taxes................... (3.5%) (3.2%)
Income taxes (benefit).............................. (0.8%) (0.9%)
--------- ---------
Net income (loss)................................... (2.8%) (2.3%)
========= =========
</TABLE>
Net Sales for the 2000 period were $75.7 million compared to $64.2 million
for the 1999 period, an increase of 17.9%. This increase was due to a $5.1
million increase in entertainment packaging, a $4.5 million increase in
cosmetics packaging, and a $1.9 million increase in other consumer products
packaging. The entertainment packaging increase was due primarily to an
increase in music packaging sales in the U.S. resulting from improved market
penetration and favorable industry conditions. The increase in cosmetics
packaging relates primarily to increased volume with the Company's existing
customers resulting from successful sales and marketing efforts. The increase
in other consumer products packaging relates primarily to the acquisitions of
Thamesdown and Atlantic.
Gross Profit for the 2000 period was $19.7 million compared to $16.9
million for the 1999 period, an increase of 16.6%. The increase in gross
profit was due to the sales increase noted above. Gross margin decreased from
26.4% to 26.1% primarily as a result of costs associated with the introduction
of new packaging for significant product lines of two of the Company's
customers.
Selling, General and Administrative Expenses for the 2000 period were $15.9
million compared to $13.6 million for the 1999 period, an increase of 17.6%.
The increase in SG&A was due primarily to increases in selling and
administrative personnel to promote and support the Company's growth. SG&A as
a percentage of sales decreased from 21.1% to 21.0%
Operating Income was $3.8 million for the 2000 period and $3.4 million for
the 1999 period due to the factors discussed above.
Net Interest Expense for the 2000 period was $6.3 million compared to $5.6
million for the 1999 period, an increase of 12.2%. The increase is due to an
increase in long-term debt, primarily for the acquisitions of Thamesdown and
Atlantic, and an increase in interest rates.
13
<PAGE>
Income Taxes were a benefit of $0.7 million for the 2000 period and $0.5
million for the 1999 period. The Company's rate of tax benefit for the periods
was less than the U.S. federal statutory rate primarily due to the effect of
non-deductible goodwill amortization of approximately $1.1 million and $1.0
million in the 2000 and 1999 periods, respectively.
Net Loss was $1.8 million for both the 2000 and the 1999 periods due to the
factors discussed above.
Liquidity and Capital Resources
Net cash provided by operating activities for the three months ended March
31, 2000 (the "2000 period") was $2.7 million compared to $2.9 million for the
three months ended March 31, 1999 (the "1999 period"). Income from operations
before non-cash charges increased to $4.2 million from $2.9 million primarily
due to increased depreciation and amortization and favorable deferred income
taxes. In the 2000 period, income from operations before non-cash charges of
$4.2 million, $3.3 million of additional subordinated indebtedness with a
related party and $4.4 million of revolver borrowings were used to fund the
acquisition of Atlantic, $5.4 million of capital expenditures, a $1.5 million
increase in working capital requirements, a $1.4 million decrease in capital
leases, the repayment of $0.3 million of bank borrowings and $0.2 million of
debt issuance costs. In the 1999 period, income from operations before non-
cash changes of $2.9 million, the issuance of 20,000 shares of Series A
Mandatorily Redeemable Preferred Stock together with Warrants to purchase
6,913 shares of Series A Common Stock and $8.7 million of revolver borrowings
were used to fund the repurchase of Series A Common Stock, the repayment of
$0.3 million of bank borrowings, $0.8 million of debt issuance costs, a $1.3
million decrease in capital leases and $4.7 million of capital expenditures.
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. The Company currently expects to spend approximately $24.0
million on capital expenditures in 2000. The Company expects to fund its
capital expenditures and other working capital requirements in 2000 through
internally generated cash flow and borrowings under the Company's Amended and
Restated Multicurrency Credit Facility (the "Facility").
On January 10, 2000, the Company acquired all of the common stock of
Atlantic for approximately $7.2 million plus acquisition costs. The
acquisition was funded through $3.3 million of additional subordinated
indebtedness with a related party, $2.9 million of additional revolver
borrowings under the Facility and the issuance of $1.0 million of Series A
Common Stock to the former Atlantic shareholders.
On April 3, 2000, the Company acquired certain assets and liabilities of
Commercial Litho for $10.5 million plus acquisition costs. The acquisition was
funded through the issuance of $11.0 million of subordinated indebtedness with
Bank of America, N.A.
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. There
are no contractual restrictions, under the Facility or otherwise, upon the
ability of the Subsidiary Guarantors to make distributions or pay dividends,
directly or indirectly, to IMPAC.
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. Pounds
Sterling, Dutch Guilders, Irish Punts, Austrian Shillings and the Euro.
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.
14
<PAGE>
Adoption of New Accounting Standards
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 the statement of
financial position and measure those instruments at fair value. This statement
is effective for fiscal years beginning after June 15, 2000. 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of revenue
in financial statements filed with the SEC. SAB 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition polices. The Company believes that
its revenue recognition policy is in compliance with the provisions of SAB 101
and that the impact of SAB 101 will not have a material effect on the
Company's financial position or results of operations.
Cautionary Note
This Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, including, but not limited to
statements regarding: the funding of and the projected amount of capital
expenditures in 2000; the impact of the new FASB statement and the SEC
bulletin; the Company's ability to incur substantial additional indebtedness;
and, 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. Subject to certain
covenants, the Company is permitted to incur substantial additional
indebtedness in the future.
. The Company's ability to make scheduled payments of principal of, or to
pay the interest or liquidated damages, if any, on, or to refinance, its
indebtedness (including the Senior Subordinated Notes), or to fund
planned capital expenditures and any acquisitions will depend on its
future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control.
. 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.
. IMPAC has no operations of its own and derives substantially all of its
revenue from its subsidiaries. Holders of indebtedness and trade
creditors of subsidiaries of IMPAC would generally be entitled to payment
of their claims from the assets of the affected subsidiaries before such
assets were made available for distribution to IMPAC.
. Several of IMPAC's foreign subsidiaries are not required to deliver a
guarantee with respect to the Senior Subordinated Notes. Additionally,
IMPAC is allowed under the Indenture to acquire or create additional
foreign subsidiaries that may not be required to deliver a guarantee with
respect to the Senior Subordinated Notes.
15
<PAGE>
. 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 IMPAC or any Subsidiary Guarantor. In
addition, the payment of interest and principal by IMPAC 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 IMPAC 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.
Furthermore, upon certain ownership changes, the dividend rate on the
Preferred Stock will increase to 24%. The acquisition of the Company by
Westvaco Corporation ("Westvaco") contemplated by the definitive purchase
agreement by and between Westvaco and the Company constitutes a Change of
Control under and as defined by the terms of the Indenture.
. 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 Company's future operations and
earnings are largely dependent upon management's ability to successfully
integrate the combined entity and execute the Company's strategy of
offering the combined product lines of AGI, Klearfold and Tinsley.
. A substantial portion of the Company's business is now conducted in
international markets. Risks inherent in foreign operations, such as
fluctuations in foreign currency exchange rates and changes in social,
political and economic conditions, could materially adversely affect the
Company's business.
. 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. In addition to
technical and new product changes that could affect demand for the
Company's products in traditional distribution channels, demand for the
Company's products could also be materially affected by change in retail
distribution channels, such as the anticipated growth in electronic
commerce distribution channels in which products are sold directly to
customers over the Internet. In addition, new technology such as MP3 and
new internet initiatives such as the Liquid Music Network permit
consumers to download music releases directly from the Internet,
eliminating the need for the Company's products. The Company's success
will depend, in part, upon its continued ability to manufacture products
that meet changing customer needs and industry-wide shifts, 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.
. A significant portion of the Company's business is attributable to
special projects relating to particular hit movie or music releases. The
existence and timing of such major releases may cause the Company's
quarterly and annual revenues to vary significantly.
. The Company acquired Music Print in November 1998, Thamesdown in November
1999, Atlantic in January 2000, and Commercial Litho in April 2000, and
it may continue to pursue selective acquisitions within the specialty
packaging and printing industry. In the event that such acquisitions have
occurred or 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.
. Many of the Company's products are sold in highly competitive markets in
the United States, the U.K. and Europe. Competitive pressures or other
factors could cause the Company to lose existing business or
opportunities to generate new business or could result in significant
price erosion, all of which would have a material adverse effect on the
Company's business, financial condition and results of operations.
16
<PAGE>
. 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, 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. In addition to the effects of
regulation, the Company's business may also be affected by environmental
concerns of consumers with respect to packaging.
. 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.
Risk factors, cautionary statements and other conditions that could cause
actual results to be adversely affected are also contained in the Company's
filings with the Securities and Exchange Commission, including the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999
Annual Report") and the foregoing discussion should be read in conjunction
with the Cautionary Note section of Management's Discussion and Analysis of
Financial Condition and Results of Operations of the 1999 Annual Report.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk exposures
since December 31, 1999.
17
<PAGE>
PART II--OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
There have been no material changes in the legal proceedings previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 10, 2000, in connection with IMPAC's (the "Company") purchase of
all of the outstanding common stock of Atlantic Packaging Corporation
("Atlantic"), IMPAC issued an aggregate of approximately 1,643 shares of
Series A Common Stock to two (2) holders of outstanding common stock of
Atlantic, representing partial consideration of approximately $1,000,000
payable by IMPAC pursuant to that certain Stock Purchase Agreement and Stock
Exchange Agreement dated as of January 10, 2000, by an among IMPAC and such
holders. The issuances of such Series A Common Stock were made by IMPAC in
reliance on the exemption from registration provided under Section 4(2) under
the Securities Act of 1933, as amended. See Note 2 to the Company's Unaudited
Condensed Consolidated Financial Statements.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 10, 2000, IMPAC's stockholders consented, in lieu of a meeting,
to an amendment of IMPAC's Fourth Amended and Restated Certificate of
Incorporation. Such stockholder action was consented to by the affirmative
vote of the holders of approximately 110,450 shares of Series A Common Stock,
4,500 shares of IMPAC"s Series B Common Stock and 20,000 shares of IMPAC's
Series A Redeemable Preferred Stock.
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
2.6 Agreement and Plan of Merger, dated as of April 24, 2000, among
Westvaco Corporation, Collision Acquisition Corp., Heritage Fund II,
L.P., as the Representative, and IMPAC Group, Inc.**
3.3 Second Amended and Restated By-laws of the Company.*
3.5 Fourth Amended and Restated Certificate of Incorporation of the
Company.*
3.6 Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation of the Company, dated November 2, 1999.*
3.7 Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation of the Company, dated January 10, 2000.*
10.120 Note Purchase Agreement, dated January 10, 2000, by and between the
Company and Heritage Fund II Investment Corporation.
10.121 Seventh Amendment to Amended and Restated Multicurrency Credit
Facility, dated as of March 30, 2000, among Bank of America, N.A., as
agent, the Company, AGI, Klearfold and the other parties thereto.@
27.1 Financial Data Schedule.
</TABLE>
18
<PAGE>
- --------
**Incorporated by reference to the same numbered exhibit to the Registrant's
Form 8-K filed by the Company on May 4, 2000.
*Incorporated by reference to the same numbered exhibit to the Registrant's
Form 10-K filed by the Registrant for the fiscal year ending December 31,
1999.
@Portions of the exhibit have been omitted pursuant to an application for
confidential treatment. The confidential portions omitted have been filed
separately with the Securities and Exchange Commission.
(b) Reports on Form 8-K
A report on Form 8-K/A was filed on January 28, 2000, supplementing the
Form 8-K filed by the Company on November 17, 1999, solely to add the
financial statements, pro forma financial information and exhibits required
by Item 7 of Form 8-K.
A report on Form 8-K was filed on May 4, 2000, announcing a definitive
purchase agreement for the acquisition of IMPAC Group, Inc. by Westvaco
Corporation.
19
<PAGE>
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.
/s/ David C. Underwood
By: _________________________________
David C. Underwood
Chief Financial Officer
Date: May 12, 2000
20
<PAGE>
Exhibit 10.120
NOTE PURCHASE AGREEMENT
-----------------------
This NOTE PURCHASE AGREEMENT (this "Agreement") is dated as of January 10,
2000, by and between (i) IMPAC Group, Inc., a Delaware corporation (the
"Company"), and (ii) Heritage Fund II Investment Corporation, a Delaware
corporation (the "Investor").
WHEREAS, the Company wishes to sell and the Investor wishes to buy certain
securities of the Company on the terms and subject to the restrictions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Company and the Investor agree as follows:
1. DEFINITIONS.
For all purposes of this Agreement, the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
"Affiliate" of any specified Person shall mean any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified.
"Agent" shall have the meaning given such term in the Loan Agreement.
"Certificate of Incorporation" shall mean the Company's Fourth Amended and
Restated Certificate of Incorporation.
"Closing" shall have the meaning specified in Section 2.2 hereof.
"Closing Date" shall have the meaning specified in Section 2.2 hereof.
"Commission" shall mean the Securities and Exchange Commission.
"Company" shall have the meaning specified in the introductory paragraph
hereof.
"Default" shall mean an event or condition which with the passage of time
or giving of notice, or both, would become an Event of Default.
"Event of Default" shall have the meaning specified in Section 7.1 hereof.
"Heritage Rate" shall mean the rate of interest payable from time to time
by the Investor on its line of credit with BankBoston, N.A. or any successor, or
any other rate of interest agreed to by the Company and the holder of the Note
if the Note is
<PAGE>
transferred. At the request of the Company the Investor will provide
documentation in reasonable detail evidencing the Heritage Rate.
"Indebtedness" shall have the meaning given such term in the Indenture.
"Indenture" shall mean the Indenture dated as of March 12, 1998 among the
Company, certain of the Company's Subsidiaries and State Street Bank and Trust
Company, as trustee thereunder, as supplemented to by the First Supplemental
Indenture, dated as of July 21, 1998 and as further supplemented by the Second
Supplemental Indenture dated as of January 31, 1999.
"Investor" shall have the meaning specified in the introductory paragraph
hereof.
"Loan Agreement" shall mean the Amended and Restated Multi-currency Credit
Agreement, dated as of March 12, 1998, and amended and restated as of July 7,
1998, as further amended by that certain First Amendment dated as of September
11, 1998, as further amended by that certain Second Amendment dated as of
November 13, 1998, as further amended by that certain Third Amendment dated as
of November 16, 1998, as further amended by that certain Fourth Amendment dated
as of December 10, 1998, as further amended by that certain Fifth Amendment
dated as of January 11, 1999, and as further amended by that certain Sixth
Amendment dated as of November 2, 1999, among the Company, certain of its
Subsidiaries and Bank of America National Trust and Savings Association and the
other lenders party thereto, as such Loan Agreement may be amended, restated,
modified, supplemented, extended, renewed or refinanced and in effect from time
to time.
"Maximum Rate" shall have the meaning specified in Section 3.4(b).
"Note" shall mean the Note of the Company in the form of Exhibit A hereto
issued to the Investor pursuant to Section 2.1 hereof and any other Notes
transferred to any other holders pursuant to Section 8 hereof.
"Obligations" shall have the meaning given to such term in the Indenture.
"Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
"Preferred Stock" shall mean the Company's Series A Redeemable Preferred
Stock, $0.001 par value per share.
"Purchase Price" shall have the meaning set forth in Section 2.1 hereof.
"Representative" shall have the meaning given to such term in the
Indenture.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Debt" shall mean any amounts outstanding or that could be drawn by
the Company from time to time under the Loan Agreement and any other debt that
constitutes Senior Debt under the Indenture.
"Senior Subordinated Notes" shall mean the Company's 10-1/8% Senior
Subordinated Notes due 2008 issued pursuant to the Indenture.
"Subsidiary" shall mean, with respect to the Company, any corporation a
majority (by number of votes) of the outstanding shares of any class or classes
of which shall at the time be owned by the Company or by a Subsidiary of the
Company, if the holders of the shares of such class or classes (a) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or persons performing similar functions) of the
issuer thereof, even though the right so to vote has been suspended by the
happening of such a contingency, or (b) are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the issuer thereof, whether or not the right so
to vote exists by reason of the happening of a contingency.
"Transfer Notice" shall have the meaning specified in Section 8.2 hereof.
2. SALE AND PURCHASE OF PURCHASED SECURITIES.
2.1 Sale and Purchase of Note. The Company agrees to issue and sell to
the 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,
the Investor agrees to purchase a Note of the Company in the form of Exhibit A
hereto in the principal amount of $3,250,000 (the "Purchase Price").
2.2. Closing. The closing of the purchase and sale of a Note pursuant to
this Section 2 (the "Closing") will take place at the offices of the Company on
January 10, 2000 or such date as the parties hereto may agree upon (the "Closing
Date"). At the Closing, the Company will deliver to the Investor the Note
against payment by the Investor of the Purchase Price by wire transfer or by
check. The Note purchased by the Investor will be issued to the Investor on or
before the Closing Date and registered in the Investor's name in the Company's
records.
2.3. Use of Proceeds. The Company agrees that it will use the proceeds
from the sale of the Note hereunder solely for working capital and general
corporate purposes, and in no event for the prepayment of the Senior
Subordinated Notes or to redeem any of the Preferred Stock.
<PAGE>
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTES.
3.1. Mandatory Principal Repayments. The Company agrees to repay the
principal amount of the Note, together with all accrued and unpaid interest
thereon, in one installment on March 31, 2006.
3.2. Prepayments. Subject to compliance with the Loan Agreement, the
Company shall be permitted to prepay all or any portion of the Note, together
with all accrued and unpaid interest thereon, at any time without premium or
penalty.
3.3. No Reborrowing. No amount repaid pursuant to Section 3.1 may be
reborrowed under the Notes.
3.4. Interest Payments.
(a) The unpaid principal amount of the Note outstanding from time to time
(including during the continuance of a Default or Event of Default of the type
described in Section 7.1(a) or 7.1(b) hereof) shall bear interest at a rate per
annum equal to the Heritage Rate; provided, that in no event shall such interest
rate be greater than 12% per annum (including all capitalized fees and
expenses). Interest on the Note shall be calculated on the basis of the actual
number of days elapsed and a 360 day year, shall accrue and be compounded semi-
annually in arrears on June 30 and December 31, commencing on June 30, 2000,
until paid pursuant to Section 3.1 hereof. All interest will be paid semi-
annually in arrears on June 30 and December 31, commencing on June 30, 2000.
(b) It is not intended by the holder of the Note, and nothing contained in
this Agreement or the Note shall be deemed, to establish or require the payment
of a rate of interest in excess of the maximum rate permitted by applicable
federal, state or other law (the "Maximum Rate") and, to prevent such an
occurrence, any agreement which may now or hereafter be in effect between the
Company and the holder of the Note regarding the payment of fees or interest to
such holder is hereby limited by the provisions of this Section 3.4(b). If, in
any month, the effective interest rate applicable to the principal outstanding
under the Note, absent the Maximum Rate limitation contained herein, would have
exceeded the Maximum Rate, then the effective interest rate applicable to the
Note for that month shall be the Maximum Rate, and, if in any subsequent month,
the effective interest rate would otherwise be less than the Maximum Rate, then
the effective interest rate applicable to the Note for such month shall be
increased to the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid in respect of
the Note if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the principal outstanding under the Note, the
total amount of interest paid or accrued in respect of the Note under the terms
of this Agreement is less than the total amount of interest which would have
been paid or accrued in respect of the Note had the interest not been limited
hereby to the Maximum Rate, then the Company shall, to
<PAGE>
the extent permitted by such applicable federal, state or other law, pay to the
holder of the Note an amount equal to the excess, if any, of (i) the lesser of
(A) the amount of interest which would have been charged in respect of the Note
if the Maximum Rate had, at all times, been in effect with respect to the Note
and (B) the amount of interest which would have accrued in respect of the Note
had the effective interest rate applicable with respect to the Note at all times
not been limited hereunder by the Maximum Rate over (ii) the amount of interest
actually paid or accrued in respect of the Note held by such holder under this
Agreement. In the event that the holder of the Note receive, collect or apply as
interest any sum in excess of the Maximum Rate, such excess or part thereof
remaining, shall be paid to the Company.
3.5. Senior Subordinated Notes. All Indebtedness of the Company evidenced
by the Note shall be pari passu in right of payment to the Indebtedness of the
Company evidenced by the Senior Subordinated Notes.
4. SUBORDINATION.
4.1. Agreement to Subordinate. The Company agrees, and any holder of the
Note by accepting the Note agrees, that the Indebtedness, interest and other
Obligations of any kind evidenced by the Note and this Agreement is subordinated
in right of payment, to the extent and in the manner provided in this Section 4,
to the prior payment in full in cash of all Senior Debt (whether outstanding on
the date hereof or hereafter created, incurred, assumed or guaranteed), and that
the subordination is for the benefit of the holders of Senior Debt.
4.2. Certain Definitions.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
New Credit Facility (as defined in the Indenture) and (ii) any other Senior Debt
permitted under the Indenture the principal amount of which is $10.0 million or
more and that has been designated by the Company as "Designated Senior Debt";
provided, however, that so long as the New Credit Facility remains in effect,
lenders holding a majority in aggregate amount of the loan commitments
thereunder shall have consented, in writing, to such designation of additional
Indebtedness as Designated Senior Debt.
"Permitted Junior Securities" means Equity Interests (as defined in the
Indenture) in the Company or debt securities that are unsecured and subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior Debt)
to at least the same extent as, or to a greater extent than, the Note is
subordinated to Senior Debt pursuant to this Agreement (without limiting the
foregoing, such Permitted Junior Securities shall have no required principal
payments or equity redemption requirements until after the final maturity of all
Senior Debt).
<PAGE>
4.3 Liquidation; Dissolution; Bankruptcy. Upon any distribution to
creditors of the Company whether in cash, properties, securities or otherwise,
in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company, or its property, an assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities, the holders of Senior Debt
shall be entitled to receive payment in full in cash of all Obligations due in
respect of such Senior Debt (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Debt whether or
not allowed as a claim in any such proceeding) before the holder of the Note
will be entitled to receive any payment with respect to the Note, and until all
Obligations with respect to Senior Debt are paid in full in cash, any
distribution to which the holder of the Note would be entitled shall be made to
the holders of Senior Debt (except that the holder of the Note may receive and
retain Permitted Junior Securities).
To the extent any payment of Senior Debt (whether by or on behalf of the
Company or any Subsidiary, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Debt or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent the obligation to
repay any Senior Debt is declared to be fraudulent, invalid, or otherwise set
aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then the obligations so declared fraudulent, invalid or otherwise
set aside (and all other amounts that would come due with respect thereto had
such obligation not been affected) shall be deemed to be reinstated and
outstanding as Senior Debt for all purposes hereof as if such declaration,
invalidity or setting aside had not occurred.
4.4. Default on Designated Senior Debt. The Company also may not make any
payment upon or in respect of the Note (except in Permitted Junior Securities)
if (i) a default in the payment of the principal of, premium, if any, or
interest on Senior Debt occurs and is continuing or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that currently,
or with the passage of time or giving of notice, permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and, in the case of any such default described in this clause (ii), the
holder of the Note receives a notice of such default of the type referred to in
this clause (ii) (a "Payment Blockage Notice") from the Company or the holders
of any Designated Senior Debt. Payments on the Note may and shall be resumed (a)
in the case of a payment default, upon the date on which such default is cured
or waived in writing by the holders of the applicable Senior Debt and (b) in
case of a nonpayment
<PAGE>
default, the earlier of the date on which such nonpayment default is cured or
waived in writing by the holders of Designated Senior Debt or 179 days after the
date on which the applicable Payment Blockage Notice is received by the holder
of the Note, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced under clause
(ii) above unless and until (i) 360 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal of, premium, if any, and interest on the Note
that have come due have been paid in full in cash. No nonpayment default that
existed and was continuing on the date of delivery of any Payment Blockage
Notice to the holder of the Note shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been waived in
writing or cured for a period of not less than 90 days. In the event that the
Company makes any payment to any holder of the Note prohibited by the foregoing,
such payment will be required to be held in trust for and paid over to the
holders of Senior Debt (or the representative thereof). The holder of the Note
will not challenge or contest the enforceability or validity of the New Credit
Facility or any obligation, Lien (as defined in the Indenture) or encumbrance
thereunder.
4.5. Acceleration of Securities. If payment of the Note is accelerated
because of an Event of Default, the Company shall promptly notify holders of
Senior Debt of the acceleration.
4.6. When Distribution Must Be Paid Over. In the event that the holder of
the Note receives any payment of any Obligations with respect to the Note at a
time when such payment is prohibited by Section 4.4 hereof, and, if such holder
is not an Affiliate of the Company, such holder had actual knowledge at the time
that such payment is prohibited by Section 4.4 hereof, such payment shall be
held by such holder, in trust for the benefit of, and shall be paid forthwith
over and delivered, upon written request, to, the holders of Senior Debt as
their interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in cash in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt.
With respect to the holders of Senior Debt, any holder of the Note
undertakes to perform only such obligations on the part of any holder of the
Note as are specifically set forth in this Section 4, and no implied covenants
or obligations with respect to the holders of Senior Debt shall be read into
this Agreement against any holder of the Note.
4.7. Notice by Company. The Company shall promptly notify the holder of
the Note of any facts known to the Company that would cause a payment of any
<PAGE>
Obligations with respect to the Note to violate this Section 4, but failure to
give such notice shall not affect the subordination of the Note to the Senior
Debt as provided in this Section 4.
4.8. Subrogation. After all Senior Debt is paid in full in cash and until
the Note is paid in full, the holder of the Note shall be subrogated (equally
and ratably with all other Indebtedness pari passu with the Note, including the
Senior Subordinated Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the holder of the Note have been applied to the payment of
Senior Debt. A distribution made under this Section 4 to holders of Senior Debt
that otherwise would have been made to the holder of the Note is not, as between
the Company and the holder of the Note, a payment by the Company on the Note.
4.9. Relative Rights. This Section 4 defines the relative rights of any
holder of the Note and holders of Senior Debt. Nothing in this Section 4 shall:
(a) impair, as between the Company and any holder of the Note, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Note in accordance with its terms;
(b) affect the relative rights of any holder of the Note and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(c) prevent the holder of the Note from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to the holder of the Note.
If the Company fails because of this Section 4 to pay principal of or interest
on the Note on the due date, the failure is still a Default or Event of Default;
provided, that, notwithstanding anything to the contrary set forth above, such
Default or Event of Default shall be deemed to be cured under the circumstances
set forth, and as provided, in Section 7.5 herein.
4.10. Subordination May Not Be Impaired by Company. No right of any
holder of Senior Debt to enforce the subordination of the Indebtedness evidenced
by the Note shall be impaired by any act or failure to act by the Company the
holder of the Note or by the failure of the Company the holder of the Note to
comply with this Agreement.
<PAGE>
The holder of the Note agrees that it will not challenge the validity,
enforceability or perfection of any Senior Debt or the liens, guarantees and
security interests securing the same and that as between the holders of the
Senior Debt on the one hand and the holder of the Note on the other, the terms
hereof shall govern even if all or part of the Senior Debt or such liens and
security interests are avoided, disallowed, subordinated, set aside or otherwise
invalidated in any judicial proceeding or otherwise, regardless of the theory
upon which such action is premised.
Without in any way limiting the generality of this Section 4.10, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the holder of the Note, without incurring responsibility
to the holder of the Note and without impairing or releasing the subordination
provided in this Section 4 or the obligations hereunder of the holder of the
Note to the holders of Senior Debt, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Debt, the New Credit Facility or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding or
secured: (b) sell, exchange, release, foreclose against or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Debt; (c) release
any Person liable in any manner for the collection of Senior Debt; and (d)
exercise or refrain from exercising any rights against the Company, any
Subsidiary thereof or any other Person.
4.11. Distribution or Notice to Representative. Whenever a distribution
is to be made or a notice given to holders of any Senior Debt, the distribution
may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in
this Section 4, the holder of the Note shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction or upon any certificate of
such Representative(s) or of the liquidating trustee or agent or other Person
making any distribution to the holder of the Note for the purpose of
ascertaining the Persons entitled to participate in such distribution, all
holders of the Senior Debt and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Section 4.
4.12. Authorization to Effect Subordination. If the holder of the Note
does not file a proper proof of claim or proof of debt in the form required in
any proceeding related to the Company, its creditors or its property or
otherwise of the type referred to in Section 6.09 of the Indenture at least 30
days before the expiration of the time to file such claim, the Representative is
hereby authorized to file an appropriate claim for and on behalf of the holder
of the Note.
<PAGE>
4.13. Amendments. The provisions of this Section 4 shall not be amended
or modified without the written consent of the Agent.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Investor to enter into this Agreement and to
purchase the Note, the Company hereby represents and warrants that, both before
and immediately after the date of this Agreement:
5.1. Organization and Good Standing. The Company and each of its
Subsidiaries is duly organized and existing in good standing in its jurisdiction
of incorporation, is duly qualified as a foreign corporation and authorized to
do business in all other jurisdictions in which the nature of its business or
property makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the business of the Company
or such Subsidiary, and has the corporate power to own its properties and to
carry on its business as now conducted and as proposed to be conducted.
5.2. Authorization. The execution, delivery and performance by the
Company of this Agreement and the issuance and sale by the Company of the Note
hereunder, (a) are within the Company's corporate power and authority, (b) have
been duly authorized by all necessary corporate proceedings, and (c) do not
conflict with or result in any breach of any provision of or the creation of any
lien upon any of the property of the Company or require any consent or approval
pursuant to the Certificate of Incorporation or bylaws of the Company, or any
law, regulation, order, judgment, writ, injunction, license, permit, agreement
or instrument.
5.3. Enforceability. The execution and delivery by the Company of this
Agreement to which it is a party, and the issuance and sale by the Company of
the Note hereunder, will result in legally binding obligations of the Company,
enforceable against the Company in accordance with the respective terms and
provisions hereof and thereof, except to the extent that (a) such enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and (b)
the availability of the remedy of specific performance or injunctive or other
equitable relief will be subject to the discretion of the court before which any
proceeding therefor may be brought.
5.4. Governmental Approvals. The execution, delivery and performance by
the Company of this Agreement to which it is a party, and the issuance and sale
by the Company of the Note hereunder, do not require the approval or consent of,
or any filing with, any governmental authority or agency prior to the date of
this Agreement other than those already obtained or filed.
<PAGE>
6. INVESTMENT REPRESENTATIONS.
(a) The Investor represents and warrants to the Company that (i) the
Investor is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act and (ii) the Investor is acquiring the Note
for investment, and not with a view to selling or otherwise distributing the
Note; provided, however, that the disposition of the Investor's property shall
at all times be and remain in the Investor's control, subject to the provisions
of Section 8 hereof.
(b) The Investor understands that the Note has not been registered under
the Securities Act on the grounds that the offer and sale of the Note to the
Investor are exempt from the registration requirements of the Securities Act
under Section 4(2) thereof as a transaction not involving any public offering of
the Note. The Investor understands that the Company's reliance on such exemption
is predicated in part on the representations of the Investor which are contained
herein.
(c) The Investor understands that it must bear the economic risk of the
investment in the Note contemplated hereby for an indefinite period of time
because the Note has not been registered under the Securities Act and,
therefore, cannot be sold unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
7. DEFAULTS.
7.1. Events of Default. Subject to Section 4 hereof, the holders of the
Note(s) will be entitled to exercise the remedies provided by Section 7.2 hereof
in accordance with the terms thereof if any one or more of the following events
("Events of Default") shall occur:
(a) the Company defaults for 30 days in the payment when due of
interest on the Note;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Note;
(c) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company (or the payment of which is
guaranteed by the Company), whether such Indebtedness or guarantee now
exists, or is created after the date of this Agreement, which default
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness the
maturity of which has been so accelerated, aggregates $5.0 million or more
(other than Existing Indebtedness
<PAGE>
(as defined in the Indenture) to the extent it is secured by or paid by the
drawing against a letter of credit permitted to be issued under the
Indenture);
(d) an Event of Default (as defined in the Indenture) specified in
Sections 6.01(f), (g) or (h) of the Indenture shall have occurred.
7.2. Remedies. Subject to Section 4 hereof, upon the occurrence and
continuance of any of the Events of Default under Section 7.1 hereof, in each
and every such case, the holder of the Note may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate proceedings
either for specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or in the Note, or in
aid of the exercise of any power granted in this Agreement or in the Note, and
(unless there shall have occurred an Event of Default under Section 7.1(d)
hereof, in which case the unpaid balance of the Note shall automatically become
due and payable) may by notice to the Company, declare all or any part of the
unpaid principal amount of the Note then outstanding to be forthwith due and
payable, and thereupon such unpaid principal amount or part thereof, together
with interest accrued thereon and any applicable prepayment charge and all other
sums, if any, payable under this Agreement or the Note shall become so due and
payable without presentation, presentment, protest or further demand or notice
of any kind, all of which are hereby expressly waived, and such holder or
holders may proceed to enforce payment of such amount or part thereof in such
manner as it or they may elect.
7.3. Waivers. The Company hereby waives, to the extent not prohibited by
applicable law, (a) all presentments, demands for performance and notices of
nonperformance (except to the extent specifically required by the provisions
hereof), (b) any requirement of diligence or promptness on the part of the
holder of Note in the enforcement of its rights under the provisions of this
Agreement, and (c) any and all notices of every kind and description which may
be required to be given by any statute or rule of law.
7.4. Course of Dealing. No course of dealing between the Company or any of
its Subsidiaries on the one hand, and the Investor or the holder of Note, on the
other hand, shall operate as a waiver of any of the Investor's or such holder's
rights under this Agreement. No delay or omission in exercising any right under
this Agreement shall operate as a waiver of such right or any other right. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any other occasion.
7.5. Default Waiver. If the Company fails to make any payment of principal
and/or interest due and owing under or in respect of the Note at any time while
such payment is prohibited by the subordination provisions contained in Section
4 herein, and such amounts (excluding amounts due after acceleration of the
Note, if accelerated) are paid within 30 days after the date on which such
payment is no longer prohibited
<PAGE>
under such Section 4, any Default or Event of Default resulting from such
nonpayment shall be deemed to have been cured on the date on which payment of
such amounts has been received and any acceleration of any payment obligations
under the Note after such nonpayment shall be deemed to have been rescinded
provided no other Default or Event of Default is then continuing, without
requirement, in either case, of any further notice or consent of the holder of
the Note.
8. RESTRICTIONS ON TRANSFER.
8.1. Transfer.
(a) The Investor shall not sell, assign, pledge or otherwise transfer
("Transfer") the Note to any other Person other than a Transfer in full of the
Note (or in such smaller principal amounts with the consent of the Agent) to (i)
an Affiliate of the Investor or (ii) any Person holding, at the time of such
Transfer, an aggregate principal amount of not less than $5,000,000 of the
Senior Subordinated Notes then outstanding.
(b) In the event of any Transfer of the Note in breach of this Agreement,
commencing immediately upon the date of such attempted Transfer (a) such
Transfer shall be void and of no effect, (b) no interest payment of any kind or
any distribution pursuant to any liquidation, redemption or otherwise shall be
paid by the Company to the purported transferee in respect of such Note (all
such rights to payment by the transferor and/or the purported transferee being
deemed waived), and (c) neither the transferor nor the purported transferee
shall be entitled to exercise any rights with respect to such Note until such
Transfer in breach of this Agreement has been rescinded.
8.2. Notice of Transfer. Prior to any transfer of any Note, the holder
thereof shall be required to give written notice to the Company describing in
reasonable detail the manner and terms of the proposed transfer and the identity
of the proposed transferee (the "Transfer Notice"), accompanied by, if
reasonably determined by the Company to be necessary with respect to such
transfer, an opinion of Bingham Dana LLP addressed to the Company, or other
counsel reasonably acceptable to the Company, that such transfer may be effected
without registration of such Notes under the Securities Act.
8.3. Restrictive Legends. Except as otherwise permitted by this Section
8, each Security shall bear the following legend:
"This Note has not been registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise transferred in the absence of
such registration or an exemption therefrom under such Act or any
applicable state securities laws. Furthermore, this Note may be sold or
otherwise transferred only in compliance with the conditions specified in
the Note Purchase Agreement referred to hereinafter, a complete and correct
copy of which is
<PAGE>
available for inspection at the principal office of IMPAC Group, Inc. and
will be furnished without charge to the holder of this Note upon written
request."
9. NOTICES.
Any notice provided for in this Agreement or the Note will be in writing
and will be deemed properly delivered if either personally delivered or sent by
telecopier, overnight courier or mailed certified or registered mail, return
receipt requested, postage prepaid, to the recipient at the address specified
below:
If to the Company, to 1950 North Ruby Street, Melrose Park, Illinois 60160,
to the attention of the Chief Executive Officer, or at such other address
as such person shall have specified by notice actually received by the
addressor.
If to the Investor, then to the Investor at the address set forth on the
signature page hereto, or at such other address as the Investor shall have
specified by notice actually received by the addressor.
Any such notice shall be effective (a) if delivered personally or by telecopier
when received, (b) if sent by overnight courier, when receipted for, and (c) if
mailed, five (5) days after being mailed as described above.
10. AMENDMENTS AND WAIVERS.
Any term of this Agreement or the Note may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the Investor and for amendments, the Agent under the
Loan Agreement, and any successor. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon the holder of the Note
sold pursuant to this Agreement and the Company. In connection with any
refinancing of the Loan Agreement, the parties hereto agree to execute any
amendments and/or restatements hereof as reasonably requested by any new
Lender(s) thereunder to evidence the continuing effect of the subordination
agreements hereunder.
11. CONSTRUCTION.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
12. MISCELLANEOUS.
This Agreement (including Exhibits and Schedules) sets forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior written or oral understandings with
respect thereto. The
<PAGE>
parties hereto acknowledge and agree that in entering into this Agreement they
have not in any way relied upon any oral or written agreements, statements,
promises, information, arrangements, understandings, representations or
warranties, express or implied, not specifically set forth in this Agreement.
The invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of any other term or provision hereof. The
headings in this Agreement are for convenience of reference only and shall not
alter or otherwise affect the meaning hereof. THIS AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE
DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING IN
CONNECTION WITH ANY MATTER REFERRED TO IN THIS AGREEMENT OR UNDER THIS AGREEMENT
OR THE NOTE IS HEREBY WAIVED BY THE PARTIES HERETO.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
THE COMPANY:
--- -------
IMPAC GROUP, INC.
By: /s/ David C. Underwood
------------------------------------------
Title: Chief Financial Officer
THE INVESTOR:
--- --------
HERITAGE FUND II INVESTMENT CORPORATION
By: /s/ Peter Z. Hermann
------------------------------------------
Title: Vice President and Secretary
Address: 30 Rowes Wharf
Boston, MA 02110
<PAGE>
List of Exhibits
----------------
Exhibit A Form of Note
<PAGE>
Exhibit A
---------
SUBORDINATED NOTE
This Note has not been registered under the Securities Act of 1933,
as amended, and may not be sold or otherwise transferred in the
absence of such registration or an exemption therefrom under such
Act or any applicable state securities laws. Furthermore, this
Note may be sold or otherwise transferred only in compliance with
the conditions specified in the Note Purchase Agreement referred
to hereinafter, a complete and correct copy of which is available
for inspection at the principal office of IMPAC Group, Inc. and
will be furnished without charge to the holder of this Note upon
written request.
$3,250,000 January 10, 2000
IMPAC GROUP, INC., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to HERITAGE FUND II
INVESTMENT CORPORATION, a Delaware corporation ("Payee"), or its registered
assigns, the entire principal amount of THREE MILLION TWO HUNDRED AND FIFTY
THOUSAND DOLLARS ($3,250,000), payable in the amounts and at the times specified
in Section 3 of the Note Purchase Agreement (as hereinafter defined) and with a
final maturity on March 31, 2006 (the "Maturity Date"), and to pay interest on
the unpaid principal amount hereof from the date hereof until and including the
payment in full of the unpaid principal amount hereof, such interest accruing
and compounding at the rate per annum set forth in Section 3.4(a) of the Note
Purchase Agreement (as hereinafter defined) (computed on the basis of actual
number of days elapsed and a 360-day year). The Company hereby promises to pay
such interest on the dates specified in the Note Purchase Agreement (as
hereinafter defined) until the obligation of the Company with respect to the
payment thereof shall be discharged. All payments of principal and interest
hereof shall be made in lawful money of the United States of America to the
account of the holder hereof upon presentation hereof at such address of the
holder hereof as such holder shall have designated to the Company in writing.
This Note is the Note of the Company issued pursuant to the Note Purchase
Agreement, dated as of January 10, 2000 (the "Note Purchase Agreement"), between
the Company and the Payee. The holder of this Note is entitled to enforce the
provisions of
<PAGE>
the Note Purchase Agreement and to enjoy the benefits thereof to the extent
provided therein and is subject to the obligations thereunder as a holder of a
Note.
The Company shall be permitted, at certain times and under certain
circumstances, to prepay all or any portion of this Note, together with all
accrued and unpaid interest thereon, and the maturity hereof may be accelerated
by the holder of the Note outstanding following an Event of Default (as defined
in the Note Purchase Agreement), all as provided in the Note Purchase Agreement,
to which reference is made for the terms and conditions of such provisions as to
prepayment and acceleration. No mandatory prepayments of this Note are
required.
Any transfer of this Note permitted in accordance with the transfer
restriction provisions set forth in the Note Purchase Agreement is registrable
on the note register of the Company upon presentation at the principal office of
the Company accompanied by a written instrument of transfer in form satisfactory
to the Company duly executed by, or on behalf of, the holder hereof. This Note
may also be exchanged at such office for one or more Notes in any authorized
denominations, as requested by the holder, of a like aggregate unpaid principal
amount. Except as permitted in the Note Purchase Agreement, this Note may not
be transferred, negotiated or assigned.
Prior to due presentment for registration of transfer, the Company and any
agent of the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment of principal and
interest as herein provided and for all other purposes.
The holder of this Note, by acceptance hereof, agrees with the Company that this
Note and all payments hereunder shall be subordinate and junior in right of
payment to the prior payment in full in cash of all Senior Debt (as defined in
the Note Purchase Agreement) to the extent and in the manner provided in the
Note Purchase Agreement.
All indebtedness of the Company evidenced by this Note is a general
unsecured obligation of the Company and shall be pari passu in right of payment
to the Indebtedness (as defined in the Note Purchase Agreement) of the Company
evidenced by the Senior Subordinated Notes (as defined in the Note Purchase
Agreement).
[remainder of this page intentionally left blank]
<PAGE>
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
IMPAC GROUP, INC.
By: /s/ David C. Underwood
------------------------------------
Name: David C. Underwood
Title: Chief Financial Officer
<PAGE>
Exhibit 10.121
--------------
SEVENTH AMENDMENT
-----------------
This Seventh Amendment (this "Amendment") to the Credit Agreement (as
---------
defined below) is entered into as of this 30th day of March, 2000 among IMPAC
GROUP, INC., a Delaware corporation (the "Company"), AGI INCORPORATED, an
-------
Illinois corporation ("AGI"), KLEARFOLD, INC., a Pennsylvania corporation
---
("Klearfold", and together with AGI, each a "L/C Borrower" and collectively, the
--------- ------------
"L/C Borrowers"), Bank of America, N.A., as Agent (the "Agent"), and the
------------- -----
financial institutions from time to time party thereto (the "Lenders"). Unless
-------
otherwise specified herein, capitalized terms used in this Agreement shall have
the meanings ascribed to them by the Credit Agreement (as defined below).
RECITALS
--------
WHEREAS, the Company, the L/C Borrowers, the Agent and the Lenders are
party to the Amended and Restated Multicurrency Credit Agreement, dated as of
March 12, 1998 and as amended and restated as of July 7, 1998 (as amended by
that certain First Amendment dated as of September 11, 1998, that certain Second
Amendment dated as of November 13th, 1998, that certain Third Amendment dated as
of November 16, 1998, that certain Fourth Amendment dated as of December 10,
1998, that certain Fifth Amendment dated as of January 11, 1999 and that certain
Sixth Amendment dated as of November 2, 1999, the "Credit Agreement");
----------------
WHEREAS, the Company, the L/C Borrowers, the Agent and the undersigned
Lenders now wish to enter into certain further amendments to the Credit
Agreement to, among other things, permit Commercial Lithographing LLC, a
Delaware limited liability company and Wholly-Owned Subsidiary of the Company,
to acquire substantially all of the operating assets of Commercial Lithographing
Company, a Kentucky corporation, as more specifically set forth herein;
NOW THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
Section 1. Amendments. A. Section 1.01 of the Credit Agreement is hereby
---------- ------------
amended by inserting the following new definitions in alphabetical order as
appropriate:
"CLC" means Commercial Lithographing Company, a Kentucky corporation.
---
"CLC Acquisition" means the acquisition by CLC LLC of substantially
---------------
all of the operating assets of CLC pursuant to the CLC Acquisition Documents and
as more fully described on Schedule 1(d) hereto.
-------------
"CLC Acquisition Documents" has the meaning specified in Section
------------------------- -------
6.25(b) hereto.
- -------
*Confidential treatment requested. Materials have been omitted and filed
separately with the Securities and Exchange Commission.
<PAGE>
"CLC LLC" means Commercial Lithographing LLC, a Delaware limited
-------
liability company and Wholly-Owned Subsidiary of the Company.
B. Section 2.07(i)(ii) of the Credit Agreement is hereby amended by
-------------------
(a) deleting the reference "Section 8.05(b)" contained therein and inserting in
lieu thereof the reference "Section 8.03(b)" and (b) deleting the phrase
"******* Acquisition or Atlantic Acquisition" contained therein and inserting in
lieu thereof the phrase "******* Acquisition, CLC Acquisition or Atlantic
Acquisition."
C. Section 6.25(b) of the Credit Agreement is hereby amended in its
---------------
entirety to read as follows:
"(b) The agreements in connection with (i) the Thamesdown Acquisition
(the "Thamesdown Acquisition Documents"), (ii) the CLC Acquisition (the
--------------------------------
"CLC Acquisition Documents"), (iii) the ******* Acquisition (the "*******
------------------------- -------
Acquisition Documents") and (iv) the Atlantic Acquisition (the "Atlantic
--------------------- --------
Acquisition Documents" and together with each of the Thamesdown Acquisition
---------------------
Documents, the CLC Acquisition Documents and the ******* Acquisition
Documents, collectively, the "New Acquisition Documents") are, or when
-------------------------
executed will be, in full force and effect, and if previously executed,
have not been terminated, rescinded or withdrawn, and no material portion
thereof has been amended or waived by any party. All requisite approvals by
governmental authorities and regulatory bodies having jurisdiction over a
Credit Party and other Persons referenced therein, with respect to the
transactions contemplated by the New Acquisition Documents, have been
obtained or will be obtained prior to the consummation of any such
Acquisition, and no such approvals impose any conditions to the
consummation of the transactions contemplated by the New Acquisition
Documents or to the conduct in any material respect by a Credit Party and
its Subsidiaries of its business thereafter. To the best of each Credit
Party's knowledge, none of any Person's representations or warranties in
the New Acquisition Documents contain or will contain when made any untrue
statement of a material fact or omit any fact necessary to make the facts
therein not misleading."
D. Subsection 8.03(b)(II) of the Credit Agreement is hereby amended
----------------------
in its entirety to read as follows:
"(II) on and after October 25, 1999 a Credit Party or a Subsidiary
Guarantor or, subject to the limitations set forth below, a Wholly-Owned
Subsidiary of the Company which is not a Subsidiary Guarantor or a Credit Party
may enter into an Acquisition (including the Thamesdown Acquisition, the CLC
Acquisition, the ******* Acquisition and the Atlantic Acquisition) provided that
(i) in any such Acquisition (whether in one transaction or a series of related
transactions) the aggregate consideration consisting of cash, assumed
Indebtedness and Capital Lease Obligations, earn-outs, promissory notes or other
instruments or similar items (other than common stock of the Company) (the
"Non-Equity Consideration") does not exceed $15,000,000 for a single Acquisition
------------------------
and $30,000,000 for all Acquisitions without the prior written approval of the
Majority Lenders, (ii) no Default or Event of Default is in existence both
before and after
-2-
*Confidential treatment requested. Material has been omitted and filed
separately with the Securities and Exchange Commission.
<PAGE>
giving effect to such Acquisition (and/or as set forth in clause (vi)
-----------
below, the creation of a new Subsidiary), (iii) such Acquisition is
undertaken in all material respects in accordance with all applicable
Requirements of Law, (iv) the target business of, or the assets subject to,
such Acquisition are shown in good faith by the Company to have generated
positive EBITDA on a pro forma basis for the twelve month period
immediately preceding the date of such Acquisition based on assumptions
showing cost savings reasonably acceptable to the Agent, (v) the prior,
effective written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained, (vi)
such Acquisition shall be structured as an asset acquisition by a Credit
Party or a Subsidiary Guarantor, or subject to the limitations set forth
below, a Wholly-Owned Subsidiary of the Company which is not a Subsidiary
Guarantor or a Credit Party, or the purchase of all of the capital stock of
the target of such Acquisition by a Credit Party or a Subsidiary Guarantor
or, subject to the limitations set forth below, a Wholly-Owned Subsidiary
of the Company which is not a Subsidiary Guarantor or a Credit Party,
provided that such target or the Person purchasing the assets of such
target will be merged with and into a Credit Party or a Subsidiary
Guarantor or shall execute a counterpart of and become a party to a
Guaranty (pursuant to documentation reasonably acceptable to the Agent)
simultaneously with the consummation of such Acquisition, (vii) the
business being acquired is otherwise permitted by Section 8.13, (viii)
------------
except as set forth in paragraph (e) below, the Agent (on behalf of the
-------------
Lenders) will simultaneously with the consummation of such Acquisition be
granted a first priority perfected security interest (subject to Permitted
Liens) in any assets being so acquired and any capital stock if a new
Subsidiary is being formed, (ix) at least fifty percent (50%) of the first
$10,000,000 of aggregate Non-Equity Consideration and one hundred percent
(100%) of all amounts above $10,000,000 paid in connection with the *******
Acquisition and the Atlantic Acquisition and one hundred percent (100%) of
the Non-Equity Consideration paid in any other Acquisition (other than the
Thamesdown Acquisition) must be financed through the substantially
simultaneous issuance of Subordinated Acquisition Debt, the assumption of
Capital Leases, and/or the sale by the Company of additional shares of its
common stock (all as otherwise permitted hereunder) and (x) except with
respect to the Thamesdown Acquisition, the Company shall have received a
loan of at least $4,900,000 from Heritage under the Heritage Subordinated
Liquidity Facility prior to the consummation of any such Acquisition."
E. Section 8.05 of the Credit Agreement is hereby amended by deleting
------------
the "and" at the end of paragraph (i) thereof, inserting the word "and" at the
-------------
end of the paragraph (j) thereof and adding the following new paragraph (k):
------------- -------------
"(k) the Company shall be permitted to issue (I) $4,900,000 in
principal amount of indebtedness under the Heritage Subordinated Liquidity
Facility in accordance with the terms and conditions of Section 7.20
------------
hereof, and (II) up to $20,000,000 (less the Dollar Equivalent of the
amount of any Capital Lease Obligations assumed (directly or indirectly) in
connection with Acquisitions permitted by Section 8.03(b) other than the
---------------
Thamesdown Acquisition) in principal amount of new subordinated
indebtedness ("Subordinated Acquisition Debt") so long as such Subordinated
-----------------------------
Acquisition Debt (A) is issued pursuant to fully executed documents,
-3-
*Confidential treatment requested. Material has been omitted and filed
separately with the Securities and Exchange Commission.
<PAGE>
promissory notes and agreements reasonably acceptable in form and substance
to Agent; (B) is subject to a valid and effective subordination agreement
on customary and commercially reasonable terms and conditions as determined
by the Agent which are at least as favorable in all material respect to the
Lenders as the subordination provisions set forth in the Senior
Subordinated Note Indenture; (C) is unsecured; (D) requires no more than
semi-annual interest payments; (E) has a market interest rate (as
acknowledged by the Agent), which in any event must be less than 14% per
annum (including all capitalized fees and expenses); (F) has a maturity
date of no earlier than March 31, 2006 and requires no scheduled or
mandatory principal prepayments or repayments before the maturity date; (H)
has no financial covenants of any type and the other affirmative and
negative covenants with respect thereto are less restrictive than those in
the Senior Subordinated Note Indenture as of the time such Subordinated
Acquisition Debt is incurred; (I) is not required to be used (and is not
voluntarily used) to prepay the Senior Subordinated Notes or to redeem the
Preferred Stock; and (J) is only issued on or after delivery to the Agent
of a legal opinion from counsel to the Company and the lender of such
Subordinated Acquisition Debt reasonably acceptable to the Agent, and in
form and substance acceptable to the Agent including, without limitation,
opinions concerning the execution, delivery, validity and enforceability of
all agreements related to the Subordinated Acquisition Debt, opinions that
such agreements do not conflict with, violate or require any prepayments
under this Agreement, the Senior Subordinated Note Documents or the
Preferred Stock Documents, and opinions that all Obligations under the
Credit Agreement constitute "Senior Debt" under the agreements with respect
to the Subordinated Acquisition Debt;".
F. Section 8.09 of the Credit Agreement is hereby amended by adding
------------
the following new language at the end of such section before the period:
", and the CLC Acquisition Documents"
G. Section 8.21 of the Credit Agreement is hereby amended by deleting
------------
paragraph (v) thereof and replacing it with the following new paragraph(v):
- ------------- ------------
"(v) in no event shall the aggregate amount of such intercompany
Indebtedness owing by the Subsidiaries other than the Credit Parties to the
Credit Parties exceed the amount permitted pursuant to Section 8.04(1) plus
---------------
$20,000,000, provided, however, that no more than $10,000,000 of such
-------- -------
amount shall be intercompany loans to Van De Steeg Packaging B.V., and no
more than (x) at any time prior to the date the Target delivers the Target
Security Document, $10,000,000 and (y) thereafter $5,000,000, shall be
attributable to intercompany loans made to a Subsidiary that is not a
Subsidiary Guarantor; provided further, that in addition to the amounts set
-------- -------
forth above in this paragraph (v) the Company may also make intercompany
-------------
loans to any Wholly-Owned Subsidiary of the Company that will be the
acquiror of ******* in an aggregate amount up to $3,000,000 to fund the
******** Acquisition, plus up to $5,500,000 to any Wholly-Owned Subsidiary
that may be created to purchase Atlantic in connection with the Atlantic
Acquisition, so long as such new Subsidiary created in the Atlantic
Acquisition becomes a Subsidiary Guarantor simultaneously with the making
of such intercompany loan, plus up to $8,000,000 to CLC LLC to purchase CLC
in connection
-4-
*Confidential treatment requested. Material has been omitted and filed
separately with the Securities and Exchange Commission.
<PAGE>
with the CLC Acquisition, so long as CLC LLC becomes a Subsidiary Guarantor
simultaneously with the making of such intercompany loan."
H. A new Schedule 1(d) is added to the Agreement in the
-------------
form of Exhibit A hereto and the existing Schedule 6.19 to the Credit Agreement
--------- -------------
is hereby amended by replacing such schedule in its entirety with the
Schedule 6.19 attached hereto as Exhibit B.
- ------------- ---------
Section 2. Consents. The Agent and the undersigned Lenders hereby
--------
consent to and permit:
(a) the transactions contemplated by this Amendment and by
the CLC Acquisition Documents;
(b) subject to compliance with Section 2.07(l) of the Credit
---------------
Agreement, the sale by Tophurst Properties Limited of real property located at
Sirdar Road, London, England, and authorize the Agent to take such actions
necessary to release any Lien held by the Agent in such property; and
(c) the transfer of 100% of the equity interests in
Thamesdown held by the Company to IMPAC Europe Limited.
Section 3. Reference to and Effect Upon the Credit Agreement.
-------------------------------------------------
(a) Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or any Lenders under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement, except as specifically set forth herein. Upon
the effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereo", "herein" or words of similar import shall mean
and be reference to the Credit Agreement as amended hereby.
Section 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
Section 5. Headings. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
Section 6. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
-5-
<PAGE>
Section 7. Amendment Fee. In connection with the approval of this
-------------
Amendment, the Company hereby agrees to pay to the Agent for the pro-rata
benefit of each Lender consenting to this Amendment prior to 5:00 p.m. (Chicago
time) on March 31, 2000 an amendment fee equal to 1/8th of 1% of each such
consenting Lender's Commitment (the "Amendment Fee").
-------------
Section 8. Effectiveness.
-------------
This Amendment shall become effective as of the date first written above
after completion of the following:
(a) delivery to the Agent of executed signature pages for this
Amendment signed by the Company, the L/C Borrowers, the Subsidiary
Guarantors, the Agent and Lenders constituting Majority Lenders;
(b) receipt by the agent of an executed legal opinion from counsel to
the Company and Heritage in form and substance acceptable to the Agent
including, without limitation, opinions concerning the execution, delivery,
validity and enforceability of this Amendment and opinions that this
Amendment does not conflict with, violate or require any prepayments under
the Senior Subordinated Note Documents or the Preferred Stock Documents;
(c) delivery to the Agent of certified copies of the CLC Acquisition
Documents in form and substance reasonably satisfactory to Agent together
with evidence reasonably acceptable to the Agent of the consummation of the
CLC Acquisition in accordance therewith;
(d) payment in cash of the Amendment Fee to the Agent on behalf of the
Lenders; and
(e) such other approvals, opinions, documents or materials as the Agent
may reasonably request.
Section 9. Representations and Warranties. Each of the Company and
------------------------------
each L/C Borrower hereby represents and warrants as to itself that;
(a) The execution, delivery and performance by each such Person of this
Amendment have been duly authorized by all necessary corporate action and
that this Amendment constitutes the legal, valid and binding obligation of
such Person, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability;
(b) The execution, delivery and performance by each such Person of this
Amendment, the consummation of the CLC Acquisition (the "Proposed CLC
------------
Acquisition Transaction") will not conflict with or result in any breach or
-----------------------
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation
-6-
<PAGE>
(including, but not limited to, the Preferred Stock Documents and the
Senior Subordinated Note Documents) to which such Person is a party or any
order, injunction, writ or decree of any Governmental Authority to which
such Person or its property is subject, and will not require any prepayment
of the Senior Subordinated Notes or any redemption of the Preferred Stock;
(c) Each of the representations and warranties contained in the Credit
Agreement, after giving effect to this Amendment and the Proposed CLC
Acquisition Transaction is true and correct in all material respects on and
as of the date hereof as if made on the date hereof (except to the extent
such representations and warranties expressly refer to an earlier date, in
which case they are true and correct as of such earlier date); and
(d) After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing.
Section 10. Reaffirmation of Guaranties. The Company and each L/C
---------------------------
Borrower and Subsidiary Guarantor as a guarantor of the Obligations under each
Guaranty and the other Loan Documents, hereby reaffirms its continuing
obligations and liabilities thereunder, and agrees that each such Guaranty and
the other Loan Documents shall remain in full force and effect and cover and
extend to all Obligations under the Credit Agreement (as amended hereby).
[Signature Pages Follow]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
their duly authorized officers as of the date fist written above.
IMPAC GROUP, INC.
By: /s/ David C. Underwood
-------------------------------
Title: Chief Financial Officer
----------------------------
ACH INCORPORATED
By: /s/ David C. Underwood
-------------------------------
Title: Chief Financial Officer
----------------------------
KLEARFOLD, INC.
By: /s/ David C. Underwood
-------------------------------
Title: Chief Financial Officer
----------------------------
BANK OF AMERICA, N.A., as Agent
By: /s/ David A. Johanson
-------------------------------
Title: Vice President
----------------------------
BANK OF AMERICA, N.A.,
individually as a Lender, the Swing Line
Lender and the Issuing Bank
By: /s/ George C. Lyman
-------------------------------
Title: Senior Vice President
----------------------------
<PAGE>
SOCIETE GENERALE, as a Lender
By: /s/ Jerry Parisi
--------------------------------
Name: Jerry Parisi
------------------------------
Title: Managing Director
-----------------------------
ABN AMRO BANK, N.V. as a Lender
By: /s/ Thomas M. Toerpe
--------------------------------
Name: Thomas M. Toerpe
------------------------------
Title: Vice President
-----------------------------
By: /s/ Joann L. Holman
--------------------------------
Name: Joann L. Holman
------------------------------
Title: Vice President
-----------------------------
DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES,
as a Lender
By: /s/ Beverly G. Cason
--------------------------------
Name: Beverly G. Cason
------------------------------
Title: Vice President
-----------------------------
By: /s/ Irena Birtarich
--------------------------------
Name: Irena Birtarich
------------------------------
Title: Vice President
-----------------------------
<PAGE>
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ F.C.H. Ashby
------------------------------------
Name: F.C.H. Ashby
----------------------------------
Title: Senior Manager Loan Operations
---------------------------------
THE FUJI BANK, LIMITED, as a Lender
By: /s/ James Fayan
------------------------------------
Name: James Fayan
----------------------------------
Title: Senior Vice President & Senior
Team Leader
---------------------------------
SENIOR DEBT PORTFOLIO, as a Lender
By: Boston Management and Research, as
Investment Advisor
By: /s/ Scott H. Page
------------------------------------
Name: Scott H. Page
----------------------------------
Title: Vice President
---------------------------------
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
NORTHWOOD CAPITAL, LIMITED, as a Lender
By: Angelo Gordon & Co., L.P.,
as Collateral Manager
By: /s/ Jeffrey H. Aronson
---------------------------------
Name: Jeffrey H. Aronson
-------------------------------
Title: Managing Director
------------------------------
<PAGE>
Acknowledged and Agreed to by the undersigned as of the date first set forth
above.
KF - INTERNATIONAL, INC.
By: /s/ David C. Underwood
----------------------------------
Title: Chief Financial Officer
-------------------------------
KF - DELAWARE, INC.
By: /s/ David C. Underwood
----------------------------------
Title: Chief Financial Officer
-------------------------------
IMPAC EUROPE HOLDINGS LIMITED (f/k/a/
IMPAC EUROPE LIMITED)
By: /s/ David C. Underwood
----------------------------------
Title: Chief Financial Officer
-------------------------------
LEVELPROMPT LIMITED
By: /s/ David C. Underwood
----------------------------------
Title: Chief Financial Officer
-------------------------------
IMPAC EUROPE LIMITED (f/k/a TINSLEY
ROBOR LIMITED)
By: /s/ David C. Underwood
----------------------------------
Title: Chief Financial Officer
-------------------------------
<PAGE>
TINSLEY ROBOR LABELS LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary
-------------------------------
JAMES UPTON LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary
-------------------------------
SONICON LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary
-------------------------------
TINSLEY ROBOR AUDIO AND COMPUTER
SERVICES LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary and Director
-------------------------------
TINSLEY ROBOR SALES LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary
-------------------------------
TOPHUST PROPERTIES LIMITED
By: /s/ A.J. Smith
----------------------------------
Title: Secretary and Director
-------------------------------
TINSLEY ROBOR (OVERSEAS) LIMITED
By: /s/ David C. Underwood
--------------------------------
Title: Chief Financial Officer
-----------------------------
<PAGE>
Disclosure Schedule to the Seventh Amendment (Omitted Herein)
Schedule 1(d) Description of CLC Acquisition
Schedule 6.19 Capitalization; Subsidiaries and Minority Interests
The Company will furnish supplementally a copy of any omitted schedule or
exhibit to the Securities and Exchange Commission upon request.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,070
<SECURITIES> 0
<RECEIVABLES> 51,304
<ALLOWANCES> 2,339
<INVENTORY> 27,503
<CURRENT-ASSETS> 85,335
<PP&E> 226,798
<DEPRECIATION> 106,266
<TOTAL-ASSETS> 383,471
<CURRENT-LIABILITIES> 63,605
<BONDS> 261,621
18,088
0
<COMMON> 0
<OTHER-SE> 41,722
<TOTAL-LIABILITY-AND-EQUITY> 383,471
<SALES> 75,694
<TOTAL-REVENUES> 75,694
<CGS> 55,969
<TOTAL-COSTS> 55,969
<OTHER-EXPENSES> 15,933
<LOSS-PROVISION> 214
<INTEREST-EXPENSE> 6,278
<INCOME-PRETAX> (2,453)
<INCOME-TAX> (701)
<INCOME-CONTINUING> (1,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,752)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
