<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1999
REGISTRATION NO. 333-50995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1 ON FORM S-4
TO
REGISTRATION STATEMENT ON FORM S-1
UNDER
THE SECURITIES ACT OF 1933
--------------------------
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<S> <C> <C> <C> <C>
PHOENIX COLOR CORP. DE 2732 22-2269911
PCC EXPRESS, INC. DE 4713 32-2038306
PHOENIX (Md.) REALTY, LLC MD 6519 None
TECHNIGRAPHIX, INC. MD 2732 55-1504959
(Exact Name of Each Registrant (State or Other (Primary Standard (I.R.S. Employer
as Jurisdiction of Industrial Identification
Specified in Its Charter) Incorporation Classification Number)
or Code
Organization) Number)
</TABLE>
--------------------------
540 WESTERN MARYLAND PARKWAY
HAGERSTOWN, MD 21740
(301) 733-0018]
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
<TABLE>
<S> <C>
WITH A COPY TO:
LOUIS LASORSA, PRESIDENT ANDREW J. GOODMAN, ESQ.
540 WESTERN MARYLAND PARKWAY BRESLER, GOODMAN & UNTERMAN, LLP
HAGERSTOWN, MD 21740 521 FIFTH AVENUE
(301) 733-0018 NEW YORK, NY 10175
(212) 661-2150
</TABLE>
(Name, Address Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practical after
the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED NOTE PRICE FEE
<S> <C> <C> <C> <C>
10 3/8% Senior Subordinated Notes due 2009.. $105,000,000 100% $105,000,000 $
Subsidiary Guarantees of the 10 3/8% Senior
Subordinated Notes due 2009............... (1) (1) (1) (1)
Total....................................... $105,000,000 100% $105,000,000 $16,402(2)
</TABLE>
(1) Each Registrant other than Phoenix Color Corp. is a subsidiary of Phoenix
Color Corp. and is guaranteeing payment of the 10 3/8% Senior Subordinated
Notes due 2009. Pursuant to Rule 457 (n) under the Securities Act of 1933,
no registration fee is required with respect to these guarantees.
(2) The Company paid a filing fee of $13,570 with the filing of the Registration
Statement on April 24, 1998.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC
is effective. This prospectus is not an offer to sell these securities and we
are not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 8, 1999
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE
ITS 10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR UP TO $105,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
THE EXCHANGE NOTES:
- The terms of the 10 3/8% Senior Subordinated Notes due 2009 which we will
issue and which have been registered under the Securities Act (we call
these the "exchange notes") will be substantially identical to the
outstanding 10 3/8% Senior Subordinated Notes which we issued on February
2, 1999 (we call these the "old notes"), except for the elimination of
certain transfer restrictions, registration rights and liquidated damages
provisions relating to the old notes.
- We will pay interest on the exchange notes twice a year, on February 1 and
August 1, beginning August 1, 1999.
- We cannot redeem the exchange notes before February 1, 2004. After that
date, we may redeem them at certain specified prices. However, until
February 1, 2002, we can redeem up to 25% of the exchange notes at
110.375% of their face amount, plus interest, with money we raise in one
or more public equity offerings.
- If we experience certain changes of control, we must offer to purchase the
exchange notes at 101% of their face amount, plus interest.
GUARANTEES:
Our subsidiaries will guarantee the exchange notes on an unsecured, senior
subordinated basis.
THE EXCHANGE OFFER:
- We are offering to exchange the exchange notes for the old notes in the
exchange offer described in this prospectus.
- Our exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless extended.
- Our completion of the exchange offer is subject to customary conditions,
which we may waive.
- Upon our completion of the exchange offer, all old notes that are validly
tendered and not withdrawn will be exchanged for an equal principal amount
of exchange notes.
- Tenders of outstanding old notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- The exchange of notes will not be a taxable exchange for federal income
tax purposes.
- We do not intend to list the exchange notes on any national securities
exchange or NASDAQ.
- We will not receive any cash proceeds from the exchange offer.
NOTICE TO INVESTORS:
- You should consider carefully the risk factors described in the "Risk
Factors" section of this prospectus before tendering your old notes in the
exchange offer.
- NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE EXCHANGE NOTES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
Each broker-dealer that receives exchange notes for its own account must
confirm that it will deliver a prospectus in connection with any resale of the
exchange notes. The accompanying letter of transmittal states that, by so
confirming and by delivering a prospectus, such broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act. A
broker-dealer receiving exchange notes for old notes it acquired as a result of
market-making or other trading activities may use this prospectus for an offer
to resell, a resale or other re-transfer of the exchange notes. We have agreed
that, for a period of one year after the expiration date of the exchange offer,
we will make this prospectus and any amendment or supplement to this prospectus
available to any such broker-dealer for use in connection with any such
transactions.
We have not authorized any person to make a statement that differs from the
statements in this prospectus. If any person makes a statement that differs from
what is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, the exchange notes in any
state where such offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
TABLE OF CONTENTS
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PAGE
-----
Prospectus Summary.................................................................... 4
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Risk Factors.......................................................................... 14
Use of Proceeds....................................................................... 20
Capitalization........................................................................ 21
Selected Historical Consolidated Financial Data....................................... 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 24
Business.............................................................................. 28
Management............................................................................ 36
Principal Stockholders................................................................ 40
Certain Transactions.................................................................. 41
Description of Senior Credit Facility................................................. 41
Description of Exchange Notes......................................................... 43
Certain U.S. Federal Income Tax Considerations........................................ 63
The Exchange Offer.................................................................... 67
Plan of Distribution.................................................................. 74
Legal Matters......................................................................... 75
Experts............................................................................... 75
Index to Financial Statements......................................................... F-1
</TABLE>
2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we have
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement. For further information about us and the
exchange notes, you should refer to the registration statement. This prospectus
summarizes material provisions of contracts and other documents to which we
refer. Since these summaries may not contain all of the information that you may
find important, you should review the full text of these documents. We have
filed certain of these documents as exhibits to the registration statement.
In addition, we have agreed that, even though the SEC may not require us to
do so, for so long as any notes remain outstanding, we will furnish to
noteholders and the trustee for the noteholders, and will file with the SEC all
such information, documents and reports as are specified in Section 13 or 15(d)
of the Securities Exchange Act.
You should direct any request for information to our Chief Financial Officer
at least 10 business days before you tender your exchange notes in the exchange
offer. Our mailing address and telephone number are:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, MD 21740
(301) 733-0018
CAUTIONARY STATEMENT
REGARDING FORWARD LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "estimate", "anticipate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or other
"forward-looking" information. Although we believe that our assumptions, plans,
intentions and expectations reflected in or suggested by such forward-looking
statements are reasonable, we cannot assure you that our plans, intentions or
expectations will be achieved. When considering such forward-looking statements,
you should keep in mind the risk factors and other cautionary statements
included in this prospectus. The risk factors noted in the "Risk Factors"
section and other factors referred to throughout this prospectus, including
certain risks and uncertainties, could cause our actual results to differ
materially from those contained in any forward-looking statement.
CERTAIN MARKET AND INDUSTRY DATA
The market data and industry forecasts that we refer to in this prospectus
were obtained from publicly available information, industry publications and
management estimates. While we believe this data, information and estimates to
be materially correct, we have not verified and cannot guarantee them.
USE OF CERTAIN TERMS
Unless the context otherwise requires, as used in this prospectus, the terms
"we," "our," "Phoenix Color," "Company" or "Issuer" refer to Phoenix Color Corp.
and its subsidiaries. The term "old notes" refers to the 10 3/8% Senior
Subordinated Notes due 2009 that we issued on February 2, 1999, the term
"exchange notes" refers to the 10 3/8% Senior Subordinated Notes due 2009 that
have been registered under the Securities Act of 1933 and that we are offering
in exchange for the old notes as described in this prospectus, and the term
"notes" refers collectively to the old notes and the exchange notes.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROSPECTUS AND DOES
NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. BEFORE MAKING YOUR
INVESTMENT DECISION, AND IN ORDER TO FULLY UNDERSTAND THE EXCHANGE OFFER, YOU
SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS (INCLUDING THE "RISK FACTORS"
SECTION) AND THE OTHER DOCUMENTS TO WHICH IT REFERS.
PHOENIX COLOR CORP.
We are the largest North American independent printer of book components,
which we supply to publishers and book manufacturers. Our book components
primarily include book jackets, paperback covers and pre-printed case covers
which are glued to hardboard and used for hardcover books. We also produce book
components such as illustrations, endpapers and inserts. We recently expanded
our capabilities and now manufacture complete books in juvenile and educational
book markets not being serviced by our principal book manufacturing customers.
We serve over 200 customers, including some of the largest firms in publishing
and book printing, such as Simon & Schuster, HarperCollins, Penguin Putnam,
Random House, McGraw-Hill, Time Warner, Microsoft, Walt Disney and R.R.
Donnelley.
Producing complete books requires both the printing of text and the
manufacture of book components. Publishers often demand high-quality, intricate
book covers. Specialized equipment, materials and finishes are needed to produce
these covers, and many leading publishers rely on specialty printers such as
Phoenix Color to supply book components, and use other commercial printers to
print text and assemble books.
We intend to increase our net sales and EBITDA by expanding our current book
components business and by using our newest production facility to offer
complete book manufacturing for children's books and educational workbooks. We
believe our long-standing reputation with our publishing customers for producing
quality book components will enable us to attract orders for the manufacture of
complete books. Based on comments and new orders from a number of our customers,
we believe our book manufacturing plans are being well-received.
We were founded in 1979 by 15 industry veterans. From 1994 through 1998, and
including our 1996 acquisition of New England Book Holding Corporation ("NEBC"),
our net sales increased at a compound annual rate of 20.5%. On a pro forma basis
reflecting two acquisitions completed in 1999, our net sales were $127.9 million
and our EBITDA was $21.1 million for the year ended December 31, 1998.
Our growth and profitability are a result of (1) consistently providing
superior customer service and product quality, (2) expanding our product line
and (3) continually adding state-of-the-art manufacturing capacity. In
developing our business, we emphasize:
- Technologically advanced prepress and manufacturing equipment and
efficient production techniques;
- A computerized management information system which links all of our
facilities and customers and furnishes immediately available operating
data;
- Fast turnaround times made possible by our state-of-the-art manufacturing
equipment, strategic location of our seven plants near major delivery
points and the use of our own delivery trucks;
- Long-term relationships with suppliers of important raw materials such as
paper, laminating film and ink; and
- A highly motivated sales force which emphasizes customer training and
educational programs.
4
<PAGE>
COMPETITIVE STRENGTHS
We attribute our strong historical results and positive growth outlook to
the following factors:
LEADING MARKET POSITION IN SPECIALIZED MARKET NICHE. Phoenix Color is the
largest independent book component manufacturer in North America. We supply book
components to multiple segments of the book market, such as general interest
(including best sellers), juvenile, education, religious and business books.
These books are distributed through retail bookstores, mass market retailers and
increasingly via the internet. We estimate that, of the approximately $400
million in annual book component sales, Phoenix Color has a leading 30% market
share with the next closest competitor at approximately 15%. We believe that the
next three largest book component manufacturers collectively possess
approximately a 15% share of the overall market.
WELL-ESTABLISHED CUSTOMER BASE. We serve over 200 customers, including some
of the largest firms in publishing and book printing, such as Simon & Schuster,
HarperCollins, Penguin Putnam, Random House, McGraw-Hill, Time Warner,
Microsoft, Walt Disney and R.R. Donnelley. We have serviced many of these
customers since our inception, due, we believe, to our ability to supply, on a
timely and consistent basis, the high quality products needed by our customers.
STATE-OF-THE-ART PRODUCTION FACILITIES. Phoenix Color is a technological
leader in book component production due to its continual investment in
technologically advanced prepress, printing and finishing equipment. Our modern
facilities enable us to provide quality products with a high level of automation
and a low number of manufacturing employees. Our proprietary Phoenix
Colornet-Registered Trademark- system allows the electronic transfer of digital
files through equipment installed by us at customer locations, resulting in
reliable, consistently color-accurate, remote digital proofing. As a result of
our investment in modern manufacturing facilities, we believe we consistently
offer our customers the most modern and complete line of printing and finishing
facilities and the shortest work-order turnaround time in the industry.
POSITIVE OPERATING RESULTS. We have grown steadily since our 1979 founding
and, over the five-year period ended December 31, 1998, generated a compound
annual growth rate in net sales of 20.5%, through internal growth and the NEBC
acquisition.
DIVERSIFIED PRODUCT MIX. We believe we service the broadest range of book
market segments of any book component manufacturer in North America, including
general interest, juvenile, educational, business, book club and religious
categories. Since each segment of the book market generally experiences yearly
fluctuations, our supplying of book components for a broad range of market
segments enables us to offset decreases in one segment with increases in other
segments.
PROFESSIONAL SALES AND MARKETING. Our direct sales force is highly trained
and is located in seven offices throughout the United States. New sales
representatives participate in a three-month manufacturing and sales orientation
program, including spending at least two weeks in a working pressroom. All sales
personnel are required to participate annually in a two-week continuing
education program. We market our services by providing regular training and
educational programs in printing processes and technology to publishing house
personnel and by participating in publishers' trade shows.
MANAGEMENT CONTINUITY AND OWNERSHIP. Current senior management has operated
the Company since its early years and through multiple economic cycles and
stages of growth. Active management owns, directly and indirectly through
participation in an Employee Stock Bonus and Ownership Plan, 52.8% of the
Company's total common stock and 73.0% of its voting common stock.
5
<PAGE>
BUSINESS STRATEGY
The key elements of our business strategy are to:
MAINTAIN PRODUCTION EFFICIENCY AND QUALITY. Our goal is to remain the
leading North American supplier of book components by maximizing production
efficiency and offering superior quality and rapid turnaround times. We continue
to invest our financial, management and personnel resources in highly automated
production equipment, digital file transfer and network communications,
real-time operating information systems and management controls. As a result, we
believe we have lower cost production capabilities than any of our primary
competitors.
EXPAND INTO COMPLEMENTARY AREAS OF BOOK MANUFACTURING. We are expanding our
business to include complete book manufacturing of children's books and
educational workbooks in order to provide one-stop shopping for our publishing
customers. These are market segments in which we believe we can obtain orders
from existing customers and attract new customers who may be under-serviced. Our
publishing customers have indicated they want us to supply these complete books
which are not being produced by our principal book manufacturing customers.
ENHANCE SALES AND MARKETING PROGRAMS. We have a direct sales force of 30
representatives and we intend to expand its size substantially over the next 18
months. We plan to use our increased sales force to capture a greater share of
business from existing publishing customers and to solicit new customers, such
as smaller regional publishers. We also intend to continue our customer training
and educational programs in printing processes and technologies in efforts to
reach a larger segment of the book publishing market.
PURSUE STRATEGIC ACQUISITIONS. The book printing industry is facing
consolidation because of the need for, and the high cost of, modern production
plants. We believe there are attractive acquisition opportunities among book
component and book printing companies, and we will continue to seek potential
acquisition targets whose geographic location, customer base and type of
business will complement ours. We expect that our management expertise, modern
production technology, single-source purchasing relationships and financial
resources will help us to achieve revenue growth and further economies of scale
through the acquisition of other companies.
MID-CITY ACQUISITION
On January 4, 1999, we acquired Mid-City Lithographers, Inc. (which we call
"Mid-City"), a specialty component printer located in Lake Forest, Illinois, for
a total purchase price of $12.5 million. Mid-City supplies components primarily
to the elementary and high school textbook segment of the book publishing
market. We believe the Mid-City acquisition will be complementary to our core
business by adding a significant customer base in the elementary and high school
textbook market. This market tends to be more active during the first half of
the year while other market segments serviced by Phoenix Color are more active
in the second half. For the year ended December 31, 1998, Mid-City's net sales
were $14.2 million and its EBITDA was $1.0 million, on an unaudited basis.
TECHNIGRAPHIX ACQUISITION
On February 12, 1999, we acquired TechniGraphix, Inc. (which we call
"TechniGraphix") for a purchase price of $7.3 million. TechniGraphix is a
producer of print-on-demand books located in Dulles, Virginia. Instead of using
offset or other press equipment requiring inked plates and set-up time to
manufacture books, TechniGraphix uses high-speed digital printing equipment to
reproduce book text directly from digitally stored files. On-demand printing
technology is suitable and cost-effective for smaller book production runs. With
on-demand printing, a publisher's titles need never be considered
"out-of-print." For the year ended December 31, 1998, TechniGraphix's net sales
were $6.3 million and its EBITDA was $1.1 million, on an unaudited basis.
6
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
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The Exchange Offer...... We are offering to exchange $1,000 principal amount of our
exchange notes for each $1,000 principal amount of old notes. As
of the date of this prospectus, $105,000,000 in aggregate
principal amount of old notes are outstanding.
Both the exchange notes and the old notes are issued under an
indenture dated February 2, 1999 with Chase Manhattan Trust
Company, National Association, as trustee.
We have registered the exchange notes under the Securities Act
and they are substantially identical to the old notes, except for
the elimination of certain transfer restrictions, registration
rights and liquidated damages provisions relating to the old
notes.
Resale of the Exchange
Notes................. Based on interpretations by the SEC set forth in certain
no-action letters issued to third parties, we believe that the
exchange notes may be offered for resale, resold and otherwise
transferred by you without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided
that
- you are acquiring the exchange notes in the ordinary course of
business;
- you are not participating, do not intend to participate, and
have no arrangement or understanding with any person to
participate, in the distribution of the exchange notes issued
to you in the exchange offer; and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any exchange notes
without delivering a prospectus meeting the requirements of the
Securities Act or without an exemption from registration of your
exchange notes from such requirements, you may incur liability
under the Securities Act. We do not assume, or indemnify you
against, such liability.
Each broker-dealer that is issued exchange notes for its own
account in exchange for old notes which were acquired by such
broker-dealer as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act, in connection
with any resale of the exchange notes. The accompanying letter of
transmittal states that, by so acknowledging and by delivering a
prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
A broker-dealer may use this prospectus for an offer to resell, a
resale or other retransfer of the exchange notes. We have agreed
that, for a period of one year after the expiration of the
exchange offer, we will make this prospectus and any amendment or
supplement to this prospectus available to any such broker-dealer
for use in connection with any such transactions. We believe that
no registered holder of the old
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7
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<S> <C>
notes is an affiliate (as such term is defined in Rule 405 of the
Securities Act) of ours.
The exchange offer is not being made to, nor will we accept
surrenders for exchange from, holders of old notes in any
jurisdiction in which this exchange offer or the acceptance
thereof would not be in compliance with the securities or blue
sky laws of such jurisdiction.
Accrued Interest on the
Exchange Notes and the
Old Notes............. Interest on the exchange notes will accrue from the last interest
payment date on which interest was yet paid on the old notes, or,
if no interest was paid on the old notes, from the date of
issuance of the old notes (February 2, 1999). Holders whose old
notes are accepted for exchange will be deemed to have waived the
right to receive any interest accrued on the old notes.
No Minimum Condition.... We are not conditioning the exchange offer on the tender of any
minimum aggregate principal amount of old notes.
Expiration Date......... The exchange offer will expire at 5:00 p.m., New York City time,
on , 1999, unless we decide to extend the exchange
offer.
Withdrawal Rights....... You may withdraw your tender at any time prior to 5:00 p.m., New
York City time, on the expiration date.
Conditions to the
Exchange Offer........ The exchange offer is subject to customary conditions, which we
may waive. We currently anticipate that each of the conditions
will be satisfied and that we will not need to waive any
conditions. We reserve the right to terminate or amend the
exchange offer at any time before the expiration date if any such
condition occurs. See "The Exchange Offer-- Conditions."
Procedures for Tendering
Old Notes............. If you are a holder of old notes who wishes to accept the
exchange offer, you must:
- complete, sign and date the accompanying letter of transmittal,
or a facsimile thereof, and mail or otherwise deliver such
documentation, together with your old notes to the exchange
agent at the address set forth under "The Exchange
Offer--Exchange Agent;" or
- arrange for the Depository Trust Company to transmit certain
required information, including an agent's message forming part
of a book-entry transfer in which you agree to be bound by the
terms of the letter of transmittal, to the exchange agent in
connection with a book-entry transfer.
By tendering your old notes, in either manner, you will be
representing, among other things, that:
- you are acquiring the exchange notes in the ordinary course of
business;
- you are not participating, do not intend to participate, and
have no arrangement or understanding with any person to
participate, in the
</TABLE>
8
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<TABLE>
<S> <C>
distribution of the exchange notes issued to you in the
exchange offer; and
- you are not an "affiliate" of ours.
Special Procedures for
Beneficial Owners..... If you beneficially own old notes registered in the name of a
broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your old notes in the exchange offer, you
should contact such registered holder promptly and instruct it to
tender on your behalf. If you wish to tender on your own behalf,
you must, prior to completing and executing the letter of
transmittal and delivering your old notes, either arrange to have
your old notes registered in your name or obtain a properly
completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery
Procedures............ If you wish to tender your old notes and time will not permit
your required documents to reach the exchange agent by the
expiration date, or the procedures for book-entry transfer cannot
be completed on time, you may tender your old notes according to
the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Use of Proceeds......... We will not receive any proceeds for the issuance of the exchange
notes in the exchange offer. We will pay all our expenses
incurred in connection with the exchange offer.
Federal Income Tax
Consequences.......... We anticipate that the exchange of notes in the exchange offer
will not be a taxable event for federal income tax purposes. See
"Certain U.S. Federal Income Tax Considerations."
Effect on Holders of Old
Notes................. As a result of this exchange offer, we will have fulfilled an
obligation under the registration rights agreement dated as of
February 2, 1999 between our Company and First Union Capital
Markets Corp., and, accordingly, there will be no increase in the
interest rate on the old notes. If you do not tender your old
notes in the exchange offer:
- you will continue to hold the old notes and will be entitled to
all the rights and limitations applicable to the old notes under
the indenture governing the notes, except for any rights under
the registration rights agreement that terminate as a result of
the completion of the exchange offer; and
- you will not have any further registration or exchange rights
and your old notes will be subject to certain restrictions on
transfer.
Accordingly, the trading market for untendered old notes could be
adversely affected.
Shelf Registration
Statement............. Under certain limited circumstances, certain holders of old notes
may require us to file a shelf registration statement under the
Securities Act, which would cover resales of old notes by such
holders.
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9
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<TABLE>
<S> <C>
Exchange Agent.......... Chase Manhattan Trust Company, National Association is serving as
exchange agent in connection with the exchange offer, and is also
trustee under the indenture. See "The Exchange Offer--Exchange
Agent."
TERMS OF THE EXCHANGE NOTES
Exchange Notes
Offered............... $105 million aggregate principal amount of 10 3/8% Senior
Subordinated Notes due 2009.
Issuer: ................ Phoenix Color Corp.
Maturity Date: ......... February 1, 2009
Interest Payment
Dates: ............... February 1 and August 1 of each year, beginning on August 1,
1999.
Optional Redemption..... We may redeem all or part of the exchange notes beginning on
February 1, 2004, at the redemption prices stated in "Description
of the Exchange Notes--Optional Redemption," plus accrued and
unpaid interest on the exchange notes to be redeemed. Until
February 1, 2002, we may also redeem up to 25% of the exchange
notes at a price of 110.375% of their face amount with the net
cash proceeds from one or more public equity offerings. See
"Description of the Exchange Notes--Optional Redemption."
Ranking: ............... The exchange notes will be general unsecured obligations of the
Company. The exchange notes will be effectively subordinated in
right of payment to our secured debt (including purchase money
indebtedness owed to suppliers of our capital equipment and
borrowings under our senior credit facility) with respect to the
assets securing such secured debt. The exchange notes will also
be subordinated in right of payment to all of our existing and
future senior debt. In the future, we may issue debt that ranks
senior, equal or subordinate to the exchange notes. See
"Description of the Exchange Notes--Ranking of the Notes."
Guarantees.............. All of our current and future "restricted subsidiaries" will
guarantee the exchange notes on an unsecured senior subordinated
basis. Each subsidiary guarantor may issue debt that ranks
senior, equal or subordinate to its subsidiary guarantee. Each
subsidiary's guarantee will be effectively subordinated to each
subsidiary guarantor's secured debt with respect to the assets
securing such secured debt. Each subsidiary's guarantee will be
subordinated in right of payment to all of its existing and
future senior debt. See "Description of the Exchange Notes--
Guarantees" and see "Description of the Exchange Notes--Ranking
of Guarantees."
Change of Control....... If a third party acquires control of our Company, you will have
the right to require us to repurchase your exchange notes at a
price equal to 101% of the principal amount of your exchange
notes plus accrued and unpaid interest to the date of purchase.
See "Description of the Exchange Notes--Change of Control."
Asset Sale Proceeds..... In certain instances, we would have to use the net cash proceeds
of certain asset sales to offer to purchase the exchange notes at
a price equal to 100% of the principal amount of the exchange
notes plus accrued and unpaid interest to the date of purchase.
See "Description of
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
the Exchange Notes--Limitation on Sales of Assets and Subsidiary
Stock."
Certain Covenants....... We will issue the exchange notes under an indenture that will
contain covenants for your benefit that, among other things,
restrict our ability to:
- incur additional debt
- pay dividends
- incur liens
- transfer or sell assets
- enter into transactions with affiliates
- issue or sell stock of restricted subsidiaries
- merge or consolidate Phoenix Color or certain subsidiaries
- change our line of business
See "Description of the Notes--Certain Covenants"
</TABLE>
RISK FACTORS
You should read the "Risk Factors" section, as well as the other cautionary
statements throughout the entire prospectus, to ensure you understand the risks
associated with tendering your old notes in the exchange offer.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
We present below summary historical and pro forma financial data of the
Company. We derived the historical financial data as of December 31, 1998 and
for the years ended December 31, 1996, 1997 and 1998 from the Company's audited
Consolidated Financial Statements and related Notes, which are included
elsewhere in this prospectus. We derived the historical financial data for the
year ended December 31, 1995 from the Company's audited Consolidated Financial
Statements and related Notes, which are not included herein. We derived the data
for the year ended December 31, 1994 from unaudited financial statements that we
prepared on the same basis as the audited Consolidated Financial Statements. In
our opinion, the unaudited financial data includes all adjustments (consisting
of normal recurring adjustments) that we consider necessary for a fair
presentation of the data.
The unaudited pro forma consolidated data presented below is based upon
audited financial statements for our Company for the year ended December 31,
1998 after giving effect to the acquisitions of Mid-City and TechniGraphix. The
unaudited pro forma consolidated operating data presented is based on certain
assumptions that we believe fairly represent the effect of both the acquisitions
and the issuance and sale of the old notes as if they had occurred on January 1,
1998, while the pro forma balance sheet data presented below assumes that the
acquisitions and such issuance and sale took place on December 31, 1998. By
including unaudited pro forma financial data, we do not suggest that the data
indicates what our results of operations would actually have been had the
acquisitions and this offering been completed on the assumed dates. You should
read this
11
<PAGE>
information in conjunction with the Consolidated Financial Statements and
related Notes and the other financial information contained elsewhere in this
offering memorandum.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996(1) 1997 1998
--------- --------- --------- ---------- ----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 50,971 $ 60,907 $ 95,262 $ 104,794 $ 107,491
Gross profit.......................................... 13,503 15,778 24,146 31,072 26,864
Selling and marketing expenses........................ 1,827 3,036 6,089 5,881 6,278
General and administrative expenses................... 4,803 4,505 9,010 12,363 13,031
Income from operations................................ 6,873 8,237 7,779 12,828 7,555
Net income............................................ 3,200 3,710 1,796 4,384 931
OTHER FINANCIAL DATA:
Depreciation and amortization expense................. $ 3,265 $ 3,119 $ 8,479 $ 9,239 $ 10,931
Capital expenditures (2).............................. 6,083 17,841 11,052 15,131 48,168
EBITDA (3)............................................ 10,208 11,346 17,351 22,005 18,946
EBITDA margin (4)..................................... 20.0% 18.6% 18.2% 21.0% 17.6%
Ratio of earnings to fixed charges (5)................ 4.7x 4.2x 1.7x 2.6x 1.5x
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
--------------------
<S> <C>
(DOLLARS IN
THOUSANDS)
UNAUDITED PRO FORMA CONSOLIDATED DATA:
Net sales................................................................................. $ 127,924
Net loss (6).............................................................................. (509)
EBITDA (3)................................................................................ 21,050
Cash interest expense..................................................................... 10,894
Ratio of total debt to EBITDA............................................................. 4.9x
Ratio of EBITDA to cash interest expense.................................................. 1.9x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
AS OF
ACTUAL PRO FORMA
---------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 14,834 $ 665
Total assets............................................................................ 132,675 143,434
Total debt (including capital lease obligations)........................................ 95,447 105,000
Total stockholders' equity.............................................................. 17,518 16,877
</TABLE>
- ------------
(1) On February 1, 1996, the Company acquired NEBC. See "Management Discussion
and Analysis of Financial Condition and Results of Operations" and Note 7 to
Notes to Consolidated Financial Statements.
(2) Includes property and equipment financed through notes, deposits and capital
leases. See Consolidated Statements of Cash Flows in the Consolidated
Financial Statements.
(3) EBITDA represents net income of the Company plus interest, income taxes and
depreciation and amortization. EBITDA is not a measure of financial
performance under generally accepted accounting principles ("GAAP") and may
not be comparable to other similarly titled measures used by other
companies. EBITDA does not represent income or cash flows from operations as
defined by GAAP and does not necessarily indicate that cash flows will be
sufficient to fund cash
12
<PAGE>
needs. As a result, EBITDA should not be considered an alternative to net
income as an indicator of operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this offering memorandum because
it is a basis on which the Company assesses its financial performance and
certain covenants in the Company's borrowing arrangements are tied to
similar measurements. See Note 2 and Consolidated Statements of Cash Flows
in Consolidated Financial Statements.
(4) EBITDA margin represents EBITDA divided by net sales.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
earnings before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs), whether expensed or capitalized,
and that portion of rental expense estimated to be attributable to interest.
(6) Includes expenses associated with the Mid-City and TechniGraphix
acquisitions and the issuance of the old notes, such as (i) incremental
interest expense and amortization of financing costs resulting from the
issuance of the old notes and (ii) amortization of goodwill attributable to
the acquisitions.
13
<PAGE>
RISK FACTORS
Before you tender your old notes, you should be aware that there are various
risks, including those described below. You should consider carefully these risk
factors together with all of the other information included in this offering
memorandum before you decide to accept the exchange offer.
YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE
NOTES, AND THERE MAY BE PROSPECTUS REQUIREMENTS FOR CERTAIN BROKER-DEALERS
SELLING THE EXCHANGE NOTES
The old notes were offered to a small number of institutional buyers and are
eligible for trading in the PORTAL Market. The exchange notes will be a new
issue of securities for which there is no existing trading market. We cannot
assure you as to the liquidity of markets that may develop for the exchange
notes, your ability to sell the exchange notes or the price at which you would
be able to sell the exchange notes. If such markets were to exist, the exchange
notes could trade at prices that may be lower than their principal amount or
purchase price depending on many factors, including prevailing interest rates
and the markets for similar securities. First Union Capital Markets Corp. has
advised us that it currently intends to make a market with respect to the
exchange notes. However, it is not obligated to do so, and any market making
with respect to the exchange notes may be discontinued at any time without
notice. In addition, such market making activity may be limited during the
pendency of the exchange offer. We do not intend to apply for listing of the
exchange notes on any national securities exchange or on NASDAQ. The liquidity
of, and trading market for, the exchange notes also may be adversely affected by
changes in the market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry
generally. As a result, you cannot be sure that an active trading market will
develop for the exchange notes.
Based on interpretations by the SEC, we believe that you may offer for
resale, resell or otherwise transfer the exchange notes issued pursuant to the
exchange offer (unless you are an "affiliate" of ours within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, so long as you acquired
the exchange notes in the ordinary course of your business and you will not, and
have no arrangement with any person to, participate in the distribution of the
exchange notes. However, each broker-dealer that receives exchange notes for its
own account in exchange for old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
OLD NOTES OUTSTANDING AFTER THE EXCHANGE OFFER WILL NOT HAVE REGISTRATION
RIGHTS, AND MAY HAVE A MORE LIMITED MARKET
If you do not exchange your old notes for exchange notes pursuant to the
exchange offer, your old notes will continue to be subject to the restrictions
on transfer of old notes. In general, you may not offer or sell old notes unless
they are registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. We do not intend to
register the old notes under the Securities Act. To the extent that old notes
are tendered and accepted in the exchange offer, the trading market for
remaining untendered and tendered but unaccepted old notes will be adversely
affected.
OUR LEVERAGE MAY RESULT IN SIGNIFICANT DEBT SERVICE OBLIGATIONS AND LIMITATIONS
As a result of the issuance and sale of the old notes, we will have a
significant level of indebtedness. As of December 31, 1998, on a pro forma basis
after giving effect to such issuance and sale, we would have had approximately
$105.0 million of indebtedness. We would have also had approximately $15.8
million of additional borrowing availability under our senior credit facility
("Senior
14
<PAGE>
Credit Facility") on that date. See "Capitalization" and "Description of Senior
Credit Facility." In addition, the indenture governing the notes allows us to
incur additional indebtedness under certain circumstances. Our ability to pay
principal and interest on the notes and to satisfy our other obligations will
depend on our future operating performance. Our operating performance will be
affected by prevailing economic conditions and financial, business and other
factors, which may be beyond our control.
Our high degree of leverage could have important consequences to you, such
as:
- we must use a substantial portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the funds available
to us for other purposes such as capital expenditures and acquisitions;
- in the future, we may not be able to obtain additional financing on
satisfactory terms for working capital, capital expenditures, acquisitions
or other general corporate purposes;
- our borrowings under our Senior Credit Facility bear interest at variable
rates, which would create higher debt service requirements if market
interest rates increase;
- we may not be able to compete as effectively with competitors that are
less leveraged; and
- our degree of leverage may hinder our ability to adjust rapidly to
changing market conditions and could make us more vulnerable to downturns
in general economic conditions or in our business.
If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay capital expenditures, sell
assets, restructure or refinance our debt, or seek additional equity capital.
However, we cannot assure you that any of these remedies would be available or
satisfactory. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
YOUR EXCHANGE NOTES WILL BE SUBORDINATED TO OUR SENIOR INDEBTEDNESS
Before paying principal and interest on the exchange notes, we must first
make payments on our existing and future senior indebtedness, including all
amounts owed under our Senior Credit Facility. As of December 31, 1998, on a pro
forma basis, we would have had no borrowings under our Senior Credit Facility
but we would have had the ability to borrow approximately $15.8 million under
such Senior Credit Facility. See "Capitalization" and "Description of Senior
Credit Facility.".
Our obligations under the Senior Credit Facility are secured by
substantially all of the Company's assets, including the real and personal
property used in our business operations, and by a majority of the ownership
interest in the Company held by our stockholders. If we default on any payments
required under any secured indebtedness (including our Senior Credit Facility),
the secured lenders could declare all amounts outstanding, together with accrued
and unpaid interest, to be immediately due and payable. If we were unable to
repay amounts due, the lenders could proceed against their collateral. If these
lenders proceed against the collateral, we may not have sufficient assets
remaining to pay you and other noteholders. Moreover, if we become bankrupt or
similarly reorganize, we would not be able to use our assets to pay you and
other noteholders until after we pay all of our senior indebtedness in full. In
addition, if certain defaults exist with respect to senior indebtedness, we may
be prohibited from paying amounts due on the exchange notes, or from purchasing,
redeeming or otherwise acquiring the exchange notes. See "Description of the
Exchange Notes--Ranking of the Exchange Notes."
15
<PAGE>
OUR INDEBTEDNESS PREVENTS US FROM ENGAGING IN CERTAIN ACTIVITIES
Our Senior Credit Facility and the indenture governing the exchange notes
each contain a number of significant covenants. These covenants limit or
restrict our ability to:
- incur additional debt;
- pay dividends;
- incur liens;
- transfer or sell assets;
- enter into transactions with affiliates;
- issue or sell stock of restricted subsidiaries;
- merge or consolidate Phoenix Color or certain subsidiaries; or
- change our line of business.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interest. In addition, our Senior Credit
Facility also requires us to comply with certain financial ratios. Our ability
to comply with these ratios may be affected by events beyond our control. If we
breach any of the covenants in the Senior Credit Facility or the indenture, or
if we are unable to comply with the required financial ratios, we may be in
default under the Senior Credit Facility. If we default, the lenders under the
Senior Credit Facility could declare all borrowings outstanding under the Senior
Credit Facility, including accrued interest and other fees, to be due and
payable. If we must use all of our available cash to repay borrowings under the
Senior Credit Facility, we may not be able to make payments on the exchange
notes. If we were unable to repay the borrowings under the Senior Credit
Facility when due, the lenders could also proceed against the collateral granted
to them. If our lenders accelerate the repayment of indebtedness under the
Senior Credit Facility, our assets may not be sufficient to repay all of the
indebtedness in full. See "Description of Senior Credit Facility" and
"Description of the Exchange Notes."
OUR EXPANSION INTO BOOK MANUFACTURING MAY CREATE NEW PROBLEMS AND MAY NOT BE
SUCCESSFUL
We are expanding our business by investing in two new facilities for
manufacturing certain types of complete books. One plant, which recently
commenced operations, is now producing complete, high-quality, multi-color,
thin, flat back, hardcover books suitable for juvenile publishing and other
markets. The second plant, expected to begin operations in the second quarter of
1999, will produce workbook-size paperbacks, suitable for the higher education
market, and digest-size paperbacks for juvenile publishing and other markets.
The manufacture and sale of complete books is a different business from the
manufacture and sale of book components, and may present different operating and
marketing problems from those we faced previously, as well as unforeseen
expenses, difficulties, complications or delays. In addition, the production of
complete books may result in loss of business from certain book manufacturers
who have ordered book components from us in the past. We cannot guarantee that
we will receive significant orders for complete books, and, even if we do, that
those orders will be sufficient to offset the cost of complete book manufacture
or that our expansion into complete book manufacturing will be successful. See
"We Could Lose Business to Our Competitors" and "Business--New Book
Manufacturing Facilities."
16
<PAGE>
OUR INABILITY TO MANAGE GROWTH COULD HARM OUR FUTURE BUSINESS
We plan to develop additional manufacturing facilities, to integrate the
recent Mid-City and TechniGraphix acquisitions and, should appropriate
opportunities arise, to acquire other book component and book manufacturing
companies in the future. If we pursue these goals at the same time, our
managerial, operational and financial resources may be strained. Our future
performance and profitability will depend on the maintenance of existing
customer relationships, the effective marketing of expanded services, the
ability to maintain a consistently high level of service, the ability to
recruit, train, motivate and retain qualified personnel, and the ability to
integrate acquired companies into our existing business. We cannot assure you
that we will be able to maintain or accelerate our growth or to anticipate
changing demands that expanding operations will impose on our resources. If we
fail to manage our growth carefully, our business could suffer adverse
consequences.
WE MIGHT NOT SUCCEED IN COMPLETING OR INTEGRATING OUR ACQUISITIONS INTO OUR
BUSINESS
We completed a substantial acquisition (NEBC) in 1996, and we recently
closed the acquisitions of Mid-City and TechniGraphix. We also intend to
evaluate other book component and book manufacturing companies for possible
future acquisitions. Acquisitions generally involve numerous risks, including
the diversion of management's attention from other business concerns and the
potential loss of key employees. The contribution of any acquisition to our
future revenues and profitability, and the realization of economies of scale
from such acquisition, will depend to a large extent on our ability to integrate
effectively the customer base, operations and personnel of the acquired company
into our existing business. If we fail to achieve such integration, our Company
could be adversely affected. See "Mid-City Acquisition" and "TechniGraphix
Acquisition."
WE COULD LOSE ONE OR MORE MAJOR CUSTOMERS
Our ten largest customers accounted for approximately 71.0% of net sales in
1998. Simon & Schuster and Harper Collins, our two largest customers, accounted,
respectively, for 14.7% and 14.9% of 1998 net sales and 17.1% and 13.7% of 1997
net sales. We have no long-term commitments for continuing orders from our
customers, and we cannot predict that we will be able to maintain or increase
the current level of sales derived from our existing customers or attract
additional customers. The loss of any of our major customers could have a
material adverse affect on our business. See "Business--Sales and Marketing."
WE COULD LOSE BUSINESS TO OUR COMPETITORS
Our industry is extremely competitive. We face competition from other
independent book component printers, as well as from such commercial printing
firms as R.R. Donnelley, Quebecor Printing, Banta and World Color Press, all of
whom offer component printing services as part of their complete book
manufacturing businesses, and all of whom are substantially larger than the
Company. In addition, now that we have begun to manufacture certain types of
complete books, we will be competing with various U.S. and foreign book printing
companies. Competitive factors in the printing of book components and in the
manufacture of complete books include price, quality, speed of production and
delivery, use of technology and ability to service specialized customer needs on
a consistent basis. There is a risk that major commercial printing firms such as
R.R. Donnelley, Quebecor Printing, Banta and World Color Press will seek to
expand their book component business significantly, which could have a material
adverse effect on our business. See "Business--Competition."
WE DEPEND ON THE BOOK MARKET AND THE GENERAL INTEREST SEGMENT OF THAT MARKET
We derive all of our revenues from customers in the book publishing and book
printing industries, which ultimately depend on the sale of books. For this
reason, our business could be adversely affected
17
<PAGE>
by factors such as changes in the book-buying habits of the general public or in
the funding of large institutional users of books such as libraries and
elementary and high schools. In addition, we are dependent on the sale of book
components used in the general interest segment of the consumer book market. The
general interest book segment experienced modest declines in total sales in 1995
and 1996. Therefore, future weakness in this segment, particularly if not offset
by improvement in other book market segments, could have a material adverse
affect on the Company's business. See "Business-- Sales and Marketing."
OUR COMPANY DEPENDS ON KEY MANAGERS
Our success is substantially dependent on the efforts, abilities and
continued services of our senior management, including Louis LaSorsa, Chairman,
President and Chief Executive Officer. Our business could suffer if we lost the
services of any one or more of such senior management. Our future success also
depends on our ability to recruit, train, motivate and retain other highly
skilled managerial, technical, marketing and customer service personnel.
Competition for such personnel is intense, and we cannot be certain we will meet
our future personnel needs. If we fail to meet such personnel needs, our
business could be adversely affected. See "Management."
WE MIGHT NOT BE ABLE TO MAKE FUTURE INVESTMENTS IN NEW TECHNOLOGY
We have invested substantial resources in modern printing technology and
must continue to do so in the future in order to remain competitive in our
industry. However, there is a risk that the Company will not be able to finance
such capital expenditures in the future. There is also a risk that subsequent
technological change will result in our newly acquired equipment being less
efficient than subsequent versions of such equipment. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources."
OUR RAW MATERIAL COSTS COULD INCREASE
The prices of raw materials we use, including paper, foil and ink, are
subject to market fluctuations. For example, paper prices increased in 1994 and
1995. Although the prices we paid for paper and other finishing materials
remained stable during that period due to our policy of single-source
purchasing, if prices for paper or other materials increase in the future and if
we are not able to pass such increases on to our customers, or if our customers
reduce the size of their orders as a result of such increases, our sales and
profitability could suffer. See "Business--Raw Materials, Purchasing and
Inventory."
WE COULD BE AFFECTED BY "YEAR 2000" COMPUTER PROBLEMS
Many existing computer programs use only two digits to identify a year in
the computer's processing operations. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the year 2000. "Year 2000" issues affect virtually all companies and
organizations, including our Company.
The Company's digital communications and information network has been
continually upgraded with the newest equipment available, all of which, the
Company has been informed by the manufacturers, is Year 2000 compliant. The
Company's information systems consist of local and wide area networks, and the
Company's file servers use the most recent versions of Novell and Microsoft NT
software, which are represented to be Year 2000 compliant. In 1998, the Company
rewrote all of its information system programs, including its manufacturing and
financial software, in conjunction with a company-wide systems upgrade and, as a
result, believes that its Year 2000 issues have been addressed.
18
<PAGE>
As part of its Year 2000 compliance program, and in order to minimize
potential disruptions caused by the Year 2000, the Company investigated Year
2000 compliance by its suppliers, including the manufacturers of such equipment.
Based on the responses received, the Company does not believe it will experience
a disruption in its manufacturing processes from equipment currently owned. The
Company also requested information from its major suppliers of consumable
products used in manufacturing, including paper, ink, and finishing materials,
as to their ability to deliver product without interruption. These suppliers
have indicated they do not anticipate any Year 2000 disruption in the delivery
of product.
Based on the actions taken with respect to internal systems, and responses
received from vendors, management does not anticipate that the Company will be
subject to a material disruption in its information systems, or in its ability
to manufacture products or receive necessary raw materials from vendors due to
computer calendaring and date change problems associated with the Year 2000.
Although the Company has taken what it believes is prudent action to eliminate
disruption which may be caused by the Year 2000, there is no guarantee that the
Company will not be affected by dislocations caused by the Year 2000 beyond its
control, such as disruptions which could affect public utilities or financial
institutions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Compliance.
WE MAY NOT HAVE SUFFICIENT FUNDS TO REPAY THE EXCHANGE NOTES UPON A CHANGE OF
CONTROL
In the event a third party acquires control of our Company, you will have
the right to require us to purchase the exchange notes at a purchase price equal
to 101% of the principal amount of your exchange notes plus accrued and unpaid
interest to the date of purchase. In such circumstances, we may be required to
(1) repay all or a portion of any senior debt outstanding or (2) obtain our
lenders' consent to our purchase of the exchange notes. If we cannot repay all
of our debt or cannot obtain the needed consents, we may be unable to purchase
the exchange notes. This would be an event of default under the indenture. Upon
a change of control, we cannot guarantee that we will have sufficient funds to
make any debt repayment (including purchases of the exchange notes) as described
above. Also, we cannot guarantee that we could refinance our outstanding debt in
order to purchase the exchange notes or, if we could refinance, that such
financing would be on terms favorable to us. See "Description of the Exchange
Notes--Change of Control."
The events that qualify as a change of control under the indenture may also
be events of default under the Senior Credit Facility or other indebtedness. An
event of default under the Senior Credit Facility would permit the lenders to
accelerate the indebtedness. If we were unable to repay such borrowings when
due, the lenders could proceed against their collateral.
ISSUANCE OF THE EXCHANGE NOTES MAY BE SUBJECT TO FRAUDULENT CONVEYANCE LAWS
Any debt that we issue may be subject to review under relevant state and
federal fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced
by or on behalf of our unpaid creditors. A court may find that, after giving
effect to the sale of the exchange notes, either:
- we issued the exchange notes with the intent of hindering, delaying or
defrauding creditors or contemplated insolvency with a design to prefer
one or more creditors to the exclusion in whole or in part of others; or
- we received less than reasonably equivalent value or fair consideration
for the exchange notes, and any one of the following occur:
- we were insolvent or rendered insolvent by reason of the issuance of
the exchange notes; or
- we were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
19
<PAGE>
- we intended to incur, or believed that we would incur, debts beyond our
ability to pay as they matured.
A court could then subordinate the exchange notes to our presently existing
and future indebtedness, void the issuance of such indebtedness and direct the
repayment of any amounts paid thereunder to our creditors or take other action
detrimental to the holders of such indebtedness.
Similarly, the guarantees of our "restricted subsidiaries" may be subject to
federal or state court review in the event of a bankruptcy or other creditor
court proceeding. If a court were to find that the guarantees were issued under
circumstances such as those described in the preceding paragraph relating to the
exchange notes, the court could void the guarantees and direct the repayment of
amounts previously paid under the guarantees.
Also, if federal bankruptcy or state insolvency proceedings were commenced
within 90 days after a payment by us with respect to the exchange notes, or if
we anticipated becoming insolvent at the time of the payment, all or a portion
of the payment could be voided as a preferential transfer and the recipient of
such payment could be required to return the payment.
There is no generally applicable standard which a court might apply in the
future to decide if we would be considered insolvent at a particular point in
time. Generally, a business is considered "insolvent" if the fair value of all
of its assets is less than the sum of its debts, or if the business is unable to
pay its debts as they mature and become due. Based on our financial statements,
recent operating history and other factors, and after taking into account the
issuance of the exchange notes, we believe we would not be considered insolvent
by a court, would not be viewed as having unreasonably small capital for our
business and would not be seen as incurring debts beyond our ability to pay them
as they become due. However, it is not certain that a court passing on such
matters in the future would agree with us.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the exchange of the old
notes ("Old Notes") pursuant to the exchange offer. The net proceeds to the
Company from the issuance of the Old Notes on February 2, 1999 were
approximately $101.0 million, after deducting the initial purchaser's discount
and expenses. The Company used the net proceeds from the offering of the Old
Notes to repay all $11.3 million of outstanding indebtedness under the Senior
Credit Facility and $40 million of indebtedness under certain senior secured
notes (the "Bridge Notes") issued September 15 and November 30, 1998. The
proceeds of the Bridge Notes, which bore interest at a rate of 9.75% as of
December 31, 1998, were used to repay the balance of two earlier term loans, to
fund the acquisition of Mid-City, and for working capital. Affiliates of First
Union Capital Markets Corp. acted as lender and the agent under both the Senior
Credit Facility and the agreement under which the Bridge Notes were issued. For
a description of the Senior Credit Facility, see "Description of Senior Credit
Facility."
20
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of December
31, 1998 (i) on a historical basis, and (ii) on a pro forma basis to give effect
to the issuance and sale of the Old Notes and the acquisitions of Mid-City and
TechniGraphix. The information in this table should be read in conjunction with
"Summary Historical and Unaudited Pro Forma Consolidated Financial Data," "Use
of Proceeds," "Selected Historical Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto included in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------
<S> <C> <C>
1998
<CAPTION>
ACTUAL PRO FORMA
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents....................................................... $ 14,834 $ 665
---------- -----------
---------- -----------
Long-term debt (including current portion):
Senior Credit Facility (1).................................................... $ 11,325 $ --
Notes payable and obligations under capital leases............................ 44,122 --
Bridge Notes.................................................................. 40,000 --
Exchange Notes offered hereby................................................. -- 105,000
---------- -----------
Total long-term debt........................................................ 95,447 105,000
Stockholders' equity.......................................................... 17,518 16,877
---------- -----------
Total capitalization...................................................... $ 112,965 $ 121,877
---------- -----------
---------- -----------
</TABLE>
- ------------
(1) The Senior Credit Facility provides for borrowings up to $20.0 million under
a revolving credit facility. On a pro forma basis, as of December 31, 1998,
the Company would have had $15.8 million of borrowing availability under the
Senior Credit Facility.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth below is certain selected consolidated historical financial
information of the Company and its subsidiaries as of December 31, 1994, 1995,
1996, 1997 and 1998 and for the years then ended. The following financial data
as of December 31, 1995, 1996, 1997, and 1998 and for each of the years then
ended have been derived from the Company's Consolidated Financial Statements and
related Notes thereto as of such dates and with respect to such periods, which
Consolidated Financial Statements have been audited by PricewaterhouseCoopers
LLP, independent accountants. Such firm's report on the Company's Consolidated
Financial Statements as of December 31, 1997 and 1998 and for each of the three
years in the period ended December 31, 1998 is included elsewhere in this
prospectus. The financial data presented below as of December 31, 1994 is
unaudited and was prepared by management of the Company on the same basis as the
audited Consolidated Financial Statements included elsewhere in this
registration statement and, in the opinion of management, includes all
adjustments necessary to present fairly the information set forth therein. The
selected historical financial information set forth below should be read in
conjunction with the Consolidated Financial Statements, the Notes thereto and
the other financial information contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1994 1995 1996(1) 1997 1998
--------- --------- --------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $ 50,971 $ 60,907 $ 95,262 $ 104,794 $ 107,491
Cost of sales........................................... 37,468 45,129 71,116 73,722 80,627
--------- --------- --------- ---------- ----------
Gross profit............................................ 13,503 15,778 24,146 31,072 26,864
--------- --------- --------- ---------- ----------
Operating expenses:
Selling and marketing expenses.......................... 1,827 3,036 6,089 5,881 6,278
General and administrative.............................. 4,803 4,505 9,010 12,363 13,031
Impairment loss (2)..................................... -- -- 1,268 -- --
--------- --------- --------- ---------- ----------
Total operating expenses................................ 6,630 7,541 16,367 18,244 19,309
--------- --------- --------- ---------- ----------
Income from operations.................................. 6,873 8,237 7,779 12,828 7,555
Interest expense........................................ 1,341 1,827 4,937 4,484 5,076
Other (income) expense (3).............................. (70) 10 (1,093) 62 (460)
--------- --------- --------- ---------- ----------
Income before income taxes:............................. 5,602 6,400 3,935 8,282 2,939
Income tax provision.................................... 2,402 2,690 2,139 3,898 2,008
--------- --------- --------- ---------- ----------
Net income.............................................. $ 3,200 $ 3,710 $ 1,796 $ 4,384 $ 931
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
BALANCE SHEET DATA (AT YEAR END):
Cash and cash equivalents............................... $ 299 $ 370 $ 158 $ 1,045 $ 14,834
Total assets............................................ 30,609 50,038 76,544 85,326 132,675
Total debt (including capital lease obligations)........ 14,488 26,411 49,939 46,726 95,447
Total stockholders' equity.............................. 7,689 10,154 12,041 16,487 17,518
OTHER FINANCIAL DATA:
Depreciation and amortization expense................... $ 3,265 $ 3,119 $ 8,479 $ 9,239 $ 10,931
Capital expenditures (4)................................ 6,083 17,841 11,052 15,131 48,168
EBITDA (5).............................................. 10,208 11,346 17,351 22,005 18,946
EBITDA margin (6)....................................... 20.0% 18.6% 18.2% 21.0% 17.6%
Ratio of earnings to fixed charges (7).................. 4.7x 4.2x 1.7x 2.6x 1.5x
</TABLE>
22
<PAGE>
- ------------
(1) On February 1, 1996, the Company acquired NEBC. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 7 of
Notes to Consolidated Financial Statements.
(2) Reflects the write-down of real estate assets held for sale to their
estimated net realizable value.
(3) Reflects the gain realized upon the sale of certain printing equipment
obtained in the NEBC acquisition in 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(4) Includes property and equipment financed through notes, deposits and capital
leases. See Consolidated Statements of Cash Flows in the Consolidated
Financial Statements.
(5) EBITDA represents net income of the Company plus interest, income taxes,
depreciation and amortization. EBITDA is not a measure of financial
performance under GAAP and may not be comparable to other similarly titled
measures by other companies. EBITDA does not represent income or cash flows
from operations as defined by GAAP and does not necessarily indicate that
cash flows will be sufficient to fund cash needs. As a result, EBITDA should
not be considered an alternative to net income as an indicator of operating
performance or to cash flows as a measure of liquidity. EBITDA is included
in this offering memorandum because it is a basis on which the Company
assesses its financial performance, and certain covenants in the Company's
borrowing agreements are tied to similar measurements. See Consolidated
Statements of Cash Flows and Note 2 in Consolidated Financial Statements.
(6) EBITDA margin represents EBITDA divided by net sales.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
earnings before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs), whether expensed or capitalized,
and that portion of rental expense estimated to be attributable to interest.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical Consolidated Financial Data" and the audited Consolidated
Financial Statements of the Company and the Notes thereto included elsewhere in
this prospectus.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain
information derived from the Company's Consolidated Statements of Operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
% % %
$ --------- $ --------- $ ---------
--------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales........................................................ 95,262 100.0 104,794 100.0 107,491 100.0
Cost of sales.................................................... 71,116 74.7 73,722 70.3 80,627 75.0
--------- --------- --------- --------- --------- ---------
Gross profit..................................................... 24,146 25.3 31,072 29.7 26,864 25.0
--------- --------- --------- --------- --------- ---------
Operating Expenses:
Selling and marketing expenses................................. 6,089 6.4 5,881 5.6 6,278 5.9
General and administrative expenses............................ 9,010 9.5 12,363 11.8 13,031 12.1
Impairment loss................................................ 1,268 1.2 -- -- -- --
--------- --------- --------- --------- --------- ---------
Total operating expenses......................................... 16,367 17.1 18,244 17.4 19,309 18.0
--------- --------- --------- --------- --------- ---------
Income from operations........................................... 7,779 8.2 12,828 12.3 7,555 7.0
Interest expense................................................. 4,937 5.2 4,484 4.3 5,076 4.7
Other (income) expense........................................... (1,093) (1.1) 62 0.1 (460) (.4)
--------- --------- --------- --------- --------- ---------
Income before income taxes....................................... 3,935 4.1 8,282 7.9 2,939 2.7
Income tax provision............................................. 2,139 2.2 3,898 3.7 2,008 1.8
--------- --------- --------- --------- --------- ---------
Net income....................................................... 1,796 1.9 4,384 4.2 931 .9
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Net sales increased $2.7 million or 2.6% to $107.5 million for the year
ended December 31, 1998 from $104.8 million for the same period in 1997. These
increases were a result of higher unit volume in the general interest, juvenile
and religious segments of the publishing market.
Gross profit declined $4.2 million or 13.5% to $26.9 million for the year
ended December 31, 1998, from $31.1 million for the same period in 1997,
decreasing the gross profit margin to 25.0% for the year ended December 31, 1998
from 29.7% for the same period in 1997. This decline resulted primarily from the
opening in September 1998 of the Company's new thin flat back book manufacturing
facility in New Jersey, for which the Company incurred approximately $2.4
million of costs, with offsetting sales of approximately $388,000. The effect of
this opening almost entirely borne by the fourth quarter. Additionally, the
Company incurred costs and expenses during the first quarter of 1998 in
connection with the distribution of a former facility's activities to various
other facilities, including establishing a prepress department in New York, and
the relocation of the Hingham, Massachusetts facility to Taunton, Massachusetts.
Operating expenses increased $1.1 million or 6.0% to $19.3 million for the
year ended December 31, 1998, from $18.2 million for the same period in 1997.
This increase was attributable to expenses incurred to provide for expanded
operations in both book components and book manufacturing, including promotional
costs, expanded sales force, sales staff support,
24
<PAGE>
telecommunications and freight costs. Operating expenses increased 0.6% as a
percentage of sales to 18.0% for the year ended December 31, 1998 from 17.4% for
the same period in 1997.
Interest expense increased $592,000 or 13.2% to $5.1 million for the year
ended December 31, 1998 from $4.5 million for the same period in 1997. The
increase was due to additions of certain term debt for equipment, the write-off
of the balance of deferred financing costs for the acquisition of NEBC and
interest incurred in connection with the Bridge Notes during the fourth quarter.
During the year ended December 31, 1998, the Company had non-operating
income of $460,000 compared with a loss of $62,000 for the same period in 1997.
The income or loss was primarily a result of gain and losses from the sale of
certain assets.
The Company's effective tax rate was 68.3% and 47.1% for the years ended
December 31, 1998 and 1997 respectively. The effective rate is primarily
attributable to the proportion of non-deductible amortization expense for
goodwill resulting from the NEBC acquisition to pretax income.
Net income declined $3.5 million to $931,000 for the year ended December 31,
1998 from $4.4 million for the same period in 1997, a decrease of 78.8%. The
decrease was due to the factors described above.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales increased $9.5 million, or 10.0%, to $104.8 million in 1997, from
$95.3 million in 1996, which included sales of NEBC following its acquisition on
February 1, 1996. If, for comparison purposes, the Company's 1996 net sales had
included the January operations of NEBC, net sales for 1997 would have shown an
increase of $6.5 million or 6.8% over such adjusted 1996 net sales. These sales
increases occurred due to increases in the Company's unit volume in the
education, computer book and book club segments of the publishing market and
despite difficult conditions in the general interest book segment of the
publishing industry in 1997. Industry sales of hardcover general interest books
declined 7.2% in 1997, due primarily to increased returns from book retailers.
Gross profit increased $7.0 million, or 29.0%, to $31.1 million in 1997 from
$24.1 million in 1996, increasing the gross profit margin to 29.7% from 25.3% in
1996. This improvement resulted from increased sales and from reductions in
material consumed and direct labor and overhead costs. Savings in materials were
the result of efficiencies created by new equipment, use of the Company's
computerized sheeter and management efforts to eliminate waste.
Operating expenses increased $1.8 million or 11.0% to $18.2 million in 1997
from $16.4 million in 1996. Operating expenses increased as a percentage of net
sales from 17.1% in 1996 to 17.4% in 1997. This increase was attributable to the
payment of $2.1 million of discretionary management incentive compensation to
certain Company officers and other supervisory personnel, a contribution of
$750,000 to the Stock Bonus Plan, the addition of sales and marketing personnel
and higher depreciation expense. Operating expenses in 1996 were adversely
impacted by a non-recurring impairment loss of $1.3 million relating to the
write-down of real estate assets held for sale to their net realizable value.
See Note 2 of Notes to Consolidated Financial Statements.
Interest expense decreased $453,000, or 9.2%, to $4.5 million in 1997 from
$4.9 million in 1996. This decrease was attributable to the reduction of both
the Company's revolving loan indebtedness and the term debt incurred in
connection with the acquisition of NEBC.
In 1997 the Company realized a loss of $62,000 on the disposition of assets,
compared with a gain of $1.1 million realized in 1996. Most of the 1996 gain
resulted from the sale of printing equipment obtained in the NEBC acquisition.
See Notes to Consolidated Financial Statements.
25
<PAGE>
The Company's effective tax rate was 47.1% for 1997 compared to 54.4% for
1996. The decrease was primarily attributable to an increase in taxable income
and a decrease in the proportion of non-deductible amortization expense for
goodwill to pretax income.
Net income grew by $2.6 million to $4.4 million for 1997 from $1.8 million
for the prior year, an increase of 144.4%. The increase was due to the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations, including funding for
the NEBC acquisition, with internally generated funds, external short and
long-term borrowings and capital and operating leases. Cash flows from operating
activities amounted to $6.8 million for 1995, $13.9 million for 1996, $19.1
million for 1997 and $14.2 million for 1998.
In September 1998, the Company entered into the Senior Credit Facility,
which provides for a three-year $20.0 million revolving credit facility with
First Union National Bank, and a $40 million facility with First Union
Investors, Inc. under which the Company issued the Bridge Notes. The Senior
Credit Facility refinanced the Company's prior senior indebtedness. The proceeds
of the Bridge Notes were used to repay certain existing indebtedness, provide
interim funding for the Company's expansion and fund the acquisition of
Mid-City. On February 2, 1999, the Company issued the old notes and used the
proceeds to repay the Bridge Notes and its borrowings under the Senior Credit
Facility. See "Use of Proceeds".
Borrowings under the Senior Credit Facility are collateralized by
substantially all of the Company's assets. As of December 31, 1998, the interest
rate on such borrowings was 9.75%. See "Description of Senior Credit Facility".
In addition to the Senior Credit Facility, the Company has credit
arrangements with various financial institutions to finance the purchase of
equipment. The Company has operating lease arrangements for two printing
presses. Rental expense related to such leases was approximately $593,000 for
1996, $480,000 for 1997 and $540,000 for 1998.
Capital expenditures, inclusive of equipment acquired under capital leases
and notes payable, totaled $11.1 million for 1996, $15.1 million for 1997 and
$48.2 million for 1998. The Company has traditionally invested in facilities and
equipment to increase capacity, improve efficiency, maintain high levels of
productivity and meet customer needs. Capital expenditures primarily have been
for prepress, pressroom and finishing equipment and plant construction.
The Company's capital expenditures for 1999 are currently estimated to total
approximately $22.9 million. Of that total, expansion-related capital
expenditures are estimated to total $19.5 million (net of equipment deposits).
This consists of $6.8 million for equipment and $12.5 million related to
facilities development for the paperback book manufacturing facility in
Maryland, and $230,000 for additional equipment for the book manufacturing
facility in New Jersey. The remaining $3.4 million will be used for maintenance
and equipment replacement at the Company's existing facilities. See
"Business--Business Strategy".
The Company believes that funds generated from operations, together with
existing cash, the net proceeds of the sale of the old notes, available credit
under the Senior Credit Facility ($15.8 million as of December 31, 1998), and
equipment leases, will be sufficient to finance its current operations, planned
capital expenditure requirements and internal growth. The cost of the Mid-City
acquisition was funded through the issuance of Bridge Notes in November 1998 and
the acquisition of TechniGraphix was funded from the proceeds of the sale of the
old notes. However, if the Company were to make any significant additional
acquisitions for cash, it may be necessary to obtain additional debt or equity
financing. There can be no assurance that such financing will be available on
satisfactory terms or at all. The Company has no current commitments or
agreements with respect to any acquisitions.
26
<PAGE>
YEAR 2000 COMPLIANCE
The Company's digital communications and information network has been
continually upgraded with the newest equipment available, all of which, the
Company has been informed by the manufacturers, is Year 2000 compliant. The
Company's information systems consist of local and wide area networks, and the
Company's file servers use the most recent versions of Novell and Microsoft NT
software, which are represented to be Year 2000 compliant. In 1998, the Company
rewrote all of its information system programs, including its manufacturing and
financial software, in conjunction with a company-wide systems upgrade and, as a
result, believes that all of its Year 2000 issues have been addressed.
Incidental to such upgrade were measures taken to insure the new software would
be Year 2000 compliant, but no separate costs were assigned to such Year 2000
compliance aspects and, if such costs could be measured, they would not be
material.
The Company uses modern, highly sophisticated computer imaging and image
management equipment in its prepress department, state-of-the-art printing
presses, finishing equipment, foil stamping and other postpress equipment. As
part of its Year 2000 compliance program, and in order to minimize potential
disruptions caused by the Year 2000, the Company investigated Year 2000
compliance by its suppliers, including the manufacturers of such equipment. The
Company has inquired of these suppliers, through publicly available information
and direct correspondence, as to the status of their Year 2000 compliance,
including any potential for disruption caused by embedded chips used in such
equipment. Based on the responses received, the Company does not believe it will
experience a disruption in its manufacturing processes from equipment currently
owned. It is the Company's intention to independently verify the Company's
system compliance with respect to Year 2000 issues.
The Company also requested information from its major suppliers of
consumable products used in manufacturing, including paper, ink, and finishing
materials, as to their ability to deliver product without interruption. These
suppliers have indicated they do not anticipate any Year 2000 disruption in the
delivery of product. For example, paper is manufactured for the Company by its
vendors, who maintain a 30-day inventory which is held in a warehouse located
near the Company for delivery upon request by the Company. In the event of an
emergency, the paper could be delivered to the Company using the Company's own
trucks.
Based on the actions taken with respect to internal systems, and responses
received from vendors, management does not anticipate that the Company will be
subject to a material disruption in its information systems, or in its ability
to manufacture products or receive necessary raw materials from vendors due to
computer calendaring and date change problems associated with the Year 2000. The
Company is continuing to monitor all aspects of its communication and
information systems, and does not foresee that any material costs will be
incurred to continue its evaluation or to take any additional remedial action,
should any such additional action be indicated.
Although the Company has taken what it believes is prudent action to
eliminate disruption which may be caused by the Year 2000, there can be no
assurance that the Company will not be affected by dislocations caused by the
Year 2000 beyond its control, such as disruptions which could affect public
utilities or financial institutions. See "Risk Factors--We Could Be Affected By
"Year 2000" Computer Problems".
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards for derivative instruments and
hedging activities. This statement is effective for fiscal years beginning after
June 15, 1999. The Company does not believe this new standard will have any
impact on the Company upon adoption.
27
<PAGE>
BUSINESS
THE COMPANY
We are the largest North American independent printer of book components,
which we supply to publishers and book manufacturers. Our book components
primarily include book jackets, paperback covers and pre-printed case covers
which are glued to hardboard and used for hardcover books. We also produce book
components such as illustrations, endpapers and inserts. We recently expanded
our capabilities and now manufacture complete books in juvenile and educational
book markets not being serviced by our principal book manufacturing customers.
We serve over 200 customers, including some of the largest firms in publishing
and book printing, such as Simon & Schuster, HarperCollins, Penguin Putnam,
Random House, McGraw-Hill, Time Warner, Microsoft, Walt Disney and R.R.
Donnelley.
Producing complete books requires both the printing of text and the
manufacture of book components. Publishers often demand high-quality, intricate
book covers. Specialized equipment, materials and finishes are needed to produce
these covers, and many leading publishers rely on specialty printers such as
Phoenix Color to supply book components, and use other commercial printers to
print text and assemble books.
We intend to increase our net sales and EBITDA by expanding our current book
components business and by using our newest production facility to offer
complete book manufacturing for children's books and educational workbooks. We
believe our long-standing reputation with our publishing customers for producing
quality book components will enable us to attract orders for the manufacture of
complete books. Based on comments and new orders from a number of our customers,
we believe our book manufacturing plans are being well-received.
We were founded in 1979 by 15 industry veterans. From 1994 through 1998, and
including our 1996 acquisition of New England Book Holding Corporation ("NEBC"),
our net sales increased at a compound annual rate of 20.5%. On a pro forma basis
reflecting two acquisitions completed in 1999, our net sales were $127.9 million
and our EBITDA was $21.1 million for the year ended December 31, 1998.
Our growth and profitability are a result of (1) consistently providing
superior customer service and product quality, (2) expanding our product line
and (3) continually adding state-of-the-art manufacturing capacity. In
developing our business, we emphasize:
- Technologically advanced prepress and manufacturing equipment and
efficient production techniques;
- A computerized management information system which links all of our
facilities and customers and furnishes immediately available operating
data;
- Fast turnaround times made possible by our state-of-the-art manufacturing
equipment, strategic location of our seven plants near major delivery
points and the use of our own delivery trucks;
- Long-term relationships with suppliers of important raw materials such as
paper, laminating film and ink; and
- A highly motivated sales force which emphasizes customer training and
educational programs.
COMPETITIVE STRENGTHS
We attribute our strong historical results and positive growth outlook to
the following factors:
LEADING MARKET POSITION IN SPECIALIZED MARKET NICHE. Phoenix Color is the
largest independent book component manufacturer in North America. We supply book
components to multiple segments of the book market, such as general interest
(including best sellers), juvenile, education, religious and
28
<PAGE>
business books. These books are distributed through retail bookstores, mass
market retailers and increasingly via the internet. We estimate that, of the
approximately $400 million in annual book component sales, Phoenix Color has a
leading 30% market share with the next closest competitor at approximately 15%.
We believe that the next three largest book component manufacturers collectively
possess approximately a 15% share of the overall market.
WELL-ESTABLISHED CUSTOMER BASE. We serve over 200 customers, including some
of the largest firms in publishing and book printing, such as Simon & Schuster,
HarperCollins, Penguin Putnam, Random House, McGraw-Hill, Time Warner,
Microsoft, Walt Disney and R.R. Donnelley. We have serviced many of these
customers since our inception, due, we believe, to our ability to supply, on a
timely and consistent basis, the high quality products needed by our customers.
STATE-OF-THE-ART PRODUCTION FACILITIES. Phoenix Color is a technological
leader in book component production due to its continual investment in
technologically advanced prepress, printing and finishing equipment. Our modern
facilities enable us to provide quality products with a high level of automation
and a low number of manufacturing employees. Our proprietary Phoenix
Colornet-Registered Trademark- system allows the electronic transfer of digital
files through equipment installed by us at customer locations, resulting in
reliable, consistently color-accurate, remote digital proofing. As a result of
our investment in modern manufacturing facilities, we believe we consistently
offer our customers the most modern and complete line of printing and finishing
facilities and the shortest work-order turnaround time in the industry.
POSITIVE OPERATING RESULTS. We have grown steadily since our 1979 founding
and, over the five-year period ended December 31, 1998, generated a compound
annual growth rate in net sales of 20.5%, through internal growth and the
NEBC acquisition.
DIVERSIFIED PRODUCT MIX. We believe we service the broadest range of book
market segments of any book component manufacturer in North America, including
general interest, juvenile, educational, business, book club and religious
categories. Since each segment of the book market generally experiences yearly
fluctuations, our supplying of book components for a broad range of market
segments enables us to offset decreases in one segment with increases in other
segments.
PROFESSIONAL SALES AND MARKETING. Our direct sales force is highly trained
and is located in seven offices throughout the United States. New sales
representatives participate in a three-month manufacturing and sales orientation
program, including spending at least two weeks in a working pressroom. All sales
personnel are required to participate annually in a two-week continuing
education program. We market our services by providing regular training and
educational programs in printing processes and technology to publishing house
personnel and by participating in publishers' trade shows.
MANAGEMENT CONTINUITY AND OWNERSHIP. Current senior management has operated
the Company since its early years and through multiple economic cycles and
stages of growth. Active management owns, directly and indirectly through
participation in an Employee Stock Bonus and Ownership Plan, 52.8% of the
Company's total common stock and 73.0% of its voting common stock.
BUSINESS STRATEGY
The key elements of our business strategy are to:
MAINTAIN PRODUCTION EFFICIENCY AND QUALITY. Our goal is to remain the
leading North American supplier of book components by maximizing production
efficiency and offering superior quality and rapid turnaround times. We continue
to invest our financial, management and personnel resources in highly automated
production equipment, digital file transfer and network communications,
real-time operating information systems and management controls. As a result, we
believe we have lower cost production capabilities than any of our primary
competitors.
29
<PAGE>
EXPAND INTO COMPLEMENTARY AREAS OF BOOK MANUFACTURING. We are expanding our
business to include complete book manufacturing of children's books and
educational workbooks in order to provide one-stop shopping for our publishing
customers. These are market segments in which we believe we can obtain orders
from existing customers and attract new customers who may be under-serviced. Our
publishing customers have indicated they want us to supply these complete books
which are not being produced by our principal book manufacturing customers.
ENHANCE SALES AND MARKETING PROGRAMS. We have a direct sales force of 30
representatives and we intend to expand its size substantially over the next 18
months. We plan to use our increased sales force to capture a greater share of
business from existing publishing customers and to solicit new customers, such
as smaller regional publishers. We also intend to continue our customer training
and educational programs in printing processes and technologies in efforts to
reach a larger segment of the book publishing market.
PURSUE STRATEGIC ACQUISITIONS. The book printing industry is facing
consolidation because of the need for, and the high cost of, modern production
plants. We believe there are attractive acquisition opportunities among book
component and book printing companies, and we will continue to seek potential
acquisition targets whose geographic location, customer base and type of
business will complement ours. We expect that our management expertise, modern
production technology, single-source purchasing relationships and financial
resources will help us to achieve revenue growth and further economies of scale
through the acquisition of other companies.
HISTORY OF COMPANY
Phoenix Color was founded in 1979 by a group of fifteen printing industry
veterans, including Louis LaSorsa, its Chairman, President and Chief Executive
Officer. Initially supplying book components for the higher education and
professional reference markets, the Company increased its services over time to
include components for the general interest, religious and other segments of the
book publishing industry. Conducting its early operations in a single production
facility in Long Island City, New York, the Company moved the major portion of
its business to Hagerstown, Maryland in 1993. The 1996 acquisition of NEBC and
the 1999 acquisition of Mid-City added significant sales and broadened the
Company's geographic base. Phoenix Color currently operates a total of seven
plants in Illinois, Maryland, Massachusetts, New York, New Jersey and Virginia
with a eighth under construction in Maryland.
The Company was incorporated in New York in 1979 and reincorporated by
merger in Delaware in 1996. The Company's headquarters are at 540 Western
Maryland Parkway, Hagerstown, Maryland 21740 and its telephone number is (301)
733-0018.
INDUSTRY OVERVIEW
The Company operates in the book manufacturing segment of the commercial
printing industry servicing both larger, well-known publishing houses and
smaller, regional, independent and specialty publishers. According to the Book
Industry Study Group's BOOK INDUSTRY TRENDS 1998: COVERING THE YEARS 1992-2002,
domestic consumer spending on books in the United States was $26.4 billion in
1997 and is projected to reach $28.9 billion in 1999 and $32.8 billion by 2002.
Demographic factors such as an aging population, increasing enrollments in
elementary and high school, and growth in public education spending are all
expected to have a positive impact on book sales over the next decade.
According to U.S. INDUSTRY AND TRADE OUTLOOK 1998: PRINTING, PUBLISHING AND
ELECTRONIC MEDIA, the U.S. book manufacturing industry is comprised of
approximately 600 U.S. enterprises. These range in size from small independent
printers to large book printing divisions of multi-national printing companies
such as R.R. Donnelley and Quebecor. The book printing industry is extremely
competitive and capital intensive. In response to competitive pressures, book
publishers have instituted practices
30
<PAGE>
such as just-in-time purchases of inventory, reduction in the size of book print
runs, more frequent reprints, shorter production cycles, and insistence on
digital proofs to make the printing process faster and less costly. In addition,
constantly changing production technology requires manufacturers to continue to
invest in more efficient and versatile pressroom and prepress equipment.
Management believes that small scale book printers and book component
manufacturers will be increasingly subject to consolidation pressures, since
generally only larger, well-capitalized enterprises will be capable of making
the capital expenditures and meeting the staffing requirements necessary to
build and operate state-of-the-art production facilities offering a full range
of services and rapid work-order turnaround time.
PRODUCTION OPERATIONS
As a result of publishers' desire to manage book inventory levels more
efficiently, book component printers, such as the Company, are under increasing
pressure to improve turnaround time. The Company believes it provides the
quickest turnaround time in the book component segment of the U.S. commercial
printing industry and, once customer approval of a proof is given, it is able to
complete the production of an order in less than 24 hours. The Company's
printing facilities operate on a 24-hour basis, seven days a week. The Company
has upgraded its digital communications and information network which
electronically links all Company locations. The upgrade permits the network to
transfer large amounts of digital information more quickly and is expected to
lead to further efficiencies.
The Company has also developed, and during 1998 made available to customers,
its Phoenix Colornet-Registered Trademark- system. Our proprietary Phoenix
Colornet-Registered Trademark-system allows the electronic transfer of digital
files through equipment installed by us at customer locations, resulting in
reliable, consistently color-accurate, remote digital proofing.
ORDER PROCESSING. Customer orders are received at the Company's various
plant locations by physical delivery or electronic file transfer. Once entered
into the Company's order processing system, a customer order can be monitored on
a real-time basis throughout the entire manufacturing process. At the time
orders are entered, management allocates work orders among the Company's plants
through the Company's data network in order to maximize plant efficiency and
minimize operating cost.
DIGITAL PREPRESS SERVICES. The Company provides a complete range of
prepress services, including color separations, high speed imaging, assembly,
electronic retouching and archiving, digital file transfer, color-accurate
digital proofing and computer-generated platemaking. The Company's prepress
services are available at each of its plants, and are linked through a high
speed telecommunications network. The Company does not rely on any
subcontractors for its prepress needs.
Prior to printing a customer order, the customer must approve the size,
layout, colors and general appearance of the image or "proof" created by the
prepress department. Virtually all of the Company's proofs are generated
digitally through its Phoenix Colornet-Registered Trademark- system, which
permits the colors and images in such proofs to be accurately reproduced on the
printing press. Phoenix Colornet-Registered Trademark- proofs are transmitted
electronically within the Company's facilities and can be transmitted to a
customer location for review and approval, thereby eliminating delays caused by
manual delivery of a proof. When a Phoenix Colornet-Registered Trademark- proof
is transmitted electronically between the Company and a customer, the Company
generally is able to complete all prepress operations on a given job in less
than one day.
PRINTING AND FINISHING SERVICES. The Company operates 31 modern high-speed,
sheetfed printing presses capable of printing up to eight colors in a single
pass for the manufacture of book components. In addition, its New Jersey book
manufacturing plant has two presses capable of printing up to ten colors on a
single side or five colors on each side during a single pass. Certain Company
presses are equipped with in-line coaters which permit multi-color printing and
coating processes to be completed simultaneously. The quality and efficiency of
the Company's pressroom operations are augmented by
31
<PAGE>
computer-to-plate technology, which permits the creation of a printing plate
directly from a digital file and eliminates the use of negative film. The
Company uses computer-to-plate technology on virtually all new jobs, and
maintains traditional platemaking equipment primarily for reorders of older jobs
originally produced using negative film. As a service to customers, the Company
archives such negative films to facilitate reorders.
The Company uses two printing processes--offset lithography with
conventional inks and offset lithography with ultraviolet inks. The Company has
been able, through its in-house printing technology staff, to improve the
quality of the Company's ultraviolet printing process to the point where the
output of such equipment is comparable to the quality available from
conventional offset lithography. The Company believes that the capabilities and
variety of its presses and other production equipment allow it to provide a wide
range of services to meet its customers needs.
After book components have been printed, they are treated through special
finishing operations to protect and enhance the printed image. The Company's
finishing services include liquid coatings applied to full sheets or selected
areas, film lamination, foil stamping, embossing and die-cutting. The Company
believes it provides the most extensive in-house line of such finishing services
of any manufacturer of book components in North America.
Finishing services offered in the New Jersey book manufacturing plant
include sewing and binding books in the thin, flatback hardcover format and the
ability to bind soft cover books. Management believes the binding equipment
installed in the plant is the most technologically advanced available.
DISTRIBUTION AND LOGISTICS. The Company operates its own tractor-trailers
to deliver a majority of its products. This enables the Company to reduce
transportation costs and to save approximately one day of delivery time in the
processing of most orders. The tractor-trailers are also used to distribute raw
materials among the Company's manufacturing plants.
RAW MATERIALS, PURCHASING AND INVENTORY
The Company uses substantial quantities of paper, ink, laminating film, foil
and other materials in its operations. Management generally favors "single
sourcing" of its various raw materials purchases, believing that establishing
strong commercial relationships with a relatively small number of suppliers
enables the Company to negotiate favorable prices and to maintain reliable
supplies of such materials. For example, in 1996 the Company's long-time
supplier of laminating film located its new plant adjacent to the Company's
headquarters at the Company's request, thereby providing the Company with
immediate access to such film. Nevertheless, the Company is not party to any
long-term supply agreements, is not dependent on any single source for its raw
materials and believes it could replace any individual supplier without
disruption to its business. The Company uses centralized purchasing and storage
at its Hagerstown plants to help control raw material costs.
Among the Company's sole suppliers are International Paper and Simpson Lee
which provide paper for book components, Superior Printing Ink which supplies
standard lithographic inks, General Binding Corp. which supplies laminating
film, and Fuji, Inc. which supplies negative film and printing plates.
The Company generally obtains annual pricing commitments from its suppliers,
but such commitments are not legally binding. Nevertheless, during 1994 and
1995, when many commercial printers experienced significantly increased paper
costs as paper manufacturers raised prices in response to strong demand and
limited supplies, the Company did not receive any paper price increases.
The Company purchases paper in large rolls and converts the paper, using its
own computerized sheeter, into sheets in the sizes required by its sheetfed
presses. By converting in excess of 30 million pounds of paper in-house
annually, the Company is able to reduce paper costs, avoid delays in
32
<PAGE>
obtaining properly-sized sheets and minimize the need to maintain an inventory
of specific sheet paper sizes.
NEW BOOK MANUFACTURING FACILITIES
While the Company has historically focused on the manufacture of book
components, management believes that complete book manufacturing represents a
natural outgrowth of the Company's core capabilities. The Company recently began
operating a 90,000 square-foot facility, located in New Jersey, which produces
complete multi-color, thin, flat back, hardcover books suitable for juvenile
publishing and other markets. A second facility located in Maryland, consisting
of approximately 150,000 square feet, is expected to become operational in the
second quarter of 1999, and will produce workbook-size paperbacks for the higher
education market and digest-size paperbacks for juvenile publishing and other
markets. State-of-the-art prepress, press and binding equipment is being
installed for these plants. The facilities' manufacturing processes will be
fully automated and entirely self-sufficient.
The Company intends initially to operate in these areas of complete book
manufacturing because it believes it can build on its established relationships
and its reputation for quality book component printing to obtain orders from its
existing customers and attract new customers it believes are currently
underserviced. The Company expects that the availability of high-quality
components and book texts from the same source should provide publishers with
"one-stop shopping" and enable them to reduce production cycle time as well as
inventory risk. The Company has targeted the manufacture of those types of books
which existing publishing customers have indicated an interest in having the
Company supply, and which are not being produced by the Company's principal book
manufacturing customers.
SALES AND MARKETING
The Company has a base of over 200 customers, including many of the leading
publishing companies in the world. Among its largest customers are Simon &
Schuster, HarperCollins, Penguin Putnam, Random House, Von Holtzbrink,
McGraw-Hill, Time Warner, International Thompson, John Wiley & Sons, Microsoft,
Houghton Mifflin, Oxford University Press, Walt Disney, Harcourt Brace and W.W.
Norton, many of whom have been customers of the Company since its inception in
1979. Many of these customers have decentralized operations in which purchasing
decisions are made by various divisions. HarperCollins Publishers and Simon &
Schuster accounted for 13.3% and 17.1%, respectively, of the Company's 1997 net
sales, and 14.9% and 14.7%, respectively, of the Company's 1998 net sales. Our
ten largest customers accounted for approximately 71.0% of net sales in 1998.
The book components which the Company produces are used in books distributed
in various segments within the consumer book market. The breakdown of the
Company's net sales for 1997 and 1998 by book market segments is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NET SALES
--------------------
<S> <C> <C>
1997 1998
--------- ---------
General Interest.......................................................... 44.9% 47.8%
Juvenile.................................................................. 6.1 7.7
Education................................................................. 14.9 14.2
Business.................................................................. 14.3 10.2
Book Club................................................................. 4.2 4.5
Religion.................................................................. 5.1 6.2
Other..................................................................... 10.5 9.4
--------- ---------
100.0% 100.0%
--------- ---------
--------- ---------
</TABLE>
33
<PAGE>
As is indicated in the above table, the Company has been dependent on the
sale of book components used in the general interest segment of the book market.
The general interest segment of the U.S. book market experienced modest declines
in total sales in 1995 and 1996. In addition, various segments of the book
market may respond to differing economic and other factors, and declines in one
or more segments in a given year may be offset by improvements in other sectors.
Accordingly, management views the Company's supplying of book components to a
broad range of book market segments as a competitive strength.
The Company has a direct sales force consisting of 30 sales representatives
located in seven offices throughout the U.S. The Company intends to expand the
size of its sales force substantially over the next 18 months to capture a
greater share of the business from its existing publishing customers, to
identify and solicit new customers, including smaller regional publishers, and
to promote its new book manufacturing services. The Company promotes its
services generally by providing training and educational programs in printing
processes and technology to publishing house personnel and by participating in
publishing industry trade shows.
New sales representatives are required to participate in a three-month
manufacturing and sales orientation program, including spending at least two
weeks in a working pressroom, and all sales personnel are required to
participate annually in a two-week continuing education program. Various forms
of monitoring by management are used to ensure that goals for individual sales
representatives are achieved, including sales call reports, monthly sales
analyses and customer ranking reports.
The Company does not operate with any backlog, since its goal and that of
its customers is to produce products on demand in the shortest possible time
frame.
IMPROVEMENTS IN MANUFACTURING OPERATIONS
The Company emphasizes the development of new products and services, and
continues to evaluate emerging technologies while assessing their
cost-effectiveness and relevance to current and future needs. The Company
created Lithoflex-Registered Trademark-, a substitute for liquid coated,
pre-printed case covering material, and developed an innovative line of
luminescent metallic colors. The Company was among the first to use offset
gravure printing extensively in order to reduce costs and improve the quality of
book component printing, and supplemented it with more advanced processes as
they became commercially available. The Company also developed and has made
available to customers its Phoenix Colornet-Registered Trademark-
color-accurate, digital proofing system.
COMPETITION
The printing industry in general, and the printing and manufacture of books
in particular, are extremely competitive. The Company faces competition from
other independent book component printers, as well as from such large commercial
printing firms as R.R. Donnelley, Quebecor, Banta and World Color Press, all of
whom offer component printing services within the context of their complete book
manufacturing businesses, and all of whom have significantly larger revenues and
assets than the Company. In addition, as the Company commences the manufacture
of certain types of complete books, the Company will be competing with various
book printing concerns, both foreign and domestic. Competitive factors in the
printing of book components and manufacture of complete books include price,
quality, speed of production and delivery, use of technology and the ability to
service specialized customer needs on a consistent basis.
34
<PAGE>
FACILITIES AND EQUIPMENT
The Company's corporate and administrative offices are located in one of its
two adjacent manufacturing facilities in Hagerstown, MD. The Company also leases
various regional sales offices. A summary of the location, size and nature of
the principal facilities appears below:
<TABLE>
<CAPTION>
LEASED/OWNED; SQUARE
LOCATION USE EXPIRATION DATE FOOTAGE
- --------------------------------- ---------------------------------------------- ------------------- ---------
<S> <C> <C> <C>
Hagerstown, MD (No. 1)........... Corporate offices; printing, prepress and Owned 114,000
finishing for book components
Hagerstown, MD (No. 2)........... Printing, prepress and finishing for book Owned 86,000
components
Long Island City, NY............. Prepress Leased; 12/31/06 54,000
Taunton, MA...................... Printing, prepress and finishing for book Leased; 12/31/12 53,000
components
Rockaway, NJ..................... Printing, prepress and finishing for complete Leased; 3/31/08 90,000
books
Lake Forest, IL (Mid-City)....... Printing, prepress and finishing for book Leased; 12/31/99 60,000
components
Dulles, VA (TechniGraphix)....... Digital book printing, prepress and finishing Leased; 4/30/07 27,000
</TABLE>
The Company's facilities contain various state-of-the-art equipment in all
departments. The pre-press capabilities at all locations include high-speed
digital scanning, composition, proofing, file transfer and platemaking
equipment. The press rooms contain high speed sheet-fed lithographic presses
capable of printing two to ten colors, many of which can print both sides of the
sheet in a single pass through the press. The finishing departments contain silk
screen presses, laminating, embossing, foil stamping and bindery machinery.
The Company believes that the facilities plus its new soft-cover book
manufacturing plant under construction in Maryland provide adequate capacity for
the production of book components and complete books for the foreseeable future.
EMPLOYEES
As of December 31, 1998, the Company had 595 employees, of whom 13 were
engaged in management, 40 in finance, administration and billing,69 in sales,
sales support and customer service, 12 in information systems and technological
development, 13 in transportation and 448 in manufacturing. None of the
employees are represented by unions, and the Company believes it has
satisfactory relations with its workforce.
LEGAL PROCEEDINGS
The Company has filed a complaint against Krause Biagosch GmbH and Krause
America ("Krause"), which is pending in the United States District Court for the
District of Maryland, based on breach of contract and statutory warranties on
certain prepress equipment which the Company had agreed to purchase from Krause.
The Company attempted to operate the equipment, and contends that the equipment
has failed to perform as warranted. During 1998, the Company removed the portion
of the equipment actually received, and is seeking recovery of the $1.6 million
paid to date on this equipment, which includes an amount for deposits on the
balance of the equipment not yet received. As of December 31, 1998, the Company
has included in other non-current assets a receivable from Krause of
approximately $1.6 million. Krause has recently counterclaimed for $1.5 million
for the balance of the purchase price for all the equipment (whether or not
delivered), plus incidental charges.
35
<PAGE>
The Company intends to vigorously prosecute its claims against Krause and
contest Krause's counterclaims. If Krause were nevertheless to prevail, the
Company may be required to pay Krause's actual lost profit on the equipment.
While such lost profit is not presently determinable, the amount the Company
might be required to pay if Krause prevailed would in no event exceed the unpaid
balance of the purchase price, claimed by Krause to be $1.5 million and by the
Company to be $1.2 million. Also, in that event, if the Company were to attempt
to resell the equipment in its possession, assuming a market existed, and the
price received from such resale were less than the price it had paid Krause, the
Company would incur a loss.
The Company is not a party to any other legal proceedings, other than claims
and lawsuits arising in the normal course of the Company's business. The Company
does not believe that such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on the Company's business,
financial condition, results of operations and cash flows.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors is composed of seven members. Directors
generally serve for one-year terms and until their successors are duly elected
and qualified.
The following table sets forth certain information regarding the Company's
current directors and executive officers:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITIONS
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Louis LaSorsa....................... 53 Chairman, Chief Executive Officer and Director
Edward Lieberman.................... 56 Executive Vice President, Chief Financial Officer, Secretary and
Director
Dion von der Lieth.................. 55 Senior Vice President, Sales and Marketing, and Director
John Carbone........................ 40 Vice President, Manufacturing, Book Components, and Director
David Rubin......................... 42 Director
Thomas Newell....................... 55 Chief Information Officer
Mitchell Weiss...................... 36 Vice President, Manufacturing, Commercial Print/Book Manufacturing
</TABLE>
LOUIS LASORSA has been with the Company since its inception in 1979, when
he became Vice President, Sales and Marketing. Mr. LaSorsa has been President of
the Company since 1982, was elected Chairman and Chief Executive Officer in
1996, and is involved in the management of all areas of the Company's
operations, planning and growth.
EDWARD LIEBERMAN joined the Company in 1981, has been Executive Vice
President, Chief Financial Officer and Secretary since February 1988, and is
responsible for financial information, general financing, legal matters, human
resources and benefits. From 1967 to 1981, Mr. Lieberman, a certified public
accountant, was a principal of Louis Lieberman & Company, an independent public
accounting firm.
DION VON DER LIETH has been Senior Vice President, Sales and Marketing,
since November 1993, directing the sales and marketing efforts of the Company.
Prior to joining the Company, Mr. von der Lieth was President of the Book Group
of Quebecor Printing Inc., a major commercial printing company, and prior
thereto, was Vice President of Manufacturing and Inventory Control for McGraw
Hill.
36
<PAGE>
JOHN CARBONE joined the Company in 1981, has been Vice President,
Manufacturing, for the Book Component Divisions since December 1997, and is
responsible for all component printing operations. Mr. Carbone was Vice
President of Manufacturing/Hagerstown from June 1996 to December 1997, Vice
President of Operations/New York from 1993 to 1996 and Vice President of Sales
from 1990 to 1993.
DAVID RUBIN was elected a director of the Company in February 1998, and is
Corporate Vice President and a director of Don Aux Associates, a privately-held
management consulting firm which services a wide range of manufacturing,
distribution and service-oriented client companies. Mr. Rubin has been employed
by Don Aux Associates since 1984, and has served as Director of Corporate
Analysis and Director of Consulting Services.
THOMAS NEWELL has been Chief Information Officer since May 1988 and is
responsible for developing, implementing and managing the Company's digital
communications and information network.
MITCHELL WEISS joined the Company in 1984, first in customer service and
later as a sales representative. In 1993, Mr. Weiss joined R.R. Donnelley & Sons
Company as a salesman, and returned to the Company as a sales representative in
1995, becoming a Regional Sales Manager in 1996. Since January 1998 Mr. Weiss
has been responsible for developing the Company's new complete book
manufacturing facility in New Jersey and will manage the facility's operations.
There are presently two vacancies on the Board, created by the resignations
in February 1999 of Andrew J. Goodman, and Govi C. Reddy. Mr. Goodman, who
continues as Assistant Secretary and as a member of the law firm which serves as
legal counsel to the Company, resigned as previously arranged and in
contemplation of the Company's pending registration of securities, in keeping
with the policy of his law firm concerning directorships. Mr. Reddy, who is the
chief executive officer of one of the Company's major suppliers, was unable to
continue as a director due to the demands of his business. The Company intends
to fill both vacancies with two outside directors, and has extended an
invitation to one candidate and is considering a list of names for the second
vacancy.
DIRECTORS COMPENSATION
Commencing January 1, 1999, directors who are not employees of the Company
will receive an annual retainer fee of $10,000.
COMMITTEES OF THE BOARD OF DIRECTORS
After the consummation of the offering, the Board of Directors will create
an Audit Committee and a Compensation Committee.
The Audit Committee's principal responsibilities will be to recommend
annually a firm of independent auditors to the Board of Directors, to review the
annual audit of the Company's Consolidated Financial Statements and to meet with
the independent auditors of the Company from time to time in order to review the
Company's general policies and procedures with respect to audits and accounting
and financial controls. The members of the Audit Committee will consist of
outside directors.
The principal responsibilities of the Compensation Committee will include
the establishment of compensation policies for the executive officers of the
Company and the administration of any stock-based compensation plans. The
members of the Compensation Committee will consist of Louis LaSorsa and two
outside directors.
37
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has not had a Compensation Committee and the
functions of such a committee have been previously performed by the Company's
Board of Directors. Louis LaSorsa, Chairman, Chief Executive Officer and a
director of the Company, will serve as one of three members of the Compensation
Committee after the consummation of the Offering. The other two members of the
Compensation Committee, will be outside directors. The Company will not approve
any interlocking relationships between the Compensation Committee or the Board
of Directors and any other company's board of directors or compensation
committee. See "Certain Transactions."
EMPLOYMENT AGREEMENTS
None of the Company's officers have employment agreements.
EMPLOYEE STOCK BONUS AND OWNERSHIP PLAN
The Company's Employee Stock Bonus and Ownership Plan (the "Stock Bonus
Plan") was established in 1980, initially as a profit-sharing, tax-qualified
retirement plan, and later as a stock bonus plan. Employees become participants
on any June 30 or December 31 after they complete one year of service. Annual
Company contributions to the Stock Bonus Plan are discretionary, and have been
made in the form of Company stock and cash. Contributions are allocated among
all Stock Bonus Plan participants, based on the proportion which each
participant's eligible compensation bears to the total compensation of all
participants. Company contributions for participants become vested for each
participant in equal installments over a six-year period of continuing service.
The Trustees of the Stock Bonus Plan are Louis LaSorsa and Edward Lieberman, and
the Stock Bonus Plan held 6,794 Class B (non-voting) shares of the Company as of
December 31, 1998. See "Certain Transactions" and "Principal Stockholders."
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the three
years ended December 31, 1998 for the Chief Executive Officer and the four other
most highly compensated executive officers of the Company, including both fixed
salary compensation and discretionary management incentive compensation
("Bonus"):
38
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------- ALL OTHER OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3) COMPENSATION(2)
- ---------------------------------------------- --------- ---------- ---------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Louis LaSorsa................................. 1998 $ 549,979 $ 452,652 $ -- $ --
Chief Executive Officer 1997 599,420 847,096 -- 6,294
1996 556,309 -- -- --
Edward Lieberman.............................. 1998 361,350 226,326 -- --
Chief Financial Officer 1997 392,729 478,840 -- 6,294
1996 375,955 -- -- --
Anthony DiMartino(1).......................... 1998 61,635 -- -- --
Vice President 1997 399,751 249,043 -- 6,294
1996 375,839 -- -- --
Dion von der Lieth............................ 1998 278,372 150,884 -- --
Vice President 1997 289,402 211,774 -- 6,294
1996 274,818 -- -- --
John Carbone.................................. 1998 267,315 94,303 -- --
Vice President 1997 201,468 90,366 -- 6,294
1996 195,850 -- -- --
</TABLE>
- ------------
(1) As of March 23, 1998, Mr. DiMartino was no longer employed by the Company.
(2) Information shown does not include amounts attributed to automobile use or
other perquisites, which total less than the level required to be reported.
(3) Reflects amounts contributed by the Company pursuant to the Stock Bonus
Plan.
No information is presented for options, restricted stock awards, long-term
incentive or other compensation because no such compensation has been awarded.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Class A voting and Class B non-voting
Common Stock as of the date of this prospectus by (i) each person known by the
Company to own beneficially more than 5.0% of the outstanding voting and
non-voting Common Stock, (ii) each director of the Company, (iii) each of the
named executive officers listed under "Management--Executive Compensation", and
(iv) all officers and directors as a group. Except as otherwise noted, the
persons named in the table have sole voting and investment powers with respect
to all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
VOTING NON- VOTING
SHARES(1) % SHARES(2) % SHARES
----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A CLASS B TOTAL
---------------------- ---------------------- ---------
Louis LaSorsa......................................................... 1,000 9.0 514 6.6 1,514
Edward Lieberman...................................................... 1,000 9.0 359 4.6 1,359
John Biancolli........................................................ 1,000 9.0 192 2.5 1,192
John Carbone.......................................................... 1,000 9.0 186 2.4 1,186
Thomas Newell......................................................... 1,000 9.0 126 1.6 1,126
Mitchell Weiss........................................................ 1,000 9.0 99 1.3 1,099
Dion von der Lieth.................................................... 1,000 9.0 24 0.3 1,024
Henry Burk............................................................ 1,000 9.0 438 5.6 1,438
Ronald Burk........................................................... 1,000 9.0 421 5.4 1,421
Anthony DiMartino..................................................... 1,000 9.0 390 5.0 1,390
Bruno Jung............................................................ 1,000 9.0 276 3.5 1,276
Judith Lieberman...................................................... -- -- 1,000 12.8 1,000
David Rubin........................................................... -- -- -- -- --
Louis LaSorsa and Edward Lieberman, as Trustees under the Stock Bonus
Plan(3)............................................................. -- -- 6,794 87.2 6,794
All directors and executive officers as a group (7 persons)........... 6,000 54.1 1,308 16.8 7,308
<CAPTION>
%
---------
<S> <C>
Louis LaSorsa......................................................... 8.0
Edward Lieberman...................................................... 7.2
John Biancolli........................................................ 6.3
John Carbone.......................................................... 6.3
Thomas Newell......................................................... 6.0
Mitchell Weiss........................................................ 5.8
Dion von der Lieth.................................................... 5.4
Henry Burk............................................................ 7.6
Ronald Burk........................................................... 7.5
Anthony DiMartino..................................................... 7.4
Bruno Jung............................................................ 6.8
Judith Lieberman...................................................... 5.3
David Rubin........................................................... --
Louis LaSorsa and Edward Lieberman, as Trustees under the Stock Bonus
Plan(3)............................................................. 36.0
All directors and executive officers as a group (7 persons)........... 38.7
</TABLE>
- ------------
(1) All Class A voting shares are held directly by the named individuals.
(2) Indicates each named individual's vested interest in Class B non-voting
shares held in the Stock Bonus Plan, except for Judith Lieberman whose Class
B shares are held directly.
(3) See "Management--Employee Stock Bonus and Ownership Plan."
The address of all stockholders listed in the above table is c/o Phoenix
Color Corp., 540 Western Maryland Parkway, Hagerstown, MD 21740.
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CERTAIN TRANSACTIONS
On February 1, 1996, in connection with a loan agreement between the Company
and two commercial banks, Louis LaSorsa, Edward Lieberman, Anthony DiMartino,
Thomas Newell, Henry Burk and Ronald Burk executed individual surety agreements
with the lending banks, under which each such person guaranteed all of the
Company's obligations under the loan agreement. Each of the Company's principal
stockholders other than Judith Lieberman also executed a Stock Pledge Agreement,
under which all of their respective shares of the Company's stock (except for
shares held through the Stock Bonus Plan) were pledged as security for the
Company's obligations under the loan agreement. See "Principal Stockholders."
The Stock Pledge Agreement required such pledge of shares to remain in effect
until the outstanding principal balance of certain term loans under the loan
agreement were repaid or reduced to an agreed level. Such term loans were repaid
in full on September 15, 1998, from the proceeds of the sale of Bridge Notes to
First Union Investors, Inc. Under the terms of the Senior Credit Facility the
personal guarantees of Messrs. LaSorsa, Lieberman, DiMartino, Newell and Henry
and Ronald Burk were released, and the earlier pledge of their shares of the
Company's stock was continued as security for indebtedness outstanding under the
Senior Credit Facility.
Louis LaSorsa and Edward Lieberman act as Trustees for the Stock Bonus Plan.
The Stock Bonus Plan owns 6,794 shares of Class B Common Non-Voting shares and,
under its terms, when permitted pursuant to the laws of Delaware, Messrs.
LaSorsa and Lieberman have full power and discretion to vote the shares of the
Company stock held by the Stock Bonus Plan, subject to their responsibilities as
fiduciaries for the participating beneficiaries of the Plan. The Stock Bonus
Plan's record ownership represents 36% of the total Company Common Stock
outstanding. See "Principal Stockholders."
Louis LaSorsa, Edward Lieberman, Ronald Burk, Henry Burk and Anthony
DiMartino made loans to the Company in 1988, the proceeds of which were used as
working capital. Such loans are represented by demand notes bearing interest at
12% per annum. The noteholders have indicated that they do not intend to make
demand for payment of such notes in the near future. The outstanding balances of
such loans are $50,000, $104,400, $98,240, $82,565 and $57,560, respectively.
The interest paid to the lenders on account of such loans amounted to $6,000,
$12,528, $11,788, $9,908 and $6,907, respectively, for each of the years ended
December 31, 1997 and 1998.
A law firm of which Andrew J. Goodman, a former director of the Company, is
a partner, acts as counsel to the Company. During the years ended December 31,
1997 and 1998, the Company paid Mr. Goodman's law firm total fees of $127,168
and $513,605, respectively, for legal services and disbursements. Mr. Goodman
continues to act as Assistant Secretary of the Company and his law firm acts as
counsel to the Company.
David Rubin, a director of the Company, is an officer and principal of Don
Aux Associates, which furnishes management consulting services to the Company.
During the years ended December 31, 1997 and 1998, the Company paid Don Aux
Associates a total of $180,000 and $36,766, respectively, in management
consulting fees.
Govi C. Reddy, a former director of the Company, is President of General
Binding Corp., which supplies certain raw materials to the Company. For the
years ended December 31, 1997 and 1998, the Company purchased a total of
$9,492,065 and $9,162,523, respectively, of such raw materials from General
Binding Corp. Such purchases were on terms and conditions no less favorable than
would be obtainable from an unaffiliated third-party vendor.
DESCRIPTION OF SENIOR CREDIT FACILITY
On September 15, 1998 the Company and its subsidiaries (collectively, the
"Borrowers") entered into the Senior Credit Facility with First Union National
Bank, as Agent and lender. Under the Senior
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Credit Facility, the lenders have agreed to provide the Borrowers a three-year
revolving credit facility under which the Borrowers may borrow up to an amount
equal to the lesser of $20.0 million or a borrowing base consisting of a
percentage of eligible inventory and accounts receivable.
SECURITY
The Senior Credit Facility is secured by a first priority lien on
substantially all of the Company's real and personal property. As additional
security, (1) the Company has pledged 100% of the capital stock or membership
interests of each subsidiary of the Company and (2) certain shareholders of the
Company have pledged substantially all of the capital stock of the Company.
INTEREST AND FEES
The annual interest rate applicable to the Senior Credit Facility is a
fluctuating rate of interest measured, at the Company's option, by reference to
either (1) LIBOR or (2) the greater of First Union National Bank's prime rate or
the overnight federal funds rate plus 0.5% ("Base Rate"), plus, in either case,
an additional amount which fluctuates based upon the leverage ratio of the
Borrowers. This additional amount ranges from 1.50% to 3.00% for LIBOR based
borrowings and from .25% to 1.75% for Base Rate based borrowings. The Senior
Credit Facility provides for an unused commitment fee payable to the lenders and
certain other fees payable by the Borrowers.
COVENANTS AND EVENTS OF DEFAULT
The Senior Credit Facility contains affirmative and negative covenants
customary for agreements of this type, including, among others, covenants
restricting the Borrowers with respect: to the incurrence of debt (including
guarantees); the creation of liens; substantially changing the nature of the
Company's or its subsidiaries' business; the consummation of certain
transactions such as dispositions of substantial assets, mergers, acquisitions,
reorganizations and recapitalizations; the making of certain investments and
loans, non-ordinary course asset sales and capital expenditures; the paying of
dividends and other distributions; transactions with affiliates; and the
Borrowers' ability to prepay certain debt. The Senior Credit Facility also
requires the Borrowers to comply with certain financial tests and maintain
certain financial ratios. Under these financial tests and ratios the Borrowers
(i) may not exceed a maximum leverage ratio; (ii) must maintain a minimum
interest coverage ratio; (iii) must maintain a minimum EBITDA; and (iv) may not
exceed annual capital expenditure limitations.
The Senior Credit Facility also contains provisions relating to customary
events of default. An event of default under the Senior Credit Facility will
allow the lenders to accelerate or, in certain cases, will automatically cause
the acceleration of, the maturity of the debt under the Senior Credit Facility
and will restrict the ability of the Borrowers to meet their obligations to the
holders of the notes.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The exchange notes offered hereby (the "Exchange Notes") are to be issued
under the indenture (the "Indenture") among the Company, the Guarantors named
therein, and Chase Manhattan Trust Company, National Association, as Trustee
(the "Trustee"). The terms of the Exchange Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Exchange
Notes are subject to all such terms, and holders ("Holders") of Exchange Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof.
The following is a summary of certain provisions of the Indenture and the
Exchange Notes. The following summary does not purport to be complete and is
expressly subject and qualified in its entirety by reference to all of the
provisions of the Indenture, including those terms made a part thereof by the
Trust Indenture Act. Investors may obtain a copy of the Indenture in the manner
described under "Available Information." Certain capitalized terms used herein
are defined in "--Certain Definitions."
The Exchange Notes will be unsecured senior subordinated obligations of the
Company. The Exchange Notes will be unconditionally guaranteed on an unsecured
senior subordinated basis by all current and future Restricted Subsidiaries of
the Company. Each such guarantee is referred to as a "Guarantee" and each such
Restricted Subsidiary is referred to as a "Guarantor." The Company will cause
each future Restricted Subsidiary to enter into a supplemental indenture
providing for a Guarantee.
Principal, premium and interest on the Exchange Notes will be payable, and
the Exchange Notes may be exchanged or transferred, at the office or agency of
the Company (which initially will be the corporate trust office of the Trustee,
at 1201 Main Street, 18th Floor, Dallas, TX 75202), except that, at the option
of the Company, payment of interest may be made by check mailed to the address
of the Holders as such address appears in the Exchange Note register which is
initially to be maintained by the Trustee. The Exchange Notes will be issued
only in fully registered form, without coupons, in denominations of $1,000 and
any integral multiple of $1,000.
TERMS OF THE EXCHANGE NOTES
The aggregate amount of Exchange Notes (and Old Notes) issuable under the
Indenture will be limited to $200.0 million in principal amount and will mature
on February 1, 2009. The Exchange Notes will bear interest at 10 3/8% per annum,
payable semiannually to Holders of record at the close of business on the
January 15 or July 15 immediately preceding the interest payment date on
February 1 and August 1 of each year, commencing August 1, 1999. The Company
will pay interest on overdue principal at 2.0% per annum in excess of such rate,
and it will pay interest on overdue installments of interest at such higher rate
to the extent permitted by law. Interest on the Exchange Notes will be computed
on the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Exchange Notes will not
be redeemable at the option of the Company prior to February 1, 2004. Beginning
February 1, 2004, the Exchange Notes will be redeemable in cash, at the
Company's option, in whole or in part, upon 20 to 60 days' prior notice mailed
to each Holder's registered address, at the following redemption prices
(expressed in
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<PAGE>
percentages of principal amount), plus accrued and unpaid interest thereon to
the redemption date, if redeemed during the 12-month period commencing on
February 1 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2004........................................................................ 105.188%
2005........................................................................ 103.458%
2006........................................................................ 101.729%
2007 and thereafter......................................................... 100.000%
</TABLE>
In addition, prior to February 1, 2002, the Company, at its option, may
redeem up to 25.0% of the original principal amount of the Exchange Notes with
the Net Cash Proceeds of one or more Public Equity Offerings following which
there is a Public Market, at a redemption price (expressed as a percentage of
principal amount) of 110.375% of the aggregate principal amount so redeemed,
plus accrued and unpaid interest thereon to the redemption date; PROVIDED,
HOWEVER, that at least 75.0% of the original principal amount of the Exchange
Notes must remain outstanding after each such redemption; and PROVIDED, FURTHER,
that each such redemption will occur within 60 days of the date of closing of
the related Public Equity Offering.
In the case of any partial redemption, selection of the Exchange Notes for
redemption will be made by the Trustee on a pro rata basis, although no Exchange
Note of $1,000 in principal amount or less will be redeemed in part. If any
Exchange Note is to be redeemed in part only, the notice of redemption relating
to such Exchange Note will state the portion of the principal amount thereof to
be redeemed. A new Exchange Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Exchange Note.
RANKING OF THE EXCHANGE NOTES
The Indebtedness evidenced by the Exchange Notes will be senior
subordinated, unsecured obligations of the Company. The payment of principal,
premium and interest on the Exchange Notes is subordinated in right of payment
to the prior payment of all existing and future Senior Indebtedness. In
addition, the Exchange Notes will be subordinated to all Senior Indebtedness of
the Guarantors and to all obligations of any other subsidiaries of the Company
that are not Restricted Subsidiaries.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Exchange Notes. The Exchange Notes will rank PARI PASSU with or be
senior to all other Indebtedness of the Company. Although the Indenture limits
the aggregate amount of additional Indebtedness that the Company may incur, the
Indenture does not limit the amount of such Indebtedness that may be Senior
Indebtedness.
In the event of any distribution of the assets of the Company upon a
liquidation, dissolution or reorganization of the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full of such Senior
Indebtedness before the Noteholders are entitled to receive any payment. Until
the Senior Indebtedness is paid, any payment to which Noteholders would be
entitled but for the subordination provisions of the Indenture will be made to
holders of such Senior Indebtedness. If a distribution is made to Noteholders
that, due to the subordination provisions, should not have been made to them,
such Noteholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them.
Notwithstanding anything herein to the contrary, the Company may not pay
principal, premium or interest on the Exchange Notes or make any deposit
pursuant to the provisions described under "--Defeasance" below if (i) any
Designated Senior Indebtedness is not paid when due or (ii) any other default on
Designated Senior Indebtedness occurs and the maturity of such Designated Senior
Indebtedness is accelerated unless, in either case, the default has been cured
or waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full.
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<PAGE>
However, the Company may pay the Exchange Notes without regard to the foregoing
if the Company and the Trustee receive written notice approving such payment
from the representative of the Designated Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the first
sentence of this paragraph) with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately, the
Company may not pay the Exchange Notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the Company)
of written notice (a "Blockage Notice") of such default from the representative
of the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier
under certain circumstances described in the Indenture). Notwithstanding the
provisions described in the immediately preceding sentence (but subject to the
first sentence of this paragraph), unless the holders of such Designated Senior
Indebtedness or the representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Company may resume payments on the
Exchange Notes after the end of such Payment Blockage Period. The Exchange Notes
will not be subject to more than one Payment Blockage Period in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period.
If payment of the Exchange Notes is accelerated because of an Event of
Default, the Company or the Trustee will promptly notify the holders of
Designated Senior Indebtedness or the representative of such holders of the
acceleration.
By reason of these subordination provisions, in the event of an insolvency,
bankruptcy, reorganization, or liquidation of the Company, or upon the
occurrence of a Change of Control or an Asset Sale requiring repurchase by the
Company of any Exchange Notes, there may not be sufficient assets remaining to
satisfy the claims of the Holders after satisfying the claims of creditors of
the Company who are holders of Senior Indebtedness and claims of creditors of
the Company's Subsidiaries. See "Risk Factors--Your Exchange Notes Will Be
Subordinated to Our Senior Indebtedness". As of December 31, 1998, after giving
effect to the issuance and sale of the Old Notes, the Company would have had no
Senior Indebtedness outstanding, but would have had the ability to borrow $15.8
million under the Senior Credit Facility. Although the Indenture contains
limitations on the amount of additional Indebtedness that the Company and its
Restricted Subsidiaries may incur, under certain circumstances the amount of
such Indebtedness could be substantial and, in any case, such Indebtedness may
be Senior Indebtedness. See Certain Covenants--Limitation on Indebtedness."
The terms of the subordination provisions described above will not apply to
payment from money or the proceeds of U.S. government obligations held in trust
by the Trustee for the payment of principal of and interest on the Exchange
Notes pursuant to the provisions described under "--Defeasance."
GUARANTEES
Each of the Company's subsidiaries is a guarantor ("Guarantor") of the
Exchange Notes. Each Guarantor will guarantee on an unsecured senior
subordinated basis the performance and payment of all obligations of the Company
under the Indenture and the Exchange Notes (all such obligations guaranteed by a
Guarantor being herein called the "Guaranteed Obligations"). Each Guarantor will
additionally agree to pay any and all expenses incurred by the Trustee or the
Holders in enforcing any rights under a Guarantee with respect to a Guarantor.
The obligations of a Guarantor under its Guarantee are senior subordinated
obligations. As such, the rights of Holders to receive payment by a Guarantor
pursuant to its Guarantee will be subordinate in right of payment to the rights
of holders of all Senior Indebtedness of the respective Guarantors,
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<PAGE>
including guarantees of the Senior Credit Facility. As of December 31, 1998,
after giving effect to the issuance of the Old Notes on February 2, 1999, the
Guarantors collectively had no Senior Indebtedness outstanding, but would have
had the ability to borrow $15.8 million under the Senior Credit Facility. Each
Guarantee will be limited to an amount not to exceed the maximum amount that can
be guaranteed by the relevant Guarantor without rendering such Guarantee
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally. See "Risk
Factors--Issuance of Exchange Notes May Be Subject To Fraudulent Conveyance
Laws."
In the event of a sale of all of the assets of any Guarantor, or a sale of
all of the capital stock of any Guarantor, such Guarantor (in the event of a
sale of all of the capital stock of such Guarantor) will be released and
relieved of its obligations under its Guarantee or the Person acquiring the
property (in the event of a sale of all of the assets of such Guarantor) will
not be required to enter into a Guarantee; PROVIDED, in each case, that such
transaction is carried out pursuant to and in accordance with "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and, if
applicable, "--Merger and Consolidation."
RANKING OF GUARANTEES
The Guarantees are subordinated in right of payment to the prior payment of
Senior Indebtedness of the Company and of the relevant Guarantor (which includes
guarantees of the Senior Credit Facility).
Upon any distribution of the assets of a Guarantor upon a liquidation,
dissolution or reorganization of such Guarantor, the holders of Senior
Indebtedness of such Guarantor will be entitled to receive payment in full of
such Senior Indebtedness before the Noteholders are entitled to receive any
payment with respect to the relevant Guarantee. Until the Senior Indebtedness of
such Guarantor is paid, any payment to which Noteholders would be entitled but
for the subordination provisions of the Indenture will be made to holders of
such Senior Indebtedness. If a distribution is made to Noteholders that, due to
the subordination provisions, should not have been made to them, such
Noteholders are required to hold it in trust for the holders of Senior
Indebtedness of such Guarantor and pay it over to them.
Notwithstanding anything herein to the contrary, a Guarantor may not pay
principal, premium or interest on the Exchange Notes or make any deposit
pursuant to the provisions described under "--Defeasance" below if (i) any
Designated Senior Indebtedness of the relevant Guarantor is not paid when due or
(ii) any other default on Designated Senior Indebtedness of such Guarantor
occurs and the maturity of such Designated Senior Indebtedness is accelerated
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Indebtedness has been
paid in full. However, such Guarantor may pay the Exchange Notes without regard
to the foregoing if such Guarantor and the Trustee receive written notice
approving such payment from the representative of the Designated Senior
Indebtedness of such Guarantor with respect to which either of the events set
forth in clause (i) or (ii) of the immediately preceding sentence has occurred
and is continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the first sentence of this paragraph) with
respect to any Designated Senior Indebtedness of such Guarantor pursuant to
which the maturity thereof may be accelerated immediately, such Guarantor may
not pay the Exchange Notes for the Payment Blockage Period commencing upon the
receipt by the Trustee (with a copy to the Company) of a Blockage Notice from
the representative of the holders of such Designated Senior Indebtedness and
ending 179 days thereafter (or earlier under certain circumstances described in
the Indenture). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the first sentence of this paragraph), unless
the holders of such Designated Senior Indebtedness of such Guarantor or the
representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness,
46
<PAGE>
such Guarantor may resume payments on the Exchange Notes after the end of such
Payment Blockage Period. Each Guarantee will not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness of a Guarantor
during such period.
By reason of these subordination provisions, if the Guarantors are required
to make payments under the Guarantees, there may not be sufficient assets
remaining to satisfy the claims of the Holders with respect to the Guarantees
after satisfying the claims of creditors of the Guarantors who are holders of
Senior Indebtedness of the Guarantors. Although the Indenture contains
limitations on the amount of additional Indebtedness that the Guarantors may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"--Certain Covenants--Limitation on Indebtedness."
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require that the Company
repurchase such Holder's Exchange Notes at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the
purchase date:
(i) any person, other than the Permitted Holders, becomes the beneficial
owner of more than 33 1/3% of the total voting power of the voting stock of the
Company;
(ii) the Company merges with or into another Person or sells or disposes of
all or substantially all of its assets to any Person, or any Person merges with
the Company, in any such event pursuant to a transaction in which the
outstanding voting stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (x) the
outstanding voting stock of the Company is converted into or exchanged for (1)
voting stock (other than Disqualified Stock) of the surviving or transferee
corporation and/or (2) cash, securities or other property in an amount which
could be paid by the Company as a Restricted Payment under the Indenture and (y)
immediately after such transaction no person or group (other than the Permitted
Holders) is the beneficial owner of (1) 33 1/3% or more of the voting power of
the voting stock of the surviving or transferee corporation on a fully diluted
basis and (2) a greater percentage of the voting stock of the surviving or
transferee corporation than the percentage beneficially owned by the Permitted
Holders;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors (together with any
new directors whose election by such board of directors or whose nomination for
election by the shareholders of the Company was approved by a vote of 66 2/3% of
the directors of the Company at the time of such approval who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors then in office; or
(iv) the liquidation or dissolution of the Company.
Within 30 days following any Change of Control, the Company will mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Exchange Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest to the
date of purchase; (2) the circumstances and relevant facts regarding such Change
of Control; (3) the repurchase date (which will be between 30 and 60 days from
the date such notice is mailed); and (4) the instructions that a Holder must
follow in order to have its Exchange Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Exchange Notes upon a Change of Control. To
the extent that the provisions of any securities laws or
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<PAGE>
regulations conflict with the Company's obligation to repurchase the Exchange
Notes upon a Change of Control, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
Subject to the limitations discussed below, the Company could, in the
future, enter into certain transactions that would not constitute a Change of
Control under the Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings. Restrictions on the ability of the Company to incur additional
Indebtedness are contained in the covenant described under "--Certain
Covenants--Limitation on Indebtedness." Such restrictions can be waived only
with the consent of the Holders of a majority in principal amount of the
Exchange Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford Holders protection in the event of a highly leveraged
transaction.
So long as the Senior Credit Facility remains in place, the Company is
prohibited from purchasing any Exchange Notes, or making any deposit with the
Trustee pursuant to the provisions described under "--Defeasance". As of
December 31, 1998, and giving effect to the issuance of the Old Notes on
February 2, 1999, there were no borrowings outstanding under the Senior Credit
Facility. The Senior Credit Facility also provides that the occurrence of
certain change of control events with respect to the Company will constitute a
default thereunder. In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Exchange Notes, the Company could seek the
consent of the lenders under the Senior Credit Facility to the purchase of
Exchange Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange Notes.
In such case, the Company's failure to purchase tendered Exchange Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Senior Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments to
the Holders.
Future Senior Indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Exchange Notes could cause a default under such Senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to Holders of Exchange Notes following the occurrence of a
Change of Control may be limited by the Company's financial resources. There can
be no assurance that sufficient funds will be available when necessary to make
any required repurchases. The Company does not currently have any indebtedness
outstanding that is PARI PASSU with the Exchange Notes that contains repurchase
provisions in the event of a Change of Control. The provisions under the
Indenture relative to the Company's obligation to make an offer to repurchase
the Exchange Notes as a result of a Change of Control may be waived or modified
with the written consent of the Holders of a majority in principal amount of the
Exchange Notes then outstanding.
CERTAIN COVENANTS
The Indenture contains covenants including the following:
LIMITATION ON INDEBTEDNESS: The Company will not, and will not permit any
Restricted Subsidiary to, incur any Indebtedness (including any Acquired
Indebtedness) other than Permitted Indebtedness. Notwithstanding the foregoing,
in addition to Permitted Indebtedness, the Company or any Restricted Subsidiary
may incur Indebtedness (including Acquired Indebtedness) if (i) no Default or
Event of Default exists on the date of the proposed incurrence of Indebtedness
or would result as a consequence of such proposed incurrence and (ii)
immediately after giving effect to such incurrence of Indebtedness,
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the Consolidated Coverage Ratio of the Company is at least 2.0 to 1.0 for
incurrences on or before February 1, 2001 and 2.25 to 1.0 for all incurrences
thereafter.
LIMITATION ON RESTRICTED PAYMENTS: (a) The Company will not, and will not
permit any Restricted Subsidiary to, make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default or Event of Default exists (or would result therefrom); (2) the Company
or such Restricted Subsidiary is not able to incur, after giving effect to such
Restricted Payment, an additional $1.00 of Indebtedness pursuant to the second
sentence under "--Limitation on Indebtedness"; or (3) the aggregate amount of
such Restricted Payment and all other Restricted Payments since the Issue Date
would exceed the sum of: (A) 50% of the Consolidated Net Income accrued on a
cumulative basis during the period beginning on the first day of the fiscal
quarter beginning immediately following the Issue Date to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income will be a deficit,
minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
Company from certain issuances or sales of its capital stock (other than
Disqualified Stock) subsequent to the Issue Date; (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange subsequent to the Issue Date of any Indebtedness of the
Company convertible or exchangeable for capital stock (other than Disqualified
Stock) of the Company; and (D) an amount equal to the sum of (i) the net
reduction in Investments in any Person resulting from dividends, repayments of
loans or advances or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from such Person, and (ii) the portion (proportionate
to the Company's equity interest in such subsidiary) of the fair market value of
the net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER, that the
foregoing sum will not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (1) if
no Default or Event of Default exists, any purchase or redemption of capital
stock or Subordinated Obligations of the Company made out of the proceeds of the
concurrent sale of capital stock of the Company (other than Disqualified Stock
and other than capital stock issued or sold to a subsidiary of the Company);
PROVIDED, HOWEVER, that (A) such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale or capital contribution will be excluded from the calculation of
amounts under clause (3) (B) of paragraph (a) above; (2) if no Default or Event
of Default exists, any purchase or redemption of Subordinated Obligations made
out of the proceeds of the concurrent sale of Indebtedness of the Company which
is permitted to be incurred under the "Limitation on Indebtedness" covenant;
PROVIDED, HOWEVER, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments; (3) dividends paid within 60
days after the date of declaration thereof if at such date of declaration such
dividend would have complied with this covenant; PROVIDED, HOWEVER, that at the
time of payment of such dividend, no other Default will exist (or result
therefrom); PROVIDED FURTHER, that such dividend will be included in the
calculation of the amount of Restricted Payments; and (4) if no Default or Event
of Default will exist or would result therefrom, any purchase of any fractional
share of capital stock of the Company resulting from: (A) any dividend or other
distribution on outstanding shares of capital stock that is payable in shares of
such capital stock, (B) any combination of all of the outstanding shares of
capital stock of the Company, (C) any reorganization or consolidation of the
Company in any merger of the Company with or into any other Person or (D) the
conversion of any securities of the Company into shares of capital stock of the
Company; PROVIDED, HOWEVER, that such purchases will be included in the
calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES: The Company will not, and will not permit any Restricted
Subsidiary to, create or permit to exist any restriction on the ability
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of any Restricted Subsidiary (a) to pay dividends or make any other
distributions on its capital stock or pay any Indebtedness owed to the Company,
(b) to make any loans to the Company or to any Restricted Subsidiary or (c) to
transfer any of its property or assets to the Company or to any Restricted
Subsidiary, except any restriction existing under (i) the Senior Credit Facility
as in effect on the Issue Date; (ii) the Exchange Notes, the Indenture or the
Guarantees; (iii) any instrument governing Acquired Indebtedness, (iv)
Refinancing Indebtedness incurred pursuant to an agreement referred to in clause
(i), (ii) or (iii); PROVIDED, HOWEVER, that the restrictions contained in any
such refinancing agreement are no less favorable to the Noteholders than
restrictions contained in such agreements governing the Indebtedness being
refinanced; (v) customary nonassignment provisions in leases to the extent such
provisions restrict the transfer of the lease or the property leased thereunder;
(vi) security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; and (vii) applicable law.
LIMITATION ON LIENS: Other than Permitted Liens, the Company will not, and
will not permit any Restricted Subsidiary to, create any lien on any property or
asset of the Company or of any Restricted Subsidiary or assign or convey any
right to receive any income or profits therefrom, or file or permit the filing
of any financing statement or other similar notice of any lien with respect to
any such property or asset under the Uniform Commercial Code of any State or
under any similar statute, unless (i) in the case of liens securing Indebtedness
that is expressly junior in right of payment to the Exchange Notes, the Exchange
Notes are secured by a lien on such property or assets that is senior to such
liens and (ii) in all other cases, the Exchange Notes are equally and ratably
secured.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK: (a) The Company will
not, and will not permit any Restricted Subsidiary to consummate any Asset Sale
unless (i) the Company or such Restricted Subsidiary receives consideration at
least equal to the fair market value of the shares and assets subject to such
Asset Sale (which fair market value will be determined in good faith by the
board of directors for any transaction involving in excess of $1.0 million) and
at least 75% of the consideration received by the Company or such Restricted
Subsidiary is in the form of cash and is received at the time of such sale and
(ii) 100% of the Net Available Cash from such Asset Sale is applied by the
Company or such Restricted Subsidiary (A) first, to the extent the Company
elects (or is required by the terms of the Senior Credit Facility) to repay
borrowings under the Senior Credit Facility; PROVIDED, that there is a permanent
reduction in the availability under the Senior Credit Facility in an amount
equal to such repayment and such repayment is made within 180 days from the date
of such Asset Sale and (B) second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to the extent
the Company elects, and within 180 days from the date of such Asset Sale, to (1)
make an investment in assets that replace the assets that were the subject of
such Asset Sale or in assets that will be used in a related business or (2)
acquire the capital stock of a Person that is engaged in a related business and
that becomes a Restricted Subsidiary as a result of the acquisition of such
capital stock.
(b) Any Net Available Cash not applied within 180 days after the
consummation of an Asset Sale as provided in paragraph (a) above will be deemed
to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company will be obligated to make offers to purchase
the Exchange Notes in an amount equal to the amount of Excess Proceeds (and not
just the amount thereof that exceeds $5.0 million) at a purchase price equal to
100% of the principal amount thereof plus accrued and unpaid interest thereon to
the purchase date in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Exchange Notes tendered pursuant to
an offer to purchase made pursuant to this paragraph is less than the amount of
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Exchange Notes surrendered by
Holders is greater than the amount of Excess Proceeds, the Trustee will select
the Exchange Notes to be purchased on a pro rata basis.
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(c) In the event of the transfer of substantially all (but not all) of the
assets of the Company and its Subsidiaries to a Person in a transaction
permitted under the caption "Certain Covenants--Merger and Consolidation" below,
the successor corporation will be deemed to have sold the assets of the Company
and its Subsidiaries not so transferred for purposes of this covenant, and will
comply with the provisions of this covenant with respect to such deemed sale as
if it were an Asset Sale. In addition, the fair market value of such assets of
the Company or its Subsidiaries deemed to be sold will be deemed to be Net
Available Cash for purposes of this covenant.
(d) If any non-cash consideration received by the Company or any subsidiary
in connection with any Asset Sale is disposed of for cash, then such disposition
will be deemed to constitute an Asset Sale hereunder and the Net Available Cash
thereof will be applied in accordance with this covenant.
(e) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Exchange Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this clause by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS: (a) Except for transactions entered into
prior to the Issue Date, the Company will not, and will not permit any
Restricted Subsidiary to, enter into any transaction with any affiliate of the
Company unless the terms thereof (1) are no less favorable to the Company or
such Restricted Subsidiary than those that could be obtained from a
non-affiliate, (2) if such affiliate transaction is in excess of $1.0 million,
(i) is set forth in writing and (ii) has been approved by a majority of the
disinterested members of the board of directors, and (3) if such affiliate
transaction is in excess of $5.0 million, has been determined by a nationally
recognized investment banking or accounting firm to be fair to the Company and
its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments;" (ii) any issuance of securities or
payments of cash pursuant to employee benefit plans or arrangements approved by
the board of directors; (iii) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the board
of directors; (iv) loans or advances to employees in the ordinary course of
business; (v) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries; and (vi) any affiliate Transaction (x) between the Company and a
Restricted Subsidiary or (y) between Restricted Subsidiaries; PROVIDED that, no
affiliate of the Company other than a Restricted Subsidiary owns any capital
stock in or otherwise has a material financial interest in any such Restricted
Subsidiary.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES: The Company will not sell any shares of capital stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary to issue or
sell any shares of its capital stock except to the Company or a Restricted
Subsidiary; PROVIDED, HOWEVER, that this covenant will not prohibit the sale of
100% of the shares of the capital stock of any Restricted Subsidiary effected in
accordance with the covenants described under "Limitation on Sales of Assets and
Subsidiary Stock" and "--Merger and Consolidation."
MERGER AND CONSOLIDATION: The Company will not, and will not permit any
Restricted Subsidiary to, consolidate or merge with any Person, or sell or
dispose of (or permit any subsidiary to sell or dispose of) all or substantially
all its assets to, any Person, unless: (i) the Company, in the case of a
transaction involving the Company, or such Restricted Subsidiary in the case of
a transaction involving a Restricted Subsidiary, will be the surviving or
transferee Person or the surviving or transferee Person (in either case, the
"Successor Company") will be a U.S. Person and the Successor Company (if not the
Company
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or such Restricted Subsidiary) will expressly assume, by an indenture
supplemental thereto, all the obligations of the Company under the Exchange
Notes and the Indenture, or the obligation of such Restricted Subsidiary under
its Guarantee, as the case may be; (ii) immediately after giving effect to such
transaction, no Default will exist; (iii) immediately after giving effect to
such transaction, the Company, if the transaction involves a Restricted
Subsidiary, or the Successor Company would be able to incur an additional $1.00
of Indebtedness pursuant to the second sentence under "--Limitation on
Indebtedness;" (iv) in the case of a transaction involving the Company,
immediately after giving effect to such transaction, the Successor Company will
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company prior to such transaction; (v) if, as a result of any
such transaction, property or assets of the Company or a Restricted Subsidiary
would become subject to a lien securing Indebtedness not excepted from the
provisions of the Indenture described above under the caption "--Limitation on
Liens," the Company, any such Restricted Subsidiary or the Successor Company, as
the case may be, will have secured the Exchange Notes and the relevant
Guarantees, as required by such provisions; and (vi) the Company will have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will be the successor to the Company or such
Restricted Subsidiary, as the case may be, and will succeed to, and may exercise
every right and power of the Company or such Restricted Subsidiary under, the
Indenture, but the predecessor Company or Restricted Subsidiary in the case of a
conveyance, transfer or lease will not be released from the obligation to pay
the principal of and interest on the Exchange Notes.
LIMITATION ON LAYERED INDEBTEDNESS: The Company will not, and will not permit
any Restricted Subsidiary to, incur any Indebtedness that is subordinate in
right of payment to any other Indebtedness, unless such Indebtedness is
subordinate in right of payment to, or ranks PARI PASSU with, the Exchange Notes
or, in the case of Restricted Subsidiaries that are Guarantors, such
Indebtedness is subordinate in right of payment to, or ranks PARI PASSU with,
the Guarantees of such Guarantors.
The Guarantors will not guarantee any Indebtedness of the Company that is
subordinate in right of payment to any other Indebtedness of the Company unless
such guarantee is subordinate in right of payment to, or ranks PARI PASSU with,
the Guarantees of such Guarantors.
ADDITIONAL SUBSIDIARY GUARANTEES: The Indenture provides that in the event that
any Person will become a Restricted Subsidiary, the Company will cause such
Restricted Subsidiary to concurrently guarantee the Company's obligations under
the Indenture and the Exchange Notes to the same extent that the Guarantors have
guaranteed the Company's obligations under the Indenture and the Exchange Notes;
PROVIDED, HOWEVER, that each additional Guarantor will be automatically and
unconditionally released and discharged from its obligations under such
additional Guarantee only in accordance with the last paragraph set forth under
"--Guarantees."
CONDUCT OF BUSINESS: The Company and its Restricted Subsidiaries will not
engage in any business other than the business of the Company and its Restricted
Subsidiaries on the Issue Date and any business related, ancillary or
complementary thereto.
SEC REPORTS: Notwithstanding that the Company may not be subject to the
reporting requirements of the Exchange Act, so long as any Exchange Notes remain
outstanding, the Company will (i) provide the Trustee, the Initial Purchaser and
the Noteholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections within the time
periods specified under such Sections and (ii) beginning on the earlier of (a)
the effective date of the Exchange Offer Registration Statement and (b) 130 days
following the Issue Date, file with the SEC, to the extent permitted, the
information, documents and reports referred to in clause (i) within the time
periods specified under
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such Sections. In addition, the Company will make available to any holder and
any prospective purchaser of Exchange Notes the information required pursuant to
Rule 144A(d)(4) under the Securities Act during any period in which the Company
is not subject to Section 13 or 15(d) of the Exchange Act.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Exchange Notes when due, continued for 30 days, (ii)
a default in the payment of principal of any Note when due at its stated
maturity, upon optional redemption, upon required repurchase, upon declaration
or otherwise, (iii) the failure by the Company to comply with its obligations
under "--Change of Control," and under "--Certain Covenants" under "--Merger and
Consolidation," "--Limitation on Sales of Assets and Subsidiary Stock,"
"--Limitation on Indebtedness," or "--Limitation on Restricted Payments" above,
(iv) the failure by the Company to comply for 30 days after notice with its
other agreements contained in the Indenture, (v) Indebtedness of the Company or
any subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million
(the "cross acceleration provision"), (vi) certain events of bankruptcy,
insolvency or reorganization of the Company or a subsidiary (the "bankruptcy
provisions"), (vii) any judgment or decree for the payment of money in excess of
$5.0 million is rendered against the Company or a subsidiary, remains
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days (the "judgment default provision")
or (viii) the Guarantee of any Guarantor ceases to be in full force and effect
or any Guarantor denies or disaffirms its obligations under its Guarantee.
However, a default under clause (iv) will not constitute an Event of Default
until the Trustee or the Holders of 25% in principal amount of the outstanding
Exchange Notes notify the Company of the default and the Company does not cure
such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing (other than an Event of
Default described in clause (vi) of the preceding paragraph with respect to the
Company), the Trustee or the Holders of at least 25% in principal amount of the
outstanding Exchange Notes may declare the principal of and accrued but unpaid
interest on all the Exchange Notes to be due. Upon such a declaration, such
principal and interest will be due immediately. If an Event of Default described
in clause (vi) of the preceding paragraph occurs and is continuing with respect
to the Company, the principal of and interest on all the Exchange Notes will
become immediately due without any declaration or other act on the part of the
Trustee or any Holders of the Exchange Notes. Under certain circumstances, the
Holders of a majority in principal amount of the outstanding Exchange Notes may
rescind any such acceleration with respect to the Exchange Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Exchange
Notes unless such Holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium or interest when due, no Holder of a Note
may pursue any remedy with respect to the Indenture or the Exchange Notes unless
(i) such Holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) Holders of at least 25% in principal amount of the
outstanding Exchange Notes have requested the Trustee to pursue the remedy,
(iii) such Holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense, (iv) the Trustee has not complied with
such request within 60 days after the receipt thereof and the offer of security
or indemnity and (v) the Holders of a majority in principal amount of the
outstanding Exchange Notes have not given the Trustee a direction inconsistent
with such request within such 60-day period. Subject to certain
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restrictions, the Holders of a majority in principal amount of the outstanding
Exchange Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder of a Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default exists and is known to the Trustee,
the Trustee must mail to each Holder of the Exchange Notes notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice so long
as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the Holders of the Exchange Notes. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status and
what action the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Exchange Notes then
outstanding and any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in principal amount of the
Exchange Notes then outstanding. However, without the consent of each Holder of
an outstanding Exchange Note affected thereby, no amendment may (i) reduce the
amount of Exchange Notes whose Holders must consent to an amendment, (ii) reduce
the rate of or extend the time for payment of interest on any Exchange Note,
(iii) reduce the principal of or extend the stated maturity of any Exchange
Note, (iv) reduce the premium payable upon the redemption of any Exchange Note
or change the time at which any Exchange Note may be redeemed as described under
"--Optional Redemption," (v) make any Exchange Note payable in money other than
that stated in the Exchange Note, (vi) impair the right of any Holder of the
Exchange Notes to receive payment of principal and interest on such Holder's
Exchange Notes after the due dates therefor or to institute suit for the
enforcement of any payment on such Holder's Exchange Notes, (vii) make any
change in the amendment provisions which require each Holder's consent or in the
waiver provisions, (viii) make any change to the subordination provisions of the
Indenture that would adversely affect the Noteholders or (ix) make any change in
the Guarantees that would adversely affect the Noteholders.
Without the consent of any Holder of the Exchange Notes, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to add Guarantees with respect
to the Exchange Notes, to secure the Exchange Notes, to add to the covenants of
the Company for the benefit of the Holders of the Exchange Notes or to surrender
any right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder of the Exchange Notes or to comply
with any requirement of the Commission in connection with the qualification of
the Indenture under the Trust Indenture Act. However, no amendment may be made
to the subordination provisions of the Indenture that adversely affects the
rights of any holder of Senior Indebtedness of the Company or a Guarantor then
outstanding unless the holders of such Senior Indebtedness (or their
representative) consent to such change.
The consent of the Holders of the Exchange Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
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After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders of the Exchange Notes a notice briefly describing
such amendment. However, the failure to give such notice to all Holders of the
Exchange Notes, or any defect therein, will not impair or affect the validity of
the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Exchange
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Exchange Notes, to replace mutilated, destroyed,
lost or stolen Exchange Notes and to maintain a registrar and paying agent in
respect of the Exchange Notes. The Company at any time may terminate its
obligations under "Change of Control" and under the covenants described under
"--Certain Covenants" (other than the covenant described under "--Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Subsidiaries and the judgment default
provision described under "--Defaults" above and the limitations contained in
clauses (iii) and (iv) under "--Certain Covenants--Merger and Consolidation"
(and clause (iii) of the first paragraph under "--Defaults" as it relates to
clauses (iii) and (iv) under "--Certain Covenants--Merger and Consolidation")
above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Exchange Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Exchange Notes may not be
accelerated because of an Event of Default specified in clause (iii), (iv) or
(viii) under "--Defaults" above or because of the failure of the Company to
comply with clause (iii) or (iv) under "--Certain Covenants--Merger and
Consolidation" above. If the Company exercises its legal defeasance option or
its covenant defeasance option, each Guarantor will be released from all its
obligations with respect to its Guarantee.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
government obligations for the payment of principal and interest on the Exchange
Notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including delivery to the Trustee of an Opinion of
Counsel to the effect that Holders of the Exchange Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
Chase Manhattan Trust Company, National Association, is the Trustee under
the Indenture and has been appointed by the Company as Registrar and Paying
Agent with regard to the Exchange Notes.
The Holders of a majority in principal amount of the outstanding Exchange
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Exchange Notes, unless such
Holder will have offered to the Trustee security and indemnity satisfactory
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to it against any loss, liability or expense and then only to the extent
required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Exchange Notes will be governed by
the laws of the State of New York.
CERTAIN DEFINITIONS
In addition to the other defined terms used herein, the following terms have
the meanings set forth below when used in this Offering Memorandum.
"ACQUIRED INDEBTEDNESS" means, with respect to any Person, (i) any
Indebtedness or Disqualified Stock of any other Person existing at the time such
Person is merged with or becomes a Restricted Subsidiary of such specified
Person, and (ii) Indebtedness secured by a lien encumbering any asset acquired
by such specified Person.
"ASSET ACQUISITION" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person will be merged with
the Company or any Restricted Subsidiary, or (b) the acquisition by the Company
or any Restricted Subsidiary of the assets of any person which constitute all or
substantially all of the assets of such Person or comprises any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"ASSET SALE" means any sale or other disposition by the Company or by any of
its Restricted Subsidiaries to any Person of (i) any of the stock of any of the
Company's Subsidiaries, (ii) substantially all of the assets of any division or
line of business of the Company or of any of its Subsidiaries, or (iii) any
other material amount of assets of the Company or of any of its Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of Consolidated EBITDA of the Company during the four full fiscal quarters
ending on or prior to the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio to Consolidated Fixed Charges of the
Company for the four quarter period. For purposes of this definition,
"Consolidated EBITDA" and "Consolidated Fixed Charges" will be calculated after
giving effect on a pro forma basis for the period of such calculation to (a) the
incurrence or repayment of any Indebtedness of the Company or any of its
Restricted Subsidiaries giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness, other than the incurrence or
repayment of Indebtedness in the ordinary course of business for working capital
purposes, occurring during the four quarter period or at any time subsequent to
the last day of the four quarter period and on or prior to the transaction date,
as if such incurrence or repayment occurred on the first day of the four quarter
period and (b) any Asset Sales or Asset Acquisitions (including any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of its Restricted Subsidiaries incurring or otherwise becoming
liable for Acquired Indebtedness and also including any Consolidated EBITDA
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the four quarter period) occurring during the four quarter
period or at any time subsequent to the last day of the four quarter period and
on or prior to the transaction date, as if such Asset Sale or Asset Acquisition
occurred on the first day of the four quarter period. If the Company or any of
its Restricted Subsidiaries guarantees Indebtedness of a third Person, the
preceding sentence will give effect to the incurrence of such guaranteed
Indebtedness as if the Company or such Restricted Subsidiary, as the case may
be, had directly incurred such guaranteed Indebtedness.
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"CONSOLIDATED EBITDA" means, for any period, the sum of (i) Consolidated Net
Income and (ii) to the extent Consolidated Net Income has been reduced thereby,
(A) all income taxes of the Company and its Restricted Subsidiaries paid or
accrued for such period, (B) Consolidated Interest Expense and (C) Consolidated
Non-Cash Charges LESS any non-cash items increasing Consolidated Net Income for
such period.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of (a)
Consolidated Interest Expense, plus (b) the product of (i) the amount of all
dividend payments on any series of preferred stock of the Company paid or
scheduled to be paid during such period times (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then-current
effective consolidated federal, state and local income tax rate of the Company,
expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum of: (i) all
interest expense of the Company and its Restricted Subsidiaries for such period;
and (ii) the interest component of capitalized lease obligations paid or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate net income
(or loss) of the Company and its Restricted Subsidiaries for such period on a
consolidated basis; PROVIDED, that there shall be excluded therefrom (a)
after-tax gains and losses from Asset Sales or abandonment or reserves relating
thereto, (b) items classified as extraordinary, nonrecurring or unusual gains,
losses or charges, and the related tax effects, each determined in accordance
with GAAP, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of the
Company or is merged or consolidated with the Company or any Restricted
Subsidiary of the Company, (d) the net income (but not loss) of any Restricted
Subsidiary of the Company to the extent that the declaration of dividends or
similar restrictions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the Company, except to the extent of cash
dividends or distributions paid to the Company or a Restricted Subsidiary of he
Company by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time after September 30, 1998, (g) income
or loss attributable to discontinued operations (including operations disposed
of during such period whether or not such operations were classified as
discontinued),and (h) in the case of a successor to the Company by consolidation
or merger or as a transferee of the Company's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Restricted Subsidiaries, as of the end
of the most recent fiscal quarter of the Company ending at least 45 days prior
to the taking of any action for the purpose of which the determination is being
made, as (i) the par or stated value of all outstanding capital stock of the
Company plus (ii) paid-in capital or capital surplus relating to such capital
stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"CONSOLIDATED NON-CASH CHARGES" means with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and its Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means the Senior Credit Facility and any
other Senior Indebtedness of the Company which, at the date of determination,
has an aggregate principal amount outstanding of, or under which the holders
thereof are committed to lend up to, at least $5.0 million
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and is specifically designated by the Company in the instrument evidencing or
governing such Senior Indebtedness as "Designated Senior Indebtedness" and, in
respect of any Guarantor, any guarantee by such Guarantor of Designated Senior
Indebtedness of the Company.
"DISQUALIFIED STOCK" means, with respect to any Person, any capital stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable (i) matures or is mandatorily redeemable for any
reason, (ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock or (iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the stated maturity
of the Exchange Notes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the Issue Date.
"HOLDER" or "NOTEHOLDER" means the Person in whose name an Exchange Note is
registered on the Registrar's books.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (i) all indebtedness of such Person for borrowed money, (ii) all
indebtedness of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all indebtedness of such Person for capitalized lease
obligations, (iv) all indebtedness of such Person upon notes payable and drafts
accepted representing extensions of credit of such Person, (v) all indebtedness
of such Person for all or any part of the deferred purchase price of property or
services which purchase price is (a) due more than six months (or a longer
period of up to one year, if such terms are available from suppliers in the
ordinary course of business) from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, (vi)
all indebtedness secured by any lien on any property or asset owned or held by
that Person except that "Indebtedness" will not include trade payables and
accrued liabilities incurred in the ordinary course of business for the purchase
of goods or services which are not secured by a lien other than a lien permitted
pursuant to clause (ii) of the definition of Permitted Liens and obligations
under interest rate protection agreements, (vii) all guarantees of such Person
in respect of Indebtedness of other Persons and (viii) all Disqualified Stock
issued by such Person with the amount of Indebtedness represented by such
Disqualified Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any.
"INVESTMENT" in any Person means any advance, loan or other extension of
credit or capital contribution to, or any purchase or acquisition of capital
stock, indebtedness or other similar instruments issued by, such Person.
"ISSUE DATE" means the date on which the Old Notes or the Exchange Notes, as
the case may be, are originally issued.
"NET AVAILABLE CASH" means, with respect to any Asset Sale, payments in cash
or cash equivalents received therefrom net of bona fide direct costs of sale,
including (i) income taxes reasonably estimated to be actually payable as a
result of such Asset Sale within two years of the date of such Asset Sale, (ii)
payment of any Indebtedness that is secured by a lien on the stock or assets in
question and that is required to be repaid as a result of such Asset Sale, (iii)
out-of-pocket expenses and fees relating to such Asset Sale and (iv) any portion
of cash proceeds which the Company determines in good faith should be reserved
for post-closing adjustments or liabilities relating to the Asset Sale retained
by the Company or any of its Restricted Subsidiaries.
"NET CASH PROCEEDS" means, with respect to any sale of capital stock, the
proceeds of such sale in the form of cash or cash equivalents net of fees,
discounts or commissions actually incurred in connection with such sale.
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"PERMITTED HOLDERS" means Louis LaSorsa, Edward Lieberman and the Company's
Employee Stock Bonus and Ownership Plan (so long as Louis LaSorsa and Edward
Lieberman are the sole trustees thereof).
"PERMITTED INDEBTEDNESS" means each of the following:
(i) Indebtedness under the Exchange Notes, the Indenture and the Guarantees;
(ii) Indebtedness under the Senior Credit Facility; PROVIDED that the
aggregate principal amount of Indebtedness outstanding under the Senior Credit
Facility at any one time will not exceed the greater of (a) $20.0 million and
(b) availability under the borrowing base thereunder.
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or permanent
reductions thereon;
(iv) Interest Rate Protection Agreements of the Company and its Restricted
Subsidiaries covering their Indebtedness;
(v) Indebtedness of a Restricted Subsidiary to the Company or to a
Restricted Subsidiary so long as such Indebtedness is held by the Company or a
Restricted Subsidiary, in each case subject to no lien held by a Person other
than the Company or a Restricted Subsidiary;
(vi) Indebtedness of the Company to a Restricted Subsidiary so long as such
Indebtedness is held by a Restricted Subsidiary, subject to no lien; PROVIDED
that any Indebtedness of the Company to any Restricted Subsidiary is unsecured
and subordinated to the Company's obligations under the Exchange Notes;
(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business;
(viii) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance or
similar requirements in the ordinary course of business;
(ix) Refinancing Indebtedness incurred in respect of Indebtedness originally
incurred pursuant to the second sentence under "Limitation on Indebtedness" or
pursuant to this clause (ix) or clause (i) or (ii) of this definition;
(x) Additional Indebtedness of the Company and its Restricted Subsidiaries
not to exceed $5.0 million at any one time outstanding for capitalized lease
obligations or for purposes of financing the purchase price or construction cost
of equipment, fixtures or similar property; and
(xi) Additional Indebtedness of the Company and its Restricted Subsidiaries
not to exceed $5.0 million at any one time outstanding.
"PERMITTED INVESTMENT" means any of the following:
(i) Investments by the Company or any Restricted Subsidiary in any Person
that is or will become immediately after such Investment a Restricted Subsidiary
or that will merge or consolidate into the Company or a Restricted Subsidiary;
(ii) Investments in the Company by any Restricted Subsidiary; PROVIDED that
any Indebtedness evidencing such Investment is unsecured and subordinated to the
Company's obligations under the Exchange Notes and the Indenture;
(iii) Investments in cash and cash equivalents;
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(iv) loans and advances to employees and officers of the Company and its
Subsidiaries in the ordinary course of business;
(v) interest rate protection agreements entered into in the ordinary course
of the Company's or its Restricted Subsidiaries' businesses;
(vi) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(vii) consideration other than cash or cash equivalents received by the
Company or its Restricted Subsidiaries in connection with an Asset Sale made in
compliance with the "Limitation on Sales of Assets and subsidiary Stock"
covenant; and
(viii) Investments not to exceed $1.0 million at any one time outstanding.
"PERMITTED LIENS" means any of the following:
(i) liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Company or the Subsidiaries will have set aside on its books
such reserves as may be required pursuant to GAAP;
(ii) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith;
(iii) liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security;
(iv) judgment liens not giving rise to an Event of Default so long as such
lien is adequately bonded and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment will not have been finally
terminated or the period within which such proceedings may be initiated will not
have expired;
(v) easements, rights-of-way zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of the
Subsidiaries;
(vi) any interest or title of a lessor under any capitalized lease
obligation;
(vii) purchase money liens to finance property or assets of the Company or a
Restricted Subsidiary acquired in the ordinary course of business;
(viii) liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers' acceptances
issued for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;
(ix) liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(x) liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company or a
Restricted Subsidiary;
(xi) liens securing interest rate protection agreements relating to
Indebtedness incurred under the Indenture;
(xii) liens securing Indebtedness under the Senior Credit Facility and
Indebtedness permitted under Section (xi) of the definition of Permitted
Indebtedness;
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(xiii) liens existing on the Issue Date and liens to secure any Refinancing
Indebtedness which is incurred to refinance any Indebtedness which has been
secured by a lien permitted under the "Limitation on liens" covenant and which
Indebtedness has been incurred in accordance with the "Limitation on
Indebtedness" covenant; and
(xiv) liens securing Acquired Indebtedness incurred in accordance with the
second sentence of the "Limitation on Indebtedness" covenant; PROVIDED that (A)
such liens secured such Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary and (B) such liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other than
the property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary and are no more favorable to the lienholders than the liens securing
the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by the Company or a Restricted Subsidiary.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
any class of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"PUBLIC MARKET" means any time after (i) an underwritten Public Equity
Offering of the Company has been consummated and (ii) at least 10% of the total
issued and outstanding common stock of the Company has been distributed by means
of an effective registration statement under the Securities Act or sales
pursuant to Rule 144 under the Securities Act.
"REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to refinance other Indebtedness of the Company or any of its Restricted
Subsidiaries; PROVIDED that: (i) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
refinanced; (ii) such Refinancing Indebtedness has a weighted average life to
maturity equal to or greater than the weighted average life to maturity of the
Indebtedness being refinanced; (iii) if the Indebtedness being refinanced is
subordinated in right of payment to the Exchange Notes, such Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Exchange Notes on terms at least
as favorable to the Holders of Exchange Notes as those relating to the
Indebtedness being refinanced; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary of the Company that is the obligor
on the Indebtedness being refinanced.
"RESTRICTED PAYMENT" means, with respect to any Person, (i) the declaration
or payment of any dividends or any other distributions in respect of its capital
stock or similar payment to the holders of its capital stock (other than
dividends or distributions payable solely in its capital stock (other than
Disqualified Stock) and dividends or distributions payable solely to the Company
or a Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Restricted Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a subsidiary that is an entity
other than a corporation)), (ii) the redemption of any capital stock of the
Company or any Restricted Subsidiary held by any Person, (iii) the redemption or
other acquisition prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment of any Subordinated Obligations or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"RESTRICTED SUBSIDIARY" means any subsidiary of the Company that is not an
Unrestricted Subsidiary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SENIOR CREDIT FACILITY" means the Credit Agreement dated as of September
15, 1998 among the Company, the subsidiaries listed therein as borrowers, the
lenders who are or may become a party thereto and First Union National Bank
("FUNB"), as administrative agent, pursuant to which the Company may borrow up
to the lesser of $20.0 million or a borrowing base consisting of a percentage of
eligible inventory and accounts receivable, together with the documents related
thereto, as such agreements may be amended or modified from time to time,
including any agreement extending the maturity of, refinancing or otherwise
restructuring all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"SENIOR INDEBTEDNESS" means with respect to any Person, (i) Indebtedness of
such Person, whether outstanding on the Issue Date or thereafter incurred and
(ii) accrued and unpaid interest (including interest accruing after commencement
of an insolvency or liquidation proceeding) in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness evidenced by notes or other
similar instruments for the payment of which such Person is responsible or
liable unless, in the instrument evidencing any of the obligations referred to
in clauses (i) or (ii) or pursuant to which any such obligations are
outstanding, it is provided that such obligations are subordinate in right of
payment to the Exchange Notes.
"SUBORDINATED OBLIGATION" means any Indebtedness of the Company or a
Restricted Subsidiary (whether outstanding on the Issue Date or thereafter
incurred) which is subordinate in right of payment to the Exchange Notes or the
Guarantees.
"UNRESTRICTED SUBSIDIARY" means (i) any subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
board of directors in the manner provided below and (ii) any subsidiary of an
Unrestricted Subsidiary. The board of directors may designate any subsidiary of
the Company to be an Unrestricted Subsidiary unless such subsidiary or any of
its Subsidiaries owns any capital stock or Indebtedness of, or holds any lien on
any property of, the Company or any other subsidiary of the Company that is not
a subsidiary of the subsidiary to be so designated; PROVIDED, HOWEVER that (A)
either (1) the subsidiary to be so designated has total assets of $1,000 or less
or (2) if such subsidiary has assets greater than $1,000, such designation would
be permitted under the covenant described under "--Limitation on Restricted
Payments" and (B) such subsidiary to be so designated and each of its
Subsidiaries has not at the time of such designation, and does not thereafter,
incur any Indebtedness pursuant to which the lender has recourse to any of the
assets or properties of the Company or any of its Restricted Subsidiaries. The
board of directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could incur $1.00 of additional Indebtedness
pursuant to the second sentence under "--Certain Covenants Limitation on
Indebtedness" and (y) no Default will exist.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal
income tax consequences of the acquisition, ownership and disposition of
Exchange Notes by corporate and individual investors that acquire Exchange Notes
at original issuance in exchange of Old Notes. This discussion does not address
the tax consequences to subsequent purchasers of Exchange Notes and is limited
to investors who hold Exchange Notes as capital assets. Furthermore, this
discussion does not address all aspects of U.S. federal income taxation that may
be applicable to investors in light of their particular circumstances or to
investors subject to special treatment under U.S. federal income tax law
(including, without limitation, certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities, persons that acquire
Exchange Notes as part of a straddle, hedge, conversion transaction or other
integrated investment or persons whose functional currency is not the U.S.
dollar), nor does it address the U.S. federal income tax consequences to any
investors that are trusts, estates or partnerships (or other pass through
entities) or any beneficiaries, partners or members thereof. This discussion is
based on provisions of the Code, United States Treasury Department ("Treasury")
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect. This discussion does
not describe any tax consequences arising under U.S. federal gift and estate
taxes (except to the limited extent set forth below under "U.S. Taxation of
Non-U.S. Holders") or under the tax laws of any state, local or foreign
jurisdiction.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS, ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the exchange offer
will not be considered a taxable exchange for U.S. federal income tax purposes
because the Exchange Notes will not differ materially in kind or extent from the
Old Notes and because the exchange will occur by operation of the terms of the
Notes. Accordingly, such exchange will have no U.S. federal income tax
consequences to Holders of Old Notes. A Holder's adjusted tax basis and holding
period in an Exchange Note will be the same as such Holder's adjusted tax basis
and holding period, respectively, in the Old Note exchanged therefor. All
references to Notes under the heading "Certain U.S. Federal Income Tax
Considerations" in this Prospectus apply equally to Exchange Notes as to Old
Notes.
Holders considering the exchange of Old Notes for Exchange Notes should
consult their own tax advisors concerning the U.S. federal income tax
consequences in light of their particular situations, as well as any
consequences arising under state, local or foreign income tax or other tax law.
U.S. TAXATION OF U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of a Note that is, for
United States federal income tax purposes, (i) a citizen or resident (as defined
in Section 7701 (b) (1) of the Code) of the United States, or (ii) a corporation
created or organized in or under the laws of the United States or of any
political subdivision thereof, and the term "Non-U.S. Holder" means a corporate
or individual holder of a Note that is not a U.S. Holder.
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PAYMENTS OF INTEREST
Stated interest payable on the Exchange Notes generally will be included in
the gross income of a U.S. Holder as ordinary interest income at the time
accrued or received, in accordance with such U.S. Holder's method of accounting
for U.S. federal income tax purposes.
DISPOSITION OF THE EXCHANGE NOTES
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of an Exchange Note (any of the foregoing being a "Disposition"), a
U.S. Holder generally will recognize capital gain or loss equal to the
difference between the amount realized by such U.S. Holder (except to the extent
such amount is attributable to accrued interest, which will be treated as
ordinary interest income) and such U.S. Holder's adjusted tax basis in such
Note. Such capital gain or loss generally will be long- term capital gain or
loss if the holding period for such Note exceeds one year at the time of the
Disposition. Individual taxpayers may be taxed at reduced rates of federal
income tax in respect of long-term capital gains realized on a Disposition of
Exchange Notes (E.G., generally, long-term capital gain recognized by an
individual U.S. Holder would be subject to a maximum tax rate of 20.0%).
Prospective investors should consult their own tax advisors regarding the tax
consequences of realizing long-term capital gains.
The exchange of various forms of certificated and global notes permitted
under the Indenture, the exchange of an Old Note for an Exchange Note in the
exchange offer, and the exchange of an Exchange Note for the unredeemed portion
of an Exchange Note partially redeemed with the proceeds of one or more Public
Equity Offerings pursuant to the terms of the Indenture, will not constitute a
"significant modification" of the Note for U.S. federal income tax purposes and,
accordingly, such Notes received (as the case may be) would be treated as a
continuation of the original Note in the hands of such U.S. Holder. As a result,
there would be no material U.S. federal income tax consequences to a U.S. Holder
who makes such exchanges.
U.S. TAXATION OF NON-U.S. HOLDERS
PAYMENTS OF INTEREST
In general, payments of interest received by a Non-U.S. Holder will not be
subject to U.S. federal income tax (including the withholding tax imposed on
certain foreign investors, the "U.S. Withholding Tax"), provided that (i) the
Non-U.S. Holder (a) does not actually or constructively own 10.0% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership and (c) provides, under
penalties of perjury (either directly or through a financial institution that
holds the Note on behalf of the Non-U.S. Holder and that holds customers'
securities in the ordinary course of its trade or business), the Company or its
agent with the Non-U.S. Holder's (or, if different, the beneficial owner's) name
and address and certifies, under penalties of perjury, that it is not a United
States person (as defined by Section 7701 (a) (30) of the Code), or (ii) the
Non-U.S. Holder is entitled to the benefits of an income tax treaty under which
the interest is exempt from such tax and the Non-U.S. Holder complies with
certain certification and reporting requirements. In addition, payments of
interest received by a Non-U.S. Holder will not be subject to U.S. Withholding
Tax if the interest received on the Exchange Note is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business within the United
States and the Non-U.S. Holder complies with certain certification and reporting
requirements. Payments of interest received by a Non-U.S. Holder that are not
exempt from U.S. Withholding Tax as described above will be subject to such
withholding tax at the rate of 30.0% of the gross amount of such payment
(subject to reduction under an applicable income tax treaty if applicable
certification and reporting requirements are met).
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In October 1997, the Treasury issued final regulations (the "New
Regulations") that provide alternative methods of satisfying the beneficial
ownership certification requirements described above. The New Regulations are
effective January 1, 2000, although valid withholding certificates held on
December 31, 1999 will remain valid until the earlier of December 31, 2000 or
the expiration date of the certificate under the current rules. Non-U.S. Holders
should consult their own tax advisors concerning the application of the New
Regulations to an investment in the Exchange Notes.
DISPOSITION OF THE EXCHANGE NOTES
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
(and generally no tax will be withheld) with respect to gain realized on the
Disposition of an Exchange Note, unless (i) the gain is effectively connected
with a U.S. trade or business conducted by the Non-U.S. Holder or (ii) the Non-
U.S. Holder is an individual who is present in the United States for 183 or more
days during the taxable year of the Disposition and certain other requirements
are satisfied. In addition, an exchange of a certificated note for an interest
in a global note, an exchange of an Old Note for an Exchange Note in the
Exchange Offer, or an exchange of the unredeemed portion of an Exchange Note as
part of a partial redemption of Exchange Notes with the proceeds of one or more
Public Equity Offerings will not constitute a taxable exchange of such Notes for
Non-U.S. Holders. See "U.S. Taxation of U.S. Holders--Disposition of the
Exchange Notes."
EFFECTIVELY CONNECTED INCOME
If interest and other payments received by a Non-U.S. Holder with respect to
the Exchange Notes (including proceeds from the Disposition of the Exchange
Notes) are effectively connected with the conduct by the Non- U.S. Holder of a
trade or business within the United States (or the Non-U.S. Holder is otherwise
subject to U.S. federal income taxation on a net basis with respect to such
Holder's ownership of the Exchange Notes), such Non-U.S. Holder will generally
be subject to the rules described above under "U.S. Taxation of U.S. Holders"
(subject to possible modification provided under an applicable income tax
treaty). Such Non-U.S. Holder also may be subject to the U.S. "branch profits
tax" if such Holder is a corporation.
U.S. FEDERAL ESTATE TAXES
An Exchange Note beneficially owned by an individual who is a Non-U.S.
Holder at the time of his or her death generally will not be subject to U.S.
federal estate tax as a result of such death if (i) the Non-U.S. Holder does not
actually or constructively own 10.0% or more of the total combined voting power
of all classes of stock of the Company entitled to vote and (ii) interest
payments with respect to such Note would not have been, if received at the time
of such individual's death, effectively connected with the conduct of a U.S.
trade or business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain individual U.S. Holders may be subject to backup withholding at a
rate of 31.0% on payments of principal, premium and interest on, and the
proceeds of the Disposition of, the Exchange Notes. In general, backup
withholding only will be imposed on an individual U.S. Holder if he or she (i)
fails to furnish a taxpayer identification number ("TIN"), which would be his or
her Social Security number, (ii) furnishes an incorrect TIN, (iii) is notified
by the IRS that he or she has failed to report payments of interest or dividends
or (iv) under certain circumstances, fails to certify, under penalty of perjury,
that he or she (a) has furnished a correct TIN and (b) has not been notified by
the IRS that he or she is subject to backup withholding tax for failure to
report interest or dividend payments. In addition, such payments of principal
and interest to U.S. Holders will generally be subject to information reporting.
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Backup withholding generally will not apply to payments made to a Non-U.S.
Holder of an Exchange Note who provides the certification described under "U.S.
Taxation of Non-U.S. Holders-- Payments of Interest" or otherwise establishes an
exemption from backup withholding. Payments by a U.S. office of a broker or the
proceeds of a Disposition of the Exchange Notes generally will be subject to
backup withholding at a rate of 31.0% unless the Non-U.S. Holder certifies that
it is a Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.
The amount of any backup withholding imposed on a payment to a Holder will
be allowed as a credit against such Holder's U.S. federal income tax liability
and may entitle such Holder to a refund, provided the required information is
furnished to the IRS. The New Regulations change certain of the rules relating
to backup withholding and information reporting. Holders should consult their
own tax advisors regarding the application to them of backup withholding and
information reporting.
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EXCHANGE OFFER
EXCHANGE OFFER REGISTRATION STATEMENT
The Company, the Guarantors and First Union Capital Markets, as the initial
purchaser of the Old Notes, previously entered into a Registration Rights
Agreement pursuant to which the Company and the Guarantors agreed to:
- file within 45 days from the Issue Date a registration statement (the
"Exchange Offer Registration Statement") with the Commission with
respect to a registered offer to exchange the Old Notes for the
Exchange Notes to be issued under the Indenture in the same principal
amount and with terms substantially identical to those of the Old
Notes;
- use their best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 130
days from the Issue Date; and
- use their best efforts to consummate the exchange offer within 30
business days from the date the Exchange Offer Registration Statement
becomes effective.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal ("Letter of Transmittal"), the
Company will accept any and all Old Notes validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the expiration date. The Company will
issue $1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of outstanding Old Notes accepted in the exchange offer.
Holders may tender some or all of their Old Notes pursuant to the exchange
offer. However, tenders of Old Notes must be in a minimum principal amount of
$1,000 or an integral multiple of $1,000 in excess thereof.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that:
- the Exchange Notes will bear a different CUSIP number from the Old
Notes;
- the issuance of the Exchange Notes will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof; and
- the holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement, including the
provisions thereof which provide for liquidated damages payable to the
holders of the Old Notes in certain circumstances relating to the
timing of the exchange offer, which rights will terminate when the
exchange offer is consummated.
The Exchange Notes will evidence the same debt as the Old Notes (which they
replace) and will be issued under and be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
As of the date of this prospectus, $105,000,000 aggregate principal amount
of Old Notes were outstanding. This prospectus and the Letter of Transmittal are
being mailed to persons who were holders of Old Notes on the close of business
on the date of this prospectus. Holders of Old Notes do not have any appraisal
or dissenters' rights under the Delaware General Corporation Law or the
indenture in connection with the exchange offer. The Company intends to conduct
the exchange offer in accordance with the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given written notice thereof to Chase Manhattan
Trust Company, National Association, as exchange agent (the "Exchange Agent").
The Exchange Agent will act as agent for the tendering Holders for the purpose
of receiving the Exchange Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such
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unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the expiration date.
Holders who tender Old Notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes for
Exchange Notes pursuant to the exchange offer. The Company will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the exchange offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless the Company in its sole discretion, extends the
exchange offer, in which case the term "expiration date" means the latest date
and time to which the exchange offer is extended.
In order to extend the exchange offer, the Company will notify the Exchange
Agent thereof by written notice and will make a public announcement of such
extension, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion:
- to delay accepting any Old Notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "--Conditions" shall not have been satisfied, by giving written
notice of such delay, extension or termination to the Exchange Agent;
or
- to amend the terms of the exchange offer in any manner, whether before
or after any tender of the Old Notes.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
INTEREST ON EXCHANGE NOTES
Interest on each Exchange Note will accrue from the original Issue Date of
the old note which it replaces, i.e., February 2, 1999, and be payable
semiannually in arrears on February 1 and August 1 of each year, commencing
August 1, 1999, at the rate of 10 3/8% per annum. Holders whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Old Notes.
PROCEDURES FOR TENDERING OLD NOTES
Only a holder of Old Notes may tender such Old Notes in the exchange offer.
Each such holder wishing to accept the exchange offer must complete, sign and
date the accompanying Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, have the
signatures thereon guaranteed if required by the Letter of Transmittal or
transmit an agent's message in connection with a book-entry transfer, and mail
or otherwise deliver such Letter of Transmittal or such facsimile or agent's
message, together with the Old Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the expiration date.
To be tendered effectively, the Old Notes, the Letter of Transmittal or agent's
message and all other required documents must be properly completed and received
by the Exchange Agent at the address set forth below under "Exchange Agent"
prior to 5:00 p.m., New York City time, on the expiration date. Delivery of the
Old Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
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book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and (iii)
that the Company may enforce such agreement against such participant.
The tender by a Holder and the acceptance thereof by the Company will
constitute an agreement between such Holder and the Company that such holder
will participate in the exchange offer in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal.
The method of delivery of the Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and sole
risk of the Holder. As an alternative to delivery by mail, Holders may wish to
consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the Exchange Agent before the expiration
date. Holders may request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect the above transactions for such Holders.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a savings institution, commercial bank or trust company having an office
or correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act, and
which is, in each case, a member of a recognized signature guarantee program
(i.e., Securities Transfer Agents Medallion Program, Stock Exchange Medallion
Program or New York Stock Exchange Medallion Signature Program) (an "Eligible
Institution"), unless the Old Notes tendered pursuant thereto are tendered (i)
by a registered Holder who has not completed the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this prospectus to establish an account through the facilities
of The Depository Trust Company ("DTC") for receipt of the tender of Old Notes
through book-entry delivery thereof. For the purpose of facilitating the
exchange offer, any financial institution that is a DTC participant may
participate in the exchange offer through book-entry delivery of Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account for the
Old Notes. Although delivery of the Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, unless an agent's message is
received by the Exchange Agent in compliance with ATOP, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address and in the manner
set forth below under "--Exchange Agent" on or prior to the expiration date, or,
if the guaranteed delivery procedures described below are complied with, within
the
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time period provided under such procedures. Delivery of documents to DTC does
not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the exchange offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as promptly as practicable following the
expiration date.
No Letter of Transmittal, Old Notes, notice of guaranteed delivery or other
documents should be sent to the Company or DTC. Delivery thereof to the Company
or DTC will not constitute valid delivery.
GUARANTEED DELIVERY PROCEDURES
Holders of Old Notes who wish to tender their Old Notes but who cannot,
prior to 5:00 p.m., New York City time, on the expiration date (i) deliver their
Old Notes, the Letter of Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent or (ii) deliver a confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
DTC and otherwise complete the procedures for book-entry transfer, may effect a
tender of Old Notes if:
- the tender is made through an Eligible Institution;
- prior to 5:00 p.m., New York City time, on the expiration date, the
Exchange Agent receives from such Eligible Institution a properly
completed and duly executed notice of guaranteed delivery (a form of
which accompanies this prospectus) (by facsimile transmission,
registered or certified mail or hand delivery) setting forth the name
and address of the Holder, the certificate number(s) of such Old Notes
and the principal amount of Old Notes tendered, stating that the tender
is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the expiration date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC), and any other
documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
- such properly completed and duly executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account
at DTC), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the expiration date.
Upon request to the Exchange Agent, additional copies of the notice of
guaranteed delivery will be sent to holders.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
the Company will accept, promptly after the expiration date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Old Notes. For a description of certain conditions to the exchange offer,
see "--Conditions" below. For purposes of the exchange offer, the Company will
be deemed to have accepted properly tendered Old Notes for exchange when, as and
if the Company has given written notice thereof to the Exchange Agent. For each
Old Note accepted for exchange, the Holder of such Old Note will receive an
Exchange Note having a principal amount equal to that of the surrendered Old
Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes (or a timely
confirmation that such Old Notes have been transferred into the Exchange Agent's
account at DTC), a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted for
any reason set forth in the terms and conditions of the exchange offer or if Old
Notes are submitted for a greater principal amount than the Holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering Holder thereof as promptly as practicable after the
expiration or termination of the exchange offer.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date.
To withdraw a tender of Old Notes in the exchange offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the expiration date. Any such notice of withdrawal must:
- specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor");
- identify the Old Notes to be withdrawn (including the certificate
number(s) and principal amount of such Old Notes, or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the applicable book-entry procedures, the
name and number of the account at DTC to be credited);
- be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee register the
transfer of such Old Notes into the name of the person withdrawing the
tender; and
- specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned, without
expense, to the Holder thereof as promptly as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering Old Notes" at any time prior to the expiration date.
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CONDITIONS
Notwithstanding any other term of the exchange offer, the Company shall not
be required to accept for exchange, or issue Exchange Notes for, any Old Notes,
and may terminate or amend the exchange offer as provided herein before the
acceptance of such Old Notes, if:
- any action or proceeding is instituted or threatened in any court or by
any governmental or quasi-governmental agency which might materially
impair the ability of the Company to proceed with the exchange offer or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company;
- the exchange offer violates applicable law or any applicable SEC
interpretation; or
- any governmental or quasi-governmental approval has not been obtained,
which approval the Company shall deem necessary for the consummation of
the exchange offer as contemplated hereby.
If the Company determines in its sole discretion that any of the foregoing
conditions are not satisfied, the Company may:
- refuse to accept any Old Notes and return all tendered Old Notes to the
tendering holders;
- extend the exchange offer and retain all Old Notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights
of Holders to withdraw such Old Notes (see "--Withdrawal of Tenders");
or
- waive such unsatisfied conditions and accept all properly tendered Old
Notes which have not been withdrawn.
In addition, the Company has reserved the right, notwithstanding the
satisfaction or failure of any or all of the foregoing conditions, to terminate
or amend the exchange offer in any manner it shall determine in its sole
discretion, which determination shall be binding.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange.
EXCHANGE AGENT
Chase Manhattan Trust Company, National Association, which also acts as
trustee under the Indenture, has been appointed as Exchange Agent for the
exchange offer. Each Holder wishing to accept the exchange offer must deliver
(i) a Letter of Transmittal, such Holder's tendered Old Notes and all other
required documents or (ii) a notice of guaranteed delivery and all other
documents described under "--Guaranteed Delivery Procedures," to the Exchange
Agent as follows:
By Mail or Hand Delivery; Chase Manhattan Trust Company, National
Association
Attn: Joseph Progar
1650 Market Street
One Liberty Place, Suite 5210
Philadelphia, PA 19103
Facsimile Transmission; (215) 972-8372
Confirm by Telephone; (215) 988-1317
Delivery to an address other than as set forth above will not constitute
valid delivery.
Questions and requests for assistance, and requests for additional copies of
this prospectus, the Letter of Transmittal or the notice of guaranteed delivery,
should be directed to the Exchange Agent at the address and telephone number set
forth in the Letter of Transmittal.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers,
employees or agents of the Company and its affiliates. The Company has not
retained any dealer-manager in connection with the exchange offer and will not
make any payments to brokers, dealers or others to solicit acceptances of the
exchange offer. The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection with the exchange offer. All other expenses
to be incurred in connection with the exchange offer will be paid by the
Company. Such expenses include fees and expenses of the Trustee, accounting and
legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company in connection with the exchange offer. The expenses
of the exchange offer will be amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such Old Notes
may not be reoffered, resold, pledged or otherwise transferred except in
accordance with applicable state securities laws and:
- to a person whom the transferor reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;
- in an offshore transaction meeting the requirements of Rule 903 or Rule
904 of Regulation S;
- to an institution that is an "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act in a transaction exempt from the registration requirements of the
Securities Act (if available);
- pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available); or
- pursuant to an effective registration statement under the Securities
Act.
Following consummation of the exchange offer, holders of the Old Notes who
were eligible to participate in the exchange offer but who did not tender their
Old Notes will generally not have any further registration rights under the
registration rights agreement, and such Old Notes will continue to be subject to
restrictions on transfer. Accordingly, the liquidity of the market for such Old
Notes could be adversely affected. See "Risk Factors."
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PLAN OF DISTRIBUTION
Except as provided herein, this prospectus may not be used for an offer to
resell, a resale or other transfer of Exchange Notes. Based on existing
interpretations of the Securities Act by the SEC set forth in several no-action
letters to third parties and unrelated to the Company and the exchange offer,
the Company believes that the Exchange Notes issued pursuant to the exchange
offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by the holders thereof (other than any such holder which is an
"affiliate" of the company within the meaning of Rule 405 under the Securities
Act) without further compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of such Exchange Notes.
Any holder who is an affiliate of the Company or who intends to participate
in the exchange offer for the purpose of distributing the Exchange Notes:
- will not be able to rely on the SEC interpretations set forth in the
above-mentioned no-action letters;
- will not be able to tender its Old Notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.
A broker-dealer holding Old Notes may participate in the exchange offer
provided that it acquired the Old Notes for its own account as a result of
market-making or other trading activities. In connection with any resales of
Exchange Notes, any participating broker-dealer who receives Exchange Notes for
Old Notes pursuant to the exchange offer may be an "underwriter" (within the
meaning of the Securities Act) and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the Exchange
Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
expiration date and ending on the close of business one year after the
expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1999, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes.
Exchange Notes received by broker-dealers for their own account pursuant to the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Act and any profit from any such resale
of Exchange Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Act. Each
participating broker-dealer wishing to accept the exchange offer must represent
to the
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Company that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Exchange Notes. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
For a period of one year after the expiration date, the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the Old Notes) other than dealers' and brokers' discounts,
commissions and other counsel fees, and will indemnify the holders of the Old
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Act.
LEGAL MATTERS
Certain legal matters in connection with this offering and the sale of the
Notes will be passed upon for the Company by Bresler Goodman & Unterman, LLP,
New York, New York.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1998 and the consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1998,
included in this registration statement, have been included herein in reliance
upon the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has agreed that, notwithstanding that it may not be required to
do so by the rules and regulations of the SEC, for so long as any Exchange Notes
or Old Notes remain outstanding, it will furnish to the holders of such Notes
and the Trustee and file with the SEC all such information, documents and
reports specified in Section 13 or 15(d) of the Exchange Act. In addition, the
Company will make available, upon request, to any Holder and any prospective
purchaser of such Notes the information required pursuant to Rule 144A(d)(4)
under the Securities Act during any period in which the Company is not subject
to Section 13 or 15(d) of the Exchange Act. Any such request should be directed
to the Chief Financial Officer of the Company.
75
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity................................................. F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Phoenix Color Corp.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Phoenix Color Corp. and its subsidiaries as of December 31, 1997 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 12, 1999
F-2
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 1,044,966 $ 14,834,035
Accounts receivable, net of allowance for doubtful accounts and rebates of
$674,463 in 1997 and $1,113,784 in 1998....................................... 19,695,780 14,760,695
Inventory....................................................................... 4,388,276 3,875,398
Income tax receivable........................................................... 1,376,977 1,233,554
Prepaid expenses and other current assets....................................... 95,607 2,222,196
Deferred income taxes........................................................... 423,606 337,571
------------- --------------
Total current assets.......................................................... 27,025,212 37,263,449
Property, plant and equipment, net................................................ 36,472,549 70,288,665
Goodwill, net..................................................................... 13,696,393 11,475,368
Deferred financing costs, net..................................................... 210,000 1,892,726
Other assets...................................................................... 7,921,463 11,754,763
------------- --------------
Total assets.................................................................. $ 85,325,617 $ 132,674,971
------------- --------------
------------- --------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit........................................................ $ 14,325,745 $ --
Notes payable................................................................... 7,250,834 --
Obligations under capital leases................................................ 3,770,178 --
Accounts payable................................................................ 16,844,510 13,619,972
Accrued expenses................................................................ 4,026,006 3,483,445
------------- --------------
Total current liabilities..................................................... 46,217,273 17,103,417
Revolving line of credit.......................................................... -- 11,325,225
Notes payable..................................................................... 15,498,930 78,150,335
Obligations under capital leases.................................................. 5,880,781 5,971,609
Deferred income taxes............................................................. 1,242,047 2,606,257
------------- --------------
Total liabilities............................................................. 68,839,031 115,156,843
------------- --------------
Commitments and contingencies
Stockholders' equity:
Common Stock, Class A, voting, par value $0.01 per share, authorized 20,000
shares, 14,560 issued shares, 11,100 outstanding shares....................... 146 146
Common Stock, Class B, non-voting, par value $0.01 per share, authorized 200,000
shares, 9,794 issued shares and 7,794 outstanding shares...................... 98 98
Additional paid in capital...................................................... 2,126,804 2,126,804
Retained earnings............................................................... 16,399,312 17,330,102
Stock subscriptions receivable.................................................. (270,544) (169,792)
Treasury stock, at cost: Class A, 3,460 shares and Class B, 2,000 shares........ (1,769,230) (1,769,230)
------------- --------------
Total stockholders' equity.................................................... 16,486,586 17,518,128
------------- --------------
Total liabilities & stockholders' equity...................................... $ 85,325,617 $ 132,674,971
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- -------------- --------------
Net sales........................................................ $ 95,262,245 $ 104,793,705 $ 107,491,045
Cost of sales.................................................... 71,115,953 73,721,630 80,627,039
------------- -------------- --------------
Gross profit............................................... 24,146,292 31,072,075 26,864,006
------------- -------------- --------------
Operating expenses:
Selling and marketing expenses................................. 6,088,693 5,880,844 6,278,379
General and administrative expenses............................ 9,009,800 12,362,938 13,030,970
Impairment loss................................................ 1,268,271 -- --
------------- -------------- --------------
Total operating expenses................................... 16,366,764 18,243,782 19,309,349
------------- -------------- --------------
Income from operations........................................... 7,779,528 12,828,293 7,554,657
Other expenses:
Interest expense............................................... 4,937,315 4,483,820 5,076,057
Other (income) expense......................................... -- -- (327,095)
Loss (gain) on disposal of assets.............................. (1,093,370) 62,436 (132,862)
------------- -------------- --------------
Income before income taxes....................................... 3,935,583 8,282,037 2,938,557
Income tax provision............................................. 2,139,286 3,897,989 2,007,767
------------- -------------- --------------
Net income....................................................... $ 1,796,297 $ 4,384,048 $ 930,790
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
CLASS A CLASS B ADDITIONAL
---------------------- ------------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995.................... 14,560 $ 146 9,794 $ 98 $ 2,126,804 $ 10,218,967
Payment of stock subscription................... -- -- -- -- -- --
Net income...................................... -- -- -- -- -- 1,796,297
--------- ----- ----- --- ------------ -------------
Balance at December 31, 1996.................... 14,560 146 9,794 98 2,126,804 12,015,264
Payment of stock subscription................... -- -- -- -- -- --
Net income...................................... -- -- -- -- -- 4,384,048
--------- ----- ----- --- ------------ -------------
Balance as of December 31, 1997................. 14,560 146 9,794 98 2,126,804 16,399,312
Payment of stock subscription................... -- -- -- -- -- --
Net income...................................... -- -- -- -- -- 930,790
--------- ----- ----- --- ------------ -------------
Balance at December 31, 1998.................... 14,560 $ 146 9,794 $ 98 $ 2,126,804 $ 17,330,102
--------- ----- ----- --- ------------ -------------
--------- ----- ----- --- ------------ -------------
<CAPTION>
STOCK TREASURY STOCK TOTAL
SUBSCRIPTIONS ------------------------ STOCKHOLDERS'
RECEIVABLE SHARES AMOUNT EQUITY
------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.................... $ (422,344) 5,460 $ (1,769,230) $ 10,154,441
Payment of stock subscription................... 90,100 -- -- 90,100
Net income...................................... -- -- -- 1,796,297
------------ --------- ------------- -------------
Balance at December 31, 1996.................... (332,244) 5,460 (1,769,230) 12,040,838
Payment of stock subscription................... 61,700 -- -- 61,700
Net income...................................... -- -- -- 4,384,048
------------ --------- ------------- -------------
Balance as of December 31, 1997................. (270,544) 5,460 (1,769,230) 16,486,586
Payment of stock subscription................... 100,752 -- -- 100,752
Net income...................................... -- -- -- 930,790
------------ --------- ------------- -------------
Balance at December 31, 1998.................... $ (169,792) 5,460 $ (1,769,230) $ 17,518,128
------------ --------- ------------- -------------
------------ --------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
-------------- ------------- --------------
<S> <C> <C> <C>
Operating activities:
Net income...................................................... $ 1,796,297 $ 4,384,048 $ 930,790
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property, plant and
equipment................................................... 6,628,111 7,017,749 8,710,352
Amortization of goodwill...................................... 1,850,864 2,221,040 2,221,025
Amortization of deferred financing costs...................... 150,000 180,000 210,000
Provision for uncollectible accounts.......................... -- -- 150,000
Deferred income taxes......................................... 374,538 328,105 1,450,245
Write-down of real estate..................................... 1,268,271 -- --
Loss (gain) on disposal of assets............................. (1,093,370) 62,436 (132,862)
Increase (decrease) in cash resulting from changes in assets and
liabilities:
Accounts receivable........................................... 4,014,558 (2,504,779) 4,785,085
Inventory..................................................... 98,584 340,921 512,878
Prepaid expenses and other assets............................. 425,110 878,408 (1,061,399)
Accounts payable.............................................. 534,820 4,988,585 (3,224,538)
Accrued expenses.............................................. (2,193,241) 2,246,669 (542,561)
Income tax refund receivable.................................. 61,332 (1,075,455) 143,423
-------------- ------------- --------------
Net cash provided by operating activities..................... 13,915,874 19,067,727 14,152,438
-------------- ------------- --------------
Investing activities:
Proceeds from sale of equipment................................. 411,300 101,875 876,247
Capital expenditures............................................ (1,735,063) (3,294,066) (9,415,529)
Increase in equipment deposits.................................. -- (6,056,372) (5,262,490)
Purchase of NEBC, net of cash acquired.......................... (21,307,354) -- --
-------------- ------------- --------------
Net cash used in investing activities....................... (22,631,117) (9,248,563) (13,801,772)
-------------- ------------- --------------
Financing activities:
Net borrowings from revolving line of credit.................... 2,534,913 2,764,393 (3,000,520)
Proceeds from long term borrowings.............................. 22,000,000 473,760 40,000,000
Principal payments on long term borrowings...................... (11,065,841) (8,472,215) (18,089,753)
Principal payments on capital lease obligations................. (4,516,156) (3,760,090) (3,679,350)
Debt financing costs............................................ (540,000) -- (1,892,726)
Payment of stock subscription................................... 90,100 61,700 100,752
-------------- ------------- --------------
Net cash provided by (used in) financing activities......... 8,503,016 (8,932,452) 13,438,403
-------------- ------------- --------------
Net increase (decrease) in cash............................. (212,227) 886,712 13,789,069
Cash and cash equivalents at beginning of year.................... 370,481 158,254 1,044,966
-------------- ------------- --------------
Cash and cash equivalents at end of year.......................... $ 158,254 $ 1,044,966 $ 14,834,035
-------------- ------------- --------------
-------------- ------------- --------------
Supplemental cash flow disclosures:
Cash paid for interest.......................................... $ 4,476,115 $ 4,104,020 $ 4,722,336
Cash paid for income taxes, net of refunds received............. $ 1,764,524 $ 4,645,339 $ 414,099
Non-cash investing and financing activities:
Equipment acquired under capital leases......................... $ 5,278,959 -- $ 555,476
Equipment acquired under notes payable.......................... $ 4,037,634 $ 5,781,290 $ 32,934,848
Equipment sold on account....................................... $ 916,089 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Phoenix Color Corp. (the "Company") manufactures book components, which
include book jackets, paperback covers, pre-printed case covers, inserts and
endpapers at its headquarters in Hagerstown, MD and other locations in Long
Island City, NY, Taunton, MA and Rockaway, NJ. Customers consist of major
publishing companies as well as smaller publishing companies throughout the
United States. The Company operates and is managed under one business segment.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiaries. All intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less at date of acquisition to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost or market value as determined by
the first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are stated at cost. Depreciation for all fixed assets
is provided on the straight-line method over the assets' estimated useful lives.
Depreciable lives range from 3-40 years: 5-40 years for buildings and
improvements, 3-10 years for machinery and equipment, and 3-5 years for
transportation equipment. Equipment under capital leases is depreciable over the
term of the lease or the estimated useful life of the assets, whichever is
shorter.
Expenditures for maintenance and repairs are charged to operations when
incurred. Expenditures determined to represent additions and betterments are
capitalized. Gains and losses from disposals, if any, are included in earnings.
The Company has purchased additional equipment which is either on order or
in various stages of installation. Depreciation begins at the time installation
is completed.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amount of certain of its financial
instruments, which include cash equivalents, accounts receivable, accounts
payable, accrued expenses, and obligations under capital leases approximate fair
value, due to the relatively short maturity of these instruments.
CONCENTRATION OF RISK
Financial instruments that subject the Company to significant concentration
of credit risk consist primarily of accounts receivable and cash equivalents.
The Company sells products to customers located throughout the United States
without requiring collateral. However, the Company assesses the financial
strength of its customers and provides allowances for anticipated losses when
necessary. The Company has
F-7
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
invested its excess cash in a money market fund with a commercial bank. The
Company has not experienced any losses on its investments.
At December 31, 1998, the Company had approximately $125,359 and $657,373 in
two banks, which exceed FDIC insured limits by $25,359 and $557,373,
respectively. For cash balances held greater than the FDIC insured amount, the
Company assumes a certain degree of associated risk. The Company has not
experienced any losses on its cash equivalents.
Customers that accounted for more than 10% of net sales or accounts
receivable are as follows:
<TABLE>
<CAPTION>
CUSTOMERS
-------------------------------
<S> <C> <C> <C>
A B C
-- -- --
Net sales
1998............................................................. 15% 15% --
1997............................................................. 17% 14% --
1996............................................................. 17% 18% --
Accounts receivable
1998............................................................. 11% 7% 14%
1997............................................................. -- 23% --
</TABLE>
The Company currently purchases its paper and printing supplies from a
limited number of suppliers. There are a number of other suppliers of these
materials throughout the U.S. and management believes that these other suppliers
could provide similar printing supplies and paper on comparable terms. A change
in suppliers, however, could cause a delay in manufacturing, and a possible loss
of sales, which could adversely affect operating results.
Because the Company derives all of its revenues from customers in the book
publishing and book printing industries, the Company's business, financial
condition and results of operations could be adversely affected by changes which
have a negative impact on these industries.
INTANGIBLE ASSETS
Goodwill represents the excess of cost of NEBC (see Note 7) over the fair
value of identifiable net tangible assets acquired and is being amortized using
the straight line method over an eight year life.
Deferred financing costs incurred in connection with the Company's bank
credit agreements with its financial institutions in 1996 (see Note 5) were
written off to interest expense in 1998 upon consummation of the financing
agreements discussed in Note 5. Costs incurred in connection with the 1998
financing discussed in Note 5 have been deferred and are being amortized using
the straight-line method, which approximates the interest method, over the life
of the related loan. These costs will be written off in their entirety in 1999
as a result of the issuance of 10 3/8% Senior Subordinated Notes in February
1999 (see Note 5).
LONG-LIVED ASSETS
The Company annually evaluates the recoverability of the carrying value of
property and equipment and intangible assets. The Company considers historical
performance and anticipated future results in its evaluation of any potential
impairment. Accordingly, when the indicators of impairment are present, the
F-8
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company evaluates the carrying value of these assets in relation to the
operating performance of the business and future and undiscounted cash flows
expected to result from the use of these assets. Impairment losses are
recognized when the sum of the expected future cash flows is less than the
assets' carrying value.
In 1998, the Company sold certain of its real estate holdings in Connecticut
for approximately $87,000. In 1996, the Company had classified these assets as
assets held for sale at their estimated net realizable value of $364,000 based
on the recent sale of a portion of the real estate holdings, which amount had
been included in other non-current assets on the balance sheet, and recognized
an impairment loss of $1,268,271 in the statement of operations for the year
ended December 31, 1996. In 1998, the Company recognized an additional loss on
the disposal of equipment of approximately $277,000. In addition, in 1996, the
Company sold certain operating machinery and equipment, obtained in the
acquisition of New England Book Holding Corporation (see Note 7), to the
manufacturer for cash and realized a gain of approximately $1.1 million.
REVENUE RECOGNITION
The Company recognizes revenue on product sales upon shipment on behalf of
or to the customer.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in the future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at year end, based on enacted tax laws and statutory
tax rates applicable to the periods in which the differences are expected to
affect taxable income. Income tax expense is the tax payable for the period and
the change during the period in deferred tax assets and liabilities. Valuation
allowances are provided when necessary to reduce deferred tax assets to the
amount expected to be realized.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
period. Actual results could differ from these estimates.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards for derivative instruments and
hedging activities. This statement is effective for fiscal years beginning after
June 15, 1999. The Company does not believe this new standard will have any
impact on the Company upon adoption.
In addition, in 1996, the Company sold certain operating machinery and
equipment, obtained in the acquisition of New England Book Holding Corporation
(See Note 7), to the manufacturer for cash and realized a gain of approximately
1.1 million.
F-9
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORY
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1998
------------ ------------
Raw materials......................................................................... $ 3,591,421 $ 3,031,744
Work in process....................................................................... 796,855 843,654
------------ ------------
$ 4,388,276 $ 3,875,398
------------ ------------
------------ ------------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
<S> <C> <C>
1997 1998
------------- --------------
Land.............................................................................. $ 803,416 $ 2,842,205
Buildings and improvements........................................................ 11,851,659 18,254,125
Machinery and equipment........................................................... 52,280,002 80,348,167
Transportation equipment.......................................................... 2,651,691 4,348,608
------------- --------------
67,586,768 105,793,105
Less: Accumulated depreciation and amortization................................... 31,114,219 35,504,440
------------- --------------
$ 36,472,549 $ 70,288,665
------------- --------------
------------- --------------
</TABLE>
Included in other long-term assets are equipment deposits (see Note 8) in
the amount of $7,310,199 and $9,786,394 as of December 31, 1997 and 1998,
respectively.
The Company leases certain printing presses under capital lease
arrangements. Included in machinery and equipment on the balance sheet are the
following amounts under capital lease arrangements:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1998
------------- -------------
Machinery and equipment............................................................ $ 17,741,894 $ 13,158,305
Less: Accumulated depreciation and amortization.................................... 7,092,705 5,988,916
------------- -------------
$ 10,649,189 $ 7,169,389
------------- -------------
------------- -------------
</TABLE>
5. NOTES PAYABLE
SENIOR SUBORDINATED NOTES
On February 2, 1999, the Company issued $105.0 million of 10 3/8% Senior
Subordinated Notes due 2009 ("Senior Notes") in a private offering. The Senior
Notes were issued under an indenture and are uncollateralized senior
subordinated obligations of the Company with interest payable semiannually on
February 1 and August 1 of each year, beginning on August 1, 1999. Net proceeds
of approximately $101.0 million from the Senior Notes were used to repay
substantially all short and long term debt facilities (discussed below) and
capital leases existing at December 31, 1998 and to fund the acquisition of
F-10
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
TechniGraphix (see Note 7) and working capital requirements. Although not due
until 2009, the Senior Notes are redeemable, at the option of the Company, on or
after February 1, 2004, at declining premiums through January 2007 and at their
principal amount thereafter. Until February 1, 2002, the Company may also redeem
up to 25% of the Senior Notes at a price of 110.375% of their face amount with
the net cash proceeds from one or more public equity offerings. If a third party
acquires control of the Company, the Senior Note holders have the right to
require the Company to repurchase the Senior Notes at a price equal to 101% of
the principal amount of the notes plus accrued and unpaid interest to the date
of purchase. All of the current and future "restricted subsidiaries," as defined
in the Senior Notes indenture, are guarantors of the Senior Notes on an
uncollateralized senior subordinated basis (see Note 12). The Company intends to
file a registration statement to register similar senior subordinated Notes with
the Securities and Exchange Commission by March 19, 1999 or it will be required
to pay liquidated damages on these Senior Notes. The registered notes will be
offered for exchange with the holders of the Senior Notes.
The Senior Notes contain limitations on the payment of dividends, the
distribution or redemption of stock, sales of assets and subsidiary stock, as
well as limitations on additional Company and subsidiary debt and require the
Company to maintain certain financial and non-financial covenants, the most
restrictive of which requires the Company to maintain certain defined coverage
ratios.
At December 31, 1997 and 1998, notes payable, which were substantially
repaid by the Senior Notes, consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C> <C>
MATURITY
NOTES DATE 1997 1998
- ---------------------------------------------------------------------- ----------- ------------- -------------
Bridge Notes.......................................................... 2008 $ -- $ 40,000,000
Equipment Notes....................................................... 1999-2004 8,473,999 37,503,130
Term Loan A........................................................... 2000 8,505,000 --
Term Loan B........................................................... 2001 4,850,000 --
Former shareholder notes (see Note 9)................................. 2000 468,000 252,000
Shareholder notes (see Note 9)........................................ Demand 452,765 395,205
------------- -------------
Total............................................................... 22,749,764 78,150,335
Less current portion................................................ 7,250,834 --
------------- -------------
Long-term portion................................................... $ 15,498,930 $ 78,150,335
------------- -------------
------------- -------------
</TABLE>
All December 31, 1998 amounts attributable to notes payable, revolving line
of credit, term loans, equipment notes and obligations under capital leases have
been classified as noncurrent liabilities on the December 31, 1998 balance sheet
as a result of the repayment of these facilities by the net proceeds of the
Senior Notes.
REVOLVING LINE OF CREDIT AND TERM LOANS
In February 1996, the Company entered into a joint $40.0 million Loan and
Security Agreement (the "1996 Loan Agreement") with two commercial banks. The
1996 Loan Agreement consisted of an $18.0 million revolving line of credit
("1996 Revolver"), a four-year term loan ("A") for $16.0 million, and a
five-year term loan ("B") for $6.0 million. In September 1998, the Company
entered into an Amended and Restated Loan Agreement ("1998 Loan Agreement") with
a commercial bank for a three year $20,000,000
F-11
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
revolving credit facility ("1998 Revolver"), the proceeds of which were used to
repay the balance of the 1996 Revolver.
Borrowings under the term loans bore interest at a base rate, as defined in
the 1996 Loan Agreement, or the LIBOR rate plus a margin based upon the
Company's achievement of certain financial ratios. The interest rate was 9.8% on
the term loans as of December 31, 1998. The 1998 Revolver bore interest, at the
Company's option, either (i) LIBOR or (ii) the greater of First Union National
Bank's prime rate at the overnight federal funds rate plus 0.5%, plus a margin,
payable quarterly in arrears (8.1% weighted average rate at December 31, 1998).
BRIDGE NOTES
In September 1998, the Company also issued $40,000,000 in senior
collateralized increasing rate notes (the "Bridge Notes") to a commercial bank
under which the Company drew $20,000,000 on each of September 15, 1998 and
November 30, 1998. The proceeds of the Bridge Notes were used to repay the
outstanding balance of term loans A and B, fund the acquisition of Mid-City (see
Note 7) and for working capital. The Bridge Notes would have matured in 2008 and
bore interest at LIBOR plus 400 basis points, plus an additional 50 basis points
for each three month anniversary from the initial issue date (9.75% at December
31, 1998). Total interest was subject to a cap of 18% per annum, of which 14%
was payable in cash and 4% would be accrued as additional Bridge Notes. Interest
was payable quarterly in arrears.
EQUIPMENT NOTES
The Company also had borrowings with various financial institutions that
financed the purchase of certain equipment which were substantially repaid by
the Senior Notes. These borrowings bore interest at rates ranging from 7.38% to
11.63%.
NONCOMPLIANCE WITH PRIOR DEBT COVENANTS
Prior to the issuance of the Senior Notes, the Company's borrowing
agreements required the Company to maintain certain financial and non financial
covenants, the most restrictive of which requires the Company to maintain
certain defined levels of tangible net worth and certain financial ratios
defined in the 1996 and 1998 Loan Agreements. Such financial covenants were
amended from time to time by agreement among the Company and the lending banks,
and any event of non-compliance by the Company was waived by such banks. The
Company was not in compliance with these covenants for any of its compliance
periods during 1997. The Company has obtained waivers for all events of
noncompliance with respect to these covenants.
F-12
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
Provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------ ------------ ------------
Current:
Federal............................................................... $ 1,445,825 $ 2,924,739 $ 592,145
State................................................................. 318,923 645,145 130,103
State refunds resulting from changes in estimates on prior year
returns............................................................. -- -- (164,726)
------------ ------------ ------------
1,764,748 3,569,884 557,522
------------ ------------ ------------
Deferred:
Federal............................................................... 306,044 268,103 1,190,866
State................................................................. 68,494 60,002 259,379
------------ ------------ ------------
374,538 328,105 1,450,245
------------ ------------ ------------
$ 2,139,286 $ 3,897,989 $ 2,007,767
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The source and tax effects of the temporary differences giving rise to the
Company's net deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1998
----------- -------------
Deferred income tax assets:
Covenant not to compete............................................................ $ 40,134 $ 42,792
Allowance for doubtful accounts.................................................... 54,837 112,827
Accrued liabilities................................................................ 469,495 306,002
----------- -------------
Total deferred income tax assets................................................. 564,466 461,621
----------- -------------
Deferred income tax liabilities:
Property and equipment............................................................. (1,282,181) (2,649,049)
Inventory.......................................................................... (100,726) (81,258)
----------- -------------
Total deferred income tax liabilities............................................ (1,382,907) (2,730,307)
----------- -------------
Net deferred tax liability....................................................... $ (818,441) $ (2,268,686)
----------- -------------
----------- -------------
</TABLE>
F-13
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The provision for income taxes differed from the amount of income tax
determined by applying the applicable U.S. statutory rate to income before taxes
as a result of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Statutory U.S. tax rate..................................................................... 34.0% 34.0% 34.0%
State taxes net of Federal benefit.......................................................... 6.6 5.9 5.2
Goodwill amortization....................................................................... 16.0 9.1 25.7
Other permanent differences................................................................. (2.2) (1.9) 3.4
--- --- ---
Effective tax rate.......................................................................... 54.4% 47.1% 68.3%
--- --- ---
--- --- ---
</TABLE>
7. ACQUISITIONS
On February 1, 1996, the Company acquired all of the outstanding stock of
New England Book Holding Corporation ("NEBC") for $21.5 million, including
acquisition costs, in a transaction accounted for as a purchase. NEBC was
immediately merged into the Company on the date of acquisition. NEBC was a
competitor of the Company and was principally engaged in the manufacturing of
book components for the publishing industry. The purchase price was allocated to
the assets and liabilities of NEBC based upon their respective fair values.
Resulting goodwill totaled $17.8 million.
On January 4, 1999, the Company acquired the outstanding capital stock of
Mid-City Lithographers, Inc. ("Mid-City") and certain assets of Viking Leasing
Partnership, a related party of Mid-City, for $10.8 million in cash and the
assumption of $1.7 million of indebtedness. Mid City, located in Lake Forest,
Illinois, supplies book components primarily to the elementary and high school
textbook segment of the book publishing market. Mid-City was merged into the
Company and does not exist as a subsidiary. On February 12, 1999, the Company
acquired the outstanding capital stock of TechniGraphix, Inc. ("TechniGraphix")
for a purchase price of $7.3 million. TechniGraphix is a producer of
print-on-demand books located in Dulles, Virginia. These transactions will be
accounted for as purchase business combinations.
The following unaudited pro forma information sets forth the consolidated
results of operations of the Company had the acquisitions of Mid-City and
TechniGraphix occurred on January 1, 1998. This unaudited pro forma information
does not purport to be indicative of the actual results that would have occurred
if the combination had been in effect on January 1, 1998. In addition, this
information does not purport to be indicative of future results of operations of
the consolidated entities.
<TABLE>
<S> <C>
Net sales..................................................... $127,924,000
Net loss...................................................... $ (509,000)
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain office and manufacturing facilities under
operating leases. Lease terms generally range from 1 to 10 years with options to
renew at varying terms. The leases generally provide for the lessee to pay
taxes, maintenance, insurance and other operating costs of the leased property.
Rent
F-14
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
expense under all leases is recognized ratably over the lease terms. Rent
expense under all operating leases was approximately $1,617,445, $1,914,650 and
$2,154,522 for the years ending December 31, 1996, 1997, and 1998, respectively.
Future minimum lease payments, including those of Mid-City and
TechniGraphix, under operating leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
PHOENIX MID-CITY TECHNIGRAPHIX TOTAL
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
1999..................................................... $ 1,821,225 $ -- $ 173,100 $ 1,994,325
2000..................................................... 1,656,618 -- 178,296 1,834,914
2001..................................................... 1,282,598 -- 183,636 1,466,234
2002..................................................... 1,279,870 -- 189,156 1,469,026
2003..................................................... 1,315,150 -- 194,820 1,509,970
Thereafter............................................... 7,145,250 -- 649,394 7,794,644
------------- ----------- ------------- -------------
$ 14,500,711 $ -- $ 1,568,402 $ 16,069,113
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
</TABLE>
In 1997, the Company entered into an agreement to lease a build-to-suit
facility in Taunton, MA. In connection with this agreement, the Company advanced
the developer $175,000 in the form of a note which is included in other
non-current assets on the balance sheet at December 31, 1998. The note bears
interest at 14% and is payable in full on May 13, 2007. The Company will receive
monthly installments of interest at 10%, while the remaining 4% will be accrued
and payable upon repayment of the debt.
CAPITAL LEASES
Capital leases were repaid in their entirety by the proceeds of the Senior
Notes, as described in Note 5.
LEGAL CONTINGENCIES
The Company has filed a complaint against Krause Biagosch GmbH and Krause
America ("Krause"), which is pending in the United States District Court for the
District of Maryland, based on breach of contract and statutory warranties on
certain prepress equipment which the Company had agreed to purchase from Krause.
The Company attempted to operate the equipment and contends that the equipment
has failed to perform as warranted. During 1998, the Company removed, the
portion of the equipment actually received, and is seeking recovery of the sum
of $1.6 million paid to date on this equipment, which includes an amount for
deposits on the balance of the equipment not yet received. As of December 31,
1998, the Company has included in other non-current assets a receivable from
Krause of approximately $1.6 million. Krause has recently counterclaimed for
$1.5 million for the balance of the purchase price for all the equipment
(whether or not delivered), plus incidental charges. The Company intends to
vigorously prosecute its claims against Krause and contest Krause's
counterclaims. If Krause were nevertheless to prevail, the Company may be
required to pay Krause's actual lost profit on the equipment. While the
potential amount of such lost profits is not presently determinable, the amount
the Company might be required to pay if Krause prevailed would in no event
exceed the unpaid balance of the purchase price, claimed by Krause to be $1.5
million and by the Company to be $1.2 million. Also, in that event, if the
Company were to attempt to resell the equipment in its possession, assuming a
market existed,
F-15
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
and the price received from such resale were less than the price it had paid
Krause, the Company would incur a loss.
The Company is also party to claims and lawsuits arising in the normal
course of the Company's business. The Company does not believe that such claims
and lawsuits, individually or in the aggregate, will have a material adverse
effect on the Company's business, financial condition, results of operations or
cash flows.
PURCHASE COMMITMENTS
The Company has commitments under contracts, which require deposits, for the
purchase of equipment and for the construction of a building. Portions of such
contracts not completed at year-end are not reflected in the consolidated
financial statements. These unrecorded commitments were approximately $18.2
million as of December 31, 1998.
9. RELATED PARTY TRANSACTIONS
In February 1995 the Company redeemed 2,000 shares from two former
stockholders in accordance with a stockholders' agreement which has been
subsequently terminated effective January 1, 1998. The total purchase price of
$1,098,000 is being paid in monthly installments of $18,000 plus interest at
1.0% below the prime rate, but not less than 7.0% (7.8% and 8.0% at December 31,
1998 and 1997, respectively). The balance due to these stockholders was $252,000
and $468,000 as of December 31, 1998 and 1997, respectively, and is included in
notes payable on the balance sheet.
The Company utilizes the services of a law firm in which a former director
of the Company is also a partner. The Company paid the law firm approximately
$514,000, $127,000 and $250,000 for the years ended December 31, 1998, 1997 and
1996, respectively. As of December 31, 1998 and 1997, included in accrued
expenses is a payable to the law firm of $51,948 and $12,561, respectively.
The Company utilizes the services of a management consulting firm in which a
director of the Company is also a principal. The Company paid the consulting
firm approximately $38,000, $180,000 and $-0- for the years ended December 31,
1998, 1997 and 1996, respectively. As of December 31, 1998 and 1997, included in
accrued expenses is a payable to the consulting firm of $1,800 and $860,
respectively.
The Company purchases raw materials from a supplier in which a former
director of the Company is President and CEO. The Company purchased
approximately $9,215,000, $9,492,000 and $5,840,000 for the years ended December
31, 1998, 1997 and 1996, respectively. As of December 31, 1998 and 1997,
included in accrued expenses is a payable to the supplier of $1,637,897 and
$2,435,167, respectively.
The Company has outstanding $392,765 of demand notes payable to five
stockholders of the Company, which are included in current liabilities in the
Consolidated Balance Sheets. These notes bear interest at the rate of 12%.
Interest expense paid to these stockholders totalled $35,348, $47,131 and
$51,601 for the years ended December 31, 1998, 1997 and 1996, respectively. The
stockholders have agreed to subordinate their claims under these notes to all
other obligations of the Company. The Company has classified all the notes
payable to the aforementioned stockholders as current liabilities.
F-16
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RETIREMENT PROGRAMS
Phoenix Color Corp.'s Employee Stock Bonus and Ownership Plan (the "Plan")
is the primary retirement program of the Company. Contributions to the Plan are
made at the discretion of management. There was a $750,000 contribution made in
the year ended December 31, 1997; however, no contribution was made in each of
the years ended December 31, 1996 and 1998.
The Company offers a 401(k) Employee Savings and Investment Plan to all
employees of the Company who have completed at least one year of service (1,000
hours) during the plan year. The Company may, at its discretion, make
contributions to the plan. No contributions were made to the plan during the
three year period ended December 31, 1998.
11. UNAUDITED QUARTERLY FINANCIAL DATA
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1998:
Net sales........................... $ 24,620,306 $ 25,167,939 $ 31,443,964 $ 26,258,836 $ 107,491,045
Cost of sales....................... 19,973,761 19,143,343 20,791,748 20,718,187 80,627,039
Income from operations.............. 822,545 1,959,212 5,051,833 (278,933) 7,554,657
Net income.......................... (69,158) 545,416 1,683,057 (1,228,525) 930,790
1997:
Net sales........................... $ 23,714,635 $ 23,746,341 $ 28,649,934 $ 28,682,795 $ 104,793,705
Cost of sales....................... 16,804,341 16,930,950 19,668,733 20,317,606 73,721,630
Income from operations.............. 2,594,292 2,591,225 4,790,769 2,852,007 12,828,293
Net income (loss)................... 734,945 803,426 1,972,193 873,484 4,384,048
</TABLE>
F-17
<PAGE>
PHOENIX COLOR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. GUARANTOR SUBSIDIARIES:
The following summarized consolidating financial information sets forth the
information regarding the Company and its subsidiaries as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998:
<TABLE>
<CAPTION>
PHOENIX PCC
COLOR EXPRESS, PHOENIX (MD.)
CORP. INC. REALTY, LLC ELIMINATIONS TOTAL
------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance sheet information:
December 31, 1998
Current assets...................... $ 38,030,305 $ 14,036 $ -- $ (780,892) $ 37,263,449
Noncurrent assets................... 95,073,614 342,908 2,038,789 (2,043,789) 95,411,522
Current liabilities................. 17,071,415 787,147 -- (755,145) 17,103,417
Noncurrent liabilities.............. 98,053,426 -- -- -- 98,053,426
December 31, 1997
Current assets...................... 27,401,061 26,320 -- (402,169) 27,025,212
Noncurrent assets................... 57,942,092 363,313 -- (5,000) 58,300,405
Current liabilities................. 46,268,032 451,410 -- (402,169) 46,317,273
Noncurrent liabilities.............. 22,510,221 111,537 -- -- 22,621,758
Statement of operations information:
December 31, 1998
Sales............................... 107,491,045 915,020 -- (915,020) 107,491,045
Gross profit........................ 26,596,945 (241,697) -- 508,758 26,864,006
Income from operations.............. 7,554,657 (256,889) -- 256,889 7,554,657
Net income.......................... 930,790 (256,889) -- 256,889 930,790
December 31, 1997
Sales............................... 104,793,705 459,215 -- (459,215) 104,793,705
Gross profit........................ 30,826,302 (169,170) -- 414,943 31,072,075
Income from operations.............. 12,828,893 (178,314) -- 178,314 12,828,893
Net income.......................... 4,384,048 (178,314) -- 178,314 4,384,048
December 31, 1996
Sales............................... 95,262,245 -- -- -- 95,262,245
Gross profit........................ 24,146,292 -- -- -- 24,146,292
Income from operations.............. 7,779,528 -- -- -- 7,779,528
Net income.......................... 1,796,297 -- -- -- 1,796,297
</TABLE>
F-18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Phoenix Color Corp. and one of its subsidiaries, PCC Express, Inc. are
Delaware corporations.
As permitted by Section 102(b) (7) of the Delaware General Corporation Law
(the "DGCL"), Phoenix Color Corp.'s ("Phoenix") and PCC Express, Inc.'s ("PCC")
Certificate of Incorporation and Phoenix's and PCC's By-Laws eliminate in
certain circumstances the liability of directors of Phoenix and PCC for monetary
damages for breach of their fiduciary duty as directors. This provision does not
eliminate the liability of a director: (i) for breach of the director's duty of
loyalty to Phoenix and PCC or its stockholders; (ii) for acts or omissions by
the director not in good faith or which involve intentional misconduct or a
knowing violation of the law; (iii) under Section 174 of the DGCL; or (iv) for
transactions from which the director derived an improper personal benefit. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such a person acted in any of the capacities set forth above, against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the defense
of any action, suit, or proceeding referred to in subsections (s) and (b) or in
the defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145 of
the DGCL shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and empowers the corporation to purchase and
maintain insurance on behalf of any person acting in any of the capacities set
forth in the second preceding paragraph against any liability asserted against
him or incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145 of the DGCL.
II-1
<PAGE>
Phoenix's and PCC's Bylaws require Phoenix and PCC, under certain
circumstances, to indemnify any person who is or was a director or officer
against expense (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of Phoenix and PCC and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Bylaws of Phoenix and PCC also provide that expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by Phoenix and PCC in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitle to be indemnified by Phoenix and PCC as
authorized in the Bylaws.
In addition, Phoenix and PCC will apply for directors' and officers'
liability insurance which, if issued, insures against liabilities that directors
and officers of Phoenix and PCC may incur in such capacities. The risks covered
by such policies do not exclude liabilities under the Securities Act.
TechniGraphix, Inc. is a Maryland Corporation.
Section 2-148 of the Maryland General Corporation Law ("MGCL") provides that
a Maryland corporation may indemnify any director or officer made party to any
proceeding by reason of service in that capacity against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the director or
officer in connection with such proceeding unless it is established that (i) the
director's or officer's act or omission was material to the matter giving rise
to the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) the director or officer actually received an
improper personal benefit in money, property or services, or, (iii) in the case
of a criminal proceeding, the director or officer had reasonable cause to
believe that his act was unlawful. However, if the proceeding was one by or in
the right of the corporation, indemnification may not be made if the director or
officer is adjudged to be liable to the corporation. A director or officer may
not be indemnified in respect of any proceeding charging improper personal
benefit, whether or not involving action in his official capacity, in which the
director or officer was adjudged to be liable on the basis that personal benefit
was improperly received. A director or officer who has been successful, on the
merits or otherwise, must be indemnified against reasonable expenses incurred in
connection with the proceeding.
TechniGraphix, Inc.'s Bylaws requires that each and every person who serves
now or hereafter shall serve as a director or officer of TechniGraphix, Inc.,
and each and every person who at the request of TechniGraphix, Inc. serves now
or hereafter shall serve as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall be indemnified
according to the MGCL. TechniGraphix, Inc.'s Bylaws also provide for expenses
incurred by such a director or officer in defending a civil or criminal action,
suit or proceeding shall be paid by TechniGraphix, Inc. in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by TechniGraphix, Inc. Such
right of indemnification shall not be deemed exclusive of any other rights to
which such person may be entitled.
Maryland (MD.) Realty, LLC is a Maryland limited liability company.
Section 4A-301 of the Maryland Limited Liability Company Act of 1992
provides that no member shall be personally liable for the obligations of the
limited liability company, whether arising in contract, tort or otherwise,
solely by reason of being a member of the limited liability company.
The operating agreement of Maryland (MD.) Realty, LLC ("Maryland Realty")
provides that any person made or threatened to be made a party to an action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator or intestate, then, is, or was a member of Maryland Realty, or
II-2
<PAGE>
then serves or has served on behalf of Maryland Realty in any capacity at the
request of Maryland Realty, shall be indemnified by Maryland Realty against
reasonable expenses, judgements, fines and amounts actually and necessarily
incurred in connection with the defense of such action or proceeding or in
connection with an appeal therein, to the fullest extent permissible by the laws
of the State of Maryland. Such right of indemnification shall not be deemed
exclusive of any other rights to which such person may be entitled.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULE
(a) Exhibits. A list of exhibits included as part of this Registration
Statement is set forth in the Exhibit Index which immediately proceeds such
exhibits and is hereby incorporated by reference.
(b) Financial Statement Schedules. Schedules have been omitted since the
required information is not present, or not present in the amounts
sufficient to require submission of the schedules or because the information
is included in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes:
(1) to file, during any period in which offers or sales are made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrants' annual reports pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, each of the
Registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of such Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person of a Registrant in connection with the
securities being registered, such Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
Each of the undersigned Registrants hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Phoenix Color
Corp. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 8th day of March, 1999.
PHOENIX COLOR CORP.
By: /s/ LOUIS LASORSA
-----------------------------------------
Louis LaSorsa
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /s/ EDWARD LIEBERMAN
-----------------------------------------
Edward Lieberman
PRINCIPAL ACCOUNTING OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints LOUIS LASORSA and EDWARD LIEBERMAN and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agents or any
of them or their or his substitute or substitutes, may unlawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or thereto has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ LOUIS LASORSA Chairman, Chief Executive
- ------------------------------ Officer March 8, 1999
Louis LaSorsa
/s/ EDWARD LIEBERMAN Executive Vice President,
- ------------------------------ Chief Financial Officer, March 8, 1999
Edward Lieberman Secretary and Director
/s/ DION VON DER LIETH Senior Vice President,
- ------------------------------ Sales and Marketing, and March 8, 1999
Dion von der Lieth Director
Vice President,
/s/ JOHN CARBONE Manufacturing, Book
- ------------------------------ Manufacturing, and March 8, 1999
John Carbone Director
/s/ DAVID RUBIN Director
- ------------------------------ March 8, 1999
David Rubin
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, PCC Express,
Inc. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 8th day of March, 1999.
PCC EXPRESS, INC.
By: /s/ LOUIS LASORSA
-----------------------------------------
Louis LaSorsa
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /s/ EDWARD LIEBERMAN
-----------------------------------------
Edward Lieberman
PRINCIPAL ACCOUNTING OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints LOUIS LASORSA and EDWARD LIEBERMAN and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agents or any
of them or their or his substitute or substitutes, may unlawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or thereto has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ LOUIS LASORSA Chairman, Chief Executive
- ------------------------------ Officer March 8, 1999
Louis LaSorsa
/s/ EDWARD LIEBERMAN Executive Vice President,
- ------------------------------ Chief Financial Officer, March 8, 1999
Edward Lieberman Secretary and Director
/s/ DION VON DER LIETH Senior Vice President,
- ------------------------------ Sales and Marketing, and March 8, 1999
Dion von der Lieth Director
Vice President,
/s/ JOHN CARBONE Manufacturing, Book
- ------------------------------ Manufacturing, and March 8, 1999
John Carbone Director
/s/ DAVID RUBIN Director
- ------------------------------ March 8, 1999
David Rubin
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TechniGraphix,
Inc. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 8th day of March, 1999.
TECHNIGRAPHIX, INC.
By: /s/ LOUIS LASORSA
-----------------------------------------
Louis LaSorsa
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /s/ EDWARD LIEBERMAN
-----------------------------------------
Edward Lieberman
PRINCIPAL ACCOUNTING OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints LOUIS LASORSA and EDWARD LIEBERMAN and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agents or any
of them or their or his substitute or substitutes, may unlawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or thereto has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ LOUIS LASORSA Chairman, Chief Executive
- ------------------------------ Officer March 8, 1999
Louis LaSorsa
/s/ EDWARD LIEBERMAN Executive Vice President,
- ------------------------------ Chief Financial Officer, March 8, 1999
Edward Lieberman Secretary and Director
/s/ DION VON DER LIETH Senior Vice President,
- ------------------------------ Sales and Marketing, and March 8, 1999
Dion von der Lieth Director
Vice President,
/s/ JOHN CARBONE Manufacturing, Book
- ------------------------------ Manufacturing, and March 8, 1999
John Carbone Director
/s/ DAVID RUBIN Director
- ------------------------------ March 8, 1999
David Rubin
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Phoenix (MD.)
Realty, LLC has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 8th day of March, 1999.
PHOENIX (MD.) REALTY, LLC
By: /s/ LOUIS LASORSA
-----------------------------------------
Louis LaSorsa
OPERATING MANAGER
By: /s/ EDWARD LIEBERMAN
-----------------------------------------
Edward Lieberman
PRINCIPAL ACCOUNTING OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints LOUIS LASORSA and EDWARD LIEBERMAN and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agents or any
of them or their or his substitute or substitutes, may unlawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or thereto has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman, Chief Executive
/s/ LOUIS LASORSA Officer and Director of
- ------------------------------ Phoenix Color Corp., sole March 8, 1999
Louis LaSorsa member of Phoenix (MD.)
Realty LLC
Executive Vice President,
Chief Financial Officer,
/s/ EDWARD LIEBERMAN Secretary and Director of
- ------------------------------ Phoenix Color Corp., sole March 8, 1999
Edward Lieberman member of Phoenix (MD.)
Realty LLC
Senior Vice President,
/s/ DION VON DER LIETH Sales and Marketing, and
- ------------------------------ Director of Phoenix Color March 8, 1999
Dion von der Lieth Corp., sole member of
Phoenix (MD.) Realty LLC
Vice President,
Manufacturing, Book
/s/ JOHN CARBONE Manufacturing, and
- ------------------------------ Director of Phoenix Color March 8, 1999
John Carbone Corp., sole member of
Phoenix (MD.) Realty LLC
/s/ DAVID RUBIN Director of Phoenix Color
- ------------------------------ Corp., sole member of March 8, 1999
David Rubin Phoenix (MD.) Realty LLC
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Acquisition Agreement dated as of November 30, 1998 among the Company, Carl E. Carlson, Wayne L.
Sorensen, Donald Davis, Margaret Davis and Viking Leasing Partnership (schedules and exhibits omitted)
2.2 Acquisition Agreement dated as of February 3, 1999 among the Company, TechniGraphix, Inc., Debra A.
Barry and Jack L. Tiner (schedules and exhibits omitted)
2.3 Stock Purchase Agreement dated as of December 27, 1995 among the Company and various stockholders of New
England Book Holding Corporation*
2.4 Plan and Agreement of Merger of Phoenix Color Corp. (New York) into Phoenix Merger Corp. (Delaware)*
3.1 Certificate of Incorporation of the Company*
3.2 By-Laws of the Company*
4.1 Note Purchase Agreement dated January 28, 1999 among the Company, the Guarantors and the Initial
Purchasers
4.2 Indenture dated as of February 2, 1999 among the Company, the Guarantors and Chase Manhattan Trust
Company, National Association, Trustee
4.3 Registration Rights Agreement dated as of February 2, 1999 among the Company, the Guarantors and the
Initial Purchasers
4.4 Form of Initial Global Note (included as Exhibit A to Exhibit 4.2)
4.5 Form of Initial Certificated Note (included as Exhibit B to Exhibit 4.2)
4.6 Form of Exchange Global Note (included as Exhibit C to Exhibit 4.2)
4.7 Form of Exchange Certificated Note (included as Exhibit D to Exhibit 4.2)
5.1 Opinion letter of Bresler Goodman & Unterman, LLP**
10.1 Employment Agreement dated as of February 12, 1999 between the Company and Jack L. Tiner
10.2 Employment Agreement dated as of January 4, 1999 between the Company and Carl E. Carlson
10.3 Non-Competition Agreement dated as of January 4, 1999 between the Company and Wayne L. Sorensen
10.4 Credit Agreement dated as of September 15, 1998 among the Company, the Guarantors and First Union
National Bank as Agent, as Issuer and as Lender (schedules omitted)
10.5 Revolving Credit Note dated as of September 15, 1998 executed by the Company and the Guarantors
10.6 Master Security Agreement dated as of September 15, 1998 among the Company, the Guarantors and First
Union National Bank as Collateral Agent (schedules omitted)**
10.7 Master Pledge Agreement dated as of September 15, 1998 executed by the stockholders of the Company
(schedules omitted)
10.8 Subsidiary Pledge Agreement dated as of September 15, 1998 executed by the Company (schedules omitted)
10.9 Loan and Security Agreement dated as of February 1, 1996 among the Company, CoreStates Bank, N.A. as
Issuer and Lender and Fleet Bank as Co-Agent and Lender*
10.10 Form of Stock Pledge Agreement dated as of February 1, 1996 among the Company, CoreStates Bank, N.A. as
Issuer and Lender and Fleet Bank as Co-Agent and Lender*
10.11 Form of Surety Agreement dated as of February 1, 1996 among the Company, CoreStates Bank, N.A. as Issuer
and Lender and Fleet Bank as Co-Agent and Lender*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.12 Lease Agreement dated as of January 4, 1999 between the Company and Laurel Limited Partnership for the
facility located at 13825 West Laurel Drive, Lake Forest, IL 60301
10.13 Lease Agreement dated as of between the Company and for the facility located at 40 Green
Pond Road, Rockaway, NJ 07866**
10.14 Lease Agreement dated as of between the Company and for the facility located at 555
Constitution Drive, Taunton, MA 02780**
10.15 Lease Agreement dated as of between the Company and for the facility located at 47-07
30th Place, Long Island City, NY 11101**
10.16 Escrow Agreement dated as of February 1, 1996 among the Company and various stockholders of New England
Book Holding Corporation*
12.1 Statement concerning Ratios of Earnings to Fixed Charges***
21.1 Subsidiaries of the Company
23.1 Consent of Bresler Goodman & Unterman, LLP (included in Exhibit 5.1)**
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Powers of attorney (included on signature pages)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Chase Manhattan Trust
Company, National Association
99.1 Form of Letter of Transmittal**
99.2 Form of Notice of Guaranteed Delivery**
99.3 Form of Instructions to Registered Holder from Beneficial Holder**
</TABLE>
- ------------
* previously filed.
** to be filed by amendment.
*** Included in Note 5 to Summary Historical and Unaudited Pro Forma
Consolidated Financial Data
<PAGE>
EXHIBIT 2.1
ACQUISITION AGREEMENT
dated as of November 30, 1998 among
Phoenix Color Corp.,
Carl E. Carlson, Wayne L. Sorensen, Donald Davis, Margaret Davis
and Viking Leasing Partnership
<PAGE>
Table of Contents
R E C I T A L S .............................................................1
I. DEFINITIONS............................................................2
1.1 Terms Defined....................................................2
II. PURCHASE AND SALE OF SHARES AND
PARTNERSHIP EQUIPMENT..................................................6
2.1 Sale of the Shares...............................................6
2.2 Sale of Partnership Equipment....................................7
2.3 Purchase Price; Allocation; Escrow Funds.........................7
2.4 Funded Debt of Company and Partnership...........................8
2.5 Credit for Funded Debt; Net Cash Payment.........................9
2.6 Closing Balance Sheet and Adjustments............................9
2.7 Disbursement of Net Cash Payment................................10
2.8 Closing.........................................................11
III. EMPLOYMENT AND OTHER ARRANGEMENTS....................................12
3.1 Employment and Non-Competition Agreements.......................12
3.2 Production Facility; Lease......................................13
IV. REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS..................................................13
4.1 Organization and Standing; By-Laws and Minutes..................13
4.2 Capitalization..................................................14
4.3 Ownership and Transfer of Shares; Validity of Agreement.........14
4.4 Financial Statements............................................15
4.5 No Undisclosed Liabilities......................................16
4.6 Books and Records...............................................16
4.7 Accounts Receivable.............................................16
4.8 Inventories.....................................................17
4.9 Backlog.........................................................17
4.10 Real Property Leases............................................17
4.11 Company Equipment...............................................18
4.12 Title to Assets Generally.......................................19
4.13 Contracts Listed; No Default....................................19
4.14 Related Party Transactions......................................20
4.15 Customers and Customer Deposits.................................21
4.16 Employee Benefit Plans..........................................21
4.17 Authorization and Non-Contravention; Consents...................26
4.18 Labor Relations.................................................27
4.19 Insurance.......................................................27
4.20 Intellectual Property...........................................28
<PAGE>
4.21 Compliance with Applicable Law..................................29
4.22 Environmental Laws..............................................29
4.23 Litigation......................................................30
4.24 Unlawful Payments...............................................31
4.25 Permits.........................................................31
4.26 Restrictive Covenants...........................................32
4.27 Tax Matters.....................................................32
4.28 Bank Accounts and Powers of Attorney............................35
4.29 Corporate and Fictitious Names..................................36
4.30 Absence of Certain Recent Changes...............................36
4.31 OSHA............................................................39
4.32 Immigration Matters.............................................39
4.33 Brokers.........................................................39
4.34 Year 2000 Issue.................................................40
4.35 Funded Debt; No Default.........................................40
4.36 Subordinated Debentures; No Default.............................40
4.37 Accuracy of Information Furnished...............................40
V. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP.....................41
5.1 Partnership Existence and Authority.............................41
5.2 Capacity of the Partners........................................42
5.3 No Broker.......................................................42
5.4 Title to Partnership Equipment..................................42
5.5 Non-Contravention; Consents.....................................42
5.6 Condition of Partnership Equipment..............................43
5.7 Books and Records...............................................43
5.8 No Undisclosed Liabilities......................................44
5.9 Contracts Listed; No Default....................................44
5.10 Insurance.......................................................45
5.11 Partnership Equipment...........................................46
5.12 Partnership Tax Liabilities.....................................46
5.13 Accuracy of Information Furnished...............................47
VI. REPRESENTATIONS OF PURCHASER..........................................47
6.1 Authorization...................................................47
6.2 Organization....................................................48
6.3 Non-Contravention...............................................48
6.4 No Broker.......................................................49
VII. CONDUCT PENDING CLOSING; COVENANTS....................................49
7.1 Access and Information..........................................49
7.2 Cooperation and Publicity.......................................50
7.3 Other Proposals to Selling Stockholders.........................50
7.4 Notification by Selling Stockholders............................50
7.5 Conduct of Business.............................................51
<PAGE>
7.6 Prohibited Activities...........................................52
7.7 Certain Affirmative Covenants...................................56
7.8 Tax Liabilities and Information.................................56
7.9 Termination of Employee Benefit Plans...........................60
7.10 Updated Financial Statements and Disclosure Schedules...........60
7.11 Books and Records to be Kept Current............................61
7.12 Special Payment of EPA Credits..................................61
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................62
8.1 Authorization of Board..........................................62
8.2 Intentionally Omitted...........................................62
8.3 Facility........................................................62
8.4 Release of Personal Guarantees..................................62
8.5 Termination of Employee Benefit Plans...........................63
8.6 Delivery of Shares..............................................63
8.7 Officers' Certificates..........................................63
8.8 Opinion of Counsel..............................................64
8.9 No Material Adverse Change......................................65
8.10 Compliance with Covenants.......................................65
8.11 Truth of Representations........................................65
8.12 Consents and Waivers............................................65
8.13 Litigation......................................................65
8.14 Employment and Non-Competition Agreements.......................66
8.15 Hart-Scott-Rodino Filing........................................66
8.16 Miscellaneous Documents.........................................66
8.17 Legal Matters...................................................67
8.18 Due Diligence...................................................67
8.19 Escrow Agreement and Disbursing Agent...........................67
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS........................67
9.1 Truth of Representations........................................68
9.2 Compliance by Purchaser.........................................68
9.3 Litigation......................................................68
9.4 Tender of Payment...............................................68
9.5 Employment and other Agreements.................................68
9.6 Release or Termination of Personal Guarantees...................68
9.7 Hart-Scott-Rodino Filing........................................69
X. INDEMNIFICATION AND CLAIMS............................................69
10.1 Indemnification by Sellers and Partnership......................69
10.2 Indemnity Fund; Escrow..........................................70
10.3 Right of Offset.................................................71
10.4 Indemnification Procedures and Notice...........................72
10.5 Distribution and Termination of Escrow Fund.....................73
10.6 Indemnification Successors and Assigns..........................73
<PAGE>
XI. MISCELLANEOUS MATTERS.................................................74
11.1 Parties to Bear Their Own Expenses; Exceptions..................74
11.2 Purchaser May Assign; Possible Merger...........................74
11.3 Messrs. Carlson and Sorensen Cause the Company and
Partnership to Act............................................75
XII. TERMINATION PRIOR TO CLOSING..........................................75
12.1 Mutual Termination..............................................75
12.2 Termination by Purchaser........................................75
12.3 Termination by Sellers..........................................75
12.4 Termination by Purchaser or Sellers.............................76
XIII. GENERAL PROVISIONS....................................................76
13.1 Survival of Representations, Warranties, etc....................76
13.2 Confidentiality.................................................77
13.3 Entire Agreement................................................78
13.4 Waiver..........................................................78
13.5 No Assignment; Exceptions.......................................79
13.6 Benefits of Agreement...........................................79
13.7 Remedies Cumulative.............................................80
13.8 Governing Law...................................................80
13.9 Notices.........................................................80
13.10 Counterparts....................................................81
13.11 Severability....................................................81
13.12 Headings........................................................82
EXHIBITS
a. Exhibit 1 - Bill of Sale
b. Exhibit 2 - Employment Agreement
c. Exhibit 3 - Non-Competition Agreement
d. Exhibit 4 - Lease Termination Agreement
e. Exhibit 5a - Opinion of Counsel - Goedert & Huntington
f. Exhibit 5b - Opinion of Counsel - Jenner & Block
g. Exhibit 5c - Opinion of Counsel - Hodge & Dwyer
h. Exhibit 6 - Escrow Agreement
i. Exhibit 7 - Assignment of Emissions Credit
SCHEDULES
a. Schedule A
b. Schedule 2.2 - Partnership Equipment
c. Schedule 2.4 - Funded Debt of Company
d. Schedule 4.3 - Ownership of Shares
e. Schedule 4.5 - Undisclosed Liabilities
f. Schedule 4.7 - Accounts Receivable
g. Schedule 4.8 - Inventories
<PAGE>
h. Schedule 4.9 - Backlog
i. Schedule 4.10 - Real Property Leases
j. Schedule 4.11 - Company Equipment
k. Schedule 4.12 - Title to Assets
l. Schedule 4.13 - Contracts
m. Schedule 4.14 - Related Party Transactions
n. Schedule 4.15 - Customers and Customer Deposits
o. Schedule 4.16 - Employee Benefit Plans
p. Schedule 4.17 - Authorization and Non-Contravention
q. Schedule 4.18 - Labor Relations
r. Schedule 4.19 - Insurance
s. Schedule 4.20 - Intellectual Property
t. Schedule 4.22 - Environmental Laws
u. Schedule 4.23 - Litigation
v. Schedule 4.25 - Permits
w. Schedule 4.26 - Restrictive Covenants
x. Schedule 4.27 - Tax Matters
y. Schedule 4.28 - Bank Accounts and Powers of Attorney
z. Schedule 4.29 - Corporate and Fictitious Names
aa. Schedule 4.30 - Absence of Certain Recent Changes
bb. Schedule 4.31 - OSHA
cc. Schedule 4.32 - Immigration Matters
dd. Schedule 4.34 - Year 2000 Issue
ee. Schedule 4.35 - Funded Debt; No Default
ff. Schedule 4.36 - Subordinated Debentures; No Default
gg. Schedule 5.4 - Title to Partnership Equipment
hh. Schedule 5.5 - Non-Contravention
ii Schedule 5.7 - Books and Records
jj. Schedule 5.8 - Undisclosed Liabilities
kk. Schedule 5.9 - Contracts
ll. Schedule 5.10 - Insurance
mm. Schedule 5.11 - Partnership Equipment
nn. Schedule 5.12 - Partnership Tax Liabilities
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (the "Agreement"), dated as of November 30, 1998
among Phoenix Color Corp., a Delaware corporation ( the "Purchaser"), Carl E.
Carlson, Wayne L. Sorensen, Donald Davis and Margaret Davis (collectively, the
"Selling Stockholders") and Viking Leasing Partnership, a Illinois general
partnership (the "Partnership," and collectively with the Selling Stockholders,
the "Sellers").
R E C I T A L S
A. The Selling Stockholders beneficially own and hold of record all of the
issued and outstanding shares of capital stock (the "Shares") of Mid-City
Lithographers, Inc. (the "Company"), a Delaware corporation ;
B. Carl E. Carlson and Wayne L. Sorensen (collectively, the "Principal
Stockholders") are active in the management of the Company, which is
engaged in the business of producing and supplying book components;
C. The Principal Stockholders are also the general partners of the
Partnership, which owns certain printing machinery and equipment (the
"Partnership Equipment") described in Sellers Disclosure Schedule 2.2
annexed hereto, which it currently leases to the Company for use in the
Company's printing operations;
D. The Selling Stockholders desire to sell and the Purchaser desires to
buy all of the Shares, subject to the terms and conditions of this
Agreement;
<PAGE>
E. Concurrently with such sale of Shares to the Purchaser, the Purchaser
desires to buy and the Partnership desires to sell the Partnership
Equipment;
F. Certain of the parties have signed a Letter of Intent dated August 19,
1998 (the "Letter of Intent") generally describing such sale and purchase,
which are subject to the specific terms and conditions hereof; and
G. The parties desire to set forth in this Agreement the terms and
conditions of such sale and purchase, and to enter into the other
agreements and arrangements provided for herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises, covenants, representations and warranties made herein, and the sum of
$10.00 and other good and valuable consideration paid and given by each party to
the others, receipt of which is hereby acknowledged, THE PARTIES AGREE AS
FOLLOWS:
I. DEFINITIONS
1.1 Terms Defined. As used in this Agreement, the following terms have the
following respective meanings:
Agreement - As defined in the initial paragraph of this Agreement.
Balance Sheet - As defined in Section 4.4 of this Agreement. Balance
Sheet Date - As defined in Section 4.4 of this Agreement.
Closing - As defined in Section 2.8 of this Agreement.
Closing Balance Sheet - As defined in Section 2.6 of this Agreement.
-2-
<PAGE>
Closing Date - As defined in Section 2.8 of this Agreement.
Code - Internal Revenue Code of 1986, and any regulations
thereunder, all as amended from time to time.
Company - As defined in the Recitals to this Agreement.
Company Funded Debt - As defined in Section 2.4 of this Agreement.
Confidential Information - As defined in Section 13.2 of this
Agreement.
Controlled Group - As defined in Section 4.16(d) of this Agreement.
Delivery Date - As defined in Section 2.6 of this Agreement.
Emission Credits - As defined in Section 7.12 of this Agreement.
Employment Agreement - As defined in Section 3.1 of this Agreement.
Environmental Laws - Any and all Federal, foreign, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
and any and all common law requirements, rules and bases of liability
regulating, relating to or imposing liability or standards of conduct concerning
pollution, protection of the environment, or the impact of pollutants,
contaminants or toxic or hazardous substances on human health or the
environment, as now or may any time hereafter be in effect.
Equipment - As defined in Section 4.11 of this Agreement.
ERISA - Defined as the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated pursuant thereto, as amended from time to time.
Escrow Agent - As defined in Section 10.2 of this Agreement.
Escrow Agreement - As defined in Section 10.2 of this Agreement.
-3-
<PAGE>
Escrow Fund - The fund consisting initially of the sum of $150,000
deducted from the Net Cash Payment; provided, however that such sum shall mean
only $60,000 in the event that Sellers provide reasonable written proof that (i)
the Company irrevocable elected prior to Closing not to carryback the 1995 net
operating loss of the Company to prior years, or (ii) the Selling Stockholders
cause the Company to file, prior to Closing, amended Federal, State and local
income tax returns for the calendar years 1992, 1993 and 1994 eliminating the
effect of any carryback of such net operating loss. If such election or
amendment is filed after Closing, the sum of $90,000 shall be released from the
Escrow Fund and disbursed in accordance with the procedure set forth in Section
2.7 of this Agreement.
Facility - As defined in Section 3.2 of this Agreement.
Financial Statements - As defined in Section 4.4 of this Agreement.
Funded Debt - As defined in Section 2.4 of this Agreement.
GAAP - means generally accepted accounting principles consistently
applied as in effect in the United States from time to time, except as applied
to the amortization of research and development expenses.
Hazardous Material - Any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substances or similar term, under any Environmental Law.
LaSalle Bank Agreement - The Revolving Credit and Term Loan
Agreement and Security Agreement, dated May 1, 1998, as amended, between LaSalle
National Bank and the Company.
Letter of Intent - As defined in the Recitals to this Agreement.
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Indemnified Losses - As defined in Section 10.1 of this Agreement.
Material Adverse Change - A material adverse change with respect to
the Sellers shall mean (a) any material adverse change (both before and after
giving effect to the transactions contemplated by this Agreement) with respect
to the business, assets, properties, financial condition, stockholders' equity,
contingent liabilities, prospects, material agreements or results of operations
of the Partnership or the Company, or (b) any fact or circumstance that, singly
or in the aggregate with any other fact or circumstance, has a reasonable
likelihood of resulting in or leading to (i) a material adverse change described
in clause (a), (ii) the inability of the Sellers to perform in any material
respect their obligations hereunder or the inability of the Purchaser to enforce
in any material respect the rights purported to be granted hereunder or under
any other agreement among the parties, or (iii) a material adverse change on the
ability of the Sellers to effect (including hindering or unduly delaying) the
transactions contemplated by this Agreement on the terms contemplated hereby and
thereby.
Net Cash Payment - As defined in Section 2.5 of this Agreement.
Non-Competition Agreement - As defined in Section 3.1 of this
Agreement.
Non-Secured Indemnified Losses - As defined in Section 10.3 of this
Agreement.
Partners - As defined in Section 5.2 of this Agreement.
Partnership - As defined in the initial paragraph to this Agreement.
Partnership Equipment - As defined in the Recitals to this
Agreement.
Partnership Funded Debt - As defined in Section 2.4 of this
Agreement.
Pension Plan - As defined in Section 4.16(b) of this Agreement.
Personal Guarantee(s) - As defined in Section 2.4 of this Agreement.
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Plan(s) - As defined in Section 4.16(a) of this Agreement.
Post-Closing Returns - As defined in Section 7.8(b) of this
Agreement.
Post-Retirement Benefits - As defined in Section 4.16(g) of this
Agreement.
Purchase Price - As defined in Section 2.3 of this Agreement.
Purchaser - As defined in the initial paragraph to this Agreement.
Purchaser Indemnitee(s) - As defined in Section 10.1 of this
Agreement.
Selling Stockholders - As defined in the initial paragraph to this
Agreement.
Sellers - As defined in the initial paragraph to this Agreement.
Shares - As defined in the Recitals to this Agreement.
Subordinated Debentures - Subordinated Debentures shall mean the
debentures issued by the Company to Bert Sullivan and Lewis Sullivan on or about
December 31, 1986, in the aggregate principal amount of $1,000,000.
Welfare Plan - As defined in Section 4.16(b) of this Agreement.
Year 2000 Problem - As defined in Section 4.34 of this Agreement.
II.PURCHASE AND SALE OF SHARES AND
PARTNERSHIP EQUIPMENT
2.1 Sale of the Shares. Subject to all of the terms and conditions of this
Agreement, the Selling Stockholders agree to sell and Purchaser agrees to buy
the Shares. The number of Shares being sold by and purchased from each of the
Selling Stockholders, and the amount of consideration to be paid to each of the
Selling Stockholders, are as set forth in Schedule A annexed hereto.
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(Schedule A and all Sellers Disclosure Schedules referred to in this Agreement
are attached hereto and made part hereof.)
2.2 Sale of Partnership Equipment. Subject to all of the terms and
conditions of this Agreement, the Partnership agrees to sell and the Purchaser
agrees to buy the Partnership Equipment, which is described and listed in
Sellers Disclosure Schedule 2.2. Such Schedule sets forth, for each item of
Partnership Equipment, a description of the Partnership Equipment, its serial
number and age, and the number of printing impressions made by such item from
the time of its initial installation.
2.3 Purchase Price; Allocation; Escrow Funds.
(a) The total purchase price (the "Purchase Price") for the Shares
and the Partnership Equipment is $12,500,000. The Purchase Price will be paid by
the Purchaser at the Closing in accordance with this Article II and the other
provisions of this Agreement.
(b) The portion of the Purchase Price allocated to the Partnership
Equipment shall be equal to the appraised value of the Partnership Equipment and
shall be paid to the Partnership. Such appraised value shall be determined at
least fifteen (15) days prior to the Closing Date by an independent appraiser
selected by the Purchaser and reasonably acceptable to the Sellers, and shall be
based on information contained in Sellers Disclosure Schedule 2.2 The remainder
of the Purchase Price shall be allocated to the purchase of the Shares and shall
be paid to the Selling Stockholders in the same proportion which their
respective ownership interests in the Shares bears to the total number of
Shares, as set forth in Schedule A.
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(c) Amounts disbursed in payment of the Purchase Price shall be
adjusted to reflect the setting aside and delivery in escrow of a portion of the
Purchase Price as set forth in Section 2.8 and Article X hereof.
2.4 Funded Debt of Company and Partnership. The funded debt of each of the
Company and the Partnership is set forth in Sellers Disclosure Schedule 2.4,
which separately lists, as of October 31, 1998, each item of the entire funded
indebtedness of the Company and the Partnership, the name of each funded
indebtedness creditor, the principal amount owed and any accrued interest which
is in arrears or is non-current, and the extent to which any of the Sellers (who
shall be identified herein) has personally guaranteed such funded debt (such
personal guarantees being referred to as the "Personal Guarantees.") Such funded
debt includes, without limitation:
(a) the outstanding principal amount of the Company's term loan
indebtedness under the LaSalle Bank Agreement;
(b) the outstanding principal balance of the Company's revolving credit
line indebtedness under the LaSalle Bank Agreement, which amount
will be adjusted for seasonal or unusual activity as agreed by the
Purchaser and the Company;
(c) the indebtedness incurred by the Partnership for the acquisition of
the Partnership Equipment and the indebtedness incurred by the
Company for its Equipment, including the balance owed on any capital
leases in each instance;
(d) certain Company indebtedness to the Partnership under the terms of
the Company's lease of Partnership Equipment;
(e) the outstanding principal balance of the Subordinated Debentures;
and
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(f) the outstanding principal balance of other funded debt incurred by
the Company, as agreed between the Selling Stockholders and the
Purchaser.
The funded debt of the Partnership is referred to as the "Partnership Funded
Debt," the funded debt of the Company is referred to as the "Company Funded
Debt," and the total of the Partnership Funded Debt and Company Funded Debt is
referred to as the "Funded Debt."
2.5 Credit for Funded Debt; Net Cash Payment. The amounts of the
Partnership Funded Debt and the Company Funded Debt, and the aggregate amount of
the Funded Debt, shall be calculated and fixed as of the Closing Date, and such
amounts shall be subject to the agreement between the Company and the Purchaser
as set forth in Section 2.6. The agreed amount of the Funded Debt shall be
deducted from the Purchase Price, and the balance thereof shall be paid in cash
(the "Net Cash Payment") at the Closing.
2.6 Closing Balance Sheet and Adjustments. In preparation for the Closing:
(a) On a date (the "Delivery Date") at least two business days prior
to the Closing, the Selling Stockholders shall cause the Company and the
Partners shall cause Partnership each to deliver to the Purchaser a separate
balance sheet showing the respective assets and liabilities of the Company and
the Partnership as of December 31, 1998 (each, a "Closing Balance Sheet,")
except that each such Closing Balance Sheet may reflect accounts receivable and
accounts payable as of a date not earlier than December 23, 1998, which date
shall be noted in such Closing Balance Sheet. Each Closing Balance Sheet shall
(i) itemize the Funded Debt by creditor, (ii) include, as supporting schedules,
the respective accounts payable and accounts receivable for the Company and the
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Partnership, together with appropriate aging schedules and amended Sellers
Disclosure Schedules as of December 31, 1998, (iii) indicate comparative
information as of December 31, 1997 and (iv) be prepared in accordance with
GAAP. In addition, each Closing Balance Sheet shall be accompanied by written
confirmations from Funded Debt creditors showing the respective outstanding
principal balances due from the Company and the Partnership as of December 31,
1998 in each case.
(b) The Closing Balance Sheet for the Company and the Closing
Balance Sheet for the Partnership (and the amount of Funded Debt reflected
therein) shall be subject to the approval of the Purchaser in each case, and the
Sellers shall provide all information and schedules requested by the Purchaser
in support of each Closing Balance Sheet. The Purchaser shall promptly review
each such Closing Balance Sheet and the supporting information, and, after all
required adjustments are made, the Closing shall proceed and each Closing
Balance Sheet, as so adjusted, shall be delivered as a Closing document.
(c) The amounts of Funded Debt reflected in each Closing Balance
Sheet shall be deducted from the Purchase Price as set forth in Section 2.5.
2.7 Disbursement of Net Cash Payment. The Net Cash Payment shall be paid
in immediately available funds by cashier or certified check or by wire transfer
to Goedert & Huntington, as special counsel for the Sellers, who will act as
disbursing agent and who will be authorized by the Sellers to receive and
disburse the Net Cash Payment in the respective amounts to which each of the
Sellers is entitled as set forth in Section 2.3 and Schedule A. The Net Cash
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Payment should be distributed into separate accounts for the Selling
Stockholders and the Partnership in accordance with the allocation formula set
forth in Section 2.3(b).
2.8 Closing. The closing for the sale and purchase of the Company's Shares
(the "Closing") shall take place at the offices of Bresler, Goodman & Unterman,
521 Fifth Avenue, New York, New York 10175 at 10:00 a.m. on January 4, 1999,
with the Closing to be effective as of the opening of business on January 1,
1999 or such other time and date as the parties may agree to in writing (the
"Closing Date"). At the Closing:
(a) the Selling Stockholders will deliver to the Purchaser, free and
clear of all liens, claims, charges and encumbrances, certificates representing,
in the aggregate, all of the Shares, which shall be validly issued, duly
endorsed for transfer to the Purchaser or accompanied by valid stock powers or
other instruments of transfer duly executed, and accompanied by all requisite
stock transfer tax stamps;
(b) the Partnership will deliver to the Purchaser a (i) bill of sale
for the Partnership Equipment in the form set forth as Exhibit 1 annexed to this
Agreement and made part hereof, and (ii) possession of the Partnership
Equipment, free and clear of any liens, claims, charges or encumbrances, except
as set forth in Sellers Disclosure Schedule 5.11;
(c) the Purchaser will deliver confirmation of either (i) payment in
full of the Partnership Funded Debt and the Company Funded Debt in respect of
which the Principal Stockholders have issued Personal Guarantees, or (ii) the
release and termination of any personal liability under such Personal
Guarantees;
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(d) the parties will deliver the executed Employment Agreement,
Non-Competition Agreement and other agreements referred to in Article III below;
(e) the Purchaser will deliver to Goedert & Huntington the Net Cash
Payment;
(f) the Purchaser and the Sellers will execute and deliver to each
other all other agreements, certificates, consents, opinions of counsel,
documents and other items required to be delivered pursuant to Article VIII and
any other applicable provisions of this Agreement;
(g) the parties will deliver all other documents and take all other
actions required to be delivered or taken at the Closing in accordance with this
Agreement.
(h) The Purchaser, the Sellers and the Escrow Agent (as hereinafter
defined) will execute and deliver an Escrow Agreement, and the Purchaser will
arrange to deposit in escrow the Escrow Fund out of the Net Cash Payment in
accordance with the provisions of Article X hereof, provided that such Escrow
Fund amount shall be increased by $250,000 in the event reports of estimated
income tax are not filed by the Company and such tax is not paid prior to
Closing as set forth in Section 7.8(g).
III. EMPLOYMENT AND OTHER ARRANGEMENTS
3.1 Employment and Non-Competition Agreements. At the Closing, the
Purchaser will enter into a one-year employment agreement with Carl E. Carlson
(the "Employment Agreement") and a non-competition agreement with Wayne L.
Sorensen (the "Non-Competition Agreement"), on the terms and conditions and in
the forms set forth as Exhibits 2 and 3 respectively, annexed to this Agreement
and made part hereof, and Messrs. Carlson and Sorensen, by their
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respective signatures to this Agreement, each confirms that he will execute and
deliver the Employment Agreement and Non-Competition Agreement.
3.2 Production Facility; Lease. At the Closing, the existing lease
agreement between the Company and Laurel Limited Partnership ("Laurel"), a
partnership controlled by the Principal Stockholders, for the Company's
production facility located at 13825 W. Laurel Drive, Lake Forest, Illinois (the
"Facility") will be terminated pursuant to the lease termination agreement
annexed as Exhibit 4 to this Agreement. At the Closing, the Purchaser will enter
into a new lease with Laurel for the Facility, which new lease will be on
substantially the same terms and conditions as the existing lease and shall be
subject to the approval of the parties as to form and substance, except that (i)
the term of the new lease shall commence as of the Closing Date and shall expire
on June 30, 1999. The termination of the existing lease at the Closing shall be
subject to Purchaser's obtaining a release or termination of any agreement under
which such lease is pledged as collateral.
IV. REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS
The Selling Stockholders jointly and severally represent and warrant to
the Purchaser, and the Purchaser is relying materially thereon in entering into
this Agreement, as follows:
4.1 Organization and Standing; By-Laws and Minutes. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power to carry
on its business as it is now
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being conducted, and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary under applicable law, except where the failure to qualify would not
result in any Material Adverse Change. The Company has no subsidiaries and its
only place of business is within the State of Illinois. The copies of the
Certificate of Incorporation and the by-laws of the Company, delivered to the
Purchaser, are true and complete copies of these documents as amended and now in
effect. The corporate minutes of the Company as presented for inspection by the
Purchaser are current, accurate and complete in all material respects.
4.2 Capitalization. The authorized capital stock of the Company consists
of 12,000 shares of voting common stock, no par value, of which 11,306 shares
are issued and outstanding, and 4,000 shares of nonvoting common stock, no par
value, of which 205 shares are issued and outstanding, as of the date hereof.
The 11,306 voting common shares and the 205 nonvoting common shares comprise the
Shares. Except as set forth in this Section 4.2, there is no other authorized
class, series or unit of securities of any kind evidencing a proprietary
interest in the Company. None of the shares of the Company has been issued in a
manner giving rise to claims for violation of the securities laws of any
jurisdiction.
4.3 Ownership and Transfer of Shares; Validity of Agreement.
(a) All of the Shares are fully paid, duly and validly issued and of
record and beneficially owned by the persons listed, in the respective amounts
indicated, in Schedule A. Except as set forth in Sellers Disclosure Schedule 4.3
annexed to this Agreement, there is no option, warrant, call,
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convertible security, preemptive right or commitment of any kind relating to
unissued shares of the capital stock of the Company. The Company owns no shares
of capital stock or other interest in any corporation, partnership, association
or other entity.
(b) The Shares to be delivered at the Closing are presently, and will be
at the time of such delivery, free and clear of any liens, charges, encumbrances
or claims. The sale and delivery of the Shares to Purchaser, when consummated
pursuant to this Agreement, will transfer to and vest in Purchaser the ownership
of all, and not less than all, the issued and outstanding shares of the Company.
(c) This Agreement constitutes the valid and binding obligation of the
Sellers enforceable against the Sellers in accordance with its terms, except as
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or by legal or equitable principles relating to or
limiting creditors' rights generally.
4.4 Financial Statements. The Selling Stockholders have provided unaudited
financial statements of the Company for the years ended December 31, 1995, 1996,
and 1997, for the six months ended June 30, 1998 and for the nine months ended
September 30, 1998 (the "Balance Sheet Date") including a balance sheet as of
the Balance Sheet Date (the "Balance Sheet") (such unaudited financial
statements being referred to collectively as the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP applied on a
basis consistent with prior periods, are accurate and complete, and present
fairly the financial condition of the Company as of the respective dates
indicated and the results of its operations and cash flows for the respective
periods indicated.
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4.5 No Undisclosed Liabilities. Sellers Disclosure Schedule 4.5 lists each
and every liability of the Company (whether accrued, absolute, contingent or
otherwise) as of the Balance Sheet Date. Except as set forth in Sellers
Disclosure Schedule 4.5, to the best knowledge of the Selling Stockholders, the
Company is not subject to any material liability (defined, for purposes of this
Section 4.5, as any single item in excess of $5,000), whether absolute,
contingent, accrued or otherwise, other than (i) liabilities of the same nature
as those set forth in Disclosure Schedule 4.5 which were incurred by the Company
in the ordinary course of business after the Balance Sheet Date, (ii)
liabilities arising under existing agreements to which the Company is a party
(excluding liabilities arising on account of breaches by the Company of such
existing agreements which breaches are not disclosed in the Sellers Disclosure
Schedule), and (iii) other liabilities disclosed in the Sellers Disclosure
Schedule. Except as disclosed herein, the Company has no material unrealized or
anticipated losses, in excess of $5,000 for a single item, from unfavorable
commitments.
4.6 Books and Records. The books and records of the Company are true,
accurate and complete in all material respects and have been consistently
maintained from period to period in accordance with GAAP applied on a consistent
basis. With respect to the audit of the December 31, 1997 and June 30, 1998
financial statements conducted by PricewaterhouseCoopers LLP, Sellers
acknowledge that they have provided, or caused to be provided, the information
contained in such financial statements.
4.7 Accounts Receivable. The accounts receivable of the Company (i) are
reflected in the Balance Sheet (except those accounts receivable collected since
the Balance Sheet Date), (ii)
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are listed in Sellers Disclosure Schedule 4.7 (which sets forth the accounts
receivable on the books of the Company, together with an aging schedule as of
the Balance Sheet date), (iii) have been generated in the ordinary course of
business and (iv) reflect bona fide obligations for the payment of goods or
services provided by the Company. The amounts reflected in such accounts
receivable are expected to be fully collected in the ordinary course of
business, on a schedule consistent with the past collection practices of the
Company, except to the extent reserved against explicitly in the Balance Sheet.
4.8 Inventories. The inventories of the Company reflected in the Balance
Sheet and listed in Sellers Disclosure Schedule 4.8 are in good, merchantable
and usable condition, have been reflected in the Balance Sheet at cost, and
include no obsolete or discontinued items, or items which have failed any
quality testing, in each case except as set forth in Sellers Disclosure Schedule
4.8 and except to the extent reserved against in the Balance Sheet. Except as
set forth in Sellers Disclosure Schedule 4.8 , such inventories are located and
maintained at the Facility, and are owned free and clear of any liens,
encumbrances, charges or claims of others.
4.9 Backlog. Sellers Disclosure Schedule 4.9 accurately sets forth as of
the Balance Sheet Date the name, aggregate contract price, revenues received to
date and balance remaining on all projects of the Company then in progress or
under contract to be performed.
4.10 Real Property Leases. The Company is a tenant in the Facility under
the lease agreement listed in Sellers Disclosure Schedule 4.10, and such lease
agreement is in full force and
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effect, and is terminable and will be terminated at the Closing in accordance
with the provisions of Exhibit 4a. The Company is not in default in the
performance of any provision of such lease. Except as set forth in Sellers
Disclosure Schedule 4.10, the Company has not collaterally assigned or
encumbered its interest under such lease and is current in its payment of rent
and other charges due under such lease. The use by the Company of the real
property leased by it has not violated and does not violate any environmental or
local zoning or similar land use laws.
4.11 Company Equipment. Sellers Disclosure Schedule 4.11 lists each item
of the Company's machinery and equipment (the "Equipment") with an original cost
on the books of the Company in excess of $1,000 per item. All of such Equipment
is owned by the Company, free and clear of any liens, charges, encumbrances or
security interests, except as set forth in Sellers Disclosure Schedule 4.11 and
4.12. With respect to any Equipment held by the Company under an equipment lease
with unaffiliated third parties, such equipment lease is in full force and
effect and the Company is not in default thereunder. With respect to Partnership
Equipment held by the Company under lease with the Partnership, such lease is in
full force and effect and the Company has made all payments due thereunder
except as set forth in Sellers Disclosure Schedule 2.4 with respect to certain
lease payment obligations included in Funded Debt. The Company has not
undertaken any action which, with the giving of notice or the passage of time or
both, would result in a default under any lease of Equipment or Partnership
Equipment. The Equipment and the Partnership Equipment are in good operating
condition and repair and are suitable for use in the ordinary course of business
of the Company, and include all machinery and equipment necessary
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to manufacture the products sold by the Company to operate the business of the
Company as currently conducted.
4.12 Title to Assets Generally. Except as stated in Sellers Disclosure
Schedule 4.12, the Company holds good and marketable title to its assets as
reflected on the Balance Sheet and to all assets and properties whose ownership
has been acquired by the Company after the Balance Sheet Date (except assets
sold or consumed in the ordinary course of business subsequent to the Balance
Sheet Date), free and clear of all adverse claims, liens, mortgages, charges,
security interests, encumbrances or restrictions.
4.13 Contracts Listed; No Default. Sellers Disclosure Schedule 4.13
contains a complete and correct list as of the date hereof of all agreements,
contracts and commitments of the following types, written or oral, to which the
Company is a party or by which the Company or any of its properties is bound as
of the date hereof: (i) mortgages, indentures, security agreements, letters of
credit, loan agreements and other agreements, guarantees and instruments
relating to the borrowing of money or extension of credit; (ii) employment,
consulting, severance and agency agreements; (iii) collective bargaining
agreements; (iv) bonus, profit-sharing, compensation, stock option, stock
purchase, pension, severance, retirement, deferred compensation or other plans,
trusts or funds for the benefit of employees, officers, agents or, directors
(whether or not legally binding); (v) sales agency, manufacturer's
representative or distributorship agreements; (vi) agreements, orders or
commitments for the purchase of raw materials, supplies or finished products
exceeding $2,500 in amount; (vii) agreements, orders or commitments, if any, for
the sale of products exceeding
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$2,500 in amount; (viii) licenses of intellectual property, transfer of
technology or know how and other intellectual property rights; (ix)
confidentiality agreements, including agreements binding any of the Company's
employees; (x) agreements or commitments for capital expenditures in excess of
$2,500 for any single project (it being warranted that all undisclosed
agreements or commitments for capital projects do not exceed $10,000 in the
aggregate for all projects); (xi) brokerage or finder's agreements; (xii)
stockholders' agreements and any agreements restricting the transfer of any of
the shares of the Company; (xiii) joint venture and partnership agreements;
(xiv) leases for real and personal property; and (xv) other agreements,
contracts and commitments which in any case involve payments or receipts of more
than $2,500. The Selling Stockholders have made available to the Purchaser
complete and correct copies of all such written agreements, contracts and
commitments, together with all amendments thereto, and provided accurate
descriptions of all oral agreements listed in Sellers Disclosure Schedule 4.13.
All agreements, contracts and commitments referred to in this Section 4.13 are
in full force and effect in accordance with their respective terms and there
does not exist thereunder as of the date hereof any default by the Company, any
other party thereto, or any event or condition which, after notice or lapse of
time or both, would constitute a default thereunder on the part of the Company,
or any other party thereto. Company has not granted any powers of attorney,
except routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction, except as set forth in Section 4.28.
4.14 Related Party Transactions. Except as set forth in Sellers Disclosure
Schedule 4.14, the Company has not made any loans to any officer, director,
shareholder or employee of the
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Company, outstanding on the date of this Agreement, nor entered into any
agreement or arrangement with any such person, or with a parent, child, spouse
or sibling of such person, in which such person or any of such relatives has a
material direct or indirect economic interest in such arrangement or agreement,
other than compensation arrangements in keeping with the usual and customary
practices of the Company.
4.15 Customers and Customer Deposits. Set forth in Sellers Disclosure
Schedule 4.15 is a true and complete list of customers and customer deposits
shown on the Balance Sheet, indicating for each customer the date on which the
deposit was received, the amount of each deposit, the product(s) ordered, the
total purchase price for each such product, the current stage of production and
the estimated delivery date for the product(s) ordered. Except as therein set
forth, each of the customer deposits represents a bona fide customer order for a
product or products that the Company reasonably believe can be delivered in
accordance with the specifications and upon the terms agreed to with the
customer. The Company is not engaged in any material dispute with any customer,
and the entering into and performance of this Agreement is not expected to
result in any Material Adverse Change in the business relationship between the
Company and its customers.
4.16 Employee Benefit Plans. With respect to each employee benefit plan of
the Company:
(a) Sellers Disclosure Schedule 4.16 sets forth all pension,
savings, retirement, health, insurance, severance and other employee benefit or
fringe benefit plans, within the meaning of Section 3(3) of ERISA, maintained
currently with respect to the business of the Company
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(referred to herein as the "Plan" or "Plans"). With respect to each of the
Plans, the Selling Stockholders have delivered to the Purchaser copies of: (i)
Plan documents, and, where applicable, related trust agreements, and any related
agreements which are in writing; (ii) summary Plan descriptions; (iii) the most
recent Internal Revenue Service ("IRS") determination letter relating to each
Plan for which a letter of determination was obtained; (iv) to the extent
required to be filed, the most recent Annual Report (Form 5500 Series and
accompanying schedules of each Plan and applicable financial statements) as
filed with the IRS; (v) audited financial statements, if any.
(b) Except as set forth in Sellers Disclosure Schedule 4.16, (i) in
all material respects, each Plan conforms to, and its administration is in
compliance with, all applicable requirements of law, including, without
limitation ERISA and the Internal Revenue Code of 1986 (the "Code") and all
rules and regulations promulgated pursuant thereto, and (ii) all of the Plans
are in full force and effect as written, and all premiums, contributions and
other payments required to be made by the Company under the terms of any pension
plan as defined in Section 3(2) of ERISA (a "Pension Plan") or welfare plan as
defined in Section 3(1) of ERISA (a "Welfare Plan") have been made. There are no
Plan defects whether by plan, instrument or operation thereof, which would make
any of the Plans eligible for any IRS voluntary compliance programs, including
the IRS Voluntary Compliance Resolution Program (VCR), Standardized VCR Program,
Closing Agreement Program (CAP), and/or Walk-In CAP.
(c) Except as set forth in Sellers Disclosure Schedule 4.16, each
Plan maintained by the Company with respect to its business that is a Pension
Plan is qualified under Section 401(a) of the Code, and a favorable
determination letter has been issued by the IRS with respect to each
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such qualified Pension Plan. No Plan maintained by the Company that is a Welfare
Plan is funded through a voluntary employee beneficiary association as defined
in Section 501(c)(9) of the Code.
(d) Except as set forth in Sellers Disclosure Schedule 4.16, all
required installments as defined in Section 412(m) of the Code required to be
made by the Company or any trade or business (whether or not incorporated) under
common control with the Company within the meaning of Sections 414(b), (c), (m)
or (o) of the Code (the "Controlled Group") before the Closing Date with respect
to each Pension Plan will have been paid prior to the Closing Date. No Pension
Plan maintained by the Company or the Controlled Group has incurred any
"accumulated funding deficiency" (whether or not waived) as that term is defined
in Section 412 of the Code or Section 302 of ERISA.
(e) Except as set forth in Sellers Disclosure Schedule 4.16, there
are no multiemployer plans (as defined in Subsection 3(37) of ERISA) in which
the Company or any other trade or business under common control (within the
meaning of Section 414(b) or (c) of the Code) has ever participated or to which
a contribution or other payment is required.
(f) Except as set forth in Sellers Disclosure Schedule 4.16 or as
required by COBRA, no Pension Plan has been terminated since January 1, 1996 in
a termination which will result in any liability to be incurred by the Company
under Title IV of ERISA. Except as indicated in Sellers Disclosure Schedule
3.16, none of the Pension Plans that are subject to Title IV of ERISA have been
partially terminated or have been the subject of a "reportable event" as defined
in Section 4043 of ERISA. No proceedings by the Pension Benefit Guaranty
Corporation ("PBGC") to terminate any of the Pension Plans pursuant to Subtitle
C of Title IV of ERISA have been instituted or threatened. All required premiums
have been paid to the PBGC with respect to all Pension Plans.
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(g) Except as set forth in Sellers Disclosure Schedule 4.16 or as
required by COBRA, the Company does not maintain any plan providing
post-retirement benefits other than pension benefits provided under a Pension
Plan qualified under Section 401(a) of the Code ("PostRetirement Benefits"). The
Company is not liable for Post-Retirement Benefits under any plan not maintained
by them. The Company has complied in all material respects with the requirements
of Section 4980B of the Code and Sections 601 to 608 of ERISA relating to
continuation coverage for group health plans.
(h) Except as disclosed in Sellers Disclosure Schedule 4.16, with
respect to each Pension Plan that is a "defined benefit plan" within the meaning
of Section 414(j) of the Code, the present value of all accrued benefits under
such Plan does not exceed the present value of the assets of such Plan, with
both such amounts calculated as of the same date based on the actuarial
assumptions established by the Company for funding. The Selling Stockholders
have delivered to the Purchaser a true and complete copy of the most recent
actuarial report for each such Pension Plan.
(i) Except as disclosed in Sellers Disclosure Schedule 4.16, each
Plan has filed all required reports, documents and notices with the IRS, the
United States Department of Labor and the PBGC.
(j) There are no investigations, proceedings, or lawsuits pending
or, to the best knowledge of the Selling Stockholders or, threatened against any
Plan by any administrative agency, whether local, state or federal.
(k) Other than routine employee claims for benefits, there are no
lawsuits or other claims pending or, to the best knowledge of the Selling
Stockholders threatened against any Plan,
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the Company or any fiduciary (within the meaning of Section 3(21)(A) of ERISA)
of a Plan brought on behalf of any participant, beneficiary or any such
fiduciary thereunder, nor is there any reasonable basis for any such claim.
(l) All amendments required to have been made prior to the date
hereof to comply with applicable law (whether required by reason of the
enactment of legislation or otherwise) have been adopted with respect to each
Plan.
(m) With respect to each Plan, (A) no nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA has occurred, and (B) no income has been received that constitutes
"unrelated business taxable income" within the meaning of Section 512 of the
Code or "unrelated debt-financed income" within the meaning of Section 514 of
the Code.
(n) All applicable local, state and federal income tax withholding
obligations have been satisfied with respect to all benefits paid under each
Plan.
(o) Except as set forth in Sellers Disclosure Schedule 4.16:
(i) on or before January 1, 1999, the Company shall cause
the Plans to be terminated, and, as to any Plan which
requires prior notice of such termination to be given,
the Company will issue such termination notice not later
than November 20, 1998;
(ii) prior to the Closing Date, the Company shall make any
and all filings and submissions then required under the
Code or ERISA to the appropriate governmental agencies
necessary in connection with such termination; and
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(iii) prior to the Closing Date, the Company shall direct the
trustees of the Plans to distribute any vested account
balances to each Plan participant, as provided under
each Plan, as soon as administratively practicable.
4.17 Authorization and Non-Contravention; Consents. Each of the Selling
Stockholders has full right, power and authority to enter into and to perform
this Agreement. Except as set forth in Sellers Disclosure Schedule 4.17, each
consent, authorization, order or approval of or filing or registration with, any
governmental authority required in connection with the execution, delivery and
performance of this Agreement by the Selling Stockholders has been or by the
Closing Date will be obtained, and the execution and delivery of this Agreement
and the performance thereof by the Selling Stockholders do not and will not:
(a) violate any provision of the charter or bylaws of the Company or
any law, order, arbitration award, judgment or decree to which either of them is
a party or by which they or any of their properties are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the properties of the Company pursuant to, any provision of any
mortgage, lien, lease, agreement, permit, indenture, license or instrument to
which any of the Selling Stockholders or the Company
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is a party or by which any of them or the Company's properties are bound and
which is material to the business of the Company as now or as proposed to be
conducted; or,
(c) violate or conflict with any other material restriction of any
kind or character to which the Company is subject or by which any of its
properties may be bound.
4.18 Labor Relations. Except as described in Sellers Disclosure Schedule
4.18, there are no agreements with, or pending petitions for recognition of, a
labor union or association as the exclusive bargaining agent for any or all of
the Company's employees; no such petitions have been pending at any time within
five years of the date of this Agreement, and, there has not been any organizing
effort by any union or any other group seeking to represent any employees of the
Company as their exclusive bargaining agent at any time within five years of the
date of this Agreement; and there are no labor strikes, work stoppages or other
labor troubles now pending or, threatened against the Company, nor have there
been any such labor strikes, work stoppages or other labor troubles at any time
within five years of the date of this Agreement.
4.19 Insurance. Set forth in Sellers Disclosure Schedule 4.19 is a true,
correct and complete listing of all insurance policies or binders of insurance
which relate to the Company's business. Except as set forth in Sellers
Disclosure Schedule 4.19:
(a) the coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company;
(b) there are no programs of self-insurance relating to the
Company's business;
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(c) there are no pending or unpaid claims under any such insurance
policy; and
(d) no event has occurred which reasonably might form the basis of
any claim against the Company relating to its business or operations or any of
their assets or properties covered by any of the policies or binders set forth
in such Schedule or which would reasonably be expected to increase materially
the insurance premiums payable under any such policy or binder.
4.20 Intellectual Property. Sellers Disclosure Schedule 4.20 sets forth a
true and complete list, including, where applicable, the date of application,
date of registration, date of issuance, date of termination, serial or
registration number of each patent, trademark or copyright and the book value
thereof, as of the Balance Sheet Date, of all intellectual property which is
related to the business of the Company, and describes the extent of the interest
of the Company and any third party therein. Except as stated in such Schedule,
the right, title or interest of the Company in any intellectual property is free
and clear of adverse claims, liens, mortgages, charges, security interests and
encumbrances or other restrictions or limitations of any kind. The Company owns
or has the legal right to use all intellectual property necessary for the
non-infringing design, manufacture, use or sale, as the case may be, of all of
the products, components of products and services which it, in its business as
currently conducted, manufactures, uses or sells. Except as set forth in such
Schedule, the Company has not, within the time period as to which liability is
not barred by statute, infringed or misappropriated any intellectual property of
another, received from another any notice or claim in respect thereto, committed
any acts of unfair competition, or received from another any notice or claim in
respect thereto.
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4.21 Compliance with Applicable Law. The Company, is in the conduct of its
business and with respect to the properties owned or used by it, currently in
compliance with all foreign, federal, state or local laws, statutes, ordinances,
regulations and permits.
4.22 Environmental Laws. Except as set forth in Sellers Disclosure
Schedule 4.22:
(a) the Facility complies and has at all times complied with, and
the Company is not in violation of and has not violated, in connection with the
ownership, use, maintenance or operation of the Facility and the conduct of the
business related thereto, any Environmental Laws;
(b) the Company (i) has operated the Facility and has at all times
received, handled, used, stored, treated, shipped and disposed of all Hazardous
Material in compliance with all Environmental Laws and all other applicable
health or safety statutes, ordinances, orders, rules, regulations or
requirements, and (ii) has removed (or will remove prior to the Closing) from
the Facility all Hazardous Material, other than those permitted to be retained
by the Company at the Facility pursuant to applicable law or valid permits or
other approvals issued by relevant governmental authorities and such removal has
or will be effected through a waste disposal hauler properly qualified under
Environmental Laws, with no residual or subsequent liability to the Company;
(c) no work, repairs, construction or capital expenditures with
respect to the Facility are necessary in order to bring it into compliance with
or avoid violation of any Environmental Laws;
(d) to the best knowledge of the Selling Stockholders and after
reasonable inquiry, no Hazardous Material has been released into the environment
or deposited, discharged,
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placed or disposed of at, on or near the Facility, nor has the Facility been
used at any time by any person as a landfill or a waste disposal site;
(e) no notices of any violation of any of the matters referred to in
subsections (a) through (d) above relating to the Facility or its use have been
received by the Company, and there are no outstanding writs, injunctions,
decrees, orders or judgments or pending or threatened lawsuits, claims,
proceedings or investigations relating to the ownership, use, maintenance or
operation of the Facility, nor is there any basis for the institution or filing
of such lawsuits, claims, proceedings or investigations;
(f) there are no monitoring wells at the Facility for monitoring
hazardous leachate or other Hazardous Materials or releases;
(g) there are no subsurface tanks situated at the Facility;
(h) there is no evidence of PCB contamination from any power
transformer, capacitor or any other source at the Facility;
(i) there is no asbestos-containing material at the Facility; and
(j) the Company knows of no fact or circumstance that would
reasonably be expected to give rise to any future civil, criminal or
administrative proceedings against them under any Environmental Laws.
4.23 Litigation. Except as set forth in Sellers Disclosure Schedule 4.23,
there is no action, suit, proceeding or investigation pending or, threatened
against the Company, and there are no facts known to the Selling Stockholders
which would reasonably be expected to serve as the basis for any such action,
suit, proceeding or investigation; and the Company is not in default in
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respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality.
4.24 Unlawful Payments. The Company has not, directly or indirectly, made
any of the following payments: (i) illegal political contributions, (ii)
payments from corporate funds not recorded or falsely recorded on its books and
records, (iii) payments from corporate funds to governmental officials in their
individual capacities for the purpose of obtaining favorable treatment in
securing business or licenses or to obtain special concessions, or (iv) illegal
payments from corporate funds to obtain or retain business.
4.25 Permits. Sellers Disclosure Schedule 4.25 lists all permits,
licenses, orders and approvals held by the Company and designates those whose
issuance or renewal is currently pending, and:
(a) the Company holds all permits, licenses, orders and approvals of
all foreign, federal, state or local governmental or regulatory bodies required
to conduct their business as currently conducted; all such permits, licenses,
orders and approvals are in full force and effect, no suspension or cancellation
of any of them is threatened; and none of such permits, licenses, orders or
approvals will be adversely affected by the consummation of the transactions
contemplated in this Agreement;
(b) the Company is currently in compliance with the rules and
regulations of all governmental agencies having authority over it, including,
without limitation, agencies concerned with export and import licenses,
occupational safety, environmental protection and employment
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practices, the failure to comply with could adversely affect its business,
operations, earnings or financial condition;
(c) the Company has not received notice of violation of any such
rules or regulations within the last five years, which could result in any
liability to the Company for penalties or damages or any injunction or
governmental order or decree; and
(d) with respect to a pending operations permit from the State of
Illinois, the Selling Stockholders know of no reason why such permit should not
be issued in the ordinary course, and the absence of such permit will not result
in any Material Adverse Change.
4.26 Restrictive Covenants. Sellers Disclosure Schedule 4.26 lists all
agreements containing restrictive covenants to which the Company is a party,
except as so set forth, the Company is not a party to any agreement, contract or
covenant limiting its freedom in competing in any line of business or with any
person or other entity in any geographic area.
4.27 Tax Matters.
(a) Except as set forth in Sellers Disclosure Schedule 4.27:
(i) All federal, state and local income, payroll, sales, use,
transfer, franchise, recordation and other tax returns, and all
reports of estimated federal, state and local taxes, required to be
filed to date by or on behalf of the Company, have been duly filed
on a timely basis, and such tax returns and reports of estimated
taxes are true, complete and correct to the best knowledge of the
Selling Stockholders after reasonable inquiry. All taxes shown on
such returns or otherwise payable with
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respect thereto (the term "tax" or "taxes" for purposes of this
Agreement being deemed to include interest, penalties and related
charges) have been paid in full on a timely basis (unless otherwise
indicated in such Schedule), and no other taxes are payable by the
Company with respect to items or periods covered by such returns
(whether or not shown on or reportable on such returns). The Company
has withheld and paid over all taxes required to have been withheld
and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor or other
third party. There are no liens on any of the assets of the Company
with respect to taxes, other than liens for taxes not yet due and
payable or for a tax liability that the Company is contesting in
good faith through appropriate proceedings and for which appropriate
reserves have been established, as set forth in Sellers Disclosure
Schedule 4.27. The Company is not currently the beneficiary of any
extension of time to file any return. No claim has ever been made by
an authority in a jurisdiction where the Company does not file
returns that they may be subject to tax by that jurisdiction.
(ii) Purchaser has been furnished by the Selling Stockholders or the
Company with true and complete copies of (A) all tax audit reports,
statements of deficiencies, and closing or other agreements received
by the Company relating to taxes, and (B) all federal, state and
local income, franchise or other tax returns for the Company, in
each case for all periods ending on and after December 31, 1995. The
Company has not done and is not doing business and has not derived
and is not deriving income
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from activities conducted (except to the extent protected by P.L.
86-272), in any state, local, territorial or foreign taxing
jurisdiction other than those for which all tax returns have been
furnished to Purchaser.
(iii) Except as set forth in Schedule 4.27, the returns of the
Company have not been audited by a government or taxing authority,
nor is any such audit in process, pending or, to the best knowledge
of the Selling Stockholders threatened (either in writing or orally,
formally or informally). Except as set forth in Schedule 4.27, no
deficiencies exist, and no deficiencies have been asserted (either
in writing or orally, formally or informally) or are expected to be
asserted with respect to taxes of the Company, and the Company has
not received notice (either in writing or orally, formally or
informally) or expects to receive notice that it has not filed a
return or paid taxes required to be filed or paid by it. The Company
is not a party to any action or proceeding for assessment or
collection of taxes, and no such action or proceeding has been
asserted or threatened (either in writing or orally, formally or
informally) against the Company or any of its assets. No waiver or
extension of any statute of limitations is in effect with respect to
taxes or returns of the Company. The Company has disclosed on
federal income tax returns all positions taken therein that could
give rise to a substantial understatement penalty, and such
disclosures are reflected in the copies of tax returns delivered to
Purchaser.
(iv) The Company is not , nor has it been, a party to any
tax-sharing agreement or arrangement.
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(v) The Company has not made an election under Section 338 of the
Code or has taken any action that would result in any income tax
liability as a result of a deemed election within the meaning of
Section 338 of the Code. The Company is not a "consenting
corporation" under Section 341(f) of the Code. The Company has not
entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a
nondeductible expense pursuant to Section 28OG of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999
of the Code. The Company has not made or will make (A) a deemed
dividend election under Treasury Regulations Section 1.1502-32(f)(2)
or (B) a consent dividend filing under Section 565 of the Code. The
Company has not agreed to, nor is it required to make, any
adjustment under Code Section 481(a) by reason of a change in
accounting method or otherwise.
(b) Sellers Disclosure Schedules and the Financial Statements contain an
accurate and complete description of the adjusted tax basis of the Company in
its assets as of December 31, 1997, its current earnings and profits, tax
carryovers, excess loss accounts, tax elections affecting the Company, and
deferred intercompany transactions. Except as disclosed in the Sellers
Disclosure Schedules, the Company has no net operating losses or other tax
attributes presently subject to limitation under Code Sections 382, 383, or 384,
or the federal consolidated return regulations.
4.28 Bank Accounts and Powers of Attorney. Sellers Disclosure Schedule
4.28 lists the name of each bank, savings and loan, or other financial
institution, in which the Company has an account, including cash contribution
accounts or safe deposit boxes, the names of all persons
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authorized to draw thereon or to have access thereto, and the names of any
persons holding powers of attorney with respect to the business of the Company
and a summary of the terms thereof.
4.29 Corporate and Fictitious Names. Except as disclosed in Sellers
Disclosure Schedule 4.29, the Company has not been known by or used any other
corporate or fictitious name.
4.30 Absence of Certain Recent Changes. Except as disclosed in Sellers
Disclosure Schedule 4.30, since the date of the Letter of Intent, the Company
has conducted its operations only in the ordinary and usual course of business,
in a manner consistent with past and present practices (including without
limiting the foregoing practices concerning the maintenance of the Equipment and
Partnership Equipment) and has not:
(a) suffered either any Material Adverse Change in its financial
condition, results of operations or business or any other event or condition of
any character that might reasonably be expected to have a material adverse
effect on its business or prospects, including any liability, loss, damage or
expense outside the ordinary course of business, except for any such Material
Adverse Change or other event or condition disclosed in an updated Sellers
Disclosure Schedule to be provided to Purchaser in accordance with the
provisions of Section 7.10 of this Agreement;
(b) suffered any loss or prospective loss of one or more dealers,
suppliers or customers, or altered any contractual arrangement with any one or
more of its dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would have a material adverse effect on
the business or prospects of the Company, except for any such loss or
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alteration disclosed in an updated Sellers Disclosure Schedule to be provided to
Purchaser in accordance with the provisions of Section 7.10 of this Agreement;
(c) made any capital expenditure or commitments for the acquisition
or construction of any single item of property, plant or equipment in excess of
$5,000;
(d) amended or terminated any lease, contract or material commitment
to which the Company is a party;
(e) entered into any transaction not in the ordinary course of
business or otherwise inconsistent in any respect with the past practices or
conduct of the business of the Company;
(f) declared, set aside or paid any dividend or other distribution
in respect of the shares of the Company;
(g) sold any accounts receivable, disposed of any inventories other
than in the ordinary course of business or accrued any liabilities not in the
ordinary course of business;
(h) changed any material accounting principle, material procedure or
material practice followed by the Company or the method of applying such
principle, procedure or practice;
(i) incurred any indebtedness for borrowed money, except for
indebtedness incurred in the ordinary course of business under the revolving
credit facility included in the LaSalle Bank Agreement;
(j) created, assumed or permitted to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind on any of its properties
or assets;
(k) permitted the occurrence or continuance of any default under any
agreement;
(l) acquired the securities or substantially all of the assets of
any other entity;
(m) merged or consolidated with any entity;
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(n) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare plan
for the employees of the Company;
(o) increased the rate of compensation payable or to become payable
to the Company's officers or employees or increased the amounts paid or payable
to such officers or employees under any Plan, or made or increased any
arrangements made for or with any of such officers or employees for the payment
of any bonus or profit-sharing amounts; provided, however, that amounts payable
to the Principal Stockholders as year-end bonuses under the Company's 401K plan
and any related drawing account, in accordance with prior Company practice,
shall not constitute a prohibited payment under this clause (o);
(p) entered into any employment or similar contract with any officer
or employee;
(q) amended in any material respect or terminated any Plan or
agreement concerning employee benefits or compensation or made awards or
distributions under any such Plan or agreement not consistent with past practice
or custom except as contemplated herein; and
(r) entered into any contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contain a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of any
rights in any Intellectual Property, or (B) contain a promise made by or to it
to pay any lump sum or royalty or other payment or consideration with respect to
the acquisition, practice or use of any intellectual property.
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4.31 OSHA. Except as otherwise provided in Sellers Disclosure Schedule
4.31, during the five years immediately prior to the date of this Agreement, the
Company has not been cited for any violations of the Occupational Safety and
Health Act of 1970, as amended, nor are there any citations pending as a result
of inspections of the Company for noncompliance with such Act. Except as
otherwise provided in such Schedule, each of the conditions which resulted in
the issuance of a citation has been abated or otherwise corrected to the
satisfaction of the Occupational Safety and Health Administration as of the date
of this Agreement.
4.32 Immigration Matters. Except as set forth in Sellers Disclosure
Schedule 4.32, the Company has properly completed and maintained Forms I-9 on
all persons who became employed by the Company for the past three years, and any
alien employee of the Company is employed pursuant to a valid temporary work
authorization. Such Schedule lists the names of any alien employees who are
required to have temporary work authorizations, the date of their employment and
their job titles and responsibilities, and attached to such Schedule is the Form
I-9 for each such person.
4.33 Brokers. No finder, broker, or agent (i) has acted for or on behalf
of Selling Stockholders or the Company in connection with negotiation or
consummation of this Agreement or the transactions contemplated hereby or (ii)
is entitled to any commission or finders fee in connection therewith. Any claim
by such finder, broker or agent shall be the obligation of the Selling
Stockholders.
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4.34 Year 2000 Issue. The Company has reviewed the areas within its
business and operations which could be adversely affected by the risk that
certain material computer applications used by the Company (or any of its
material suppliers, customers or vendors) may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not result in any
Material Adverse Change to the Company or its operations.
4.35 Funded Debt; No Default. Except as set forth in Sellers Disclosure
Schedule 4.35, the Company is not in default under the terms and conditions of
the Funded Debt, and the Company is not aware of, and has not received notice of
any event or condition that, would create a Company default under the terms and
conditions of the Funded Debt. The aggregate principal amount of Funded Debt is
listed in Sellers Disclosure Schedule 2.4.
4.36 Subordinated Debentures; No Default. Except as set forth in Sellers
Disclosure Schedule 4.36, the Company is not in default of any terms and
conditions governing the Subordinated Debentures. The aggregate outstanding
principal amount of the Subordinated Debentures is $1,000,000.
4.37 Accuracy of Information Furnished. No statement or information given
by the Selling Stockholders or the Company contained in this Agreement or in any
Sellers Disclosure Schedule or other Schedule annexed hereto or in the Financial
Statements, and no statement contained in any certificate, confirmation, exhibit
or other instrument or document furnished or to
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be furnished by or on behalf of the Selling Stockholders or the Company to the
Purchaser or Purchaser's representatives pursuant to this Agreement, or in
connection with the transactions contemplated by this Agreement, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact which is necessary to make the statements contained
herein or therein not misleading.
V. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership and Carl E. Carlson and Wayne L. Sorensen as general
partners, jointly and severally, make the following representations and
warranties to the Purchaser, each of which shall be deemed material, and the
Purchaser, in executing, delivering and consummating the transactions
contemplated by this Agreement, has relied and will rely upon the correctness
and completeness of each of such representations and warranties:
5.1 Partnership Existence and Authority. The Partnership is a general
partnership, duly organized and validly existing under the laws of the State of
Illinois. The Partnership exists and remains in existence under the laws of the
State of Illinois. The copy of the Partnership's articles of organization or
Partnership Agreement, as amended to date, delivered to Purchaser, are true and
complete.
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5.2 Capacity of the Partners. Carl E. Carlson and Wayne L. Sorensen (the
"Partners") are the general partners of the Partnership and have full authority
and capacity to make, execute and deliver this Agreement and to carry out the
transactions contemplated hereby on behalf of the Partnership. The Partners
constitute the only partners of the Partnership.
5.3 No Broker. No finder, broker, or agent (i) has acted for or on behalf
of Partnership in connection with the negotiation or consummation of this
Agreement or the transactions contemplated hereby or (ii) is entitled to any
commission or finders fee in connection therewith. Any claim by such finder,
broker or agent shall be the obligation of the Partners.
5.4 Title to Partnership Equipment. Except as set forth in Sellers
Disclosure Schedule 5.4, the Partnership has good and marketable title to the
Partnership Equipment, free and clear of all liens, claims, encumbrances,
security interests or restrictions on transfer. Subject to any liens or
encumbrances set forth in Schedule 5.4, the Partnership will convey good and
marketable title to the Partnership Equipment to the Purchaser at the Closing.
5.5 Non-Contravention; Consents. Except as set forth in Sellers Disclosure
Schedule 5.5, each consent, authorization, order or approval of or filing or
registration required in connection with the execution, delivery and performance
of this Agreement by the Partners has been or by the Closing Date will be
obtained, and the execution and delivery of this Agreement and the performance
thereof by the Partnership does not and will not:
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(a) violate any provision of the of the Partnership or any law,
order, arbitration award, judgment or decree to which either of them is a party
or by which they or any of their assets are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the assets of the Partnership Equipment pursuant to, any provision
of any mortgage, lien, lease, agreement, permit, indenture, license or
instrument to which the Partnership properties are bound and which is material
to the business of the Partnership as now or as proposed to be conducted; or,
(c) violate or conflict with any other material restriction of any
kind or character to which the Partnership Equipment is subject.
5.6 Condition of Partnership Equipment. The Partnership Equipment is free
from material defect, patent or latent, has been maintained in accordance with
good industry practice, is in good operating condition and repair, subject to
normal wear and tear in the ordinary course, and is suitable for the purposes
for which it is being acquired by the Purchaser.
5.7 Books and Records. Except as set forth in Sellers Disclosure Schedule
5.7, the books and records of the Partnership are true, accurate and complete in
all material respects and have been maintained in accordance with GAAP applied
on a consistent basis.
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5.8 No Undisclosed Liabilities. Sellers Disclosure Schedule 5.8 lists each
and every liability of the Partnership (whether accrued, absolute, contingent or
otherwise). Except as set forth in Sellers Disclosure Schedule 5.8, to the best
knowledge of the Partners, the Partnership is not subject to any material
liability (defined, for purposes of this Section 5.8, as any single item in
excess of $2,500), whether absolute, contingent, accrued or otherwise, other
than (i) liabilities of the same nature as those set forth in Disclosure
Schedule 5.8 which were incurred by the Partnership in the ordinary course of
business, (ii) liabilities arising under existing agreements to which the
Partnership is a party (excluding liabilities arising on account of breaches by
the Partnership of such existing agreements which breaches are not disclosed in
the Sellers Disclosure Schedule), and (iii) other liabilities disclosed in the
Sellers Disclosure Schedule. Except as disclosed herein, the Partnership has no
material unrealized or anticipated losses, in excess of $2,500 for a single
item, from unfavorable commitments.
5.9 Contracts Listed; No Default. Sellers Disclosure Schedule 5.9 contains
a complete and correct list as of the date hereof of all agreements, contracts
and commitments of the following types, written or oral concerning the
Partnership Equipment, by which the Partnership is bound as of the date hereof,
including: (i) mortgages, indentures, security agreements, letters of credit,
loan agreements and other agreements, guarantees and instruments relating to the
borrowing of money or extension of credit by the Purchaser; (ii) licenses of
intellectual property, transfer of technology or know how and other intellectual
property rights; (iii) leases for real and personal property; and (iv) other
agreements, contracts and commitments which in any case involve payments or
receipts of more than $2,500. The Partnership has made available to the
Purchaser complete and correct
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copies of all such written agreements, contracts and commitments, together with
all amendments thereto, and provided accurate descriptions of all oral
agreements listed in Sellers Disclosure Schedule 5.8. All agreements, contracts
and commitments referred to in this Section 5.9 are in full force and effect in
accordance with their respective terms and there does not exist thereunder as of
the date hereof any default by the Partnership, any other party thereto, or any
event or condition which, after notice or lapse of time or both, would
constitute a default thereunder on the part of the Partnership, or any other
party thereto. The Partnership has not granted any powers of attorney, except
routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction.
5.10 Insurance. Set forth in Sellers Disclosure Schedule 5.10 is a true,
correct and complete listing of all insurance policies or binders of insurance
which relate to the Partnership Equipment. Except as set forth in such Schedule:
(a) the coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Partnership;
(b) there are no pending or unpaid claims under any such insurance
policy; and
(c) no event has occurred which reasonably might form the basis of
any claim against the Partnership relating to the Partnership Equipment by any
of the policies or binders set forth in the Schedule or which would reasonably
be expected to increase materially the insurance premiums payable under any such
policy or binder.
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5.11 Partnership Equipment. Sellers Disclosure Schedule 5.11 lists each
item of Partnership Equipment with an original cost on the books of the
Partnership in excess of $1,000 per item. All of such Partnership Equipment is
owned by the Partnership, free and clear of any liens, charges, encumbrances or
security interests, except as set forth in Sellers Disclosure Schedules 5.4 and
5.11. With respect to any Partnership Equipment subject to a capital lease
between the Partnership and third parties, such capital lease is in full force
and effect and the Partnership is not in default thereunder. The Partnership
Equipment is in possession of the Company pursuant to an equipment lease between
the Partnership and the Company described in Sellers Disclosure Schedule 4.11
and 4.13, which lease is in full force and effect. The Company is not in default
under such lease, or any default thereunder has been waived subject to the
Company's obligation to repay the Partnership the amount owed by the Company to
the Partnership as set forth in Sellers Disclosure Schedule 2.4. The Partnership
has not undertaken any action which, with the giving of notice or the passage of
time or both, would result in any such default.
5.12 Partnership Tax Liabilities.
(a) Except as set forth in Sellers Disclosure Schedule 5.12, the
Partnership and the Partners have filed or caused to be filed all federal, state
and local income, payroll, sales, use, transfer, franchise, recordation and
other tax returns, and all reports of estimated federal, state and local taxes,
required to be filed in connection with the business and property of the
Partnership. Such tax returns and reports of estimated taxes are true, complete
and correct to the best knowledge of the Partnership and the Partners, and all
taxes shown on such returns or otherwise payable with respect thereto (the term
"tax" or "taxes" for purposes of this Agreement, being deemed to include
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interest, penalties and related charges) have been paid in full on a timely
basis (unless otherwise indicated in such Schedule), and no other taxes are
payable by the Partnership or the Partners with respect to items or periods
covered by such returns (whether or not shown on or reportable on such returns).
(b) The sale of the Partnership Equipment to the Purchaser will be
exempt from any sales or use taxes imposed by the State of Illinois.
(c) The Partnership and the Partners will be responsible for filing,
and will file in a timely manner, any required federal, state and local income,
payroll, sales, use, transfer, franchise and recordation tax return in respect
of the sale of the Partnership Equipment, and all tax obligations in connection
therewith shall be the responsibility of the Partnership and the Partners.
5.13 Accuracy of Information Furnished. No statement or information given
by the Partnership contained in this Agreement or in any Sellers Disclosure
Schedule or other Schedule annexed hereto, and no statement contained in any
certificate, confirmation, exhibit or other instrument or document furnished or
to be furnished by or on behalf of the Partnership or to the Purchaser or
Purchaser's representative pursuant to this Agreement, or in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
which is necessary to make the statements contained herein or therein not
misleading.
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VI. REPRESENTATIONS OF PURCHASER
The Purchaser represents and warrants to the Sellers acknowledging
that they are relying thereon, as follows:
6.1 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly approved by the Purchaser's Board of Directors. The
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate such
transactions in accordance with the terms and conditions of this Agreement. This
Agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws or by legal or equitable principles relating to or limiting
creditors' rights generally.
6.2 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.3 Non-Contravention. The execution, delivery and performance of this
Agreement by Purchaser do not and will not (i) conflict with the charter or the
by-laws of Purchaser, (ii) violate any order, writ, injunction, or decree
applicable to Purchaser or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or create any rights of
termination, cancellation, or acceleration in any person under, any contract,
agreement, arrangement, commitment, license, lease,
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easement, permit, right of way or understanding or violate any provisions of any
laws, ordinances, rules or regulations to which Purchaser is a party or by which
Purchaser or any of its assets, business or operations is bound; provided,
however, that Purchaser may be required to obtain the consent of First Union
National Bank and First Union Investors to its execution of this Agreement.
6.4 No Broker. No finder, broker, or agent (i) has acted for or on behalf
of Purchaser in connection with negotiation or consummation of this Agreement or
the transactions contemplated hereby or (ii) is entitled to any commission or
finders fee in connection therewith. Any claim by such finder, broker or agent
shall be the obligation of the Sellers.
VII. CONDUCT PENDING CLOSING; COVENANTS
7.1 Access and Information. From the date of this Agreement until the
Closing:
(a) The Selling Stockholders shall cause the Company to permit
Purchaser and Purchaser's counsel, accountants, investment bank, commercial bank
and other representatives full access during normal business hours and upon
reasonable notice to (i) all of the properties, assets, books, records, files,
agreements, and other documents of the Company, and (ii) to all Partnership
Equipment for purposes of inspecting and appraising same;
(b) The Sellers shall furnish to Purchaser and its representatives
all information with respect to the Company and the Partnership as Purchaser may
reasonably request; and
(c) As agreed between the Company and the Purchaser, the Sellers
shall permit and facilitate communications between Purchaser and all providers,
suppliers and other persons
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having dealings with the Company, and all persons or entities maintaining,
servicing, repairing or financing the Partnership Equipment.
7.2 Cooperation and Publicity. From the date of this Agreement until the
Closing, the Selling Stockholders will cause the Company and its officers and
employees to cooperate with Purchaser and its representatives in planning for
the post-Closing operations of the Company and Purchaser on a combined basis,
including the possible merger or consolidation of the Company with the
Purchaser. In addition, the Selling Stockholders and Purchaser will consult with
each other before making any public announcements with respect to the
transactions contemplated hereby, and any public announcements shall be made
only at such time and in such manner as the Selling Stockholders, and Purchaser
shall mutually agree.
7.3 Other Proposals to Selling Stockholders. From the date of this
Agreement until the Closing (provided that this Agreement has not been
terminated pursuant to Article X hereof), the Selling Stockholders will not,
directly or indirectly, whether through representatives or otherwise, solicit or
encourage any written inquiries or proposals for the acquisition of the Shares
or all or substantially all of the assets or the business of the Company, and
the Selling Stockholders and will promptly inform Purchaser of any unsolicited
offers from third parties for the purchase of the shares of the Company or the
purchase of its assets.
7.4 Notification by Selling Stockholders. Each of the Selling Stockholders
shall give prompt notice to Purchaser of:
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(a) any notice or other communication received by him or the
Company, or any occurrence or state of facts of which he or it shall become
aware, subsequent to the date of this Agreement and prior to the Closing Date,
which would cause any representation or warranty of the Selling Stockholders to
be or become untrue or misleading under this Agreement, or which relate to a
default (or event which with notice or lapse of time or both would become a
default) under any contract, agreement or instrument to which the Company is a
party or by or to which either the Company or the Selling Stockholders any of
their respective property is bound or subject; and
(b) Any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
this Agreement and the performance thereof.
7.5 Conduct of Business. From the date of this Agreement until the Closing
Date, the Selling Stockholders will cause, and from the date of the Letter of
Intent until the date of this Agreement have caused, the business conducted by
the Company to be operated in the ordinary and usual course of business, in a
manner consistent with past and current practices, and in compliance with the
terms of this Agreement. Without limiting the generality of the foregoing, the
Selling Stockholders shall cause the Company to:
(a) preserve intact its business, organization and relationships
with employees, agents, customers and others having business dealings with it;
(b) complete or maintain in full force and effect all existing
contracts;
(c) preserve its goodwill;
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(d) pay all of its respective accounts payable and other obligations
as they become due;
(e) maintain in force its respective existing insurance policies;
(f) observe all commitments and perform all obligations imposed on
the Company under any contract, arrangement or understanding or required under
any applicable statute, regulation, ruling, decree, judgment or directive; and
(g) properly maintain, service and repair all of the Company's
Equipment and the Partnership Equipment in accordance with good industry
practice.
7.6 Prohibited Activities. From the date of this Agreement until the
Closing Date, the Sellers shall take all measures necessary to ensure that the
Company and the Partnership will not, without Purchaser's express written
consent:
(a) issue, sell or contract to sell any stock, notes, bonds,
Partnership interests or other securities, or any option to purchase the same,
or enter into any agreement with respect thereto:
(b) amend the charter or bylaws of the Company and the Partnership
agreement;
(c) redeem, repurchase, or otherwise acquire any interest in the
Partnership or any Shares or securities convertible into or exchangeable for
such Shares or enter into any agreement to do so;
(d) initiate any legal proceedings, including suits and
administrative proceedings in either the United States or foreign countries;
provided, however, that if any such proceeding is commenced without such
consent, the Sellers will be responsible for the costs and expenses
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(including attorneys fees) of such proceeding and any adverse judgment or award
rendered as a result thereof;
(e) suffer either any Material Adverse Change in the financial
condition, results of operations or business of the Company and the Partnership
or any other event or condition of any character that might reasonably be
expected to have a Material Adverse Change on the Company and the Partnership,
including any liability, loss, damage or expense outside the ordinary course of
business;
(f) suffer any loss or prospective loss of one or more dealers,
suppliers or customers, or alter any contractual arrangement with any one or
more of such dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would have an adverse effect on the
business of the Company;
(g) make any capital expenditures or commitments for the acquisition
or construction or lease of any single item of property, plant, machinery or
equipment in excess of $5,000; and, for more than a single item, in excess of
$10,000 in the aggregate;
(h) amend or terminate any lease, contract or material commitment to
which the Company or the Partnership is a party;
(i) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of the Company and the capital of the Partnership;
(j) sell any accounts receivable, dispose of any inventories other
than in the ordinary course of business or accrue any liabilities not in the
ordinary course of business;
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(k) change any material accounting principle, material procedure or
material practice followed by the Company and the Partnership or the method of
applying such principle, procedure or practice;
(l) incur any indebtedness for borrowed money, other than for
working capital under the revolving credit line pursuant to the LaSalle Bank
Agreement;
(m) create, assume or permit to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind on any of the properties or assets
of the Company and the Partnership, other than pursuant to the LaSalle Bank
Agreement, and then only in the ordinary course of business ;
(n) permit the occurrence or continuance of any default under any
agreement for Funded Debt, except with respect to the Subordinated Debentures as
set forth in Section 4.36 of the Sellers Disclosure Schedule;
(o) acquire the securities or substantially all of the assets of any
other entity;
(p) merge or consolidate with any entity other than Purchaser;
(q) sell any assets other than in the ordinary course of business of
the Company, except for the Emission Credits referred to in Section 7.12.
(r) increase the rate of compensation payable or to become payable
to the Company's and the Partnership's officers or employees or increase the
amounts paid or payable to such officers or employees under any Plan, or make or
increase any arrangements for the payment of any bonus or profit-sharing amounts
provided, however, that amounts payable to the Principal Stockholders as
year-end bonuses under the Company's 401K plan and any related drawing account,
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in accordance with prior Company practice, shall not constitute a prohibited
payment under this clause (r);
(s) enter into any employment or similar contract with any officer
or employee;
(t) adopt, amend in any material respect or terminate any Plans,
severance plan or agreement or collective bargaining agreement or make awards or
distributions under any such plan or agreement, except as otherwise contemplated
by Section 7.9 hereof;
(u) enter into any material contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and loans or security agreements) concerning any rights in any
Intellectual Property;
(v) make any change in the business conducted by the Company or the
Partnership;
(w) agree, whether in writing or otherwise, to take any action
described in this Section 7.6;
(x) permit the relocation of the Partnership Equipment, the
incurring or imposition of any lien or encumbrance on the Partnership Equipment
(except as set forth in Sellers Disclosure Schedules 5.4 and 5.11) which would
grant, convey or create an interest or claim of any third party in or to the
Partnership Equipment; and
(y) except with Purchaser's consent, not to be unreasonably withheld
or delayed, file any amended tax returns, original tax returns after the due
date thereof, or enter into any tax settlement or closing agreements with any
federal, state or local tax authority.
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7.7 Certain Affirmative Covenants. Prior to the Closing Date, the Selling
Stockholders will cause the Company and the Partners will cause the Partnership,
with the cooperation of Purchaser where appropriate, to:
(a) comply promptly with all filing requirements, if any, which
foreign, federal or state law may impose on the execution, delivery and
performance of this Agreement; and
(b) use their best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or other third party,
including without limitation, the Company's and the Partnership's Funded Debt
and other lenders and landlords and those persons or entities who are parties to
the agreements or instruments described in the Sellers Disclosure Schedules,
whose consent is or may be required to be obtained by the Company or the
Partnership in connection with the consummation of the transactions contemplated
in this Agreement, including without limitation, any consent, authorization or
approval necessary to waive any default under any of such agreements or
instruments.
7.8 Tax Liabilities and Information.
(a) The Selling Stockholders shall cause the Company and the
Partners shall cause the Partnership to prepare and timely file all tax returns
and amendments thereto and reports of estimated taxes required to be filed by
them on or before the Closing Date. The time for filing such returns and reports
will not be extended without Purchaser's consent, and, if such late filing
occurs or such an extension is obtained (as to which Purchaser shall be informed
in each case) without Purchaser's consent, the Sellers shall be responsible for
any interest, penalties or assessments or other costs resulting from such late
filing or extension. Purchaser shall have a reasonable
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opportunity to review such returns, reports and amendments thereto prior to
filing, and , if Purchaser shall make specific objection thereto, such return,
report or amendment shall be corrected to incorporate such objection. From the
date of this Agreement until the Closing Date, the Selling Stockholders will
cause the Company and the Partners will cause the Partnership to pay and
discharge all taxes, assessments and governmental charges upon or against them
or any of their properties or assets, including liabilities for estimated tax
payments, and all interest and penalties, except to the extent and as long as:
(i) the same are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause
any adverse effect upon the condition (financial or otherwise) or
operations of the Company and the Partnership; and
(ii) the Company and the Partnership shall have set aside on its
respective books reserves (segregated to the extent required by
sound accounting practice) in the amount of demanded from the
Company or the Partnership, together with interest and penalties
relating thereto, if any.
Between the date of this Agreement and the Closing Date, the Sellers shall give
Purchaser and its authorized representatives full access to all tax returns and
estimated tax reports of the Company and the Partnership, whether in their
possession or in the possession of third parties. The Sellers and the Company
shall, as of the Closing Date, terminate all tax allocation agreements and shall
ensure that such agreements are of no further force or effect.
(b) With respect to the Company and the Partnership tax returns and
reports required to be prepared and filed after the Closing Date for any prior
period through the Closing Date
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("Post-Closing Returns"): (i) the Sellers will prepare, sign and timely file all
Post-Closing Returns, and, for this purpose, shall have access after the Closing
Date to the appropriate tax and financial records of the Company and the
Partnership as set forth in subsection (f) of this Section 7.8; (ii) the
Purchaser shall have a reasonable opportunity to review such returns prior to
the filing thereof; and (iii) any taxes shown by the Post-Closing Returns to be
payable in the ordinary course shall be the responsibility of the Company and
the Partnership, subject to the provisions of the following subsection.
(c) Notwithstanding any other provision of this Agreement to the
contrary, if, as the result of any tax audit, examination, or proceeding by any
tax authority, any deficiency, assessment, interest or penalty is asserted
(whether before or after the Closing) against the Company and the Partnership
with respect to any period prior to and through the Closing Date, any liability
in respect thereof (including, in addition to tax, penalty and interest, any
legal and accounting fees related thereto) shall be the responsibility of the
Sellers (and not the obligation of the Company or the Purchaser) to the extent,
that any such deficiency, assessment, interest or penalty exceeds the tax
benefit received by Purchaser or the Company and the Partnership with respect to
the item which is the subject of such tax audit, examination or proceeding;
provided, however, that if the subject deficiency, assessment, interest or
penalty results in a tax benefit to be received by refund claims, then such
deficiency, assessment, interest or penalty shall be paid in full from the
Escrow Fund described in Section 10.2, and Purchaser will cause to be filed any
and all applicable refund claims and will reimburse the Escrow Fund if, as and
when any such refund (and any interest thereon) is received.
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(d) The Purchaser shall be responsible for preparing and filing any
of the Company tax returns required for any period commencing on or after the
Closing Date, and for any tax liabilities in connection therewith.
(e) The Purchaser and the Sellers agree to furnish or cause to be
furnished to each other, as promptly as practicable, such information and
assistance relating to the Company and the Partnership as is reasonably
necessary for the preparation and filing of any return, claim for refund or
other required or optional filings relating to tax matters, for the preparation
for and proof of facts during any tax audit, for the preparation for any tax
protest, for the prosecution or defense of any suit or other proceeding relating
to tax matters and for the answer to any governmental or regulatory inquiry
relating to tax matters.
(f) The Purchaser agrees to retain possession of all accounting,
business, financial and tax records and information (i) relating to the Company
and the Partnership and which are in existence on the Closing Date and are
transferred to the Purchaser hereunder and (ii) coming into existence after the
Closing Date which relate to the Company and the Partnership before the Closing
Date, for a period not to exceed six years from the Closing Date. In addition,
from and after the Closing Date, the Purchaser agrees that it will not
unreasonably withhold access by the Sellers and their attorneys, accountants and
other representatives (after reasonable notice and during normal business hours
and with reasonable charge), to such books, records, documents and any or all
other information relating to the Company and the Partnership as the Sellers and
may reasonably deem necessary to prepare for, file, prove, answer, prosecute
and/or defend any such return, filing, audit, protest, claim, suit, inquiry or
other proceeding.
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(g) If prior to the Closing, the Company and the Partnership shall
(i) fail to file reports of estimated federal, state, and local income, payroll,
franchise and other taxes due for the year ended December 31, 1998 and (ii) fail
to pay all such estimated taxes and interest and penalties reflected therein,
the Purchaser shall deduct from the Net Cash Payment the sum of $250,000 (in
addition to the Escrow Fund to be so deducted as set forth in Section 2.8), and
such sum of $250,000 shall be added to and shall constitute a portion of the
Escrow Fund to be applied in accordance with Section 10.2
7.9 Termination of Employee Benefit Plans. On or before the Closing Date,
the Selling Stockholders will cause the Company to take all actions necessary to
terminate, effective on or prior to the Closing Date, the Plans to be terminated
on or prior to the Closing Date, listed in Section 4.16 of Sellers Disclosure
Schedule, and such termination shall be accomplished without requiring any
contributions or payments after the Closing Date by the Company or Purchaser;
provided, however, that if notice prior to termination is required to be given
by any Plan, and such notice is duly in accordance with this Agreement, the
effective date of termination shall be as set forth in such notice. Such actions
shall include, but shall not be necessarily limited to the actions described in
the Sellers Disclosure Schedule 4.16.
7.10 Updated Financial Statements and Disclosure Schedules. From the date
of this Agreement until the Closing Date, the Selling Stockholders will cause
the Company and the Partners will cause the Partnership to prepare and deliver
to Purchaser (i) monthly unaudited financial statements for each calendar month
subsequent to the Balance Sheet Date, and (ii) an amended
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Sellers Disclosure Schedule updated to reflect current information as of the end
of each such calendar month, in each case no later than 30 days after the end of
such calendar month, except that updated schedules of accounts receivable and
accounts payable included in such amended Sellers Disclosure Schedule will be
delivered no later than 15 days after the end of such calendar month.
7.11 Books and Records to be Kept Current. From the date of this Agreement
until the Closing Date, the Selling Stockholders shall cause the Company and the
Partners shall cause the Partnership to keep its books and records current and
to safeguard and maintain such books and records and other corporate documents,
so that such books, records and documents will be available to the Purchaser
from and after the Closing.
7.12 Special Payment of EPA Credits. Purchaser agrees that Selling
Stockholders shall receive the proceeds from the pending disposition of EPA
Credit Sale Exclusions for approximately one hundred (100) tons of VOM emission
reduction credits (the "Emission Credits"), expected to be completed prior to
the Closing. If the sale of the Emission Credits is completed after the Closing,
the proceeds thereof will be placed in a special escrow account for the benefit
of the Selling Stockholders. All expenses incurred by the Company in connection
with the sale of Emission Credits will be deducted from the proceeds of the sale
of the Emission Credits and repaid to the Company. The Selling Stockholders will
be responsible for any taxes related to the sale of the Emission Credits and
which result from the Company distributing the proceeds of such sale to the
Selling Stockholders. If no contract for the sale of the Emission Credits is
entered into by the Company prior to Closing, the Purchaser agrees that the
Company shall assign, set over, and transfer, effective
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at Closing, its rights to any Emission Credits that have been generated at the
Company's Facility, located at 13825 West Laurel Drive, Lake Forest, Illinois
since 1990 or that are gained from future reductions in emissions of volatile
organic material generated by changes in the operation or permanent closure of
the facility pursuant to the Assignment annexed as Exhibit 7 to this Agreement.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated in
this Agreement is subject to the fulfillment of each of the following
conditions:
8.1 Authorization of Board. The form and substance of this Agreement and
all appended Exhibits and Schedules, and the consummation of the transactions
contemplated thereby shall have been duly approved by the Board of Directors of
the Purchaser.
8.2 Intentionally Omitted.
8.3 Facility. With respect to the Facility, the Selling Stockholders shall
have delivered an agreement terminating the Facility lease in the form set forth
as Exhibit 4, and the Purchaser shall have entered into a new lease agreement
for the Facility as set forth in Section 3.2.
8.4 Release of Personal Guarantees. The Purchaser shall have obtained a
commitment for the release of Personal Guarantees, from the beneficiaries of
such Personal
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Guarantees, with respect to any portion of the Funded Debt which is subject to
such Personal Guarantees and which is not being fully paid at the Closing.
8.5 Termination of Employee Benefit Plans. The Selling Stockholders shall
have delivered agreements, instruments, certificates and other documents, and a
legal opinion of counsel to the Company, all of which shall be satisfactory in
form and substance to Purchaser and its attorneys, confirming the termination of
each of the Plans without obligation to Purchaser, to be terminated on or prior
to the Closing Date (except for any Plan whose termination is pending pursuant
to notice of termination given prior to the Closing Date), as listed in Sellers
Disclosure Schedule 4.16, and as set forth in Section 7.9 above.
8.6 Delivery of Shares. The Selling Stockholders shall have delivered
certificates for the Shares, free and clear of all liens, encumbrances, charges
and claims, which Shares, as of the Closing Date, shall be duly and validly
issued and fully paid and non-assessable, and which shall constitute all, and
not less than all, of the issued and outstanding shares of the Company.
8.7 Officers' Certificates. The Sellers shall have delivered the following
certificates, dated as of the Closing Date:
(a) a certificate duly executed by the Secretary of the Company,
certifying as to the incumbency and signatures of the officers of the Company,
as to copies of the charter and by-laws and good standing certificates of the
Company, as to any director or shareholder resolutions
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required in connection with the consummation of the transactions contemplated by
this Agreement, as to the form of certificates for Shares, and as to the
Company's authorized and outstanding shares;
(b) a certificate duly executed by the Partners, certifying as to
the incumbency and signatures of the Partners, the organization and good
standing of the Partnership and the authority of the Partners; and
(c) a certificate executed by the respective Sellers to the effect
that the representations and warranties of the Sellers made under this Agreement
are true and correct in all material respects at and as of the Closing Date, and
that the Sellers have complied with or performed all conditions, and have caused
the Company to comply with and perform all conditions, required to be performed
by each of them on or prior to the Closing Date in accordance with this
Agreement.
8.8 Opinions of Counsel. The Purchaser shall have received:
(a) a favorable opinion, dated as of the Closing Date, from Goedert
& Huntington, special counsel to the Sellers and counsel to the Company, in the
form annexed hereto as Exhibit 5(a);
(b) a favorable opinion from Jenner & Block, in the form annexed as
Exhibit 5(b); and
(c) a favorable opinion from Hodge & Dwyer, in the form annexed as
Exhibit 5(c).
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8.9 No Material Adverse Change. No Material Adverse Change in the
business, operations, earnings, assets or financial condition of the Company,
shall have occurred prior to the Closing.
8.10 Compliance with Covenants. The Sellers and the Company shall have
duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing.
8.11 Truth of Representations. The representations and warranties of the
Sellers contained in this Agreement shall have been true and correct in all
material respects when made, and shall also be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as if
made at and as of the Closing.
8.12 Consents and Waivers. At the Closing, all consents, authorizations,
orders or approvals required for the closing of the transactions contemplated in
this Agreement hereof shall have been obtained, including without limitation the
consent of First Union National Bank in accordance with a Credit Agreement
between such bank and Purchaser dated as of September 15, 1998 and the consent,
if required, of First Union Investors in accordance with a Bridge Note Purchase
Agreement dated September 15, 1998.
8.13 Litigation. At the Closing, (i) there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency
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of competent jurisdiction restraining or prohibiting the consummation of the
transactions provided for herein or limiting in any manner Purchaser's right to
control the Company or any aspect of their business or requiring the sale or
other disposition of any of their operations or making such consummation unduly
burdensome to the Purchaser, and (ii) no proceeding or lawsuit shall have been
commenced and be pending or be threatened by any governmental or regulatory
agency or any other person with respect to such consummation which Purchaser, in
good faith and with the advice of counsel, believes is likely to result in any
of the foregoing or which seeks the payment of substantial damages by the
Company or Purchaser.
8.14 Employment and Non-Competition Agreements. The Employment Agreement
and Non-Competition Agreement described in Section 3.1 shall have been executed
and delivered.
8.15 Hart-Scott-Rodino Filing. The Purchaser shall have completed a
Hart-Scott-Rodino filing with the appropriate federal agency, and the time for a
determination in respect thereof, and any extension thereof as required by law,
shall have finally elapsed and the Purchaser shall not have received any adverse
determination as a result thereof.
8.16 Miscellaneous Documents. The Selling Stockholders shall have caused
the Company to deliver certificates of good standing for the jurisdictions in
which the Company is incorporated and qualified to do business as a foreign
corporation and the Partners shall have caused the Partnership to deliver a
certificate from the appropriate County Clerk that the Partnership exists
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and remains in existence, as well as such resolutions, consents and other
confirmatory documents and instruments reasonably requested by Purchaser's
counsel.
8.17 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the Sellers
with respect to the Company and the Partnership, under the provisions of this
Agreement, and all other actions and proceedings required to be taken by or on
behalf of the Sellers in furtherance of the transactions contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for the
Purchaser.
8.18 Due Diligence. The Purchaser shall be satisfied in its sole
discretion as to its due diligence activities concerning the Company and the
Partnership, which due diligence activities shall commence at the signing of
this Agreement.
8.19 Escrow Agreement and Disbursing Agent. The parties shall have
executed and delivered the Escrow Agreement provided for in Article X.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligation of the Sellers to consummate the transactions contemplated
in this Agreement is subject to the fulfillment of each of the following
conditions:
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9.1 Truth of Representations. The representations and warranties made by
Purchaser shall be true and correct in all material respects and shall be deemed
to have been made again on and as of the Closing Date.
9.2 Compliance by Purchaser. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by the Purchaser
on or before the Closing Date shall have been complied with and performed in all
respects.
9.3 Litigation. No action or proceeding shall have been instituted or
shall have been threatened to restrain or prohibit any of the transactions
contemplated hereby.
9.4 Tender of Payment. The Purchaser shall have tendered payment of the
Purchase Price in accordance with the terms of this Agreement.
9.5 Employment and other Agreements. The Purchaser shall have executed the
Employment Agreement, Non-Competition Agreement, and lease termination agreement
provided for in Article III above.
9.6 Release or Termination of Personal Guarantees. The Purchaser shall
have delivered instruments releasing the Personal Guarantees or shall have paid
in full the Funded Debt secured by such Personal Guarantees.
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9.7 Hart-Scott-Rodino Filing. If the Purchaser's counsel determines that a
Hart-Scott-Rodino filing is required, the Purchaser shall have made such filing
with the appropriate federal agency and the time for a determination in respect
thereof, and any extensions thereof as required by law, shall have finally
elapsed without any adverse determination. All of the Company's costs of such
filing, including attorney and accounting fees related thereto, shall be paid by
Purchaser.
X. INDEMNIFICATION AND CLAIMS
10.1 Indemnification by Sellers and Partnership. Subject to the provisions
of Section 13.1 of this Agreement as to the survival of representations,
warranties, covenants and agreements, the Sellers hereby jointly and severally
agree to indemnify Purchaser and its directors, officers, employees, agents and
affiliates (any of the foregoing being referred to as a "Purchaser Indemnitee"
or collectively, as "Purchaser Indemnitees") from and against any loss,
liability, damage, obligation or expense whether absolute or accrued, including
interest, penalties and reasonable attorneys fees and expenses (collectively,
"Indemnified Losses") incurred in the investigation or defense of, or in
asserting the rights of, the Purchaser Indemnitees hereunder, incurred and
arising directly or indirectly by reason of or in connection with:
(i) the inaccuracy or breach of any representation or warranty by
the Sellers set forth in this Agreement or in any certificate or
other document furnished by Sellers or the Company pursuant to this
Agreement;
(ii) the nonperformance or breach of any covenant, agreement or
obligation of any of the Sellers or the Company, which is contained
in this Agreement, including, but
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not limited to the nonperformance of the obligations of the Sellers
set forth in Section 7.8 above;
(iii) any tax liability (of any kind whatsoever) of the Company or
any of the Selling Stockholders (including any interest and penalty)
resulting from or in connection with any breach of the
representations contained in Section 4.27 and 5.12 or nonperformance
of the obligations of the Sellers and the Company set forth in
Section 7.8;
(iv) any past, present or future obligation or liability, whether or
not disclosed pursuant to this Agreement, arising from a condition
prior to Closing at the Facility, which, as a result of enforcement
of any Environmental Laws, results in Indemnified Losses; and
(v) any obligation or liability arising or resulting from the
termination of any or all of the Plans listed in Sellers Disclosure
Schedule 4.16, and any liability or obligation resulting from any
failure by the Company or the Partnership to have made any
contributions, pay any premiums or take any steps required by
applicable laws or regulations in connection with such Plans prior
to the Closing.
10.2 Indemnity Fund; Escrow. In order to secure the indemnification
obligations set forth in Section 10.1(iii), the parties agree that the Escrow
Fund will be set aside out of the Net Cash Payment and placed in escrow at the
Closing, to be held, administered, applied, disbursed and distributed as set
forth in a separate escrow agreement ("Escrow Agreement") among the parties and
counsel to Purchaser (the "Escrow Agent"), in the form annexed to this Agreement
as Exhibit 6,
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which Escrow Agreement shall be executed and delivered at the Closing; provided,
however, that the Escrow Fund shall be increased by $250,000 in the event the
conditions set forth in Section 7.8(g) are not satisfied prior to the Closing.
Subject to the provisions of the Escrow Agreement, the Escrow Fund will be
available to pay any Indemnified Losses required to be paid and not otherwise
resolved or settled, will be maintained for a period of equal to greater of
three years after the Closing, or the end of the statutory period of limitation
on the tax liability of the Company and the Partnership for all periods prior to
the Closing, will be held in an interest-bearing form at a reputable financial
institution selected by Purchaser's counsel, and will be released and returned
to the Sellers at the end of the escrow period as set forth in the Escrow
Agreement. The amount or availability of the Escrow Fund to pay Indemnified
Losses at any given time shall not be deemed to limit or fix the liability of
the Sellers under Section 10.1.
10.3 Right of Offset. In the event that any Indemnified Losses shall occur
which shall not be payable or paid from the Escrow Fund, such Indemnified Losses
being referred to as the Non-Secured Indemnified Losses, Purchaser shall have
the right to offset and deduct the amount of any Non-Secured Indemnified Losses
from (i) amounts due to the Selling Stockholders under the Employment Agreement
and Non-Competition Agreement referred to in Section 3.1 and (ii) amounts due to
the Laurel Limited Partnership as landlord under the lease agreement for the
Facility to be executed at the Closing. In the event the Purchaser shall elect
to exercise its right of offset, it shall so notify the Selling Stockholders
immediately prior to effecting such offset. The Right of offset hereby granted
may be exercised by the Purchaser on its own behalf or on behalf of any
Purchaser Indemnitee.
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10.4 Indemnification Procedures and Notice.
(a) If any event which may give rise to any Indemnified Losses
occurs or is alleged, and any Purchaser Indemnitee asserts that the Sellers have
become obligated to such Purchaser Indemnitee pursuant to Section 10.1, or if
any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Sellers may become obligated to any
Purchaser Indemnitee under any provision, term or condition of this Agreement,
such Purchaser Indemnitee shall give written notice thereof to the Sellers, and,
if the Purchaser Indemnitee is a person other than the Purchaser, to the
Purchaser as well. The Sellers shall thereafter defend, contest or otherwise
protect the Purchaser Indemnitee against any such suit, action, investigation,
claim or proceeding at their sole cost and expense. The Purchaser Indemnitee
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Purchaser Indemnitee's choice and shall
in any event cooperate with and assist the Sellers in the defense of any such
suit, action, investigation, claim or proceeding to the extent reasonably
possible. If the Sellers fail timely to defend, contest or otherwise protect any
Purchaser Indemnitee against such suit, action, investigation, claim or
proceeding, the Purchaser Indemnitee shall have the right to do so, including,
without limitation, the right to make any compromise or settlement thereof, and
the Purchaser Indemnitee shall be entitled to recover the entire cost thereof
from the Sellers including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
(b) If, at any time after the notice and other procedures provided
for in the preceding subparagraph are undertaken, a Purchaser Indemnitee will be
required to pay any Indemnified Losses, and if the Sellers have been unable or
have failed to pay, settle or eliminate such
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Indemnified Losses, the affected Purchaser Indemnitee shall be entitled to
payment of the full amount of such Indemnified Losses from the Escrow Fund. In
such case, the Purchaser Indemnitee shall send notice to the Escrow Agent of the
Escrow Fund, stating the amount and nature of the Indemnified, and indicating
the inability, failure or refusal of the Sellers to indemnify such Purchaser
Indemnitee. Within 15 days after such notice, the Escrow Agent of the Escrow
Fund shall issue a check drawn on the Escrow Fund and payable to the Purchaser
Indemnitee in the full amount of such Indemnified Losses or shall take such
other action as shall be provided for in the Escrow Agreement, and shall so
notify the Sellers.
10.5 Distribution and Termination of Escrow Fund. Amounts held in the
Escrow Fund, less amounts paid or reserved for Indemnified Losses or for claims
in connection therewith, shall be subject to distribution to the Sellers from
time to time, and the Escrow Fund shall be terminated, as set forth in the
Escrow Agreement.
10.6 Indemnification Successors and Assigns. All of the rights and
obligations of the Sellers, the Purchaser and any Purchaser Indemnitee pursuant
to this Article X shall survive any sale, assignment or other transfer by the
Purchaser of title to or interest in the Shares or any assets of the Company or
the Partnership Equipment, and shall apply to and bind each and every successor
and assign of the Purchaser.
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XI. MISCELLANEOUS MATTERS
11.1 Parties to Bear Their Own Expenses; Exceptions. The parties will be
responsible for their own legal fees, advisory fees and other expenses incurred
by them, respectively, in connection with the preparation of this Agreement and
the consummation of the transactions contemplated therein, as well as all
personal federal, state and local tax liabilities incurred in connection with
such transactions. It is understood that the Company will pay the fees and
disbursements of Nickolas Kokoron in connection with the preparation of
financial and accounting information for the Company, but, if the Purchaser
shall terminate this Agreement for any reason other than the failures or
breaches referred to in the first sentence of Section 12.2, the Purchaser will
reimburse the Company for amounts so paid to Mr. Kokoron, up to a maximum
reimbursement by the Purchaser of $25,000. However, if this Agreement is
terminated by the Purchaser because the Purchaser is unable to obtain any
consent required from First Union National Bank and/or First Union Investors,
such maximum amount shall be increased from $25,000 to $50,000.
11.2 Purchaser May Assign; Possible Merger. Purchaser has informed Selling
Stockholders that it is considering merging the Company into Purchaser. In
connection therewith, Purchaser may assign its interest in this Agreement to a
wholly-owned subsidiary corporation, without obtaining the consent of the
Selling Stockholders; provided, however, that the Purchaser shall remain
primarily liable under this Agreement. Subsequent to the completion of the
Closing, the Selling Stockholders will cooperate with and assist the Company to
the extent possible (and without additional cost to the Selling Stockholders )
to effectuate such merger.
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11.3 Messrs. Carlson and Sorensen Cause the Company and Partnership to
Act. Whenever a provision of this Agreement requires any action to be taken by
the Company or the Partnership, Messrs. Carlson and Sorensen, by their execution
of this Agreement, undertake to cause such action to be taken by the Company or
the Partnership.
XII. TERMINATION PRIOR TO CLOSING
12.1 Mutual Termination. This Agreement may be terminated at any time
prior to Closing by the mutual written consent of the Sellers, and the
Purchaser.
12.2 Termination by Purchaser. This Agreement may be terminated at any
time prior to Closing by Purchaser, if any of the Sellers or the Company shall
(i) fail to perform the obligations required in this Agreement to be performed
by such party on or prior to the Closing Date, or (ii) breach any of the
representations, warranties or covenants of the Sellers contained in this
Agreement, which failure or breach is not cured within ten (10) days after the
Purchaser has notified the breaching party of Purchaser's intent to terminate
this Agreement pursuant to this Section 12.2. This Agreement may also be
terminated by Purchaser if it shall not be able to obtain the consents as set
forth in Section 8.12 on or before December 31, 1998.
12.3 Termination by Sellers. This Agreement may be terminated by the
Sellers if (i) Purchaser has not obtained the consents set forth in Section 8.12
on or before December 31, 1998, (ii) Purchaser shall fail to perform in any
material respect the obligations contained herein required
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to be performed by Purchaser on or prior to the Closing Date, or (iii) Purchaser
shall breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within ten (10) days after the
Sellers have notified the breaching party of the intent of the Sellers to
terminate this Agreement pursuant to this Section 12.3.
12.4 Termination by Purchaser or Sellers. Either the Purchaser or Sellers
may terminate this Agreement if there shall be any order, writ, injunction or
decree of any court or governmental or regulatory agency binding on any party
which prohibits or restrains such party from consummating the transactions
contemplated hereby, or in the event that the transactions contemplated hereby
have not been consummated (other than on account of any default by any party
hereto) on or prior to January 4,1999, or to such later date as the parties may
agree.
XIII. GENERAL PROVISIONS
13.1 Survival of Representations, Warranties, etc. Each of the
representations and warranties, covenants and agreements contained in this
Agreement shall survive for a period of seven (7) years from the Closing Date
(except that the representations and warranties contained in Section 4.27 shall
survive until the applicable tax statutes of limitations relating thereto shall
have run) and any liability relating thereto shall be extinguished with regard
to any indemnification or other claim not made against the Sellers prior to the
seventh anniversary of the Closing Date; provided, however, that claims against
the Sellers based on fraudulent conduct shall not be subject to any such
limitation period.
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13.2 Confidentiality.
(a) Except as required by law, neither the Purchaser nor the
Principal Stockholders will, without the prior written consent of the other
party, divulge, furnish to or make accessible to anyone any knowledge or
information to confidential or secret information (including, without
limitation, customer lists, supplier lists and pricing arrangements with
customers or suppliers) ("Confidential Information").
(b) The Parties agree that if any of them or their representatives
is requested or required (by court order or process) to disclose any of the
Confidential Information, each party will notify the other so that it may seek
any appropriate protective order and/or take any other action. Notwithstanding
the foregoing (i) either party may disclose to any tribunal or other person only
that portion of the Confidential Information with respect to which it is advised
by legal counsel that it is legally required to make such disclosure and shall
use its reasonable efforts to obtain assurance that confidential treatment will
be accorded such Confidential Information; and (ii) the Purchaser may make such
disclosures as it is required under federal securities law in connection with
the preparation and consummation of a private placement offering to investors
and/or the registration of the Purchaser's securities with the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
(c) Any information, which (i) at or prior to the time of disclosure
by any party was generally available to the public through no breach of this
covenant, (ii) was available to the public on a non-confidential basis prior to
its disclosure by any of the parties or (iii) was made available to the public
from a third party provided that such third party did not obtain or disseminate
such information in breach of any legal obligations of the parties, shall not be
deemed Confidential
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Information for purposes hereof, and the undertakings in this covenant with
respect to Confidential Information shall not apply thereto.
13.3 Entire Agreement. This Agreement and the Schedules, Exhibits, lists
and other documents referred to herein constitute the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements, discussions and proposals with respect thereto,
whether written or oral. This Agreement may be modified only by a written
instrument executed by the parties.
13.4 Waiver. The terms and conditions of this Agreement are intended for
the benefit of the respective parties hereto and are not subject to waiver
unless such waiver is expressly set forth in writing. In addition:
(a) No omission or delay in exercising any right or power under this
Agreement or any related agreement or document will be deemed to impair such
right or power or shall be construed as a waiver of same or a waiver of or
acquiescence in any default under this Agreement or any related agreement or
document. Any single or partial exercise of any such right or power shall not
preclude other or further exercise thereof, and no waiver shall be valid unless
in writing and signed by the party making such waiver, and then only to the
extent specified in such writing.
(b) Neither the performance of a due diligence investigation by any
party hereto (including, specifically, and without limiting the scope of the
foregoing, (i) an audit of certain financial statements of the Company performed
on behalf of the Purchaser, and (ii) assistance by representatives of the
Purchaser in the preparation of certain schedules) nor completion of the
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Closing provided for herein shall waive a breach of, or otherwise release or
discharge, any representation or warranty made by any of the Sellers in this
Agreement or in any agreement, schedule, certificate or other document delivered
to the Purchaser pursuant to this Agreement. It is expressly understood that the
representations and warranties of the Sellers set forth in this Agreement are
made by the Sellers and not by any other party, that the Purchaser has a right
to rely on such warranties and representations, and any claims and rights of the
Purchaser resulting from any breach of a representation or warranty are
specifically reserved.
13.5 No Assignment; Exceptions. Except as provided in Sections 10.6 and
11.2, neither the Sellers, nor the Purchaser shall have the authority to assign
any of their respective interests in this Agreement without the prior written
consent of the other; provided, however, that Purchaser may assign or pledge all
or any portion of its rights hereunder as security, without the prior written
consent of Sellers, to any bank or other financial institution providing
financing to Purchaser as set forth in Section 8.2 above. The Sellers shall
execute, and shall cause the Company and Partnership to execute, any documents
reasonably required in order to effect such assignments.
13.6 Benefits of Agreement. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors and assigns. However, it is the intent
of the parties hereto that no third-party beneficiary rights be created or
deemed to exist, and none shall so exist, in favor of any person not a party to
this Agreement, unless otherwise expressly agreed in writing by the parties.
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13.7 Remedies Cumulative. Subject only to the express limitations set
forth in this Agreement, the rights and remedies provided herein shall be
cumulative and shall not preclude any party from asserting any other rights or
seeking any other remedies against the other to which it may otherwise be
entitled by law.
13.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without regard to conflict of
law provisions. The parties agree that any actions or claims arising under this
Agreement shall be brought in a court of general jurisdiction located in Lake
County or a United States District Court in Chicago, Cook County.
13.9 Notices. Any notice, request, instruction or other document required
or permitted to be given hereunder by a party shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid overnight delivery service, addressed as
follows:
If to Sellers:
Robert A. Huntington, Esq.
Goedert & Huntington
1011 Lake Street, Suite 303
Oak Park, IL 60305
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If to Purchaser:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, MD 21740
Attn: Louis LaSorsa, President
Edward Lieberman, Executive Vice President
with a copy to:
Andrew J. Goodman, Esq.
Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
or to such other persons or addresses as may be designated in writing by the
party desiring to receive such notice. If mailed as aforesaid, the day of
mailing shall be deemed to be the date of delivery.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
13.11 Severability. In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
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13.12 Headings. The headings of the various Articles and Sections of this
Agreement, were employed, are for convenience of reference only and shall not be
deemed in any way to modify, interpret or construe the text of this Agreement or
the intent of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on the date and year first above written.
PHOENIX COLOR CORP.
By: /s/ Louis LaSorsa
--------------------------------------
President
/s/ Carl E. Carlson
--------------------------------------
CARL E. CARLSON,
/s/ Wayne L. Sorensen
--------------------------------------
WAYNE L. SORENSEN,
/s/ Donald Davis
--------------------------------------
DONALD DAVIS
/s/ Margaret Davis
--------------------------------------
MARGARET DAVIS
VIKING LEASING PARTNERSHIP,
A General Partnership
/s/ Carl E. Carlson
--------------------------------------
CARL E. CARLSON,
General Partner
/s/ Wayne L. Sorensen
--------------------------------------
WAYNE L. SORENSEN,
General Partner
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EXHIBIT 2.2
ACQUISITION AGREEMENT
dated February 3, 1999 by and among
Phoenix Color Corp.,
and
TechniGraphix, Inc.
Debra A. Barry
and
Jack L. Tiner
<PAGE>
Table of Contents
R E C I T A L S..............................................................5
I. DEFINITIONS............................................................5
1.1 Terms Defined....................................................5
II. PURCHASE AND SALE OF ALL OF THE ISSUED AND OUTSTANDING STOCK
OF THE COMPANY.........................................................8
2.1 Sale of the Shares...............................................8
2.2 Purchase Price and Payment; Additional Payments..................9
2.3 Closing..........................................................9
III. EMPLOYMENT AND OTHER ARRANGEMENTS.....................................10
3.1 Employment Agreement............................................10
IV. REPRESENTATIONS AND WARRANTIES OF THE
WARRANTING PARTIES....................................................10
4.1 Organization and Standing; By-Laws and Minutes..................10
4.2 Capitalization..................................................11
4.3 Ownership and Transfer of Shares; Validity of Agreement.........11
4.4 Financial Statements............................................11
4.5 No Undisclosed Liabilities......................................12
4.6 Books and Records...............................................13
4.7 Accounts Receivable.............................................13
4.8 Inventories.....................................................13
4.9 Real Property Leases............................................13
4.10 Company Equipment...............................................14
4.11 Title to Assets Generally.......................................14
4.12 Contracts Listed; No Default....................................14
4.13 Related Party Transactions......................................16
4.14 Customers and Customer Deposits.................................16
4.15 Employee Benefit Plans..........................................17
4.16 Authorization and Non-Contravention; Consents...................21
4.17 Labor Relations.................................................22
4.18 Insurance.......................................................22
4.19 Intellectual Property...........................................23
4.20 Compliance with Applicable Law..................................23
4.21 Environmental Laws..............................................24
4.22 Litigation......................................................25
4.23 Unlawful Payments...............................................25
4.24 Permits.........................................................26
4.25 Restrictive Covenants...........................................26
4.26 Tax Matters.....................................................26
4.27 Bank Accounts and Powers of Attorney............................28
<PAGE>
4.28 Corporate and Fictitious Names..................................29
4.29 Absence of Certain Recent Changes...............................29
4.30 OSHA............................................................31
4.31 Immigration Matters.............................................32
4.32 Brokers.........................................................32
4.33 Year 2000 Issue.................................................32
4.34 Funded Debt; No Default.........................................32
4.35 No Shareholder Debt.............................................33
V. REPRESENTATIONS OF PURCHASER..........................................33
5.1 Authorization...................................................33
5.2 Organization....................................................33
5.3 Non-Contravention...............................................33
5.4 No Broker.......................................................34
5.5 Regulation D....................................................34
5.6 Reliance on Representations and Warranties......................34
5.7 Capital Adequacy; Insolvency....................................34
VI. CONDUCT PENDING CLOSING; COVENANTS....................................35
6.1 Access and Information..........................................35
6.2 Cooperation and Publicity.......................................36
6.3 Other Proposals to Warranting Parties...........................36
6.4 Notification by Warranting Parties..............................36
6.5 Conduct of Business.............................................37
6.6 Prohibited Activities...........................................38
6.7 Certain Affirmative Covenants...................................40
6.8 Tax Liabilities and Information.................................41
6.9 Termination of Employee Benefit Plans...........................44
6.10 Updated Financial Statements and Disclosure Schedules...........45
6.11 Books and Records to be Kept Current............................45
6.12 Maintenance of Books and Records Post-Closing...................45
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................45
7.1 Termination of Employee Benefit Plans...........................45
7.2 The Company Shares..............................................45
7.3 Officers' Certificates..........................................46
7.4 Opinions of Counsel.............................................46
7.5 No Material Adverse Change......................................46
7.6 Compliance with Covenants.......................................46
7.7 Truth of Representations........................................47
7.8 Consents and Waivers............................................47
7.9 Litigation......................................................47
7.10 Employment Agreement............................................47
7.11 Miscellaneous Documents.........................................48
7.12 Legal Matters...................................................48
<PAGE>
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF WARRANTING
PARTIES...............................................................48
8.1 Truth of Representations........................................48
8.2 Compliance by Purchaser.........................................48
8.3 Litigation......................................................49
8.4 Payment.........................................................49
8.5 Employment and other Agreements.................................49
8.6 Release or Termination of Personal Guarantees...................49
8.7 Consents and Waivers............................................49
8.8 Opinion of Counsel..............................................49
IX. INDEMNIFICATION AND CLAIMS............................................49
9.1 Indemnification by Warranting Parties...........................49
9.2 Indemnification Procedures and Notice...........................52
9.3 Indemnification Successors and Assigns..........................53
X. MISCELLANEOUS MATTERS.................................................53
10.1 Parties to Bear Their Own Expenses; Exceptions..................53
10.2 Purchaser May Assign; Possible Merger...........................54
XI. TERMINATION PRIOR TO CLOSING..........................................54
11.1 Mutual Termination..............................................54
11.2 Termination by Purchaser........................................54
11.3 Termination by Warranting Parties...............................55
11.4 Termination by Purchaser or Warranting Parties..................55
XII. GENERAL PROVISIONS....................................................55
12.1 Survival of Representations, Warranties, etc....................55
12.2 Confidentiality.................................................56
12.3 Entire Agreement................................................57
12.4 Waiver..........................................................57
12.5 No Assignment; Exceptions.......................................58
12.6 Benefits of Agreement...........................................58
12.7 Remedies Cumulative.............................................59
12.8 Governing Law...................................................59
12.9 Notices.........................................................59
12.10 Counterparts....................................................60
12.11 Severability....................................................60
12.12 Headings........................................................60
EXHIBITS
a. Exhibit 1 - Employment Agreement
b. Exhibit 2 - Opinion of Counsel - Dickstein Shapiro Morin & Oshinsky
c. Exhibit 3 - Opinion of Counsel - Bresler Goodman & Unterman, LLP
<PAGE>
SCHEDULES
a. Schedule 4.3 - Ownership and Transfer of Shares; Validity of Agreement
b. Schedule 4.5 - No Undisclosed Liabilities
c. Schedule 4.7 - Accounts Receivable
d. Schedule 4.8 - Inventories
e. Schedule 4.9 - Real Property Leases
f. Schedule 4.10 - Company Equipment
g. Schedule 4.11 - Title to Assets Generally
h. Schedule 4.12 - Contracts Listed; No Default
i. Schedule 4.13 - Related Party Transactions
j. Schedule 4.14 - Customers and Customer Deposits
k. Schedule 4.15 - Employee Benefit Plans
l. Schedule 4.16 - Authorization and Non-Contravention; Consents
m. Schedule 4.17 - Labor Relations
n. Schedule 4.18 - Insurance
o. Schedule 4.19 - Intellectual Property
p. Schedule 4.21 - Environmental Laws
q. Schedule 4.22 - Litigation
r. Schedule 4.24 - Permits
s. Schedule 4.25 - Restrictive Covenants
t. Schedule 4.26 - Tax Matters
u. Schedule 4.27 - Bank Accounts and Powers of Attorney
v. Schedule 4.28 - Corporate and Fictitious Names
w. Schedule 4.29 - Absence of Certain Recent Changes
x. Schedule 4.30 - OSHA
y. Schedule 4.31 - Immigration Matters
z. Schedule 4.34 - Funded Debt; No Default
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (the "Agreement"), dated February 3, 1999 among
Phoenix Color Corp., a Delaware corporation ( the "Purchaser"), Jack L. Tiner
and Debra A. Barry (the "Warranting Parties") and TechniGraphix, Inc., a
Maryland corporation (the "Company").
R E C I T A L S
A. Debra A. Barry beneficially owns and holds of record all of the issued
and outstanding shares of capital stock (the "Shares") of the Company;
B. The Warranting Parties are active in the management of the Company,
which is engaged in the business of producing and supplying "print on
demand" books;
C. Debra A. Barry desires to sell and the Purchaser desires to buy all of
the issued and outstanding shares, subject to the terms and conditions of
this Agreement; and
D. The parties desire to set forth in this Agreement the terms and
conditions of such sale and purchase, and to enter into the other
agreements and arrangements provided for herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises, covenants, representations and warranties made herein, THE PARTIES
AGREE AS FOLLOWS:
I. DEFINITIONS
1.1 Terms Defined. As used in this Agreement, the following terms have the
following respective meanings:
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Agreement - As defined in the initial paragraph of this Agreement.
Balance Sheet - As defined in Section 4.7 of this Agreement.
Balance Sheet Date - Means September 30, 1998.
Bankruptcy Code - As defined in Section 5.7 of this Agreement.
Closing - As defined in Section 2.3 of this Agreement.
Closing Date - As defined in Section 2.3 of this Agreement.
Code - Internal Revenue Code of 1986, and any regulations
thereunder, as amended as of the date hereof.
Company - As defined in the Preamble to this Agreement.
Confidential Information - As defined in Section 12.2 of this
Agreement.
Employment Agreement - As defined in Section 3.1 of this Agreement.
Environmental Laws - Any and all applicable Federal, foreign, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances, codes
and decrees relating to pollution, protection of the environment, or the impact
of pollutants, contaminants or toxic or hazardous substances on human health or
the environment.
Equipment - As defined in Section 4.10 of this Agreement.
ERISA - Defined as the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated pursuant thereto, as amended from time to time.
Facility - Means the premises occupied by the Company's production
facility located at 22977 Eaglewood Court, Dulles, Virginia 20166.
Financial Statements - As defined in Section 4.4 of this Agreement.
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Funded Debt - As defined in Section 4.34 of this Agreement.
GAAP - Means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
Hazardous Material - Petroleum products (including gasoline, diesel
fuel, and heating oil) and any substances designated as hazardous or toxic
waste, hazardous or toxic material, hazardous or toxic substances or similar
term, under any Environmental Law.
Knowledge - Means the actual knowledge of such individual.
Indemnified Losses - As defined in Section 9.1 of this Agreement.
Material Adverse Change - A material adverse change with respect to
a party or the Company shall mean, (a) any material adverse change (both before
and after giving effect to the transactions contemplated by this Agreement) with
respect to the business, assets, properties, financial condition, stockholders'
equity, contingent liabilities, prospects, material agreements or results of
operations of such party or the Company, or (b) any fact or circumstance that,
singly or in the aggregate with any other fact or circumstance, has a reasonable
likelihood of resulting in or leading to (i) a material adverse change described
in clause (a), (ii) the inability of such party or the Company to perform in any
material respect its obligations hereunder or the inability of a party to
enforce in any material respect its rights purported to be granted hereunder or
under any other agreement among the parties, or (iii) a material adverse change
in the ability of such party or the Company to effect (including hindering or
unduly delaying) the transactions contemplated by this Agreement on the terms
contemplated hereby.
Pension Plan - As defined in Section 4.15(b) of this Agreement.
Plan(s) - As defined in Section 4.15(a) of this Agreement.
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Post-Closing Returns - As defined in Section 6.8(b) of this
Agreement.
Post-Retirement Benefits - As defined in Section 4.15(g) of this
Agreement.
Purchase Price - Means $6,800,000.
Purchaser - As defined in the Preamble to this Agreement.
Purchaser Indemnitee(s) - As defined in Section 9.1 of this
Agreement.
"Section 338 Adjustment" - Means an amount such that the Seller
derives proceeds, after reduction for all taxes imposed on the Seller solely by
reason of the sale of the Shares and receipt of the sales proceeds, in the
amount which the Seller would have derived as a result of such sale, after
reduction for all Taxes imposed on the Seller solely by reason of such sale, if
the election described in Section 6.8(d) were not made. The Section 338
Adjustment shall be determined based on tax returns prepared by Seller and shall
be increased (grossed up) to include all taxes imposed on Seller by reason of
the receipt of the Section 338 Adjustment.
Seller - Debra A. Barry.
Shares - As defined in the Recitals to this Agreement.
Warranting Parties - As defined in the Preamble to this Agreement.
Warranting Parties Indemnitee(s) - As defined in Section 9.1 of this
Agreement.
Welfare Plan - As defined in Section 4.15(b) of this Agreement.
Year 2000 Problem - As defined in Section 4.33 of this Agreement.
II. PURCHASE AND SALE OF ALL OF THE ISSUED
AND OUTSTANDING STOCK OF THE COMPANY
2.1 Sale of the Shares. Subject to all of the terms and conditions of this
Agreement,
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Seller agrees to sell and Purchaser agrees to buy all of the issued and
outstanding Shares, but not less than all of the issued and outstanding Shares.
2.2 Purchase Price and Payment; Additional Payments.
(a) The Purchase Price shall be paid at closing.
(b) The Section 338 Adjustment shall be paid within three (3)
business days after Purchaser receives notice from Seller that Seller
intends to actually make payment within ten days solely on account of the
election described in Section 6.8(d). In the event that Purchaser fails to
make payment as required herein, interest will accrue at the prime rate
charged by First Union Bank until paid.
2.3 Closing. The closing for the sale and purchase of the business of the
Company shall take place at the offices of the attorneys for Purchaser at 10:00
a.m. on February 12, 1999 (the "Closing Date"). At the Closing:
(a) Seller will deliver to the Purchaser, free and clear of all
liens, claims, charges and encumbrances, certificates representing, in the
aggregate, all of the Shares, which shall be validly issued, duly endorsed for
transfer to the Purchaser or accompanied by valid stock powers or other
instruments of transfer duly executed, and accompanied by all requisite stock
transfer tax stamps;
(b) the Company and Mr. Tiner will deliver the executed Employment
Agreement;
(c) the Purchaser will deliver the Closing Payment to Seller;
(d) the Purchaser and the Warranting Parties will execute and
deliver to each other all other agreements, certificates, consents, opinions of
counsel, documents and other items
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required to be delivered pursuant to Article VIII and any other applicable
provisions of this Agreement; and
(e) the parties will deliver all other documents and take all other
actions required to be delivered or taken at the Closing in accordance with this
Agreement.
III. EMPLOYMENT AND OTHER ARRANGEMENTS
3.1 Employment Agreement. At the Closing, the Purchaser will enter into a
two-year employment agreement with Jack L. Tiner (the "Employment Agreement") on
the terms and conditions and in the form set forth as Exhibit 1, annexed to this
Agreement and made part hereof, and Mr. Tiner by his signature to this
Agreement, confirms that he will execute and deliver the Employment Agreement.
IV. REPRESENTATIONS AND WARRANTIES OF THE
WARRANTING PARTIES
The Warranting Parties jointly and severally represent and warrant to the
Purchaser, and the Purchaser is relying materially thereon in entering into this
Agreement, as follows:
4.1 Organization and Standing; By-Laws and Minutes. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland. The Company has all requisite corporate power to carry
on its business as it is now being conducted, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary under applicable law, except where the
failure to qualify would not result in any Material Adverse Change. The Company
has no subsidiaries and
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its only place of business is within the Commonwealth of Virginia. The copies of
the Certificate of Incorporation and the by-laws of the Company, delivered to
the Purchaser, are true and complete copies of these documents as amended and
now in effect. The corporate minutes of the Company as presented for inspection
by the Purchaser are current, accurate and complete in all material respects.
4.2 Capitalization. The authorized capital stock of the Company consists
of 100,000 shares of voting common stock, $0.10 par value, of which 10,000
shares are issued and outstanding, as of the date hereof. Except as set forth in
this Section 4.2, there is no other authorized class, series or unit of
securities of any kind evidencing a proprietary interest in the Company. None of
the shares of the Company has been issued in a manner giving rise to claims for
violation of the securities laws of any jurisdiction.
4.3 Ownership and Transfer of Shares; Validity of Agreement.
(a) All of the Shares are fully paid, duly and validly issued and of
record and beneficially owned by the Seller. Except as set forth in Sellers
Disclosure Schedule 4.3 annexed to this Agreement, there is no option, warrant,
call, convertible security, preemptive right or commitment of any kind relating
to unissued shares of the capital stock of the Company. The Company owns no
shares of capital stock or other interest in any corporation, partnership,
association or other entity.
(b) This Agreement constitutes the valid and binding obligation of
Warranting Parties enforceable against each of them in accordance with its
terms, except as may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws or by legal or equitable principles
relating to or limiting creditors' rights generally.
4.4 Financial Statements. The Warranting Parties have provided unaudited
financial
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statements of the Company for the years ended December 31, 1996, and 1997, and
for the nine months ended September 30, 1998 including a balance sheet as of
each such date (such unaudited financial statements being referred to
collectively as the "Financial Statements"). Each of the Financial Statements
has been prepared in accordance with GAAP applied on a basis consistent with
prior periods, except for footnote disclosures and, in the case of any interim
unaudited financial statements, normal year end accounting adjustments; each is
accurate and complete, except for footnote disclosures and, in the case of any
interim unaudited financial statements, normal year end accounting adjustments,
and presents fairly the financial condition of the Company as of the respective
dates indicated and the results of its operations and cash flows for the
respective periods indicated.
4.5 No Undisclosed Liabilities. Sellers Disclosure Schedule 4.5 lists all
material liabilities of the Company (defined, for purposes of this Section 4.5,
as any single item in excess of $5,000, whether accrued, absolute, contingent or
otherwise) as of the Balance Sheet Date. Except as set forth in Sellers
Disclosure Schedule 4.5, to the Knowledge of the Warranting Parties, the Company
is not subject to any material liability (defined, for purposes of this Section
4.5, as any single item in excess of $5,000), whether absolute, contingent,
accrued or otherwise, other than (i) liabilities of the same nature as those set
forth in Disclosure Schedule 4.5 which were incurred by the Company in the
ordinary course of business after the Balance Sheet Date, (ii) liabilities
arising under existing agreements to which the Company is a party (excluding
liabilities arising on account of breaches by the Company of such existing
agreements which breaches are not disclosed in the Sellers Disclosure Schedule),
and (iii) other liabilities disclosed in the Sellers Disclosure Schedule. Except
as disclosed herein, the Company has no material unrealized or anticipated
losses, in excess
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of $10,000 for a single item.
4.6 Books and Records. The books of account and other records of the
Company are true, accurate and complete in all material respects and have been
consistently maintained from period to period in accordance with GAAP applied on
a consistent basis.
4.7 Accounts Receivable. The accounts receivable of the Company (i) are
reflected in the balance sheet of the Company as of the Balance Sheet Date (the
"Balance Sheet") (except those accounts receivable collected since the Balance
Sheet Date), (ii) are listed in Sellers Disclosure Schedule 4.7 (which sets
forth the accounts receivable on the books of the Company, together with an
aging schedule as of the Balance Sheet Date), (iii) have been generated in the
ordinary course of business, and (iv) reflect bona fide obligations for the
payment of goods or services provided by the Company. Except as set forth on
Seller's Disclosure Schedule 4.7, to the Knowledge of the Warranting Parties,
the amounts reflected in such accounts receivable are expected to be fully
collected in the ordinary course of business, except to the extent reserved
against explicitly in the Balance Sheet.
4.8 Inventories. The inventories of the Company reflected in the Balance
Sheet and listed in Sellers Disclosure Schedule 4.8 are in good, merchantable
and usable condition, have been reflected in the Balance Sheet at cost, and
include no obsolete or discontinued items, or items which have failed any
quality testing, in each case except as set forth in Sellers Disclosure Schedule
4.8 and except to the extent reserved against in the Balance Sheet. Except as
set forth in Sellers Disclosure Schedule 4.8 , such inventories are located and
maintained at the Facility, and are owned free and clear of any liens,
encumbrances, charges or claims of others.
4.9 Real Property Leases. The Company is a tenant in the Facility under
the lease
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agreement listed in Sellers Disclosure Schedule 4.9, and such lease agreement is
in full force and effect. The Company is not in default in the performance of
any provision of such lease. Except as set forth in Sellers Disclosure Schedule
4.9, the Company has not collaterally assigned or encumbered its interest under
such lease and is current in its payment of rent and other charges due under
such lease. To the Knowledge of the Warranting Parites, the use by the Company
of the real property leased by it has not violated and does not violate any
local zoning or similar land use laws.
4.10 Company Equipment. Sellers Disclosure Schedule 4.10 lists each item
of the Company's machinery and equipment (the "Equipment") with an original cost
on the books of the Company in excess of $1,000 per item. All of such Equipment
is owned by the Company, free and clear of any liens, charges, encumbrances or
security interests, except as set forth in Sellers Disclosure Schedule 4.10 and
4.11. Except as set forth in Seller's Disclosure Schedule 4.10, with respect to
any Equipment held by the Company under an equipment lease with unaffiliated
third parties, to the Knowledge of the Warranting Parties, such equipment lease
is in full force and effect and the Company is not in default thereunder. Except
as set forth in Seller's Disclosure Schedule 4.10, the Company has not
undertaken any action which, with the giving of notice or the passage of time or
both, would result in a default under any lease of Equipment. The Equipment is
in good operating condition and repair (ordinary wear and tear excepted) and is
suitable for use in the ordinary course of business of the Company. The
machinery is sufficient to operate the business of the Company as currently
conducted.
4.11 Title to Assets Generally. Except as stated in Sellers Disclosure
Schedule 4.11, the Company holds good and marketable title to its assets as
reflected on the Balance Sheet and to all assets and properties whose ownership
has been acquired by the Company after the Balance Sheet
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<PAGE>
Date (except assets sold or consumed in the ordinary course of business
subsequent to the Balance Sheet Date ), free and clear of all adverse claims,
liens, mortgages, charges, security interests, encumbrances or restrictions.
4.12 Contracts Listed; No Default. Sellers Disclosure Schedule 4.12
contains a complete and correct list as of the date hereof of all agreements,
contracts and commitments of the following types, written or oral, to which the
Company is a party or by which the Company or any of its properties is bound as
of the date hereof: (i) mortgages, indentures, security agreements, letters of
credit, loan agreements and other agreements, guarantees and instruments
relating to the borrowing of money or extension of credit; (ii) employment,
consulting, severance and agency agreements; (iii) collective bargaining
agreements; (iv) bonus, profit-sharing, compensation, stock option, stock
purchase, pension, severance, retirement, deferred compensation or other plans,
trusts or funds for the benefit of employees, officers, agents or, directors
(whether or not legally binding); (v) sales agency, manufacturer's
representative or distributorship agreements; (vi) agreements, orders or
commitments for the purchase of raw materials, supplies or finished products
exceeding $2,500 per month and for the sale or other disposition of any waste
products, garbage or by-products, exceeding $2,500 per month; (vii) agreements,
orders or commitments, if any, for the sale of products exceeding $2,500 per
month; (viii) licenses of intellectual property, transfer of technology or know
how and other intellectual property rights; (ix) confidentiality agreements,
including agreements binding any of the Company's employees; (x) agreements or
commitments for capital expenditures in excess of $2,500 for any single project
(it being warranted that all undisclosed agreements or commitments for capital
projects do not exceed $10,000 in the aggregate for all projects); (xi)
brokerage or finder's agreements; (xii) stockholders' agreements and any
agreements
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restricting the transfer of any of the shares of the Company; (xiii) joint
venture and partnership agreements; (xiv) leases for real and personal property;
and (xv) other agreements, contracts and commitments which in any case involve
payments or receipts of more than $2,500 per month. The Warranting Parties have
made available to the Purchaser complete and correct copies of all such written
agreements, contracts and commitments, together with all amendments thereto, and
provided accurate descriptions of all oral agreements listed in Sellers
Disclosure Schedule 4.12. All agreements, contracts and commitments referred to
in this Section 4.12 are in full force and effect in accordance with their
respective terms and, to the Knowledge of the Warranting Parties, there does not
exist thereunder as of the date hereof any default by the Company, any other
party thereto, or any event or condition which, after notice or lapse of time or
both, would constitute a default thereunder on the part of the Company, or any
other party thereto. The Company has not granted any powers of attorney, except
routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction, and except as set forth in Section 4.27.
4.13 Related Party Transactions. Except as set forth in Sellers Disclosure
Schedule 4.13, the Company has not made any loans to any officer, director,
shareholder or employee of the Company, outstanding on the date of this
Agreement, nor entered into any agreement or arrangement with any such person,
or with a parent, child, spouse or sibling of such person, in which such person
or any of such relatives has a material direct or indirect economic interest in
such arrangement or agreement, other than compensation arrangements in keeping
with the usual and customary practices of the Company.
4.14 Customers and Customer Deposits. Set forth in Sellers Disclosure
Schedule 4.14
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is a true and complete list of customers and customer deposits shown on the
Balance Sheet, indicating for each customer the date on which the deposit was
received, the amount of each deposit, the product(s) ordered, the total purchase
price for each such product, the current stage of production and the estimated
delivery date for the product(s) ordered. Except as therein set forth, each of
the customer deposits represents a bona fide customer order for a product or
products that the Company reasonably believes can be delivered in accordance
with the specifications and upon the terms agreed to with the customer. The
Company is not engaged in any material dispute with any customer, and the
entering into and performance of this Agreement is not expected to result in any
Material Adverse Change in the business relationship between the Company and its
customers.
4.15 Employee Benefit Plans. With respect to each employee benefit plan of
the Company:
(a) Sellers Disclosure Schedule 4.15 sets forth all pension,
savings, retirement, health, insurance, severance and other employee benefit or
fringe benefit plans, within the meaning of Section 3(3) of ERISA, maintained
currently with respect to the business of the Company (referred to herein as the
"Plan" or "Plans"). With respect to each of the Plans, the Warranting Parties
have delivered to the Purchaser copies of: (i) Plan documents, and, where
applicable, related trust agreements, and any related agreements which are in
writing; (ii) Summary Plan Descriptions; (iii) the most recent Internal Revenue
Service ("IRS") determination letter relating to each Plan for which a letter of
determination was obtained; (iv) to the extent required to be filed, the most
recent Annual Report (Form 5500 Series and accompanying schedules of each Plan
and applicable financial statements) as filed with the IRS; and (v) audited
financial statements, if any.
(b) Except as set forth in Sellers Disclosure Schedule 4.15, (i) in
all material
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respects, each Plan conforms to, and its administration is in compliance with,
all applicable requirements of law, including, without limitation ERISA and the
Code and all rules and regulations promulgated pursuant thereto, and (ii) all of
the Plans are in full force and effect as written, and all premiums,
contributions and other payments required to be made by the Company under the
terms of any pension plan as defined in Section 3(2) of ERISA (a "Pension Plan")
or welfare plan as defined in Section 3(1) of ERISA (a "Welfare Plan") have been
made. To the Knowledge of the Warranting Parties, there are no Plan defects
whether by plan, instrument or operation thereof, which would make any of the
Plans eligible for any IRS voluntary compliance programs, including the IRS
Voluntary Compliance Resolution Program (VCR), Standardized VCR Program, Closing
Agreement Program (CAP), and/or Walk-In CAP.
(c) Except as set forth in Sellers Disclosure Schedule 4.15, each
Plan maintained by the Company with respect to its business that is a Pension
Plan is qualified under Section 401(a) of the Code, and a favorable
determination letter has been issued by the IRS with respect to each such
qualified Pension Plan. No Plan maintained by the Company that is a Welfare Plan
is funded through a voluntary employee beneficiary association as defined in
Section 501(c)(9) of the Code.
(d) The Company has never had nor does it currently have any Pension
Plan that is a "defined benefit plan" within the meaning of Section 3(35) of
ERISA.
(e) Except as set forth in Sellers Disclosure Schedule 4.15, there
are no multiemployer plans (as defined in Subsection 3(37) of ERISA) in which
the Company or any other trade or business under common control (within the
meaning of Section 414(b) or (c) of the Code) has ever participated or to which
a contribution or other payment is required.
(f) Except as set forth in Sellers Disclosure Schedule 4.15 or as
required by
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COBRA, no Pension Plan has been terminated since January 1, 1996 in a
termination which will result in any liability to be incurred by the Company
under Title IV of ERISA. Except as indicated in Sellers Disclosure Schedule
4.15, none of the Pension Plans that are subject to Title IV of ERISA has been
partially terminated or have been the subject of a "reportable event" as defined
in Section 4043 of ERISA. No proceedings by the Pension Benefit Guaranty
Corporation ("PBGC") to terminate any of the Pension Plans pursuant to Subtitle
C of Title IV of ERISA have been instituted or threatened. All required premiums
have been paid to the PBGC with respect to all Pension Plans.
(g) Except as set forth in Sellers Disclosure Schedule 4.15 or as
required by COBRA, the Company does not maintain any plan providing
post-retirement benefits other than pension benefits provided under a Pension
Plan qualified under Section 401(a) of the Code ("Post-Retirement Benefits").
The Company is not liable for Post-Retirement Benefits under any plan not
maintained by it. The Company has complied in all material respects with the
requirements of Section 4980B of the Code and Sections 601 to 608 of ERISA
relating to continuation coverage for group health plans.
(h) Except as disclosed in Sellers Disclosure Schedule 4.15, each
Plan has filed all required reports, documents and notices with the IRS, the
United States Department of Labor and the PBGC.
(i) There are no investigations, proceedings, or lawsuits pending
or, to the Knowledge of the Warranting Parties, threatened against any Plan by
any administrative agency, whether local, state or federal.
(j) Other than routine employee claims for benefits, there are no
lawsuits or other claims pending or, to the best Knowledge of the Warranting
Parties threatened against any Plan,
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the Company or any fiduciary (within the meaning of Section 3(21)(A) of ERISA)
of a Plan brought on behalf of any participant, beneficiary or any such
fiduciary thereunder, nor is there any reasonable basis for any such claim.
(k) All amendments required to have been made prior to the date
hereof to comply with applicable law (whether required by reason of the
enactment of legislation or otherwise) have been adopted with respect to each
Plan.
(l) With respect to each Plan, to the Knowledge of the Warranting
Parties, (A) no nonexempt "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA has occurred, and (B) no income has
been received that constitutes "unrelated business taxable income" within the
meaning of Section 512 of the Code or "unrelated debt-financed income" within
the meaning of Section 514 of the Code.
(m) To the Knowledge of the Warranting Parties, all applicable
local, state and federal income tax withholding obligations have been satisfied
with respect to all benefits paid under each Plan.
(n) Except as set forth in Sellers Disclosure Schedule 4.15:
(i) on or before the Closing Date, the Board of Directors of
the Company shall adopt a resolution to terminate the
Company's Profit Sharing Plan effective upon the Closing
Date, the Company will issue a termination notice to
such effect prior to the Closing Date;
(ii) as soon as practicable after the Closing Date, the
Company shall make any and all filings and submissions
then required under the Code or ERISA to the appropriate
governmental agencies necessary
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in connection with such termination; and
(iii) as soon as practicable after the Closing Date, the
Company shall direct the trustees of the Profit Sharing
Plan to distribute any vested account balances to each
plan participant, as provided thereunder.
4.16 Authorization and Non-Contravention; Consents. Each of the Warranting
Parties has full right, power and authority to enter into and to perform this
Agreement. Except as set forth in Sellers Disclosure Schedule 4.16, each
consent, authorization, order or approval of or filing or registration with, any
governmental authority required in connection with the execution, delivery and
performance of this Agreement by any of the Warranting Parties has been or by
the Closing Date will be obtained, and the execution and delivery of this
Agreement and the performance thereof by any of the Warranting Parties does not
and will not:
(a) violate any provision of the charter or bylaws of the Company or
any law, order, arbitration award, judgment or decree to which either of them is
a party or by which they or any of their properties are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the properties of the Company pursuant to, any provision of any
mortgage, lien, lease, agreement, permit, indenture, license or instrument to
which any of the Warranting Parties or the Company is a party or by which any of
them or the Company's properties are bound and which is material to the business
of the Company as now conducted; or,
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(c) to the Knowledge of the Warranting Parties, violate or conflict
with any other material restriction of any kind or character to which the
Company is subject or by which any of its properties may be bound.
4.17 Labor Relations. Except as described in Sellers Disclosure Schedule
4.17, there are no agreements with, or pending petitions for recognition of, a
labor union or association as the exclusive bargaining agent for any or all of
the Company's employees; no such petitions have been pending at any time within
five years of the date of this Agreement, and, to the Knowledge of the
Warranting Parties, there has not been any organizing effort by any union or any
other group seeking to represent any employees of the Company as their exclusive
bargaining agent at any time within five years of the date of this Agreement;
and there are no labor strikes, work stoppages or other labor troubles now
pending or, to the Knowledge of the Warranting Parties, threatened against the
Company, nor have there been any such labor strikes, work stoppages or other
labor troubles at any time within five years of the date of this Agreement.
4.18 Insurance. Set forth in Sellers Disclosure Schedule 4.18 is a true,
correct and complete listing of all insurance policies or binders of insurance
which relate to the Company's business. Except as set forth in Sellers
Disclosure Schedule 4.18:
(a) the coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company;
(b) there are no programs of self-insurance relating to the
Company's business;
(c) there are no pending or unpaid claims under any such insurance
policy; and
(d) to the Knowledge of the Warranting Parties, no event has
occurred which
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reasonably might form the basis of any claim against the Company relating to its
business or operations or any of their assets or properties covered by any of
the policies or binders set forth in such Schedule.
4.19 Intellectual Property. Sellers Disclosure Schedule 4.19 sets forth a
true and complete list, including, where applicable, the date of application,
date of registration, date of issuance, date of termination, serial or
registration number of each patent, trademark or copyright of all intellectual
property which is related, to the Knowledge of the Warranting Parties, to the
business of the Company, and describes the extent of the interest of the Company
and, to the Knowledge of the Warranting Parties, any third party therein. Except
as stated in such Schedule, the right, title or interest of the Company in any
intellectual property is free and clear of adverse claims, liens, mortgages,
charges, security interests and encumbrances or other restrictions or
limitations of any kind. The Company owns or has the legal right to use all
intellectual property necessary for the non-infringing design, manufacture, use
or sale, as the case may be, of all of the products, components of products and
services which it, in its business as currently conducted, manufactures, uses or
sells. Except as set forth in such Schedule, to the Knowledge of the Warranting
Parties, the Company has not, within the time period as to which liability is
not barred by statute, infringed or misappropriated any intellectual property of
another, received from another any notice or claim in respect thereto, committed
any acts of unfair competition, or received from another any notice or claim in
respect thereto.
4.20 Compliance with Applicable Law. To the knowledge of the Warranting
Parties, the Company is, in the conduct of its business and with respect to the
properties owned or used by it, currently in compliance with all foreign,
federal, state or local laws, statutes, ordinances,
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regulations and permits.
4.21 Environmental Laws. Except as set forth in Sellers Disclosure
Schedule 4.21, to the Knowledge of the Warranting Parties:
(a) The Company is and at all times has been in compliance with the
Environmental Laws;
(b) the Company (i) has operated the Facility and has at all times
received, handled, used, stored, treated, shipped and disposed of all Hazardous
Material in compliance with the Environmental Laws, and (ii) has removed (or
will remove prior to the Closing) from the Facility all Hazardous Material
accumulated or stored at the Facility in compliance with the Environmental Laws;
(c) no work, repairs, construction or capital expenditures with
respect to the Facility are necessary in order to bring it into compliance with
or avoid violation of any Environmental Laws;
(d) no Hazardous Material has been released by the Company into the
environment or deposited, discharged, placed or disposed of at, on or near the
Facility, nor has the Facility been used at any time by any person as a landfill
or a waste disposal site;
(e) no notices of any violation of any of the matters referred to in
subsections (a) through (d) above relating to the Facility or its use have been
received by the Company, and there are no outstanding writs, injunctions,
decrees, orders or judgments or pending or threatened lawsuits, claims,
proceedings or investigations relating to the ownership, use, maintenance or
operation of the Facility, nor is there any basis for the institution or filing
of such lawsuits, claims, proceedings or investigations;
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(f) there are no monitoring wells at the Facility for monitoring
hazardous leachate or other Hazardous Materials or releases;
(g) there are no subsurface tanks situated at the Facility;
(h) there is no evidence of PCB contamination from any power
transformer, capacitor or any other source at the Facility;
(i) there is no asbestos-containing material at the Facility; and
(j) there is no fact or circumstance that would reasonably be
expected to give rise to any future civil, criminal or administrative
proceedings against them under any Environmental Laws.
4.22 Litigation. Except as set forth in Sellers Disclosure Schedule 4.22,
there is no action, suit, proceeding or investigation pending or, to the
Knowledge of the Warranting Parties, threatened against the Company, and there
are no facts known to either of the Warranting Parties which would reasonably be
expected to serve as the basis for any such action, suit, proceeding or
investigation; and the Company is not in default in respect of any judgment,
order, writ, injunction or decree of any court or any federal, state, local or
other governmental department, commission, board, bureau, agency or
instrumentality.
4.23 Unlawful Payments. The Company has not, directly or indirectly, made
any of the following payments: (i) illegal political contributions, (ii)
payments from corporate funds not recorded or falsely recorded on its books and
records, (iii) payments from corporate funds to governmental officials in their
individual capacities for the purpose of obtaining favorable treatment in
securing business or licenses or to obtain special concessions, or (iv) illegal
payments from corporate funds to obtain or retain business.
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4.24 Permits. Sellers Disclosure Schedule 4.24 lists all permits,
licenses, orders and approvals held by the Company and designates those the
issuance or renewal of which is currently pending, and the Company holds all
permits, licenses, orders and approvals of all foreign, federal, state or local
governmental or regulatory bodies required to conduct its business as currently
conducted; to the Knowledge of the Warranting Parties, all such permits,
licenses, orders and approvals are in full force and effect, and no suspension
or cancellation of any of them is threatened; and to the Knowledge of the
Warranting Parties, none of such permits, licenses, orders or approvals will be
adversely affected by the consummation of the transactions contemplated in this
Agreement.
4.25 Restrictive Covenants. Except as set forth on Sellers Disclosure
Schedule 4.25, the Company is not a party to any agreement, contract or covenant
limiting its freedom in competing in any line of business or with any person or
other entity in any geographic area.
4.26 Tax Matters.
(a) Except as set forth in Sellers Disclosure Schedule 4.26:
(i) All federal, state and local income, payroll, sales, use,
transfer, franchise, recordation and other tax returns, and all
reports of estimated federal, state and local taxes, required to be
filed to date by or on behalf of the Company, have been duly filed
on a timely basis, and each such tax return and report of estimated
taxes is true, complete and correct in all material respects. All
taxes shown on such returns or otherwise payable with respect
thereto (the term "tax" or "taxes" for purposes of this Agreement
being deemed to include interest, penalties and related charges)
have been paid in full on a timely basis (unless otherwise indicated
in such Schedule), and no other taxes are payable by the Company
with respect to items or periods covered by
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such returns (whether or not shown on or reportable on such
returns). The Company has withheld and paid over all taxes required
to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party. There are no liens on any of the
assets of the Company with respect to taxes, other than liens for
taxes not yet due and payable or for a tax liability that the
Company is contesting in good faith through appropriate proceedings
and for which appropriate reserves have been established, as set
forth in Sellers Disclosure Schedule 4.26. The Company is not
currently the beneficiary of any extension of time to file any
return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file returns that it may be
subject to tax by that jurisdiction.
(ii) Purchaser has been furnished by the Warranting Parties or the
Company with true and complete copies of (A) all tax audit reports,
statements of deficiencies, and closing or other agreements received
by the Company relating to taxes, and (B) all federal, state and
local income, franchise or other tax returns for the Company, in
each case for all periods ending on and after December 31, 1995. The
Company has not done and is not doing business and has not derived
and is not deriving income from activities conducted (except to the
extent protected by P.L. 86-272) in any state, local, territorial or
foreign taxing jurisdiction other than those for which all tax
returns have been furnished to Purchaser.
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(iii) Except as set forth in Schedule 4.26, the returns of the
Company have not been audited by a government or taxing authority,
nor is any such audit in process or pending, nor has any notice of
audit been received. Except as set forth in Schedule 4.26, no
deficiencies exist, and no deficiencies have been asserted. The
Company has not received notice that it has failed to file a return
or pay taxes required to be filed or paid by it. The Company is not
a party to any action or proceeding for assessment or collection of
taxes, and no such action or proceeding has been asserted against
the Company or any of its assets. No waiver or extension of any
statute of limitations is in effect with respect to taxes or returns
of the Company.
(iv) The Company is not, nor has it been, a party to any tax-sharing
agreement or arrangement.
(v) The Company is not a "consenting corporation" under Section
341(f) of the Code. The Company has not entered into any
compensatory agreements with respect to the performance of services
which payment thereunder would result in a nondeductible expense
pursuant to Section 28OG of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code. The
Company has not agreed, nor is it required to make any adjustment
under Code Section 481(a) by reason of a change in accounting method
or otherwise.
(b) [Intentionally deleted]
4.27 Bank Accounts and Powers of Attorney. Sellers Disclosure Schedule
4.27 lists the name of each bank, savings and loan, or other financial
institution, in which the Company has an account, including cash contribution
accounts or safe deposit boxes, the names of all persons
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authorized to draw thereon or to have access thereto, and the names of any
persons holding powers of attorney with respect to the business of the Company
and a summary of the terms thereof.
4.28 Corporate and Fictitious Names. Except as disclosed in Sellers
Disclosure Schedule 4.28, the Company has not been known by or used any other
corporate or fictitious name.
4.29 Absence of Certain Recent Changes. Except as disclosed in Sellers
Disclosure Schedule 4.29, to the Knowledge of the Warranting Parties, since the
Balance Sheet Date, the Company has conducted its operations only in the
ordinary and usual course of business, in a manner consistent with past and
present practices (including without limiting the foregoing practices concerning
the maintenance of the Equipment) and has not:
(a) suffered any loss or prospective loss of one or more dealers,
suppliers or customers, or altered any contractual arrangement with any one or
more of its dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would be likely to result in a Material
Adverse Change;
(b) made any capital expenditure or commitments for the acquisition
or construction of any single item of property, plant or equipment in excess of
$10,000;
(c) amended or terminated any lease, contract or material commitment
to which the Company is a party except in the ordinary course of business;
(d) entered into any transaction in excess of $10,000 which is not
in the ordinary course of business or otherwise inconsistent with the past
practices or conduct of the business of the Company;
(e) except as provided in subsection (n) below, declared, set aside
or paid any dividend or other distribution in respect of the Shares;
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(f) sold any accounts receivable, disposed of any inventories other
than in the ordinary course of business or accrued any liabilities not in the
ordinary course of business;
(g) changed any material accounting principle, material procedure or
material practice followed by the Company or the method of applying such
principle, procedure or practice;
(h) incurred any indebtedness for borrowed money, except for
indebtedness incurred in the ordinary course of business;
(i) created, assumed or permitted to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind on any of its properties
or assets;
(j) to the Knowledge of the Warranting Parties, permitted the
occurrence or continuance of any default under any agreement;
(k) acquired the securities or substantially all of the assets of
any other entity;
(l) merged or consolidated with any entity;
(m) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare plan
for the employees of the Company;
(n) increased the rate of compensation payable or to become payable
to the Company's officers or employees or increased the amounts paid or payable
to such officers or employees under any Plan, or made or increased any
arrangements made for or with any of such officers or employees for the payment
of any bonus or profit-sharing amounts; provided, however, that (y) amounts
payable to the Warranting Parties as year-end bonuses under the Company's 401K
plan and any related drawing account, in accordance with prior Company practice,
shall not constitute a prohibited payment under this clause (n) (provided that
Purchaser has consented thereto, such consent not to be unreasonably withheld or
delayed), and (z) amounts payable to Seller as a
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distribution to enable her to pay taxes on her 1998 and 1999 income from the
Company shall not constitute a prohibited payment under this clause (n);
(o) entered into any employment or similar contract with any officer
or employee;
(p) except as contemplated by the Agreement amended in any material
respect or terminated any Plan or agreement concerning employee benefits or
compensation or made awards or distributions under any such Plan or agreement
not consistent with past practice or custom except as contemplated herein; and
(q) entered into any contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contains a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of any
rights in any intellectual property, or (B) contains a promise made by or to it
to pay any lump sum or royalty or other payment or consideration with respect to
the acquisition, practice or use of any intellectual property.
4.30 OSHA. Except as otherwise provided in Sellers Disclosure Schedule
4.30, during the five years immediately prior to the date of this Agreement, the
Company has not been cited for any violations of the Occupational Safety and
Health Act of 1970, as amended, nor, to the Knowledge of the Warranting Parties,
are there any citations pending as a result of inspections of the Company for
noncompliance with such Act. Except as otherwise provided in such Schedule, each
of the conditions which resulted in the issuance of a citation has been abated
or otherwise corrected to the satisfaction of the Occupational Safety and Health
Administration as of the date of this Agreement.
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4.31 Immigration Matters. Except as set forth in Sellers Disclosure
Schedule 4.31, the Company has properly completed and maintained Forms I-9 on
all persons who became employed by the Company for the past three years, and any
alien employee of the Company is employed pursuant to a valid temporary work
authorization. Such Schedule lists the names of any alien employees who are
required to have temporary work authorizations, the date of their employment and
their job titles and responsibilities, and attached to such Schedule is the Form
I-9 for each such person.
4.32 Brokers. Other than Ryan, Lee & Company, no finder, broker, or agent
(i) has acted for or on behalf of Warranting Parties or the Company in
connection with negotiation or consummation of this Agreement or the
transactions contemplated hereby or (ii) is entitled to any commission or
finders fee in connection therewith. Payment to Ryan, Lee & Company and any
claim by any other finder, broker or agent acting on behalf of the Warranting
Parties shall be the obligation of the Warranting Parties.
4.33 Year 2000 Issue. The Company has reviewed the areas within its
business and operations which are within its direct control, which could be
materially adversely affected by, and has developed or is developing a program
to address on a timely basis, the risk that certain computer applications used
by the Company in such areas may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). To the Knowledge of the Warranting Parties, the Year
2000 Problem will not result in any Material Adverse Change to the Company or
its operations.
4.34 Funded Debt; No Default. The aggregate principal amount of funded
indebtedness (including all long-term indebtedness, and current portions
thereof, for borrowed money of the
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Company owed as of the Closing Date and all amounts due under capitalized leases
(the "Funded Debt") is listed in Sellers Disclosure Schedule 4.34.
4.35 No Shareholder Debt. Neither the Seller nor the Warranting Parties
owe any debt or obligation to the Company, except to the extent as accrued as
against any income tax obligation of the Seller.
V. REPRESENTATIONS OF PURCHASER
The Purchaser represents and warrants to the Seller acknowledging
that she is materially relying thereon in entering into this Agreement, as
follows:
5.1 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly approved by the Purchaser's Board of Directors. The
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate such
transactions in accordance with the terms and conditions of this Agreement. This
Agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws or by legal or equitable principles relating to or limiting
creditors' rights generally.
5.2 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.3 Non-Contravention. The execution, delivery and performance of this
Agreement by Purchaser do not and will not (i) conflict with the charter or the
by-laws of Purchaser, (ii) violate
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any order, writ, injunction, or decree applicable to Purchaser or (iii) result
in any breach or termination of, or constitute a default under, or constitute an
event which, with notice or lapse of time, or both, would become a default
under, or create any rights of termination, cancellation, or acceleration in any
person under, any contract, agreement, arrangement, commitment, license, lease,
easement, permit, right of way or understanding or violate any provisions of any
laws, ordinances, rules or regulations to which Purchaser is a party or by which
Purchaser or any of its assets, business or operations is bound; provided,
however, that Purchaser is required to obtain the consent of First Union
National Bank and First Union Investors to its Closing of the transactions
contemplated by this Agreement.
5.4 No Broker. No finder, broker, or agent has acted for or on behalf of
Purchaser in connection with negotiation or consummation of this Agreement or
the transactions contemplated hereby or is entitled to any commission or finders
fee in connection therewith. Any claim by any such finder, broker or agent
acting on behalf of the Purchaser shall be the obligation of the Purchaser.
5.5 Regulation D. Purchaser is an Accredited Investor within the meaning
of Regulation D of the United States Securities and Exchange Commission.
5.6 Reliance on Representations and Warranties. In completing the
transactions contemplated in accordance with this Agreement, Purchaser has not
and is not relying on any representation or warranty of any Warranting Party or
the Company which is not expressly stated in this Agreement.
5.7 Capital Adequacy; Insolvency. Purchaser represents that, subject to
the accuracy of the Company's representations and warranties herein, immediately
after the sale of the Shares and
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the other transactions contemplated herein, the Company (and any successor
company), will have a positive net worth (calculated in accordance with GAAP)
and will not be insolvent (as defined under the U.S. Bankruptcy Code (the
"Bankruptcy Code") and in equity) and that the sale of the Shares and other
transactions contemplated hereby and any borrowing by Purchaser or related
entities (including the incurring of any obligation or granting of any security
by the Company or any successor company) in connection with such transactions
will not have the effect of hindering, delaying or defrauding any creditors of
the Company (or any successor company). Purchaser further represents that (A)
upon consummation of the sale of the Shares and within the meaning of Section
548 of the Bankruptcy Code, the Company (and any successor company) (i) will
have adequate capitalization, (ii) will not have an unreasonably small capital
with respect to the business or transactions engaged in or to be engaged in,
(iii) will not incur debts that would be beyond the ability of the Company or
any successor company's ability to pay as such debts mature, and (B) the
Purchase Price is a reasonably equivalent value in exchange for the Shares.
VI. CONDUCT PENDING CLOSING; COVENANTS
6.1 Access and Information. From the date of this Agreement until the
Closing:
(a) The Warranting Parties shall cause the Company to permit
Purchaser and Purchaser's counsel, accountants, investment bank, commercial bank
and other representatives full access during normal business hours and upon
reasonable notice to all of the properties, assets, books, records, files,
agreements, and other documents of the Company for purposes of inspecting and
appraising same;
(b) The Warranting Parties shall furnish to Purchaser and its
representatives all
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information with respect to the Company as Purchaser may reasonably request; and
(c) The Purchaser shall not contact any provider, supplier or other
person having dealings with the Company without the Company's consent, which
shall not be unreasonably withheld.
6.2 Cooperation and Publicity. From the date of this Agreement until the
Closing, the Warranting Parties will cause the Company and its officers and
employees to cooperate with Purchaser and its representatives in planning for
the post-Closing operations of the Company and Purchaser on a combined basis,
including the possible merger or consolidation of the Company with the
Purchaser. In addition, the Warranting Parties and Purchaser will consult with
each other before making any public announcements with respect to the
transactions contemplated hereby, and any public announcements shall be made
only at such time and in such manner as the Warranting Parties, and Purchaser
shall mutually agree.
6.3 Other Proposals to Warranting Parties. From the date of this Agreement
until the Closing (provided that this Agreement has not been terminated pursuant
to Article XI hereof), the Warranting Parties will not, directly or indirectly,
whether through representatives or otherwise, solicit or encourage any written
inquiries or proposals for the acquisition of all or substantially all of the
assets or the business of the Company, and each Warranting Party will promptly
inform Purchaser of any unsolicited offers from third parties for the purchase
of the shares of the Company or the purchase of its assets.
6.4 Notification by Warranting Parties. Each of the Warranting Parties
shall give prompt notice to Purchaser of:
(a) any notice or other communication received by him or the
Company, or any
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occurrence or state of facts of which he or it shall become aware, subsequent to
the date of this Agreement and prior to the Closing Date, which would cause any
representation or warranty of the Warranting Parties to be or become untrue or
misleading under this Agreement, or which relate to a default (or event which
with notice or lapse of time or both would become a default) under any contract,
agreement or instrument to which the Company is a party or by or to which either
the Company or the Warranting Parties or any of their respective property is
bound or subject; and
(b) Any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
this Agreement and the performance thereof.
6.5 Conduct of Business. From the date of this Agreement until the Closing
Date, the Warranting Parties will cause the business conducted by the Company to
be operated in the ordinary and usual course of business, in a manner consistent
with past and current practices, and in compliance with the terms of this
Agreement. Without limiting the generality of the foregoing, the Warranting
Parties shall cause the Company to:
(a) preserve intact its business, organization and relationships
with employees, agents, customers and others having business dealings with it;
(b) complete or maintain in full force and effect all existing
contracts in the ordinary course of business;
(c) preserve its goodwill;
(d) pay all of its respective accounts payable and other obligations
as they become due and in the ordinary course of business;
(e) maintain in force its respective existing insurance policies;
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(f) observe all commitments and perform all obligations imposed on
the Company under any contract, arrangement or understanding or required under
any applicable statute, regulation, ruling, decree, judgment or directive; and
(g) properly maintain, service and repair all of the Company's
Equipment in accordance with good industry practice.
6.6 Prohibited Activities. From the date of this Agreement until the
Closing Date, the Warranting Parties shall take all measures necessary to ensure
that the Company will not, without Purchaser's express written consent:
(a) issue, sell or contract to sell any stock, notes, bonds, or
other securities, or any option to purchase the same, or enter into any
agreement with respect thereto;
(b) amend the charter or bylaws of the Company;
(c) redeem, repurchase, or otherwise acquire any interest in the
Company or any Shares or securities convertible into or exchangeable for such
Shares or enter into any agreement to do so;
(d) initiate any legal proceedings, including suits and
administrative proceedings in either the United States or foreign countries;
provided, however, that if any such proceeding is commenced without such
consent, the Warranting Parties will be responsible for the costs and expenses
(including attorneys fees) of such proceeding and any adverse judgment or award
rendered as a result thereof;
(e) suffer Material Adverse Change;
(f) suffer any loss or prospective loss of one or more dealers,
suppliers or customers, or alter any contractual arrangement with any one or
more of such dealers, suppliers or
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customers, the loss or alteration of which, either individually or in the
aggregate, would be likely to result in a Material Adverse Change;
(g) make any capital expenditures or commitments for the acquisition
or construction or lease of any single item of property, plant, machinery or
equipment in excess of $2,500; and, for more than a single item, in excess of
$10,000 in the aggregate;
(h) except in the ordinary course of business, amend or terminate
any lease, contract or material commitment to which the Company is a party;
(i) except as set forth in subsection (r) below, declare, set aside
or pay any dividend or other distribution in respect of the capital stock of the
Company;
(j) sell any accounts receivable, dispose of any inventories other
than in the ordinary course of business or accrue any liabilities not in the
ordinary course of business;
(k) change any material accounting principle, material procedure or
material practice followed by the Company or the method of applying such
principle, procedure or practice;
(l) incur any indebtedness for borrowed money;
(m) create, assume or permit to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind on any of the properties or assets
of the Company;
(n) incur or, to the Knowledge of the Warranting Parties, continue
any default under any agreement for Funded Debt;
(o) acquire the securities or substantially all of the assets of any
other entity;
(p) merge or consolidate with any entity other than Purchaser;
(q) sell any assets other than in the ordinary course of business of
the Company;
(r) increase the rate of compensation payable or to become payable
to the
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Company's officers or employees or increase the amounts paid or payable to such
officers or employees under any Plan, or make or increase any arrangements for
the payment of any bonus or profit-sharing amounts provided, however, that (y)
amounts payable to the Warranting Parties as year-end bonuses under the
Company's 401K plan, and any related drawing account, in accordance with prior
Company practice, shall not constitute a prohibited payment under this clause
(r)(provided that Purchaser has consented thereto, such consent not to be
unreasonably withheld or delayed), and (z) amounts payable to Seller as
distribution to enable her to pay taxes on her 1998 and 1999 income from the
Company, shall not constitute a prohibited payment under this clause (r);
(s) enter into any employment or similar contract with any officer
or employee;
(t) adopt, amend in any material respect or terminate any Plans,
severance plan or agreement or collective bargaining agreement or make awards or
distributions under any such plan or agreement, except as otherwise contemplated
by Section 6.9 hereof;
(u) enter into any material contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and loans or security agreements) concerning any rights in any
Intellectual Property;
(v) make any change in the nature of the business conducted by the
Company;
(w) agree, whether in writing or otherwise, to take any action
described in this Section 6.6; and
(x) file any amended tax returns, original tax returns after the due
date thereof, or enter into any tax settlement or closing agreements with any
federal, state or local tax authority.
6.7 Certain Affirmative Covenants. Prior to the Closing Date, each party,
with the
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cooperation of the other parties where appropriate, shall:
(a) comply promptly with all filing requirements, if any, which
foreign, federal or state law may impose on the execution, delivery and
performance of this Agreement; and
(b) use their best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or other third party.
6.8 Tax Liabilities and Information.
(a) The Warranting Parties shall cause the Company to prepare and
timely file all tax returns and amendments thereto and reports of estimated
taxes required to be filed by them on or before the Closing Date. The time for
filing such returns and reports will not be extended without Purchaser's
consent, and, if such late filing occurs or such an extension is obtained (as to
which Purchaser shall be informed in each case) without Purchaser's consent, the
Warranting Parties shall be responsible for any interest, penalties or
assessments or other costs resulting from such late filing or extension.
Purchaser shall have a reasonable opportunity to review such returns, reports
and amendments thereto prior to filing, and, if Purchaser shall make specific
objection thereto, such return, report or amendment shall be corrected to
incorporate such objection. From the date of this Agreement until the Closing
Date, the Warranting Parties will cause the Company to pay and discharge all
taxes, assessments and governmental charges upon or against them or any of their
properties or assets, including liabilities for estimated tax payments, and all
interest and penalties, except to the extent and as long as:
(i) the same are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause
any adverse effect upon the condition (financial or otherwise) or
operations of the Company; and
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(ii) the Company shall have set aside on its books reserves
(segregated to the extent required by sound accounting practice) in
the amount demanded from the Company, together with interest and
penalties relating thereto, if any.
Between the date of this Agreement and the Closing Date, the Warranting Parties
shall give Purchaser and its authorized representatives full access to all tax
returns and estimated tax reports of the Company, whether in their possession or
in the possession of third parties. The Warranting Parties and the Company
shall, as of the Closing Date, terminate all tax allocation agreements and shall
ensure that such agreements are of no further force or effect.
(b) With respect to the Company's tax returns and reports required
to be prepared and filed after the Closing Date for any period ending on or
prior to the Closing Date ("Post-Closing Returns"): (i) the Warranting Parties
will prepare, sign and timely file (at the Company's expense) all Post-Closing
Returns, and, for this purpose, shall have access after the Closing Date to the
appropriate tax and financial records of the Company as set forth in subsection
(f) of this Section 6.8; (ii) the Purchaser shall have a reasonable opportunity
to review such returns prior to the filing thereof; and (iii) in addition to any
taxes payable by the Purchaser pursuant to Section 6.8(c), any taxes shown by
the Post-Closing Returns to be payable in the ordinary course shall be the
responsibility of the Company. In preparing any such returns, the books of the
Company shall be closed as of the close of business on the Closing Date and any
transactions occurring after the Closing on the Closing Date that are outside
the ordinary course of business shall be deemed to occur on the day after the
Closing Date. Neither the Company nor Purchaser shall amend any such tax return
nor shall either of them take any position inconsistent with such tax return or
any future tax return.
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(c) Notwithstanding any other provision of this Agreement to the
contrary, if, as the result of any tax audit, examination, or proceeding by any
tax authority, any deficiency, assessment, interest or penalty is asserted
(whether before or after the Closing) against the Company with respect to any
period prior to and through the Closing Date, any liability in respect thereof
(including, in addition to tax, penalty and interest, any legal and accounting
fees related thereto) shall be the responsibility of the Warranting Parties (and
not the obligation of the Company or the Purchaser) to the extent that any such
deficiency, assessment, interest or penalty exceeds the tax benefit received by
Purchaser or the Company with respect to the item which is the subject of such
tax audit, examination or proceeding provided, however, that the Warranting
Parties shall not, and the Purchaser shall, be liable for any tax obligation of
the Company or Seller to the federal government, the Commonwealth of Virginia,
the State of Maryland or any other taxing authority by reason of the Purchaser
having made an election under the provisions of Section 338 of the Code with
respect to the manner in which the Purchaser elected to treat the transaction
described in this Agreement.
(d) The Purchaser shall be responsible for preparing and filing any
of the Company tax returns required for any period commencing on or after the
Closing Date, and for any tax liabilities in connection therewith. Without
limiting the generality of the foregoing, the Purchaser shall make an election
as permitted under Section 338 of the Code and shall provide all such
information as may be required by Section 338(h)(10) of the Code and otherwise,
to effect the elections.
(e) The Purchaser and the Warranting Parties agree to furnish or
cause to be furnished to each other, as promptly as practicable, such
information and assistance relating to the
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Company as is reasonably necessary for the preparation and filing of any return,
claim for refund or other required or optional filings relating to tax matters,
for the preparation for and proof of facts during any tax audit, for the
preparation for any tax protest, for the prosecution or defense of any suit or
other proceeding relating to tax matters and for the answer to any governmental
or regulatory inquiry relating to tax matters.
(f) The Purchaser agrees to retain possession of all accounting,
business, financial and tax records and information (i) relating to the Company
and which are in existence on the Closing Date and are transferred to the
Purchaser hereunder and (ii) coming into existence after the Closing Date which
relate to the Company before the Closing Date, for a period not to exceed six
years from the Closing Date. In addition, from and after the Closing Date, the
Purchaser agrees that it will not unreasonably withhold access by the Warranting
Parties and their attorneys, accountants and other representatives (after
reasonable notice and during normal business hours and with reasonable charge),
to such books, records, documents and any or all other information relating to
the Company as the Warranting Parties and may reasonably deem necessary to
prepare for, file, prove, answer, prosecute and/or defend any such return,
filing, audit, protest, claim, suit, inquiry or other proceeding.
6.9 Termination of Employee Benefit Plans. On or before the Closing Date,
the Warranting Parties will cause the Board of Directors of the Company to pass
a resolution to terminate, effective as of to the Closing Date, the Profit
Sharing Plan, and such termination shall be accomplished without requiring any
contributions or payments after the Closing Date by the Company or Purchaser;
provided, however, that if notice prior to termination is required to be given
by the Profit Sharing Plan, and such notice is duly given in accordance with
this Agreement, the
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effective date of termination shall be as set forth in such notice.
6.10 Updated Financial Statements and Disclosure Schedules. On the Closing
Date, the Warranting Parties will cause the Company to prepare and deliver to
Purchaser an amended Sellers Disclosure Schedule updated to reflect current
information as of the Closing Date.
6.11 Books and Records to be Kept Current. From the date of this Agreement
until the Closing Date, the Warranting Parties shall cause the Company to keep
its books and records current and to safeguard and maintain such books and
records and other corporate documents, so that such books, records and documents
will be available to the Purchaser from and after the Closing.
6.12 Maintenance of Books and Records Post-Closing. Purchaser will
preserve all books and records of the Company received from the Seller, or held
by the Company immediately after the Closing, and provide the Seller or her
agents reasonable access to such books and records for a period of six (6) years
following the Closing Date, or until such later date as preservation of and
access to those books and records is no longer required by any governmental or
similar body.
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated in
this Agreement is subject to the fulfillment of each of the following
conditions:
7.1 Termination of Employee Benefit Plans. The Warranting Parties shall
have delivered certified resolutions to terminate the Profit Sharing Plan
effective as of the Closing Date without obligation to Purchaser.
7.2 The Company Shares. Seller shall have delivered certificates for the
Shares, free and clear of all liens, encumbrances, charges and claims, which
Shares, as of the Closing Date, shall
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be duly and validly issued and fully paid and non-assessable, and which shall
constitute all, and not less than all, of the issued and outstanding shares of
the Company.
7.3 Officers' Certificates. The Warranting Parties shall have delivered
the following certificates, dated as of the Closing Date:
(a) a certificate duly executed by the Secretary of the Company,
certifying as to the incumbency and signatures of the officers of the Company,
as to copies of the charter and by-laws and good standing certificates of the
Company, and as to all director or shareholder resolutions required in
connection with the consummation of the transactions contemplated by this
Agreement; and
(b) a certificate executed by the respective Warranting Parties to
the effect that the representations and warranties of the Warranting Parties
made under this Agreement are true and correct in all material respects at and
as of the Closing Date, and that the Warranting Parties have complied with or
performed all conditions, and have caused the Company to comply with and perform
all conditions, required to be performed by each of them on or prior to the
Closing Date in accordance with this Agreement.
7.4 Opinions of Counsel. The Purchaser shall have receive an opinion,
dated as of the Closing Date, from Dickstein Shapiro Morin & Oshinsky, counsel
to the Warranting Parties and counsel to the Company, in the form annexed hereto
as Exhibit 2.
7.5 No Material Adverse Change. No Material Adverse Change in the
business, operations, earnings, assets or financial condition of the Company,
shall have occurred prior to the Closing.
7.6 Compliance with Covenants. The Warranting Parties and the Company
shall have
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duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing.
7.7 Truth of Representations. The representations and warranties of the
Warranting Parties contained in this Agreement shall have been true and correct
in all material respects when made, and shall also be true and correct in all
material respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing.
7.8 Consents and Waivers. At the Closing, all consents, authorizations,
orders or approvals required for the closing of the transactions contemplated in
this Agreement hereof shall have been obtained, including without limitation the
consent of First Union National Bank in accordance with a Credit Agreement
between such bank and Purchaser dated as of September 15, 1998.
7.9 Litigation. At the Closing, (i) there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction restraining
or prohibiting the consummation of the transactions provided for herein or
limiting in any manner Purchaser's right to control the Company or any aspect of
their business or requiring the sale or other disposition of any of their
operations or making such consummation unduly burdensome to the Purchaser, and
(ii) no proceeding or lawsuit shall have been commenced and be pending or be
threatened by any governmental or regulatory agency or any other person with
respect to such consummation which Purchaser, in good faith and with the advice
of counsel, believes is likely to result in any of the foregoing or which seeks
the payment of substantial damages by the Company or Purchaser.
7.10 Employment Agreement. The Employment Agreement described in Section
3.1
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shall have been executed and delivered by Jack Tiner.
7.11 Miscellaneous Documents. The Warranting Parties shall have caused the
Company to deliver certificates of good standing for the jurisdictions in which
the Company is incorporated, and in which it is qualified to do business, as
well as such resolutions, consents and other confirmatory documents and
instruments reasonably requested by Purchaser's counsel.
7.12 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the Warranting
Parties with respect to the Company, under the provisions of this Agreement, and
all other actions and proceedings required to be taken by or on behalf of the
Warranting Parties in furtherance of the transactions contemplated hereby, shall
be reasonably satisfactory in form and substance to counsel for the Purchaser.
VIII. CONDITIONS PRECEDENT TO
OBLIGATIONS OF WARRANTING PARTIES
The obligation of the Warranting Parties to consummate the transactions
contemplated in this Agreement is subject to the fulfillment of each of the
following conditions:
8.1 Truth of Representations. The representations and warranties made by
Purchaser shall be true and correct in all material respects and shall be deemed
to have been made again on and as of the Closing Date and the Warranting Parties
shall receive a certificate executed by the President of the Purchaser to that
effect.
8.2 Compliance by Purchaser. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by the Purchaser
on or before the Closing Date shall have been complied with and performed in all
respects.
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8.3 Litigation. No action or proceeding shall have been instituted or
shall have been threatened to restrain or prohibit any of the transactions
contemplated hereby.
8.4 Payment. The Purchaser shall have tendered payment of the Closing
Payment in accordance with the terms of this Agreement.
8.5 Employment and other Agreements. The Purchaser shall have executed the
Employment Agreement provided for in Article III above.
8.6 Release or Termination of Personal Guarantees. The Purchaser shall
have delivered instruments releasing any personal guarantees or shall have paid
in full the Funded Debt secured by any such personal guarantees.
8.7 Consents and Waivers. At the Closing, all consents, authorizations,
orders or approvals required from Purchaser for the closing of the transactions
contemplated in this Agreement hereof shall have been obtained, including,
without limitation, the consent of First Union National Bank in accordance with
that certain Credit Agreement between such bank and Purchaser dated as of
September 15, 1998.
8.8 Opinion of Counsel. The Warranting Parties shall have received an
opinion, dated as of the Closing Date, from Bresler Goodman & Unterman, LLP,
counsel to Purchaser, in the form annexed hereto as Exhibit 3.
IX. INDEMNIFICATION AND CLAIMS
9.1 Indemnification by Warranting Parties.
(a) Subject to the provisions of Section 12.1 of this Agreement as
to the survival of representations, warranties, covenants and agreements and the
limitations set forth in this Section
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9.1, the Warranting Parties hereby jointly and severally agree to indemnify
Purchaser and its directors, officers, employees, agents and affiliates (any of
the foregoing being referred to as a "Purchaser Indemnitee" or collectively, as
"Purchaser Indemnitees") from and against any loss, liability, damage,
obligation or expense whether absolute or accrued, including interest, penalties
and reasonable attorneys fees and expenses (collectively, "Indemnified Losses")
incurred in the investigation or defense of, or in asserting the rights of, the
Purchaser Indemnitees hereunder, incurred and arising directly or indirectly by
reason of or in connection with:
(i) the inaccuracy or breach of any representation or warranty by
the Company or any Warranting Party set forth in this Agreement or
in any certificate or other document furnished by Warranting Parties
or the Company pursuant to this Agreement;
(ii) the nonperformance or breach of any covenant, agreement or
obligation of any of the Warranting Parties or the Company, which is
contained in this Agreement, including, but not limited to the
nonperformance of the obligations of the Warranting Parties set
forth in Section 6.8 above;
(iii) any tax liability (of any kind whatsoever) of the Company or
any of the Warranting Parties (including any interest and penalty)
resulting from or in connection with any breach of the
representations contained in Section 4.26 or nonperformance of the
obligations of the Warranting Parties and the Company set forth in
Section 6.8 excluding any tax liability caused by or resulting from
any Section 338 Adjustment;
(iv) the litigation matter set forth on Schedule 4.22; provided,
that the Warranting
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Parties shall be entitled to control the defense of such matter; and
(v) any obligation or liability arising or resulting from the
termination of the Profit Sharing Plan and any liability or
obligation resulting from any failure by the Company to have made
any contributions, pay any premiums or take any steps required by
applicable laws or regulations in connection with such Plan prior to
the Closing.
(b) Purchaser shall indemnify the Warranting Parties and their
respective affiliates, successors, heirs and legal representatives (any of the
foregoing being referred to as a "Warranting Parties' Indemnitee" or
collectively, as the "Warranting Parties' Indemnitees") from and against
Indemnified Losses incurred in the investigation or defense of, or in asserting
the rights of, the Warranting Parties' Indemnitees hereunder, incurred and
arising directly or indirectly by reason of any of the following:
(i) the breach of any representation or warranty made by Purchaser
set forth in this Agreement or in any certificate or other
document furnished by Purchaser pursuant to this Agreement;
and
(ii) the nonperformance or breach of any covenant, agreement or
obligation of Purchaser, which is contained in this Agreement;
(c) Notwithstanding anything to the contrary provided herein, the
liability of the Warranting Parties under this Agreement shall be limited as
follows:
(i) the Warranting Parties shall have no liability hereunder to
indemnify the Purchaser for Indemnified Losses unless the
aggregate of all such Indemnified Losses exceed Twenty-Five
Thousand Dollars ($25,000); and
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(ii) the aggregate liability of the Warranting Parties after
Closing for Indemnified Losses shall not exceed Five Hundred
Thousand Dollars ($500,000), except for any default or breach
of the obligations in Section 12.2 for which there shall be no
limitation of liability.
(d) Except in the case of the actual, willful or intentional fraud
on the part of either of the Warranting Parties with respect to the
representations and warranties contained in this Agreement, the sole recourse
and exclusive remedy of Purchaser, the Company and the Warranting Parties
against each other arising out of this Agreement or any certificate delivered in
connection with this Agreement, or otherwise arising from Purchaser's
acquisition of the Shares, shall be to assert a claim for indemnification under
the indemnification provisions of Article IX, and that, except to the extent
Purchaser has asserted a claim for indemnification prior to the applicable
expiration date set forth in Section 12.1, Purchaser shall have no remedy
against the Warranting Parties for any breach of a representation or warranty
made by them in this Agreement.
9.2 Indemnification Procedures and Notice.
(a) If any event which may give rise to any Indemnified Losses
occurs or is alleged, and any Indemnitee asserts that the Indemnitor(s) have or
one of them has become obligated to such Indemnitee pursuant to Section 9.1, or
if any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Indemnitors or one of them may become
obligated to any Indemnitee under any provision, term or condition of this
Agreement, such Indemnitee shall give written notice thereof to the Indemnitors
or one of them. The Indemnitor(s) shall thereafter defend, contest or otherwise
protect the Indemnitee against any such suit, action, investigation, claim or
proceeding at the sole cost and expense of the Indemnitor(s). The Indemnitee
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shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Indemnitee's choice and shall in any
event cooperate with and assist the Indemnitor(s) in the defense of any such
suit, action, investigation, claim or proceeding to the extent reasonably
possible. If the Indemnitor(s) fail timely to defend, contest or otherwise
protect any Indemnitee against such suit, action, investigation, claim or
proceeding, the Indemnitee shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and the
Indemnitee shall be entitled to recover the entire cost thereof from the
Indemnitor(s) including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
(b) Subject to the limitations set forth in Section 9.1(c), if, at
any time after the notice and other procedures provided for in the preceding
subparagraph are undertaken, an Indemnitee will be required to pay any
Indemnified Losses, and if the Indemnitor(s) have been unable or have failed to
pay, settle or eliminate such Indemnified Losses, the affected Indemnitee shall
be entitled to payment of the full amount of such Indemnified Losses.
9.3 Indemnification Successors and Assigns. All of the rights and
obligations of the Warranting Parties, the Purchaser and any Purchaser
Indemnitee or Warranting Parties Indemnitees pursuant to this Article IX shall
survive any sale, assignment or other transfer by the Purchaser of title to or
interest in the Company or any assets of the Company, and shall apply to and
bind each and every successor and assign of the Purchaser.
X. MISCELLANEOUS MATTERS
10.1 Parties to Bear Their Own Expenses; Exceptions. The parties will be
responsible
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for their own legal fees, advisory fees and other expenses incurred by them,
respectively, in connection with the preparation of this Agreement and the
consummation of the transactions contemplated herein, as well as all personal
federal, state and local tax liabilities incurred in connection with such
transactions.
10.2 Purchaser May Assign; Possible Merger. Purchaser has informed
Warranting Parties that it is considering merging the Company into Purchaser. In
connection therewith, Purchaser may assign its interest in this Agreement to a
wholly-owned subsidiary corporation, without obtaining the consent of the
Warranting Parties; provided, however, that the Purchaser shall remain primarily
liable under this Agreement for the Post-Closing Payments. Notwithstanding
anything to the contrary provided herein, Purchaser shall indemnify Seller and
Warranting Parties for any adverse tax consequences of any such merger or
assignment.
XI. TERMINATION PRIOR TO CLOSING
11.1 Mutual Termination. This Agreement may be terminated at any time
prior to Closing by the mutual written consent of the Warranting Parties, and
the Purchaser.
11.2 Termination by Purchaser. This Agreement may be terminated at any
time prior to Closing by Purchaser, if any of the Warranting Parties or the
Company shall (i) fail to perform the obligations required in this Agreement to
be performed by such party on or prior to the Closing Date, or (ii) breach any
of the representations, warranties or covenants of the Warranting Parties
contained in this Agreement, which failure or breach is not cured within ten
(10) days after the Purchaser has notified the breaching party of Purchaser's
intent to terminate this Agreement pursuant to this Section 11.2.
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11.3 Termination by Warranting Parties. This Agreement may be terminated
by the Warranting Parties if (i) the transactions contemplated hereby have not
been consummated within three (3) calendar weeks from the date hereof, (ii)
Purchaser shall fail to perform in any material respect the obligations
contained herein required to be performed by Purchaser on or prior to the
Closing Date, or (iii) Purchaser shall breach any of its representations,
warranties or covenants contained herein, which failure or breach is not cured
within ten (10) days after the Warranting Parties have notified the breaching
party of the intent of the Warranting Parties to terminate this Agreement
pursuant to this Section 11.3.
11.4 Termination by Purchaser or Warranting Parties. Either the Purchaser
or Warranting Parties may terminate this Agreement if there shall be any order,
writ, injunction or decree of any court or governmental or regulatory agency
binding on any party which prohibits or restrains such party from consummating
the transactions contemplated hereby, or in the event that the transactions
contemplated hereby have not been consummated (other than on account of any
default by any party hereto) on or prior to February 24, 1999.
XII. GENERAL PROVISIONS
12.1 Survival of Representations, Warranties, etc. Each of the
representations and warranties, covenants and agreements contained in this
Agreement shall survive for a period of two (2) years from the Closing Date
(except that the representations and warranties contained in Sections 4.3, 4.11,
4.15 and 4.26 shall survive until the applicable statutes of limitations
relating thereto shall have run) and any liability relating thereto shall be
extinguished with regard to any indemnification or other claim not made against
the Warranting Parties prior to the second anniversary of the Closing
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Date; provided however claims against the Warranting Parties based on actual,
willful and intentional fraud in respect of the warranties and representations
contained in this agreement shall not be subject to any such limitation period.
12.2 Confidentiality.
(a) Neither the Purchaser nor any Warranting Party will, without
consent, except as required by law or regulation, divulge, furnish to or make
accessible to anyone any knowledge or information to confidential or secret
information (including, without limitation, customer lists, supplier lists and
pricing arrangements with customers or suppliers) ("Confidential Information").
(b) The Parties agree that if any of them or their representatives
is requested or required (by court order or process) to disclose any of the
Confidential Information, each party will notify the other so that it may seek
any appropriate protective order and/or take any other action. Notwithstanding
the foregoing (i) either party may disclose to any tribunal or other person only
that portion of the Confidential Information with respect to which it is advised
by legal counsel that it is legally required to make such disclosure and shall
use its reasonable efforts to obtain assurance that confidential treatment will
be accorded such Confidential Information; and (ii) the Purchaser may make such
disclosures as it is required under federal securities law in connection with
the preparation and consummation of a private placement offering to investors
and/or the registration of the Purchaser's securities with the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
(c) Any information, which (i) at or prior to the time of disclosure
by any party was generally available to the public through no breach of this
covenant, (ii) was available to the public on a non-confidential basis prior to
its disclosure by any of the parties or (iii) is or was known
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or independently developed by any party without the reliance on any Confidential
Information or (iv) was made available to the public from a third party provided
that such third party did not obtain or disseminate such information in breach
of any legal obligations of the parties, shall not be deemed Confidential
Information for purposes hereof, and the undertakings in this covenant with
respect to Confidential Information shall not apply thereto.
12.3 Entire Agreement. This Agreement and the Schedules, Exhibits, lists
and other documents referred to herein constitute the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements, discussions and proposals with respect thereto,
whether written or oral. This Agreement may be modified only by a written
instrument executed by the parties. Without limiting the generality of the
foregoing, the Warranting Parties make no other representations with respect to
the Shares or the Company other than as specifically provided in this Agreement,
and all warranties (except as provided) including those of merchantability and
of fitness, whether express or implied, are specifically excluded (except as
provided).
12.4 Waiver. The terms and conditions of this Agreement are intended for
the benefit of the respective parties hereto and are not subject to waiver
unless such waiver is expressly set forth in writing. In addition:
(a) No omission or delay in exercising any right or power under this
Agreement or any related agreement or document will be deemed to impair such
right or power or shall be construed as a waiver of same or a waiver of or
acquiescence in any default under this Agreement or any related agreement or
document. Any single or partial exercise of any such right or power shall not
preclude other or further exercise thereof, and no waiver shall be valid unless
in writing and
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signed by the party making such waiver, and then only to the extent specified in
such writing.
(b) Neither the performance of a due diligence investigation by any
party hereto (including, specifically, and without limiting the scope of the
foregoing, (i) an audit of certain financial statements of the Company being
performed on behalf of the Purchaser, and (ii) assistance by representatives of
the Purchaser in the preparation of certain schedules) nor completion of the
Closing provided for herein shall waive a breach of any representation or
warranty made by any of the Warranting Parties in this Agreement or in any
agreement, schedule, certificate or other document delivered to the Purchaser
pursuant to this Agreement except to the extent that Purchaser had actual
knowledge of such breach prior to Closing but did not advise the Warranting
Parties in writing of such breach prior to Closing. It is expressly understood
that the representations and warranties of the Warranting Parties set forth in
this Agreement are made by the Warranting Parties and not by any other party,
and any claims and rights of the Purchaser resulting from any breach of a
representation or warranty are specifically reserved.
12.5 No Assignment; Exceptions. Except as provided in Sections 9.3 and
10.2, neither the Warranting Parties, nor the Purchaser shall have the authority
to assign any of their respective interests in this Agreement without the prior
written consent of the other; provided, however, that Purchaser may assign or
pledge all or any portion of its rights hereunder as security, without the prior
written consent of Warranting Parties, to any bank or other financial
institution providing financing to Purchaser. The Warranting Parties shall
execute, and shall cause the Company to execute, any documents reasonably
required in order to effect such assignments.
12.6 Benefits of Agreement. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors
-58-
<PAGE>
and assigns. However, it is the intent of the parties hereto that no third-party
beneficiary rights be created or deemed to exist, and none shall so exist, in
favor of any person not a party to this Agreement, unless otherwise expressly
agreed in writing by the parties.
12.7 Remedies Cumulative. To the extent and only to the extent provided in
Section 9.1(d), the rights and remedies provided herein shall be cumulative and
shall not preclude any party from asserting any other rights or seeking any
other remedies against the other to which it may otherwise be entitled by law.
12.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, without regard to conflict of
law provisions. The parties agree that any actions or claims arising under this
Agreement shall be brought in a court of general jurisdiction located in
Washington County or a United States District Court in Baltimore, Maryland.
12.9 Notices. Any notice, request, instruction or other document required
or permitted to be given hereunder by a party shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid overnight delivery service, addressed as
follows:
If to Warranting Parties:
Jack L. Tiner and Debra A. Barry
12517 Overridge Road
Potomac, MD 20854
with a copy to
Matthew Maloney, Esq.
Dickstein Shapiro Morin & Oshinsky
2101 L Street NW
Washington D.C. 20037-1526
If to Purchaser:
-59-
<PAGE>
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, MD 21740
Attn: Louis LaSorsa, President
Edward Lieberman, Executive Vice President
with a copy to:
Andrew J. Goodman, Esq.
Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
or to such other persons or addresses as may be designated in writing by the
party desiring to receive such notice. If mailed as aforesaid, the day of
mailing shall be deemed to be the date of delivery.
12.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
12.11 Severability. In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
12.12 Headings. The headings of the various Articles and Sections of this
Agreement, were employed, are for convenience of reference only and shall not be
deemed in any way to modify, interpret or construe the text of this Agreement or
the intent of the parties.
[The remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on the date and year first above written.
PHOENIX COLOR CORP.
By: /s/ Louis LaSorsa
----------------------------
President
TECHNIGRAPHIX INC.
By: /s/ Jack L. Tiner
----------------------------
President
/s/ Jack L. Tiner
----------------------------
JACK L. TINER
/s/ Debra A. Barry
----------------------------
DEBRA A. BARRY
<PAGE>
EXHIBIT 4.1
PHOENIX COLOR CORP.
$105,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
NOTE PURCHASE AGREEMENT
January 28, 1999
First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
Phoenix Color Corp., a Delaware corporation (the "Issuer"), proposes to
issue and sell (the "Placement") to First Union Capital Markets, a division of
Wheat First Securities, Inc. (the "Initial Purchaser"), $105,000,000 principal
amount of its 10 3/8% Senior Subordinated Notes due 2009 (the "Notes"). The
Notes will be unconditionally guaranteed (the "Guarantees"), on a senior
subordinated basis, by each of the guarantors listed on the signature pages
hereto (collectively, the "Guarantors"). The Notes and the Guarantees are to be
issued under an indenture, to be dated the Closing Date (as defined below) (the
"Indenture"), by and among the Issuer, the Guarantors and Chase Manhattan Trust
Company, National Association, as trustee (the "Trustee"). The Placement is to
occur concurrently with, and is conditioned upon the redemption (the
"Redemption") of the bridge notes (the "Bridge Notes") purchased by First Union
Investors, Inc., a North Carolina corporation ("FUI"), pursuant to the Bridge
Securities Purchase Agreement, dated as of September 15, 1998 (the "Bridge
Securities Purchase Agreement"), by and among the Issuer, all of the
subsidiaries thereof as guarantors, and FUI. This Agreement, the registration
rights agreement to be dated the Closing Date between the Initial Purchaser and
the Issuer (the "Registration Rights Agreement"), the Notes, the Guarantees, the
Indenture, the Bridge Securities Purchase Agreement (and all the other documents
entered into in connection with it), and the documents to be entered into in
connection with the Redemption are hereinafter collectively referred to as the
"Transaction Documents." The Placement and the Redemption, together with all of
the other transactions contemplated by the foregoing, are hereinafter referred
to as the "Transactions."
The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon
<PAGE>
certain exemptions from the registration requirements of the Securities Act. You
have advised the Issuer that you will offer and sell the Notes purchased by you
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Issuer and the Guarantors
prepared a preliminary offering memorandum, dated January 13, 1999 (the
"Preliminary Memorandum"), and a final offering memorandum, dated January 28,
1999 (the "Final Memorandum"). The Preliminary Memorandum and the Final
Memorandum set forth certain information concerning the Issuer, the Guarantors,
the Transaction Documents and the Transactions. The Issuer and the Guarantors
hereby confirm that each of them has authorized the use of the Preliminary
Memorandum and the Final Memorandum and any amendment or supplement thereto, in
connection with the offer and sale of the Notes by the Initial Purchaser. Unless
stated to the contrary, all references herein to the Final Memorandum are to the
Final Memorandum at the Execution Time (as defined in section 6 below) and are
not meant to include any amendment or supplement, or any information
incorporated by reference therein, subsequent to the Execution Time.
As used herein, "Material Adverse Effect" means (a) a material adverse
effect upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Issuer and its Subsidiaries, taken as a whole,
whether before or after giving effect to the Transactions or (b) a material
impairment of the ability of the Issuer and its Subsidiaries, taken as a whole,
to execute, deliver or perform any of its obligations under, or the material
impairment of the ability of the Trustee and the holders of the Notes (the
"Holders") to enforce any obligations under, any of the Transaction Documents.
Other capitalized terms used and not defined herein have the meanings ascribed
to them in the Indenture.
1. Representations and Warranties. The Issuer and the Guarantors jointly
and severally represent and warrant to the Initial Purchaser the following:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Final Memorandum, at the date hereof,
does not and, at the Closing Date, will not (and any amendment or supplement
thereto, at the date thereof and at the Closing Date, will not) contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
are being made, not misleading; provided, however, that the Issuer and the
Guarantors make no representation or warranty as to the information contained in
or omitted from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information relating to the Initial Purchaser furnished to the Issuer in writing
by or on behalf of the Initial Purchaser expressly for use therein; and
provided, further, that all forward-looking statements in the Preliminary
Memorandum and the Final Memorandum (as described under the caption "Cautionary
Statement Regarding Forward Looking Statements") have been prepared in good
faith by the Issuer and represent its reasonable good faith expectations as to
the subject matter thereof.
2
<PAGE>
(b) Except as disclosed in the Preliminary Memorandum or the Final
Memorandum, no holder of securities of the Issuer or the Guarantors will be
entitled to have such securities registered under any registration statement
required to be filed by the Issuer or the Guarantors.
(c) None of the Issuer, the Guarantors or any of their Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")) nor any person acting on any of their behalf (other than the Initial
Purchaser or any of its Affiliates, as to whom the Issuer and the Guarantors
make no representation or warranty) has, directly or indirectly:
(i) made offers or sales of any security, or solicited offers
to buy any security, which is or will be integrated with the sale of the Notes
or the Guarantees in a manner that would require their registration under the
Securities Act;
(ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any offer or
sale of the Notes or the Guarantees;
(iii) taken any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute,
stabilization or manipulation of the price of any security of the Issuer or the
Guarantors or facilitate the sale or resale of the Notes;
(iv) taken any action designed to facilitate the sale or
resale of the Notes;
(v) except as disclosed in the Preliminary Memorandum or the
Final Memorandum, paid or agreed to pay to any person any compensation for
soliciting another person to purchase any securities of the Issuer or the
Guarantors; or
(vi) engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with respect
to the Notes or the Guarantees, and each of the Issuer and its Affiliates and
any person acting on its or their behalf (other than the Initial Purchaser or
any of its Affiliates as to which no representation is made) has complied with
the offering restrictions requirements of Regulation S.
(d) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(e) Assuming the accuracy of your representations in Section 4
hereof and your compliance with your covenants set forth therein, it is not
necessary in connection with the offer, sale and delivery of the Notes in the
manner contemplated by this Agreement and the Final Memorandum to register the
Notes or the Guarantees under the Securities Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
3
<PAGE>
(f) Each of the Issuer and its Subsidiaries is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of the Issuer and its Subsidiaries has the power and
authority to own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing under the laws of all jurisdictions in which it is doing
business, except where failure to be so qualified or be in good standing,
individually or in the aggregate, has not had and will not have a Material
Adverse Effect.
(g) All of the outstanding shares of Capital Stock of the Issuer
have been duly authorized and validly issued and are fully paid and
nonassessable. Exhibit A hereto lists each wholly owned Subsidiary of the Issuer
(including each Guarantor) along with its jurisdiction of organization. There
are no non-wholly owned Subsidiaries of the Issuer. Each Subsidiary of the
Issuer does not and will not on the Closing Date have outstanding any (i)
securities convertible or exchangeable for its Capital Stock, (ii) rights to
subscribe for or to purchase any of its Capital Stock or (iii) options providing
for the purchase of, agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its Capital Stock. All of the Capital Stock of each Subsidiary shown on Exhibit
A is beneficially owned by the Issuer, directly or indirectly, free and clear of
all liens other than liens granted to secure the Bridge Notes and the loans
under the Credit Agreement dated as of September 15, 1998, among the Issuer, the
subsidiaries listed therein as borrowers, the lenders who are or may become
party thereto and First Union National Bank, as administrative agent, together
with the documents related thereto, as amended, supplemented, or modified (the
"Senior Credit Facility"). The Issuer does not, directly or indirectly, have any
Subsidiaries that are not Guarantors.
(h) Each of the Issuer and the Guarantors has the power and
requisite authority to execute, deliver and carry out the terms and provisions
of the Transaction Documents and has taken all necessary action to authorize the
execution, delivery and performance of the Transaction Documents and the
Exchange Notes.
(i) Each of the Transaction Documents and each other document or
instrument to be delivered in connection therewith has been, or as of the
Closing Date will have been, duly authorized by all necessary corporate action
of the Issuer and the Guarantors. This Agreement has been duly executed and
delivered by the Issuer and each Guarantor; each of the other Transaction
Documents to be executed and delivered on or prior to the date hereof has been
duly executed and delivered by each of the Issuer and the Guarantors that are a
party thereto; and each of the Transaction Documents to be executed and
delivered after the date hereof will be duly executed and delivered by the
Issuer and each of the Guarantors that are a party thereto. This Agreement is,
and such other Transaction Documents and other documents and instruments to
which the Issuer and each of the Guarantors is a party are or will be, the
legal, valid and binding obligations of the Issuer and each of the Guarantors,
enforceable in accordance with their respective terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4
<PAGE>
(j) The execution, delivery and performance by the Issuer of the
Transaction Documents do not and on the Closing Date will not (i) violate any
statute, law, ordinance, regulation, rule, order, judgment, writ, injunction or
decree of any state, commonwealth, nation, territory, possession, province,
county, parish, township, village, municipality or other jurisdiction
(collectively, the "Laws") applicable to any of the Issuer and the Guarantors,
or any judgment, order, writ or decree of any government, any arbitration panel,
any court or any governmental department, commission, board, bureau, agency,
authority or instrumentality of any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing ("Tribunal") binding on any of
them, which violations, either individually or in the aggregate, would have a
Material Adverse Effect, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under the certificate of
incorporation, bylaws or other organizational documents of the Issuer or any
Guarantor, (iii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to which the
Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is
bound or to which any property or assets of the Issuer or any of its
Subsidiaries is subject (collectively the "Contracts"), which conflicts,
breaches or defaults, either individually or in the aggregate, would have a
Material Adverse Effect, (iv) result in or require the creation or imposition of
any lien upon any of the properties or assets of any of the Issuer and the
Guarantors, (v) require any approval of stockholders or (vi) require any
approval or consent of any person under any Contracts.
(k) No consent, approval, authorization or order of any Tribunal or
other person is required in connection with the execution and delivery by the
Issuer or the Guarantors of the Transaction Documents or any other document or
instrument to be delivered in connection with the Transactions or the
consummation of the transactions contemplated hereby or thereby, except for
consents, approvals, authorizations and orders that have heretofore been
obtained.
(l) The audited financial statements (including the notes thereto)
of (i) the Issuer and its Subsidiaries and (ii) New England Book Holding
Corporation and its Subsidiaries included in the Final Memorandum comply as to
form in all material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act and fairly present in all
material respects the consolidated financial position of such entities and the
results of operations and cash flows thereof as of the dates and for the periods
therein specified. Such financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved. Since the date of the most recent financial
statements included in the Final Memorandum, except as described therein, in the
Notes thereto or as set forth in the Final Memorandum, (i) neither the Issuer
nor any of its Subsidiaries has incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions or
Contracts not in the ordinary course of business, which liabilities,
obligations, transactions or Contracts would, individually or in the aggregate,
have a Material Adverse Effect, (ii) the Issuer has not purchased any of its
outstanding Capital Stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its Capital Stock, (iii) there has not been any
material change in the long-term indebtedness of the Issuer or any of its
Subsidiaries and (iv) none of the assets of the Issuer have materially
diminished in value. The unaudited pro forma financial information included in
the Final Memorandum
5
<PAGE>
complies in all material respects with the requirements of the Securities Act
relating to pro forma financial information (it being understood that such
unaudited pro forma financial information is voluntarily included in the Final
Memorandum and that such information would not be required to be included in a
registration statement on Form S-1 filed under the Securities Act); the pro
forma adjustments have been properly applied to the historical amounts in the
compilation of such pro forma information; the assumptions utilized in preparing
such pro forma financial information provide a reasonable basis for presenting
the significant effects of the transactions contemplated therein; and such pro
forma adjustments give appropriate effect to those adjustments, in each case in
accordance with Regulation S-X under the Securities Act ("Regulation S-X").
(m) The Issuer and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(n) The Issuer is not now, and after giving effect to the
consummation of the Transactions will not be, (i) insolvent, (ii) left with
unreasonably small capital with which to engage in its anticipated businesses or
(iii) incurring debts beyond its ability to pay such debts as they become due.
The Issuer is not in liquidation, administration or receivership nor has any
petition been presented for the winding-up of the Issuer.
(o) The Issuer and each of its Subsidiaries has, and after
consummation of the Transactions will have, good, sufficient and legal title to
all their respective properties and assets, and all properties held under lease
by any of them, are, and immediately after the consummation of the Transactions
will be, held under valid, subsisting and enforceable leases, and none of the
Issuer or any of its Subsidiaries and, to the knowledge of the Issuer, any other
party thereto, is in default under any lease, except in each case for such
defects or defaults that, individually or in the aggregate, would not have a
Material Adverse Effect. All such properties and assets owned or leased are so
owned or leased free and clear of liens other than liens permitted under the
definition "Permitted Liens" set forth in the Final Memorandum. None of the
material assets of the Issuer or any of its Subsidiaries is subject to any
restriction that would prevent continuation of the use currently made thereof or
which would materially adversely effect the value thereof.
(p) Both before and after giving effect to the Transactions, none of
the Issuer or any of its Subsidiaries is (i) in violation of its charter,
by-laws or other organizational documents, (ii) in violation of any Law or (iii)
in breach of or default under (nor has any event occurred which, with notice or
the passage of time or both, would constitute a breach of or default under) or
in violation of any of the terms or provisions of any Contract, except for any
such breach, default, violation or event that would, individually or in the
aggregate, not have a Material Adverse Effect.
6
<PAGE>
(q) Except (i) as described in the Final Memorandum under the
caption "Business -- Legal Proceedings," (ii) for the claim by Anthony DiMartino
against the Issuer relating to his bonus and loans he made to the Issuer, which
claim the Issuer believes will not result in liability to it in excess of
$210,000 and (iii) an action instituted in Superior Court, Commonwealth of
Massachusetts on January 13, 1999 against the Issuer by a former employee
earning $80,000 per year, alleging wrongful termination, which action the Issuer
believes will not result in liability to it in excess of $175,000, there is no
litigation pending or threatened, by, against, or which may relate to or affect
(a) any benefit plan or any fiduciary or administrator thereof, (b) the
Transactions or (c) the Issuer or any of its Subsidiaries, which individually or
in the aggregate, would involve in excess of $100,000. There are no outstanding
injunctions or restraining orders prohibiting consummation of any of the
Transactions. Neither the Issuer nor any of its Subsidiaries is in default with
respect to any judgment, order, writ, injunction or decree of any Tribunal, and
there are no unsatisfied judgments against the Issuer or any of its Subsidiaries
or their respective businesses or properties. None of the Issuer or any of its
Subsidiaries has been advised that there is a reasonable likelihood of an
adverse determination of any litigation, which adverse determination,
individually or in the aggregate, would result in judgments in excess of
$100,000.
(r) The proceeds from the issuance and sale of the Notes will be
used solely for the purposes specified in the Final Memorandum. None of such
proceeds will be used for the purpose of purchasing or carrying any Margin Stock
within the meanings of the applicable provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry Margin Stock or for any other purpose that might cause any of the Notes
to be considered a "purpose credit" within the meaning of the applicable
provisions of Regulation G, T, U or X.
(s) All Tax Returns required to be filed by the Issuer and each of
its Subsidiaries in any jurisdiction have been filed, and all Taxes (whether or
not actually shown on such Tax Returns) for which any of them is directly or
indirectly liable or to which any of their respective properties or assets are
subject have been paid other than Taxes being contested in good faith and for
which adequate reserves have been established in accordance with GAAP. All such
Tax Returns are true, correct and complete in all respects and accurately set
forth all items to the extent required to be reflected or included in such Tax
Returns by applicable federal, state, local or foreign Tax Laws, regulations or
rules. Except for an assessment with respect to New York state franchise taxes
which the Issuer believes will not result in liability to it in excess of
$10,000, there is no proposed Tax assessment against the Issuer or any of its
Subsidiaries, and, to the best knowledge of the Issuer, there is no basis for
such assessment, except for contested claims.
As used herein, the following terms shall have the respected meanings
ascribed to them below:
"Tax Return" means a report, return or other information (including any
amendments) required to be supplied to a governmental entity with respect to
Taxes including, where
7
<PAGE>
permitted or required, combined or consolidated returns for any group of
entities that includes the Issuer or any of its Subsidiaries.
"Taxes" means all taxes however denominated, including any interest or
penalties that may become payable in respect thereof, imposed by any federal,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include all income taxes (including, but not
limited to, United States federal income taxes and state income taxes), payroll
and employee withholding taxes, unemployment insurance, social security, sales
and use taxes, excise taxes, environmental, franchise taxes, gross receipts
taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer
taxes, withholding taxes, workers' compensation, and other obligations of the
same or a similar nature, whether arising before, on or after the Closing Date.
(t) Both before and after giving effect to the Transactions, no
ERISA Events have occurred or are reasonably expected to occur which,
individually or in the aggregate, resulted in or might reasonably be expected to
result in a liability of the Issuer or any of its Subsidiaries or any ERISA
Affiliates which would have a Material Adverse Effect. There are no defined
benefit plans. Therefore, in accordance with the most recent actuarial
valuations, the Amount of Unfunded Benefit Liabilities for all Pension Plans
(excluding for purposes of such computation any Pension Plans which have a
negative Amount of Unfunded Benefit Liabilities) is -$0-.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to any Pension
Plan, (i) if set forth on the most recent actuarial valuation report with
respect to such Pension Plan, the amount of unfunded benefit liabilities (as
defined in Section 4001(a)(18) of ERISA) and (ii) otherwise, the excess of (a)
the greater of the current liability (as defined in Section 412(l)(7) of the
Internal Revenue Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the current market value of the
assets of such Pension Plan.
"Employee Pension Benefit Plan" means any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (i) which is, or, at any time within the
five calendar years immediately preceding the date hereof, was at any time,
sponsored, maintained or contributed to by any of the Issuer or its Subsidiaries
or any of their respective ERISA Affiliates or (ii) with respect to which any of
the Issuer or its Subsidiaries retains any liability, including any potential
joint and several liability as a result of an affiliation with an ERISA
Affiliate or a party that would be an ERISA Affiliate except for the fact the
affiliation ceased more than five calendar years prior to the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder and any successor statute, regulations and rulings.
8
<PAGE>
"ERISA Affiliate," as applied to any person, means (i) any corporation
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that person
is, or was at any time within the five calendar years immediately preceding the
date hereof, a member; (ii) any trade or business (whether or not incorporated)
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue Code
of which that person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that person, any corporation described in clause
(i) above or any trade or business described in clause (ii) above is, or was at
any time within the five calendar years immediately preceding the date hereof, a
member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation); (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any Pension
Plan (whether or not waived) or the failure to make any required contribution
within 30 days of its due date with respect to any Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the
Issuer or any of its Subsidiaries or any of their respective ERISA Affiliates
from any Multiple Employer Plan or the termination of any such Multiple Employer
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of liability on the
Issuer or any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by the Issuer or any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by the Issuer or any of its Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on the Issuer or any of its Subsidiaries or any
of their respective ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 406, 409,
502(i) or 502(1) of ERISA in respect of any Employee Pension Benefit Plan; (ix)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Pension Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any trust forming
part of any Pension Plan or Employee Pension Benefit Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue Code; or
(x) the imposition of a lien
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pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any of the Issuer, its Subsidiaries or any of their
respective ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Issuer
or any of its Subsidiaries or any of their respective ERISA Affiliates and at
least one person other than employees of the Issuer, its Subsidiaries and their
respective ERISA Affiliates or (ii) was so maintained and in respect of which
such Issuer, any of their Subsidiaries or any of their ERISA Affiliates could
have liability under Section 4064 or Section 4069 of ERISA in the event such
plan has been or were to be terminated.
"Pension Plan" means a Single Employer Plan or Multiple Employer Plan.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
to all or any of the Pension Benefit Guaranty Corporation's functions under
ERISA.
"Single Employer Plan" means a "single-employer plan," as defined in
Section 4001 (a)(15) of ERISA, that (i) is maintained for employees of the
Issuer, any of its Subsidiaries or any of their ERISA Affiliates and no person
other than employees of the Issuer, any of its Subsidiaries or any of their
ERISA Affiliates or (ii) was so maintained and in respect of which such Issuer,
any of their Subsidiaries or any of their ERISA Affiliates could have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
(u) The Issuer and each of its Subsidiaries is in compliance with
all Laws, except where the failure to comply, individually or in the aggregate,
would not have a Material Adverse Effect.
(v) None of the Issuer or any of its Subsidiaries is subject to
regulation under the Public Utility Holding Issuer Act of 1935, the Federal
Power Act, or the Investment Company Act of 1940 (as any of the preceding acts
have been amended).
(w) The Issuer and its Subsidiaries own or are licensed to use all
patents, trademarks, tradenames, copyrights, technology, know-how and processes
used in or necessary for the conduct of the business of the Issuer as currently
conducted ("Intellectual Property"). No claim has been asserted by any person
with respect to the use of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any such Intellectual Property. The
use of such Intellectual Property by the Issuer or any of its Subsidiaries does
not infringe on the rights of any person. The consummation of the Transactions
will not in any manner or to any
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extent impair the ownership of (or the license to use, as the case may be) of
such intellectual property by the Issuer or any of its Subsidiaries.
(x) Except as set forth in the Final Memorandum in the first
paragraph under the caption "Business - Legal Proceedings," both before and
after giving effect to the Transactions:
(i) the operations of the Issuer and each of its Subsidiaries
comply with all Environmental Laws;
(ii) each of the Issuer and its Subsidiaries has obtained all
Permits under Environmental Laws necessary to their respective operations, and
all such Permits are being maintained in good standing, and each of the Issuer
and its Subsidiaries is in compliance with all material terms and conditions of
such Permits except for any such failure to obtain, maintain or comply which
would not reasonably be expected to have a Material Adverse Effect;
(iii) none of the Issuer or its Subsidiaries has received (a)
any notice or claim to the effect that it is or may be liable to any person
under any Environmental Law or (b) any letter or request for information under
Section 104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss. 9604) or comparable Environmental Laws regarding
any matter, none of the Issuer or its Subsidiaries is or will be involved in any
investigation, response or corrective action relating to or in connection with
any Hazardous Materials at any Facility or at any other location;
(iv) except as set forth on Exhibit B hereto, none of the
Issuer or its Subsidiaries is subject to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental Laws;
(v) except as set forth on Exhibit B hereto, none of the
Issuer or its Subsidiaries or any of their respective Facilities or operations
is subject to any outstanding written order or agreement with any governmental
authority or private party relating to (A) any actual or potential violation of
or liability under Environmental Laws or (B) any Environmental Claims;
(vi) none of the Issuer or its Subsidiaries has any contingent
liability in connection with any Release or threatened Release of any Hazardous
Materials by any of the Issuer or its Subsidiaries;
(vii) no Hazardous Materials exist on, under or about any
Facility in a manner that would reasonably be expected to give rise to an
Environmental Claim, and none of the Issuer or its Subsidiaries has filed any
notice or report of a Release of any Hazardous Materials that would reasonably
be expected to give rise to an Environmental Claim;
(viii) none of the Issuer or its Subsidiaries or any of their
respective predecessors has disposed of any Hazardous Materials in a manner that
would reasonably be expected to give rise to an Environmental Claim;
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(ix) to the best of the Issuer's knowledge, no underground
storage tanks or surface impoundments are on or at any Facility; and
(x) no lien in favor of any person relating to or in
connection with any Environmental Claim has been filed or has been attached to
any Facility or other assets of the Issuer or any of its Subsidiaries.
As used herein, the following terms shall have the respective meanings
ascribed to them below:
"Environmental Claims" means any allegation, notice of violation, claim,
demand, abatement order or other order or direction (conditional or otherwise)
by any governmental authority or any person for any response or corrective
action, any damage, including, without limitation, personal injury, property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case arising
under any Environmental Law, including without limitation, relating to,
resulting from or in connection with Hazardous Materials and relating to the
Issuer, any of its Subsidiaries or any of their respective Facilities or
predecessors in interest.
"Environmental Laws" means the common law and all statutes, ordinances,
orders, rules, regulations, requirements, judgments, plans, policies or decrees
relating to (i) pollution, protection, preservation, cleanup or reclamation of
the environment, natural resources, human, plant or animal health or welfare,
(ii) the Release or threatened Release of Hazardous Materials, or (iii)
manufacture, processing, treatment, handling, recycling, generation, use,
storage, transportation or disposal of Hazardous Materials including, without
limitation, investigation, study, assessment, testing, monitoring, containment,
removal, remediation, or clean-up of any such Release, each as in effect as of
the date of determination.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Issuer, its
Subsidiaries or any of their respective predecessors in interest.
"Hazardous Materials" means (i) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any flammable substances or
explosives; (iv) any radioactive materials; (v) asbestos in any form; (vi) urea
formaldehyde foam insulation; (vii) electrical equipment which contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million; (viii) pesticides; and (ix) any other chemical,
material or substance, exposure to which is prohibited,
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limited or regulated by any governmental authority or which may or could pose a
hazard to human health or safety or the environment.
"Permits" has the meaning ascribed to it in Section 1(y) below.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the environment (including, without
limitation, the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or onto or out of any
Facility, including the movement of any Hazardous Material through the air,
soil, surface water, groundwater or property.
(y) Except as set forth in the Final Memorandum in the first
paragraph under the caption "Business - Legal Proceedings" and as set forth on
Exhibit B, the Issuer and its Subsidiaries have, and immediately after the
consummation of the Transactions will have, such certificates, permits,
licenses, franchises, consents, approvals, authorizations and clearances
("Permits"), and will be after giving effect to the Transactions in compliance
in all material respects with all Laws as are necessary to own, lease or operate
their respective properties and to conduct their businesses in the manner as
presently conducted and to be conducted immediately after the consummation of
the Transactions except where the failure to have such Permits or to comply with
such Laws would not, individually or in the aggregate, have a Material Adverse
Effect, and all such Permits are valid and in full force and effect and will be
valid and in full force and effect immediately upon consummation of the
Transactions. The Issuer and its Subsidiaries are, and immediately after the
consummation of the Transactions will be, in compliance in all material respects
with their respective obligations under such Permits and no event has occurred
that allows, or after notice or lapse of time would allow, revocation or
termination of such Permits except for any such revocation or termination as
would not, individually or in the aggregate, have a Material Adverse Effect.
(z) The Issuer and its Subsidiaries carry or are entitled to the
benefits of insurance (including self-insurance) in such amounts and covering
such risks as is generally maintained by companies of established repute engaged
in the same or similar businesses, and all such insurance is (and will be
immediately after the consummation of the Transactions) in full force and
effect.
(aa) No labor disturbance by the employees of the Issuer or its
Subsidiaries exists or, to the best knowledge of the Issuer, is threatened and
the Issuer is not aware of any existing or imminent labor disturbance by the
employees of the Issuer's or its Subsidiaries' principal suppliers,
manufacturers or customers.
(bb) Except for the fees and expenses payable to the Initial
Purchaser, which will be paid by the Issuer on the Closing Date, the Issuer did
not employ any investment banker, broker, finder, consultant, intermediary or
other person in connection with the Transactions who would be entitled to any
investment banking, brokerage, finder's or other fees or commissions in
connection with this Agreement or the transactions contemplated hereby.
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(cc) The relationships of the Issuer and its Subsidiaries taken as a
whole with suppliers, distributors, dealers, sales representatives, customers
and others having business relationships with them are satisfactory, and there
is no indication of any intention by any party thereto to terminate or modify
the terms of any of such relationships, except for any termination or
modification which could not reasonably be expected to have a Material Adverse
Effect.
(dd) No statement by the Issuer or any Subsidiary thereof contained
in this Agreement (including all Exhibits and certificates delivered pursuant
hereto or thereto), the other Transaction Documents and no written statement
(including, but only as of the date of its filing, the Issuer's Registration
Statement on Form S-1 filed with the Commission on April 24, 1998) furnished to
the Initial Purchaser or its representatives by the Issuer or any Subsidiary
thereof or at the direction of any officer thereof contains any untrue statement
of a material fact, or omits to state a material fact necessary in order to make
the statements therein contained not misleading.
Any certificate signed by any officer of the Issuer or of any of the
Guarantors and delivered to the Initial Purchaser or its counsel shall be deemed
to be a representation and warranty by the Issuer or of the Guarantor, as the
case may be, to the Initial Purchaser as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Issuer agrees to
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
the Issuer at a purchase price equal to 97.0% of the principal amount thereof,
Notes in the principal amount of $105,000,000.
3. Delivery and Payment. Delivery of and payment for the Notes shall be
made at 10:00 a.m., New York City time, on February 2, 1999, which date and time
may be postponed by agreement between the Initial Purchaser and the Issuer (such
date and time of delivery and payment for the Notes being herein called the
"Closing Date"). Delivery of the Notes shall be made to the Initial Purchaser
against payment by the Initial Purchaser of the purchase price thereof to or
upon the order of the Issuer by intrabank transfer payable in same day funds or
such other manner of payment as may be agreed by the Issuer and the Initial
Purchaser. Delivery of the Notes shall be made at such location as the Initial
Purchaser shall reasonably designate at least one Business Day in advance of the
Closing Date and payment for the Notes shall be made at the office of Kennedy
Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite 4200,
Charlotte, North Carolina 28202. Certificates for the Notes shall be registered
in such names and in such denominations as the Initial Purchaser may request not
less than two full Business Days in advance of the Closing Date.
4. Offering of Notes. The Initial Purchaser represents and warrants to and
agrees with the Issuer and the Guarantors that:
(a) It has not offered or sold, and will not offer or sell, any
Notes except (i) within the United States to those persons it reasonably
believes to be qualified institutional buyers (as defined in Rule 144A under the
Securities Act) ("QIBs"), (ii) to other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) who provide
to it and to the Issuer a letter in the form of Exhibit C hereto or (iii)
outside the United
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States to persons other than U.S. persons in reliance upon and pursuant to
Regulation S under the Securities Act. In connection with each sale pursuant to
clause (i) above, the Initial Purchaser has taken or will take reasonable steps
to ensure that the purchaser of such Notes is aware that such sale is being made
in reliance on Rule 144A.
(b) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes by means of any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act).
(c) It is an "accredited investor" (as defined in Rule 501 (a)(1),
(2), (3) or (7) under the Securities Act) with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the merits
and risks of an investment in the Notes.
(d) It has not offered or sold, and will not offer or sell, any
notes in violation of the "blue sky" laws of any state.
5. Agreements. The Issuer and its Subsidiaries agree with the Initial
Purchaser that:
(a) The Issuer will furnish to the Initial Purchaser and to Kennedy
Covington Lobdell & Hickman, L.L.P. ("Counsel for the Initial Purchaser"),
without charge, during the period referred to in paragraph (c) below, as many
copies of the Final Memorandum and any amendments and supplements thereto as
they may reasonably request. The Issuer will pay the expenses of printing or
other production of all documents relating to the offering of the Notes and will
reimburse the Initial Purchaser for payment of the required PORTAL filing fee.
(b) The Issuer will not amend or supplement the Final Memorandum
prior to the completion of the distribution of the Notes by the Initial
Purchaser, without the prior written consent of the Initial Purchaser.
(c) If at any time prior to the completion of the sale of the Notes
acquired by the Initial Purchaser pursuant to this Agreement (as determined by
the Initial Purchaser), any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it should be necessary to amend or supplement the Final
Memorandum to comply with applicable law, the Issuer will promptly notify the
Initial Purchaser of the same and, subject to the requirements of paragraph (b)
of this Section 5, will prepare and provide to the Initial Purchaser pursuant to
paragraph (a) of this Section 5 an amendment or supplement that will correct
such statement or omission or effect such compliance.
(d) The Issuer will arrange for the qualification of the Notes and
the Guarantees for sale by the Initial Purchaser under the laws of such
jurisdictions as the Initial Purchaser may reasonably designate and will
maintain such qualifications in effect so long as required for the sale of the
Notes and the Guarantees by the Initial Purchaser; provided, however, that none
of the Issuer or the Guarantors will be required to qualify generally to do
business in any jurisdiction in which any of them is not then so qualified, to
file any general consent to
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service of process or to take any action which would subject any of them to
general service of process or to taxation in any such jurisdiction where it is
not then so subject. The Issuer will promptly advise the Initial Purchaser of
the receipt by the Issuer of any notification with respect to the suspension of
the qualification of the Notes and the Guarantees for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose.
(e) The Issuer, whenever any of the Issuer and its Subsidiaries
publishes or makes available to the public (by filing with any regulatory
authority or securities exchange or by publishing a press release or otherwise)
any information that could reasonably be expected to be material in the context
of the issue of Notes under this Agreement, shall promptly notify the Initial
Purchaser as to the nature of such information or event. The Issuer will
likewise notify the Initial Purchaser of (i) any decrease in the rating of the
Notes or any other debt securities of the Issuer or its Subsidiaries by any
nationally recognized statistical rating organization (as defined in Rule
436(g)(2) under the Securities Act) or (ii) any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change, as soon as the
Issuer becomes aware of any such decrease or notice. So long as the Issuer has
any obligations with respect to the Notes or the Holders, the Issuer will also
deliver to the Initial Purchaser, as soon as available and without request,
copies of all documents it files with or furnishes to the Securities and
Exchange Commission.
(f) The Issuer will not, and will not permit any of its Affiliates
to, resell any Notes that have been acquired by any of them, other than pursuant
to an effective registration statement under the Securities Act.
(g) Except as contemplated by the Registration Rights Agreement or
otherwise disclosed in the Final Memorandum, none of the Issuer or any of its
Affiliates, nor any person acting on its or their behalf (other than the Initial
Purchaser or any of its Affiliates, as to whom the Issuer and its Subsidiaries
make no agreement) will, directly or indirectly, make offers or sales of any
security, or solicit offers to buy any security, under circumstances that would
require the registration of the Notes under the Securities Act.
(h) None of the Issuer or any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser or any of its
Affiliates, as to whom the Issuer and its Subsidiaries make no agreement) will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, if the Issuer ceases to
be subject to the reporting requirements of Sections 13 and 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), it will provide to each
Holder of the Notes and to each prospective purchaser (as designated by such
Holder) of the Notes, upon the request of such Holder or prospective purchaser,
any information required to be provided by Rule 144A(d)(4) under the Securities
Act. This covenant is intended to be for the benefit of the Holders, and the
prospective purchasers designated by such Holders, from time to time of the
Notes.
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(j) The Issuer will cooperate with the Initial Purchaser and use
their best efforts to (i) permit the Notes to be designated PORTAL securities in
accordance with the rules and regulations of the NASD relating to trading in the
Private Offerings, Resale and Trading through Automated Linkages market
("PORTAL") and (ii) permit the Notes to be eligible for clearance and settlement
as described under "Book Entry; Delivery and Form" in the Final Memorandum.
(k) The Issuer will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Issuer and its Subsidiaries will conduct their operations in
a manner that will not subject the Issuer or any of its Subsidiaries to
registration as an investment company under the Investment Company Act.
(m) Each Note will bear a legend substantially to the following
effect until such legend shall no longer be necessary or advisable because the
Notes are no longer subject to the restrictions on transfer described therein:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) UNDER THE ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO
AN ACCREDITED INVESTOR THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
AVAILABLE) OR (F) PURSUANT
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TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS
NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE ACT.
6. Conditions to the Obligations of the Initial Purchaser. The obligation
of the Initial Purchaser to purchase the Notes shall be subject to the accuracy
of the representations and warranties on the part of the Issuer and the
Guarantors contained herein at the date and time that this Agreement is executed
and delivered by the parties hereto (the "Execution Time") and on the Closing
Date, to the accuracy of the statements of the Issuer and the Guarantors made in
any certificates pursuant to the provisions hereof, to the performance by the
Issuer and the Guarantors of their obligations hereunder and to the following
additional conditions:
(a) The Issuer and the Guarantors shall have furnished to the
Initial Purchaser the opinion of Bresler Goodman & Unterman, LLP ("Counsel for
the Issuer"), dated the Closing Date, in form and substance satisfactory to the
Initial Purchaser to the effect set forth in Exhibit D hereto.
(b) The Issuer and the Guarantors shall have furnished to Counsel
for the Initial Purchaser such documents as Counsel for the Initial Purchaser
reasonably requests for the purpose of enabling Counsel for the Initial
Purchaser to deliver such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and other related matters as the
Initial Purchaser may reasonably require.
(c) The Issuer and each of the Guarantors shall have furnished to
the Initial Purchaser a certificate dated the Closing Date, signed on behalf of
each of the Issuer and the Guarantors by any two of their Chairman of the Board,
Chief Executive Officer, President and Chief Financial Officer to the effect
that the signer of such certificate has carefully examined the Final Memorandum,
any amendment or supplement to the Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Issuer and the
Guarantors contained in this Agreement are true and correct in all respects on
and as of the Closing Date with the same effect as if made on the Closing Date,
and the Issuer and the Guarantors have complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date; and
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(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no change or development or
event involving a prospective change constituting a Material Adverse Effect.
(d) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers, LLP shall have furnished to the Initial Purchaser a
letter or letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Initial Purchaser (it
being understood that the draft of the comfort letter to be delivered at the
Execution Time previously received by the Initial Purchaser is satisfactory to
the Initial Purchaser).
(e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have been
(i) any change or decrease specified in the letter or letters referred to in
paragraph (d) of this Section 6, or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties of
the Issuer and its Subsidiaries, the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the reasonable judgment of the Initial
Purchaser, so material and adverse as to make it impractical or inadvisable to
market the Notes as contemplated by the Final Memorandum.
(f) Subsequent to the respective dates as of which information is
given in the Final Memorandum and giving effect to the Transactions, (i) the
Issuer and its Subsidiaries shall not have incurred any material liability or
obligation, direct or contingent, or entered into any material transaction not
in the ordinary course of business; (ii) the Issuer and its Subsidiaries shall
not have purchased any of its outstanding Capital Stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its Capital Stock;
and (iii) there shall not have been any material change in the Capital Stock of
the Issuer and its Subsidiaries or in the short-term debt or long-term debt of
the Issuer and its Subsidiaries, except in each case as described in or
contemplated by the Final Memorandum; and (iv) none of the assets of the Issuer
and its Subsidiaries shall have materially diminished in value, except as would
not result in a Material Adverse Effect.
(g) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of the Notes by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Securities Act) or any notice given of any intended or potential decrease in any
such rating or of a possible change in any such rating that does not indicate
the direction of the possible change.
(h) Each of the Transaction Documents (including any amendments
thereto) shall have been duly authorized, executed and delivered by each of the
parties thereto, and the Initial Purchaser shall have received copies of each
such Transaction Document (including any amendments thereto) as so executed and
delivered in the form provided to the Initial Purchaser on or before the date
hereof except for changes approved by the Initial Purchaser or changes which do
not materially affect the rights or obligations of the Issuer and the
Guarantors.
19
<PAGE>
(i) The Issuer shall have been advised by the National Association
of Securities Dealers, Inc. (the "NASD") that the Notes have been designated
PORTAL-eligible securities in accordance with the rules and regulations of the
NASD relating to trading in the PORTAL Market.
(j) The Redemption shall have occurred concurrently with the sale of
the Notes hereunder as contemplated in the Final Memorandum.
(k) Prior to the Closing Date, the Issuer and the Guarantors shall
have furnished to the Initial Purchaser such further information, certificates
and documents as the Initial Purchaser may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be satisfactory in all respects in form and substance to the
Initial Purchaser and Counsel for the Initial Purchaser, this Agreement and all
obligations of the Initial Purchaser hereunder may be canceled at the Closing
Date by the Initial Purchaser. Notice of such cancellation shall be given to the
Issuer in writing, by telecopier or by telephone confirmed in writing.
The documents required to be delivered by this Section 6 will be delivered
at the office of Counsel for the Initial Purchaser on the Closing Date.
7. Reimbursement of Expenses, Fees. The Issuer and the Guarantors will,
whether or not the sale of the Notes provided for herein is consummated, (i) pay
all expenses incident to the performance of their obligations under this
Agreement and the offering documents and the other Transaction Documents,
including the fees and disbursements of their accountants and counsel, the cost
of printing or other production and delivery of the Preliminary Memorandum, the
Final Memorandum, all amendments thereof and supplements thereto, and all other
documents relating to the offering of the Notes, the cost of preparing,
printing, packaging and delivering the Notes, the fees and disbursements,
including fees of counsel incurred in compliance with Section 5(d), the fees and
disbursements of the Trustee and the fees of any agency that rates the Notes,
and the fees and expenses, if any, incurred in connection with the admission of
the Notes for trading in the PORTAL Market, and (ii) reimburse the Initial
Purchaser as requested for all reasonable out of pocket expenses (including
reasonable legal fees and expenses) incurred by the Initial Purchaser in
connection with the proposed sale and resale of the Notes.
8. Indemnification and Contribution.
(a) The Issuer and the Guarantors jointly and severally agree to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise,
20
<PAGE>
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Issuer and the Guarantors to any
Holder or prospective purchaser of Notes pursuant to Section 5(i), or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and agree to reimburse
each such indemnified party, as incurred, for any legal or other expenses
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Issuer and the
Guarantors will not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information relating to the Initial Purchaser furnished to the Issuer or the
Guarantors by or on behalf of the Initial Purchaser specifically for inclusion
therein; and, provided, further, that with respect to any untrue statement or
omission of material fact made in the Preliminary Memorandum, the indemnity
agreement contained in this Section 8(a) shall not inure to the benefit of the
Initial Purchaser to the extent that any such losses, claims, damages or
liabilities asserted against the Initial Purchaser occurs under circumstances
where it shall have been determined by a court of competent jurisdiction by
final and nonappealable judgment that (x) the Issuer had previously furnished
copies of the Final Memorandum to the Initial Purchaser as required by this
Agreement, (y) the untrue statement or omission of a material fact contained in
the Preliminary Memorandum was corrected in the Final Memorandum and (z) there
was not sent or given to such person asserting any such losses, claims, damages
or liabilities, at or prior to the written confirmation of the sale of Notes to
such person, a copy of the Final Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold harmless (i)
the Issuer, (ii) each Guarantor, (iii) each of their respective directors and
officers and (iv) each person who controls the Issuer or any Guarantor within
the meaning of either the Securities Act or the Exchange Act to the same extent
as the foregoing indemnity from the Issuer and the Guarantors to the Initial
Purchaser, but only with reference to written information relating to the
Initial Purchaser furnished to the Issuer and the Guarantors by or on behalf of
the Initial Purchaser specifically for inclusion in the documents referred to in
the foregoing indemnity. This indemnity agreement will be in addition to any
liability which the Initial Purchaser may otherwise have. The Issuer and the
Guarantors acknowledge that the statements set forth under the headings "Notice
to Investors" and "Plan of Distribution" in the Preliminary Memorandum and the
Final Memorandum constitute the only information furnished in writing by or on
behalf of the Initial Purchaser for inclusion in the Preliminary Memorandum or
Final Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless
21
<PAGE>
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with an actual conflict of interest, (ii) the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall have authorized the indemnified party to employ separate counsel at
the expense of the indemnifying party. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Issuer and the Guarantors, on the one hand, and the
Initial Purchaser, on the other, agrees to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Issuer and the Guarantors, on the one hand, and the
Initial Purchaser on the other, may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Issuer and the
Guarantors, on the one hand, and by the Initial Purchaser, on the other, from
the offering of the Notes; provided, however, that in no case shall the Initial
Purchaser be responsible for any amount in excess of the purchase discount or
commission applicable to the Notes purchased by the Initial Purchaser hereunder.
If the allocation provided by the immediately preceding sentence is unavailable
for any reason, the Issuer and the Guarantors, on the one hand, and the Initial
Purchaser, on the other, shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Issuer and the Guarantors, on the one hand, and of the Initial Purchaser, on the
other, in connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Issuer and the Guarantors shall be
22
<PAGE>
deemed to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions received by the Initial
Purchaser from the Issuer in connection with the purchase of the Notes
hereunder. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission relates to information
provided by the Issuer, the Guarantors or the Initial Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Issuer, the Guarantors and the Initial
Purchaser agrees that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to in the immediately
preceding paragraph shall be deemed to include any legal or other expenses
incurred by such indemnified person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of the Initial
Purchaser shall have the same rights to contribution as the Initial Purchaser,
and each person who controls the Issuer or any Guarantor within the meaning of
either the Securities Act or the Exchange Act and each officer, director,
employee and agent of the Issuer or any Guarantor shall have the same rights to
contribution as the Issuer and the Guarantors, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination by notice
given by the Initial Purchaser to the Issuer prior to delivery of and payment
for the Notes if, after the date hereof and prior to such time, there shall have
occurred a material adverse change in the condition of the financial, banking or
capital markets the effect of which, in the judgment of the Initial Purchaser,
makes it impractical to market the Notes or to enforce sale contracts with
respect to the Notes.
10. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Issuer, the
Guarantors or their officers and of the Initial Purchaser set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchaser or the Issuer,
the Guarantors or any of their officers, directors or controlling persons
referred to in Section 8 hereof, and will survive delivery of and payment for
the Notes. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Initial Purchaser, will be mailed,
delivered or telecopied and confirmed to it at 301 South College Street, TW-10,
Charlotte, NC 28288-0606, Telecopy No.: (704) 383-5097, Attention: Douglas Fink,
or, if sent to the Issuer, will be mailed, delivered or telecopied
23
<PAGE>
and confirmed to them at 540 Western Maryland Parkway, Hagerstown, Maryland
21740, Attention: Edward Lieberman.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns and the
officers and directors and controlling persons referred to in Section 8 hereof,
and, except as expressly set forth in Section 5(i) hereof, nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm, corporation or other entity any legal or equitable right, remedy
or claim under or in respect to this Agreement or any provisions herein
contained. No purchaser of Notes from the Initial Purchaser shall be deemed to
be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business Day" means any
day excluding Saturday, Sunday and any day which is a legal holiday under the
laws of Charlotte, North Carolina or of New York, New York, or is a day on which
banking institutions therein located are authorized or required by law or other
governmental action to close.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
* * *
24
<PAGE>
If the foregoing is in accordance with your understanding of our agreement
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement among the
Issuer, the Guarantors and the Initial Purchaser.
Very truly yours,
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
GUARANTORS:
PCC EXPRESS, INC.
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
PHOENIX (MD.) REALTY, LLC
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
25
<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
FIRST UNION CAPITAL MARKETS
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Douglas J. Fink
---------------------------
Name: Douglas J. Fink
Title: Managing Director
26
<PAGE>
EXHIBIT 4.2
================================================================================
PHOENIX COLOR CORP.
Issuer
$105,000,000
10 3/8% Senior Subordinated Notes due 2009
INDENTURE
Dated as of February 2, 1999
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Section Indenture Section
- ----------- -----------------
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
310(a)(5) 7.10
(b) 7.08; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 13.03
(c) 13.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 13.02
(d) 7.06
314(a) 4.07; 13.02
(b) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) 4.11
315(a) 7.01
(b) 7.05; 13.02
(c) 7.01
(d) 7.01
(e) 6.11
316(a)(last sentence) 13.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
316(c) 9.04
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 13.01
<PAGE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of this Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE........................1
SECTION 1.01. Definitions.............................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act......20
SECTION 1.03. Rules of Construction..................................21
ARTICLE 2 THE NOTES........................................................22
SECTION 2.01. Form and Dating........................................22
SECTION 2.02. Execution and Authentication...........................25
SECTION 2.03. Registrar and Paying Agent.............................26
SECTION 2.04. Paying Agent To Hold Money in Trust....................27
SECTION 2.05 Holder Lists...........................................27
SECTION 2.06. Global Notes...........................................28
SECTION 2.07. Transfer and Exchange..................................28
SECTION 2.08. Replacement Notes......................................34
SECTION 2.09. Outstanding Notes......................................35
SECTION 2.10. Temporary Notes........................................35
SECTION 2.11. Cancellation...........................................35
SECTION 2.12. Payment of Interest, Interest Rights Preserved.........35
SECTION 2.13. CUSIP Numbers..........................................36
SECTION 2.14. Transfers, etc.........................................36
ARTICLE 3 REDEMPTION.......................................................37
SECTION 3.01. Notices to Trustee.....................................37
SECTION 3.02. Selection of Notes To Be Redeemed......................37
SECTION 3.03. Notice of Redemption...................................37
SECTION 3.04. Effect of Notice of Redemption.........................38
SECTION 3.05. Deposit of Redemption Price............................38
SECTION 3.06. Notes Redeemed in Part.................................39
ARTICLE 4 COVENANTS........................................................39
SECTION 4.01. Payment of Notes.......................................39
SECTION 4.02. Maintenance of Office or Agency........................39
i
<PAGE>
SECTION 4.03. Money for the Notes to be Held in Trust................40
SECTION 4.04. Corporate Existence....................................40
SECTION 4.05. Maintenance of Property................................40
SECTION 4.06. Payment of Taxes and Other Claims......................41
SECTION 4.07. SEC Reports............................................41
SECTION 4.08. Limitation on Indebtedness.............................41
SECTION 4.09. Limitation on Restricted Payments......................41
SECTION 4.10. Limitation on Restrictions on Distributions from
Restricted Subsidiaries................................43
SECTION 4.11. Limitation on Sales of Assets and Subsidiary Stock.....44
SECTION 4.12. Limitation on Affiliate Transactions...................48
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries.............................49
SECTION 4.14. Change of Control......................................49
SECTION 4.15. Limitation on Liens....................................52
SECTION 4.16. Limitation on Layered Indebtedness.....................52
SECTION 4.17. Compliance Certificate.................................53
SECTION 4.18. Waiver of Stay, Extension or Usury Laws................53
SECTION 4.19. Investment Company Act.................................53
SECTION 4.20. Limitation on Conduct of Business......................53
SECTION 4.21. Further Instruments and Acts...........................53
ARTICLE 5 SUCCESSOR COMPANY................................................53
SECTION 5.01. When Issuer May Merge or Transfer Assets...............53
ARTICLE 6 DEFAULTS AND REMEDIES............................................55
SECTION 6.01. Events of Default......................................55
SECTION 6.02. Acceleration...........................................56
SECTION 6.03. Other Remedies.........................................57
SECTION 6.04. Waiver of Past Defaults................................57
SECTION 6.05. Control by Majority....................................57
SECTION 6.06. Limitation on Suits....................................58
SECTION 6.07. Rights of Holders To Receive Payment...................58
SECTION 6.08. Collection Suit by Trustee.............................58
ii
<PAGE>
SECTION 6.09. Trustee May File Proofs of Claim.......................58
SECTION 6.10. Priorities.............................................59
SECTION 6.11. Undertaking for Costs..................................59
SECTION 6.12. Waiver of Stay or Extension Laws.......................59
ARTICLE 7 TRUSTEE..........................................................60
SECTION 7.01. Duties of Trustee......................................60
SECTION 7.02. Rights of Trustee......................................61
SECTION 7.03. Individual Rights of Trustee...........................61
SECTION 7.04. Trustee's Disclaimer...................................62
SECTION 7.05. Notice of Defaults.....................................62
SECTION 7.06. Reports by Trustee to Holders..........................62
SECTION 7.07. Compensation and Indemnity.............................62
SECTION 7.08. Replacement of Trustee.................................63
SECTION 7.09. Successor Trustee by Merger............................64
SECTION 7.10. Eligibility; Disqualification..........................64
SECTION 7.11. Preferential Collection of Claims Against Issuer.......64
SECTION 7.12. Trustee's Application for Instructions from the
Issuer.................................................65
ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE...............................65
SECTION 8.01. Discharge of Liability on Notes; Defeasance............65
SECTION 8.02. Conditions to Defeasance...............................66
SECTION 8.03. Application of Trust Money.............................68
SECTION 8.04. Repayment to Issuer....................................68
SECTION 8.05. Indemnity for Government Obligation....................68
SECTION 8.06. Reinstatement..........................................68
ARTICLE 9 AMENDMENTS.......................................................68
SECTION 9.01. Without Consent of Holders.............................68
SECTION 9.02. With Consent of Holders................................69
SECTION 9.03. Compliance with Trust Indenture Act....................70
SECTION 9.04. Revocation and Effect of Consents and Waivers..........70
SECTION 9.05. Notation on or Exchange of Notes.......................71
iii
<PAGE>
SECTION 9.06. Trustee To Sign Amendments.............................71
SECTION 9.07. Payment for Consent....................................71
ARTICLE 10 SUBORDINATION OF THE NOTES......................................71
SECTION 10.01. Agreement To Subordinate...............................71
SECTION 10.02. Liquidation, Dissolution, Bankruptcy...................71
SECTION 10.03. Default on Senior Indebtedness of the Issuer...........72
SECTION 10.04. Acceleration of Payment of Notes.......................73
SECTION 10.05. When Distribution Must Be Paid Over....................73
SECTION 10.06. Subrogation............................................73
SECTION 10.07. Relative Right.........................................73
SECTION 10.08. Subordination May Not Be Impaired by Issuer............73
SECTION 10.09. Rights of Trustee and Paying Agent.....................73
SECTION 10.10. Distribution or Notice to Representative...............74
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate..............................74
SECTION 10.12. Trust Moneys Not Subordinated..........................74
SECTION 10.13. Trustee Entitled To Rely...............................74
SECTION 10.14. Trustee To Effectuate Subordination....................75
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness...........................................75
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions...............................75
SECTION 10.17. No Waiver of Subordination Provisions..................75
SECTION 10.18. Other Rights of Holders of Senior Indebtedness.........76
ARTICLE 11 GUARANTEES; RELEASE OF GUARANTEES; ADDITIONAL GUARANTEES........77
SECTION 11.01. Guarantees.............................................77
SECTION 11.02. Successors and Assigns.................................78
SECTION 11.03. No Waiver..............................................79
SECTION 11.04. Modification...........................................79
SECTION 11.05. Limitation of Guarantor's Liability....................79
SECTION 11.06. Release of Guarantees..................................79
SECTION 11.07. Additional Guarantees..................................80
iv
<PAGE>
ARTICLE 12 SUBORDINATION OF THE GUARANTEES.................................80
SECTION 12.01. Agreement To Subordinate...............................80
SECTION 12.02. Liquidation, Dissolution, Bankruptcy...................80
SECTION 12.03. Default on Senior Indebtedness of Guarantor............80
SECTION 12.04. Demand for Payment.....................................81
SECTION 12.05. When Distribution Must Be Paid Over....................81
SECTION 12.06. Subrogation............................................81
SECTION 12.07. Relative Rights........................................82
SECTION 12.08. Subordination May Not Be Impaired by Guarantor.........82
SECTION 12.09. Rights of Trustee and Paying Agent.....................82
SECTION 12.10. Distribution or Notice to Representative...............82
SECTION 12.11. Article 12 Not To Prevent Defaults Under the
Guarantees or Limit Right To Demand Payment............82
SECTION 12.12. Trustee Entitled To Rely...............................83
SECTION 12.13. Trustee To Effectuate Subordination....................83
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Guarantors.............................83
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions...............................83
SECTION 12.16. No Waiver of Subordination Provisions..................84
SECTION 12.17. Other Rights of Holders of Senior Indebtedness.........84
ARTICLE 13 MISCELLANEOUS...................................................85
SECTION 13.01. Trust Indenture Act Controls...........................85
SECTION 13.02. Notices................................................85
SECTION 13.03 Communication by Holders with Other Holders............86
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.....86
SECTION 13.05. Statements Required in Certificate or Opinion..........86
SECTION 13.06. When Notes Disregarded.................................87
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar...........87
SECTION 13.08. Legal Holidays.........................................87
SECTION 13.09. Governing Law..........................................87
SECTION 13.10. No Recourse Against Others.............................87
v
<PAGE>
SECTION 13.11. Successors, Assigns and Transferees....................88
SECTION 13.12. Multiple Originals.....................................88
SECTION 13.13. Table of Contents, Headings............................88
SECTION 13.14. Severability...........................................88
SECTION 13.15. Further Instruments and Acts...........................88
vi
<PAGE>
EXHIBITS
Exhibit A - Form of Initial Global Note
Exhibit B - Form of Initial Certificated Note
Exhibit C - Form of Exchange Global Note
Exhibit D - Form of Exchange Certificated Note
Exhibit E - Form of Transfer Certificate For Transfer to a QIB
Exhibit F - Form of Transfer Certificate for Transfer to an
Institutional Accredited Investor
Exhibit G - Form of Investment Letter for Institutional Accredited
Investors
Exhibit H - Form of Transfer Certificate for Transfer to a
Non-U.S. Person
Exhibit I - Form of Investment Letter for Regulation S Purchasers
Exhibit J - Form of Registration Rights Agreement
vii
<PAGE>
INDENTURE
INDENTURE dated as of February 2, 1999, among PHOENIX COLOR CORP., a
Delaware corporation (the "Issuer"), certain Subsidiaries thereof as guarantors
(the "Guarantors") and Chase Manhattan Trust Company, National Association, a
national banking association (the "Trustee").
RECITALS
The Issuer has duly authorized the creation and issue of its 10 3/8%
Senior Subordinated Notes due 2009 (the "Initial Notes") of substantially the
tenor and amount hereinafter set forth and, to provide therefor and for, if and
when issued in exchange for the Initial Notes pursuant to this Indenture and the
Registration Rights Agreement, the Issuer's 10 3/8% Senior Subordinated Notes
due 2009 (the "Exchange Notes" and together with the Initial Notes, the
"Notes"), the Issuer has duly authorized the execution and delivery of this
Indenture.
Each of the Guarantors has duly authorized the execution and delivery of
this Indenture to provide a Guarantee of the Notes and of certain of the
obligations of the Issuer hereunder.
All things necessary to make the Notes, when executed by the Issuer and
authenticated and delivered by the Trustee hereunder and duly issued by the
Issuer, the valid obligations of the Issuer, and to make this Indenture a valid
instrument of the Issuer and each of the Guarantors, in accordance with their
respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that for and in consideration
of the premises and the purchase of the Initial Notes by the Holders thereof, it
is mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Notes, as follows;
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any Person, (i) any
Indebtedness or Disqualified Stock of any other Person existing at the time such
Person is merged with or into or becomes a Restricted Subsidiary of such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person, and in either
case for purposes of this Indenture shall be deemed to be incurred by such
specified Person at the time such other Person is merged with or into or becomes
a Restricted Subsidiary of such specified Person or at the time such asset is
acquired by such specified Person, as the case may be.
"Additional Guarantee" has the meaning assigned to it in Section 11.07.
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"Additional Guarantor" has the meaning assigned to it in Section 11.07.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person, including any director or executive officer
of such specified Person. For the purposes of this definition, "control"
(including with correlative meaning, the terms "controlling," "controlled by"
and "under common control with"), when used with respect to any Person, means
(i) the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, or (ii) the beneficial ownership of 10% or more of the total voting
power of the Voting Stock (on a Fully Diluted basis) of such Person.
"Affiliate Transaction" has the meaning assigned to it in Section 4.12.
"Agent Members" has the meaning assigned to it in Section 2.06(a).
"Asset Acquisition" means (i) an Investment by the Issuer or any
Restricted Subsidiary in any other Person pursuant to which such Person shall be
merged with or into the Issuer or any Restricted Subsidiary, or (ii) the
acquisition by the Issuer or any Restricted Subsidiary of the assets of any
Person (other than a Subsidiary of the Issuer) which constitutes all or
substantially all of the assets of such person or comprises any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
lease, assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any sale and leaseback transaction) by the Issuer or by any of its Restricted
Subsidiaries to any Person other than the Issuer or any of its Restricted
Subsidiaries (any such transaction, a "disposition") of (i) any of the stock of
any of the Issuer's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of the Issuer or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Issuer or of any
of its Subsidiaries; excluding (a) any disposition of Cash Equivalents or
inventory in the ordinary course of business or obsolete equipment in the
ordinary course of business consistent with past practices of the Issuer or any
of its Subsidiaries or the lease or sublease of any real or personal property in
the ordinary course of business, (b) dispositions of stock or assets the
aggregate value of which does not exceed $1,000,000 less the aggregate value of
all other dispositions of stock or assets made subsequent to the Issue Date
pursuant to this clause (b), (c) exchanges of properties or assets for other
properties or assets, excluding cash or Cash Equivalents but including the
Capital Stock of a Person if, as a result of such exchange, such Person becomes
a Restricted Subsidiary; provided, that the property or assets so acquired, or
the property or assets of the Person the Capital Stock of which is so acquired
(1) are used in a Related Business and (2) have a fair market value at least
equal to the fair market value of the assets or properties being exchanged (as
evidenced by a resolution of the Issuer's Board of Directors) and (d) for
purposes of Section 4.11 only, a disposition made in accordance with Section
4.09.
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"Asset Sale Offer" has the meaning assigned to it in Section 4.11.
"Asset Sale Offer Amount" has the meaning assigned to it in Section 4.11.
"Asset Sale Purchase Date" has the meaning assigned to it in Section 4.11.
"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Blockage Notice" has the meaning assigned to it in Section 10.03.
"Board of Directors" means, as the context requires, the Board of
Directors or comparable governing body of the Issuer or the applicable
Restricted Subsidiary, as the case may be, or any committee thereof duly
authorized to act on behalf of such Board. In the case of a partnership or
limited liability company, the comparable governing body shall be partners or
members of such partnership or limited liability company or such other body as
may be duly authorized by such partners or members generally to manage the
business and affairs of the partnership or limited liability company.
"Board Resolution" means a copy of a resolution certified pursuant to an
Officers' Certificate to have been duly adopted by the Board of Directors of the
Issuer or a Guarantor, as appropriate, and to be in full force and effect, and
delivered to the Trustee.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of New York, New York or is a day on which
banking institutions therein or banking institutions located in the city in
which the Corporate Trust Office is located are authorized or required by law or
other governmental action to close.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) the equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be capitalized and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof
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maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having the highest rating obtainable from either S&P or Moody's,
(iii) commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P's or Moody's, (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any commercial bank organized under the laws of the United States of America
or any state thereof or the District of Columbia that (a) is at least
"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $100,000,000, (v) shares of any money market mutual fund that
(a) has its assets invested continuously in the types of investments referred to
in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000,
and (c) has the highest rating obtainable from either S&P's or Moody's, and (vi)
repurchase agreements with respect to, and which are fully secured by a
perfected security interest in, obligations of a type described in clause (i) or
clause (ii) above and are with any commercial bank described in clause (iv)
above.
"Certificated Notes" means Notes in certificated form.
"Change of Control" has the meaning assigned to it in Section 4.14.
"Change of Control Offer" has the meaning assigned to it in Section 4.14.
"Change of Control Payment Date" has the meaning assigned to it in Section
4.14.
"Change of Control Purchase Price" has the meaning assigned to it in
Section 4.14.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of Consolidated EBITDA of the Issuer during the four full fiscal quarters
(the "Four Quarter Period") ending on or immediately prior to the date of the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
(the "Transaction Date") to Consolidated Fixed Charges of the Issuer for the
Four Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis, in
accordance with Article 11 of Regulation S-X under the Securities Act, for the
period of such calculation to (i) the incurrence or repayment of any
Indebtedness of the Issuer or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including any Asset Acquisition giving rise to the need to make such
calculation as a result of the Issuer or one of its Restricted Subsidiaries
incurring, assuming or otherwise being liable for Acquired Indebtedness and also
including any Consolidated EBITDA attributable to the assets which are the
subject of the Asset Acquisition or Asset Sale during the Four Quarter Period)
occurring during the Four Quarter Period or at any
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time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Four Quarter Period. If the Issuer or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if the Issuer or such Restricted Subsidiary, as the case may be,
had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator of this "Consolidated Coverage Ratio," (a) interest
on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date, (b) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period, and (c) notwithstanding clause (a) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Agreements shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated EBITDA" means, with respect to the Issuer for any period,
the sum, without duplication, of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (a) all income taxes of
the Issuer and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (b) Consolidated Interest
Expense and (c) Consolidated Non-Cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for the Issuer and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charges" means, with respect to the Issuer for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(including any premium or penalty paid in connection with redeeming or retiring
Indebtedness of the Issuer and its Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness), plus
(ii) the product of (a) the amount of all dividend payments on any series of
Preferred Stock of the Issuer (other than dividends paid in Capital Stock that
is not Disqualified Stock) paid, accrued or scheduled to be paid or accrued
during such period times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then-current effective consolidated
federal, state and local income tax rate of the Issuer, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Issuer for any
period, the sum without duplication of: (i) the aggregate of all cash and
non-cash interest expense (minus amortization or write-off of deferred financing
costs included in cash or non-cash interest expense) of the Issuer and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including (a) any amortization of debt discount, (b) the
net costs under Interest Rate Protection Agreements, (c) all capitalized
interest and (d) the
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interest portion of any deferred payment obligation, and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Issuer and its Restricted Subsidiaries during such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Issuer and its Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; provided, that there
shall be excluded therefrom (i) after-tax gains and losses from Asset Sales or
abandonment or reserves relating thereto, (ii) items classified as
extraordinary, nonrecurring or unusual gains, losses or charges, and the related
tax effects, each determined in accordance with GAAP, (iii) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the Issuer or is merged or
consolidated with the Issuer or any Restricted Subsidiary of the Issuer, (iv)
the net income (but not loss) of any Restricted Subsidiary of the Issuer to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract, operation of
law or otherwise, (v) the net income of any Person, other than a Restricted
Subsidiary of the Issuer, except to the extent of cash dividends or
distributions paid to the Issuer or to a Restricted Subsidiary of the Issuer by
such Person, (vi) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time after September 30, 1998, (vii) income or loss
attributable to discontinued operations (including operations disposed of during
such period whether or not such operations were classified as discontinued), and
(viii) in the case of a successor to the Issuer by consolidation or merger or as
a transferee of the Issuer's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Issuer and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Issuer ending at least forty-five (45) days
prior to the taking of any action for the purpose of which the determination is
being made, as (i) the par or stated value of all outstanding Capital Stock of
the Issuer plus (ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus less (a) any
accumulated deficit and (b) any amounts attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" means with respect to the Issuer, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Issuer and its Restricted Subsidiaries reducing Consolidated Net Income of
the Issuer for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charges constituting an extraordinary item or loss
or any such charge which requires an accrual of or a reserve for cash charges
for any future period).
"Corporate Trust Office" means the office of the Trustee at which at any
particular time this Indenture shall be principally administered, which office
is, at the date of execution of this Indenture, 1650 Market Street, Suite 5210,
Philadelphia, PA 19103, Attention: Capital
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Market Fiduciary Services (Phoenix Color Corp. 10 3/8% Senior Subordinated Notes
due 2009).
"Custodian" means any receiver, trustee, assignee, liquidator, custodian
or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.12 hereof.
"Depositary" means The Depository Trust Company, its nominees, and their
respective successors.
"Designated Senior Indebtedness" means, in respect of the Issuer, the
Senior Credit Facility and any other Senior Indebtedness of the Issuer which, at
the date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to, at least $5,000,000 and is specifically designated by the Issuer in
the instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" and, in respect of any Guarantor, any Guarantee by such
Guarantor of Designated Senior Indebtedness of the Issuer.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable
for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of
the holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an Asset Sale or Change of
Control occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are not more favorable to
the holders of such Capital Stock than the provisions described under Section
4.11 and Section 4.14.
"Event of Default" has the meaning assigned to it in Section 6.01.
"Excess Proceeds" has the meaning assigned to it in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Certificated Notes" has the meaning assigned to it in Section
2.01.
"Exchange Global Note" has the meaning assigned to it in Section 2.01.
"Exchange Note" has the meaning assigned to it in the recital hereto.
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"Fully Diluted" means all shares of Common Stock, computed as if all
warrants, options and other securities exercisable for, convertible into or
otherwise having the right to acquire Common Stock had been exercised or
converted.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the published rules and regulations of the
Commission governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff of
the Commission.
"Global Notes" means the Initial Global Note and the Exchange Global Note.
"Guarantee" means the Guarantee of the Notes by each Guarantor under
Article 11 hereof.
"Guarantor" means each Subsidiary of the Issuer identified as a Guarantor
on the signature pages hereto and each Additional Guarantor.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, that any Indebtedness or Capital Stock of a Person existing at
the time such Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Restricted Subsidiary. The term "incurrence"
when used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination, (i) all indebtedness, obligations and liabilities of such Person
for borrowed money, (ii) all indebtedness, obligations and liabilities of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all indebtedness, obligations and liabilities of such Person evidenced by
Capitalized Lease Obligations, (iv) all indebtedness, obligations and
liabilities of such Person evidenced by notes payable and drafts accepted
representing extensions of credit, whether or not representing obligations for
borrowed money, of such Person, (v) all indebtedness, obligations or liabilities
of such Person owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months (or a longer period of up
to one year, if such terms are available from suppliers in the ordinary course
of business) from the date of incurrence of the obligation in respect thereof or
(b) evidenced by a note or similar written instrument, (vi) all indebtedness,
obligations and liabilities secured by any Lien on any property
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or asset owned or held by that Person (including any Lien arising under any
conditional sale or other title retention agreement, any sale-leaseback
arrangement or any other lease in the nature thereof and any agreement to give
any security interest) regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is nonrecourse to the credit of that
Person except that "Indebtedness" shall not include trade payables and accrued
liabilities incurred in the ordinary course of business for the purchase of
goods or services which are not secured by a Lien other than a Lien permitted
pursuant to clause (viii) of the definition of Permitted Liens and obligations
under Interest Rate Protection Agreements, (vii) guarantee obligations of such
Person in respect of Indebtedness of other Persons and (viii) all Disqualified
Stock issued by such Person with the amount of Indebtedness represented by such
Disqualified Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Stock as
if such Disqualified Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified Stock,
such fair market value to be determined reasonably and in good faith by the
board of directors of the issuer of such Disqualified Stock.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Certificated Notes" has the meaning assigned to it in Section
2.01.
"Initial Global Note" has the meaning assigned to it in Section 2.01.
"Initial Notes" has the meaning assigned to it in the recital hereto.
"Initial Purchaser" means First Union Capital Markets Corp., which prior
to February 1, 1999 was known as First Union Capital Markets, a division of
Wheat First Securities, Inc.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Issuer or its assets, or (ii) any liquidation, dissolution or other winding up
of the Issuer, whether voluntary or involuntary or whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors
or any other marshaling of assets or liabilities of the Issuer.
"Institutional Accredited Investors" means institutional "accredited
investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act, other than QIBs.
"Interest Payment Date" means each semiannual Interest Payment Date on
February 1 and August 1 of each year, commencing August 1, 1999, in respect of
the Notes.
"Interest Rate Protection Agreement" of any Person means any interest rate
protection agreement (including interest rate swaps, caps, floors, collars,
derivative instruments and similar agreements) in support of the Issuer's
business and not of a speculative nature.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are,
in conformity with GAAP, recorded as accounts receivable on the balance sheet of
such Person) or other extensions of credit (including by way of a guarantee
obligation or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary," the definition of
"Restricted Payment" and Section 4.09, (i) "Investment" shall include the
portion (proportionate to the Issuer's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Issuer at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Issuer shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary equal to an amount (if positive) equal to (a) the
Issuer's "Investment" in such Unrestricted Subsidiary at the time of such
redesignation as a Restricted Subsidiary less (b) the portion (proportionate to
the Issuer's equity interest in such Unrestricted Subsidiary) of the fair market
value of the net assets of such Unrestricted Subsidiary at the time of such
redesignation as a Restricted Subsidiary, and (ii) any property transferred to
or from an Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer, in each case as determined in good faith by the Board
of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
indenture securities.
"Issuer Order" means a written order signed in the name of the Issuer by
(i) the Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer or any Vice President of the Issuer and (ii) the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Issuer, and
delivered to the Trustee.
"Legal Holiday" has the meaning assigned to it in Section 13.08.
"Lien" means any mortgage, pledge, assignment, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement, any sale-leaseback arrangement or any other lease in
the nature thereof and any agreement to give any security interest) and any
option, trust or other preferential arrangement having the practical effect of
any of the foregoing.
"Liquidated Damages" has the meaning assigned to it in the Registration
Rights Agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Available Cash" means, with respect to any Asset Sale, payments in
cash or Cash Equivalents received therefrom, net of bona fide direct costs of
sale, including, but not limited to, (i) income taxes reasonably estimated to be
actually payable as a result of such Asset Sale within two years of the date of
such Asset Sale, (ii) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on, any Indebtedness that is secured by a Lien on
the stock or assets in question and that is required to be repaid under the
terms thereof as a result of such Asset Sale, (iii) out-of-pocket expenses and
fees relating to such Asset Sale (including legal, accounting and investment
banking fees and sales commissions) and (iv) any portion of cash proceeds which
the Issuer determines in good faith should be reserved for post-closing
adjustments or liabilities relating to the Asset Sale retained by the Issuer or
any of its Restricted Subsidiaries, it being understood and agreed that on the
day that all such post-closing adjustments have been finally determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments, payable by the Issuer or any of its
Restricted Subsidiaries, shall constitute Net Available Cash on such date.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
mean the proceeds of such issuance or sale in the form of cash or Cash
Equivalents net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Non-U.S. Person" means any Person who is not a "U.S. Person," as
defined in Rule 902(k) under the Securities Act.
"Note Register" has the meaning assigned to it in Section 2.03.
"Notes" has the meaning assigned to it in the recital hereto.
"Notice of Default" has the meaning assigned to it in Section 6.01.
"Obligation" has the meaning assigned to it in Section 11.01.
"Officer" means the Chairman of the Board, the President, Chief Financial
Officer, any Vice President, the Treasurer, or the Secretary of the Issuer or
any Restricted Subsidiary, as the case may be (or, in the case of any Restricted
Subsidiary that is not a corporation, the respective Persons having the duties
and authority correlative to the foregoing officers of a corporation).
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee.
"Paying Agent" has the meaning assigned to it in Section 2.03.
"Payment Blockage Period" has the meaning assigned to it in Section 10.03.
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"Permitted Holders" means any or all of Louis LaSorsa, Edward Lieberman
and the Issuer's Stock Bonus Plan (so long as Louis LaSorsa and Edward Lieberman
are the sole trustees of such Stock Bonus Plan).
"Permitted Indebtedness" means each of the following:
(i) Indebtedness under the Notes, this Indenture and the Guarantees;
(ii) Indebtedness under the Senior Credit Facility; provided, that the
aggregate principal amount of Indebtedness outstanding under the Senior Credit
Facility at any one time shall not exceed the greater of (a) $20.0 million or
(b) the Borrowing Base (as defined in the Senior Credit Facility);
(iii) other Indebtedness of the Issuer and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or permanent
reductions thereon;
(iv) Interest Rate Protection Agreements of the Issuer covering
Indebtedness of the Issuer or any of its Restricted Subsidiaries and Interest
Rate Protection Agreements of any Restricted Subsidiary covering Indebtedness of
such Restricted Subsidiary; provided, that (a) such Interest Rate Protection
Agreements are entered into to protect the Issuer and its Subsidiaries from
fluctuations in interest rates on Indebtedness incurred either in accordance
with this Indenture or in accordance with the Senior Credit Facility to the
extent the notional principal amount of such Interest Rate Protection Agreements
does not exceed the principal amount of the Indebtedness to which such Interest
Rate Protection Agreements relates and (b) such Interest Rate Protection
Agreements do not increase the Indebtedness of the Issuer and its Restricted
Subsidiaries outstanding other than by reason of fees, indemnities and
compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary to the Issuer or to a
Restricted Subsidiary for so long as such Indebtedness is held by the Issuer or
a Restricted Subsidiary, in each case subject to no Lien held by a Person other
than the Issuer or a Restricted Subsidiary; provided that if as of any date any
Person other than the Issuer or a Restricted Subsidiary owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vi) Indebtedness of the Issuer to Restricted Subsidiary for so long as
such Indebtedness is held by Restricted Subsidiary, subject to no Lien; provided
that (a) any Indebtedness of the Issuer to any Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to the Issuer's
obligations under the Notes and (b) if as of any date any Person other than a
Restricted Subsidiary owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the Issuer;
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(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of day-light overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, that such Indebtedness is extinguished within two
business days of incurrence;
(viii) Indebtedness of the Issuer or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Issuer or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(ix) Refinancing Indebtedness incurred in respect of Indebtedness
originally incurred pursuant to the second sentence of Section 4.08 or pursuant
to this clause (ix) or clause (i) or (ii) of this definition;
(x) Additional Indebtedness of the Issuer and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $5,000,000 at any one time
outstanding for Capitalized Lease Obligations or for purposes of financing the
purchase price or construction cost of equipment, fixtures or similar property;
and
(xi) Additional Indebtedness of the Issuer and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $5,000,000 at any one time
outstanding.
"Permitted Investment" means any of the following:
(i) Investments by the Issuer or any Restricted Subsidiary in any Person
that is or will become immediately after such Investment a Restricted Subsidiary
or that will merge or consolidate into the Issuer or a Restricted Subsidiary;
(ii) Investments in the Issuer by any Restricted Subsidiary; provided that
any Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written agreement, to the Issuer's obligations under the Notes and
this Indenture;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Issuer and its
Subsidiaries in the ordinary course of business for bona fide business purposes
not, in the aggregate, in excess of $1,000,000 at any one time outstanding;
(v) Interest Rate Protection Agreements entered into in the ordinary
course of the Issuer's or its Restricted Subsidiaries' businesses and otherwise
in compliance with this Indenture;
(vi) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
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(vii) consideration other than cash or Cash Equivalents received by the
Issuer or its Restricted Subsidiaries in connection with an Asset Sale made in
compliance with Section 4.11; and
(viii) Investments not to exceed $1,000,000 at any one time outstanding.
"Permitted Liens" means any of the following:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Issuer or the Subsidiaries shall have set aside on its books
such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect thereof,
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired;
(v) easements, rights-of-way zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Issuer or any of its
Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of the Issuer or
a Restricted Subsidiary acquired in the ordinary course of business; provided,
that (a) the related purchase money Indebtedness shall not exceed the cost of
such property or assets and shall not be secured by any property or assets of
the Issuer or any Restricted Subsidiary other than the property and assets so
acquired and (b) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
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(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof,
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Issuer or a
Restricted Subsidiary, including rights of offset and set-off,
(xi) Liens securing Interest Rate Protection Agreements which Interest
Rate Protection Agreements relate to Indebtedness that is incurred under this
Indenture or the Senior Credit Facility;
(xii) Liens securing Indebtedness under the Senior Credit Facility or
pursuant to clause (xi) of the definition of "Permitted Indebtedness";
(xiii) Liens existing on the Issue Date and Liens to secure any
Refinancing Indebtedness which is incurred to refinance any Indebtedness which
has been secured by a Lien permitted under Section 4.15 and which Indebtedness
has been incurred in accordance with Section 4.08; provided that such new Liens
(a) are no less favorable to the Holders of Notes and are not more favorable to
the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (b) do not extend to any property or assets
other than the property or assets securing the Indebtedness refinanced or
replaced by such Refinancing Indebtedness; and
(xiv) Liens securing Acquired Indebtedness incurred in accordance with the
second sentence of Section 4.08; provided that (a) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary and (b) such
Liens do not extend to or cover any property or assets of the Issuer or any
Restricted Subsidiary other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Issuer or a Restricted Subsidiary and are no more favorable
to the lienholders than the Liens securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Issuer or a Restricted
Subsidiary.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
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"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any Insolvency or Liquidation Proceeding (and interest that
would accrue but for the commencement of any Insolvency or Liquidation
Proceeding) in accordance with and at the contract rate (including any rate
applicable upon default) specified in the agreement or instrument creating,
evidencing or governing any Indebtedness, whether or not, pursuant to applicable
law or otherwise, the claim for such interest is allowed as a claim in such
Insolvency or Liquidation Proceeding.
"Preferred Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Placement Legend" has the meaning assigned to it in Section 2.01.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, tangible or
intangible.
"Public Equity Offering" means an underwritten primary public offering of
any class of common stock of the Issuer pursuant to an effective registration
statement under the Securities Act.
"Public Market" means any time after (i) an underwritten Public Equity
Offering of the Issuer has been consummated and (ii) at least 10% of the total
issued and outstanding common stock of the Issuer (as determined on a Fully
Diluted basis) has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Agreement" means the purchase agreement relating to the Notes,
dated January 28, 1999, among the Issuer, the Guarantors and the Initial
Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Record Date" means, for the interest payable on any Interest Payment
Date, the date specified in Section 2.12 hereof.
"Redemption Date" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the date fixed for redemption of such Notes
pursuant to the terms of the Notes and this Indenture.
"Redemption Price" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the price fixed for redemption of such Note
pursuant to the terms of the Notes and this Indenture, plus accrued and unpaid
interest thereon, if any, and Liquidated Damages, if any, to the Redemption
Date.
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"Refinancing Indebtedness" means any Indebtedness of the Issuer or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or any of its Restricted Subsidiaries; provided that:
(i) the principal amount of such Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith), (ii) such Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on terms
at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, and (iv) such Indebtedness is incurred either by
the Issuer or by the Restricted Subsidiary of the Issuer that is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Registered Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Registrar" has the meaning assigned to it in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Notes, dated February 2, 1999 among the Issuer, the Guarantors
and the Initial Purchaser, in substantially the form of Exhibit J hereto.
"Regulation S" means Regulation S under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Related Business" means the businesses of the Issuer and the Restricted
Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the businesses of the Issuer and the Restricted Subsidiaries on
the Issue Date.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Issuer.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions in respect of its Capital
Stock (including any payment in connection with any merger or consolidation
involving such Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Issuer or a Restricted Subsidiary, and other than pro rata
dividends or other distributions made by a Restricted Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Issuer or
any Restricted Subsidiary held by any Person (other than the Issuer or a
Restricted Subsidiary), or any warrants,
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rights or options to acquire shares of any class of such Capital Stock, (iii)
the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Issuer that is not an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement, dated as of September
15, 1998, among the Issuer, the lenders who are or may become party thereto
listed therein and First Union National Bank, as administrative agent, together
with the documents related thereto (including any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
increasing, replacing or otherwise restructuring (including adding Subsidiaries
of the Issuer as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Senior Indebtedness" means with respect to any Person, (i) Indebtedness
of such Person, whether outstanding on the Issue Date or thereafter incurred,
and (ii) accrued and unpaid interest (including Post-Petition Interest) in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
instrument creating or evidencing any of the obligations referred to in clauses
(i) or (ii) or pursuant to which any such obligations are outstanding, it is
provided that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of such Person to any Subsidiary, (2) any liability for Federal, state, local or
other taxes owed or owing by such Person, (3) any accounts payable or other
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liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness
or other obligation of such Person or (5) that portion of any Indebtedness which
at the time of incurrence is incurred in violation of Section 4.08.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 2.12 for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer or a
Restricted Subsidiary of the Issuer (whether outstanding on the Issue Date or
thereafter incurred) which is subordinate or junior in right of payment to the
Notes or the Guarantees pursuant to a written agreement to that effect.
"Subordinated Reorganization Securities" has the meaning assigned to it
in Section 10.02.
"Subsidiary" means, in respect of any Person, any corporation, limited
liability company, association, partnership or other business entity of which
more than fifty percent (50%) of the total Voting Stock or other interests
(including partnership and membership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Successor Company" has the meaning assigned to it in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer in the Corporate Trust Office of the
Trustee assigned by the Trustee to administer its corporate trust matters.
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"Uniform Commercial Code" means the New York Uniform Commercial Code in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Issuer (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, that (a) either (1) the Subsidiary to
be so designated has total assets of $1,000 or less or (2) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under
Section 4.09 and (b) such Subsidiary to be so designated and each of its
Subsidiaries has not at the time of such designation, and does not thereafter,
incur any Indebtedness pursuant to which the lender has recourse to any of the
assets or properties of the Issuer or any of its Restricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, that immediately after giving effect to such designation
(x) the Issuer could incur $1.00 of additional Indebtedness pursuant to the
second sentence of Section 4.08 and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced by
the Issuer to the Trustee by promptly filing with the Trustee a copy of the
board resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligation" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership or member interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
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"indenture securities" means the Notes; "indenture security holder" means
a Noteholder; "indenture to be qualified" means this Indenture; "indenture
trustee" or "institutional trustee" means the Trustee;
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or junior
to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be shown
on a balance sheet of the issuer dated such date prepared in accordance with
GAAP and accretion of principal on such security shall be deemed to be the
incurrence of Indebtedness;
(h) the principal amount of any Preferred Stock shall be (i) the maximum
liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater; and
(i) all references to the date the Notes were originally issued shall
refer to the date the Initial Notes were originally issued.
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ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating.
(a) The Initial Notes and the certificate of authentication of the Trustee
thereon shall be substantially in the form of Exhibit A or Exhibit B hereto, as
applicable, which are hereby incorporated in and expressly made a part of this
Indenture. The Exchange Notes and the certificate of authentication of the
Trustee thereon shall be substantially in the form of Exhibit C or Exhibit D
hereto, as applicable, which are hereby incorporated in and expressly made a
part of this Indenture.
(b) The Notes may have such letters, numbers or other marks of
identification and such legends and endorsements, stamped, printed, lithographed
or engraved thereon, (i) as the Issuer may deem appropriate and as are not
inconsistent with the provisions of this Indenture, (ii) as may be required to
comply with this Indenture, any law or any rule of any securities exchange on
which the Notes may be listed and (iii) as may be necessary to conform to
customary usage. Each Note shall be dated the date of its authentication by the
Trustee. The Notes shall be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof; provided
that Initial Certificated Notes transferred to Institutional Accredited
Investors shall be subject to a minimum denomination of $250,000. Definitive
Notes shall be typed, printed, lithographed or engraved or produced by any
combination of such methods or produced in any other manner permitted by the
rules of any securities exchange on which such Notes may be listed, all as
determined by the officers of the Issuer executing such Notes, as evidenced by
their execution of such Notes.
(c) Initial Notes offered and sold to QIBs in reliance on Rule 144A or
Non-U.S. Persons in reliance on Regulation S as provided in the Purchase
Agreement shall be issued initially in the form of a single, permanent global
note in definitive, fully registered form, without coupons, substantially in the
form set forth in Exhibit A hereto and shall bear the legends set forth in
Section 2.01(e)(i), Section 2.01(e)(ii) and Section 2.01(e)(iii) hereof (the
"Initial Global Note"). Upon issuance, such Initial Global Note shall be
registered in the name of the Depositary or its nominee, duly executed by the
Issuer and authenticated by the Trustee as hereinafter provided and deposited on
behalf of the purchasers of the Initial Notes represented thereby with the
Trustee at its designated office, as custodian for the Depositary. Owners of
beneficial interests in the Initial Global Note shall be entitled to receive
physical delivery of Initial Certificated Notes pursuant to Section 2.07(b)(ii).
Initial Notes offered and sold to Institutional Accredited Investors shall be
issued in the form of a note in definitive, fully registered form, without
coupons, substantially in the form set forth in Exhibit B hereto and shall bear
the legend set forth in Section 2.01(e)(i) hereof, except as provided in Section
2.07(a) (such Notes together with interests in the Initial Global Note that are
subsequently transferred or exchanged pursuant to Section 2.07(b)(ii),
2.07(b)(iii), 2.07(b)(iv) or 2.07(c), the "Initial Certificated Notes"). Upon
issuance, any such Initial Certificated Note shall be duly executed by the
Issuer and authenticated by the Trustee as hereinafter provided. Upon transfer
of any Initial Certificated Note to a QIB pursuant to Section 2.07(b)(i) hereof,
such Initial Certificated Note
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may be exchanged for a beneficial interest in the Initial Global Note, except as
provided in Section 2.07(c).
(d) If the Initial Global Note is tendered in a Registered Exchange Offer,
it shall be exchanged for a single, permanent global note in definitive, fully
registered form, without coupons, substantially in the form set forth in Exhibit
C hereto and shall bear the legends set forth in Section 2.01(e)(ii) and Section
2.01(e)(iv) hereof (the "Exchange Global Note"). Upon issuance, such Exchange
Global Note shall be registered in the name of the Depositary or its nominee,
duly executed by the Issuer and authenticated by the Trustee as hereinafter
provided and deposited on behalf of the beneficial owners of the Exchange Notes
represented thereby in accordance with the procedures of the Depositary.
If Initial Certificated Notes are tendered in a Registered Exchange Offer,
they will be exchanged for Certificated Notes in definitive, fully registered
form, without coupons and without legends, substantially in the form set forth
in Exhibit D hereto ("Exchange Certificated Notes"). Upon issuance, any such
Exchange Certificated Note shall be duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided.
At the option of the Holder thereof, Exchange Notes may be held either in
the form of a beneficial interest in the Exchange Global Note or as Exchange
Certificated Notes.
(e) The following legends shall appear on each Global Note and each
Certificated Note as indicated below:
(i) Except as provided in Section 2.07(a) hereof, each Initial
Global Note and Initial Certificated Note shall bear the following legend (the
"Private Placement Legend") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501
(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THIS NOTE
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN ACCREDITED
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INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE
IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF
THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
(ii) Each Global Note shall bear the following legend on the face
thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO PHOENIX COLOR CORP. OR A SUCCESSOR
THEREOF OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
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(iii) The Initial Global Note shall bear the following legend on the
face thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.07 OF THE
INDENTURE, DATED AS OF FEBRUARY 2, 1999 AMONG PHOENIX COLOR CORP.,
AS ISSUER, THE GUARANTORS LISTED THEREIN, AND CHASE MANHATTAN TRUST
COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE, PURSUANT TO WHICH THIS
NOTE WAS ISSUED.
(iv) The Exchange Global Note shall bear the following legend on the
face thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE.
SECTION 2.02. Execution and Authentication. The Notes may be issued in two
series, a series of Initial Notes and a series of Exchange Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed $200,000,000
except as provided in Section 2.08 hereof. The Notes shall be executed on behalf
of the Issuer by its Chief Executive Officer, President, Chief Operating
Officer, Treasurer or any Vice President, and shall be attested by the Issuer's
Secretary or one of its Assistant Secretaries, in each case by manual or
facsimile signature.
The Notes shall be authenticated by manual signature of an authorized
signatory of the Trustee and shall not be valid for any purpose unless so
authenticated.
In case any officer of the Issuer whose signature shall have been placed
upon any of the Notes shall cease to be such officer of the Issuer before
authentication of such Notes by the Trustee and the issuance and delivery
thereof, such Notes may, nevertheless, be authenticated by the Trustee and
issued and delivered with the same force and effect as though such Person had
not ceased to be such an officer of the Issuer.
The Trustee shall, upon receipt of an Issuer Order requesting such action,
authenticate (a) Initial Notes for original issue up to the aggregate principal
amount not to exceed $200,000,000 outstanding at any given time, or (b) Exchange
Notes for issue pursuant to a Registered Exchange Offer for Initial Notes in a
principal amount equal to the principal amount of Initial Notes exchanged in
such Registered Exchange Offer. Such Issuer Order shall specify the amount of
Notes to be authenticated and the date on which, in the case of clause (a)
above, the Initial
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Notes or, in the case of clause (b) above, the Exchange Notes, are to be
authenticated and shall further provide instructions concerning registration,
amounts for each Holder and delivery.
Upon the occurrence of any event specified in Section 2.07(c) hereof, the
Issuer shall execute and the Trustee shall authenticate and make available for
delivery to each beneficial owner identified by the Depositary, in exchange for
such beneficial owner's interest in the Initial Global Note or Exchange Global
Note, as the case may be, Initial Certificated Notes or Exchange Certificated
Notes, as the case may be, representing Notes theretofore represented by the
Initial Global Note or Exchange Global Note, as the case may be.
A Note shall not be valid or entitled to any benefits under this Indenture
or obligatory for any purpose unless executed by the Issuer and authenticated by
the manual signature of one of the authorized signatories of the Trustee as
provided herein. Such signature upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
under this Indenture and is entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Issuer to authenticate the Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Any authenticating agent of the
Trustee shall have the same rights hereunder as any Registrar or Paying Agent.
Notwithstanding the foregoing, if any Note shall have been authenticated
and delivered hereunder but never issued and sold by the Issuer, and the Issuer
shall deliver such Note to the Trustee for cancellation as provided in Section
2.11 together with a written statement (which need not be accompanied by an
Opinion of Counsel) stating that such Note has never been issued and sold by the
Issuer, for all purposes of this Indenture such Note shall be deemed never to
have been authenticated and delivered hereunder and shall not be entitled to the
benefits of this Indenture.
SECTION 2.03. Registrar and Paying Agent. The Issuer shall maintain,
pursuant to Section 4.02 hereof, an office or agency where the Notes may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Notes may be presented for payment (the "Paying Agent")
and an office or agency where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served.
The Issuer shall cause to be kept at such office a register (the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Issuer shall provide for the registration of Notes and of transfers of Notes
entitled to be registered or transferred as provided herein. The Trustee, at its
Dallas, Texas office, is initially appointed Registrar for the purpose of
registering Notes and transfers of Notes as herein provided. The Issuer may,
upon written notice to the Trustee, change the designation of the Trustee as
Registrar and appoint another Person to act as Registrar for purposes of this
Indenture. If any Person other than the Trustee acts as Registrar, the Trustee
shall have the right at any time, upon reasonable notice, to inspect or examine
the Note Register and to make such inquiries of the Registrar as the Trustee
shall in its discretion deem necessary or desirable in performing its duties
hereunder.
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The Issuer shall enter into an appropriate agency agreement with any
Person designated by the Issuer as Registrar or Paying Agent that is not a party
to this Indenture, which agreement shall incorporate the provisions of the TIA
and shall implement the provisions of this Indenture that relate to such
Registrar or Paying Agent. Prior to the designation of any such Person, the
Issuer shall, by written notice (which notice shall include the name and address
of such Person), inform the Trustee of such designation. The Trustee, at its
Dallas, Texas office, is initially appointed Paying Agent under this Indenture.
If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
Subject to Section 2.07 hereof, upon surrender for registration of
transfer of any Note at an office or agency of the Issuer designated for such
purpose, the Issuer shall execute, and the Trustee shall authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Initial Notes or Exchange Notes, as the case may be, of any
authorized denomination or denominations, of like tenor and aggregate principal
amount, all as requested by the transferor.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Issuer, the Trustee or the Registrar) be
duly endorsed, or be accompanied by a duly executed instrument of transfer in
form satisfactory to the Issuer, the Trustee and the Registrar, by the Holder
thereof or such Holder's attorney duly authorized in writing.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior to each due
date of the principal, premium, if any, or any payment of interest or Liquidated
Damages, if any, with respect to any Note, the Issuer shall deposit with the
Paying Agent a sum sufficient to pay such principal, premium, if any, or
interest or Liquidated Damages, if any, when so becoming due.
The Issuer shall require each Paying Agent (other than the Trustee) to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by such Paying Agent for the payment of
principal, premium, if any, or interest or Liquidated Damages, if any, with
respect to the Notes, shall notify the Trustee of any default by the Issuer in
making any such payment and at any time during the continuance of any such
default, upon the written request of the Trustee, shall forthwith pay to the
Trustee all sums held in trust by such Paying Agent.
The Issuer at any time may require a Paying Agent to pay all money held by
it to the Trustee and to account for any funds disbursed by such Paying Agent.
Upon complying with this Section 2.04, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05 Holder Lists. The Trustee shall preserve in as current a form
as is reasonably practicable the most recent list available to it of the names
and addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at
least seven Business Days before each Interest Payment Date and at such other
times as the Trustee may request in writing, a list in such form and as of
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such date as the Trustee may reasonably require of the names and addresses of
the Holders of Notes and the Issuer shall otherwise comply with TIA Section
312(a).
SECTION 2.06. Global Notes. (a) So long as a Global Note is registered in
the name of the Depositary or its nominee, members of, or participants in, the
Depositary ("Agent Members") shall have no rights under this Indenture with
respect to the Global Note held on their behalf by the Depositary or the Trustee
as its custodian, and the Depositary may be treated by the Issuer, the
Guarantors, the Trustee and any agent of the Issuer, the Guarantors or the
Trustee as the absolute owner of such Global Note for all purposes.
Notwithstanding the foregoing, nothing herein shall (i) prevent the Issuer, the
Guarantors, the Trustee or any agent of the Issuer, the Guarantors or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or (ii) impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder.
(b) The Holder of a Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests in such
Global Note through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
(c) Whenever, as a result of an optional redemption of Notes by the
Issuer, a Change of Control Offer, an Asset Sale Offer, a Registered Exchange
Offer or an exchange for Certificated Notes pursuant to the provisions of
Section 2.07(b) or Section 2.07(c) hereof, a Global Note is redeemed,
repurchased or exchanged in part, such Global Note shall be surrendered by the
Holder thereof to the Trustee who shall cause an adjustment to be made to
Schedule A thereof so that the principal amount of such Global Note will be
equal to the portion of such Global Note not redeemed, repurchased or exchanged
and shall thereafter return such Global Note to such Holder, provided that each
such Global Note shall be in a principal amount of $1,000 or an integral
multiple thereof.
SECTION 2.07. Transfer and Exchange. (a) By its acceptance of any Initial
Note represented by a certificate bearing the Private Placement Legend, each
Holder of, and beneficial owner of an interest in, such Initial Note
acknowledges the restrictions on transfer of such Initial Note set forth in the
Private Placement Legend and agrees that it will transfer such Initial Note only
in accordance with the Private Placement Legend. Upon the registration of
transfer, exchange or replacement of an Initial Note not bearing the Private
Placement Legend, the Trustee shall deliver an Initial Note or Initial Notes
that do not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of an Initial Note bearing the Private Placement Legend, the Trustee
shall deliver an Initial Note or Initial Notes bearing the Private Placement
Legend, unless such legend may be removed from such Note as provided in this
Section 2.07(a). If the Private Placement Legend has been removed from an
Initial Note, as provided herein, no other Initial Note issued in exchange for
all or any part of such Initial Note shall bear such legend, unless the Issuer
has reasonable cause to believe that such other Initial Note represents a
"restricted security" within the meaning of Rule 144 and instructs the Trustee
in writing to cause a legend to appear thereon. Each Initial Note shall bear the
Private Placement Legend unless and until:
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(i) a transfer of such Initial Note is made pursuant to an effective Shelf
Registration Statement, in which case the Private Placement Legend shall
be removed from such Initial Note so transferred at the request of the
Holder; or
(ii) there is delivered to the Issuer such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in
the State of New York, as may reasonably be requested by the Issuer
confirming that neither such legend nor the restrictions on transfer set
forth therein are required to ensure that transfers of such Initial Note
will not violate the registration and prospectus delivery requirements of
the Securities Act; provided that the Trustee shall not be required to
determine (but may rely on a determination made by the Issuer with respect
to) the sufficiency of any such evidence; and upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for such
Initial Note, an Initial Note or Initial Notes (representing the same
aggregate principal amount of the Initial Note being exchanged) without
such legend.
(b) Special Transfer Provisions. The following provisions of this
paragraph (b) are applicable only to Initial Notes bearing the Private Placement
Legend:
(i) Transfers to QIBs. If the Holder of an Initial Certificated Note
wishes to transfer such Initial Certificated Note to a QIB pursuant to
Rule 144A, such Holder may, subject to the rules and procedures of the
Depositary, cause the exchange of such Initial Certificated Note for an
equivalent beneficial interest in the Initial Global Note. Upon receipt by
the Trustee, as Registrar, at its designated office of (A) such Initial
Certificated Note, duly endorsed as provided herein, (B) written
instructions from such Holder directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in the Initial Global
Note equal to the principal amount of the Initial Certificated Note to be
exchanged, such instructions to contain information regarding the
participant account with the Depositary to be credited with such increase
and (C) a certificate in the form of Exhibit E attached hereto from the
transferor, then the Trustee, as Registrar, shall cancel or cause to be
canceled such Initial Certificated Note and shall instruct the Depositary
to increase or cause to be increased such Initial Global Note by the
aggregate principal amount of the beneficial interest in the Initial
Certificated Note to be exchanged and to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Initial Global Note equal to the principal amount of the
Initial Certificated Note so canceled;
(ii) Transfers to Institutional Accredited Investors and Exchange of
Interests in Global Notes:
(A) If a Holder of a beneficial interest in the Initial Global Note
deposited with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such Initial
Global Note to an Institutional Accredited Investor or to exchange such
interest for an Initial Certificated Note evidencing such interest, such
Holder may, subject to the rules and procedures of the Depositary, cause
the transfer or exchange of such interest for one or more Initial
Certificated Notes of any authorized denomination or denominations and of
the same aggregate principal amount. Upon
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receipt by the Trustee, as Registrar, at its designated office of (I)
written instructions from the Depositary directing the Trustee, as
Registrar, to authenticate and deliver one or more Initial Certificated
Notes of the same aggregate principal amount as the beneficial interest in
the Initial Global Note to be transferred or exchanged, such instructions
to contain the name or names of the designated transferee or transferees,
if any, the authorized denomination or denominations of the Initial
Certificated Notes to be so issued and appropriate delivery instructions
and (II) in the case of a transfer, (x) a certificate in the form of
Exhibit F attached hereto from the transferor, (y) a certificate in the
form of Exhibit G attached hereto from the transferee and (z) such other
certifications, legal opinions or other information as the Issuer or the
Trustee may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, then the Trustee, as
Registrar, will instruct the Depositary to reduce or cause to be reduced
such Initial Global Note by the aggregate principal amount of the
beneficial interest therein to be exchanged or transferred and to debit or
cause to be debited from the account of the Person making such exchange or
transfer the beneficial interest in the Initial Global Note that is being
exchanged or transferred, and concurrently with such reduction and debit
the Issuer shall execute, and the Trustee shall authenticate and deliver,
one or more Initial Certificated Notes of the same aggregate principal
amount in accordance with the instructions referred to above; and
(B) if a Holder of an Initial Certificated Note wishes to transfer
such Note to an Institutional Accredited Investor, such Holder may,
subject to the restrictions on transfer set forth herein and in such
Initial Certificated Note, cause the exchange of such Initial Certificated
Note for one or more Initial Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal amount.
Upon receipt by the Trustee, as Registrar, at its designated office of (I)
such Initial Certificated Note, duly endorsed as provided herein, (II)
written instructions from such Holder directing the Trustee, as Registrar,
to authenticate and deliver one or more Initial Certificated Notes of the
same aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions, (III) a certificate in the form of
Exhibit F attached hereto from the transferor, (IV) a certificate in the
form of Exhibit G attached hereto from the transferee and (V) such other
certifications, legal opinions or other information as the Issuer or the
Trustee may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, then the Trustee, as
Registrar, shall cancel or cause to be canceled such Initial Certificated
Note and concurrently therewith, the Issuer shall execute, and the Trustee
shall authenticate and deliver, one or more Initial Certificated Notes of
the same aggregate principal amount, in accordance with the instructions
referred to above;
(iii) Transfers to Non-U.S. Persons:
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(A) If a Holder of a beneficial interest in the Initial Global Note
deposited with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such Initial
Global Note to a Non-U. S. Person pursuant to Regulation S who wishes to
take delivery thereof in the form of a Certificated Note, such Holder may,
subject to the rules and procedures of the Depositary, cause the exchange
of such interest for one or more Initial Certificated Notes of any
authorized denomination or denominations and of the same aggregate
principal amount. Upon receipt by the Trustee, as Registrar, at its
designated office of (I) written instructions from the Depositary
directing the Trustee, as Registrar, to authenticate and deliver one or
more Initial Certificated Notes of the same aggregate principal amount as
the beneficial interest in the Initial Global Note to be exchanged, such
instructions to contain the name or names of the designated transferee or
transferees, the authorized denomination or denominations of the Initial
Certificated Notes to be so issued and appropriate delivery instructions,
(II) a certificate in the form of Exhibit H attached hereto from the
transferor and (III) a certificate in the form of Exhibit I attached
hereto from the transferee, then the Trustee, as Registrar, will instruct
the Depositary to reduce or cause to be reduced such Initial Global Note
by the aggregate principal amount of the beneficial interest therein to be
exchanged and to debit or cause to be debited from the account of the
Person making such transfer the beneficial interest in the Initial Global
Note that is being transferred, and concurrently with such reduction and
debit the Issuer shall execute, and the Trustee shall authenticate and
deliver, one or more Initial Certificated Notes of the same aggregate
principal amount in accordance with the instructions referred to above;
and
(B) if a Holder of an Initial Certificated Note wishes to transfer
such Note to a Non-U. S. Person pursuant to Regulation S who wishes to
take delivery thereof in the form of a Certificated Note, such Holder may,
subject to the restrictions on transfer set forth herein and in such
Initial Certificated Note, cause the exchange of such Initial Certificated
Note for one or more Initial Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal amount.
Upon receipt by the Trustee, as Registrar, at its designated office of (I)
such Initial Certificated Note, duly endorsed as provided herein, (II)
written instructions from such Holder directing the Trustee, as Registrar,
to authenticate and deliver one or more Initial Certificated Notes of the
same aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions, (III) a certificate in the form of
Exhibit H attached hereto from the transferor and (IV) a certificate in
the form of Exhibit I attached hereto from the transferee, then the
Trustee, as Registrar, shall cancel or cause to be canceled such Initial
Certificated Note and concurrently therewith, the Issuer shall execute,
and the Trustee shall authenticate and deliver, one or more Initial
Certificated Notes of the same aggregate principal amount, in accordance
with the instructions referred to above;
(iv) Transfers Pursuant to Other Exemptions.
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(A) If a Holder of a beneficial interest in the Initial Global Note
deposited with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such Initial
Global Note pursuant to another applicable exemption from the registration
requirements of the Securities Act, such Holder may, subject to the rules
and procedures of the Depositary, cause the exchange of such interest for
one or more Initial Certificated Notes of any authorized denomination or
denominations and of the same aggregate principal amount. Upon receipt by
the Trustee, as Registrar, at its designated office of (I) written
instructions from the Depositary directing the Trustee, as Registrar, to
authenticate and deliver one or more Initial Certificated Notes of the
same aggregate principal amount as the beneficial interest in the Initial
Global Note to be exchanged, such instructions to contain the name or
names of the designated transferee or transferees, the authorized
denomination or denominations of the Initial Certificated Notes to be so
issued and appropriate delivery instructions and (II) such certifications,
legal opinions or other information as the Issuer or the Trustee may
reasonably require to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the Trustee, as Registrar, will
instruct the Depositary to reduce or cause to be reduced such Initial
Global Note by the aggregate principal amount of the beneficial interest
therein to be exchanged and to debit or cause to be debited from the
account of the Person making such transfer the beneficial interest in the
Initial Global Note that is being transferred, and concurrently with such
reduction and debit the Issuer shall execute, and the Trustee shall
authenticate and deliver, one or more Initial Certificated Notes of the
same aggregate principal amount in accordance with the instructions
referred to above; and
(B) if a Holder of an Initial Certificated Note wishes to transfer
such Initial Certificated Note pursuant to another applicable exemption
from the registration requirements of the Securities Act, such Holder may,
subject to the restrictions on transfer set forth herein and in such
Initial Certificated Note, cause the exchange of such Initial Certificated
Note for one or more Initial Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal amount.
Upon receipt by the Trustee, as Registrar, at its designated office of (I)
such Initial Certificated Note, duly endorsed as provided herein, (II)
written instructions from such Holder directing the Trustee, as Registrar,
to authenticate and deliver one or more Initial Certificated Notes of the
same aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions and (III) such certifications, legal
opinions or other information as the Issuer or the Trustee may reasonably
require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the Trustee, as Registrar, shall
cancel or cause to be canceled such Initial Certificated Note and
concurrently therewith, the Issuer shall execute, and the Trustee shall
authenticate and deliver, one or more Initial Certificated Notes of the
same aggregate principal amount, in accordance with the instructions
referred to above.
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The Issuer shall deliver to the Trustee, and the Trustee shall retain for
two (2) years, copies of all documents received pursuant to this Section
2.07(b). The Issuer shall have the right to inspect and make copies of all such
documents at its sole expense at any reasonable time upon the giving of
reasonable written notice to the Trustee.
(c) The Initial Global Note or Exchange Global Note, as the case may be,
shall be exchanged by the Issuer for one or more Initial Certificated Notes or
Exchange Certificated Notes, as the case may be, if (i) the Depositary has
notified the Issuer that it is unwilling or unable to continue as, or ceases to
be, a clearing agency registered under Section 17A of the Exchange Act and a
successor to the Depositary registered as a clearing agency under Section 17A of
the Exchange Act is not able to be appointed by the Issuer within ninety (90)
calendar days, or (ii) the Depositary is at any time unwilling or unable to
continue as Depositary and a successor to the Depositary is not able to be
appointed by the Issuer within ninety (90) calendar days, or (iii) the Issuer,
at its option, notifies the Trustee in writing that it elects to cause the
issuance of Notes in the form of Certificated Notes. If an Event of Default
occurs and is continuing, the Issuer shall, at the request of the Holder
thereof, exchange all or part of the Initial Global Note or Exchange Global
Note, as the case may be, for one or more Initial Certificated Notes or Exchange
Certificated Notes, as the case may be; provided that the principal amount of
each of such Initial Certificated Note or Exchange Certificated Note, as the
case may be, and such Global Note, after such exchange, shall be $1,000 or an
integral multiple thereof. Whenever a Global Note is exchanged as a whole for
one or more Initial Certificated Notes or Exchange Certificated Notes, as the
case may be, it shall be surrendered by the Holder thereof to the Trustee for
cancellation. Whenever a Global Note is exchanged in part for one or more
Initial Certificated Notes or Exchange Certificated Notes, as the case may be,
it shall be surrendered by the Holder thereof to the Trustee and the Trustee
shall make the appropriate notations thereon pursuant to Section 2.06(c) hereof.
All Initial Certificated Notes or Exchange Certificated Notes, as the case may
be, issued in exchange for a Global Note or any portion thereof shall be
registered in such names, and delivered, as the Depositary shall instruct the
Trustee in writing. Any Initial Certificated Notes issued pursuant to this
Section 2.07(c) shall include the Private Placement Legend, except as set forth
in Section 2.07(a) hereof.
(d) Any Initial Notes that are presented to the Registrar for exchange
pursuant to a Registered Exchange Offer shall be exchanged for Exchange Notes of
equal principal amount upon surrender to the Registrar of the Initial Notes to
be exchanged in accordance with the terms of the Registered Exchange Offer;
provided that the Initial Notes so surrendered for exchange are accompanied by a
letter of transmittal and duly endorsed or accompanied by a written instrument
of transfer in form satisfactory to the Issuer, the Trustee and the Registrar
and duly executed by the Holder thereof or such Holder's attorney who shall be
duly authorized in writing to execute such document on behalf of such Holder.
Whenever any Initial Notes are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver to the surrendering
Holder thereof, Exchange Notes in the same aggregate principal amount as the
Initial Notes so surrendered.
(e) A Holder may transfer a Note only upon the surrender of such Note for
registration of transfer. No such transfer shall be effected until, and the
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer in the Note
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Register by the Registrar. When Notes are presented to the Registrar with a
request to register the transfer of, or to exchange, such Notes, the Registrar
shall register the transfer or make such exchange as requested if its
requirements for such transactions and any applicable requirements hereunder are
satisfied. To permit registrations of transfers and exchanges, the Issuer shall
execute and the Trustee shall authenticate and deliver Certificated Notes at the
Registrar's request.
(f) The Issuer shall not be required to make and the Registrar need not
register the transfer or exchange of Certificated Notes or portions thereof
selected for redemption (except, in the case of a Certificated Note to be
redeemed in part, the portion of such Note not to be redeemed) or any
Certificated Notes for a period of fifteen (15) calendar days before a selection
of Notes to be redeemed.
(g) No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer of Notes (other than in respect of a
Registered Exchange Offer, except as provided in the Registration Rights
Agreement).
(h) All Notes issued upon any registration of transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes surrendered for
such registration of transfer or exchange.
(i) Any Holder of a Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Note may be effected
only through a book entry system maintained by the Depository (or its agent),
and that ownership of a beneficial interest in the Notes represented thereby
shall be required to be reflected in book-entry form. Transfers of a Global Note
shall be limited to transfers in whole and not in part, to the Depositary, its
successors, and their respective nominees. Interests of beneficial owners in a
Global Note shall be transferred in accordance with the rules and procedures of
the Depositary (or its successors), which shall, in the case of the Initial
Global Note, include restrictions designed to ensure that the beneficial owners
of such Initial Global Note are QIBs.
SECTION 2.08. Replacement Notes. If a mutilated Note is surrendered to the
Registrar or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Issuer, such
Holder shall furnish an indemnity bond sufficient in the judgment of the Issuer
and the Trustee to protect the Issuer, the Trustee, the Paying Agent, the
Registrar and any co-registrar from any loss or liability which any of them may
suffer if a Note is replaced. The Issuer and the Trustee may charge the Holder
for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuer.
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SECTION 2.09. Outstanding Notes. Notes outstanding at any time are all
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Note does not cease to be outstanding because the Issuer or an
Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Issuer receive proof satisfactory to them
that the replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a Redemption Date or maturity date money sufficient to pay all
principal, premium, if any, and interest and Liquidated Damages, if any, payable
on that date with respect to the Notes (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited from paying
such money to the Noteholders on that date pursuant to the terms of this
Indenture, then on and after that date such Notes (or portions thereof) cease to
be outstanding and interest on them ceases to accrue.
SECTION 2.10. Temporary Notes. Until definitive Notes are ready for
delivery the Issuer may prepare and the Trustee shall authenticate and deliver
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Issuer considers appropriate
for temporary Notes. Without unreasonable delay, the Issuer shall prepare and
the Trustee shall authenticate definitive Notes and deliver them in exchange for
temporary Notes.
SECTION 2.11. Cancellation. The Issuer at any time may deliver Notes to
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel and destroy
(subject to the record retention requirements of the Exchange Act) all Notes
surrendered for registration of transfer, exchange, payment or cancellation and
deliver a certificate of such destruction to the Issuer unless the Issuer
directs the Trustee to deliver canceled Notes to the Issuer; provided, that the
Trustee shall not be required to destroy any Notes. The Issuer may not issue new
Notes to replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation.
SECTION 2.12. Payment of Interest, Interest Rights Preserved. Interest on
any Note which is payable, and is paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name such Note is registered
at the close of business on the Record Date for such interest payment, which
shall be the January 15 or July 15 (whether or not a Business Day) immediately
preceding such Interest Payment Date.
Any interest on any Note which is payable, but is not paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder on the relevant
Record Date, and, except as hereinafter provided, such Defaulted Interest, and
any interest payable on such Defaulted Interest, may be paid by the Issuer, at
its election, as provided in clause (a) or (b) below:
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(a) The Issuer may elect to make payment of any Defaulted Interest, and
any interest payable on such Defaulted Interest, to the Persons in whose names
the Notes are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Issuer shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on the Notes and the date of the proposed
payment, and at the same time the Issuer shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as provided in this Section 2.12(a). Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than fifteen (15) calendar days and not less than ten (10)
calendar days prior to the date of the proposed payment and not less than ten
(10) calendar days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Issuer of such Special
Record Date and, in the name and at the expense of the Issuer, shall cause
notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be sent, first-class mail, postage prepaid, to each Holder at
such Holder's address as it appears in the Note Register, not less than ten (10)
calendar days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names the Notes are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause (b);
or
(b) The Issuer may make payment of any Defaulted Interest, and any
interest payable on such Defaulted Interest, on the Notes in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Issuer to the Trustee of the proposed
payment pursuant to this clause (b), such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each Note
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu of, any other Note, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Note.
SECTION 2.13. CUSIP Numbers. The Issuer in issuing the Notes may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers.
SECTION 2.14. Transfers, etc. Each Holder of a Note agrees to indemnify
the Issuer and the Trustee against any liability that may result from the
transfer, exchange or assignment by
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such Holder of such Holder's Note in violation of any provision of this
Indenture and/or applicable U.S. Federal or state securities law.
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee. If the Issuer elects to redeem Notes
pursuant to paragraph 8 of the Initial Notes or paragraph 7 of the Exchange
Notes, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Notes to be redeemed.
The Issuer shall give each notice to the Trustee provided for in this
Section 3.01 not less than thirty (30) days nor more than sixty (60) days before
the Redemption Date unless the Trustee consents to a shorter period. Such notice
shall be accompanied by an Officers' Certificate and an Opinion of Counsel from
the Issuer to the effect that such redemption will comply with the conditions
herein.
SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all the
Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro
rata or by lot or by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee considers fair and
appropriate and in accordance with methods generally used at the time of
selection by fiduciaries in similar circumstances. The Trustee shall make the
selection from outstanding Notes not previously called for redemption. The
Trustee may select for redemption portions of the principal of Notes that have
denominations larger than $1,000. Notes and portions of them the Trustee selects
shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption. The Trustee shall notify the Issuer promptly of the
Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption. At least twenty (20) days but not more
than sixty (60) days before a Redemption Date, the Issuer shall mail a notice of
redemption by first-class mail, postage prepaid, to each Holder of Notes to be
redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price;
(e) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, the Global Note, with a
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notation on Schedule A thereof adjusting the principal amount thereof to be
equal to the unredeemed portion, will be returned to the Holder thereof,
(f) if any Certificated Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, a new Certificated Note or Certificated Notes in principal amount equal to
the unredeemed portion will be issued;
(g) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be redeemed;
(h) that, unless the Issuer defaults in making such redemption payment or
the Paying Agent is prohibited from making such payment pursuant to the terms of
this Indenture, interest on Notes (or portion thereof) called for redemption
ceases to accrue on and after the Redemption Date; and
(i) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuer's request, the Trustee shall give the notice of redemption
in the Issuer's name and at the Issuer's expense. In such event, the Issuer
shall provide the Trustee with the information required by this Section 3.03.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price stated in the notice. Upon surrender to the
Paying Agent, such Notes shall be paid at the Redemption Price stated in the
notice, plus accrued interest to the Redemption Date. Failure to give notice or
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the Redemption
Date, the Issuer shall deposit with the Paying Agent (or, if the Issuer or a
domestically incorporated wholly-owned Subsidiary is the Paying Agent, shall
segregate and hold in trust) money in immediately available funds, sufficient to
pay the Redemption Price of and accrued interest on all Notes to be redeemed on
that date other than Notes or portions of Notes called for redemption which have
been delivered by the Issuer to the Trustee for cancellation.
So long as the Issuer complies with the preceding paragraph and the other
provisions of this Article 3, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date shall cease to accrue from and after
such date and such Notes or portions thereof shall be deemed not to be entitled
to any benefit under this Indenture except to receive payment of the Redemption
Price on the Redemption Date (subject to the right of each Holder of record on
the relevant Record Date to receive interest due on the relevant Interest
Payment Date). If any Note called for redemption shall not be so paid upon
surrender for redemption, then, from the Redemption Date until such Redemption
Price is paid, interest shall be paid on the unpaid principal and premium and,
to the extent permitted by law, on any accrued but unpaid interest thereon, in
each case at the rate prescribed therefor by such Notes.
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SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is
redeemed in part, the Issuer shall execute and the Trustee shall authenticate
for the Holder of the Note being surrendered (at the Issuer's expense) a new
Note equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes. The Issuer shall promptly pay the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes on the dates and in the manner provided in the Notes and in this
Indenture. Principal, premium, if any, and interest and Liquidated Damages, if
any, shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
principal, premium, if any, and interest and Liquidated Damages, if any, then
due and the Trustee or the Paying Agent, as the case may be, is not prohibited
from paying such money to the Noteholders on that date pursuant to the terms of
this Indenture.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, Defaulted Interest and Liquidated Damages (without regard to
any applicable grace period) at the interest rate borne on the Notes. The
Issuer's obligation pursuant to the previous sentence shall apply whether such
overdue amount is due at its maturity, as a result of the Issuer's obligations
pursuant to Sections 3.05, Section 4.11 or Section 4.14 hereof, or otherwise.
All payments with respect to a Global Note or a Certificated Note
(including principal, premium, if any, interest and Liquidated Damages, if any)
the Holders of which have given wire transfer instructions to the Issuer will be
required to be made by wire transfer of immediately available funds to the
account or (in the case of a Global Note) accounts specified by the Holders
thereof or, if no such account is specified, by sending via first-class mail,
postage prepaid, a check to each such Holders' registered address.
SECTION 4.02. Maintenance of Office or Agency. The Issuer shall maintain
an office or agency where Notes may be presented or surrendered for payment and
where Notes may be surrendered for registration of transfer or exchange. The
Issuer shall maintain an office where notices and demands to or upon the Issuer
in respect of the Notes and this Indenture may be served, which office shall be
initially the Corporate Trust Office designated in the proviso of the definition
of "Corporate Trust Office." The Issuer shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuer shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Issuer hereby appoints the
Trustee its agent to receive all presentations, surrenders, notices and demands.
The Issuer may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all of
such purposes, and may from
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time to time rescind such designations; provided that no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency for such purposes. The Issuer shall give prompt written
notice to the Trustee of any such designation and any change in the location of
any such other office or agency.
The Issuer hereby designates the Dallas, Texas office of the Trustee as
one such office or agency of the Issuer in accordance with Section 2.03 hereof.
SECTION 4.03. Money for the Notes to be Held in Trust. If the Issuer, any
Subsidiary of the Issuer or any of their respective Affiliates shall at any time
act as Paying Agent with respect to the Notes, such Paying Agent shall, on or
before each due date of the principal of, premium, if any, or interest or
Liquidated Damages, if any, on any of the Notes, segregate and hold in trust for
the benefit of the Persons entitled thereto money sufficient to pay the
principal, premium, if any, or interest or Liquidated Damages, if any, so
becoming due until such money shall be paid to such Persons or otherwise
disposed of as herein provided, and shall promptly notify the Trustee of its
action or failure so to act.
Whenever the Issuer shall have one or more Paying Agents with respect to
the Notes, it shall, prior to 10:00 a.m. New York City time on each due date of
the principal of, premium, if any, or interest or Liquidated Damages, if any, on
any of the Notes, deposit with a Paying Agent a sum sufficient to pay the
principal, premium, if any, or interest or Liquidated Damages, if any, so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest or Liquidated Damages, if any,
and (unless such Paying Agent is the Trustee) the Paying Agent shall promptly
notify the Trustee of the Issuer's action or failure so to act.
SECTION 4.04. Corporate Existence. Subject to the provisions of Article 5
hereof, the Issuer shall do or cause to be done all things necessary to preserve
and keep in full force and effect the corporate existence, rights (charter and
statutory) and franchises of the Issuer and each of its Restricted Subsidiaries;
provided that the Issuer and any such Restricted Subsidiary shall not be
required to preserve the corporate existence of any such Restricted Subsidiary
or any such right or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Issuer and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 4.05. Maintenance of Property. The Issuer shall cause all Property
used in the conduct of its business or the business of any of its Restricted
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as, in the judgment of the Issuer, may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, that nothing in this Section 4.05 shall prevent the
Issuer from discontinuing the operation or maintenance of any of such Property
if such discontinuance is, in the judgment of the Issuer, desirable in the
conduct of its business or the business of any of its Subsidiaries and not
disadvantageous in any material respect to the Holders.
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SECTION 4.06. Payment of Taxes and Other Claims. The Issuer and its
Subsidiaries shall pay or discharge or cause to be paid or discharged, before
the same shall become delinquent (a) all material obligations and liabilities,
(b) all taxes, assessments and governmental charges levied or imposed upon the
Issuer or any of its Subsidiaries or upon the income, profits or Property of the
Issuer or any of its Subsidiaries and (c) all material lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
Property of the Issuer or any of its Subsidiaries; provided, that the Issuer
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP or other appropriate provision has been made.
SECTION 4.07. SEC Reports. Notwithstanding that the Issuer may not be
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Issuer shall (a) provide the Trustee, the Initial
Purchaser and Noteholders with such annual reports, information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, and (b) beginning on
the earlier of (i) the date the registration statement filed with the SEC
relating to the Exchange Notes is declared effective and (ii) 130 days after the
Issue Date, file with the Commission, to the extent permitted, the annual
reports, information, documents and reports described in clause (a), in each
case, such information, documents and other reports to be so provided and filed
at the times specified for the filing of such information, documents and reports
under such Sections. In addition, the Issuer will make available, upon request,
to any Holder and any prospective purchaser of Notes the information required
pursuant to Rule 144A(d)(4) under the Securities Act during any period in which
the Issuer is not subject to Section 13 or 15(d) of the Exchange Act. The Issuer
also shall comply with the other provisions of TIA Section 314(a). Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.08. Limitation on Indebtedness. The Issuer shall not, and shall
not permit any Restricted Subsidiary to, incur, directly or indirectly, any
Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness. Notwithstanding the foregoing, in addition to Permitted
Indebtedness, the Issuer or any Restricted Subsidiary may incur Indebtedness
(including Acquired Indebtedness) if (i) no Default or Event of Default shall
have occurred and be continuing on the date of the proposed incurrence thereof
or would result as a consequence of such proposed incurrence and (ii)
immediately after giving effect to such proposed incurrence, the Consolidated
Coverage Ratio of the Issuer is at least 2.0 to 1.0 for incurrences on or before
February 1, 2001 and 2.25 to 1.0 for all incurrences thereafter.
SECTION 4.09. Limitation on Restricted Payments.
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(a) The Issuer shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Issuer
or such Restricted Subsidiary makes such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing (or would result therefrom); or
(ii) the Issuer or such Restricted Subsidiary is not able to incur,
after giving effect to such Restricted Payment, an additional $1.00 of
Indebtedness pursuant to the second sentence of Section 4.08; or
(iii) the aggregate amount of such Restricted Payment and any other
Restricted Payments since the Issue Date would exceed the sum of
(A) fifty percent (50%) of the Consolidated Net Income accrued
on a cumulative basis during the period (treated as one accounting
period) beginning on the first day of the fiscal quarter beginning
immediately following the Issue Date to the end of the most recent
fiscal quarter ending at least forty-five (45) days prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Issuer
from the issuance or sale of, or as a capital contribution in
respect of, its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Issuer and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the
Issuer or any of its Subsidiaries for the benefit of their
employees);
(C) the amount by which Indebtedness of the Issuer is reduced
on the Issuer's balance sheet upon the conversion or exchange (other
than by a Subsidiary of the Issuer) subsequent to the Issue Date of
any Indebtedness of the Issuer convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Issuer (less
the amount of any cash, or the fair value of any other property,
distributed by the Issuer upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investment in any Person resulting from dividends, repayments of
loans or advances or other transfers of assets, in each case to the
Issuer or any Restricted Subsidiary from such Person, and (ii) the
portion (proportionate to the Issuer's equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, that the foregoing sum
shall not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted
Payment) by the Issuer or any Restricted Subsidiary in such
Unrestricted Subsidiary.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) if no Default or Event of Default shall have occurred and be
continuing, any purchase or redemption of Capital Stock or Subordinated
Obligations of the Issuer made by exchange for, or out of the proceeds of
the substantially concurrent sale of, or capital contribution in respect
of, Capital Stock of the Issuer (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Issuer);
provided, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale or capital contribution shall be excluded from the
calculation of amounts under clause (iii) (B) of paragraph (a) above;
(ii) if no Default or Event of Default shall have occurred and be
continuing, any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Issuer which is permitted to be incurred under
Section 4.08; provided, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded
in the calculation of the amount of Restricted Payments;
(iii) dividends paid within sixty (60) days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this covenant; provided, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
result therefrom); provided further, that such dividend shall be included
in the calculation of the amount of Restricted Payments; and
(iv) if no Default or Event of Default shall have occurred and be
continuing or would result therefrom, any purchase of any fractional share
of Capital Stock of the Issuer resulting from (A) any dividend or other
distribution on outstanding shares of Capital Stock that is payable in
shares of such Capital Stock (including any stock split or subdivision of
the outstanding Capital Stock of the Issuer), (B) any combination of all
of the outstanding shares of Capital Stock of the Issuer, (C) any
reorganization or consolidation of the Issuer in any merger of the Issuer
with or into any other Person or (D) the conversion of any securities of
the Issuer into shares of Capital Stock of the Issuer; provided, that such
purchases shall be included in the calculation of the amount of Restricted
Payments.
SECTION 4.10. Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Issuer shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary:
(a) to pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by the profits of the
Issuer or such Restricted Subsidiary or pay any Indebtedness owed to the Issuer,
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(b) to make any loans or advances to the Issuer or to any Restricted
Subsidiary; or
(c) to transfer any of its property or assets to the Issuer or to any
Restricted Subsidiary, except any encumbrance or restriction existing under or
by reason of;
(i) the Senior Credit Facility as in effect on the Issue Date;
(ii) the Notes, this Indenture or the Guarantees;
(iii) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;
(iv) Refinancing Indebtedness incurred pursuant to an agreement
referred to in clause (i) (ii) or (iii); provided, that the encumbrances
and restrictions contained in any such refinancing agreement are no less
favorable to the Noteholders than encumbrances and restrictions contained
in such agreements governing the Indebtedness being refinanced;
(v) customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease
or the property leased thereunder;
(vi) security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or mortgages;
and
(vii) applicable law.
SECTION 4.11. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Sale unless:
(i) the Issuer or such Restricted Subsidiary receives consideration
at the time of such Asset Sale at least equal to the fair market value
(including as to the value of all non-cash consideration) of the shares
and assets subject to such Asset Sale (which fair market value shall be
determined in good faith by the Board of Directors for any transaction (or
series of transactions) involving in excess of $1,000,000) and at least
75% of the consideration received therefor by the Issuer or such
Restricted Subsidiary is in the form of cash or Cash Equivalents and is
received at the time of such sale; and
(ii) an amount equal to 100% of the Net Available Cash from such
Asset Sale is applied by the Issuer (or such Restricted Subsidiary, as the
case may be):
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(A) first, to the extent the Issuer elects (or is required by
the terms of the Senior Credit Facility or other Senior
Indebtedness), to prepay or repay outstandings under the Senior
Credit Facility or such other Senior Indebtedness; provided, that
(1) there is a permanent reduction in the availability of funds
under the Senior Credit Facility or such other Senior Indebtedness
under a revolving credit facility in an amount equal to such
prepayment or repayment and (2) such prepayment or repayment is made
within one hundred eighty (180) days from the date of such Asset
Sale; and
(B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent
the Issuer elects, and within one hundred eighty (180) days from the
date of such Asset Sale, to:
(1) make an investment in properties or assets that
replace the properties or assets that were the subject of such
Asset Sale or in properties or assets that will be used in a
Related Business or
(2) acquire the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such
Capital Stock; provided that such Person is, at the time it
becomes a Restricted Subsidiary, engaged in a Related
Business.
(b) Any Net Available Cash not applied within one hundred eighty (180)
days after the consummation of an Asset Sale as provided in clauses (A) or (B)
of paragraph (ii) above will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5,000,000, the Issuer will be
required to make an offer to all Holders (an "Asset Sale Offer"), to purchase,
on a pro rata basis the principal amount of Notes equal in amount to the Excess
Proceeds (and not just the amount thereof that exceeds $5,000,000) (the "Asset
Sale Offer Amount"), at a purchase price in cash in an amount equal to one
hundred percent (100%) of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), in accordance with the procedures
set forth in this Indenture, and in accordance with the following standards:
(i) If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes (or portions thereof) to be purchased on a pro rata
basis, based on the principal amount of Notes tendered, with such
adjustments as may be deemed appropriate by the Trustee, so that only
Notes (or portions thereof) in denominations of $1,000 or integral
multiples thereof shall be purchased.
(ii) If the aggregate principal amount of Notes tendered pursuant to
such Asset Sale Offer is less than the Excess Proceeds, the Issuer may use
any remaining Excess
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Proceeds following the completion of the Asset Sale Offer for general
corporate purposes (subject to the other provisions of this Indenture).
Upon completion of an Asset Sale Offer, the amount of Excess Proceeds then
required to be otherwise applied in accordance with this covenant shall be reset
to zero, subject to any subsequent Asset Sale.
(c) In the event of the transfer of substantially all (but not all) of the
property and assets of the Issuer and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01 below, the successor
corporation shall be deemed to have sold the properties and assets of the Issuer
and its Subsidiaries not so transferred for purposes of this covenant, and shall
comply with the provisions of this covenant with respect to such deemed sale as
if it were an Asset Sale. In addition, the fair market value of such properties
and assets of the Issuer or its Subsidiaries deemed to be sold shall be deemed
to be Net Available Cash for purposes of this covenant.
(d) If at any time any non-cash consideration received by the Issuer or
any Subsidiary in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Available Cash thereof
shall be applied in accordance with this covenant.
(e) Within thirty (30) calendar days after the date the amount of Excess
Proceeds exceeds $5,000,000, the Issuer, or the Trustee at the written request
and expense of the Issuer, shall send to each Holder by first-class mail,
postage prepaid, a notice prepared by the Issuer stating:
(i) that an Asset Sale Offer is being made pursuant to this Section
4.11 and that all Notes that are timely tendered will be accepted for
payment, subject to proration if the amount of Excess Proceeds is less
than the aggregate principal amount of all Notes timely tendered pursuant
to the Asset Sale Offer;
(ii) the Asset Sale Offer Amount, the amount of Excess Proceeds that
are available to be applied to purchase tendered Notes, and the date Notes
are to be purchased pursuant to the Asset Sale Offer (the "Asset Sale
Purchase Date"), which date shall be a Business Day no earlier than thirty
(30) calendar days nor later than sixty (60) calendar days subsequent to
the date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or accepted
for payment will continue to accrue interest;
(iv) that, unless the Issuer defaults in the payment of the Asset
Sale Offer Amount with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest from and after the Asset Sale Purchase Date;
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(v) that any Holder electing to have any Notes or portions thereof
purchased pursuant to the Asset Sale Offer will be required to surrender
such Notes, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of such Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Asset Sale Purchase Date;
(vi) that any Holder shall be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
fifth Business Day preceding the Asset Sale Purchase Date, a facsimile
transmission or letter, setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that
such Holder is withdrawing such Holder's election to have such Notes or
portions thereof purchased pursuant to the Asset Sale Offer;
(vii) that any Holder electing to have Notes purchased pursuant to
the Asset Sale Offer must specify the principal amount that is being
tendered for purchase, which principal amount must be $1,000 or an
integral multiple thereof,
(viii) if Certificated Notes have been issued hereunder, that any
Holder of Certificated Notes whose Certificated Notes are being purchased
only in part will be issued new Certificated Notes equal in principal
amount to the unpurchased portion of the Certificated Note or Notes
surrendered, which unpurchased portion will be equal in principal amount
to $1,000 or an integral multiple thereof,
(ix) that the Trustee will return to the Holder of a Global Note
that is being purchased in part, such Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to tender
Notes and to have such Notes purchased pursuant to this Section 4.11.
(f) On the Asset Sale Purchase Date, the Issuer shall (i) accept for
payment any Notes or portions thereof properly tendered and selected for
purchase pursuant to the Asset Sale Offer and Section 4.11(e) hereof, (ii)
irrevocably deposit with the Paying Agent, by 10:00 a.m., New York City time, on
such date, in immediately available funds, an amount equal to the Asset Sale
Offer Amount in respect of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee the Notes so accepted together
with an Officers' Certificate listing the Notes or portions thereof tendered to
the Issuer and accepted for payment. Subject to the provisions of Section 4.01,
the Paying Agent shall promptly send by first class mail, postage prepaid, to
each Holder of Notes or portions thereof so accepted for payment the Asset Sale
Offer Amount for such Notes or portions thereof. The Issuer shall publicly
announce the results of the Asset Sale Offer on or as soon as practicable after
the Asset Sale Purchase Date. For purposes of this Section 4.11, the Trustee
shall act as the Paying Agent.
(g) Upon surrender and cancellation of a Certificated Note that is
purchased in part, the Issuer shall promptly issue and the Trustee shall
authenticate and deliver to the surrendering Holder of such Certificated Note, a
new Certificated Note equal in principal amount to the
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unpurchased portion of such surrendered Certificated Note; provided that each
such new Certificated Note shall be in a principal amount of $1,000 or an
integral multiple thereof.
(h) Upon surrender of a Global Note that is purchased in part, the Paying
Agent shall forward such Global Note to the Trustee who shall make a notation on
Schedule A thereof to reduce the principal amount of such Global Note, as
provided in Section 2.06(c) hereof.
(i) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.11. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Issuer shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.11 by virtue thereof.
SECTION 4.12. Limitation on Affiliate Transactions.
(a) Except for transactions entered into or existing prior to the Issue
Date, the Issuer shall not, and shall not permit any Restricted Subsidiary to,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Issuer (an "Affiliate
Transaction") unless the terms thereof:
(i) are no less favorable to the Issuer or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate;
(ii) if such Affiliate Transaction involves an amount in excess of
$1,000,000, (A) are set forth in writing and (B) have been approved by a
majority of the disinterested members of the Board of Directors; and
(iii) if such Affiliate Transaction involves an amount in excess of
$5,000,000, have been determined by a nationally recognized investment
banking or accounting firm having experience in such matters to be fair,
from a financial point of view, to the Issuer and its Restricted
Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to Section
4.09;
(ii) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans or
similar employee benefit plans or arrangements approved by the Board of
Directors;
(iii) the grant of stock options or similar rights to employees and
directors of the Issuer pursuant to plans approved by the Board of
Directors;
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(iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Issuer or its
Restricted Subsidiaries, but in any event not to exceed $1,000,000 in the
aggregate outstanding at any one time;
(v) the payment of reasonable fees to directors of the Issuer and
its Restricted Subsidiaries who are not employees of the Issuer or its
Restricted Subsidiaries; and
(vi) any Affiliate Transaction (x) between the Issuer and a
Restricted Subsidiary or (y) between Restricted Subsidiaries; provided
that, no Affiliate of the Issuer other than a Restricted Subsidiary owns
any Capital Stock in or otherwise has a material financial interest in any
such Restricted Subsidiary.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Issuer shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except to the Issuer or a Restricted
Subsidiary; provided, that this covenant will not prohibit the sale of one
hundred percent (100%) of the shares of the Capital Stock of any Restricted
Subsidiary owned by the Issuer or any Restricted Subsidiary effected in
accordance with Section 4.11 and Section 5.01.
SECTION 4.14. Change of Control.
(a) Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Issuer
repurchase such Holder's Notes pursuant to the offer described in Section
4.14(b) hereof (the "Change of Control Offer") at a purchase price (the "Change
of Control Purchase Price") in cash equal to one hundred and one percent (101%)
of the aggregate principal amount of such Notes (or portions thereof) to be
redeemed plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the purchase date (the "Change of Control Payment Date") (subject to
the right of holders of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date):
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and l3d-5 under the Exchange
Act, except that for purposes of this clause (i) such person shall be
deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
thirty-three and one-third percent (33 1/3%) of the total voting power
of the Voting Stock of the Issuer;
(ii) the Issuer merges with or into another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges with
or into the Issuer, in any such event pursuant to a transaction in which
the outstanding Voting Stock of the Issuer is converted into or exchanged
for cash, securities or other property, other than any such transaction
where (x) the outstanding Voting Stock of the Issuer is converted into or
exchanged for (1) Voting
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Stock (other than Disqualified Stock) of the surviving or transferee
corporation and/or (2) cash, securities or other property in an amount
which could be paid by the Issuer as a Restricted Payment under Section
4.09 and (y) immediately after such transaction no "person" or "group"
(within the meaning of Section 13(d) or 14(d) of the Exchange Act) (other
than the Permitted Holders) is the "beneficial owner" (as defined in Rules
13d-3 and l3d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of (1)
thirty-three and one-third percent (33 1/3%) or more of the voting power
of the Voting Stock of the surviving or transferee corporation on a Fully
Diluted basis, after giving effect to the conversion or exercise of all
outstanding warrants, options and other securities of such surviving or
transferee corporation, convertible into or exercisable for Voting Stock
of such surviving or transferee corporation (whether or not such
securities are then currently convertible or exercisable) and (2) a
greater percentage of the voting power of the Voting Stock of such
surviving or transferee corporation calculated on such Fully Diluted
basis, than the percentage beneficially owned by the Permitted Holders;
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Issuer was approved by
a vote of sixty-six and two-thirds percent (66 2/3%) of the directors of
the Issuer at the time of such approval who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office; or
(iv) the liquidation or dissolution of the Issuer.
(b) Within 30 days following any Change of Control, the Issuer shall mail
a notice to each Holder with a copy to the Trustee stating:
(i) that a Change of Control has occurred, the circumstances and
relevant facts with respect to such Change of Control and that a Change of
Control Offer is being made pursuant to this Section 4.14, and that all
Notes (or portions thereof) that are timely tendered will be accepted for
payment;
(ii) the Change of Control Purchase Price, and the Change of Control
Payment Date, which date shall be a Business Day no earlier than thirty
(30) calendar days nor later than sixty (60) calendar days subsequent to
the date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or accepted
for payment will continue to accrue interest;
(iv) that, unless the Issuer defaults in the payment of the Change
of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment
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pursuant to the Change of Control Offer shall cease to accrue interest
from and after the Change of Control Payment Date;
(v) that any Holder electing to have any Notes or portions thereof
purchased pursuant to a Change of Control Offer will be required to tender
such Notes, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of such Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(vi) that any Holder shall be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
fifth Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter, setting forth the name of the Holder,
the principal amount of Notes delivered for purchase, and a statement that
such Holder is withdrawing such Holder's election to have such Notes or
portions thereof purchased pursuant to the Change of Control Offer;
(vii) that any Holder electing to have Notes purchased pursuant to
the Change of Control Offer must specify the principal amount that is
being tendered for purchase, which principal amount must be $1,000 or an
integral multiple thereof,
(viii) if Certificated Notes have been issued, that any Holder of
Certificated Notes whose Certificated Notes are being purchased only in
part will be issued new Certificated Notes equal in principal amount to
the unpurchased portion of the Certificated Note or Notes surrendered,
which unpurchased portion will be equal in principal amount to $1,000 or
an integral multiple thereof,
(ix) that the Trustee will return to the Holder of a Global Note
that is being purchased in part, such Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to tender
Notes and to have such Notes purchased pursuant to this Section 4.14.
(c) On the Change of Control Payment Date, the Issuer shall (i) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (ii) irrevocably deposit with the Paying Agent, by 10:00 a.m.,
New York City time, on such date, in immediately available funds, an amount
equal to the Change of Control Purchase Price in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so tendered together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuer. Subject to the provisions of Section 4.01 hereof, the Paying Agent shall
promptly send by first class mail, postage prepaid, to each Holder of Notes or
portions thereof so accepted for payment the Change of Control Purchase Price
for such Notes or portions thereof. The Issuer shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. For purposes of this Section 4.14, the Trustee
shall act as the Paying Agent.
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(d) Upon surrender and cancellation of a Certificated Note that is
purchased in part pursuant to the Change of Control Offer, the Issuer shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Note a new Certificated Note equal in
principal amount to the unpurchased portion of such surrendered Certificated
Note; provided that each such new Certificated Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
Upon surrender of a Global Note that is purchased in part pursuant to a
Change of Control Offer, the Paying Agent shall forward such Global Note to the
Trustee who shall make a notation on Schedule A thereof to reduce the principal
amount of such Global Note to an amount equal to the unpurchased portion of such
Global Note, as provided in Section 2.06(c) hereof.
(e) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.14. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.14, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.14 by virtue
thereof
(f) Prior to complying with the provisions of this Section 4.14, but in
any event within 30 days following a Change of Control, the Issuer shall, to the
extent required, either repay all outstanding Senior Indebtedness or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this Section 4.14.
SECTION 4.15. Limitation on Liens. Other than Permitted Liens, the Issuer
shall not, and shall not cause or permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume or permit to exist any Lien on or with
respect to any property or asset (including any document or instrument in
respect of goods or accounts receivable) of the Issuer or of any Restricted
Subsidiary, whether now owned or hereafter acquired, or assign or otherwise
convey any right to receive any income or profits therefrom, or file or permit
the filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Notes, the Notes are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured.
SECTION 4.16. Limitation on Layered Indebtedness. The Issuer shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, incur
any Indebtedness that is subordinate in right of payment to any other
Indebtedness, unless such Indebtedness is subordinate in right of payment to, or
ranks pari passu with, the Notes or, in the case of Restricted Subsidiaries that
are Guarantors, such Indebtedness is subordinate in right of payment to, or
ranks pari passu with, the Guarantees of such Guarantors.
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The Guarantors will not, directly or indirectly, guarantee any
Indebtedness of the Issuer that is subordinate in right of payment to any other
Indebtedness of the Issuer unless such guarantee is subordinate in right of
payment to, or ranks pari passu with, the Guarantees of such Guarantors.
SECTION 4.17. Compliance Certificate. The Issuer shall deliver to the
Trustee within one hundred twenty (120) days after the end of each fiscal year
of the Issuer an Officers' Certificate stating that in the course of the
performance by the signers of their duties as Officers of the Issuer they would
normally have knowledge of any Default and whether or not the signers know of
any Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Issuer is taking or
proposes to take with respect thereto. The Issuer also shall comply with TIA
Section 314(a)(4).
SECTION 4.18. Waiver of Stay, Extension or Usury Laws. Neither the Issuer
nor any Guarantor will at any time, to the extent that they may lawfully not do
so, insist upon, or plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Issuer or its Subsidiaries or the Note from paying
all or any portion of the principal of or premium, if any, or interest or
Liquidated Damages, if any, on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of this Indenture; and, to the extent that they may lawfully
do so, the Issuer and the Guarantors hereby expressly waive all benefit or
advantage of any such law and expressly agree that they will not hinder, delay
or impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.19. Investment Company Act. None of the Issuer or its
Subsidiaries shall become an investment company subject to registration under
the Investment Company Act of 1940, as amended.
SECTION 4.20. Limitation on Conduct of Business. The Issuer and its
Restricted Subsidiaries will not engage in any business other than a Related
Business.
SECTION 4.21. Further Instruments and Acts. Upon request of the Trustee,
the Issuer will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. When Issuer May Merge or Transfer Assets.
(a) The Issuer shall not, and shall not permit any Restricted Subsidiary
to, consolidate with or merge with or into any Person (other than the
consolidation or merger of a Restricted Subsidiary with another Restricted
Subsidiary or into the Issuer), or sell, assign, convey, transfer, lease or
otherwise dispose of (or permit any Subsidiary to sell, assign, convey,
transfer, lease or
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otherwise dispose of), in one transaction or a series of transactions, all or
substantially all its assets (determined on a consolidated basis for the Issuer
and its Subsidiaries) to, any Person, unless:
(i) the Issuer, in the case of a transaction involving the Issuer,
or such Restricted Subsidiary in the case of a transaction involving a
Restricted Subsidiary, shall be the resulting, surviving or transferee
Person or the resulting, surviving or transferee Person (in either case,
the "Successor Company") shall be a Person organized and existing under
the laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company (if not the Issuer or such
Restricted Subsidiary) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Issuer under the
Notes and this Indenture, or the obligation of such Restricted Subsidiary
under its Guarantee, as the case may be;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company as a result of such transaction as having been incurred by such
Successor Company at the time of such transaction), no Default shall have
occurred and be continuing,
(iii) immediately after giving effect to such transaction, the
Issuer, if the transaction involves a Restricted Subsidiary, or the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to the second sentence of Section 4.08,
(iv) in the case of a transaction involving the Issuer, immediately
after giving effect to such transaction, the Successor Company shall have
Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Issuer prior to such transaction;
(v) if, as a result of any such transaction, property or assets of
the Issuer or a Restricted Subsidiary would become subject to a Lien
securing Indebtedness not excepted from the provisions of this Indenture
described above under Section 4.15, the Issuer, any such Restricted
Subsidiary or the Successor Company, as the case may be, shall have
secured the Notes and the relevant Guarantees, as required by such
provisions; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
(b) the Successor Company shall be the successor to the Issuer or such
Restricted Subsidiary, as the case may be, and shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer or such
Restricted Subsidiary under this Indenture, but the predecessor Issuer or
Restricted Subsidiary in the case of a conveyance, transfer or lease shall not
be released from the obligation to pay the principal of and interest on the
Notes.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. The term "Event of Default," wherever
used herein with respect to the Notes, means any one of the following events
(whatever the reason for such event, and whether it shall be voluntary or
involuntary, or be effected by operation of law, pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the Issuer defaults in any payment of interest on or Liquidated
Damages with respect to any Note when the same becomes due and payable, whether
or not such payment shall be prohibited by Article 10, and such default
continues for a period of thirty (30) days;
(b) the Issuer (i) defaults in the payment of the principal of, or
premium, if any, on any Note when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, whether or not such
payment shall be prohibited by Article 10, or (ii) fails to redeem or purchase
Notes when required pursuant to this Indenture or the Notes, whether or not such
payment shall be prohibited by Article 10;
(c) the Issuer fails to observe or perform any covenant, condition or
agreement on the part of the Issuer to be observed or performed pursuant to
Sections 4.08, 4.09, 4.11, 4.14 and 5.01;
(d) the Issuer fails to comply with any of its other agreements or
covenants in or provisions of the Notes or this Indenture and such failure
continues for thirty (30) days after the notice specified below;
(e) Indebtedness of the Issuer or any Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5,000,000 or its foreign currency equivalent at the time;
(f) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Issuer or any Subsidiary of the
Issuer in an involuntary case or proceeding under any Bankruptcy Law or (ii) a
decree or order (A) adjudging the Issuer or any Subsidiary of the Issuer a
bankrupt or insolvent, or (B) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of, or in respect of, the
Issuer or any Subsidiary of the Issuer under any Bankruptcy Law, or (C)
appointing a Custodian of the Issuer or any Subsidiary of the Issuer or of any
substantial part of the Property of the Issuer or any Subsidiary of the Issuer,
or (D) ordering the winding-up or liquidation of the affairs of the Issuer or
any Subsidiary of the Issuer, and in each case, the continuance of any such
decree or order for relief or any such other decree or order unstayed and in
effect for a period of sixty (60) consecutive calendar days; or
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(g) (i) the commencement by the Issuer or any Subsidiary of the Issuer of
a voluntary case or proceeding under any Bankruptcy Law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by the
Issuer or any Subsidiary of the Issuer to the entry of a decree or order for
relief in respect of the Issuer or any Subsidiary of the Issuer in an
involuntary case or proceeding under any Bankruptcy Law or to the commencement
of any bankruptcy or insolvency case or proceeding against the Issuer or any
Subsidiary of the Issuer; or (iii) the filing by the Issuer or any Subsidiary of
the Issuer of a petition or answer or consent seeking reorganization or relief
under any Bankruptcy Law; or (iv) the consent by the Issuer or any Subsidiary of
the Issuer to the filing of such petition or to the appointment of or taking
possession by a Custodian of the Issuer or any Subsidiary of the Issuer or of
any substantial part of the Property of the Issuer or any Subsidiary of the
Issuer, or (v) the making by the Issuer or any Subsidiary of the Issuer of an
assignment for the benefit of creditors; or (vi) the admission by the Issuer or
any Subsidiary of the Issuer in writing of its inability to pay its debts
generally as they become due; or (vii) the approval by stockholders of the
Issuer or any Subsidiary of the Issuer of any plan or proposal for the
liquidation or dissolution of the Issuer or any Subsidiary of the Issuer; or
(viii) the taking of corporate action by the Issuer or any Subsidiary of the
Issuer in furtherance of any such action; or
(h) any judgment or decree for the payment of money in excess of
$5,000,000 or its foreign currency equivalent at the time is entered against the
Issuer or any Subsidiary, remains outstanding for a period of sixty (60) days
following the entry of such judgment or decree and is not discharged, waived or
the execution thereof stayed within ten (10) days after the notice specified
below; or
(i) the Guarantee of any Guarantor ceases to be in full force and effect
(other than in accordance with the terms of such Guarantee) or any Guarantor
denies or disaffirms its obligations under its Guarantee.
A Default under clause (d) is not an Event of Default until the Trustee or
the Holders of at least twenty-five percent (25%) in principal amount of the
Notes notify the Issuer of the Default and the Issuer does not cure such Default
within the time specified after receipt of such notice. Such notice must specify
the Default, demand that it be remedied and state that such notice is a "Notice
of Default".
The Issuer shall deliver to the Trustee, within thirty (30) days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (c), (e), (h) or (i) and any event which with
the giving of notice or the lapse of time would become an Event of Default under
clause (d), its status and what action the Issuer is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.01(f) or (g) with respect to the Issuer) occurs
and is continuing, the Trustee by written notice to the Issuer, or the Holders
of at least twenty-five (25%) in principal amount of the Notes by written notice
to the Issuer and the Trustee, may declare the principal of, premium, if any,
and accrued but unpaid interest and Liquidated Damages, if any, on all the Notes
to be due and payable. Upon such a declaration, such principal, premium, if any,
and interest and Liquidated Damages, if any, shall be due and payable
immediately. If an Event of Default specified in Section 6.01(f) or (g) with
respect to the Issuer occurs, the principal of, premium, if any, and
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interest and Liquidated Damages, if any, on all the Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Noteholders. The Holders of a majority in
principal amount of the Notes by written notice to the Trustee and the Issuer
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal, premium, if any, or
interest and Liquidated Damages, if any, that has become due solely because of
such acceleration. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
SECTION 6.03. Other Remedies. The Issuer covenants that if an Event of
Default specified in Section 6.01(a) or 6.01(b) occurs, the Issuer shall, upon
demand of the Trustee, pay to the Trustee, for the benefit of the Holders, the
whole amount then due and payable on the Notes for principal, premium, if any,
and interest and Liquidated Damages, if any, and, to the extent that payment of
such interest shall be legally enforceable, interest upon the overdue principal
(and premium, if any) and upon Defaulted Interest (and Liquidated Damages, if
any) at the rate or rates prescribed therefor in the Notes, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, including the
allocated reasonable costs of its in-house counsel and legal staff, and all
other amounts due to the Trustee pursuant to Section 7.07 hereof.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture. The Trustee may
maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or any
Noteholder in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or acquiescence
in the Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Notes by written notice to the Trustee may,
on behalf of the Holders of all the Notes, waive an existing Default or Event of
Default and its consequences except a continuing Default or Event of Default (i)
in the payment of the principal of, premium, if any or interest or Liquidated
Damages, if any, on a Note (except a payment default resulting from an
acceleration that has been rescinded) or (ii) in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Noteholder
affected.
SECTION 6.05. Control by Majority. The Holders of not less than a majority
in principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Noteholders or would involve the Trustee in personal
liability; provided, that
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the Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. A Noteholder may not pursue any remedy
with respect to this Indenture or the Notes unless:
(a) the Holder has previously given to the Trustee written notice stating
that an Event of Default is continuing;
(b) the Holders of at least twenty-five percent (25%) in principal amount
of the Notes have made a written request to the Trustee to pursue the remedy in
respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable security
or indemnity against any loss, liability or expense to be incurred in compliance
with such request;
(d) the Trustee has not complied with the request within sixty (60) days
after receipt of the request and the offer of security or indemnity; and
(e) the Holders of a majority in principal amount of the Notes have not
given the Trustee a direction inconsistent with the request during such sixty
(60) day period.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes held by such Holder, on or after the respective due dates expressed in
the Notes, or the Redemption Dates or purchase dates provided for therein or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified
in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuer
for the whole amount then due and owing on the Notes for principal, premium, if
any, and interest and Liquidated Damages, if any, and, to the extent that
payment of such interest shall be legally enforceable, interest upon the overdue
principal (and premium, if any) and upon Defaulted Interest (and Liquidated
Damages, if any) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Noteholders allowed in any
judicial proceedings relative to the Issuer, its creditors or its property and,
unless prohibited by law or applicable regulations, may
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vote on behalf of the Holders in any election of a trustee in bankruptcy or
other Person performing similar functions, and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Issuer to the
extent required by Article 10 or Article 12;
THIRD: to Noteholders for amounts due and unpaid on the Notes
for principal of, premium, if any, and interest and Liquidated Damages,
if any, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal and interest,
respectively; and
FOURTH: to the Issuer.
The Trustee may fix a Record Date and payment date for any payment to
Noteholders pursuant to this Section 6.10. At least fifteen (15) days before
such Record Date, the Issuer shall mail to each Noteholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit initiated
by the Trustee, a suit initiated by a Holder pursuant to Section 6.07 or a suit
initiated by Holders of more than ten percent (10%) in principal amount of the
Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuer (to the extent
it may lawfully do so) shall not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture, and the Issuer (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
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(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on any
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, that the Trustee's conduct does not constitute willful
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Officers' Certificate and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer, the Guarantors or their Affiliates with the same rights it
would have if it were not Trustee.
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Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Notes, it shall not be accountable for the Issuer's use of the proceeds
from the Notes, and it shall not be responsible for any statement of the Issuer
in this Indenture or in any document issued in connection with the sale of the
Notes or in the Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing
and if it is actually known to the Trustee, the Trustee shall mail to each
Noteholder notice of the Default within 90 days after it occurs. Except in the
case of a Default in the payment of principal of, premium, if any, or interest
or Liquidated Damages, if any, on any Note (including payments pursuant to the
mandatory redemption provisions of such Note, if any), the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable
after each May 15 beginning with the May 15 following the date of this
Indenture, and in any event prior to July 15 in each year, the Trustee shall
mail to each Noteholder a brief report dated as of May 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed with the SEC and each stock exchange (if any) on which the Notes are
listed. The Issuer agrees to notify promptly the Trustee in writing whenever the
Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the
Trustee from time to time compensation for its services as the Issuer and the
Trustee shall from time to time agree in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents and counsel, including the allocated reasonable costs of its
in-house counsel and legal staff. The Issuer hereby agrees to indemnify and hold
the Trustee and its directors, officers, agents and employees (collectively, the
"Indemnitees") harmless from and against any and all claims, liabilities,
losses, damages, fines, penalties, and expenses, including out-of-pocket,
incidental expenses, legal fees and expenses, and the allocated reasonable costs
and expenses of in-house counsel and legal staff ("Losses") that may be imposed
on, incurred by, or asserted against, the Indemnitees or any of them for
following any instruction or other direction upon which the Trustee is
authorized to rely pursuant to the terms of this Indenture. In addition to and
not in limitation of the immediately preceding sentence, the Issuer also agrees
to indemnify and hold the Indemnitees and each of them harmless from and against
any and all Losses that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them in connection with or arising out of the Trustee's
performance under this Indenture, provided the Trustee has not acted with
negligence or engaged
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in willful misconduct. The provisions of this Section 7.07 shall survive the
termination of this Indenture and the resignation or removal of the Trustee for
any reason. The Trustee shall notify the Issuer promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not
relieve the Issuer of its obligations hereunder. The Issuer shall defend the
claim and the Trustee shall cooperate in the defense of the claim; provided that
the Trustee may have separate counsel and the Issuer shall pay the reasonable
fees and expenses of such counsel if the actual or potential defendants in, or
the targets of, any such claim include both the Trustee and the Issuer and the
Trustee shall have reasonably concluded that there may be legal defenses
available to it which are different from or additional to those available to the
Issuer. The Trustee will not, without the prior written consent of the Issuer,
settle or compromise or consent to the entry of any judgment with respect to any
claim in respect of which indemnification may be sought hereunder. The Issuer
need not reimburse any expense or indemnify against any loss, liability or
expense incurred by the Trustee through the Trustee's own willful misconduct,
negligence or bad faith.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of, premium, if any, and interest and Liquidated Damages, if any, on
particular Notes.
The Issuer's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(f) or (g) with respect to
the Issuer, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time
by so notifying the Issuer. The Holders of not less than a majority in principal
amount of the Notes may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee. The Issuer shall remove the Trustee
if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuer or by the Holders of a
majority in principal amount of the Notes and such Holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Noteholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the Lien provided for in Section 7.07.
If a successor Trustee does not take office within thirty (30) days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of not less than ten percent (10%) in principal amount of the Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. Any corporation or association
into which the Trustee in its individual capacity may be merged or converted or
with which it may be consolidated, or any corporation or association resulting
from any merger, conversion or consolidation to which the Trustee in its
individual capacity shall be a party or any corporation or association to which
all or substantially all the corporate trust business of the Trustee in its
individual capacity may be sold or otherwise transferred, shall be the Trustee
hereunder without further act.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee, and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of authentication of the Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Issuer. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section
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311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
SECTION 7.12. Trustee's Application for Instructions from the Issuer. Any
application by the Trustee for written instructions from the Issuer may, at the
option of the Trustee, be set forth in writing and shall state any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any Officer of the Issuer actually receives
such application, unless any such Officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance.
(a) When
(i) the Issuer delivers to the Trustee all outstanding Notes (other
than Notes replaced pursuant to Section 2.08) for cancellation or
(ii) all outstanding Notes have become due and payable, whether at
Stated Maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Issuer irrevocably deposits with the
Trustee funds sufficient to pay at Stated Maturity or upon redemption all
outstanding Notes, including interest accrued and unpaid thereon to Stated
Maturity or such Redemption Date (other than Notes replaced pursuant to
Section 2.08), and if in either case the Issuer pays all other sums
payable hereunder by the Issuer, then this Indenture shall, subject to
Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel
addressed to the Trustee and at the cost and expense of the Issuer.
(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any time may
terminate:
(i) all its obligations under the Notes and this Indenture ("legal
defeasance option") subject to the following which shall survive until
otherwise terminated or discharged hereunder:
(A) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages, if any, on such Notes when payments
are due from the trust referred to below,
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(B) the Issuer's obligations with respect to such Notes under
Sections 2.03, 2.04, 2.07, 2.08, 2.10, 4.02, 4.03 and 4.04 hereof,
(C) the Issuer's obligations under the Registration Rights
Agreement,
(D) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture and the Issuer's obligations in
connection therewith,
(E) Article 3 hereof, and
(F) this Article 8; or
(ii) its obligations under Sections 4.05 through 4.16 and 4.20 and
the operation of Section 6.01(c) (but only as it applies to Section
5.01(a)(iii) and (iv)), 6.01(e), 6.01(f), 6.01(g) and 6.01(h) or contained
in Section 5.01(a)(iii) and (iv) ("covenant defeasance option"). The
Issuer may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Issuer exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default. If the Issuer exercises
its covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in Sections 6.01(c), 6.01(d), and
6.01(i) or because of the failure of the Issuer to comply with Section
5.01(a)(iii) and (iv). If the Issuer exercises its legal defeasance option or
its covenant defeasance option, each Guarantor shall be released from all of its
obligations under its Guarantee.
Upon satisfaction of the conditions set forth herein and upon request of
the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's obligations in
Sections 8.04, 8.05 and 8.06 shall survive.
SECTION 8.02. Conditions to Defeasance. The Issuer may exercise its legal
defeasance option or its covenant defeasance option only if
(a) the Issuer irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal of and interest on the
Notes to maturity or redemption, as the case may be;
(b) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will
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be sufficient to pay principal of, premium, if any, and interest and Liquidated
Damages, if any, when due on all the Notes to Stated Maturity or redemption, as
the case may be;
(c) one hundred twenty-three (123) days pass (or Stated Maturity or a
Redemption Date is reached if such time period is less than one hundred
twenty-three (123) days) after the deposit is made and during the one hundred
twenty-three (123) day period (or such lesser period as provided for above) no
Default specified in Sections 6.01(f) or (g) with respect to the Issuer occurs
which is continuing at the end of the period;
(d) the deposit does not result in a breach or violation of, or constitute
a default under any other agreement or instrument binding on the Issuer or any
of its Subsidiaries and is not prohibited by Article 10;
(e) the Issuer delivers to the Trustee an Opinion of Counsel addressed to
the Trustee to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(f) in the case of the legal defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel addressed to the Trustee stating
that (i) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this Indenture
there has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Noteholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel addressed to the Trustee to the
effect that the Noteholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not occurred;
(h) the Issuer delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee, each stating that all conditions
precedent to the defeasance and discharge of the Notes as contemplated by this
Article 8 have been complied with;
(i) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the intent
of preferring the Holders over any other creditors of the Issuer or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuer or others; and
(j) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the TIA (assuming
for the purpose of this clause (j) that all Notes are in default within the
meaning of such Act).
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Before or after a deposit, the Issuer may make arrangements satisfactory
to the Trustee for the redemption of Notes at a future date in accordance with
Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes.
Money and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Issuer. The Trustee and the Paying Agent shall
promptly turn over to the Issuer upon written request any excess money or
securities held by them at any time. Subject to any applicable abandoned
property law, the Trustee and the Paying Agent shall pay to the Issuer upon
written request any money held by them for the payment of principal of, premium,
if any, or interest or Liquidated Damages, if any, that remains unclaimed for
two years, and, thereafter, Noteholders entitled to the money must look to the
Issuer for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligation. The Issuer shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U. S. Government Obligations in accordance with this Article
8 by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuer's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, that, if the Issuer has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Issuer shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders. The Issuer and the Trustee may
amend this Indenture or the Notes without notice to or consent of any
Noteholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5;
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(c) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; provided, that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Internal Revenue Code or
in a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Internal Revenue Code;
(d) to make any change in Article 10 or Article 12 that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or
Representatives thereof) under Article 10 or Article 12;
(e) to add Guarantees with respect to the Notes or to secure the Notes;
(f) to add to the covenants of the Issuer for the benefit of the Holders
or to surrender any right or power herein conferred upon the Issuer;
(g) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the TIA;
or
(h) to make any change that does not adversely affect the rights of any
Noteholder.
An amendment under this Section 9.01 may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent in writing to such change.
After an amendment under this Section 9.01 becomes effective, the Issuer
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders. The Issuer and the Trustee may
amend this Indenture or the Notes without notice to any Noteholder but with the
written consent of the Holders of at least a majority in principal amount of the
Notes then outstanding and any past Default or compliance with any provisions
may also be waived with the consent of the Holders of not less than a majority
of the principal amount of Notes then outstanding. However, without the consent
of each Noteholder affected, an amendment may not:
(a) reduce the amount of Notes whose Holders must consent to an amendment;
(b) reduce the rate of or extend the time for payment of interest on any
Note;
(c) reduce the principal of or extend the Stated Maturity of any Note;
(d) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed in accordance with Article 3;
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(e) make any Note payable in money other than that stated in the Note;
(f) make any change in Article 10 or Article 12 that adversely affects the
rights of any Noteholder under Article 10 or Article 12;
(g) make any change in Section 6.04 or 6.07 or the second sentence of
this Section 9.02; or
(h) make any change in any Guarantee that would adversely affect the
Noteholders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof
An amendment under this Section 9.02 may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent in writing to such change.
After an amendment under this Section 9.02 becomes effective, the Issuer
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to
an amendment or a waiver by a Holder of a Note shall bind the Holder and every
subsequent Holder of that Note or portion of the Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent or waiver
is not made on the Note. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Note or portion of the Note if
the Trustee receives the notice of revocation before the date the amendment or
waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Noteholder. An amendment or waiver becomes effective upon the
execution of such amendment or waiver by the Trustee.
The Issuer may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Noteholders entitled to give their consent or take
any other action described above or required or permitted to be taken pursuant
to this Indenture. If a Record Date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Noteholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such Record Date.
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SECTION 9.05. Notation on or Exchange of Notes. If an amendment changes
the terms of a Note, the Trustee may require the Holder of the Note to deliver
it to the Trustee. The Trustee may place an appropriate notation on the Note
regarding the changed terms and return it to the Holder. Alternatively, if the
Issuer or the Trustee so determines, the Issuer in exchange for the Note shall
issue and the Trustee shall authenticate and deliver a new Note that reflects
the changed terms. Failure to make the appropriate notation or to issue a new
Note shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
constitutes the legal, valid and binding obligation of the Issuer and each
Guarantor, subject to customary exceptions.
SECTION 9.07. Payment for Consent. Neither the Issuer nor any Affiliate of
the Issuer shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid to all Holders that so consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
ARTICLE 10
SUBORDINATION OF THE NOTES
SECTION 10.01. Agreement To Subordinate. The Issuer agrees, and each
Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment of all Senior Indebtedness of
the Issuer and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. Only Indebtedness that is Senior
Indebtedness will rank senior to the Notes in accordance with the provisions set
forth herein. The Notes shall in all respects rank pari passu with, or be senior
to, all other Indebtedness of the Issuer. All provisions of this Article 10
shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Issuer to creditors upon a total or partial
liquidation or a total or partial dissolution of the Issuer or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Issuer or its property:
(a) holders of Senior Indebtedness of the Issuer shall be entitled to
receive payment in full of such Senior Indebtedness in cash or cash equivalents
before Noteholders shall be entitled to receive any payment of principal of,
premium, if any, or interest or Liquidated Damages, if any, on the Notes; and
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(b) until such Senior Indebtedness is paid in full in cash or cash
equivalents, any distribution to which Noteholders would be entitled but for
this Article 10 shall be made to holders of such Senior Indebtedness as their
interests may appear, except that Noteholders may receive (i) securities of a
Person that are subordinated ("Subordinated Reorganization Securities") to such
Senior Indebtedness to at least the same extent as the Notes are subordinated to
(A) Senior Indebtedness of the Issuer and (B) any securities issued in exchange
for Senior Indebtedness, and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof.
SECTION 10.03. Default on Senior Indebtedness of the Issuer. The Issuer
may not pay the principal of, premium, if any, or interest or Liquidated
Damages, if any, on the Notes or make any deposit pursuant to Section 8.01 and
may not repurchase, redeem or defease any Notes (collectively, "pay the Notes")
(other than Subordinated Reorganization Securities and payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) if (i) any Designated Senior Indebtedness of the Issuer is not paid when
due or (ii) any other default on such Designated Senior Indebtedness occurs and
the maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded or (y) such Designated Senior
Indebtedness has been paid in full; provided, however, that the Issuer may pay
the Notes without regard to the foregoing if the Issuer and the Trustee receive
written notice approving such payment from the Representative of such Designated
Senior Indebtedness. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness of the Issuer pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Issuer may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Issuer and the
Trustee of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Issuer from the Person or Persons who gave such Blockage Notice, (ii) by
repayment in full of such Designated Senior Indebtedness or (iii) because the
Representative of the holders of such Designated Senior Indebtedness shall have
notified the Trustee in writing that the default giving rise to such Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Issuer may resume
payments on the Notes after such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period. For purposes of this Section 10.03, no default or event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360
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consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Notes. If payment of the Notes
is accelerated because of an Event of Default, the Issuer shall promptly notify
the holders of the Designated Senior Indebtedness of the Issuer (or their
Representative) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is
made to Noteholders that because of this Article 10 should not have been made to
them, the Issuer shall so notify the Noteholders who receive the distribution,
which Noteholders shall hold it in trust for holders of Senior Indebtedness of
the Issuer and pay it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the Issuer is
paid in full and until the Notes are paid in full, Noteholders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article 10 to holders of such Senior Indebtedness which otherwise would
have been made to Noteholders is not, as between the Issuer and Noteholders, a
payment by the Issuer on such Senior Indebtedness.
SECTION 10.07. Relative Right. This Article 10 defines the relative rights
of Noteholders and holders of Senior Indebtedness of the Issuer. Nothing in this
Indenture shall:
(a) impair, as between the Issuer and Noteholders, the obligation of the
Issuer, which is absolute and unconditional, to pay principal of, premium, if
any, and interest and Liquidated Damages, if any, on the Notes in accordance
with their terms; or
(b) prevent the Trustee or any Noteholder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior Indebtedness
of the Issuer to receive distributions otherwise payable to Noteholders.
SECTION 10.08. Subordination May Not Be Impaired by Issuer. No right of
any holder of Senior Indebtedness of the Issuer to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Issuer or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section
10.03, the Trustee or Paying Agent may continue to make payments on the Notes
and shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than two Business Days
prior to the date of such payment, a Trust Officer of the Trustee receives
written notice from a holder of Designated Senior Indebtedness that it is
exercising its rights under Section 10.03. The Issuer, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if the holders of an
issue of Senior Indebtedness of the Issuer have a Representative, only the
Representative may give the notice.
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The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Issuer with the same rights it would have if it were not
Trustee. The Registrar and coregistrar and the Paying Agent may do the same with
like rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness of the Issuer which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness, and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Issuer, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right
To Accelerate. The failure to make a payment pursuant to the Notes by reason of
any provision in this Article 10 shall not be construed as preventing the
occurrence of a Default. Nothing in this Article 10 shall have any effect on the
right of the Noteholders or the Trustee to accelerate the maturity of the Notes.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of, premium, if any, and interest and Liquidated Damages,
if any, on the Notes shall not be subordinated to the prior payment of any
Senior Indebtedness or subject to the restrictions set forth in this Article 10,
and none of the Noteholders or Trustee shall be obligated to pay over any such
amount to the Issuer or any holder of Senior Indebtedness of the Issuer or any
other creditor of the Issuer.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution
pursuant to this Article 10, the Trustee and the Noteholders shall be entitled
to rely (i) upon any order or decree of a court of competent jurisdiction in
which any proceedings of the nature referred to in Section 10.02 are pending,
(ii) upon a certificate of the liquidating trustee or agent or other Person
making such payment or distribution to the Trustee or to the Noteholders or
(iii) upon the Representative for the holders of Senior Indebtedness of the
Issuer for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article 10. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Issuer to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
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SECTION 10.14. Trustee To Effectuate Subordination. Each Noteholder by
accepting a Note authorizes and directs the Trustee on such Noteholder's behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Noteholders and the holders of Senior
Indebtedness of the Issuer as provided in this Article 10 and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Noteholders or the Issuer or any other
Person, money or assets to which any holders of Senior Indebtedness of the
Issuer shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination
Provisions. Each Noteholder by accepting a Note acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness of the
Issuer, whether such Senior Indebtedness was created or acquired before or after
the issuance of the Notes, to acquire and continue to hold, or to continue to
hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall
be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
SECTION 10.17. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Issuer or
by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Issuer with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this section, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Noteholders, without incurring
responsibility to the Noteholders and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Noteholders to the holders of Senior Indebtedness, do any one or more of the
following:
(i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, or waive compliance with the terms of,
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in manner for the collection or
payment of Senior Indebtedness; or
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(iv) exercise or refrain from exercising any rights against the
Issuer and any other Person;
provided, however, that in no event shall any such actions limit the right of
the Noteholders to take any action to accelerate the maturity of the Notes
pursuant to Article 6 of this Indenture or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article, subject to the rights, if any,
under this Article of the holders from time to time of Senior Indebtedness to
receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
SECTION 10.18. Other Rights of Holders of Senior Indebtedness. All rights
and interest under this Indenture of the holders of Senior Indebtedness and all
agreements and obligations of the Trustee, the Noteholders and the Issuer under
this Article shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Senior Credit
Facility and promissory notes evidencing the Senior Credit Facility or any
other agreement or instrument relating thereto or to any other Senior
Indebtedness; or
(b) any other circumstance that might constitute a defense available
to or a discharge of a guarantor or surety (other than as a result of any
payments made on the Senior Credit Facility or other Senior Indebtedness).
The holders of Senior Indebtedness are hereby authorized to demand
specific performance of this Article at any time when the Trustee, the Issuer or
any Noteholder shall have failed to comply with any of these provisions.
The provisions of this Article shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Indebtedness is rescinded or must otherwise be returned by any holder of Senior
Indebtedness upon the insolvency, bankruptcy or reorganization of the Issuer or
otherwise, all as though such payment had not been made.
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ARTICLE 11
GUARANTEES; RELEASE OF GUARANTEES;
ADDITIONAL GUARANTEES
SECTION 11.01. Guarantees.
(a) Each Guarantor hereby unconditionally and irrevocably guarantees to
each Holder and to the Trustee and its successors and assigns (i) the full and
punctual payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Issuer under
this Indenture and the Notes and (ii) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer under this
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
such Guarantor and that such Guarantor will remain bound under this Article 11
notwithstanding any extension or renewal of any Obligation.
(b) Each Guarantor waives presentation to, demand of, payment from and
protest to the Issuer of any of the Obligations and also waives notice of
protest for nonpayment. Each Guarantor waives notice of any default under the
Notes or the Obligations. The obligations of each Guarantor hereunder shall not
be affected by (i) the failure of any Holder or the Trustee to assert any claim
or demand or to enforce any right or remedy against the Issuer or any other
Person under this Indenture, the Notes or any other agreement or otherwise, (ii)
any extension or renewal of any thereof, (iii) any rescission, waiver, amendment
or modification of any of the terms or provisions of this Indenture, the Notes
or any other agreement, (iv) the release of any security held by any Holder or
the Trustee for the Obligations or any of them, (v) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Obligations, or (vi) any change in the ownership of any Guarantor.
(c) Each Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Obligations.
(d) Each Guarantee is, to the extent and in the manner set forth in
Article 12, subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness of such Guarantor and is made subject to such
provisions of this Indenture.
(e) Except as expressly set forth in Section 8.01(b), the obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, (i) the obligations
of each Guarantor herein shall not be discharged or impaired or otherwise
affected by the failure of any Holder or the Trustee to assert
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any claim or demand or to enforce any remedy under this Indenture, the Notes or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
each Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law or equity and (ii) each Guarantor hereby waives any right such
Guarantor may have under Sections 26.7 through 26.9 of the North Carolina
General Statutes.
(f) Each Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal, premium, if any, or interest or Liquidated
Damages, if any, on any Obligation is rescinded or must otherwise be restored by
any Holder or the Trustee upon the bankruptcy or reorganization of the Issuer or
otherwise.
(g) In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of, premium, if any or interest or Liquidated damages, if any, on any Obligation
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Obligation, each
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations,
(ii) accrued and unpaid interest on such Obligations (but only to the extent not
prohibited by law) and (iii) all other monetary Obligations of the Issuer to the
Holders and the Trustee.
(h) Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full of all Obligations and all obligations to which the Obligations are
subordinated as provided in Article 12. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of such Guarantor's Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor for the purposes of this Section 10.01.
(i) Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses, including the allocated
reasonable costs and expenses of its in-house counsel and legal staff) incurred
by the Trustee or any Holder in enforcing any rights under this Section 11.01.
SECTION 11.02. Successors and Assigns. This Article 11 shall be binding
upon each Guarantor and its successors and assigns and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture
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and in the Notes shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.03. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.
SECTION 11.04. Modification. No modification, amendment or waiver of any
provision of this Article 11, nor the consent to any departure by any Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any other
or further notice or demand in the same, similar or other circumstances.
SECTION 11.05. Limitation of Guarantor's Liability. Each Guarantor, the
Trustee, and by its acceptance hereof each Holder, hereby confirms that it is
the intention of all such parties that the Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, federal and state fraudulent conveyance laws or any similar federal, state
or foreign law. To effectuate the foregoing intention, the Holders, the Trustee
and each Guarantor hereby irrevocably agree that the obligations of each
Guarantor under this Article 11 shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Guarantee not constituting a fraudulent transfer or conveyance under
applicable federal, state or foreign law.
SECTION 11.06. Release of Guarantees. In the event of a sale or other
disposition of all or substantially all of the assets of any Guarantor, by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the Capital Stock of any Guarantor, by way of merger, consolidation or
otherwise, such Guarantor (in the event of a sale or other disposition of all of
the Capital Stock of such Guarantor) will be released and relieved of any
obligations under its Guarantee or the Person acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of such Guarantor) will not be required to enter into a Guarantee; provided, in
each case, that such transaction is carried out pursuant to and in accordance
with Section 4.11 and Section 5.01 (if applicable) hereof. Upon delivery by the
Issuer to the Trustee of an Officers' Certificate and Opinion of Counsel
addressed to the Trustee, to the effect that such sale or other disposition was
made by the Issuer in accordance with the provisions of this Indenture,
including without limitation Section 4.11 and Section 5.01 (if applicable)
hereof, the Trustee shall execute any documents reasonably required in order to
evidence the release of any such Guarantor from its obligations under its
Guarantee.
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SECTION 11.07. Additional Guarantees. The Issuer will cause any Person
that shall become a Restricted Subsidiary (an "Additional Guarantor") to
concurrently guarantee (an "Additional Guarantee") the Issuer's obligations
under this Indenture and the Notes to the same extent that the Guarantors have
guaranteed the Issuer's obligations under this Indenture and the Notes;
provided, that each Additional Guarantor will be automatically and
unconditionally released and discharged from its obligations under such
Additional Guarantee only in accordance with Section 11.06 above; provided,
further, that each Additional Guarantor's liability will be limited in
accordance with Section 11.05 above.
ARTICLE 12
SUBORDINATION OF THE GUARANTEES
SECTION 12.01. Agreement To Subordinate. Each Guarantor agrees, and each
Noteholder by accepting a Note agrees, that the obligations of such Guarantor
are subordinated in right of payment, to the extent and in the manner provided
in this Article 12, to the prior payment of all Senior Indebtedness of such
Guarantor and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. Only Senior Indebtedness of each
Guarantor shall rank senior to the obligations of such Guarantor in accordance
with the provisions set forth herein. The obligations of each Guarantor shall in
all respects rank pari passu with, or be senior to, all other Indebtedness of
such Guarantor.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of any Guarantor to creditors upon a total or partial
liquidation or a total or partial dissolution of such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the such Guarantor or its property:
(1) holders of Senior Indebtedness of such Guarantor shall be entitled to
receive payment in full of such Senior Indebtedness in cash or cash equivalents
before Noteholders shall be entitled to receive any payment pursuant to the
Guarantee of such Guarantor; and
(2) until the Senior Indebtedness of such Guarantor is paid in full in
cash or cash equivalents, any distribution to which Noteholders would be
entitled but for this Article 12 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Noteholders may receive
Subordinated Reorganization Securities and payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof.
SECTION 12.03. Default on Senior Indebtedness of Guarantor. No Guarantor
may make any payment pursuant to any of its obligations or repurchase, redeem or
otherwise retire or defease any Notes or other Obligations (collectively, "pay
its Guarantee") (other than Subordinated Reorganization Securities and payments
and other distributions from any defeasance trust created pursuant to Section
8.01 hereof) if (i) any Designated Senior Indebtedness of the relevant Guarantor
is not paid when due or (ii) any other default on Designated Senior Indebtedness
of such Guarantor occurs and the maturity of such Designated Senior Indebtedness
is accelerated in accordance with its terms unless, in either case, the default
has been cured or waived and any such acceleration has been rescinded or such
Designated
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Senior Indebtedness has been paid in full. However, such Guarantor may pay its
Guarantee without regard to the foregoing if such Guarantor and the Trustee
receive written notice approving such payment from the Representative of the
Designated Senior Indebtedness of such Guarantor with respect to which either of
the events set forth in clause (i) or (ii) of the immediately preceding sentence
has occurred and is continuing. During the continuance of any default (other
than a default described in clause (i) or (ii) of the second preceding sentence)
with respect to any Designated Senior Indebtedness of such Guarantor pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, such Guarantor may not pay its
Guarantee for the Payment Blockage Period commencing upon the receipt by the
Trustee (with a copy to such Guarantor) of a Blockage Notice from the
Representative of the holders of such Designated Senior Indebtedness and ending
179 days thereafter (or earlier if such Payment Blockage Period is terminated
(i) by written notice to the Trustee and such Guarantor from the Person or
Persons who gave such Blockage Notice, (ii) because a Representative of the
holders of such Designated Senior Indebtedness has notified the Trustee that the
default giving rise to such Blockage Notice is no longer continuing or (iii)
because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the first sentence of this paragraph), unless the holders of
such Designated Senior Indebtedness of such Guarantor or the Representative of
such holders have accelerated the maturity of such Designated Senior
Indebtedness, such Guarantor may resume payments on its Guarantee after the end
of such Payment Blockage Period. Each Guarantee shall not be subject to more
than one Payment Blockage Period in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness of a
Guarantor during such period. For purposes of this Section 12.03, no default or
event of default which existed or was continuing on the date of the commencement
of any Payment Blockage Period with respect to the Designated Senior
Indebtedness initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative of such Designated Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 12.04. Demand for Payment. If a demand for payment is made on any
Guarantor pursuant to Article 11, such Guarantor shall promptly notify the
holders of the Designated Senior Indebtedness (or their Representatives) of such
Guarantor of such demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is
made to Noteholders that because of this Article 12 should not have been made to
them, the applicable Guarantor shall notify the Noteholders who receive the
distribution, which Noteholders shall hold it in trust for holders of the
relevant Senior Indebtedness of such Guarantor and pay it over to them or their
Representative as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of each
Guarantor is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness. A distribution
made under this Article 12 to holders of such Senior Indebtedness
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which otherwise would have been made to Noteholders is not, as between each
Guarantor and Noteholders, a payment by such Guarantor on such Senior
Indebtedness.
SECTION 12.07. Relative Rights. This Article 12 defines the relative
rights of Noteholders and holders of Senior Indebtedness of each Guarantor.
Nothing in this Indenture shall:
(1) impair, as between each Guarantor and the Noteholders, the obligation
of the such Guarantor, which is absolute and unconditional, to pay its
obligations to the extent set forth in Article 11; or
(2) prevent the Trustee or any Noteholder from exercising its available
remedies upon a default by any Guarantor under its obligations, subject to the
rights of holders of Senior Indebtedness of such Guarantor to receive
distributions otherwise payable to Noteholders.
SECTION 12.08. Subordination May Not Be Impaired by Guarantor. No right of
any holder of Senior Indebtedness of any Guarantor to enforce the subordination
of the obligations of such Guarantor shall be impaired by any act or failure to
act by such Guarantor or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section
12.03, the Trustee or Paying Agent may continue to demand payments on each
Guarantee and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice from a holder of Designated Senior Indebtedness that it
is exercising its rights under Section 12.03. The Issuer, each Guarantor, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of any Guarantor may give the notice; provided, however,
that, if an issue of Senior Indebtedness of any Guarantor has a Representative,
only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of any Guarantor with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 12 with respect to any Senior Indebtedness of any Guarantor which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 12 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of any Guarantor, the distribution may be made and the notice given to their
Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under the Guarantees or
Limit Right To Demand Payment. The failure to make a payment pursuant to any
Guarantee by reason of any provision in this Article 12 shall not be construed
as preventing the occurrence of a
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default under such Guarantee. Nothing in this Article 12 shall have any effect
on the right of the Noteholders or the Trustee to make a demand for payment on
any Guarantor pursuant to Article 11.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution
pursuant to this Article 12, the Trustee and the Noteholders shall be entitled
to rely (i) upon any order or decree of a court of competent jurisdiction in
which any proceedings of the nature referred to in Section 12.02 are pending,
(ii) upon a certificate of the liquidating trustee or agent or other Person
making such payment or distribution to the Trustee or to the Noteholders or
(iii) upon the Representative for the holders of Senior Indebtedness of any
Guarantor for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness of such Guarantor to participate in any payment or
distribution pursuant to this Article 12, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness of such Guarantor held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 12, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each Noteholder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Noteholders and the holders of Senior Indebtedness of
any Guarantor as provided in this Article 12 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of
Guarantors. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of any Guarantor and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Noteholders or the
Issuer or any other Person, money or assets to which any holders of such Senior
Indebtedness shall be entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness on Subordination
Provisions. Each Noteholder by accepting a Note acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness of any
Guarantor, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall
be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
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SECTION 12.16. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by any Guarantor with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this section, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Noteholders, without incurring
responsibility to the Noteholders and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Noteholders to the holders of Senior Indebtedness, do any one or more of the
following:
(i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, or waive compliance with the terms of,
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in manner for the collection or
payment of Senior Indebtedness; or
(iv) exercise or refrain from exercising any rights against the
Guarantor and any other Person;
provided, however, that in no event shall any such actions limit the right of
the Noteholders to take any action to accelerate the maturity of the Notes
pursuant to Article 6 of this Indenture or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article, subject to the rights, if any,
under this Article of the holders from time to time of Senior Indebtedness to
receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
SECTION 12.17. Other Rights of Holders of Senior Indebtedness. All rights
and interest under this Indenture of the holders of Senior Indebtedness and all
agreements and obligations of the Trustee, the Noteholders and the Guarantors
under this Article shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Senior Credit
Facility and promissory notes evidencing the Senior Credit Facility or any
other agreement or instrument relating thereto or to any other Senior
Indebtedness; or
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(b) any other circumstance that might constitute a defense available
to or a discharge of a guarantor or surety (other than as a result of any
payments indefeasibly made on the Senior Credit Facility or other Senior
Indebtedness).
The holders of Senior Indebtedness are hereby authorized to demand
specific performance of this Article at any time when the Trustee, any Guarantor
or any Noteholder shall have failed to comply with any of these provisions.
The provisions of this Article shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Indebtedness is rescinded or must otherwise be returned by any holder of Senior
Indebtedness upon the insolvency, bankruptcy or reorganization of any Guarantor
or otherwise, all as though such payment had not been made.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication by the Issuer, any
Guarantor or the Trustee to the others is duly given if in writing and delivered
in Person or mailed by first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
to the others' address as follows:
if to the Issuer and/or any Guarantor:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Mr. Edward Lieberman
if to the Trustee:
Chase Manhattan Trust Company, National Association
1650 Market Street, One Liberty Place, Suite 5210
Philadelphia, PA 19103
Attention: Capital Markets Fiduciary Services
Telephone: (215) 988-1317
Telecopy: (215) 972-8372
(Phoenix Color Corp. 10 3/8% Senior Subordinated Notes due
2009)
The Issuer, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communication.
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All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, to its address shown on
the register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuer mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each agent at the same time.
SECTION 13.03. Communication by Holders with Other Holders. Noteholders
may communicate pursuant to TIA Section 312(b) with other Noteholders with
respect to their rights under this Indenture or the Notes. The Issuer, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Issuer to the Trustee to take or refrain from
taking any action under this Indenture, the Issuer shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(3) a statement that, in the opinion of such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
SECTION 13.06. When Notes Disregarded. In determining whether the Holders
of the required principal amount of Notes have concurred in any direction,
waiver or consent, Notes owned by the Issuer or by any Affiliate of the Issuer
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which the Trustee knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Notes
outstanding at the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Noteholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions are not required or are not authorized to
be open in the Commonwealth of Pennsylvania or State of New York. If a payment
date is a Legal Holiday, payment shall be made on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
If a regular record date is a Legal Holiday, the record date shall not be
affected.
SECTION 13.09. Governing Law. (a) THIS INDENTURE AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(b) Each of the Issuer and each Guarantor hereby (i) agrees that any suit,
action or proceeding against it arising out of or relating to this Indenture or
the Notes, as the case may be, may be instituted in any Federal or state court
sitting in The City of New York, (ii) waives, to the extent permitted by
applicable law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding, and any claim that any suit,
action or proceeding in such a court has been brought in an inconvenient forum,
(iii) irrevocably submits to the non-exclusive jurisdiction of such courts in
any suit, action or proceeding, (iv) agrees that final judgment in any such
suit, action or proceeding brought in such a court shall be conclusive and
binding upon each and may be enforced in the courts of the jurisdiction of which
each is subject, respectively, by a suit upon judgment, (v) agrees that service
of process by mail to the addressed specified in Section 13.02 hereof shall
constitute personal service of such process on it in any such suit, action or
proceeding.
SECTION 13.10. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Issuer or any Guarantor, as such, shall have
any liability for
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any obligations of the Issuer or such Guarantor under the Notes, the Guarantees
or this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation, solely by reason of its status as a
director, officer, employee, incorporator or stockholder of the Issuer or such
Guarantor. By accepting a Note, each Holder waives and releases all such
liability (but only such liability) as part of the consideration for issuance of
such Note to such Holder.
SECTION 13.11. Successors, Assigns and Transferees. All agreements of the
Issuer and each Guarantor in this Indenture and the Notes shall bind their
respective successors and assigns. All agreements of the Trustee and the Initial
Purchaser in this Indenture shall bind their respective successors, assigns and
transferees.
SECTION 13.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 13.13. Table of Contents, Headings. The table of contents,
cross-reference table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 13.14. Severability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 13.15. Further Instruments and Acts. Upon request of the Trustee,
the Issuer and each Guarantor will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purposes of this Indenture.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PHOENIX COLOR CORP.,
as Issuer,
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
PHOENIX (MD) REALTY, LLC,
as Guarantor
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
PCC EXPRESS, INC.,
as Guarantor
By: /s/ Edward Lieberman
---------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
as Trustee
By: /s/ J. C. Progar
---------------------------------
Name: J.C. Progar
Title: Vice President
[Indenture]
<PAGE>
EXHIBIT A
FORM OF INITIAL GLOBAL NOTE
FACE OF INITIAL GLOBAL NOTE
PHOENIX COLOR CORP.
No. _____ CUSIP No. ________________
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3)
OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
SUCH AN ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A
<PAGE>
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS NOTE, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A
TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO PHOENIX COLOR CORP. OR A SUCCESSOR THEREOF OR THE REGISTRAR FOR
REGISTRATION OF TRANSFER OR EXCHANGE AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN
PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.07 OF THE INDENTURE, DATED AS OF FEBRUARY 2, 1999, AMONG PHOENIX COLOR
CORP., AS ISSUER, THE GUARANTORS LISTED THEREIN AND CHASE MANHATTAN TRUST
COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE, PURSUANT TO WHICH THIS NOTE WAS
ISSUED.
GLOBAL NOTE
REPRESENTING 10-3/8% SENIOR SUBORDINATED NOTES DUE 2009
Phoenix Color Corp., a Delaware corporation, for value received, hereby
promises to pay to Cede & Co., or its registered assigns, the principal sum
indicated on Schedule A hereof, on February 1, 2009.
Interest Payment: Dates: February 1 and August 1, commencing August 1,
1999.
Record Dates: January 15 and July 15.
<PAGE>
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse by manual signature, this Note shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purposes.
<PAGE>
IN WITNESS WHEREOF, Phoenix Color Corp. has caused this Note to be duly
executed.
PHOENIX COLOR CORP.
By:_____________________________
Louis LaSorsa
Chairman and Chief Executive Officer
Attest:_______________________
Dated:________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:______________________________
Authorized Signatory
<PAGE>
REVERSE SIDE OF INITIAL GLOBAL NOTE
PHOENIX COLOR CORP.
GLOBAL NOTE
REPRESENTING 10-3/8% SENIOR SUBORDINATED NOTES DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "10-3/8% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$200,000,000, issued under an indenture dated as of February 2, 1999 (as amended
or supplemented from time to time, the "Indenture") among the Issuer, as issuer,
and the guarantors listed therein (collectively, the "Guarantors"), and Chase
Manhattan Trust Company, National Association, as trustee (the "Trustee," which
term includes any successor trustee under the Indenture). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and such Act for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantors, the Trustee and each Holder and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The summary of the terms of
this Note contained herein does not purport to be complete and is qualified by
reference to the Indenture. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control. All capitalized terms used
in this Note which are not defined herein shall have the meanings assigned to
them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Phoenix Color Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on Schedule
A of this Note to the Holder hereof on February 1, 2009.
The Issuer shall pay interest at a rate of 10-3/8% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided
<PAGE>
for, semiannually in arrears on February 1 and August 1 of each year, commencing
on August 1, 1999, in cash, to the Holder hereof until the principal amount
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions provided in the Indenture, be paid to the Person in whose
name this Note (or the Note in exchange or substitution for which this Note was
issued) is registered at the close of business on the Record Date for interest
payable on such Interest Payment Date. The Record Date for any interest payment
is the close of business on January 15 or July 15, as the case may be, whether
or not a Business Day, immediately preceding the Interest Payment Date on which
such interest is payable. Any such interest not so punctually paid or duly
provided for ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Record Date and shall be paid as provided in Section 2.12 of the
Indenture. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in a Registered Exchange Offer prior to the
Record Date for the first Interest Payment Date following such exchange, accrued
and unpaid interest, if any, on this Note, up to but not including the date of
issuance of the Exchange Note or Exchange Notes issued in exchange for this
Note, shall be paid on the first Interest Payment Date for such Exchange Note or
Exchange Notes to the Holder or Holders of such Exchange Note or Exchange Notes
on the first Record Date with respect to such Exchange Note or Exchange Notes.
If this Note is exchanged in a Registered Exchange Offer subsequent to the
Record Date for the first Interest Payment Date following such exchange but on
or prior to such Interest Payment Date, then any such accrued and unpaid
interest with respect to this Note and any accrued and unpaid interest on the
Exchange Note or Exchange Notes issued in exchange for this Note, through the
day before such Interest Payment Date, shall be paid on such Interest Payment
Date to the Holder of this Note on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, Defaulted Interest and overdue Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on this Note.
The Issuer's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its maturity, as a result of the Issuer's
obligations pursuant to Section 3.05, Section 4.11 or Section 4.14 of the
Indenture, or otherwise.
3. Registration Rights, Liquidated Damages.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated February 2, 1999, among the Issuer, the Guarantors and
the Initial Purchaser (the "Registration Rights Agreement"), which agreement is
attached to the Indenture as Exhibit J thereto. Such benefits include the right
of the Holder to receive Liquidated Damages in the event
<PAGE>
of a failure on the part of the Issuer to comply with certain registration
covenants, as provided in Section 4 of the Registration Rights Agreement.
4. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any, in
money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered Holders at their registered addresses; provided, that all
payments with respect to Notes the Holders of which have given wire transfer
instructions to the Issuer will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
5. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar, provided, that if the Issuer or such Affiliate
is acting as Paying Agent, the Issuer or such Affiliate shall segregate all
funds held by it as Paying Agent and hold them in trust for the benefit of the
Holders or the Trustee.
6. Guarantees.
This Note is initially entitled to the benefits of the Guarantees made by
the Guarantors listed on Annex A hereto and may thereafter be entitled to
Guarantees made by other Guarantors for the benefit of the Holders of Notes.
Each present Guarantor has, and each future Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Issuer under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes expenses, indemnification or otherwise. A
Guarantor shall be released from its Guarantee upon the terms and subject to the
conditions set forth in the Indenture.
7. Subordination.
This Note and the Guarantees are subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all existing and future
Senior Indebtedness. Each of the Issuer and the Guarantors agrees, and each
Holder by accepting a Note agrees, to the subordination provisions set forth in
the Indenture, authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
8. Redemption.
<PAGE>
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to February 1, 2004. Thereafter,
the Notes will be subject to redemption at the option of the Issuer, in whole or
in part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning February 1 of the years indicated below:
Year Percentage
---- ----------
2004 105.188%
2005 103.458%
2006 101.729%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to February 1, 2002
the Issuer, at its option, may redeem in the aggregate up to 25.0% of the
original principal amount of the Notes with the Net Cash Proceeds of one or more
Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount) of 110.375% of
the aggregate principal amount so redeemed, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable Redemption Date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date); provided, however, that at
least 75.0% of the original principal amount of the Notes must remain
outstanding after each such redemption; and provided, further, that each such
redemption shall occur within 60 days of the date of closing of the related
Public Equity Offering.
9. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption.
If fewer than all the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Notes not previously
called for redemption; provided, that the Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000 (Notes in denominations of
$1,000 may be redeemed only in whole). If any Note is redeemed subsequent to a
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid on
<PAGE>
such Interest Payment Date to the Holder of the Note on such Record Date. If
money in an amount sufficient to pay the Redemption Price of all Notes (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date will cease to accrue.
10. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereto) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
11. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Issuer may then use such amounts for general corporate purposes.
<PAGE>
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale Offer. Unless the Issuer defaults in the payment of the Asset
Sale Purchase Price with respect thereto, all Notes or portions thereof selected
for payment pursuant to the Asset Sale Offer will cease to accrue interest from
and after the Asset Sale Purchase Date.
12. The Global Note.
So long as this Global Note is registered in the name of the Depositary or
its nominee, members of, or participants in, the Depositary ("Agent Members")
shall have no rights under the Indenture with respect to this Global Note held
on their behalf by the Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Issuer, the Guarantors, the Trustee and any
agent of the Issuer, the Guarantors or the Trustee as the absolute owner of this
Global Note for all purposes. Notwithstanding the foregoing, nothing herein
shall (i) prevent the Issuer, the Guarantors, the Trustee or any agent of the
Issuer, the Guarantors or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or (ii)
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder.
The Holder of this Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests in this
Global Note through Agent Members, to take any action which a Holder is entitled
to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Issuer, a Change of
Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an exchange
for Certificated Notes, this Global Note is redeemed, repurchased or exchanged
in part, this Global Note shall be surrendered by the Holder thereof to the
Trustee who shall cause an adjustment to be made to Schedule A hereof so that
the principal amount of this Global Note will be equal to the portion not
redeemed, repurchased or exchanged and shall thereafter return this Global Note
to such Holder; provided, that this Global Note shall be in a principal amount
of $1,000 or an integral multiple of $1,000.
13. The Registered Exchange Offer.
Any Initial Notes represented by this Global Note that are presented to
the Registrar for exchange pursuant to the Registered Exchange Offer (as defined
in the Registration Rights Agreement) shall be exchanged for a Global Note
representing Exchange Notes of equal principal amount upon surrender of this
Global Note to the Registrar in accordance with the terms of the Registered
Exchange Offer and the Indenture.
<PAGE>
14. Transfer and Exchange.
The transfer of this Note is subject to certain restrictions, including
those to which reference is made in the Private Placement Legend. A Holder may
transfer or exchange Notes as provided in the Indenture and subject to certain
limitations therein set forth. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes, fees and expenses required by law or permitted by the Indenture.
15. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
16. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors under the Notes, the
Guarantees and the Indenture if the Issuer irrevocably deposits in trust with
the Trustee cash or U.S. Government Obligations for the payment of principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes to
redemption or maturity, as the case may be.
17. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or acknowledgment of a Restricted Subsidiary that it is a
Guarantor for all purposes under the Indenture (including, without limitation,
Article 12 thereof).
18. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) a default in the payment when
<PAGE>
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Issuer to observe or perform certain covenants, conditions, agreements or
other provisions of the Indenture or this Note (and, in the case of certain
covenants, agreements or other provisions, such failure has continued after
written notice by the Trustee or the Holders of at least 25% in principal amount
of the Notes for a time period specified in such notice); (iv) a default in the
payment of Indebtedness of the Issuer or any of its Subsidiaries within any
applicable grace period after final maturity or acceleration of such
Indebtedness in an amount in excess of $5.0 million in the aggregate; (v)
certain events of bankruptcy or insolvency with respect to the Issuer or any of
its Subsidiaries; (vi) certain undischarged judgments in excess of $5.0 million
against the Issuer or any of its Subsidiaries; or (vii) the Guarantee of any
Guarantor ceasing for any reason to be in full force and effect (other than in
accordance with the terms of the Indenture) or any Guarantor denying or
disaffirming its obligations under its Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the Notes being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium or Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
19. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors or their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
20. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor, as such, shall have any liability for any obligations of the
Issuer or such Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Issuer or such Guarantor. By accepting a
Note, each
<PAGE>
Holder waives and releases all such liability (but only such liability) as part
of the consideration for issuance of such Note to such Holder.
21. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the other side of this Note.
22. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
23. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
24. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Mr. Edward Lieberman
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$____________________. The following decreases/increases in the principal amount
in denominations of $ 1,000 or integral multiples thereof at maturity of this
Note have been made:
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
- ------------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
(TM) In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
(TM) In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:_________________
- ------------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX A
LIST OF GUARANTORS
<PAGE>
EXHIBIT B
FORM OF INITIAL CERTIFICATED NOTE
FACE OF INITIAL CERTIFICATED NOTE
PHOENIX COLOR CORP.
No. _____ CUSIP No. ___________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3)
OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
SUCH AN ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS
NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR
<PAGE>
IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
TRANSFER OF THIS NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.07 OF THE INDENTURE, DATED AS OF FEBRUARY 2,
1999, AMONG PHOENIX COLOR CORP., AS ISSUER, THE GUARANTORS LISTED THEREIN AND
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE, PURSUANT TO
WHICH THIS NOTE WAS ISSUED.
10 3/8% SENIOR SUBORDINATED NOTE DUE 2009
Phoenix Color Corp., a Delaware corporation, for value received, hereby
promises to pay to ________________, or its registered assigns, the principal
amount of _______________, on February 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing August 1,
1999.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
<PAGE>
IN WITNESS WHEREOF, Phoenix Color Corp. has caused this Note to be duly
executed.
PHOENIX COLOR CORP.
By: _____________________________
Louis LaSorsa
Chairman and Chief Executive Officer
Attest:___________________
Dated:____________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:____________________________
Authorized Signatory
<PAGE>
REVERSE SIDE OF INITIAL CERTIFICATED NOTE
PHOENIX COLOR CORP.
10-3/8% SENIOR SUBORDINATED NOTE DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "10-3/8% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$200,000,000, issued under an indenture dated as of February 2, 1999 (as amended
or supplemented from time to time, the "Indenture") among the Issuer, as issuer,
and the guarantors listed therein (collectively, the "Guarantors"), and Chase
Manhattan Trust Company, National Association, as trustee (the "Trustee," which
term includes any successor trustee under the Indenture). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and such Act for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantors, the Trustee and each Holder and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The summary of the terms of
this Note contained herein does not purport to be complete and is qualified by
reference to the Indenture. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control. All capitalized terms used
in this Note which are not defined herein shall have the meanings assigned to
them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Phoenix Color Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on the face
of this Note to the Holder hereof on February 1, 2009.
The Issuer shall pay interest at a rate of 10-3/8% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, semiannually in arrears on February
1 and August 1 of each year, commencing on August 1,
<PAGE>
1999, in cash, to the Holder hereof until the principal amount hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued) is registered
at the close of business on the Record Date for interest payable on such
Interest Payment Date. The Record Date for any interest payment is the close of
business on January 15 or July 15 as the case may be, whether or not a Business
Day, immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.12 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in a Registered Exchange Offer prior to the
Record Date for the first Interest Payment Date following such exchange, accrued
and unpaid interest, if any, on this Note, up to but not including the date of
issuance of the Exchange Note or Exchange Notes issued in exchange for this
Note, shall be paid on the first Interest Payment Date for such Exchange Note or
Exchange Notes to the Holder or Holders of such Exchange Note or Exchange Notes
on the first Record Date with respect to such Exchange Note or Exchange Notes.
If this Note is exchanged in a Registered Exchange Offer subsequent to the
Record Date for the first Interest Payment Date following such exchange but on
or prior to such Interest Payment Date, then any such accrued and unpaid
interest with respect to this Note and any accrued and unpaid interest on the
Exchange Note or Exchange Notes issued in exchange for this Note, through the
day before such Interest Payment Date, shall be paid on such Interest Payment
Date to the Holder of this Note on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, Defaulted Interest and overdue Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on this Note.
The Issuer's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its maturity, as a result of the Issuer's
obligations pursuant to Section 3.05, Section 4. 11 or Section 4.14 of the
Indenture, or otherwise.
3. Registration Rights; Liquidated Damages.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated February 2, 1999, among the Issuer, the Guarantors and
the Initial Purchaser (the "Registration Rights Agreement"), which agreement is
attached to the Indenture as Exhibit J thereto. Such benefits include the right
of the Holder to receive Liquidated Damages in the event
<PAGE>
of a failure on the part of the Issuer to comply with certain registration
covenants, as provided in Section 4 of the Registration Rights Agreement.
4. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any, in
money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered Holders at their registered addresses; provided, that all
payments with respect to Notes the Holders of which have given wire transfer
instructions to the Issuer will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
5. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar, provided, that if the Issuer or such Affiliate
is acting as Paying Agent, the Issuer or such Affiliate shall segregate all
funds held by it as Paying Agent and hold them in trust for the benefit of the
Holders or the Trustee.
6. Guarantees.
This Note is initially entitled to the benefits of the Guarantees made by
the Guarantors listed on Annex A hereto and may thereafter be entitled to
Guarantees made by other Guarantors for the benefit of the Holders of Notes.
Each present Guarantor has, and each future Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Issuer under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Guarantee upon the terms and subject to the
conditions set forth in the Indenture.
7. Subordination.
This Note and the Guarantees are subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all existing and future
Senior Indebtedness. Each of the Issuer and the Guarantors agrees, and each
Holder by accepting a Note agrees, to the subordination provisions set forth in
the Indenture, authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
<PAGE>
8. Redemption.
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to February 1, 2004. Thereafter,
the Notes will be subject to redemption at the option of the Issuer, in whole or
in part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning February 1 of the years indicated below:
Year Percentage
---- ----------
2004 105.188%
2005 103.458%
2006 101.729%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to February 1, 2002,
the Issuer, at its option, may redeem in the aggregate up to 25.0% of the
original principal amount of the Notes with the Net Cash Proceeds of one or more
Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount) of 110.375% of
the aggregate principal amount so redeemed, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable Redemption Date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date); provided, however, that at
least 75.0% of the original principal amount of the Notes must remain
outstanding after each such redemption; and provided, further, that each such
redemption shall occur within 60 days of the date of closing of the related
Public Equity Offering.
9. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption. If fewer than all the Notes are to be redeemed
at any time, the Trustee shall select the Notes to be redeemed pro rata or by
lot or by a method that complies with applicable legal and securities exchange
requirements, if any, and that the Trustee considers fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Notes not previously called for redemption; provided, that the Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Notes that have denominations larger than $1,000
(Notes in denominations of $1,000 may be redeemed only in whole). If any Note is
redeemed subsequent to a Record Date with respect to any Interest Payment Date
specified above and on or prior to such Interest Payment Date, then any accrued
interest will be paid on such Interest Payment Date to the Holder of the Note on
<PAGE>
such Record Date. If money in an amount sufficient to pay the Redemption Price
of all Notes (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent on or before the applicable Redemption Date and
certain other conditions are satisfied, interest on the Notes or portions
thereof to be redeemed on the applicable Redemption Date will cease to accrue.
10. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $ 1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
11. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Issuer may then use such amounts for general corporate purposes.
<PAGE>
Within 30 calendar days of the date the amount of Excess Proceeds exceeds $5.0
million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale Offer. Unless the Issuer defaults in the payment of the Asset
Sale Purchase Price with respect thereto, all Notes or portions thereof selected
for payment pursuant to the Asset Sale Offer will cease to accrue interest from
and after the Asset Sale Purchase Date.
12. The Registered Exchange Offer.
Any Initial Notes (including this Note) that are presented to the
Registrar for exchange pursuant to the Registered Exchange Offer (as defined in
the Registration Rights Agreement) shall be exchanged for Exchange Notes of
equal principal amount upon surrender of such Notes to the Registrar in
accordance with the terms of the Registered Exchange Offer and the Indenture.
13. Transfer and Exchange.
The transfer of this Note is subject to certain restrictions, including
those to which reference is made in the Private Placement Legend. A Holder may
transfer or exchange Notes as provided in the Indenture and subject to certain
limitations therein set forth. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes, fees and expenses required by law or permitted by the Indenture. The
Registrar need not register the transfer or exchange of Certificated Notes or
portions thereof selected for redemption (except, in the case of a Certificated
Note to be redeemed in part, the portion of such Certificated Note not to be
redeemed) or any Certificated Notes for a period of 15 calendar days before a
selection of Notes to be redeemed.
14. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount;
provided, that Initial Certificated Notes originally purchased by or transferred
to Institutional Accredited Investors shall be subject to a minimum denomination
of $250,000.
15. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors under the Notes, the
Guarantees and the Indenture if the Issuer irrevocably deposits in trust with
the Trustee cash or U.S. Government Obligations for the payment of principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes to
redemption or maturity, as the case may be.
<PAGE>
16. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or acknowledgment of a Restricted Subsidiary that it is a
Guarantor for all purposes under the Indenture (including, without limitation,
Article 12 thereof).
17. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) a default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Issuer to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued after written notice by the Trustee or
the Holders of at least 25% in principal amount of the Notes for a time period
specified in such notice); (iv) a default in the payment of Indebtedness of the
Issuer or any of its Subsidiaries within any applicable grace period after final
maturity or acceleration of such Indebtedness in an amount in excess of $5.0
million in the aggregate; (v) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries; (vi) certain undischarged
judgments in excess of $5.0 million against the Issuer or any of its
Subsidiaries; or (vii) the Guarantee of any Guarantor ceasing for any reason to
be in full force and effect (other than in accordance with the terms of the
Indenture) or any Guarantor denying or disaffirming its obligations under its
Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the Notes being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
<PAGE>
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium or Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
18. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors or their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
19. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor, as such, shall have any liability for any obligations of the
Issuer or such Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Issuer or such Guarantor. By accepting a
Note, each Holder waives and releases all such liability (but only such
liability) as part of the consideration for issuance of such Note to such
Holder.
20. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the other side of this Note.
21. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to
<PAGE>
Holders of Notes. No representation is made as to the accuracy of such numbers
either as printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
23. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Mr. Edward Lieberman
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
- ------------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
(TM) In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
(TM) In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:____________________
- ------------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX A
LIST OF GUARANTORS
<PAGE>
EXHIBIT C
FORM OF EXCHANGE GLOBAL NOTE
FACE OF EXCHANGE GLOBAL NOTE
PHOENIX COLOR CORP.
No. ____ CUSIP No._________________
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO PHOENIX COLOR CORP. OR A SUCCESSOR THEREOF OR THE REGISTRAR FOR
REGISTRATION OF TRANSFER OR EXCHANGE AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN
PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE.
GLOBAL NOTE
REPRESENTING 10-3/8% SENIOR SUBORDINATED NOTES DUE 2009
Phoenix Color Corp., a Delaware corporation, for value received, hereby
promises to pay to Cede & Co., or its registered assigns, the principal sum
indicated on Schedule A hereof, on February 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing August 1,
1999.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
<PAGE>
IN WITNESS WHEREOF, Phoenix Color Corp. has caused this Note to be duly
executed.
PHOENIX COLOR CORP.
By:______________________________
Louis LaSorsa
Chairman and Chief Executive Officer
Attest:___________________
Dated:____________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
, as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:_____________________________
Authorized Signatory
<PAGE>
REVERSE SIDE OF EXCHANGE GLOBAL NOTE
PHOENIX COLOR CORP.
GLOBAL NOTE
REPRESENTING 10-3/8% SENIOR SUBORDINATED NOTES DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "10-3/8% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$200,000,000, issued under an indenture dated as of February 2, 1999 (as amended
or supplemented from time to time, the "Indenture") among the Issuer, as issuer,
and the guarantors listed therein (collectively, the "Guarantors"), and Chase
Manhattan Trust Company, National Association, as trustee (the "Trustee," which
term includes any successor trustee under the Indenture). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and such Act for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantors, the Trustee and each Holder and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The summary of the terms of
this Note contained herein does not purport to be complete and is qualified by
reference to the Indenture. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control. All capitalized terms used
in this Note which are not defined herein shall have the meanings assigned to
them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Phoenix Color Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on Schedule
A of this Note to the Holder hereof on February 1, 2009.
The Issuer shall pay interest at a rate of 10-3/8% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided
<PAGE>
for, semiannually in arrears on February 1 and August 1 of each year, commencing
on August 1, 1999, in cash, to the Holder hereof until the principal amount
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions provided in the Indenture, be paid to the Person in whose
name this Note (or the Note in exchange or substitution for which this Note was
issued) is registered at the close of business on the Record Date for interest
payable on such Interest Payment Date. The Record Date for any interest payment
is the close of business on January 15 or July 15, as the case may be, whether
or not a Business Day, immediately preceding the Interest Payment Date on which
such interest is payable. Any such interest not so punctually paid or duly
provided for ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Record Date and shall be paid as provided in Section 2.12 of the
Indenture. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange Offer on or prior
to the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest, if any, on the equivalent principal amount of the
Initial Note in exchange for which this Note was issued, up to but not including
the date of issuance of this Note, shall be paid on the first Interest Payment
Date for this Note to the Holder of this Note on the first Record Date with
respect to this Note. If this Note is issued pursuant to a Registered Exchange
Offer subsequent to the Record Date for the first Interest Payment Date
following such exchange but on or prior to such Interest Payment Date, then any
such accrued and unpaid interest with respect to the equivalent principal amount
of the Initial Note in exchange for which this Note was issued and any accrued
and unpaid interest on this Note, through the day before such Interest Payment
Date, shall be paid on such Interest Payment Date to the Holder of such Initial
Note on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, Defaulted Interest and overdue Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on this Note.
The Issuer's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its maturity, as a result of the Issuer's
obligations pursuant to Section 3.05, Section 4.11 or Section 4.14 of the
Indenture, or otherwise.
3. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any,
in money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
<PAGE>
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered Holders at their registered addresses; provided, that all
payments with respect to Notes the Holders of which have given wire transfer
instructions to the Issuer will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar, provided , that if the Issuer or such
Affiliate is acting as Paying Agent, the Issuer or such Affiliate shall
segregate all funds held by it as Paying Agent and hold them in trust for the
benefit of the Holders or the Trustee.
5. Guarantees.
This Note is initially entitled to the benefits of the Guarantees made by
the Guarantors listed on Annex A hereto and may thereafter be entitled to
Guarantees made by other Guarantors for the benefit of the Holders of Notes.
Each present Guarantor has, and each future Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Issuer under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Guarantee upon the terms and subject to the
conditions set forth in the Indenture.
6. Subordination.
This Note and the Guarantees are subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all existing and future
Senior Indebtedness. Each of the Issuer and the Guarantors agrees, and each
Holder by accepting a Note agrees, to the subordination provisions set forth in
the Indenture, authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
7. Redemption.
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to February 1, 2004. Thereafter,
the Notes will be subject to redemption at the option of the Issuer, in whole or
in part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning February 1 of the years indicated below:
<PAGE>
Year Percentage
---- ----------
2004 105.188%
2005 103.458%
2006 101.729%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to February 1, 2002
the Issuer, at its option, may redeem in the aggregate up to 25. 0% of the
original principal amount of the Notes with the Net Cash Proceeds of one or more
Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount) of 110.375% of
the aggregate principal amount so redeemed, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable Redemption Date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date); provided, however, that at
least 75.0% of the original principal amount of the Notes must remain
outstanding after each such redemption; and provided, further, that each such
redemption shall occur within 60 days of the date of closing of the related
Public Equity Offering.
8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption.
If fewer than all the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Notes not previously
called for redemption; provided, that the Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000 (Notes in denominations of
$1,000 may be redeemed only in whole). If any Note is redeemed subsequent to a
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such Record Date. If
money in an amount sufficient to pay the Redemption Price of all Notes (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date will cease to accrue.
<PAGE>
9. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Issuer may then use such amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale
<PAGE>
Offer. Unless the Issuer defaults in the payment of the Asset Sale Purchase
Price with respect thereto, all Notes, or portions thereof selected for payment
pursuant to the Asset Sale Offer will cease to accrue interest from and after
the Asset Sale Purchase Date.
11. The Global Note.
So long as this Global Note is registered in the name of the Depositary or
its nominee, members of, or participants in, the Depositary ("Agent Members")
shall have no rights under the Indenture with respect to this Global Note held
on their behalf by the Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Issuer, the Guarantors, the Trustee and any
agent of the Issuer, the Guarantors or the Trustee as the absolute owner of this
Global Note for all purposes. Notwithstanding the foregoing, nothing herein
shall (i) prevent the Issuer, the Guarantors, the Trustee or any agent of the
Issuer, the Guarantors or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or (ii)
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder.
The Holder of this Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests in this
Global Note through Agent Members, to take any action which a Holder is entitled
to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Issuer, a Change of
Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an exchange
for Certificated Notes, this Global Note is redeemed, repurchased or exchanged
in part, this Global Note shall be surrendered by the Holder thereof to the
Trustee who shall cause an adjustment to be made to Schedule A hereof so that
the principal amount of this Global Note will be equal to the portion not
redeemed, repurchased or exchanged and shall thereafter return this Global Note
to such Holder; provided, that this Global Note shall be in a principal amount
of $1,000 or an integral multiple of $1,000.
12. Transfer and Exchange.
A Holder may transfer or exchange Notes as provided in the Indenture and
subject to certain limitations therein set forth. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes, fees and expenses required by law or permitted
by the Indenture.
13. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
14. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors under the Notes, the
Guarantees and the Indenture if the Issuer irrevocably deposits in trust with
the Trustee cash or U.S. Government Obligations for
<PAGE>
the payment of principal, premium, if any, interest and Liquidated Damages, if
any, on the Notes to redemption or maturity, as the case may be.
15. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or acknowledgment of a Restricted Subsidiary that it is a
Guarantor for all purposes under the Indenture (including, without limitation,
Article 12 thereof).
16. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) a default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Issuer to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued after written notice by the Trustee or
the Holders of at least 25% in principal amount of the Notes for a time period
specified in such notice); (iv) a default in the payment of Indebtedness of the
Issuer or any of its Subsidiaries within any applicable grace period after final
maturity or acceleration of such Indebtedness in an amount in excess of $5.0
million in the aggregate; (v) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries; (vi) certain undischarged
judgments in excess of $5.0 million against the Issuer or any of its
Subsidiaries; or (vii) the Guarantee of any Guarantor ceasing for any reason to
be in full force and effect (other than in accordance with the terms of the
Indenture) or any Guarantor denying or disaffirming its obligations under its
Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the
<PAGE>
Notes being immediately due and payable upon the occurrence of such Events of
Default without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium or Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
17. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors or their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
18. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor, as such, shall have any liability for any obligations of the
Issuer or such Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Issuer or such Guarantor. By accepting a
Note, each Holder waives and releases all such liability (but only such
liability) as part of the consideration for issuance of such Note to such
Holder.
19. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
signs the certificate of authentication on the other side of this Note.
20. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
<PAGE>
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$____________________. The following decreases/increases in the principal amount
in denominations of $ 1,000 or integral multiples thereof at maturity of this
Note have been made:
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
- -------- -------- -------- -------- -------
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
- ----------------------------------- --------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
(TM) In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
(TM) In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:___________________
- ----------------------------------- --------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX A
LIST OF GUARANTORS
<PAGE>
EXHIBIT D
FORM OF EXCHANGE CERTIFICATED NOTE
FACE OF EXCHANGE CERTIFICATED NOTE
PHOENIX COLOR CORP.
No. _____ CUSIP No._____________
10-3/8% SENIOR SUBORDINATED NOTE DUE 2009
Phoenix Color Corp., a Delaware corporation, for value received, hereby
promises to pay to ______________________, or its registered assigns, the
principal amount of _____________ on February 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing August 1,
1999.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
<PAGE>
IN WITNESS WHEREOF, Phoenix Color Corp. has caused this Note to be duly
executed.
PHOENIX COLOR CORP.
By:_____________________________________
Louis LaSorsa
Chairman and chief Executive Officer
Attest:_________________________
Dated:__________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:_____________________________
Authorized Signatory
<PAGE>
REVERSE SIDE OF EXCHANGE CERTIFICATED NOTE
PHOENIX COLOR CORP.
10-3/8% SENIOR SUBORDINATED NOTE DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "10-3/8% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$200,000,000, issued under an indenture dated as of February 2, 1999 (as amended
or supplemented from time to time, the "Indenture") among the Issuer, as issuer,
and the guarantors listed therein (collectively, the "Guarantors"), and Chase
Manhattan Trust Company, National Association, as trustee (the "Trustee," which
term includes any successor trustee under the Indenture). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and such Act for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantors, the Trustee and each Holder and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The summary of the terms of
this Note contained herein does not purport to be complete and is qualified by
reference to the Indenture. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control. All capitalized terms used
in this Note which are not defined herein shall have the meanings assigned to
them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Phoenix Color Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on the face
of this Note to the Holder hereof on February 1, 2009.
The Issuer shall pay interest at a rate of 10-3/8% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, semiannually in arrears on February
1 and August 1 of each year, commencing on August 1,
<PAGE>
1999, in cash, to the Holder hereof until the principal amount hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued) is registered
at the close of business on the Record Date for interest payable on such
Interest Payment Date. The Record Date for any interest payment is the close of
business on January 15 or July 15, as the case may be, whether or not a Business
Day, immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.12 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange Offer on or prior
to the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest on the equivalent principal amount of the Initial
Note in exchange for which this Note was issued, up to but not including the
date of issuance of this Note, shall be paid on the first Interest Payment Date
for this Note to the Holder of this Note on the first Record Date with respect
to this Note. If this Note is issued pursuant to a Registered Exchange Offer
subsequent to the Record Date for the first Interest Payment Date following such
exchange but on or prior to such Interest Payment Date, then any such accrued
and unpaid interest with respect to the equivalent principal amount of the
Initial Note in exchange for which this Note was issued and any accrued and
unpaid interest on this Note through the day before such Interest Payment Date
shall be paid on such Interest Payment Date to the Holder of such Initial Note
on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, Defaulted Interest and overdue Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on this Note.
The Issuer's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its maturity, as a result of the Issuer's
obligations pursuant to Section 3.05, Section 4.11 or Section 4.14 of the
Indenture, or otherwise.
3. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any, in
money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered
<PAGE>
Holders at their registered addresses; provided, that all payments with respect
to Notes the Holders of which have given wire transfer instructions to the
Issuer will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar, provided, that if the Issuer or such Affiliate
is acting as Paying Agent, the Issuer or such Affiliate shall segregate all
funds held by it as Paying Agent and hold them in trust for the benefit of the
Holders or the Trustee.
5. Guarantees.
This Note is initially entitled to the benefits of the Guarantees made by
the Guarantors listed on Annex A hereto and may thereafter be entitled to
Guarantees made by other Guarantors for the benefit of the Holders of Notes.
Each present Guarantor has, and each future Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Issuer under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Guarantee upon the terms and subject to the
conditions set forth in the Indenture.
6. Subordination.
This Note and the Guarantees are subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all existing and future
Senior Indebtedness. Each of the Issuer and the Guarantors agrees, and each
Holder by accepting a Note agrees, to the subordination provisions set forth in
the Indenture, authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
7. Redemption.
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to February 1, 2004. Thereafter,
the Notes will be subject to redemption at the option of the Issuer, in whole or
in part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning February 1 of the years indicated below:
Year Percentage
---- ----------
<PAGE>
2004 105.188%
2005 103.458%
2006 101.729%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to February 1, 2002
the Issuer, at its option, may redeem in the aggregate up to 25.0% of the
original principal amount of the Notes with the Net Cash Proceeds of one or more
Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount) of 110.375% of
the aggregate principal amount so redeemed, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable Redemption Date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date); provided, however, that at
least 75.0% of the original principal amount of the Notes must remain
outstanding after each such redemption; and provided, further, that each such
redemption shall occur within 60 days of the date of closing of the related
Public Equity Offering.
8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption.
If fewer than all the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Notes not previously
called for redemption; provided, that the Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000 (Notes in denominations of
$1,000 may be redeemed only in whole). If any Note is redeemed subsequent to a
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such Record Date. If
money in an amount sufficient to pay the Redemption Price of all Notes (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date will cease to accrue.
<PAGE>
9. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Issuer may then use such amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale
<PAGE>
Offer. Unless the Issuer defaults in the payment of the Asset Sale Purchase
Price with respect thereto, all Notes or portions thereof selected for payment
pursuant to the Asset Sale Offer will cease to accrue interest from and after
the Asset Sale Purchase Date.
11. Transfer and Exchange.
A Holder may transfer or exchange Notes as provided in the Indenture and
subject to certain limitations therein set forth. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes, fees and expenses required by law or permitted
by the Indenture. The Registrar need not register the transfer or exchange of
Certificated Notes or portions thereof selected for redemption (except, in the
case of a Certificated Note to be redeemed in part, the portion of such
Certificated Note not to be redeemed) or any Certificated Notes for a period of
15 calendar days before a selection of Notes to be redeemed.
12. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
13. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors under the Notes, the
Guarantees and the Indenture if the Issuer irrevocably deposits in trust with
the Trustee cash or U.S. Government Obligations for the payment of principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes to
redemption or maturity, as the case may be.
14. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or
<PAGE>
acknowledgment of a Restricted Subsidiary that it is a Guarantor for all
purposes under the Indenture (including, without limitation, Article 12
thereof).
15. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) a default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture), (iii) failure by the Issuer to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued after written notice by the Trustee or
the Holders of at least 25% in principal amount of the Notes for a time period
specified in such notice); (iv) a default in the payment of Indebtedness of the
Issuer or any of its Subsidiaries within any applicable grace period after final
maturity or acceleration of such Indebtedness in an amount in excess of $5.0
million in the aggregate; (v) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries, (vi) certain undischarged
judgments in excess of $5.0 million against the Issuer or any of its
Subsidiaries; or (vii) the Guarantee of any Guarantor ceasing for any reason to
be in full force and effect (other than in accordance with the terms of the
Indenture) or any Guarantor denying or affirming its obligations under its
Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the Notes being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium or Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
16. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors or their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
<PAGE>
17. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor, as such, shall have any liability for any obligations of the
Issuer or such Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Issuer or such Guarantor. By accepting a
Note, each Holder waives and releases all such liability (but only such
liability) as part of the consideration for issuance of such Note to such
Holder.
18. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the other side of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
- --------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
(TM) In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
(TM) In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
(TM) the entire principal amount
(TM) $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:_______________________
- --------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX A
LIST OF GUARANTORS
<PAGE>
EXHIBIT E
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER TO A QIB
Chase Manhattan Bank
Corporate Trust-Customer Service
1201 Main Street, 18th Floor
Dallas, Texas 75202
Re: Phoenix Color Corp. (the "Issuer") 10-3/8% Senior Subordinated Notes
due 2009 (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of February 2, 1999 (as
amended and supplemented from time to time, the "Indenture") among the Issuer,
the Guarantors named therein, and Chase Manhattan Trust Company, National
Association, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture. This letter relates to
$_______________ aggregate principal amount of Notes which are held in the name
of [name of transferor] (the "Transferor") to effect the transfer of such Notes
in exchange for an equivalent beneficial interest in the Initial Global Note.
In connection with such request, and with respect to such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended ("Rule
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
<PAGE>
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
__________________________________________
[Name of Transferor]
By:_______________________________________
Name:
Title:
Date:____________________________
cc: Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
EXHIBIT F
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO AN
INSTITUTIONAL ACCREDITED INVESTOR
Chase Manhattan Bank
Corporate Trust-Customer Service
1201 Main Street, 18th Floor
Dallas, Texas 75202
Re: Phoenix Color Corp. (the "Issuer") 10-3/8% Senior Subordinated Notes
due 2009 (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of February 2, 1999 (as
amended and supplemented from time to time, the "Indenture") among the Issuer,
the Guarantors named therein, and Chase Manhattan Trust Company, National
Association, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture.
This letter relates to U.S. $ aggregate principal amount of Notes which
are held [in certificated form in the name of [name of transferor] (the
"Transferor")] [through the beneficial interest of [name of transferor] (the
"Transferor") in the Initial Global Note] to effect the transfer of such Notes
to an institutional "accredited investor" as defined in Rule 501 (a)(1), (2),
(3) or (7) of Regulation D under the Securities Act of 1933, as amended (an
"Institutional Accredited Investor").
In connection with such request, and with respect to such Notes, the
Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes, (ii) to a
transferee that the Transferor reasonably believes is an Institutional
Accredited Investor that is acquiring at least $250,000 principal amount of
Notes for its own account or for one or more accounts as to which the transferee
exercises sole investment discretion and (iii) in accordance with applicable
securities laws of any state of the United States or any other jurisdiction.
<PAGE>
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
__________________________________________
[Name of Transferor]
By:_______________________________________
Name:
Title:
Date:____________________________
cc: Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
EXHIBIT G
FORM OF INVESTMENT LETTER
FOR INSTITUTIONAL ACCREDITED INVESTORS
Chase Manhattan Bank
Corporate Trust-Customer Service
1201 Main Street, 18th Floor
Dallas, Texas 75202
Re: Phoenix Color Corp. (the "Issuer") 10-3/8% Senior Subordinated Notes
Due 2009 (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of February 2, 1999 (as
amended and supplemented from time to time, the "Indenture") among the Issuer,
the Guarantors named therein, and Chase Manhattan Trust Company, National
Association, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture.
In connection with our proposed purchase of $___________ aggregate
principal amount of Notes, we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We understand and agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, (x) that such Notes are being offered only in a transaction not
involving any public offering within the meaning of the Securities Act, (y) that
if we should resell, pledge or otherwise transfer such Notes within two years
after the later of the date of the original issuance of the Notes and the last
date on which the Issuer or any affiliate (within the meaning of Rule 144 under
the Securities Act ("Rule 144")) of the Issuer was the owner of such Notes (or
any predecessor of such Notes), or within three months after we cease to be an
affiliate of the Issuer, such Notes may be resold, pledged or transferred only
(i) to the Issuer, (ii) so long as Notes are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A"), to a person whom we reasonably
believe is a "qualified institutional buyer" (as defined in Rule 144A) ("QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule
144A, (iii) in an offshore transaction in accordance with Regulation S under the
Securities Act, (iv) to an institution that is an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act ("Institutional Accredited Investor") that has certified to the Issuer and
the Trustee that it is such an accredited investor and is acquiring the Notes
for investment purposes and not for distribution, (v) pursuant to an effective
registration statement under the Securities Act or (vi) pursuant to any other
available exemption from the registration
<PAGE>
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States, and we will notify
any purchaser of the Notes from us of the above resale restrictions, if then
applicable. We further understand that, in connection with any transfer of the
Notes by us, the Issuer and the Trustee may request, and if so requested we will
furnish, such certificates, legal opinions and other information as they may
reasonably require to confirm that any such transfer complies with the foregoing
restrictions. We understand that the Notes will be issued in registered form
only and that any certificates issued will bear a legend substantially to the
effect set forth in the Indenture.
2. We are able to fend for ourselves in this transaction, we have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment and can afford the complete loss of such investment.
3. We understand that the minimum principal amount of Notes purchased by
an Institutional Accredited Investor is $250,000.
4. We understand that the Issuer, the Trustee and others will rely upon
the truth and accuracy of the foregoing acknowledgments, representations and
agreements, and we agree that if any of the acknowledgments, representations and
warranties deemed to have been made by us by our purchase of Notes, for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion, are no longer accurate, we shall promptly notify the
Issuer and the Trustee.
5. We are acquiring the Notes purchased by us for investment purposes, and
not for distribution, for our own account or for one or more accounts as to each
of which we exercise sole investment discretion and we are or such account is an
Institutional Accredited Investor.
<PAGE>
6. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
__________________________________________
[Name of Purchaser]
By:_______________________________________
Name:
Title:
Date:____________________________
cc: Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
EXHIBIT H
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
TO A NON-U. S. PERSON
Chase Manhattan Bank
Corporate Trust-Customer Service
1201 Main Street, 18th Floor
Dallas, Texas 75202
Re: Phoenix Color Corp. (the "Issuer") 10-3/8% Senior Subordinated Notes
due 2009 (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of February 2, 1999 (as
amended and supplemented from time to time, the "Indenture") among the Issuer,
the Guarantors named therein, and Chase Manhattan Trust Company, National
Association, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture.
This letter relates to $ aggregate principal amount of Notes which are
held [in certificated form in the name of [name of transferor] (the
"Transferor")] [through the beneficial interest of [name of transferor] (the
"Transferor") in the Initial Global Note] to effect the transfer of such Notes
in exchange for Initial Certificated Notes.
In connection with such request, the Transferor does hereby certify that
such Notes are being transferred in accordance with (i) the transfer
restrictions set forth in the Notes and (ii) Regulation S ("Regulation S") under
the United States Securities Act of 1933, as amended (the "Securities Act") and
does hereby further certify that:
(1) the offer of the Notes was not made to a person in the United States;
(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market, and neither the Transferor, nor any
person acting on its behalf knows that the transaction was pre-arranged
with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b)of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
<PAGE>
In addition, if the sale is made during a Restricted Period (as defined in
Regulation S) and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of
Regulation S are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule
904(c)(1), as the case may be.
<PAGE>
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
__________________________________________
[Name of Purchaser]
By:_______________________________________
Name:
Title:
Date:____________________________
cc: Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
EXHIBIT I
FORM OF INVESTMENT LETTER
FOR REGULATION S PURCHASERS
Chase Manhattan Bank
Corporate Trust-Customer Service
1201 Main Street, 18th Floor
Dallas, Texas 75202
Re: Phoenix Color Corp. (the "Issuer") 10-3/8% Senior Subordinated Notes
due 2009 (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of February 2, 1999 (as
amended and supplemented from time to time, the "Indenture") among the Issuer,
the Guarantors named therein, and Chase Manhattan Trust Company, National
Association, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture.
In connection with our proposed purchase of $ aggregate principal amount
of the Notes which are held [in certificated form in the name of [name of
transferor] (the "Transferor")] [through the beneficial interest of [name of
transferor] (the "Transferor") in the Initial Global Note], we hereby certify
that we are (or we will hold such Notes on behalf of) a person outside the
United States to whom the Notes could be transferred in accordance with Rule 904
of Regulation S promulgated under the United States Securities Act of 1933, as
amended.
<PAGE>
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
__________________________________________
[Name of Purchaser]
By:_______________________________________
Name:
Title:
Date:____________________________
cc: Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
<PAGE>
EXHIBIT J
FORM OF REGISTRATION RIGHTS AGREEMENT
[Attached]
<PAGE>
EXHIBIT 4.3
PHOENIX COLOR CORP.
$105,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
Charlotte, North Carolina
February 2, 1999
First Union Capital Markets Corp.,
as Initial Purchaser
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
This Registration Rights Agreement is dated as of February 2, 1999 (the
"Agreement") and is by and among Phoenix Color Corp., a Delaware corporation
(the "Issuer"), Phoenix (Md.) Realty, LLC, a Maryland limited liability company
("Phoenix Realty"), and PCC Express, Inc., a Delaware corporation (together with
Phoenix Realty, the "Guarantors") and First Union Capital Markets Corp.
(formerly known as First Union Capital Markets, a division of Wheat First
Securities, Inc.) (the "Initial Purchaser").
This Agreement is being entered into in connection with the issuance of
certain 10 3/8% Senior Subordinated Notes due 2009 (the "Initial Notes")
pursuant to a Note Purchase Agreement dated January 28, 1999 by and among the
Issuer, the Guarantors and the Initial Purchaser (the "Note Purchase
Agreement"). The Initial Notes are to be unconditionally guaranteed, on a senior
subordinated basis (the "Guarantees"), by the Guarantors. To induce the Initial
Purchaser to enter into the Note Purchase Agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Issuer has agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchaser and its direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the obligation of the Initial Purchaser to purchase the Initial
Notes. The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition shall
have their respective meanings set forth in the Note Purchase Agreement. As used
in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
<PAGE>
"Affiliate" means, with respect to any specified person, any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
"control" of a person means the power, directly or indirectly, to direct or
cause the direction of the management and policies of such person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble hereto.
"Business Day" means any day excluding Saturday, Sunday or any other day
which is a legal holiday under the laws of New York, New York or is a day on
which banking institutions located therein are authorized or required by law or
other governmental action to close.
"Commission" means the Securities and Exchange Commission.
"Consummate" means, with respect to a Registered Exchange Offer, the
occurrence of (a) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the
Registered Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Registered Exchange Offer open for
a period not less than the minimum period required pursuant to Section 2(c)(ii)
hereof, (c) the Issuer's acceptance for exchange of all Registrable Notes duly
tendered and not validly withdrawn pursuant to the Registered Exchange Offer and
(d) the delivery by the Issuer to the Registrar under the Indenture of Exchange
Notes in the same aggregate principal amount as the aggregate principal amount
of Registrable Notes tendered by Holders thereof pursuant to the Registered
Exchange Offer. The term "Consummation" or "Consummated" has a meaning
correlative to the foregoing.
"Damages Accrual Period" has the meaning assigned to it in Section 4
hereto.
"Damages Payment Date" has the meaning assigned to it in Section 4 hereto.
"DTC" has the meaning assigned to it in Section 5.
"Effectiveness Target Date" has the meaning assigned to it in Section 4
hereto.
"Event" has the meaning assigned to it in Section 4 hereto.
"Event Date" has the meaning assigned to it in Section 4 hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" means debt securities of the Issuer identical in all
material respects to the Initial Notes (except that the Liquidated Damages
provisions and the transfer restrictions pertaining to the Initial Notes will be
eliminated) to be issued under the Indenture.
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"Exchange Offer Registration Period" means the 12-month period following
the Consummation of the Registered Exchange Offer, exclusive of any period
during which any stop order shall be in effect suspending the effectiveness of
the Exchange Offer Registration Statement; provided, however, that in the event
that all resales of Exchange Notes (including, subject to the time periods set
forth herein, any resales by Exchanging Dealers) covered by such Exchange Offer
Registration Statement have been made, the Exchange Offer Registration Statement
need not thereafter remain continuously effective for such period.
"Exchange Offer Registration Statement" means a registration statement of
the Issuer on an appropriate form under the Act with respect to the Registered
Exchange Offer, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
Purchaser) that is a broker-dealer, electing to exchange Initial Notes acquired
for its own account as a result of market-making activities or other trading
activities for Exchange Notes.
"Guarantees" has the meaning set forth in the preamble hereto.
"Guarantors" has the meaning set forth in the preamble hereto.
"Holder" means any holder from time to time of Registrable Notes
(including the Initial Purchaser).
"Indenture" means the Indenture dated the date hereof by and among the
Issuer, the Guarantors and Chase Manhattan Trust Company, National Association,
a national banking association, as trustee.
"Initial Notes" has the meaning set forth in the preamble hereto.
"Initial Purchaser" has the meaning set forth in the preamble hereto.
"Issuer" has the meaning set forth in the preamble hereto.
"Liquidated Damages" has the meaning set forth in Section 4(b) hereto.
"Losses" has the meaning set forth in Section 7(d) hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of Registrable Notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment bankers
and manager or managers that shall administer an underwritten offering under a
Shelf Registration Statement.
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"Note Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"Registered Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Initial Notes, a like
principal amount of Exchange Notes.
"Registrable Notes" means each Initial Note upon original issuance of the
Initial Notes and, at all times subsequent thereto, each Exchange Note as to
which clauses (iii), (iv) or (v) of the first paragraph of Section 3 hereof are
applicable upon original issuance and at all times subsequent thereto, until in
the case of any such Initial Note or Exchange Note, as the case may be, the
earliest to occur of (i) a Registration Statement (other than, with respect to
any Exchange Note as to which clauses (iii), (iv) or (v) of the first paragraph
of Section 3 hereof are applicable, the Exchange Registration Statement)
covering such Initial Note or Exchange Note, as the case may be, has been
declared effective by the Commission and such Initial Note (unless such Initial
Note was not tendered for exchange by the Holder thereof) or Exchange Note, as
the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Initial Note or Exchange Note, as the case may
be, is sold in compliance with Rule 144, or (iii) such Initial Note or Exchange
Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
"Registration Statement" means any Exchange Offer Registration Statement
or Shelf Registration Statement that covers any of the Registrable Notes
(including any Guarantees of each thereof) pursuant to the provisions of this
Agreement, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto, and all material incorporated by reference
therein.
"Shelf Registration" means a registration effected pursuant to Section 3
hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement of
the Issuer pursuant to the provisions of Section 3 hereof, which covers some or
all of the Registrable Notes, as applicable, on an appropriate form under Rule
415 under the Act, or any similar rule that may be adopted by the Commission,
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
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"Shelf Registration Trigger Date" means the date on which the filing of a
Shelf Registration is requested or required under Section 3 hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the trustee with respect to the Initial Notes or Exchange
Notes, as applicable, under the Indenture.
"Underwriter" means any underwriter of Registrable Notes in connection
with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of Exchange Notes by Exchanging
Dealers; Private Exchange. (a) The Issuer and the Guarantors shall prepare and,
not later than 45 days from the date of original issuance of the Initial Notes
(or, if such 45th day is not a Business Day, by the first Business Day
thereafter), shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Issuer and the
Guarantors shall use their best efforts (i) to cause the Exchange Offer
Registration Statement to be declared effective under the Act within 130 days
from the date of original issuance of the Initial Notes (or, if such 130th day
is not a Business Day, by the first Business Day thereafter), and (ii) to
Consummate the Registered Exchange Offer within 30 Business Days from the date
the Exchange Offer Registration Statement becomes effective (or, if such 30th
day is not a Business Day, by the first Business Day thereafter).
(b) Upon the effectiveness of the Exchange Offer Registration Statement,
the Issuer and the Guarantors shall promptly commence and Consummate the
Registered Exchange Offer. The objective of such Registered Exchange Offer is to
enable each Holder electing to exchange Registrable Notes for Exchange Notes
(assuming that such Holder (x) is not an "affiliate" of the Issuer or the
Guarantors within the meaning of the Act, (y) is not a broker-dealer that
acquired the Registrable Notes in a transaction other than as a part of its
market-making or other trading activities and (z) if such Holder is not a
broker-dealer, acquires the Exchange Notes in the ordinary course of such
Holder's business, is not participating in the distribution of the Exchange
Notes and has no arrangements or understandings with any person to participate
in the distribution of the Exchange Notes) to resell such Exchange Notes from
and after their receipt without any limitations or restrictions under the Act
and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuer and the
Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 20 Business Days after the date notice thereof is mailed to the
Holders;
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(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) The Issuer and the Guarantors may suspend the use of the Prospectus
for a period not to exceed 30 days in any three-month period or for three
periods not to exceed an aggregate of 90 days in any twelve-month period for
valid business reasons, to be determined by the Issuer and the Guarantors in
their reasonable judgment (not including avoidance of their obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided, that the Issuer and the Guarantors promptly thereafter
comply with the requirements of Section 5(k) hereof, if applicable.
(e) As soon as practicable after the Consummation of the Registered
Exchange Offer, the Issuer and the Guarantors shall cause the Trustee promptly
to authenticate and deliver to each Holder Exchange Notes equal in principal
amount to the Registrable Notes of such Holder so accepted for exchange.
(f) The Initial Purchaser, the Issuer and the Guarantors acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of the
Act, and in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of any
Exchange Notes received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Registrable Notes acquired for its own account as
a result of market-making activities or other trading activities. Accordingly,
the Issuer and the Guarantors shall:
(i) include the information set forth in Annex A hereto on the cover
of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the
Registered Exchange Offer, in Annex C hereto in the underwriting or plan
of distribution section of the Prospectus forming a part of the Exchange
Offer Registration Statement, and in Annex D hereto in the letter of
transmittal delivered pursuant to the Registered Exchange Offer; and
(ii) use their best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Act during the Exchange Offer
Registration Period for delivery of the prospectus included therein by
Exchanging Dealers in connection with sales of Exchange Notes received
pursuant to the Registered Exchange Offer, as contemplated by Section 5(h)
below.
(g) In the event that the Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Registrable Notes constituting any portion of an unsold allotment,
upon the effectiveness of the Shelf Registration Statement as contemplated by
Section 3 hereof and at the request of the Initial Purchaser, the
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<PAGE>
Issuer and the Guarantors shall issue and deliver to the Initial Purchaser, or
to the party purchasing Registrable Notes registered under the Shelf
Registration Statement from the Initial Purchaser, in exchange for such
Registrable Notes, a like principal amount of Exchange Notes. The Issuer and the
Guarantors shall use their best efforts to cause the CUSIP Service Bureau to
issue the same CUSIP number for such Exchange Notes as for Exchange Notes issued
pursuant to the Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or applicable
interpretations thereof by the Commission's staff, any of the Issuer or the
Guarantors determines upon advice of its outside counsel that it is not
permitted to effect the Registered Exchange Offer as contemplated by Section 2
hereof, or (ii) the Registered Exchange Offer is not Consummated within 30
Business Days from the date the Exchange Offer Registration Statement becomes
effective (or, if such 30th day is not a Business Day, by the first Business Day
thereafter), or (iii) the Initial Purchaser so requests with respect to
Registrable Notes held by it as a result of the purchase of such Registrable
Notes directly from the Issuer and the Guarantors following Consummation of the
Registered Exchange Offer and the Initial Purchaser is not eligible to receive
Exchange Notes pursuant to the Registered Exchange Offer in respect of such
Registrable Notes, or (iv) any Holder (other than the Initial Purchaser) is not
eligible to participate in the Registered Exchange Offer or the Exchange Notes
such Holder would receive in the Registered Exchange Offer could only be
reoffered and resold by such Holder upon compliance with the registration and
prospectus delivery requirements of the Act and the delivery of the Prospectus
contained in the Exchange Offer Registration Statement, as appropriately
amended, is not a legally available alternative, or (v) in the case where the
Initial Purchaser participates in the Registered Exchange Offer or acquires
Exchange Notes pursuant to Section 2(g) hereof, the Initial Purchaser does not
receive freely tradable Exchange Notes in exchange for Initial Notes
constituting any portion of an unsold allotment (it being understood that, for
purposes of this Section 3, (x) the requirement that the Initial Purchaser
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Act in connection with sales of Exchange Notes
acquired in exchange for such Registrable Notes shall not result in such
Exchange Notes being not "freely tradable" and (y) the requirement that an
Exchanging Dealer deliver a Prospectus in connection with sales of Exchange
Notes acquired in the Registered Exchange Offer in exchange for Registrable
Notes acquired as a result of market-making activities or other trading
activities shall not result in such Exchange Notes being not "freely tradable"),
the following provisions shall apply:
(a) The Issuer and the Guarantors shall prepare, and not later than 45
days following the Shelf Registration Trigger Date (or, if such 45th day is not
a Business Day, by the first Business Day thereafter), shall file with the
Commission and thereafter, but not later than 130 days following the Shelf
Registration Trigger Date (or, if such 130th day is not a Business Day, by the
first Business Day thereafter), shall use their best efforts to cause to be
declared effective under the Act a Shelf Registration Statement relating to the
offer and sale of the Registrable Notes by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement, provided, that with respect to
Exchange Notes received by the Initial Purchaser in exchange for Notes
constituting any portion of an unsold allotment, the Issuer and the Guarantors
may, if permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration
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Statement containing the information required by Regulation S-K, Items 507
and/or 508, as applicable, in satisfaction of their obligations under this
paragraph (a) with respect thereto, and any such Exchange Offer Registration
Statement, as so amended, shall be referred to herein as, and governed by the
provisions herein applicable to, a Shelf Registration Statement.
(b) The Issuer and the Guarantors shall use their best efforts to keep
such Shelf Registration Statement continuously effective in order to permit the
Prospectus forming a part thereof to be usable by Holders until the earliest of
(i) the second anniversary of the date on which the filing of a Shelf
Registration Statement was required or requested pursuant to this Section 3,
(ii) the date on which the Registrable Notes may be sold pursuant to Rule 144(k)
(or any successor provision) promulgated by the Commission under the Act and
(iii) such date as of which all the Registrable Notes have been sold pursuant to
the Shelf Registration Statement (in any such case, such period being called the
"Shelf Registration Period"). The Issuer and the Guarantors shall be deemed not
to have used their best efforts to keep the Shelf Registration Statement
effective during the requisite period if any of them voluntarily takes any
action that would result in Holders of Registrable Notes covered thereby not
being able to offer and sell such notes during that period, unless such action
is (x) required by applicable law or (y) pursuant to Section 3(c) hereof, and,
in either case, so long as the Issuer or the Guarantors promptly thereafter
comply with the requirements of Section 5(k) hereof, if applicable.
(c) The Issuer and the Guarantors may suspend the use of the Prospectus
for a period not to exceed 30 days in any three-month period or for three
periods not to exceed an aggregate of 90 days in any twelve-month period for
valid business reasons, to be determined by the Issuer and the Guarantors in
their reasonable judgment (not including avoidance of their obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided, that the Issuer and the Guarantors promptly thereafter
comply with the requirements of Section 5(k) hereof, if applicable.
(d) No Holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such Holder furnishes to the Issuer in writing, within 20 Business Days
after receipt of a request therefor, such information as the Issuer may
reasonably request for use in connection with any Shelf Registration Statement
or Prospectus or preliminary Prospectus included therein. No Holder of
Registrable Notes shall be entitled to Liquidated Damages pursuant to Section 4
hereof unless and until such Holder shall have used its best efforts to provide
all such reasonably requested information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Issuer all information required to be disclosed in order to make the information
previously furnished to the Issuer by such Holder not misleading.
4. Liquidated Damages.
(a) The parties hereto agree that the Holders of the Exchange Notes or the
Registrable Notes, as the case may be, will suffer damages, and that it would
not be feasible to ascertain the extent of such damages with precision, if (i)
either the Exchange Offer Registration Statement or the Shelf Registration
Statement has not been filed on or prior to the date specified for such
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<PAGE>
filing in this Agreement, (ii) the Exchange Offer Registration Statement or the
Shelf Registration Statement has not been declared effective under the Act on or
prior to the target date specified for such effectiveness in this Agreement (the
"Effectiveness Target Date"), (iii) the Registered Exchange Offer has not been
Consummated within 30 Business Days after the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, (iv) prior to the end of
the Exchange Offer Registration Period or the Shelf Registration Period, the
Commission shall have issued a stop order suspending the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, or proceedings have been initiated with respect to the
Registration Statement under Section 8(d) or 8(e) of the Act, (v) the aggregate
number of days in any one such suspension period exceeds the period permitted
pursuant to Section 2(d) or 3(c) hereof, as each may be applicable, or (vi) the
number of suspension periods exceeds the number permitted pursuant to Section
2(d) or 3(c) hereof, as each may be applicable (each of the events of a type
described in any of the foregoing clauses (i) through (vi) are individually
referred to herein as an "Event;" and the date specified for the filing of the
Registration Statement in the case of clause (i), the target date specified for
the declaration of the effectiveness of the Registration Statement in the case
of clause (ii), the date specified for the Consummation of the Registered
Exchange Offer in the case of clause (iii), the date on which the effectiveness
of a Registration Statement has been suspended or proceedings with respect to
the Registration Statement under Section 8(d) or 8(e) of the Act have been
commenced in the case of clause (iv), the date on which the duration of a
suspension period exceeds the periods permitted by Section 2(d) or 3(c) hereof,
as each may be applicable, in the case of clause (v), and the date of the
commencement of a suspension period that causes the limit on the number of
suspension periods under Section 2(d) or 3(c) hereof, as each may be applicable,
to be exceeded in the case of clause (vi), are referred to herein as an "Event
Date"). Events shall be deemed to continue until the date of the termination of
such Event, which shall be the following date with respect to the respective
types of Events: the date the Registration Statement is filed in the case of an
Event of the type described in clause (i), the date the Registration Statement
is declared effective under the Act in the case of an Event described in clause
(ii), the date a Registered Exchange Offer is Consummated in the case of an
Event described in clause (iii), the date that all stop orders suspending
effectiveness of the Registration Statement have been removed and the
proceedings initiated with respect to the Registration Statement under Section
8(d) or 8(e) of the Act have terminated, as the case may be, in the case of
Events of the types described in clause (iv), termination of the suspension
period which caused the aggregate number of days in any one suspension period to
exceed the number permitted by Section 2(d) or 3(c) to be exceeded in the case
of Events of the type described in clause (v), and termination of the suspension
period the commencement of which caused the number of suspension periods
permitted by Section 2(d) or 3(c) to be exceeded in the case of Events of the
type described in clause (vi).
(b) Accordingly, upon the occurrence of any Event and until such time as
there are no Events which have occurred and have not terminated (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Borrower and the Guarantors jointly and severally agree to pay
to each Holder, as liquidated damages (the "Liquidated Damages"), and not as a
penalty, with respect to the first 60-day period immediately following the Event
Date, an additional amount equal to $0.05 per week per $1,000 of the principal
amount of Exchange Notes or Registrable Notes held by such Holder. The amount of
the liquidated damages shall increase by an additional $0.05 per week per $1,000
of such
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principal amount with respect to each subsequent 60-day period until such Event
have terminated, up to a maximum amount of liquidated damages of $0.30 per week
per $1,000 of the principal amount of the Exchange Notes or Registrable Notes
held. Notwithstanding the foregoing, no Liquidated Damages shall accrue after
the expiration of the Exchange Offer Registration Period or the Shelf
Registration Period, as applicable.
(c) Liquidated Damages due on any Exchange Note or Registrable Note, as
the case may be, shall be payable on each date falling during the Damage Accrual
Period on which interest is due on such notes, and on the date immediately
following (or which would have followed) the termination of such Period on which
interest is due on the notes (the "Damages Payment Dates"). The Issuer shall pay
the Liquidated Damages due on any Registrable Notes or Exchange Notes by
depositing with the Trustee under the appropriate Indenture, in trust, for the
benefit of the Holders of Exchange Notes or Registrable Notes, as the case may
be, entitled thereto, at least one Business Day prior to the applicable Damages
Payment Date, sums sufficient to pay the Liquidated Damages accrued or accruing
since the last preceding Damages Payment Date to such Damages Payment Date. The
Trustee shall be entitled, on behalf of the Holders of Exchange Notes or
Registrable Notes, as the case may be, to seek any available remedy for the
enforcement of this Agreement, including for the payment of such Liquidated
Damages. Notwithstanding the foregoing, the parties agree that the sole remedy
payable for a violation of the terms of this Agreement with respect to which
Liquidated Damages are expressly provided shall be such Liquidated Damages.
Nothing shall preclude a Holder of Exchange Notes or Registrable Notes from
pursuing or obtaining specific performance or other equitable relief with
respect to any violation of this Agreement for which liquidated damages are not
expressly provided by this Agreement.
(d) All of the Issuer's and Guarantors' obligations set forth in this
Section 4 which are outstanding with respect to any Exchange Note or Registrable
Note at the time such note ceases to be covered by an effective Registration
Statement shall survive until such time as all such obligations with respect to
such security have been satisfied in full (notwithstanding termination of the
Agreement).
5. Registration Procedures. In connection with any Shelf Registration
Statement and, to the extent applicable, any Exchange Offer Registration
Statement, the following provisions shall apply:
(a) The Issuer and the Guarantors shall furnish to the Initial Purchaser,
prior to the filing thereof with the Commission, a copy of any Registration
Statement, and each amendment thereof and each amendment or supplement, if any,
to the Prospectus included therein and shall use their best efforts to reflect
in each such document, when so filed with the Commission, such comments as the
Initial Purchaser reasonably may propose.
(b) The Issuer and the Guarantors shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Act;
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(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, that no representation or agreement shall be required to be made
hereby with respect to information with respect to the Initial Purchaser, any
Underwriter or any Holder required to be included in any Registration Statement
or Prospectus pursuant to the Act or the rules and regulations thereunder or
provided in writing by the Initial Purchaser, any Holder or any Underwriter
specifically for inclusion in any Registration Statement or Prospectus.
(c) (1) The Issuer and the Guarantors shall advise the Initial Purchaser
and, in the case of a Shelf Registration Statement, the Holders of Registrable
Notes covered thereby, and, if requested by the Initial Purchaser or any such
Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information.
(2) The Issuer and the Guarantors shall advise the Initial Purchaser and,
in the case of a Shelf Registration Statement, the Holders of Registrable Notes
covered thereby, and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer that has provided in writing to the Issuer a telephone or
facsimile number and address for notices, and, if requested by the Initial
Purchaser or any such Holder or Exchanging Dealer, confirm such advice in
writing:
(i) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Issuer or the Guarantors of any
notification with respect to the suspension of the qualification of the
Registrable Notes included in any Registration Statement for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(iii) of the suspension of the use of the Prospectus pursuant to
Section 5(c) hereof or of the happening of any event that requires the
making of any changes in the Registration Statement or the Prospectus so
that, as of such date, the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein
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are not misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been
made).
(d) The Issuer and the Guarantors shall use their best efforts to obtain
the withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time and in any event shall within 30 days of
any such order (or, if such 30th day is not a Business Day, by the first
Business Day thereafter) amend the Registration Statement covering all of the
Registrable Notes (whereupon references herein to the Registration Statement
shall be deemed to include reference to such additional filing).
(e) The Issuer and the Guarantors shall furnish to each Holder of
Registrable Notes included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits thereto (including those incorporated by reference).
(f) The Issuer and the Guarantors shall, during the Shelf Registration
Period, deliver to each Holder of Registrable Notes included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Issuer and the Guarantors consent to the use of
the Prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable Notes in connection with the offering and sale of the
Registrable Notes covered by the Prospectus or any amendment or supplement
thereto.
(g) The Issuer and the Guarantors shall furnish to each Exchanging Dealer
that so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Exchanging Dealer so requests in writing, all exhibits
thereto (including those incorporated by reference).
(h) The Issuer and the Guarantors shall, during the Exchange Offer
Registration Period, deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included in
such Exchange Offer Registration Statement and any amendment or supplement
thereto as such Exchanging Dealer may reasonably request; and the Issuer and the
Guarantors consent to the use of the Prospectus or any amendment or supplement
thereto by any such Exchanging Dealer in connection with the offering and sale
of the Exchange Notes, as provided in Section 2(f) above.
(i) Prior to the Registered Exchange Offer or any other offering of
Registrable Notes pursuant to any Registration Statement, the Issuer and the
Guarantors shall register, qualify or cooperate with the Holders of Registrable
Notes included therein and their respective counsel in connection with the
registration or qualification of such Registrable Notes for offer and sale
12
<PAGE>
under the securities or blue sky laws of such states as any such Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions of the
Registrable Notes covered by such Registration Statement; provided, however,
that none of the Issuer or Guarantors will be required to qualify generally to
do business in any jurisdiction in which any of them is not then so qualified,
to file any general consent to service of process or to take any action which
would subject any of them to general service of process or to taxation in any
such jurisdiction where it is not then so subject.
(j) The Issuer and the Guarantors shall cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in denominations and registered in such names as Holders
may request prior to sales of Registrable Notes pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by paragraph (c)(2)(iii)
of this Section 5, the Issuer and the Guarantors shall promptly prepare and file
a post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that, as
thereafter delivered to purchasers of the Registrable Notes included therein,
the Prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(l) The Issuer and the Guarantors shall use their best efforts to cause
The Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Registration Statement hereunder or as soon as possible
thereafter to remove (i) from any existing CUSIP number assigned to the
Registrable Notes or Exchange Notes, as the case may be, any designation
indicating that such notes are "restricted securities," which efforts shall
include delivery to DTC of a letter executed by the Issuer substantially in the
form of Annex E hereto and (ii) any other stop or restriction on DTC's system
with respect to the Registrable Notes or Exchange Notes, as the case may be. In
the event the Issuer and the Guarantors are unable to cause DTC to take actions
described in the immediately preceding sentence, the Issuer and the Guarantors
shall take such actions as the Initial Purchaser may reasonably request to
provide, as soon as practicable, a CUSIP number for the Registrable Notes or
Exchange Notes registered under such Registration Statement and to cause such
CUSIP number to be assigned to the Registrable Notes or Exchange Notes (or to
the maximum aggregate principal amount of the securities to which such number
may be assigned). Upon compliance with the foregoing requirements of this
Section 5(l), the Issuer shall provide the Trustee with global certificates for
such Registrable Notes or Exchange Notes, in a form eligible for deposit with
The Depository Trust Company.
(m) The Issuer and the Guarantors shall use their best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to their security holders as soon as practicable after the
effective date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Act and Rule 158 promulgated
thereunder.
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<PAGE>
(n) The Issuer and the Guarantors shall cause the Indenture to be
qualified under the Trust Indenture Act in a timely manner.
(o) The Issuer and the Guarantors may require each Holder of Registrable
Notes to be sold pursuant to any Shelf Registration Statement to furnish to the
Issuer such information regarding the Holder and the distribution of such
Registrable Notes as may, from time to time, be reasonably required by the Act
and the rules and regulations promulgated thereunder, and the obligations of the
Issuer and the Guarantors to any Holder hereunder shall be expressly conditioned
on the compliance of such Holder with such request.
(p) The Issuer and the Guarantors shall, if requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement (i) such information as the Majority Holders provide or,
if the Registrable Notes are being sold in an underwritten offering, as the
Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provide to the Issuer or Guarantors in writing for
inclusion in the Shelf Registration Statement or Prospectus, and (ii) such
information as a Holder may provide from time to time to the Issuer or
Guarantors in writing for inclusion in a Prospectus or any Shelf Registration
Statement concerning such Holder and the distribution of such Holder's
Registrable Notes and, in either case, shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
being notified in writing of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Issuer and the
Guarantors shall enter into such agreements (including underwriting agreements)
and take all other customary and appropriate actions as may be reasonably
requested in order to expedite or facilitate the registration or the disposition
of any Registrable Notes, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures no less favorable than those set forth in Section 7 (or such
other provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any, with respect to all parties to be indemnified
pursuant to Section 7 from Holders of Exchange Notes to the Issuer and the
Guarantors). In the event any Shelf Registration Statement is prepared and filed
in connection with an underwritten offering, the managing underwriters in
connection therewith shall be reasonably acceptable to the Issuer.
(r) In the case of any Shelf Registration Statement, the Issuer and the
Guarantors shall:
(i) make reasonably available for inspection by the Holders of
Registrable Notes to be registered thereunder, any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such Underwriter, all relevant financial and other records,
pertinent corporate documents and properties of the Issuer, the Guarantors
and their subsidiaries;
(ii) cause the Issuer's and the Guarantors' officers, directors and
employees to supply all relevant information reasonably requested by the
Holders or any such
14
<PAGE>
Underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated
in writing by the Issuer or the Guarantors, in their sole discretion, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such Underwriter, attorney, accountant
or agent (who shall execute a confidentiality agreement in a form
reasonably acceptable to the Issuer), unless disclosure thereof is made in
connection with a court proceeding or required by law, or such information
becomes available to the public generally through the Issuer or the
Guarantors or through a third party without an accompanying obligation of
confidentiality;
(iii) make such representations and warranties to the Holders of
Registrable Notes registered thereunder and the Underwriters, if any, in
form, substance and scope as are customarily made by issuers to
Underwriters and covering matters including, but not limited to, those set
forth in the Note Purchase Agreement;
(iv) use their best efforts to obtain opinions of counsel to the
Issuer and the Guarantors and updates thereof (which counsel and opinions,
in form, scope and substance, shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the
Underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Holders and Underwriters;
(v) use their best efforts to obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Issuer and the Guarantors (and, if necessary, any other independent
certified public accountants of any subsidiary of the Issuer or the
Guarantors or of any business acquired by the Issuer and the Guarantors
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of the Registrable Notes covered by such Shelf Registration
Statement (provided such Holder furnishes the accountants with such
representations as the accountants customarily require in similar
situations) and the Underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 5(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuer and the Guarantors.
(vii) The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 5(r) shall be performed at (A) the effectiveness
of such Shelf Registration Statement and each post-effective amendment
thereto and (B) each closing under any underwriting or similar agreement
as and to the extent required thereunder.
15
<PAGE>
(s) The Issuer shall, if and to the extent required under the Act and/or
the Trust Indenture Act and the rules and regulations thereunder in order to
register the Registrable Notes (including the Guarantees) under the Act and
qualify the Indenture under the Trust Indenture Act, cause each Guarantor to
sign any Registration Statement and take all other action necessary to register
the Guarantees under the applicable Registration Statement.
6. Registration Expenses. The Issuer and the Guarantors shall bear all
expenses incurred in connection with the performance of their obligations under
Sections 2, 3, 4 and 5 hereof (other than brokers', dealers' and underwriters'
discounts and commissions and brokers', dealers' and underwriters' counsel or
other expert fees) and shall reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith.
7. Indemnification and Contribution.
(a) (i) In connection with any Registration Statement, the Issuer
and the Guarantors, jointly and severally, agree to indemnify and hold
harmless each Holder of Registrable Notes covered thereby, the directors,
officers, employees and agents of each such Holder and each person who
controls any such Holder within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under
the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement as originally filed or in any
amendment thereof, in any preliminary Prospectus or Prospectus or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and agree to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Issuer and the Guarantors
will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (A) any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information
furnished to the Issuer or the Guarantors by or on behalf of any such
Holder specifically for inclusion therein, (B) use of a Registration
Statement or the related Prospectus during a period when a stop order has
been issued in respect of such Registration or any proceedings for that
purpose have been initiated or use of a Prospectus when use of such
Prospectus has been suspended pursuant to Section 5(c); provided, further,
in each case, that Holders received prior notice of such stop order,
initiation of proceedings or suspension, or (C) if the Holder fails to
deliver a Prospectus or the then current Prospectus. This indemnity
agreement will be in addition to any liability which the Issuer or the
Guarantors may otherwise have.
16
<PAGE>
(ii) The Issuer and the Guarantors also agree to indemnify or
contribute to Losses, as provided in Section 7(d), of any Underwriters of
Registrable Notes registered under a Registration Statement, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the selling
Holders provided in this Section 7(a) and shall, if requested by any
Holder, enter into an underwriting agreement reflecting such agreement, as
provided in Section 5(q) hereof.
(b) Each Holder of Registrable Notes covered by a Registration Statement
severally agrees to indemnify and hold harmless (i) the Issuer, (ii) each
Guarantor, (iii) each of their respective directors, (iv) each of their
respective officers who signs such Registration Statement and (v) each person
who controls the Issuer or any Guarantor within the meaning of either the Act or
the Exchange Act to the same extent as the foregoing indemnity from the Issuer
and the Guarantors to each such Holder, but only with reference to written
information relating to such Holder furnished to the Issuer and the Guarantors
by or on behalf of such Holder specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof,
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and local
counsel) if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall have authorized the indemnified party to employ separate counsel at the
expense of the indemnifying party; provided, further, that the indemnifying
party shall not be responsible for the fees and expenses of more than one
separate counsel (together with appropriate local counsel)
17
<PAGE>
representing all the indemnified parties under paragraph (a)(i), paragraph
(a)(ii) or paragraph (b) above. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 7 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such Losses; provided, however, that in no case shall any
Underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Registrable Notes purchased by such Underwriter
under the Registration Statement which resulted in such Losses. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Issuer and the Guarantors shall be
deemed to be equal to the aggregate principal amount of the Initial Notes.
Benefits received by any Holder shall be deemed to be equal to the value of
receiving Registrable Notes registered under the Act. Benefits received by any
Underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Issuer or any Guarantor within the meaning of either the
Act or the Exchange Act, each officer of the Issuer or any Guarantor who shall
have signed the Registration Statement and each director of the Issuer or any
Guarantor shall have the same rights to contribution as the Issuer or such
Guarantor, subject in each case to the applicable terms and conditions of this
paragraph (d).
18
<PAGE>
(e) The provisions of this Section 7 will remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder, the Issuer
or any Guarantor or any of the officers, directors or controlling persons
referred to in Section 7 hereof, and will survive the sale by a Holder of
Registrable Notes covered by a Registration Statement.
8. Rules 144 and 144A
The Issuer covenants that it will file the reports required to be filed by
it under the Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder in a timely manner in accordance with the requirements of the
Act and the Exchange Act and, if at any time the Issuer is not required to file
such reports, it will, upon the request of any Holder of Registrable Notes, make
publicly available annual reports and such information, documents and other
reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The
Issuer further covenants, for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of Registrable
Notes in connection with any sale thereof and any prospective purchaser of such
Registrable Notes from such Holder or beneficial owner the information required
by Rule 144A(d)(4) under the Act in order to permit resales of such Registrable
Notes pursuant to Rule 144A. The Issuer acknowledges that the foregoing is in
addition to its obligations under Section 4.07 of the Indenture.
9. Miscellaneous.
(a) No Inconsistent Agreements. None of the Issuer or the Guarantors has,
as of the date hereof, entered into nor shall any of them, on or after the date
hereof, enter into any agreement that is inconsistent with the rights granted to
the Holders herein or otherwise conflicts with the provisions hereof
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuer and the Guarantors have obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Registrable Notes are being
sold pursuant to a Shelf Registration Statement or whose Initial Notes are being
exchanged pursuant to an Exchange Offer Registration Statement, as the case may
be, and which does not directly or indirectly affect the rights of other Holders
may be given by such Holders, determined on the basis of notes being sold rather
than registered; and, furthermore, the signatories hereto may make any amendment
that does not, in the good faith opinion of the board of directors of the Issuer
(as evidenced by a resolution of such board) materially affect any Holder.
Notwithstanding any of the foregoing, no amendment, modification, supplement,
waiver or consents to any departure from the provisions of Section 7 hereof
shall be effective as against any Holder of Registrable Notes unless consented
to in writing by such Holder.
19
<PAGE>
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to the Initial Purchaser, as follows:
First Union Capital Markets Corp.
301 South College Street, TW-10
Charlotte, NC 28288-0606
Attention: Corporate Finance Department
(Phoenix Color Corp. 10 3/8% Senior Subordinated
Notes due 2009)
(ii) if to any other Holder, at the most current address given by such
Holder to the Issuer in accordance with the provisions of this Section
9(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the registrar under the Indenture, with a
copy in like manner to the Initial Purchaser; and
(iii) if to the Issuer, as follows:
Phoenix Color Corp.
540 Western Maryland Parkway
Hagerstown, Maryland 21740
Attention: Edward Lieberman
with a copy to:
Bresler, Goodman & Unterman
521 Fifth Avenue
New York, New York 10175
Attention: Andrew J. Goodman
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail, telex or telecopier.
The Issuer by notice to the others may designate additional or different
addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Issuer or any Guarantor thereto, subsequent Holders. The Issuer and the
Guarantors hereby agree to extend the benefits of this Agreement to any Holder
and any such Holder may specifically enforce, and shall be bound by, the
provisions of this Agreement as if an original party hereto.
20
<PAGE>
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Heading. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State, without regard to the conflicts of law rules
thereof
(h) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Issuer, etc. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Registrable Notes or
Exchange Notes is required hereunder, Registrable Notes or Exchange Notes held
by the Issuer, the Guarantors or their Affiliates (other than subsequent Holders
of Registrable Notes or Exchange Notes if such subsequent Holders are deemed to
be Affiliates solely by reason of their holdings of such notes) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
* * *
21
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer, the Guarantors and the Initial Purchaser.
Very truly yours,
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
-------------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
PHOENIX (MD.) REALTY, LLC
By: /s/ Edward Lieberman
-------------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
PCC EXPRESS, INC.
By: /s/ Edward Lieberman
-------------------------------------
Name: Edward Lieberman
Title: Chief Financial Officer
<PAGE>
The foregoing Agreement is hereby
accepted as of the date first above written.
FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Douglas J. Fink
--------------------------
Name: Douglas J. Fink
Title: Managing Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Initial Notes, where such Initial Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business one
year after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until _____________,1999, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Registered Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Registered Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Act and any profit
from any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the holders of the Initial Notes) other than dealers' and brokers'
discounts, commissions and counsel fees and will indemnify the holders of the
Initial Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
<PAGE>
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
(TM)
Name: ____________________________________________
Address: ____________________________________________
____________________________________________
The undersigned represents that it is not an affiliate of the Company,
that any Exchange Notes to be received by it will be acquired in the ordinary
course of business and that at the time of the commencement of the Registered
Exchange Offer it had no arrangement with any person to participate in a
distribution of the Exchange Notes.
In addition, if the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Initial Notes, it
represents that the Initial Notes to be exchanged for Exchange Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Act.
<PAGE>
ANNEX E
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004
Re: 10 3/8% Senior Subordinated Notes Due 2009 (the "Initial
Notes") of Phoenix Color Corp.
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has declared
effective a Registration Statement under the Securities Act of 1933, as amended,
with regard to all of the Initial Notes referenced above. Accordingly, there is
no longer any restriction as to whom such Initial Notes may be sold and any
restrictions on the CUSIP designation are no longer appropriate and may be
removed. I understand that upon receipt of this letter, DTC will remove any stop
or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can be of further
assistance.
Very truly yours,
Authorized Officer
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") made as of the 12th day of
February, 1999 by and between PHOENIX COLOR CORP., a Delaware corporation ( the
"Company") and Jack L. Tiner (the "Employee").
RECITALS
A. The Employee has been an officer, director and key employee of
TechniGraphix, Inc. ("TGI"), for a substantial period, has been active in
the management and business operations of TGI, and has acquired special
expertise and knowledge in connection therewith.
B. The Company is acquiring all of the issued and outstanding shares of
TGI, pursuant to an Acquisition Agreement dated February 3, 1999 (the
"Acquisition Agreement") among the Company, the Employee and other
parties, and will henceforth operate the business formerly conducted by
TGI.
C. The Employee desires to commence active employment with the Company, in
connection with the business formerly operated through TGI, and the
parties desire to set forth the terms and conditions under which the
Employee will be now employed by the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
1. Employment; Term. Subject to the terms and conditions of this
Agreement, the Company will employ the Employee for a term of two years
commencing on the date of this Agreement (the "Employment Period").
-1-
<PAGE>
2. Title and Duties
2.1 The Employee's title will be mutually agreed upon by the
Employee and Chairman of the Company (the "Chairman"). The duties and
responsibilities of the Employee will be generally assigned by the Chairman, and
are subject to review and adjustment by the Company's Board of Directors,
provided that any duties and responsibilities shall not be inconsistent with
Employee's position as a senior officer of the Company.
2.2 Employee shall diligently and faithfully use his best efforts to
further the interests of the Company, and shall make available and devote
substantially all of his working time for the performance of services under this
Agreement.
3. Compensation.
3.1 For all of the services to be rendered by the Employee during
the Employment Period, the Employee shall receive a salary of $200,000 per year,
payable at the times and for the same compensation periods as those in effect
for senior management of the Company.
3.2 The Employee shall be accorded the right to participate in and
receive benefits under and in accordance with the provisions of the Company's
health insurance, life insurance, pension, disability, deferred compensation,
incentive, profit-sharing or performance bonus plans or programs of the Company,
either in existence as of the date hereof or hereafter adopted, and in which
other senior management of the Company may participate to the extent and as
determined by the Company's Board of Directors.
4. Vacations. The Employee shall be entitled to paid vacation in the
aggregate amount provided for other similarly situated senior officers of the
Company during the Employment Period but
-2-
<PAGE>
in no event less than three (3) weeks per year. Unused vacation shall not
carry-over or accrue from year to year.
5. Reimbursement of Business Expenses. The Employee shall be entitled to
reimbursement of all reasonable and necessary accountable business expenses
incurred by him for and on behalf of the Company in the performance of his
duties during the Employment Period, pursuant to Company policies concerning
such expenses and the reporting and documentation thereof.
6. Disability Payments; Credit. In the event that the Employee shall
receive any payment in the nature of disability compensation under the terms of
any Company disability policy which provides disability payment benefits to
Company employees, the amount of any such disability compensation received by
the Employee for the disability period shall be credited against and deducted
from the amount of salary payable under Section 3.1 above.
7. Confidentiality. In view of the fact that the Employee will have access
to Confidential Information (as defined below) of the Company, the Employee
agrees to keep secret and retain in the strictest confidence all such
information, as follows:
(a) "Confidential Information" means any and all proprietary or
non-public information relating to Company and its business, including, but not
limited to, customer lists and profiles, product pricing and pricing methods,
vendor lists, information on Company costs and markups, marketing, sales and
distribution plans and information, lists of employees and representatives,
information on compensation of Company personnel, operational methods, financial
statements, credit and financing plans, expansion plans and the like; provided,
however, that Confidential Information shall not include information that (i) is
or was known or independently developed by the Employee without use of or
reliance on any Confidential Information; (ii) the Employee lawfully obtains
from any
-3-
<PAGE>
third party who, to the knowledge of the Employee, has not unlawfully obtained
such information; (iii) is published or generally disclosed to the public by the
Company; or (iv) is otherwise in the public domain.
(b) The Employee will not, at any time (other than as may be
required or appropriate in connection with the performance by him of his duties
hereunder) directly or indirectly, use, communicate, disclose or disseminate any
Confidential Information in any manner whatsoever, except as may be required
under legal process by subpoena or other court or administrative order.
(c) The Employee, upon any termination of his employment, shall
deliver to the Company any records, reports and other documents of the Company
which he may then possess or have under his control.
8. Injunctive Relief.
8.1 The parties hereby acknowledge and agree that (i) the Company
may be irreparably injured in the event of a breach by the Employee of any of
his obligations under Section 7 of this agreement, (ii) monetary damages will
not be an adequate remedy for any such breach, (iii) the Company will be
entitled to injunctive relief, without the necessity of posting a bond, in
addition to any other remedy which it may have, in the event of any such breach.
8.2 The right of the Company to obtain injunctive relief shall be
independent of, and separately enforceable from, all other rights and remedies
of the Company available under law or in equity.
-4-
<PAGE>
9. Representations of Employee. The Employee hereby represents and
warrants as follows:
(a) The Employee is not under any contractual obligation,
restriction or disability which would limit or hinder the undertaking of
contemplated activities for the Company.
(b) Except as disclosed in writing to the Company, to his knowledge,
the Employee is not subject to any pending or threatened claims against him, and
there are no pending or threatened court or regulatory proceedings,
investigations, enforcement actions or other proceedings by any governmental
authority concerning any past activities of the Employee.
10. Notices. Any notice required or permitted under this Agreement shall
be in writing and shall be personally delivered or sent by registered or
certified mail, or by express delivery service, to the party for whom intended
at such party's last known business or residence address.
11. Miscellaneous Provisions.
11.1 This Agreement shall be deemed to be made under and construed
in accordance with the laws of the State of Maryland applicable to contracts
made and to be performed in such state, and without reference to any conflict of
law provisions. The parties agree that any claims arising hereunder shall be
brought in court of general jurisdiction in the County of Washington and State
of Maryland, and waive any objection to the jurisdiction of such court.
11.2 This Agreement shall inure to the benefit of the Company and
its successors but is not assignable except with the written consent of both
parties.
11.3 This Agreement constitutes and expresses the whole agreement of
the parties in reference to its subject matter. The rights and remedies of the
parties hereunder shall not be exclusive
-5-
<PAGE>
and shall supplement and be in addition to the rights and remedies available to
each of them by contract, at law or in equity or otherwise and all such rights
and remedies (hereunder or otherwise) may be exercised singly, concurrently or
successively. This Agreement may not be amended, modified or supplemented except
by a writing signed by each of the parties hereto.
11.4 In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
-------------------------
Authorized Officer
/s/ Jack L. Tiner
-------------------------
Employee: Jack L. Tiner
-6-
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") made as of the 4th day of January,
1999 by and between PHOENIX COLOR CORP., a Delaware corporation ( the "Company")
and Carl E. Carlson (the "Employee").
RECITALS
A. The Employee has been an officer, director and a principal shareholder
of Mid-City Lithographers, Inc. ("Mid-City"), for a substantial period,
has been active in the management and business operations of Mid-City, and
has acquired special expertise and knowledge in connection therewith.
B. The Company is acquiring all of the issued and outstanding shares of
Mid-City, pursuant to a Acquisition Agreement dated November 30, 1998 (the
"Acquisition Agreement") among the Company, the Employee and other
parties, and will henceforth operate the business formerly conducted by
Mid-City.
C. The Employee desires to commence active employment with the Company, in
connection with the business formerly operated through Mid-City, and the
parties desire to set forth the terms and conditions under which the
Employee will be now employed by the Company.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
1. Employment; Term. Subject to the terms and conditions of this
Agreement, the Company will employ the Employee for a term of one year
commencing on the date of this Agreement (the "Employment Period").
2. Title and Duties
2.1 The Employee's title will be mutually agreed upon by the
Employee and Chairman of the Company (the "Chairman"). The duties and
responsibilities of the Employee will be generally assigned by the Chairman, and
are subject to review and adjustment by the Company's Board of Directors,
provided that any duties and responsibilities shall not be inconsistent with
Employee's position as a senior officer of the Company.
2.2 Employee shall diligently and faithfully use his best efforts to
further the interests of the Company, and shall make available and devote
substantially all of his working time for the performance of services under this
Agreement.
3. Compensation.
3.1 For all of the services to be rendered by the Employee during
the Employment Period, the Employee shall receive a salary of $170,000 per year,
payable at the times and for the same compensation periods as those in effect
for senior management of the Company.
-2-
<PAGE>
3.2 The Employee shall be accorded the right to participate in and
receive benefits under and in accordance with the provisions of the Company's
health insurance, life insurance, pension, disability, deferred compensation,
incentive, or profit-sharing plans or programs of the Company, either in
existence as of the date hereof or hereafter adopted, and in which other senior
management of the Company may participate, as determined by the Company's Board
of Directors.
3.3 In the event of the failure, refusal or inability of the Sellers
(as defined in the Acquisition Agreement) to comply with the indemnification
provisions of the Acquisition Agreement and/or the non-payment of any bona-fide
Company indemnification claims from the Escrow Fund (by reason of exhaustion of
such Escrow Fund or otherwise) as defined and provided for in the Acquisition
Agreement, the Company shall have the right to withhold and offset, up to the
amount of its claims for such indemnification, any sums due to the Employee
under this Section 2, with notice of any such offset to be given to the
Employee.
4. Vacations. The Employee shall be entitled to paid vacation in the
aggregate amount provided for other similarly situated senior officers of the
Company during the Employment Period. Unused vacation shall not carry-over or
accrue from year to year.
5. Reimbursement of Business Expenses. The Employee shall be entitled to
reimbursement of all reasonable and necessary accountable business expenses
incurred by him for and on behalf of the Company in the performance of his
duties during the Employment Period, pursuant to Company policies concerning
such expenses and the reporting and documentation thereof.
-3-
<PAGE>
6. Disability Payments; Credit. In the event that the Employee shall
receive any payment in the nature of disability compensation under the terms of
any Company disability policy which provides disability payment benefits to
Company employees, the amount of any such disability compensation received by
the Employee for the disability period shall be credited against and deducted
from the amount of salary payable under Section 3.1 above.
7. Confidentiality. In view of the fact that the Employee will have access
to Confidential Information (as defined below) of the Company, the Employee
agrees to keep secret and retain in the strictest confidence all such
information, as follows:
(a) "Confidential Information" means any and all proprietary or
non-public information relating to Company and its business, including, but not
limited to, customer lists and profiles, product pricing and pricing methods,
vendor lists, information on Company costs and markups, marketing, sales and
distribution plans and information, lists of employees and representatives,
information on compensation of Company personnel, operational methods, financial
statements, credit and financing plans, expansion plans and the like; provided,
however, that Confidential Information shall not include information that (i) is
independently developed by the Employee without use of or reliance on any
Confidential Information; (ii) the Employee lawfully obtains from any third
party who, to the best knowledge of the Employee, has not unlawfully obtained
such information; (iii) is published or generally disclosed to the public by the
Company; or (iv) is otherwise in the public domain.
(b) The Employee will not, at any time (other than as may be
required or appropriate in connection with the performance by him of his duties
hereunder) directly or indirectly, use,
-4-
<PAGE>
communicate, disclose or disseminate any Confidential Information in any manner
whatsoever, except as may be required under legal process by subpoena or other
court or administrative order.
(c) The Employee, upon any termination of his employment, shall
deliver to the Company any records, reports and other documents of the Company
which he may then possess or have under his control.
8. Injunctive Relief.
8.1 The parties hereby acknowledge and agree that (i) the Company
may be irreparably injured in the event of a breach by the Employee of any of
his obligations under Section 7 of this agreement, (ii) monetary damages will
not be an adequate remedy for any such breach, (iii) the Company will be
entitled to injunctive relief, without the necessity of posting a bond, in
addition to any other remedy which it may have, in the event of any such breach.
8.2 The right of the Company to obtain injunctive relief shall be
independent of, and separately enforceable from, all other rights and remedies
of the Company available under law or in equity.
9. Representations of Employee. The Employee hereby represents and
warrants as follows:
(a) The Employee is not under any contractual obligation,
restriction or disability which would limit or hinder the undertaking of
contemplated activities for the Company.
-5-
<PAGE>
(b) Except as disclosed in writing to the Company, the Employee is
not subject to any pending or threatened claims against him, and there are no
pending or threatened court or regulatory proceedings, investigations,
enforcement actions or other proceedings by any governmental authority
concerning any past activities of the Employee.
10. Notices. Any notice required or permitted under this Agreement shall
be in writing and shall be personally delivered or sent by registered or
certified mail, or by express delivery service, to the party for whom intended
at such party's last known business or residence address.
11. Miscellaneous Provisions.
11.1 This Agreement shall be deemed to be made under and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed in such state, and without reference to any conflict of
law provisions. The parties agree that any claims arising hereunder shall be
brought in court of general jurisdiction in the County and State of New York,
and waive any objection to the jurisdiction of such court.
11.2 Any notices required or permitted under this Agreement shall be
in writing and shall be given by registered or certified mail, return receipt
requested, by personal delivery or by overnight express delivery service,
addressed to the respective parties at the address which each has designated for
such purpose.
11.3 This Agreement shall inure to the benefit of the Company and
its successors but is not assignable except with the written consent of both
parties.
-6-
<PAGE>
11.4 This Agreement constitutes and expresses the whole agreement of
the parties in reference to its subject matter. The rights and remedies of the
parties hereunder shall not be exclusive and shall supplement and be in addition
to the rights and remedies available to each of them by contract, at law or in
equity or otherwise and all such rights and remedies (hereunder or otherwise)
may be exercised singly, concurrently or successively. This Agreement may not be
amended, modified or supplemented except by a writing signed by each of the
parties hereto.
11.5 In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
-------------------------------
Authorized Officer
/s/ Carl E. Carlson
-------------------------------
Employee: Carl E. Carlson
-7-
<PAGE>
EXHIBIT 10.3
NON-COMPETITION AGREEMENT
Non-Competition Agreement (the "Agreement") made as of the 4th day of
January, 1999 by and between PHOENIX COLOR CORP., a Delaware corporation ( the
"Company") and Wayne L. Sorensen ("WLS").
RECITALS
A. WLS has been an officer, director and a principal shareholder of
Mid-City Lithographers, Inc. ("Mid-City") for a substantial period, has
been active in the management and business operations of Mid-City, and has
acquired special expertise and knowledge in connection therewith.
B. The Company is acquiring all of the issued and outstanding shares of
Mid-City, pursuant to an Acquisition Agreement dated November 30, 1998
(the "Acquisition Agreement") among the Company, WLS and other parties.
C. WLS does not desire to continue active employment with Mid-City or the
Company, and the parties desire to set forth the terms and conditions
under which WLS will henceforth refrain from engaging in any activities
competitive with the business of Mid-City and the Company.
<PAGE>
NOW, THEREFORE, in consideration of the mutual undertakings set forth in
this Agreement and the sum of $10.00 and other valuable consideration paid and
given by each party to the other, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Non-Competition. For a period of one year after the date hereof, WLS
will not directly or indirectly (whether as employee, director, owner,
stockholder, consultant, partner or otherwise) own, manage, control, participate
in, consult with or render services for any person or entity engaged in, or in
any manner undertake activities which would constitute engaging in, the business
of manufacturing, printing, assembling or otherwise supplying book covers, case
covers, dust jackets, inserts, end papers or complete books anywhere in the
United States; provided, however, that the ownership by WLS and any member of
his immediate family of less than 5% of the issued and outstanding capital stock
of any corporation which is publicly traded shall not be deemed a violation of
this Section 1, unless WLS or any member of his immediate family is an officer,
director or employee of such corporation.
2. Payment. In consideration of WLS's undertaking as set forth in the
preceding paragraph, the Company agrees to pay WLS the sum of $160,000, in the
form of twelve (12) equal consecutive monthly payments in the amount of
$13,333.33 each, commencing on January 31, 1999 and continuing on the last day
of each month thereafter, until paid in full; provided, however, that, in the
event of the failure, refusal or inability of WLS to comply with the
indemnification provisions of the Acquisition Agreement and/or the non-payment
of any bona fide Company indemnification claims from the Escrow Fund (by reason
of exhaustion of such Escrow Fund or otherwise) as defined
2
<PAGE>
and provided for in the Acquisition Agreement, the Company shall have the right
to withhold and offset, up to the amount of its claims for such indemnification,
any sums due to WLS under this Section 2, with notice of any such offset to be
given to WLS.
3. Confidentiality. In view of the fact that WLS has had access to
Confidential Information (as defined below) of Mid-City, WLS agrees to keep
secret and retain in the strictest confidence all such information, as follows:
(a) "Confidential Information" means any and all proprietary or
non-public information relating to Mid-City and its business, including, but not
limited to, customer lists and profiles, product pricing and pricing methods,
vendor lists, information on costs and markups, marketing, sales and
distribution plans and information, lists of employees and representatives,
information on compensation of personnel, operational methods, financial
statements, credit and financing plans, expansion plans and the like; provided,
however, that Confidential Information shall not include information that (i) is
independently developed by WLS without use of or reliance on any Confidential
Information; (ii) WLS lawfully obtains from any third party who has not
unlawfully obtained such information; (iii) is published or generally disclosed
to the public by Mid-City or the Company; or (iv) is otherwise in the public
domain.
(b) WLS will not, at any time directly or indirectly, use,
communicate, disclose or disseminate any Confidential Information in any manner
whatsoever, except as may be required under legal process by subpoena or other
court or administrative order.
3
<PAGE>
4. Injunctive Relief.
4.1 The parties hereby acknowledge and agree that (i) the Company
may be irreparably injured in the event of a breach by WLS of any of his
obligations under this agreement, (ii) monetary damages will not be an adequate
remedy for any such breach, and (iii) the Company will be entitled to injunctive
relief, without the necessity of posting a bond, in addition to any other remedy
which it may have in the event of any such breach.
4.2 The right of the Company to obtain injunctive relief shall be
independent of, and separately enforceable from, all other rights and remedies
of the Company available under law or in equity.
5. Limitation or Reduction of Undertaking. If any of the provisions
contained in this Agreement or any part thereof is held to be unenforceable
because of the duration of such provision or the area covered thereby, the court
making such determinations shall have the power to reduce the duration and/or
area covered by such provision to the extent required to render such provision
enforceable.
6. Miscellaneous Provisions.
6.1 This Agreement shall be deemed to be made under and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in such state, and without reference to any conflict of law
provisions. The parties agree that any claims arising hereunder shall be brought
in court of general jurisdiction in the County and State of New York, and waive
any objection to the jurisdiction of such court.
4
<PAGE>
6.2 Any notices required or permitted under this Agreement shall be
in writing and shall be given by registered or certified mail, return receipt
requested, by personal delivery or by overnight express delivery service,
addressed to the respective parties at the address which each has designated for
such purpose.
6.3 This Agreement shall inure to the benefit of the Company and its
successors but is not assignable except with the written consent of both
parties.
6.4 This Agreement constitutes and expresses the whole agreement of
the parties in reference to its subject matter. In the event of any conflict
between the provisions of this Agreement and the Acquisition Agreement, the
provisions of the Acquisition Agreement shall take precedence. The rights and
remedies of the parties hereunder shall not be exclusive and shall supplement
and be in addition to the rights and remedies available to each of them by
contract, at law or in equity or otherwise and all such rights and remedies
(hereunder or otherwise) may be exercised singly, concurrently or successively.
This Agreement may not be amended, modified or supplemented except by a writing
signed by each of the parties hereto.
6.5 In case any one or more of the covenants, agreements, provisions
or terms contained in this Agreement shall be invalid, illegal or unenforceable
in any respect, the validity of the remaining covenants, agreements, provisions
or terms contained herein shall be in no way affected, prejudiced or disturbed
thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
-------------------------------
Authorized Officer
/s/ Wayne L. Sorenson
-------------------------------
Wayne L. Sorensen
6
<PAGE>
EXHIBIT 10.4
CREDIT AGREEMENT
Phoenix Color Corp.
PCC Express, Inc.
Phoenix (MD.)Realty, LLC,
with
First Union National Bank, as Agent
and
Those financial institutions now or hereafter parties hereto
Dated as of September 15, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION...................................4
1.1 Terms Defined....................................................4
1.2 Accounting Principles...........................................22
1.3 Construction....................................................23
SECTION 2. THE LOANS.......................................................23
2.1 Revolving Credit - Description..................................23
2.2 Letters of Credit:..............................................25
2.3 Advances, Conversions, Renewals and Payments....................31
2.4 Revolving Credit Interest.......................................34
2.5 Additional Interest Provisions..................................37
2.6 Fees............................................................38
2.7 Use of Proceeds.................................................39
2.8 Indemnity.......................................................39
2.9 Capital Adequacy................................................40
2.10 Taxes...........................................................40
2.11 Joint and Several Liability.....................................43
SECTION 3. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES....................43
3.1 Resolutions, Opinions, and Other Documents......................43
3.2 Absence of Certain Events.......................................45
3.3 Warranties and Representations at Closing.......................45
3.4 Compliance with this Agreement..................................45
3.5 Officers' Certificate...........................................46
3.6 Closing.........................................................46
3.7 Waiver of Rights................................................46
3.8 Conditions for Future Advances..................................46
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................47
4.1 Corporate Organization and Validity.............................47
4.2 Places of Business..............................................48
4.3 Pending Litigation..............................................48
4.4 Title to Properties.............................................48
4.5 Governmental Consent............................................49
4.6 Taxes...........................................................49
4.7 Financial Statements............................................49
4.8 Full Disclosure.................................................49
4.9 Subsidiaries....................................................50
4.10 Guarantees, Contracts, etc......................................50
4.11 Government Regulations, etc.....................................50
4.12 Business Interruptions..........................................51
4.13 Names and Intellectual Property.................................52
4.14 Other Associations..............................................52
4.15 Environmental Matters...........................................53
4.16 Regulation O....................................................54
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<PAGE>
4.17 Capital Stock...................................................54
4.18 Solvency........................................................54
4.19 Interrelatedness of Borrowers...................................55
4.20 Bridge Notes....................................................55
4.21 Year 2000.......................................................55
4.22 Consolidated Capital Expenditures...............................55
SECTION 5. BORROWERS' AFFIRMATIVE COVENANTS................................56
5.1 Payment of Taxes and Claims.....................................56
5.2 Maintenance of Properties and Corporate Existence...............56
5.3 Business Conducted..............................................58
5.4 Litigation......................................................58
5.5 Issue Taxes.....................................................58
5.6 Bank Accounts...................................................58
5.7 Employee Benefit Plans..........................................58
5.8 Financial Covenants.............................................59
5.9 Financial and Business Information..............................60
5.10 Officers' Certificates..........................................62
5.11 Audits and Inspection...........................................63
5.12 Tax Returns and Reports.........................................63
5.13 Information to Participant......................................64
5.14 Material Adverse Developments...................................64
5.15 Places of Business:.............................................64
5.16 Account Verification............................................64
5.17 Year 2000.......................................................64
5.18 Build-out Appraisal.............................................65
5.19 Updated Environmental Report....................................65
5.20 Local Counsel...................................................65
SECTION 6. BORROWERS' NEGATIVE COVENANTS:..................................65
6.1 Merger, Consolidation, Dissolution or Liquidation...............65
6.2 Acquisitions....................................................66
6.3 Liens and Encumbrances..........................................66
6.4 Transactions With Affiliates or Subsidiaries....................66
6.5 Guarantees......................................................67
6.6 Distributions and Bonuses.......................................67
6.7 Other Indebtedness..............................................68
6.8 Loans and Investments...........................................68
6.9 Use of Lenders' Name............................................68
6.10 Miscellaneous Covenants.........................................68
6.11 Certain Restrictions............................................68
SECTION 7. DEFAULT.........................................................69
7.1 Events of Default...............................................69
7.2 Cure............................................................72
7.3 Rights and Remedies on Default..................................72
7.4 Nature of Remedies..............................................73
7.5 Set-Off.........................................................73
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SECTION 8. AGENT...........................................................74
8.1 Appointment and Authorization...................................74
8.2 General Immunity................................................74
8.3 Consultation with Counsel.......................................74
8.4 Documents.......................................................74
8.5 Rights as a Lender..............................................75
8.6 Responsibility of Agent.........................................75
8.7 Collections and Disbursements...................................76
8.8 Indemnification.................................................77
8.9 Expenses........................................................77
8.10 No Reliance.....................................................78
8.11 Reporting.......................................................78
8.12 Removal of Agent................................................78
8.13 Action on Instructions of Lenders...............................79
8.14 Several Obligations.............................................79
8.15 Consent of Lenders..............................................79
8.16 Participation and Assignments...................................80
SECTION 9. MISCELLANEOUS...................................................82
9.1 GOVERNING LAW...................................................82
9.2 Integrated Agreement............................................82
9.3 Waiver..........................................................82
9.4 Indemnity.......................................................82
9.5 Time............................................................83
9.6 Expenses of Agent and Lenders...................................83
9.7 Brokerage.......................................................84
9.8 Notices.........................................................85
9.9 Headings........................................................86
9.10 Survival........................................................86
9.11 Successors and Assigns..........................................86
9.12 Duplicate Originals.............................................86
9.13 Modification....................................................87
9.14 Signatories.....................................................87
9.15 Third Parties...................................................87
9.16 ................................................................87
Discharge of Taxes, Borrowers' Obligations, Etc.......................87
9.17 Withholding and Other Tax Liabilities...........................87
9.18 Confidential Information........................................88
9.19 Consent to Jurisdiction.........................................88
9.20 Arbitration; Preservation and Limitation of Remedies............89
9.21 Waiver of Jury Trial............................................90
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EXHIBIT LIST
Exhibit _ -- Form of Borrowing Advance Request
Exhibit _ -- Bridge Note Documents
Exhibit _ -- Form of Quarterly Compliance Certificate
Exhibit _ -- Form of Assignment and Acceptance
SCHEDULES
Schedule A -- Schedules of Lenders
Schedule 4.1 -- Borrowers' States of Qualifications
Schedule 4.2 -- Places of Business
Schedule 4.3 -- Judgments, Proceedings, Litigation and
Orders
Schedule 4.4 -- Existing Liens and Claims
Schedule 4.7 -- Borrowers' Federal Tax Identification
Numbers
Schedule 4.9 -- Subsidiaries and Affiliates
Schedule 4.10(a) -- Existing Guaranties, Investments and
Borrowings, Leases and Employment Agreements
Schedule 4.11 -- Employee Benefit Plans
Schedule 4.12 -- Labor Disputes
Schedule 4.13(a) -- Schedule of Names
Schedule 4.13(b) -- Trademarks, Patents and Copyrights
Schedule 4.13(c) -- Licenses
Schedule 4.14 -- Other Associations
Schedule 4.15 -- Environmental Matters
Schedule 4.17 -- Capital Stock
Schedule 6.7 -- Existing Indebtedness
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CREDIT AGREEMENT
This Amended, Restated and Confirmatory Credit Agreement ("Agreement") is
dated this 15th day of September, 1998, by and among Phoenix Color Corp.,
("Phoenix"), a Delaware corporation, PCC Express, Inc. ("PCC"), a Delaware
corporation, and Phoenix (MD.) Realty, LLC ("Realty"), a Maryland limited
liability company (collectively, "Borrowers" and singly, a "Borrower"), the
lending institutions listed from time to time on Schedule A attached hereto and
incorporated herein that are parties to this Agreement (collectively, "Lenders"
and singly, a "Lender"), First Union National Bank, a national banking
association, as issuer of letters of credit hereunder (in such capacity,
"Issuer") and First Union National Bank, as administrative agent for Issuer and
Lenders hereunder, (in such capacity, "Agent").
BACKGROUND
A. On February 1, 1996, Phoenix and Alpha Systems, Inc. ("Alpha") as
borrowers, entered into a Loan and Security Agreement with First Union National
Bank (as successor to CoreStates Bank, N.A.), in its capacity thereunder as
lender, issuer and agent and with Fleet Bank of Massachusetts, N.A., as lender
and co-agent.
B. The Loan and Security Agreement was subsequently amended by a First
Amendment to Loan and Security Agreement dated as of September 30, 1997, a
Second Amendment to Loan and Security Agreement dated December 4, 1997, an
undated Third Amendment to Loan and Security Agreement, a Fourth Amendment to
Loan and Security Agreement dated March 10, 1998, and a Fifth Amendment and
Joinder to Loan and Security Agreement ("Fifth Amendment") dated on or about
August 31, 1998 (the Loan and Security Agreement, as so amended, is referred to
herein as the "Existing Loan Agreement").
C. The Existing Loan Agreement provides for the following credit
accommodations to Borrowers:
(i) a secured revolving credit facility in the maximum amount of
$18,000,000 outstanding at any time and from time to time (the "Existing
Revolving Credit");
(ii) a term loan in the principal amount of $16,000,000 ("Term Loan
A"); and
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(iii) a term loan in the principal amount of $6,000,000 ("Term Loan
B").
D. Contemporaneously with the execution of this Agreement, Phoenix will
enter into a Bridge Securities Purchase Agreement ("Purchase Agreements") which
will provide for the issuance by Phoenix of up to $40,000,000 in Bridge Notes
(as defined herein) to First Union Investors, Inc. ("Purchaser").
E. At or prior to the execution hereof, Term Loan A and Term Loan B were
paid in full from the proceeds of the Bridge Notes.
F. By Agreement and Plan of Merger dated December 31, 1997, Alpha, a
wholly-owned subsidiary of Phoenix was merged into Phoenix, as the sole
remaining borrower under the Existing Loan Agreement.
G. Under the Fifth Amendment, PCC and Realty, as wholly-owned subsidiaries
of Phoenix, joined into the Existing Loan Agreement as borrowers, as if they
were existing signatories thereto.
H. On or prior to the date hereof, Fleet National Bank, as successor by
merger to Fleet Bank of Massachusetts, N.A., in its capacity as lender and
co-agent, assigned all of its right, title, interest and estate under the
Existing Loan Agreement to First Union National Bank.
I. The indebtedness under the Existing Loan Agreement is secured by, among
other things, the security interests granted under the Existing Loan Agreement,
a Deed of Trust, Assignment of Rents and Security Agreement dated February 1,
1996 between Phoenix and trustees named therein for the benefit of First Union
National Bank, a Deed of Trust, Assignment of Rents and Security Agreement dated
August 28, 1998, between Realty and trustees named therein for the benefit of
First Union National Bank and certain Stock Pledge Agreements for the benefit of
First Union National Bank.
J. The parties hereto wish to enter into this Agreement for the purpose
of:
(i) Confirming and preserving the liens and security interests
granted and created under the Existing Loan Agreement, the deeds of trust and
stock pledges, and the loans and lines of credit secured hereby and thereby in
order to preserve the priorities of those liens and security interests with
respect to third party creditors;
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(ii) Amending the terms of the Existing Loan Agreement in order to
reflect extended maturity dates and other terms and conditions governing the
Revolving Credit (as defined herein).
(iii) Restating the terms of the Existing Loan Agreement, as hereby
modified, amended and supplemented, into two instruments, one being this Credit
Agreement and the second being a separate Security Agreement;
(iv) Retaining First Union National Bank, as assignee of Fleet
National Bank, as lender, issuer and sole administrative agent under this
Agreement; and
(v) increasing the maximum credit under the secured revolving credit
facility from $18,000,000 to $20,000,000.
K. The parties hereto confirm the legal operation and effect of the
Existing Loan Agreement, the deeds of trust and stock pledges, and the
respective grants, conveyances and assignments made therein by Borrowers, such
that the deeds of trust, stock pledges, and the Existing Loan Agreement, as so
confirmed, modified, amended, supplemented, and restated hereby, shall
constitute one integrated agreement, and that the terms of the Existing Loan
Agreement as so confirmed, modified, amended, supplemented, and restated by this
Agreement and the Security Documents, shall be binding upon and inure to the
benefit of the respective parties hereto and (with respect to the liens and
security interests so confirmed, modified, amended, supplemented and restated)
to Purchaser, their successors and assigns and all Lenders, as may from time to
time be identified in this Agreement, such that neither this Agreement nor
anything contained herein shall be construed as a substitution or novation of
borrowers' indebtedness to lenders, issuer and agent under, or of the terms of,
the Existing Loan Agreement, which shall remain in full force and effect, as
confirmed, modified, amended, supplemented, and restated herein and in the
Security Documents.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have the
following respective meanings:
Account - All of the "accounts" (as that term is defined in Section
9106 of the UCC) of Borrowers, whether now existing or hereafter arising.
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Account Debtor - Any Person obligated on any Account owing to
Borrowers.
Adjusted LIBOR Rate - For any LIBOR Interest Period, as applied to a
LIBOR Rate Loan, the rate per annum (rounded upwards, if necessary to the next
1/16 of 1%) determined pursuant to the following formula:
Adjusted Libor Rate = Libor Rate
----------
(1 - Reserve Percentage)
For purposes hereof, "Libor Rate" shall mean the rates of interest per annum for
U. S. Dollar deposits for a LIBOR Interest Period as reported on Telerate page
3750 as of eleven o'clock (11:00) a.m. London time on the second London Business
Day before the relevant LIBOR Interest Period begins (or if not so reported,
then as determined by Agent from another recognized source or interbank
quotation). The LIBOR Rate shall be rounded to the next higher 1/100 of 1%, or
if Borrowers have hedged the LIBOR Rate Loan with an Interest Hedging
Instrument, the LIBOR Rate shall be rounded five decimal places as set forth in
the 1991 ISDA Definitions published by the International Swaps and Derivatives
Association, Inc.
Administration Fee - Section 2.6(b).
Advance(s) - Any monies advanced or credit extended to Borrowers by
any Lender under the Revolving Credit, including, without limitation, cash
advances and the issuance of Letters of Credit.
Affiliate - As to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power directly or indirectly, either to (i) vote
5% or more of the securities having voting power for the election of directors
(or, if applicable, managers) of such Person or (ii) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
Applicable Margin - A marginal rate of interest which is added to
the Adjusted LIBOR Rate or Base Rate, as the case may be, to determine the
effective rate of interest on LIBOR Rate Loans or Base Rate Loans, as the case
may be. Until the Quarterly Compliance Certificate for the period ended
September 30, 1998, is delivered to Agent and Lenders, the Applicable Margin (i)
for LIBOR Rate Loans shall be 2.50% and (ii) for Base Rate Loans shall be
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1.25%. Thereafter, the Applicable Margin for LIBOR Rate Loans and Base Rate
Loans, as the case may be, shall be the percentage amount set forth below under
the caption Applicable Margin opposite the relevant Total Leverage Ratio:
Total Leverage Ratio Applicable Margin
-------------------- -----------------
Base Rate Loans LIBOR Rate Loans
--------------- ----------------
>5.0 to 1.0 1.75% 3.00%
< =5.0 to 1.0 but 1.50% 2.75%
>4.5 to 1.0
< =4.5 to 1.0 but 1.25% 2.50%
>3.75 to 1.0
< =3.75 to 1.0 but 1.00% 2.25%
>3.25 to 1.0
< =3.25 to 1.0 but .75% 2.00%
>2.50 to 1.0
< =2.50 to 1.0 but .50% 1.75%
>2.00 to 1.0
< =2.00 to 1.0 .25% 1.50%
The Applicable Margin shall be adjusted five Business Days after receipt of the
Quarterly Compliance Certificate. At any time that such Quarterly Compliance
Certificate is required to be delivered under the terms of this Agreement and is
not so delivered, then the Applicable Margin shall be the highest rate specified
for the subject Type of Loan until the Quarterly Compliance Certificate is so
delivered.
Asset Sale - The sale, transfer, lease, license or other
disposition, outside of the ordinary course of business, by any Borrower or by
any Subsidiary of a Borrower to any Person other than a Borrower of any Property
now owned or hereafter acquired, of any nature whatsoever in any transaction or
series of related transactions.
Authorized Officer - Any officer of any Borrower authorized by
specific resolution of such Borrower to request Advances as set forth in the
incumbency certificate referred to in Section 3.1(d) of this Agreement.
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Bank Affiliate - Any bank that is controlled by a Lender. A bank
shall be deemed controlled by a Lender if (i) the Lender, directly or
indirectly, or acting through one or more other Persons owns, controls or has
power to vote twenty five percent (25%) or more of any class of voting
securities of the bank; or (ii) the Lender controls in any manner the election
of a majority of the directors or trustees of the bank.
Bank Tax - Any (i) income or franchise taxes imposed on any Lender
by any Governmental Authority of any jurisdiction under the laws of which such
Lender is organized or any political subdivision or taxing authority thereof or
therein or as a result of a connection between such Lender and any jurisdiction
other than a connection resulting solely from this Agreement and the
transactions contemplated hereby, and (ii) income or franchise taxes imposed by
any jurisdiction in which any Lender's lending offices which make or book Loans
are located or any political subdivision or taxing authority thereof of therein.
Base Rate - The higher of (i) Agent's Prime Rate or (ii) the Fed
Funds Rate plus 0.50%.
Base Rate Loans - Loans under the Revolving Credit subject to
interest calculated under the terms hereof based on the Base Rate plus the
Applicable Margin.
Borrowing Base - The sum of sixty percent (60%) of Eligible
Inventory not to exceed, in any event, Three Million Dollars ($3,000,000.00)
plus eighty-five percent (85%) of Eligible Accounts.
Bridge Note Documents - Collectively, the Purchase Agreement, the
Bridge Notes and all instruments, documents and agreements executed and/or
delivered in connection therewith, all as may be amended, modified, restated or
supplemented from time to time.
Bridge Note Obligations - Collectively, all debts, liabilities and
obligations of Phoenix and its Subsidiaries under the Bridge Note Documents.
Bridge Notes - Collectively, Phoenix's secured notes issued under
and pursuant to the terms of the Bridge Note Documents, as the same may be
amended, modified, restated or supplemented from time to time.
Burkholder Facility - Realty's real estate and improvements located
at Hagerstown, Washington County, Maryland, as
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more fully described in the Master Mortgage covering the Burkholder
Facility.
Business Day - A day other than Saturday or Sunday when Agent is
open for business in Philadelphia, Pennsylvania.
Capitalized Lease Obligations - Any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, consistently applied.
Capital Stock - Any and all shares, interests, participation or
other equivalents (however designated) of capital stock of a corporation, any
and all other ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
Cash Collateral Account - Section 2.3(b).
Change of Control - (i) with respect to any Borrower, the result
caused by any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Permitted Holders, becoming the beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for
purposes of this clause (i) such person shall be deemed to have "beneficiary
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than thirty-three and one-third percent (33
1/3%) of the total voting power of the Capital Stock of such Borrower entitled
to vote; or (ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted such Borrower's board of directors
(together with any new directors whose election by such board of directors or
whose nomination for election by the shareholders of such Borrower was approved
by a vote of sixty-six and two-thirds percent (66 2/3%) of the directors of such
Borrower at the time of such approval who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors then in office.
Closing - Section 3.
Closing Date - Section 3.6.
Code - Internal Revenue Code of 1986, and any regulations
thereunder, all as may be amended from time to time.
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Collateral - The Cash Collateral Account and all of Borrowers'
Property and interests in Property now owned or hereafter acquired, created or
arising upon which a Lien is created or purported to be created by the Security
Documents.
Collateral Agency Agreement - The Collateral Agency Agreement dated
on or prior to the Closing Date among Collateral Agent, Agent and Purchaser, as
the same may be amended, modified, restated or supplemented from time to time.
Collateral Agent - First Union National Bank, as collateral agent
under the Security Documents and Collateral Agency Agreement.
Connecticut Facility - Phoenix's real estate and improvements
located at Wallingford, New Haven County, Connecticut, as more fully described
in the Master Mortgage covering the Connecticut Facility.
Consolidated Amortization Expense - For any period, the aggregate
consolidated amount of amortization expenses of Borrowers, as determined in
accordance with GAAP.
Consolidated Capital Expenditures - For any period, the aggregate of
all expenditures (including that portion of Capitalized Lease Obligations
incurred during that period) made by Borrowers and their Subsidiaries during
such period in respect of the purchase, construction or other acquisition of
fixed or capital assets determined in accordance with GAAP. For the purposes
hereof, any deposits made by any Borrower or its Subsidiaries for the purpose of
acquiring fixed or capital assets shall be deemed Consolidated Capital
Expenditures.
Consolidated Depreciation Expense - For any period, the aggregate,
consolidated amount of depreciation expenses of Borrowers, as determined in
accordance with GAAP.
Consolidated EBIT - For any period, Borrowers' Consolidated Net
Income (or deficit) plus (a) Consolidated Interest Expense plus (b) Consolidated
Tax Expense plus (c) extraordinary non-cash losses and minus (d) extraordinary
gains, all as determined in accordance with GAAP.
Consolidated EBITDA - For any period, Borrowers' Consolidated Net
Income (or deficit) plus, without duplication,(a) Consolidated Interest Expense,
(b) Consolidated Tax Expense, (c) Consolidated Depreciation Expense, (d)
Consolidated Amortization
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Expense minus (e) extraordinary gains and plus (f) extraordinary non-cash
losses, all as determined in accordance with GAAP.
Consolidated Funded Debt - At any date, without duplication, the
consolidated aggregate principal amount of Borrowers' Indebtedness (except for
the item described in clause (vi) of the definition of Indebtedness) all as
determined in accordance with GAAP.
Consolidated Interest Expense - For any period, the aggregate,
consolidated amount of interest expense required to be paid or accrued during
such period on all Indebtedness of Borrowers outstanding during all or any part
of such period, as determined in accordance with GAAP.
Consolidated Net Income - The consolidated net income after taxes of
Borrowers as such would appear on Borrowers' consolidated statement of income,
prepared in accordance with GAAP.
Consolidated Rental Payments - For any period, the aggregate,
consolidated amount of all rents paid or to be incurred under all operating
leases of Borrowers as lessees.
Consolidated Tax Expense - For any period, the aggregate,
consolidated amount of income tax expense of Borrowers, as determined in
accordance with GAAP.
Default - Any event, act, condition or occurrence which with notice,
or lapse of time or both, would constitute an Event of Default hereunder.
Default Rate - With respect to any amounts payable hereunder or
under the Loan Documents, a rate equal to the sum of (i) 2% per annum plus (ii)
the interest rate otherwise in effect with respect to such amounts or, if no
such rate is otherwise in effect with respect to such amounts, a rate equal to
the sum of (a) the Base Rate plus (b) the highest Applicable Margin thereon plus
(c) 2%.
Disputes - Section 9.21.
Distribution -
(1) Dividends or other distributions on any now or
hereafter outstanding Capital Stock of any Borrower;
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(2) The redemption, repurchase, defeasance or acquisition of
such Capital Stock or of warrants, rights or other options to purchase such
Capital Stock; and
(3) Any loans or advances (other than salaries, and to the
extent permitted hereunder, bonuses), to any shareholder(s) of any Borrower.
Eligible Accounts - All Accounts of any Borrower meeting all of the
following specifications: (i) the Account is lawfully and exclusively owned by
such Borrower and subject to no Lien (other than Permitted Liens, if applicable,
and Liens granted under the Security Documents) and such Borrower has the right
of assignment thereof and the power to grant a security interest therein; (ii)
the Account is valid and enforceable representing the undisputed indebtedness of
an Account Debtor for the purchase of Inventory not more than ninety (90) days
past the invoice date and does not represent a rebilling; (iii) not more than
50% of the aggregate balance of all Accounts owing from an Account Debtor
obligated on the Account are outstanding more than 90 days past their invoice
date; (iv) the Account is not subject to any defense, set-off, or counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance or adjustment
of any kind; (v) the Account is net of any portion thereof attributable to the
sale of goods that have been returned, rejected, lost or damaged; (vi) if the
Account arises from the sale of goods by a Borrower, such sale was an absolute
sale and not on consignment or on approval or on a sale-or-return basis nor
subject to any other repurchase or return agreement, and such goods have been
shipped to the Account Debtor or its designee; (vii) if the Account arises from
the performance of services, such services have actually been performed; (viii)
the Account arose in the ordinary course of such Borrower's business; (ix) no
notice of the bankruptcy, receivership, reorganization, liquidation,
dissolution, or insolvency of the Account Debtor has been received by Agent, any
Lender or any Borrower; (x) the Account Debtor is not a Subsidiary or Affiliate
of any Borrower; (xi) the Account is not an Account of an Account Debtor having
its principal place of business or executive office outside the United States,
unless the payment of such Account is guaranteed by an irrevocable letter of
credit satisfactory to Agent; (xii) the Account does not represent a sale to the
government of the United States or any subdivision or agency thereof unless
Borrowers have complied, for the benefit of Agent, with the Federal Assignment
of Claims Act; (xiii) the Account is not an Account on which the Account Debtor
is obligated to any Borrower under any instrument; (xiv) the transaction which
gave rise to the Account complies in all respects with all applicable laws,
rules and regulations of any Governmental Authority; and (xv) the Account meets
such other reasonable
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specifications and requirements which may from time to time be established by
Agent. Eligible Accounts shall not include that portion of an Account
representing interest charges for past due balances or debit memos.
Eligible Inventory - Any and all raw material Inventory (including
raw paper, raw laminating film and unused printing plates) of any Borrower
located at such Borrower's places of business shown on Schedule "4.2" attached
hereto and made a part hereof (and for which location Collateral Agent has
received a landlord, warehouse or mortgagee waiver as determined by, and in form
and substance satisfactory to Collateral Agent), which (i) is not subject to any
Lien (other than Liens granted under the Security Documents and Permitted Liens,
if applicable); (ii) is not slow moving, obsolete or unmerchantable; (iii) meets
all standards, if any, imposed by any Governmental Authority; and (iv) meets
such other reasonable specifications and requirements which may from time to
time be established by Agent. Eligible Inventory does not include
work-in-process, used printing plates, finished goods, packaging materials,
supplies and other similar items or any unused printing plates in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00).
Environmental Laws - Any and all Federal, foreign, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
and any and all common law requirements, rules and bases of liability
regulating, relating to or imposing liability or standards of conduct concerning
pollution, protection of the environment, or the impact of pollutants,
contaminants or toxic or hazardous substances on human health or the
environment, as now or may at any time hereafter be in effect.
ERISA - The Employee Retirement Income Security Act of 1974, as the
same may be amended, from time to time.
Event of Default - Section 7.1.
Exchange Act - The Securities Exchange Act of 1934, as
amended.
Exchange Documents - Collectively, the Exchange Indenture, Exchange
Notes and all instruments, documents and agreements, executed and/or delivered
in connection therewith as the same may be amended, modified, restated or
supplemented from time to time.
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Exchange Indenture - That certain Exchange Indenture pursuant to
which the Exchange Notes are issued by Phoenix in substantially the form of
Exhibit E to the Purchase Agreement.
Exchange Notes - Collectively, those certain secured exchange notes
to be issued under and pursuant to Section 2.8 of the Purchase Agreement, as the
same may be amended, modified, restated or supplemented from time to time.
Exchange Obligations - Collectively, all debts, liabilities and
obligations of Phoenix and its Subsidiaries under the Exchange Documents.
Expenses - Section 9.6.
Facility Limit - The sum of Twenty Million Dollars
($20,000,000).
Fed Funds Rate - On any day means the rate per annum determined by
Agent (which determination shall be conclusive) to be the rate per annum
announced by the Federal Reserve Bank of New York on such day as being the
weighted average of the rates on overnight federal funds transactions arranged
by federal funds brokers on the previous trading day or, if such Federal Reserve
Bank does not announce such rate on any day, the rate for the last day on which
such rate was announced.
GAAP - Generally accepted accounting principles as in effect on the
Closing Date applied in a manner consistent with the most recent audited
financial statements of Borrowers furnished to Agent under Section 6.9 herein.
Government Acts - Section 2.2(g).
Government Authority - Any government or political subdivision, or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury, or arbitration
(to the extent having jurisdiction over on the Borrowers or any of their
Subsidiaries, in each case whether foreign or domestic).
Guaranty - With respect to any Person (a "Guarantor"), any
contractual or other obligation, contingent or otherwise, of such Person to pay
any Indebtedness or other obligation of any other Person or to otherwise protect
the holder of any such Indebtedness or other obligation against loss (whether
such obligation arises by agreement to pay, to keep well, to purchase assets,
goods, securities or services or otherwise) provided,
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however, that the term "Guaranty" shall not include an endorsement for
collection or deposit in the ordinary course of business.
Hagerstown Facility - Phoenix's real estate and improvements located
at Hagerstown, Washington County, Maryland as more fully described in the Master
Mortgage covering the Hagerstown Facility.
Hazardous Substance - Section 4.15.
Indebtedness - Of any Person at any date, without duplication, (i)
all obligations of such Person for borrowed money (including, with respect to
Borrowers, the Loan Obligations, Bridge Note Obligations and Subordinated Note
Obligations) or for the deferred purchase price of property or services (other
than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (ii) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar instrument,
(iii) all Capitalized Lease Obligations of such Person, (iv) the face amount of
all letters of credit issued for the account of such Person and all drafts drawn
thereunder which have not been reimbursed and all obligations of such Person
with respect to acceptances or similar obligations issued for the account of
such Person, (v) all Guarantees of such Person, and (vi) all liabilities secured
by any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
Interest Coverage Ratio - The ratio of (i) Consolidated EBITDA to
(ii) Consolidated Interest Expense.
Interest Hedging Instrument - Any documentation evidencing any
interest rate swap, interest "cap" or "collar" or any other interest rate
hedging device or swap agreement (as defined in 11 U.S.C. ss. 101) between any
Borrower and any Lender (or any Affiliate of any Lender).
Inventory - All of the "inventory" (as that term is defined in
Section 9109 of the UCC) of Borrowers whether now existing or hereafter acquired
or created.
IRS -Internal Revenue Service.
Lender - Any of the financial institutions listed on Schedule A
attached hereto and made a part hereof, as such Schedule A may be changed from
time to time.
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Letters of Credit - (i) Standby letters of credit, and (ii)
commercial letter or letters of credit, in each case issued to or to be issued
by Issuer for the account of Borrowers pursuant to Section 2.2 herein.
L/C Commitment - The sum of One Million Dollars ($1,000,000.00).
L/C Fees - Section 2.6(c).
Liabilities - All liabilities of every kind of each Borrower as
would be shown on a consolidated financial statement of Borrowers prepared in
accordance with GAAP.
LIBOR Interest Period - With respect to any LIBOR Rate Loan, (i)
initially, the period commencing on the borrowing or conversion date, as the
case may be, and ending one, three or six months thereafter as selected by the
Borrowers pursuant to Section 2.4(c)(ii) below, and (ii) thereafter, each period
commencing on the day after the last day of the preceding LIBOR Interest Period
and ending one, three or six months thereafter, as selected by Borrowers
pursuant to Section 2.4(c)(ii) below, provided, however, if any such LIBOR
Interest Period would otherwise end on a day which is not a London Business Day,
such LIBOR Interest Period shall be extended to the next succeeding London
Business Day unless the result of such extension would be to carry such LIBOR
Interest Period into another calendar month in which event such LIBOR Interest
Period shall end on the immediately preceding London Business Day and provided,
further, if any such LIBOR Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Interest Period (as may be the case with a LIBOR Interest Period commencing at
the end of a calendar month) the LIBOR Interest Period shall end on the last
London Business Day of the relevant calendar month.
LIBOR Rate Loan - That portion of any Loan on which interest accrues
at the Adjusted LIBOR Rate plus the Applicable Margin.
Lien - Any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement and any Capitalized Lease
Obligation having substantially the same economic effect as any of the
foregoing.
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Loan - The unpaid balance of any Advance under the Revolving Credit.
Loan Documents - This Agreement, the Revolving Credit Notes, the
Security Documents, the Collateral Agency Agreement, and all agreements,
instruments and documents executed and/or delivered in connection therewith, all
as may be amended, modified, restated or supplemented from time to time.
Loan Obligations - All existing and future debts, liabilities and
obligations of every kind or nature at any time owing by Borrowers, or any of
them, to Lenders or to Agent, whether joint or several, related or unrelated,
primary or secondary, matured or contingent, due or to become due, and whether
principal, interest, fees, Expenses, indemnification obligations hereunder
(specifically including debts, liabilities and obligations arising or occurring
after the commencement of any bankruptcy, insolvency or similar proceeding with
respect to any Borrower whether or not a claim for such post-commencement
obligation is allowed), including, without limitation, debts, liabilities and
obligations in respect of the Revolving Credit, whether related to cash Advances
or Letters of Credit (whether drawn or undrawn), and any extensions,
modifications, substitutions, increases and renewals thereof; any amount payable
by any Borrower pursuant to any Interest Hedging Instrument; the payment of all
amounts advanced by Agent or Lenders to preserve, protect and enforce rights
hereunder and in the Collateral; and all Expenses incurred by Agent or Lenders.
Lockbox - Section 2.3(b).
London Business Day - Any Business Day on which banks in London,
England are open for business.
Majority Lenders - At any time, Lenders holding Pro Rata Percentages
aggregating at least 662/3% at such time; provided that if at any time there are
only two Lenders party to this Agreement, then Majority Lenders shall mean both
such Lenders.
Master Mortgages - Collectively, those certain Mortgage and Security
Agreements or Deeds of Trust executed by Phoenix or Realty, as the case may be,
in favor of Collateral Agent, on or prior to the Closing Date, in form and
substance satisfactory to Collateral Agent, and encumbering the (i) Hagerstown
Facility, (ii) Connecticut Facility and (iii) Burkholder Facility, as the same
may be amended, modified, restated or supplemented from time to time.
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Master Pledge Agreement - Collectively, those certain stock pledge
agreements executed by each of the holders of Capital Stock of Phoenix in favor
of Collateral Agent, on or prior to the Closing Date, in form and substance
satisfactory to Collateral Agent, as the same may be amended, modified, restated
or supplemented from time to time.
Master Security Agreement - The Master Security Agreement executed
and delivered by Borrowers in favor of Collateral Agent, on or prior to the
Closing Date, in form and substance satisfactory to Collateral Agent, as the
same may be amended, modified, restated or supplemented from time to time.
Material Adverse Effect - (a) With respect to any Borrower, any
material adverse effect (both before and after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents) with respect to the
business, assets, properties, financial condition, stockholders' equity,
contingent liabilities, prospects, material agreements or results of operations
of such Borrower, or (b) any fact or circumstance that, singly or in the
aggregate with any other fact or circumstance, has a reasonable likelihood of
resulting in or leading to (i) a material adverse effect described in clause
(a), (ii) the inability of such Borrower to perform in any material respect its
obligations hereunder or under any other Loan Document or the inability of
Lenders, Agent or Collateral Agent, to enforce in any material respect the
rights purported to be granted hereunder or under any other Loan Document, or
(iii) a material adverse effect on the ability of such Borrower to effect
(including hindering or unduly delaying) the transactions contemplated by this
Agreement and the other Loan Documents on the terms contemplated hereby and
thereby.
Maximum Revolving Credit Amount - The sum of Twenty Million Dollars
($20,000,000.00) as such amount may be permanently reduced from time to time
pursuant to Section 2.1(d) herein.
Notes - Collectively, the Revolving Credit Notes.
Offering - The sale or issuance by any Borrower of any of its
Capital Stock or any debt instrument in any public or private transaction, or
the receipt of capital contributions in the form of cash to any Borrower.
Overadvance - Section 2.1(a)(i).
Participants - Section 8.16.
Participation - Section 8.16.
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PBGC - Pension Benefit Guaranty Corporation; or any successor entity
thereto.
People's Intercreditor Agreement - That certain intercreditor
agreement among Collateral Agent, People's Capital, and Borrowers dated on or
prior to the Closing Date, in form and substance satisfactory to Collateral
Agent.
Permitted Bonus - For any fiscal year, twenty -seven percent (27%)
of the sum of (a) Consolidated Net Income plus (b) Consolidated Tax Expense.
Permitted Liens - Section 6.3.
Permitted Holders - Any or all of Louis Lasorsa, Edward Lieberman
and Phoenix's stock bonus plan (so long as Louis Lasorsa and Edward Lieberman
are the sole trustees of such stock bonus plan).
Person - An individual, partnership, corporation, trust, limited
liability company, limited liability partnership, unincorporated association or
organization, joint venture or any other entity.
Phoenixcor Intercreditor Agreement- That certain intercreditor
agreement among Collateral Agent, Phoenixcor, Inc. and Borrowers dated on or
prior to the Closing Date, in form and substance satisfactory to Collateral
Agent.
Prime Rate - That rate publicly designated by Agent at its principal
office from time to time as its prime rate of interest, which is not necessarily
the lowest or best rate of interest charged by Agent to any other borrowers or
other banks.
Pro Rata Percentage - The percentage set forth opposite each
Lender's name on Schedule A.
Pro Rata Share - The amount set forth opposite each Lender's name on
Schedule A.
Property - Any interest of any Borrower in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible including,
without limitation, Real Property.
Purchase Agreement - As defined in the Background to this Agreement.
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Purchaser - As defined in the Background to this Agreement.
Quarterly Compliance Certificate - Section 5.10.
Real Property - All right, title and interest of any Borrower or any
of its Subsidiaries (including any leasehold estate) in and to any parcel of
real property owned or operated by any Borrower or any of its Subsidiaries,
(including, without limitation, the Hagerstown Facility, Connecticut Facility
and Burkholder Facility), together with, in each case, all improvements, and
appurtenant fixtures, equipment, easements and other property and rights
incidental to the ownership, lease or operation thereof.
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as
amended, and any successor thereto.
Reimbursement Obligations - Section 2.2(d).
Reserve Percentage - For a Lender (or any Bank Affiliate of such
Lender) on any day, that percentage (expressed as a decimal) which is in effect
on such day, prescribed by the Board of Governors of the Federal Reserve System
(or any successor or any other banking authority to which a Lender (or any Bank
Affiliate of such Lender) is subject, including any board or governmental or
administrative agency of the United States or any other jurisdiction to which a
Lender (or any Bank Affiliate of such Lender is subject), for determining the
maximum reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for (i) deposits of United States
Dollars or (ii) Eurocurrency liabilities as defined in Regulation D, in each
case used to fund a LIBOR Based Rate Loan subject to an Adjusted LIBOR Rate. The
Adjusted LIBOR Rate shall be adjusted automatically on and as of the effective
day of any change in the Reserve Percentage.
Revolving Credit - Section 2.1(a).
Revolving Credit Maturity Date - The three (3) year anniversary of
the date of this Agreement.
Revolving Credit Notes - Section 2.1(b).
Security Documents - Collectively, the Master Security Agreement,
Master Pledge Agreement, Subsidiary Pledge Agreement, Master Mortgages and all
other security documents hereafter
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delivered to Collateral Agent granting a Lien on any assets or Property of any
Borrower or any other Person in favor of Collateral Agent to secure the Loan
Obligations, the Bridge Note Obligations or the Exchange Obligations or any
guarantee of the Loan Obligations, the Bridge Note Obligations or the Exchange
Obligations as the same may be amended, modified, restated or supplemented from
time to time.
Subordinated Note Indenture - An indenture which may be entered into
between Phoenix and the trustee designated therein relating to the issuance of
the Subordinated Notes, as such Indenture may be amended, modified, restated or
supplemented from time to time.
Subordinated Note Obligations - Collectively, all debts, liabilities
and obligations of Phoenix and its Subsidiaries incurred in connection with the
issuance of the Subordinated Notes or under the terms of the Subordinated Note
Indenture and/or any instrument, document or agreement related thereto.
Subordinated Notes - Subordinated Notes to be issued by Phoenix
pursuant to the Subordinated Note Indenture in a principal amount not less than
Seventy Five Million Dollars ($75,000,000), that are eligible for resale under
Rule 144A of the Securities Act of 1933, as amended, the proceeds of which shall
be used to redeem the Bridge Note Obligations and/or Exchange Note Obligations
and to repay certain other Indebtedness and which shall be issued on the terms
and conditions set forth in that certain commitment letter dated August 11,
1998, among Phoenix, First Union Capital Markets and First Union Investors,
Inc., as the same may be amended, modified, restated or supplemented from time
to time.
Subsidiary - With respect to any Person at any time, (i) any
corporation more than fifty percent (50%) of whose Capital Stock normally
entitled to vote is legally and beneficially owned by such Person or owned by a
corporation more than fifty percent (50%) of whose Capital Stock normally
entitled to vote is legally and beneficially owned by such Person; (ii) any
trust of which a majority of the beneficial interest is at such time owned
directly or indirectly, beneficially or of record, by such Person or one or more
Subsidiaries of such Person; and (iii) any partnership, joint venture or other
entity of which ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are at such time owned directly or indirectly, beneficially or of record, by, or
which is otherwise controlled directly, indirectly or through one or more
intermediaries by, such Person or one or more Subsidiaries of such Person.
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Subsidiary Pledge Agreement - That certain Subsidiary Pledge
Agreement executed and delivered by Phoenix in favor of Collateral Agent dated
on or prior to the Closing Date, in form and substance satisfactory to
Collateral Agent.
Tax - Any federal, state, local or foreign tax assessment or other
governmental charge or levy (including any withholding tax) upon a Person or
upon its assets, revenue, income or profits.
Total Leverage Ratio - For any period, the ratio of (i) Consolidated
Funded Debt to (ii) Consolidated EBITDA.
Type - With respect to any Loan, each of which shall be deemed to be
a different "Type of Loan": Base Rate Loans, LIBOR Rate Loans with a LIBOR
Interest Period of one month commencing on a specified date, LIBOR Rate Loans
with a LIBOR Interest Period of three months commencing on a specified date or
LIBOR Rate Loans with a LIBOR Interest Period of six months commencing on a
specified date.
UCC - The Uniform Commercial Code as adopted in the
Commonwealth of Pennsylvania at 13 Pa.C.S.A. ss.1101 et seq.
Unfinanced Capital Expenditures - Consolidated Capital Expenditures
that are not financed through interest bearing debt from a Person, within sixty
(60) days of the acquisition of the asset.
Unused Fee - Section 2.6(a).
Upfront Fee - The up front fee which is referred to in, and has been
fully earned by Agent pursuant to, the fee letter dated August 18, 1998, among
Phoenix, Agent and First Union Capital Markets, and which Upfront Fee is payable
in full at Closing.
Year 2000 Problem - Section 4.21.
1.2 Accounting Principles: Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP,
consistently applied, to the extent applicable, except as otherwise expressly
provided in this Agreement.
1.3 Construction: No doctrine of construction of ambiguities in agreements
or instruments against the interests of the party controlling the drafting shall
apply to any Loan Documents.
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SECTION 2. THE LOANS
2.1 Revolving Credit - Description:
(a) (i) Subject to the terms and conditions of this Agreement, each Lender
hereby establishes for the benefit of Borrowers a revolving credit facility
(collectively, the "Revolving Credit") which shall include cash Advances
extended by Lenders to or for the benefit of Borrowers as well as Letters of
Credit issued for the account of Borrowers from time to time hereunder. The
aggregate principal amount of unpaid cash Advances, unreimbursed draws on
Letters of Credit plus outstanding and undrawn Letter(s) of Credit shall not at
any time exceed the lesser of (A) the Maximum Revolving Credit Amount or (B) the
Borrowing Base minus such reserves as Agent may from time to time reasonably
establish, in such amounts and with respect to such matters as Agent may deem
appropriate in its discretion. Subject to such limitation, the outstanding
balance of Advances under the Revolving Credit may fluctuate from time to time,
to be reduced by repayments made by Borrowers, to be increased by future
Advances which may be made by Lenders, to or for the benefit of Borrowers, and,
subject to the provisions of Section 7 below, shall be due and payable on the
Revolving Credit Maturity Date. If the aggregate principal amount of unpaid cash
Advances, unreimbursed draws on Letters of Credit plus outstanding and undrawn
Letter(s) of Credit at any time exceed the lesser of the Maximum Revolving
Credit Amount or the Borrowing Base minus such reserves established by Agent
(such excess referred to as "Overadvance"), Borrowers shall immediately repay
the Overadvance in full.
(ii) Each Lender agrees severally to make cash Advances to
Borrowers, as a part of the Revolving Credit, subject to the terms of this
Agreement, up to the lesser of such Lender's Pro Rata Percentage of the
Revolving Credit or such Lender's Pro Rata Share.
(b) At Closing, Borrowers shall execute and deliver a promissory note to
each Lender for the total principal amount of such Lender's Pro Rata Share. As
additional Lenders become parties to this Agreement in accordance with the
provisions of Section 8.16 herein, Borrowers shall execute and deliver to each
such additional Lender a promissory note in the original principal amount of
such Lender's Pro Rata Share, and shall issue to the applicable selling Lender a
replacement promissory note (in the form of the promissory note replaced, which
replaced notes shall be returned to Borrowers) to reflect the reduced Pro Rata
Share of such Lender (collectively the "Revolving Credit Notes"). The Revolving
Credit Notes shall
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evidence each Borrower's unconditional joint and several obligation to repay
such Lender for all Advances made under the Revolving Credit, with interest as
herein and therein provided. Each Advance under the Revolving Credit shall be
deemed evidenced by the Revolving Credit Notes, which are deemed incorporated
herein by reference and made part hereof. The obligations of Borrowers under the
Revolving Credit and this Agreement shall at all times be joint and several. All
Revolving Credit Notes shall be in form and substance satisfactory to Agent.
(c) The term of the Revolving Credit shall expire on the Revolving Credit
Maturity Date. On such date, unless having been sooner accelerated by Agent
pursuant to the terms hereof, all sums owing under the Revolving Credit shall be
due and payable in full, and as of and after such date no further Advances shall
be available from Lenders.
(d) Borrowers shall have the right at any time and from time to time, upon
ten (10) Business Days prior written notice to Agent to permanently reduce,
without premium or penalty (but subject to Section 2.8 of this Agreement), the
Maximum Revolving Credit Amount in the minimum amount of Three Million Dollars
($3,000,000.00) and integral multiples of One Million Dollars ($1,000,000.00) in
excess thereof. Upon the effectiveness of such notice, each Lender's Pro Rata
Share shall be reduced in accordance with each Lender's Pro Rata Percentage of
the amount specified in the notice. Agent shall promptly notify Lenders of its
receipt of such notice. Any notice to reduce the Maximum Revolving Credit Amount
pursuant to this Section 2.1(d) shall be permanent and may not be revoked. In
the event of any such reduction, outstanding Advances in an amount in excess of
the Maximum Revolving Credit Amount, as so reduced, shall be paid on the
effective date together with interest accrued on the amount so paid (subject to
Section 2.8 of this Agreement) to the date of reduction.
2.2 Letters of Credit:
(a) As a part of the Revolving Credit and subject to its terms and
conditions (including, without limitation, the Borrowing Base) Issuer shall, on
behalf of and for the benefit of all Lenders, make available to Borrowers
Letters of Credit which shall not exceed, in the aggregate at any one time
outstanding the L/C Commitment. Notwithstanding the foregoing, all Letters of
Credit shall be in form and substance reasonably satisfactory to Issuer. No
Letter of Credit shall be issued with an expiry date later than (i) three
hundred sixty five (365) days from the date of issuance or (ii) ten (10)
Business Days prior to the Revolving Credit Maturity Date. Borrowers shall
execute and deliver to Issuer all
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letter of credit agreements and other documents required by Issuer for such
purposes, all such documents to be in form and substance reasonably satisfactory
to Issuer.
(b) Immediately upon the issuance of any Letter of Credit, Issuer is
deemed to have granted to each other Lender, and each other Lender is hereby
deemed to have acquired, an undivided participating interest (without recourse
or warranty), in accordance with each such other Lender's respective Pro Rata
Percentage, in all of Issuer's rights and liabilities with respect to such
Letter of Credit. Each Lender shall be directly and unconditionally obligated to
Issuer, according to its Pro Rata Percentage, to reimburse Issuer for any draws
not reimbursed by Borrowers in accordance with the terms hereof, made at any
time without regard to the occurrence of a Default or Event of Default
(including, without limitation, any draw made following the commencement of any
bankruptcy, reorganization, receivership, liquidation or dissolution proceeding
with respect to any Borrower) under any Letter of Credit outstanding under the
Revolving Credit.
(c) Each Letter of Credit issued from time to time under the Revolving
Credit which remains undrawn (and the amounts of draws on Letters of Credit
prior to payment as hereinafter set forth) shall reduce, dollar for dollar, the
amount available to be borrowed by Borrowers under the Revolving Credit.
(d) In the event of any request for drawing under any Letter of Credit by
the beneficiary thereof, Issuer shall promptly notify Borrowers and Borrowers
shall immediately reimburse Issuer on the day when such drawing is honored, by
either a cash payment by Borrowers, or, so long as no Event of Default has
occurred and is continuing, in the absence of such payment by Borrowers, and at
Agent's option, by Lenders automatically making, or having been deemed to have
made, (without further request or approval of Borrowers) a cash Advance under
the Revolving Credit on such date to reimburse Issuer. All cash Advances which
constitute a reimbursement for a draw under a Letter of Credit shall be shared
by Lenders in accordance with their Pro Rata Percentages and shall be subject to
the provisions of this Agreement including, without limitation, Section 2.3(c).
If, for any reason, proceeds of cash Advances are not received by Issuer from
any Lender on the date a drawing under a Letter of Credit is honored in an
amount equal to the amount of such drawing, Borrowers shall reimburse Issuer, in
same day funds, on the Business Day immediately following the date of such
drawing, in an amount equal to the excess of the amount of such drawing over the
amount of such proceeds, if any, that are so received, plus accrued interest on
such amount at the then applicable interest rate for Base Rate Loans. Borrowers'
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reimbursement obligation for draws under Letters of Credit along with the
obligation to pay L/C Fees shall herein be referred to collectively as
Borrowers' "Reimbursement Obligations". All of Borrowers' Reimbursement
Obligations hereunder with respect to Letters of Credit shall apply
unconditionally and absolutely to, and shall be joint and several with respect
to, Letters of Credit issued hereunder on behalf of Borrowers.
(e) (i) In the event that Borrowers shall fail to reimburse Issuer as
provided in Section 2.2(d) in an amount equal to the amount of the drawing
honored by Issuer under a Letter of Credit, Issuer shall promptly notify each
Lender of the unreimbursed amount of such drawing and of such Lender's
participation therein based on such Lender's Pro Rata Percentage. Each Lender
shall make available to Issuer an amount equal to its respective participation
in same day funds, at the office of Issuer specified in such notice, not later
than 1:00 p.m. (Eastern time) on the Business Day after the date notified by
Issuer. In the event that any Lender fails to make available to such Issuer the
amount of such Lender's participation based on such Lender's Pro Rata Percentage
in such Letter of Credit, as provided in this Section 2.2(e), Issuer shall be
entitled to recover such amount on demand from such Lender together with
interest at the Fed Funds Rate for three (3) Business Days and thereafter at the
then applicable interest rate for Base Rate Loans. Issuer shall distribute to
each other Lender which has paid all amounts payable by it under this Section
2.2(e) with respect to any Letter of Credit, such other Lender's share, based on
such Lender's Pro Rata Percentage, of all payments received by Issuer from
Borrowers in reimbursement of drawings honored by Issuer under such Letter of
Credit, when such payments are received. Nothing in this Section 2.2(e) shall be
deemed to relieve any Lender from its obligation to pay all amounts payable by
it under this Section 2.2(e) with respect to any Letter of Credit issued by
Issuer or to prejudice any rights that Issuer may have against a Lender as a
result of any default by such Lender hereunder and no Lender shall be
responsible for the failure of any other Lender to pay its respective
participation, based on its Pro Rata Percentage, payable under this Section
2.2(e).
(ii) In connection with the failure of any Lender to make
available to Issuer the amount of such Lender's participation in any Letter of
Credit, such Lender hereby agrees to protect, indemnify, pay and save Issuer
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including, without limitation, reasonable
attorneys' fees, allocated costs of internal counsel and the costs (including
judgments) in connection with any related litigation) which Issuer may incur or
be subject to as a consequence, direct or indirect, of
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the failure of such Lender to make available its participation in such Letter of
Credit. Notwithstanding anything to the contrary contained in this Section
2.2(e), no Lender failing to provide its participation in any Letter of Credit
shall have any obligation to indemnify Issuer in respect of any liability
incurred by Issuer arising solely out of the gross negligence or willful
misconduct of Issuer.
(f) The obligation of Borrowers to reimburse Issuer for drawings
made (or Lenders for cash Advances made to cover drawings made) under the
Letters of Credit and the obligations of Lenders to Issuer under Section 2.2(e)
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of any
Letter of Credit;
(ii) the existence of any claim, setoff, defense or other
right that Borrowers or any other Person may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or transferee may be acting), Issuer,
Agent, any Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(iii)any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Issuer under any Letter of Credit against
presentation of a demand, draft or certificate or other document that does not
comply with the terms of such Letter of Credit unless Issuer shall have acted
with willful misconduct or gross negligence in issuing such payment;
(v) any other circumstance or happening whatsoever that is
similar to any of the foregoing; or
(vi) the fact that a Default or Event of Default shall have
occurred and be continuing.
(g) If by reason of (i) any change after the Closing Date in
applicable law, regulation, rule, decree or regulatory requirement or any change
in the interpretation or application by any judicial or regulatory authority of
any law, regulation, rule,
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decree or regulatory requirement or (ii) compliance by Issuer or any Lender with
any direction, reasonable request or requirement (whether or not having the
force of law) of any governmental or monetary authority including, without
limitation, Regulation D:
(A) Issuer or any Lender shall be subject to any tax or other
levy or charge of any nature or to any variation thereof (except for changes in
the rate of any tax on the net income of Issuer or any Lender or its applicable
lending office) or to any penalty with respect to the maintenance or fulfillment
of its obligations under this Section 2.2, whether directly or by such being
imposed on or suffered by Issuer or any Lender;
(B) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued by the
Issuer or participation therein purchased by any Lender; or
(C) there shall be imposed on Issuer or any Lender any other
condition regarding this Section 2.2, any Letter of Credit or any participation
therein;
and the result of the foregoing is to directly or indirectly increase the cost
to Issuer or any Lender of issuing, creating, making or maintaining any Letter
of Credit or of purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by Issuer or any Lender, then
and in any such case Issuer or such Lender shall, after the additional cost is
incurred or the amount received is reduced, notify Borrowers and Borrowers shall
pay on demand such amounts as may be necessary to compensate Issuer or such
Lender for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate per
annum equal at all times to the applicable interest rate for Base Rate Loans. A
certificate signed by an officer of Issuer or such Lender as to the amount of
such increased cost or reduced receipt showing in reasonable detail the basis
for the calculation thereof, submitted to Borrowers and the Agent by Issuer or
any Lender, as the case may be, shall, except for manifest error, and absent
written notice from Borrowers to Agent within ten (10) days from submission, be
final, conclusive and binding for all purposes.
(h) (i) In addition to amounts payable as elsewhere provided in this
Section 2.2, without duplication, Borrowers hereby agree to protect, indemnify,
pay and save Issuer, Agent and Lenders harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which Issuer may incur or be subject to
as a
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consequence, direct or indirect, of (A) the issuance of the Letters of Credit or
(B) the failure of Issuer to honor a drawing under any Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority (all such acts
or omissions herein called "Government Acts") in each case except for claims,
demands, liabilities, damages, losses, costs, charges and expenses arising
solely from acts or conduct of Issuer, Agent or Lenders constituting gross
negligence or willful misconduct.
(ii) As between Borrowers and Issuer, Agent and Lenders, Borrowers
assume all risks of the acts and omissions of, or misuse of the Letters of
Credit issued by Issuer by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, Issuer shall not
be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness
or legal effects of any document submitted by any party in connection with the
application for and issuance of such Letters of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) for
failure of the beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit; (D) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they are in
cipher, unless any of the foregoing are caused by Issuer's gross negligence or
willful misconduct; (E) for errors in interpretation of technical terms; (F) for
any loss or delay in the transmission of any document required in order to make
a drawing under any such Letter of Credit or of the proceeds thereof, unless
caused by Issuer's gross negligence or willful misconduct; (G) for the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; and (H) for any consequences arising
from causes beyond the control of Issuer, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the vesting
of any of Issuer's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by Issuer
in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not create any liability
on the part of Issuer to Borrowers.
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(iv) The term "Lender" shall, unless the context otherwise
indicates, include the Issuer in its individual capacity as a Lender.
2.3 Advances, Conversions, Renewals and Payments:
(a) Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Revolving Credit, the Expenses, the
Administration Fee, the Unused Fee, the L/C Fees, and all other charges and any
other Loan Obligations of Borrowers hereunder, shall be made to Agent at its
main Philadelphia banking office, Broad and Chestnut Streets, Philadelphia,
Pennsylvania, in United States dollars, in immediately available funds. Agent
and each Lender, on behalf of all Lenders, shall have the unconditional right
and discretion to charge any Borrower's operating account with any such
respective institution for all of Borrowers' Loan Obligations as they become due
from time to time under this Agreement including without limitation, interest,
principal, fees and reimbursement of Expenses. Alternatively, Agent may in its
discretion (and Borrowers hereby authorize Agent to) direct Lenders to make a
cash Advance under the Revolving Credit (subject to the terms and provisions of
this Agreement) in a sum sufficient to pay all interest accrued and payable on
the Loan Obligations during the immediately preceding month and to pay all
costs, fees and Expenses owing hereunder.
(b) Borrowers shall maintain a lockbox account(s) ("Lockbox") with
Agent (on terms and conditions satisfactory to Agent) and a depository
account(s) ("Cash Collateral Account") with Agent subject to the provisions of
this subparagraph. Borrowers have agreed with Agent that all collections of
Accounts will be paid directly from Account Debtors into the Lockbox. Borrowers
shall then cause (and Agent is also hereby irrevocably authorized to cause) the
transfer of such collections from the Lockbox to the Cash Collateral Account.
Deposits into the Cash Collateral Account shall be applied by Agent daily,
subject to Agent's standard clearing procedures and clearing periods for
deposited funds, to reduce the outstanding indebtedness under the Revolving
Credit of this Agreement. All collections of Accounts and proceeds of other
Collateral to the extent received by any Borrower shall be held in trust for the
benefit of Lenders and remitted, in specie, to Agent for deposit in the Cash
Collateral Account immediately upon receipt by any Borrower. Borrowers shall
have no right of access to or withdrawal from the Lockbox or the Cash Collateral
Account; provided that if there are no outstanding Advances and no Event of
Default has occurred and is continuing, then all collections of Accounts shall
be, subject to Agent's standard clearing procedures
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and clearing periods for deposited funds, transferred to Phoenix's operating
accounts with Agent.
(c) (i) Advances which may be made by Lenders from time to time
under the Revolving Credit shall be made available by crediting such proceeds to
Phoenix's operating account with Agent.
(ii) All Advances, other than Letters of Credit, requested by
Borrowers under the Revolving Credit must be in the minimum amount of (A) One
Hundred Thousand Dollars ($100,000.00) and integral multiples of Fifty Thousand
Dollars ($50,000.00) in excess thereof for Base Rate Loans and (B) One Million
Dollars ($1,000,000.00) and integral multiples of One Hundred Thousand Dollars
($100,000.00) in excess thereof for LIBOR Rate Loans and must be requested:
(1) by 11:00 A.M., Eastern time, on the date such
Advance is to be made if a Base Rate Loan, and
(2) by 11:00 A.M. Eastern time at least three (3)
Business Days in advance of the date such Advance is to be made if a LIBOR
Rate Loan.
(iii) All requests for an Advance are irrevocable and shall
either be in writing via a borrowing base certificate ("Borrowing Certificate")
in the form of Exhibit "A" attached hereto and made a part hereof or pursuant to
a written request satisfactory to Agent, and which request is to be executed by
an Authorized Officer of Phoenix and shall specify (A) the amount of the
Advance, (B) the requested date (which shall be a Business Day) for the making
of such Advance. If such Advance is to be a LIBOR Rate Loan, Borrowers shall
also provide the information required under Section 2.4(c)(ii). Such request may
be sent by telecopy or facsimile transmission provided that Agent shall have the
right to require that receipt of such request not be effective unless confirmed
via telephone with Agent.
(iv) A. Upon receiving a request for an Advance in accordance
with subparagraph (ii) above, by twelve o'clock (12:00) noon, Eastern time or as
soon as is reasonably practicable thereafter, Agent shall notify all Lenders of
the request. Each Lender shall advance its applicable Pro Rata Percentage of the
requested Advance to Agent by remitting federal funds, immediately available, to
Agent pursuant to Agent's instructions prior to two o'clock (2:00) p.m. Eastern
time on the date of the Advance. Subject to the satisfaction of the terms and
conditions hereof, and receipt by Agent of all required funds from the other
Lenders, Agent shall make the requested Advance available to Borrowers by
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crediting such amount to Phoenix's operating account with Agent as soon as is
reasonably practicable thereafter on the day the requested Advance is to be
made. In lieu of the foregoing, Agent may, in its discretion (and without any
obligation to do so or continue to do so), fund the Pro Rata Share of an Advance
(including any cash Advance to reimburse Issuer for unreimbursed draws under a
Letter of Credit) on behalf of any one or more Lenders (unconditionally and
absolutely obliging such affected Lender to reimburse Agent in full without
deduction or setoff for its portion of such Advance) with a settlement of the
Pro Rata Shares of Lenders on the following Business Day or under such other
settlement procedures as Agent establishes from time to time.
B. Neither Agent nor any other Lender shall be
obligated, for any reason whatsoever, to advance the share of any other Lender.
If such corresponding amount is not made available to Agent by such Lender on
the date the Advance is made and Agent elects (at its discretion, without any
obligation to do so) to make such Lender's share of the Advance (including any
cash Advance to reimburse Issuer for unreimbursed draws under a Letter of
Credit), Agent shall be entitled to recover such amount on demand from such
Lender, or from Borrowers, together with interest at a per annum rate equal to
the Fed Funds Rate in respect of each day during the period commencing on the
date such amount was made available to Borrowers (or on that date Agent required
such funds to be advanced pursuant to the settlement procedures established by
Agent) and ending on (but excluding) the date Agent recovers such amount. To the
extent not reimbursed by such Lender, Borrowers shall immediately repay on
demand such amount. Agent shall also be entitled to recover any and all losses
and damages (including without limitation, attorneys' fees) from any Lender
failing to so advance upon demand of Agent. Agent may set off the obligations of
a Lender under this paragraph against any distributions or payments of the
Obligations which Agent would otherwise make available to such Lender. To the
extent any Lender fails to provide or delays providing its respective Pro Rata
Percentage of any requested Advance, such Lender's Pro Rata Percentage of all
payments of the Obligations (but not its Pro Rata Share of Advances required to
be funded by such Lender) shall decrease to reflect the actual percentage which
its actual outstanding Advances bears to the total outstanding Advances of all
Lenders.
2.4 Revolving Credit Interest:
(a) The unpaid principal balance of cash Advances under the
Revolving Credit shall bear interest, subject to the terms of this Agreement, at
the per annum rate equal to either (i) the Base Rate or (ii) the Adjusted LIBOR
Rate for a specified LIBOR Interest
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Period plus, in the case of both (i) and (ii), the Applicable Margin.
(b) Changes in the interest rate applicable to Base Rate Loans shall
become effective on the same day that a change in the Base Rate occurs.
(c) Unless otherwise designated by Borrowers as a LIBOR Rate Loan,
in accordance with this paragraph (c), each Loan shall be deemed to be a Base
Rate Loan.
(i) Base Rate Loans shall continue as Base Rate Loans unless
and until such Loans are converted into Loans of another Type. LIBOR Rate Loans
for any Interest Period shall continue as Loans of such Type until the end of
the then current LIBOR Interest Period therefor, at which time they shall be
automatically converted into Base Rate Loans unless Phoenix (on behalf of
Borrowers) shall have given Agent notice in accordance with clause (ii) below
requesting that such Loans continue as LIBOR Rate Loans for another LIBOR
Interest Period of a specified duration.
(ii) To elect a LIBOR Rate Loan, Phoenix (on behalf of
Borrowers) shall give Agent notice (which shall be irrevocable) as required
under Section 2.3(c)(ii) and such notice shall also specify (A) the requested
date (which shall be a Business Day) of such funding, conversion or
continuation, (B) whether the subject Loan is a new Advance or an existing Loan
that is to be converted or continued, (C) in the case of any LIBOR Rate Loan
being continued, the last day of the current LIBOR Interest Period, and (D) the
amount of, and the desired LIBOR Interest Period for, the Loan subject to such
LIBOR Rate election provided that Borrowers shall not be entitled to select a
LIBOR Interest Period for any Loan which shall end on a date later than the
Revolving Credit Maturity Date. Upon receipt of any such notice, Agent shall
promptly notify each Lender of the contents thereof.
(iii) Notwithstanding anything to the contrary contained in
clauses (i) or (ii) of this paragraph (c), so long as an Event of Default shall
have occurred and be continuing, Agent may (and, at the request of Majority
Lenders, shall) notify Phoenix (on behalf of Borrowers) that Loans may only be
converted into or continued upon the expiration of the applicable current LIBOR
Interest Period therefor as Base Rate Loans. Thereafter, until no Event of
Default shall continue to exist, Loans may not be converted into or continued as
Loans of any Type other than Base Rate Loans.
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(iv) Notwithstanding anything to the contrary contained in
this Agreement, Borrowers shall borrow, prepay, convert and continue Loans in a
manner such that (A) the aggregate principal amount of LIBOR Rate Loans of the
same Type shall, at all times, be not less than $1,000,000 and (B) there shall
be, at any one time, no more than five (5) LIBOR Interest Periods in effect at
such time.
(v) Each Lender may fund LIBOR Rate Loans from any source that
such Lender deems (in its sole discretion) appropriate without loss of any
rights hereunder.
(d) Interest shall be payable (i) in the case of Base Rate Loans,
quarterly in arrears commencing October 1, 1998 and on the first day of each
calendar quarter thereafter, (ii) in the case of LIBOR Rate Loans, on the last
day of each applicable LIBOR Interest Period (and, in the case of any LIBOR Rate
Loan having a LIBOR Interest Period longer than three months, on each
three-month anniversary of the first day of such LIBOR Interest Period) and
(iii) in the case of any Loan, when such Loan shall be due (whether at maturity,
by reason of notice of prepayment or acceleration, or otherwise) or converted,
but only to the extent then accrued on the amount then so due or converted.
(e) At any time that an Event of Default shall have occurred and
shall be continuing, any amount payable hereunder and under each other Loan
Document shall bear interest, payable on demand, at a rate per annum equal to
the applicable Default Rate.
(f) (i) The Adjusted LIBOR Rate may be automatically adjusted by
Agent on a prospective basis to take into account the additional or increased
cost of maintaining any necessary reserves for Eurodollar deposits or increased
costs due to changes in applicable law or regulation or the interpretation
thereof occurring subsequent to the commencement of the then applicable LIBOR
Interest Period, including but not limited to changes in tax laws (except
changes of general applicability in corporate income tax laws) and changes in
the reserve requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding the Reserve Percentage and any
event which has resulted in a payment pursuant to Section 2.8 below, that
increase the cost to Lenders of funding the LIBOR Rate Loan. Agent shall
promptly give Borrowers and each Lender notice of such a determination and
adjustment, which determination shall be prima facie evidence of the correctness
of the fact and the amount of such adjustment.
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(ii) If Borrowers shall have requested a LIBOR Rate Loan and
Agent shall have reasonably determined that Eurodollar deposits equal to the
amount of the principal of the requested LIBOR Rate Loan and for the LIBOR
Interest Period specified are unavailable, or that the rate based on the
Adjusted LIBOR Rate will not adequately and fairly reflect the cost of the
Adjusted LIBOR Rate applicable to the specified LIBOR Interest Period of making
or maintaining the principal amount of the requested LIBOR Rate Loan specified
by Borrowers during the LIBOR Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate and reasonable means do not
exist for ascertaining the rate based on the Adjusted LIBOR Rate applicable to
the specified LIBOR Interest Period, Agent shall promptly give notice of such
determination to Borrowers that the rate based on the Adjusted LIBOR Rate is not
available. A determination by Agent hereunder shall be prima facie evidence of
the correctness of the fact and amount of such additional costs or
unavailability. Upon such a determination, (A) the obligation to convert to, or
maintain a LIBOR Rate Loan at the rate based on the Adjusted LIBOR Rate shall be
suspended until such conditions shall have ceased to exist, and (B) the
applicable Loan subject to the requested conversion shall continue to accrue
interest at the Base Rate plus the Applicable Margin.
(iii) If, as a result of any changes in applicable law or
regulation or the interpretation thereof, it becomes unlawful for a Lender (or
such Lender's Bank Affiliate) to maintain Eurodollar liabilities sufficient to
fund any LIBOR Rate Loan subject to the rate based on the Adjusted LIBOR Rate,
then such Lender shall immediately notify Agent who shall immediately notify
Borrowers thereof and such Lender's obligations hereunder to convert to, or
maintain a LIBOR Rate Loan at the rate based on the Adjusted LIBOR Rate shall be
suspended until such time as such Lender (or such Lender's Bank Affiliate) may
again cause the rate based on the Adjusted LIBOR Rate to be applicable to its
share of any LIBOR Rate Loan and such Lender's share of the Revolving Credit
subject to the LIBOR Rate Loan shall accrue interest at the Base Rate plus the
Applicable Margin. Promptly after it is no longer unlawful for such Lender (or
such Lender's Bank Affiliate) to maintain such Eurodollar liabilities, such
Lender shall notify Agent who will notify Borrowers thereof and such suspension
shall cease to exist.
2.5 Additional Interest Provisions.
(a) Interest on the Loans, regardless of the rate option, shall be
calculated on the basis of a year of three hundred sixty (360) days but charged
for the actual number of days elapsed.
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(b) All contractual rates of interest chargeable on outstanding
principal under the Loans, regardless of the rate option, shall continue to
accrue and be paid even after Default, an Event of Default, maturity,
acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the
happening of any event or occurrence similar or dissimilar.
(c) In no contingency or event whatsoever shall the aggregate of all
amounts deemed interest hereunder and charged or collected pursuant to the terms
of this Agreement exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such court determines Lenders have charged or received
interest hereunder in excess of the highest applicable rate, Lenders shall
apply, in their sole discretion, and set off such excess interest received by
Lenders against other Loan Obligations due or to become due and such rate shall
automatically be reduced to the maximum rate permitted by such law; provided
that if the Loan Obligations have been paid and satisfied in full and the
Revolving Credit terminated, any excess interest shall be paid as such court
directs.
2.6 Fees:
(a) Borrowers shall pay to Agent, for the account of each Lender, a
commitment fee ("Unused Fee") on the daily unused amount of the Revolving Credit
for each day from and including the Closing Date to but excluding the Revolving
Credit Maturity Date. The rate per annum shall initially be equal to .50% of
such unused amount but shall be adjusted five (5) Business Days following
delivery of the Quarterly Compliance Certificate for the quarter ending
September 30, 1998 pursuant to Section 5.10 below and thereafter shall be
readjusted on the fifth (5th) Business Day following delivery of such Quarterly
Compliance Certificates. At any time that such Quarterly Compliance Certificate
is required to be delivered pursuant to Section 5.10 and is not so delivered,
then the Unused Fee shall be based on the highest percentage set forth below in
this Section 2.6(a). The adjustments in the rate shall be based on the Total
Leverage Ratio as set forth in the chart below. The Unused Fee shall be payable
quarterly in arrears (i) on the first day of each calendar quarter commencing
October 1, 1998, (ii) on the date of any reduction of the Revolving Credit (to
the extent accrued and unpaid on the amount of such reduction),
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pursuant to Section 2.1(d) and (iii) on the Revolving Credit Maturity Date.
Total Leverage Ratio Unused Fee
-------------------- ----------
>3.25 to 1.0 .50%
< =3.25 to 1.0 but .375%
>2.50 to 1.0
< =2.50 to 1.0 .25%
The Unused Fee shall be calculated on the basis of a year of three hundred sixty
(360) days but charged for the actual number of days elapsed.
(b) At any time that there is more than one Lender party to this
Agreement, Borrowers shall unconditionally pay to Agent, for its own account,
until the Obligations are satisfied in full, a non-refundable fee
("Administration Fee") of Twenty-Five Thousand Dollars ($25,000.00), payable
annually in advance, beginning on the date any such other Lender becomes a party
hereto and on the same day of each year thereafter.
(c) Borrowers shall pay to Agent, for the respective accounts of
Lenders, a letter of credit commission for each outstanding Letter of Credit at
a rate per annum equal to the Applicable Margin that would be applicable to
LIBOR Rate Loans at such time. In addition, Borrowers shall pay to Agent, for
the sole account of Issuer, a Letter of Credit fronting fee for each outstanding
Letter of Credit at a rate per annum equal to .125% times the face amount of
each outstanding Letter of Credit. Such fees shall be payable quarterly in
arrears on the first day of each calendar quarter commencing October 1, 1998 and
at the expiration or other termination of each Letter of Credit. In addition,
Borrowers shall pay to Agent, for the benefit of Issuer, Issuer's standard
posted charges for such matters as opening, negotiation and transfer. All fees
described herein are referred to collectively as "L/C Fees."
2.7 Use of Proceeds:
(a) The extensions of credit under and proceeds of the Revolving
Credit shall be used (i) for working capital, and (ii) for the issuance of
Letters of Credit.
2.8 Indemnity: Borrowers shall indemnify, defend and hold harmless Agent
and Lenders against any and all loss, liability, cost or expense which Agent and
Lenders may sustain or incur
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(including, without limitation, loss of the Applicable Margin) as a consequence
of (a) any failure of Borrowers to borrow, convert or extend any LIBOR Rate Loan
after notice thereof has been given to Agent or (b) any payment, prepayment or
conversion of a LIBOR Rate Loan by Borrowers made for any reason (including,
without limitation, any acceleration of the Loans), on a date other than the
last day of the applicable LIBOR Interest Period. Borrowers shall pay the full
amount thereof to Agent on demand by Agent at the request of any Lender.
2.9 Capital Adequacy: If any present or future law, governmental rule,
regulation, policy, guideline, directive or similar requirement (whether or not
having the force of law) imposes, modifies, or deems applicable any capital
adequacy, capital maintenance or similar requirement which affects the manner in
which any Lender or Issuer allocates capital resources to its commitments
(including any commitments hereunder), and as a result thereof, in the opinion
of such Lender or Issuer, the rate of return on such Lender's or Issuer's
capital with regard to the Loans is reduced to a level below that which such
Lender or Issuer could have achieved but for such circumstances, then in such
case and upon notice from such Lender or Issuer to Borrowers, from time to time,
Borrowers shall pay such Lender or Issuer such additional amount or amounts as
shall compensate such Lender or Issuer for such reduction in Lender's or Issuer
rate of return. Such notice shall contain the statement of such Lender or Issuer
with regard to any such amount or amounts which shall, in the absence of
manifest error, be binding upon Borrowers. In determining such amount, such
Lender may use any reasonable method of averaging and attribution that it deems
applicable.
2.10 Taxes:
(a) If any Tax is required to be withheld or deducted from, or is
otherwise payable by Borrowers in connection with, any payment due to Agent,
Issuer or any Lender that is not a "United States Person" (as such term is
defined in Section 7701(a) (30) of the Code), Borrowers (i) shall, if required,
withhold or deduct the amount of such Tax from such payment and, in any case,
pay such Tax to the appropriate taxing authority in accordance with applicable
law and (ii) except in the case of any Bank Tax, shall pay to Issuer, such
Lender or Agent such additional amounts as may be necessary so that the net
amount received by such Person with respect to such payment, after withholding
or deducting all Taxes required to be withheld or deducted, is equal to the full
amount payable hereunder. If any Tax is withheld or deducted from or is
otherwise payable by Borrowers in connection with, any payment due to Issuer,
any Lender or Agent hereunder, Borrowers shall furnish
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to such Person the original or a certified copy of a receipt (if any) for such
Tax from the applicable taxing authority or other evidence of payment thereof
satisfactory to such Person within 30 days after the date of such payment (or,
if such receipt shall not have been made available by such taxing authority
within such time, Borrowers shall use reasonable efforts to promptly obtain and
furnish such receipt). If Borrowers fail to pay any such Taxes when due to the
appropriate taxing authority or fail to remit to Issuer, any Lender or Agent the
required receipts or other evidence of payment thereof satisfactory to such
Person, Borrowers shall indemnify such Person for any Taxes, interest, penalties
or additions to Tax that may become payable by such Person as a result of any
such failure.
(b) Borrowers shall, promptly upon request by Issuer, any Lender or
Agent that is not a United States Person, pay to such Person an amount equal to
(i) all Taxes (other than Bank Taxes and without duplication of amounts paid
pursuant to the preceding paragraph (a)) payable by such Person with respect to
any payment due to such Person hereunder and (ii) all Taxes (other than Bank
Taxes) payable by such Person as a result of payments made by Borrowers (whether
made to a taxing authority or to such Person pursuant to the preceding paragraph
(a) or this paragraph (b)).
(c) If Issuer, any Lender or Agent is, in its sole opinion, able to
apply for any refund, offset, credit, deduction or other reduction in Taxes by
reason of any payment made by Borrowers under the preceding paragraph (a) or
(b), Issuer, such Lender or Agent, as the case may be, shall use reasonable
efforts to obtain such refund, offset, credit, deduction or other reduction and,
upon receipt thereof, will pay to Borrowers such amount, not exceeding the
increased amount paid by Borrowers, as is equal to the net after-tax value to
Issuer, such Lender or Agent, in its sole opinion, of such part of such refund,
offset, credit, deduction or other reduction as it considers to be allocable to
such payment by Borrowers, having regard to all of such Persons' dealings giving
rise to similar refunds, offsets, credits, deductions or other reductions in
relation to the same tax period and to the cost of obtaining the same; provided,
however, that if such Person has made a payment to Borrowers pursuant to this
paragraph (c) and the applicable refund, offset, credit, deduction or other
reduction in Tax is subsequently disallowed, Borrowers shall, promptly upon
request by Issuer, Agent or such Lender refund to such Person that portion of
such payment determined by such Person, in its sole opinion, relating to such
disallowance; and provided, further that (i) Issuer, Agent or such Lender, as
the case may be, shall not be obligated to disclose to Borrowers any information
regarding its Tax affairs or computations and (ii) nothing in this paragraph (c)
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shall interfere with the right of such Person to arrange its Tax affairs as it
deems appropriate.
(d) Each Lender that is not a United States Person shall submit to
Borrowers and Agent, on or before September 25, 1998 (or, in the case of a
Person that is not a United States Person and that became a Lender by
assignment, promptly upon such assignment), two duly completed and signed copies
of either (A) Form 1001 of the IRS entitling such Lender to a complete exemption
from withholding on all amounts to be received by such Lender pursuant to this
Agreement and the Loans, (B) Form 4224 of the IRS relating to all amounts to be
received by such Lender pursuant to this Agreement and the Loans, or (C) in the
case of a Lender that is claiming an exemption from United States withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", two accurate and complete signed original Forms W-8 (or
any successor form prescribed by the Internal Revenue Service, certifying that
such Lender is exempt from or is entitled to a reduced rate of United States
withholding tax on payments under this Agreement or the Notes) and, if such
Lender delivers Forms W-8 (or successor form), two signed certificates
certifying that such Lender is not (1) a "bank" for purposes of Section 881(c)
of the Code, (2) is not a 10% shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of any Borrower and (3) is not a controlled foreign
corporation related to any Borrower (within the meaning of Section 864(d)(4) of
the Code), as appropriate. Each such Lender shall, from time to time after
submitting either such Form, submit to Borrowers and Agent such additional duly
completed and signed copies of one or the other such Forms (or any successor
forms as shall be adopted from time to time by the relevant United States taxing
authorities) as may be (A) requested in writing by Borrowers or Agent and (B)
appropriate under the circumstances and under then current United States law or
regulations to avoid or reduce United States withholding taxes on payments in
respect of all amounts to be received by such Lender pursuant to this Agreement
or the Loans.
(e) Obligations under this Section 2.10 shall survive payment of the
Loans.
2.11 Joint and Several Liability:
(a) Phoenix and, subject only to the terms of Section 2.11(c)
hereof, the other Borrowers shall be jointly and severally liable for all Loan
Obligations regardless of, inter alia, which Borrower or Borrowers requested (or
received the proceeds of) a particular Loan.
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(b) Each of the other Borrowers hereby irrevocably authorizes
Phoenix to give notices, make requests, make payments, receive payments and
notices, give receipts and otherwise take action on behalf of such Borrower
under and with respect to any Loan Document, including, without limitation, with
regard to provisions herein referring to notices or requests being given by or
to "Phoenix, on behalf of Borrowers" and similar provisions.
(c) Without limiting the effect of Section 9.1 hereof, to the extent
that mandatory and non-waivable provisions of applicable law (including but not
limited to any applicable business corporation laws) otherwise would render the
other Loan Documents invalid or unenforceable, such Borrower's obligations
hereunder and under the other Loan Documents shall be limited to the maximum
amount which does not result in such invalidity or unenforceability.
SECTION 3. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance
reasonably satisfactory to Agent and Agent's counsel):
3.1 Resolutions, Opinions, and Other Documents: Borrowers shall have
delivered, or caused to be delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes;
(b) mortgages, financing statements and each of the other Loan
Documents to be executed by any Borrower or any other Person pursuant to the
terms hereof or the Security Documents;
(c) certified copies of (i) resolutions of each Borrower's board of
directors (or similar governing body) authorizing the execution of this
Agreement, the Revolving Credit Notes to be issued hereunder and each document
required to be delivered by any Section hereof and (ii) each Borrower's Articles
or Certificate of Incorporation and By-laws or other applicable organizational
documents;
(d) an incumbency certificate for each Borrower identifying all
Authorized Officers, with specimen signatures;
(e) a written opinion of Borrowers' independent counsel addressed to
Agent for the benefit of all Lenders and Issuer and
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opinions of such other counsel as Agent deems reasonably necessary including,
without limitation, such opinions that Purchaser may reasonably require with
respect to the Security Documents;
(f) such financial statements, reports, certifications and other
operational information as Agent may reasonably require;
(g) certification by the chief financial officer of each Borrower
that there has not occurred any material adverse change in the business,
Properties, operations and condition (financial or otherwise) of Borrowers since
December 31, 1997;
(h) payment by Borrowers of all fees including, without limitation,
the Upfront Fee due Agent on the Closing Date and Expenses associated with the
Loans;
(i) intentionally omitted;
(j) the Intercreditor Agreement properly executed by each of the
parties thereto;
(k) the Security Documents properly executed by each of the parties
thereto;
(l) Uniform Commercial Code, judgment, federal and state tax lien
searches against each Borrower, at Borrowers' expense, showing that the Property
of each such Person is not subject to any Liens except for Permitted Liens,
together with Good Standing and Corporate Tax Lien Search Certificates showing
no Liens on each such Person's Property and showing each Borrower to be in good
standing in each jurisdiction in which it is qualified to do business;
(m) an initial Borrowing Certificate dated the Closing Date;
(n) simultaneous consummation of the issuance of the
Bridge Notes;
(o) title insurance policies required with respect to each of the
Master Mortgages (other than the Master Mortgage with respect to the Connecticut
Facility) insuring the first priority Lien of Collateral Agent against such Real
Property (other than the Connecticut Facility) from a title insurance company
acceptable to Collateral Agent and in an amount satisfactory to Collateral Agent
and subject only to such written exceptions as Agent may approve; and
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(p) evidence reasonably satisfactory to Collateral Agent that all
insurance requirements hereunder and under the Security Documents have been
satisfied in full.
3.2 Absence of Certain Events: At the Closing Date, no Default or Event of
Default hereunder shall have occurred and be continuing.
3.3 Warranties and Representations at Closing: The warranties and
representations contained in Section 4 as well as any other Section of this
Agreement and any other Loan Document shall be true and correct in all material
respects on the Closing Date with the same effect as though made on and as of
that date. Borrowers shall not have taken any action or permitted any condition
to exist which would have been prohibited by any Section hereof.
3.4 Compliance with this Agreement: Borrowers shall have performed and
complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 5 and 6 hereof, which
are required to be performed or complied with by Borrowers before or at the
Closing Date.
3.5 Officers' Certificate: Agent shall have received a certificate dated
the Closing Date and signed by the chief financial officer of each Borrower
certifying that all of the conditions specified in this Section have been
fulfilled.
3.6 Closing: Subject to the conditions of this Section, the Revolving
Credit shall be made available on such date (the "Closing Date") and at such
time as may be mutually agreeable to the parties contemporaneously with the
execution hereof ("Closing") at Philadelphia, Pennsylvania.
3.7 Waiver of Rights: By completing the Closing hereunder, or by making
Advances hereunder, Agent and Lenders do not thereby waive a breach of any
warranty or representation made by Borrowers hereunder or any agreement,
document, or instrument delivered to Agent or otherwise referred to herein, and
any claims and rights of Agent and Lenders resulting from any breach or
misrepresentation by Borrowers are specifically reserved by Agent and Lenders.
3.8 Conditions for Future Advances: The making of Advances under the
Revolving Credit in any form following the Closing Date is subject to the
following conditions precedent (all instruments, documents and agreements to be
in form and substance reasonably satisfactory to Agent and its counsel)
following the Closing Date:
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(a) This Agreement and each of the other Loan Documents
shall be effective;
(b) No event or condition shall have occurred or become known to any
Borrower, or would result from the making of any requested Advance, which could
have a Material Adverse Effect;
(c) No Default or Event of Default then exists;
(d) Each Advance is within and complies with the terms and
conditions of this Agreement including, without limitation, the notice
provisions contained in Sections 2.3 and 2.4 hereof;
(e) No Lien (other than a Permitted Lien), including, without
limitation, any federal tax Lien, has been imposed on any Borrower; and
(f) Each representation and warranty set forth in Section 4 and any
other Loan Document in effect at such time (as amended or modified from time to
time) is then true and correct in all material respects.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the initial Advances
under the Revolving Credit to Borrowers, each Borrower warrants and represents
to Agent, Issuer and Lenders that:
4.1 Corporate Organization and Validity:
(a) Each Borrower (i) is duly organized and validly existing under
the laws of its state of organization, (ii) has all power and authority to
operate its business and own its Property and (iii) is duly qualified, is
validly existing and in good standing and has lawful power and authority to
engage in the business it conducts in each state where the nature and extent of
its business requires qualification, except where the failure to so qualify does
not and could not have a Material Adverse Effect. A list of all states and other
jurisdictions where each Borrower is qualified to do business is attached hereto
as Schedule "4.1" and made a part hereof.
(b) The making and performance of this Agreement and the other Loan
Documents will not violate any law, government rule or regulation, court or
administrative order or other such order, or the charter, minutes or bylaw
provisions of any Borrower or violate or result in a default (immediately or
with the passage of time) under any contract, agreement or instrument to which
each Borrower
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is a party, or by which each is bound. No Borrower is in violation of any term
of any agreement or instrument to which it is a party or by which it may be
bound, which violation has or could have a Material Adverse Effect, or of its
charter, minutes or its bylaws.
(c) Each Borrower has all requisite power and authority to enter
into and perform this Agreement and to incur the obligations herein provided
for, and has taken all proper and necessary action to authorize the execution,
delivery and performance of this Agreement, and the other Loan Documents as
applicable.
(d) This Agreement, the Revolving Credit Notes to be issued
hereunder, and all of the other Loan Documents, when delivered, will be valid
and binding upon each Borrower and enforceable in accordance with their
respective terms.
4.2 Places of Business: The only places of business of each Borrower, and
the places where each keeps and intends to keep its Property, are (except as
qualified in the immediately succeeding sentence), at the addresses shown on
Schedule "4.2" attached hereto and made part hereof. Except for computer
equipment stored on a customer's premise for the purpose of utilizing Phoenix's
Color Net(R) System, Schedule "4.2" identifies each location where any Borrower
keeps its Inventory and Equipment.
4.3 Pending Litigation: There are no judgments or judicial or
administrative orders or proceedings pending, or to the knowledge of Borrowers,
threatened, against any Borrower in any court or before any Governmental
Authority except as shown in Schedule "4.3" attached hereto and made part
hereof. To the knowledge of Borrowers, there are no investigations (civil or
criminal) pending or threatened against any Borrower in any court or before any
Governmental Authority. No Borrower is in default with respect to any order of
any Governmental Authority, which causes or could cause a Material Adverse
Effect. To the best of the knowledge of each Borrower, no shareholder or
executive officer of any Borrower has been indicted in connection with or
convicted of engaging in any criminal conduct, or is currently subject to any
lawsuit or proceeding or under investigation in connection with any
anti-racketeering or other conduct or activity which may result in the
forfeiture of any property to any Governmental Authority.
4.4 Title to Properties: Each Borrower has good and marketable title in
fee simple (or its equivalent under applicable law) to all the Property it
respectively purports to own, free from Liens and free from the claims of any
other Person, except for
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those Liens shown on Schedule "4.4" attached hereto and made part hereof.
4.5 Governmental Consent: Neither the nature of any Borrower or of its
business or Property, nor any relationship between any Borrower and any other
Person, nor any circumstance affecting any Borrower in connection with the
issuance or delivery of this Agreement, the Revolving Credit Notes, or any other
Loan Documents is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of any Borrower in connection with the exe cution, issuance or delivery of
this Agreement or the issuance or delivery of the Revolving Credit Notes or the
other Loan Documents.
4.6 Taxes: All tax returns required to be filed by each Borrower in any
jurisdiction, have been filed, and all Taxes, fees and other governmental
charges upon each Borrower, or upon any of their respective Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those Taxes being contested in good faith with due diligence by
appropriate proceedings for which appropriate reserves have been maintained
under GAAP and as to which no Lien has been entered. No Borrower is aware of any
proposed material additional tax assess ment or Tax to be assessed against or
applicable to such Borrower.
4.7 Financial Statements: The annual consolidated audited balance sheet of
Phoenix as of December 31, 1997, and the related statements of profit and loss,
stockholder's equity and cash flow as of such date, all accompanied by reports
thereon from Phoenix's independent certified public accountants, (complete
copies of which have been delivered to Agent), have been prepared in accordance
with GAAP and present fairly the financial position of Phoenix and its
consolidated Subsidiaries as of such date and the results of its operations for
such period. The fiscal year for all Borrowers currently ends on December 31.
Each Borrower's federal tax identification number is as shown on Schedule "4.7"
attached hereto and made part hereof.
4.8 Full Disclosure: Neither the financial statements referred to in
Section 4.7, nor this Agreement or related agreements and documents or any
written statement furnished by Borrowers or any of them to Agent and/or any
Lender in connection with the negotiation of the Revolving Credit and contained
in any financial statements or documents relating to any Borrower contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading. There is no fact
known to any Borrower which has not
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been disclosed in writing to Agent which has or could have a Material Adverse
Effect.
4.9 Subsidiaries: No Borrower has any Subsidiaries or Affiliates, except
as shown on Schedule "4.9" attached hereto and made a part hereof.
4.10 Guarantees, Contracts, etc.:
(a) No Borrower owns or holds equity or long term debt investments
in, has any outstanding advances to, or serves as guarantor, surety or
accommodation maker for the obligations of any Person, or has entered into any
leases for real or personal Property (whether as landlord or tenant), except as
shown on Schedule "4.10", attached hereto and made part hereof.
(b) No Borrower is a party to any contract or agreement, or subject
to any charter or other corporate restriction, which has or could have a
Material Adverse Effect.
(c) Except as otherwise specifically provided in this Agreement, no
Borrower has agreed or consented to cause or permit any of its Property whether
now owned or hereafter acquired to be subject in the future (upon the happening
of a contingency or otherwise), to a Lien not permitted by this Agreement.
4.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrowers' issuance of the
Revolving Credit Notes will not directly or indirectly violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations U, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II. No Borrower owns or intends to carry or pur chase any
"margin stock" within the meaning of said Regulation U.
(b) Each Borrower has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its Property
and for the conduct of its business, except for those which, if not obtained,
cause or could cause a Material Adverse Effect.
(c) As of the date hereof, no employee benefit plan ("Pension
Plan"), as defined in Section 3(2) of ERISA, (other than a multi employer plan
described in Section 3(37) of ERISA) maintained by any Borrower or under which
any Borrower could have any liability under ERISA (i) has failed to meet the
minimum
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funding standards established in Section 302 of ERISA, (ii) has failed to comply
in a material respect with all applicable requirements of ERISA and of the Code,
including all applicable rulings and regulations thereunder, (iii) has engaged
in or been involved in a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code which would subject Borrowers to any material
liability, or (iv) has been terminated if such termination would subject such
Borrowers to any material liability. No Borrower has assumed, or received notice
of a claim asserted against such Borrower for, withdrawal liability (as defined
in Section 4207 of ERISA) with respect to any multi employer pension plan. Each
Borrower has timely made all contributions when due with respect to any multi
employer pension plan in which it participates and no event has occurred
triggering a claim against such Borrower for withdrawal liability with respect
to any multi employer pension plan in which such Borrower participates. All
Employee Benefit Plans and multi employer pension plans to which any Borrower
participates are shown on Schedule "4.11(c)" attached hereto and made part
hereof.
(d) No Borrower is in violation of or has received written notice
that it is in violation of any applicable statute, regulation or ordinance of
the United States of America, or of any state, city, town, municipality, county
or of any other jurisdiction, or of any agency, or department thereof,
(including without limitation, Environmental Laws), a violation of which causes
or could cause a Material Adverse Effect.
(e) Each Borrower is current with all reports and docu ments
required to be filed with any state or federal securities commission or similar
agency and is in full compliance in all material respects with all applicable
rules and regulations of such commissions.
4.12 Business Interruptions: Within five (5) years prior to the date
hereof, none of the business, Property or operations of any Borrower has been
materially and adversely affected in any way by any casualty, strike, lockout,
combination of workers, order of the United States of America, or any state or
local government, or any political subdivision or agency thereof, directed
against such Borrower. Except as shown on Schedule "4.12" attached hereto and
made part hereof, there are no pending or, to Borrowers' knowledge, threatened
labor disputes, strikes, lockouts or similar occurrences or grievances affecting
the business being operated by any Borrower.
4.13 Names and Intellectual Property:
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(a) Within five (5) years prior to the Closing Date, no Borrower has
conducted business under or used any other name (whether corporate or assumed)
except for the names shown on Schedule "4.13(a)" attached hereto and made part
hereof. Each Borrower is the sole owner of all names shown on such Schedule
"4.13(a)" and any and all business done and all invoices issued in such trade
names are such Borrower's sales, business and invoices. Each trade name of each
Borrower represents a division or trading style of such Borrower and not a
separate Subsidiary or Affiliate or independent entity.
(b) All trademarks, service marks, patents or copyrights which each
Borrower uses, plans to use or has a right to use are shown on Schedule
"4.13(b)" attached hereto and made part hereof and such Borrower is the sole
owner of such Property except to the extent any other Person has claims or
rights in such Property, as such claims and rights are shown on Schedule
"4.13(b)." Borrower is not in violation of any rights of any other Person with
respect to such Property.
(c) Except as shown on Schedule "4.13(c)" attached hereto and made a
part hereof, (i) Borrower does not require any patents, trademarks or other
intellectual property, or any license(s) to use any patents, trademarks or other
intellectual property in order to sell Inventory in the ordinary course of
business; and (ii) Lender will not require any patents, trademarks or other
intellectual property or any licenses to use the same in order to sell any of
such Inventory after the occurrence of an Event of Default.
4.14 Other Associations: No Borrower is engaged or has an interest in any
joint venture or partnership with any other Person except as shown on Schedule
"4.14" hereto and made part hereof.
4.15 Environmental Matters: Except as shown on Schedule "4.15" attached
hereto and made part hereof:
(a) To each Borrower's knowledge, no Property presently owned,
leased or operated by any Borrower contains, or has previously contained, and,
no property formerly owned, leased or operated by any Borrower during the period
of such ownership, lease of operation, contained, any Hazardous Substances in
amounts or concentrations which (i) constitute or constituted a violation of, or
(ii) could give rise to liability under, any Environmental Law.
(b) To each Borrower's knowledge, each Borrower is in compliance,
and, for the duration of all applicable statutes of limitations periods, has
been in compliance with all applicable
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Environmental Laws, and there is no contamination at, under or about any
properties presently owned, leased, or operated by any Borrower or violation of
any Environmental Law with respect to such properties which could reasonably be
expected to interfere with any of their continued operations or reasonably be
expected to impair the fair saleable value thereof.
(c) No Borrower has received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws and no Borrower has
knowledge that any such notice will be received or is being threatened.
(d) Hazardous Substances have not been transported or disposed of in
a manner or to a location which are reasonably likely to give rise to liability
of any Borrower under any Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of any Borrower, threatened, under any
Environmental Law to which any Borrower is or, to any Borrower's knowledge, will
be named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding, the implementation of which is reasonably
likely to have a Material Adverse Effect.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, under any Environmental Law.
4.16 Regulation O: No director, executive officer or principal shareholder
of any Borrower is a director, executive officer or principal shareholder of any
Lender. For the purposes hereof the terms "director" "executive officer" and
"principal shareholder" (when used with reference to a Lender), have the
respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.
4.17 Capital Stock: The authorized and outstanding Capital Stock of each
Borrower is as shown on Schedule "4.17" attached hereto and made part hereof.
All of the Capital Stock of each Borrower has been duly and validly authorized
and issued and is fully paid and non-assessable and has been sold and delivered
to the holders thereof in compliance with, or under valid exemption from, all
Federal and state laws and the rules and regulations of
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all Governmental Authorities governing the sale and delivery of securities.
Except for the rights and obligations shown on Schedule "4.17", there are no
subscriptions, warrants, options, calls, commitments, rights or agreements by
which any Borrower or any of the shareholders or members of such Borrower is
bound relating to the issuance, transfer, voting or redemption of shares of its
Capital Stock or any pre-emptive rights held by any Person with respect to the
shares of Capital Stock of any Borrower. Except as shown on Schedule "4.17", no
Borrower has issued any securities convertible into or exchangeable for shares
of its Capital Stock or any options, warrants or other rights to acquire such
shares or securities convertible into or exchangeable for such shares.
4.18 Solvency: After giving effect to the transactions contemplated under
the Bridge Note Documents and this Agreement, each Borrower is solvent, is able
to pay its respective debts as they become due, and has capital sufficient to
carry on its respective business and all businesses in which each is about to
engage, and now owns Property having a value both at fair valuation and at
present fair salable value greater than the amount required to pay such entity's
debts. No Borrower will be rendered insolvent by the execution and delivery of
this Agreement or any of the other Loan Documents executed in connection with
this Agreement or by the transactions contemplated hereunder or thereunder.
4.19 Interrelatedness of Borrowers: The business operations of each
Borrower are interrelated and complement one another, and such companies have a
common business purpose, with inter-company bookkeeping and accounting
adjustments used to separate their respective Properties, Liabilities, and
transactions. To permit their uninterrupted and continuous operations, such
companies now require and will from time to time hereafter require funds for
general business purposes. The proceeds of Advances under the Revolving Credit
will directly or indirectly benefit each Borrower hereunder severally and
jointly, regardless of which Borrower requests or receives part or all of the
proceeds of such advances.
4.20 Bridge Notes: The issuance of the Bridge Notes by Phoenix has been
completed strictly in accordance with all applicable law and the terms of the
Bridge Note Documents. The Bridge Note Documents constitute valid and binding
agreements, enforceable against each Borrower in accordance with their terms.
The Bridge Note Documents, true and correct copies of which are attached as
Exhibit "B" and made a part hereof, have not been amended or modified in any
way; provided that Phoenix and Purchaser may, subject to Section 6.11, amend or
modify the Bridge Note Documents subsequent to the Closing Date.
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4.21 Year 2000: Each Borrower has reviewed the areas within its business
and operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by such Borrower (or any of its material suppliers,
customers or vendors) may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). The Year 2000 Problem will not result in any Material
Adverse Effect.
4.22 Consolidated Capital Expenditures. As of June 30, 1998, Borrowers'
Consolidated Capital Expenditures for the four (4) quarter period ending June
30,1998 is $27,296,344.00.
SECTION 5. BORROWERS' AFFIRMATIVE COVENANTS
Each Borrower covenants that until all of the Loans are paid and satisfied
in full and the Revolving Credit has been terminated:
5.1 Payment of Taxes and Claims: Each Borrower shall pay, before they
become delinquent,
(a) all Taxes, assessments and governmental charges or levies
imposed upon it or upon such Borrower's Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons entitled to the benefit of statutory
or common law Liens, which, if unpaid, would result in the imposition of a Lien
upon its Property;
provided, however, that such Borrower shall not be required to pay any such Tax,
assessment, charge, levy, claim or demand if the amount, applicability or
validity thereof shall at the time be contested in good faith and by appropriate
proceedings by such Borrower, and if such Borrower shall have set aside on its
books adequate reserves in respect thereof, if so required in accordance with
GAAP; which deferment of payment is permissible so long as no Lien other than a
Permitted Lien has been entered and such Borrower's title to, and its right to
use, its Property are not materially adversely affected thereby.
5.2 Maintenance of Properties and Corporate Existence:
(a) Property - Each Borrower shall maintain its Property in good
condition (normal wear and tear excepted) and make all necessary renewals,
replacements, additions, betterments and improvements thereto and will pay and
discharge when due the cost
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of repairs and maintenance to its Property, and will pay all rentals when due
for all real estate leased by any Borrower.
(b) Property Insurance, Public and Products Liability Insurance -
Each Borrower shall maintain insurance (i) on all insurable tangible Property
against fire, flood, casualty and such other hazards (including, without
limitation, extended coverage, workmen's compensation, boiler and machinery,
with inflation coverage by endorsement) and (ii) against public liability,
product liability and business interruption, in each case in such amounts, with
such deductibles and with such insurers as are customarily used by companies
operating in the same industry as Borrowers. At or prior to Closing, Borrowers
shall furnish Agent with duplicate original policies of insurance or such other
evidence of insurance as Agent may require. In the event any Borrower fails to
procure or cause to be procured any such insurance or to timely pay or cause to
be paid the premium(s) on any such insurance, Agent (on behalf of Lenders) may
do so for such Borrower, but such Borrower shall continue to be liable for the
same. All such policies of insurance shall comply with the requirements of the
Security Documents. Borrowers further covenant that all insurance premiums owing
under its current policies have been paid. Borrowers shall notify Agent,
immediately, upon any Borrower's receipt of a notice of termination,
cancellation, or non-renewal from its insurance company of any such policy.
(c) Financial Records - Each Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP. No Borrower shall change its respective fiscal year end date without
the prior written consent of Agent.
(d) Corporate Existence and Rights - Each Borrower shall do (or
cause to be done) all things necessary to preserve and keep in full force and
effect its existence, good standing, rights and franchises.
(e) Compliance with Laws - Each Borrower shall be in compliance with
any and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including, without limitation, Environmental Laws) and shall obtain
any and all licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its Property or to the conduct of its businesses,
which violation or failure to obtain causes or could cause a Material Adverse
Effect. Borrowers shall
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timely satisfy all assessments, fines, costs and penalties imposed (after
exhaustion of all appeals, provided a stay has been put in effect during such
appeal) by any Governmental Authority against any Borrower or any Property of
any Borrower.
5.3 Business Conducted: Each Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers and
goodwill. No Borrower shall engage, directly or indirectly, in any material
respect in any line of business substantially different from the businesses
conducted by the Borrowers immediately prior to the Closing Date. For the
purposes of Section 5.3, the printing and binding of books shall be deemed
substantially similar to the business of Borrowers on the Closing Date.
5.4 Litigation: Borrowers shall give prompt notice to Agent of any
litigation claiming in excess of $250,000 from any Borrower, or which may
otherwise have a Material Adverse Effect.
5.5 Issue Taxes: Each Borrower shall pay all Taxes (other than Taxes), if
any, in connection with the issuance of the Revolving Credit Notes, and the
recording of any lien documents. The obligations of each Borrower hereunder
shall survive the payment of Borrowers' Loan Obligations hereunder and the termi
nation of this Agreement.
5.6 Bank Accounts: Each Borrower shall maintain its major depository and
disbursement account(s) with Agent.
5.7 Employee Benefit Plans: Each Borrower will (a) fund all its Pension
Plan(s) in a manner that will satisfy the minimum funding standards of Section
302 of ERISA, or will promptly satisfy any accumulated funding deficiency that
arises under Section 302 of ERISA, (b) furnish Agent, promptly after filing of
the same, with copies of all reports or other statements filed with the United
States Department of Labor, the PBGC or the IRS with respect to all Pension
Plan(s), or which any Borrower, or any member of a Controlled Group, may receive
from the United States Department of Labor, the IRS or the PBGC, with respect to
all such Pension Plan(s), and (c) promptly advise Agent of the occurrence of any
reportable event (as defined in Section 4043 of ERISA, other than a reportable
event for which the thirty (30) day notice requirement has been waived by the
PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of
the Code) with respect to any such Pension Plan(s) and the action which such
Borrower proposes to take with respect thereto. Each Borrower will make all
contributions when due with respect to any multi employer pension plan in which
it participates and will promptly advise Agent upon
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(i) its receipt of notice of the assertion against such Borrower of a claim for
withdrawal liability, (ii) the occurrence of any event which, to the best of
each Borrower's knowledge, would trigger the assertion of a claim for withdrawal
liability against any Borrower, and (iii) upon the occurrence of any event
which, to the best of each Borrower's knowledge, would place any Borrower in a
Controlled Group as a result of which any member (including such Borrower)
thereof may be subject to a claim for withdrawal liability, whether liquidated
or contingent.
5.8 Financial Covenants: Borrowers shall maintain and comply
with the following financial covenants:
(a) Total Leverage Ratio: Borrowers shall have and maintain at all
times a Total Leverage Ratio of not more than the following during the following
periods (measured quarterly on a rolling four quarter basis):
Period Maximum Ratio
------ -------------
Closing Date through 12/31/98 5.00 to 1.0
1/1/99 through 3/31/99 4.75 to 1.0
4/1/99 through 6/30/99 4.50 to 1.0
7/1/99 through 9/30/99 4.25 to 1.0
10/1/99 through 12/31/99 4.00 to 1.0
1/1/00 through 6/30/00 3.75 to 1.0
7/1/00 through 9/30/00 3.50 to 1.0
10/1/00 through 3/31/01 3.25 to 1.0
4/1/01 and thereafter 3.00 to 1.0
(b) Interest Coverage Ratio: Borrowers shall have and maintain at
all times an Interest Coverage Ratio of not less than the following during the
following periods (measured quarterly on a rolling four quarter basis; provided
that the measurement at (i) September 30, 1998, shall be based on three months;
(ii) December 31 , 1998, shall be based on six months; and (iii) March 31, 1999,
shall be based on nine months):
Period Minimum Ratio
------ -------------
Closing Date through 12/31/98 3.00 to 1.0
1/1/99 through 3/31/99 2.25 to 1.0
4/1/99 through 9/30/99 2.50 to 1.0
10/1/99 through 3/31/00 2.75 to 1.0
4/1/00 and thereafter 3.00 to 1.0
(c) Minimum Consolidated EBITDA: Borrowers shall have and maintain
at all times Consolidated EBITDA of not less than the
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following during the following periods (measured quarterly on a
rolling four-quarter basis):
Period Minimum Amount
------ --------------
Closing Date through 12/31/98 $16,500,000
1/1/99 through 3/31/99 $17,000,000
4/1/99 through 6/30/99 $17,500,000
7/1/99 through 9/30/99 $18,500,000
10/1/99 through 12/31/99 $19,000,000
1/1/00 through 3/31/00 $19,500,000
4/1/00 through 6/30/00 $20,000,000
7/1/00 through 9/30/00 $20,500,000
10/1/00 through 12/31/00 $21,000,000
1/1/01 through 3/31/01 $22,000,000
4/1/01 through 6/30/01 $22,500,000
7/1/01 through 9/30/01 $23,000,000
(d) Consolidated Capital Expenditures: Borrowers shall not expend
for Consolidated Capital Expenditures more than the following amounts during the
following periods (measured quarterly on a rolling four quarter basis):
Period Maximum Amount
------ --------------
Closing Date through 9/30/98 $50,000,000
10/1/98 through 3/31/99 $55,000,000
4/1/99 through 6/30/99 $42,000,000
7/1/99 through 9/30/99 $25,000,000
10/1/99 through 12/31/00 $15,000,000
1/1/01 and thereafter $10,000,000
5.9 Financial and Business Information: Borrowers shall
deliver to Agent the following:
(a) Financial Statements and Collateral Reports: such data, reports,
statements and information, financial or otherwise, as Agent may reasonably
request, including, without limitation:
(i) within thirty (30) days after the end of each calendar
month in each fiscal year of Borrowers, the earnings and retained earnings
statement of Borrowers for such month and for the expired portion of the fiscal
year ending with the end of such month, setting forth in comparative form the
corresponding figures for the corresponding periods of the previous fiscal year,
and, for each fiscal year, a comparison of Borrowers' actual earnings statement
for such month compared to the monthly earnings forecast required under Section
5.9(a)(v), and the consolidated and
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consolidating balance sheet of Borrowers as at the end of such month, setting
forth in comparative form the corresponding figures as at the end of the
corresponding period of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of Phoenix to have been prepared from
the books and records of each Borrower;
(ii) within one hundred five (105) days after the end of each
fiscal year of Borrowers, the earnings and retained earnings statement of
Borrowers for such year, the balance sheet of Borrowers as at the end of such
fiscal year and a statement of cash flows for such fiscal year, all on a
consolidated and consolidating basis, setting forth in each case in comparative
form the corresponding figures as at the end of and for the previous fiscal
year, all in reasonable detail, including all supporting schedules, and audited
and unqualifiedly certified by a nationally recognized independent public
accounting firm acceptable to Agent, to have been prepared in accordance with
GAAP, and such independent public accountants shall also unqualifiedly certify
that in making the examinations necessary to their certification mentioned above
they have reviewed the terms of this Agreement and the accounts and conditions
of the Borrowers during the accounting period covered by the certificate and
that such review did not disclose the existence of any condition or event which
constitutes a Default or an Event of Default (or if such conditions or events
existed, describing them) together with copies of any management letters
provided by such accountants to management of any Borrower;
(iii) within fifteen (15) days of the end of each calendar
month, Borrowers' accounts receivable aging report, accounts payable aging
report, inventory certificates, account status reports, and such other reports
as Agent reasonably deems necessary, certified by Phoenix's chief financial
officer as or to Agent;
(iv) within sixty (60) days after each fiscal year end,
consolidated projections of Borrowers' earnings statements for the then current
and succeeding three (3) fiscal years; and a comparison of actual results to the
projections for the just completed fiscal year;
(v) within thirty (30) days prior to each fiscal year end, a
monthly forecast of Borrowers' consolidated earnings statement for each month of
the next succeeding fiscal year; and
(vi) on a weekly basis, or sooner if Agent requests, a
Borrowing Certificate.
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(b) Notice of Event of Default - promptly upon becoming aware of the
existence of any condition or event which constitutes a Default or an Event of
Default under this Agreement, a written notice specifying the nature and period
of existence thereof and what action Borrowers are taking (and propose to take)
with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by any
Borrower, notice of default, oral or written, given to such Borrower by any
creditor holding Indebtedness of such Borrower in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00);
(d) Securities and Other Reports - if any Borrower shall be required
to file reports with the Securities and Exchange Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, promptly upon
its becoming avail able, one copy of each financial statement, report, notice or
proxy statement sent by such Borrower to stockholders generally, and, a copy of
each regular or periodic report, and any registration statement, or prospectus
in respect thereof, filed by such Borrower with any securities exchange or with
federal or state securities and exchange commissions or any successor agency.
5.10 Officers' Certificates: Along with the set of financial statements
delivered to Agent at the end of each calendar month that is also the end of a
fiscal quarter pursuant to Section 5.9(a) hereof, Phoenix shall deliver to Agent
a certificate ("Quarterly Compliance Certificate") (in the form of Exhibit "C"
attached hereto and made a part hereof) from the chief financial officer of
Phoenix (and as to certificates accompanying the annual financial statements of
Borrowers, also certified by Phoenix's independent certified public accountant)
setting forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether Borrowers are in compliance
with the requirements of Sections 5.8 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 5.9; and
(b) Event of Default - that the signer has reviewed the relevant
terms of this Agreement, and has made (or caused to be made under his
supervision) a review of the transactions and conditions of Borrowers from the
beginning of the accounting period covered by the income statements being
delivered therewith to the date of the certificate, and that such review has not
disclosed the existence during such period of any condition or event which
constitutes a Default or an Event of Default, specifying the nature
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and period of existence thereof and what action Borrowers have taken or propose
to take with respect thereto.
5.11 Audits and Inspection: Each Borrower shall permit any of Agent's
officers or other representatives to visit and inspect upon reasonable notice
during business hours any of the locations of any Borrower, to examine and audit
all of such Borrower's books of account, records, reports and other papers, to
make copies and extracts therefrom and to discuss its affairs, finances and
accounts with its officers, employees and independent certified public
accountants all at Borrowers' expense at the standard rates charged by Agent for
such activities (plus Agent's out-of-pocket expenses). Representatives of each
Lender may accompany Agent during each such inspection and visit. Agent shall
conduct at least two (2) audits per year.
5.12 Tax Returns and Reports: At Agent's request from time to time,
Borrowers shall promptly furnish Agent with copies of the annual federal and
state income tax returns of each Borrower. Each Borrower further agrees that, if
requested by Agent, such Borrower shall promptly furnish Agent with copies of
all reports filed with any federal, state or local governmental authority or
agency, board or commission.
5.13 Information to Participant: Agent and each Lender may divulge to any
participant, assignee or co-lender or prospective participant, assignee or
co-lender it may obtain in the Revolving Credit or any portion thereof, all
information, and furnish to such Person copies of any reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement, or related agreements and documents; provided, however, such
Participant, assignee, co-lender or prospective participant, assignee or
co-lender is aware of Agent's and such Lender's covenant pursuant to Section
9.18 hereof and has agreed to comply with such covenant.
5.14 Material Adverse Developments: Each Borrower agrees that immediately
upon becoming aware of any development or other information outside the ordinary
course of business and excluding matters of a general economic, financial or
political nature which would reasonably be expected to have a Material Adverse
Effect, such Borrower shall give to Agent telephonic or telegraphic notice
specifying the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed by written
notice thereof to Agent on the same day such verbal communication is made on the
next business day thereafter.
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5.15 Places of Business: Borrowers shall give thirty (30) days prior
written notice to Agent of any changes in the location of any of its respective
places of business, of the places where records concerning its Accounts are
kept, or the establishment of any new, or the discontinuance of any existing
place of business; provided that no Borrower may establish any place of business
outside of the United States without Agent's prior written consent.
5.16 Account Verification: Whether or not a Default or Event of Default
has occurred, any of Agent's officers, employees or agents shall have the right
at any time, upon reasonable notice during business hours, in the name of Agent
or a Borrower, to verify the validity, amount or any other matter relating to
Accounts by mail, telephone or otherwise. Borrowers shall cooperate fully with
Agent, its officers, employees or agents in such process.
5.17 Year 2000: Borrowers shall take all action within their power
necessary to assure that there will be no Material Adverse Effect because of the
Year 2000 Problem. At Agent's request, Borrowers shall provide to Agent
assurance reasonably acceptable to Agent that Borrowers' computer applications
are Year 2000 compatible.
5.18 Build-out Appraisal: Within sixty (60) days from the Closing Date,
Borrower shall provide Agent with an appraisal of the Burkholder Facility on an
"as-built" basis. Such appraisal shall contain an analysis of the actual cost to
build versus the "as-built" appraised value and shall be in form and from an
appraiser acceptable to Agent.
5.19 Updated Environmental Report: Within sixty (60) days from the Closing
Date, Borrowers shall provide Agent with an updated environmental survey of the
Hagerstown Facility which shall be in form and from an engineer acceptable to
Agent and the results of which shall be consistent with Section 4.15 of this
Agreement.
5.20 Local Counsel: Within thirty (30) days from the Closing Date,
Borrowers shall deliver to Agent and Purchaser local counsel opinions (with
regard to the Security Documents) for the States of Massachusetts and New
Jersey, in form and substance reasonably satisfactory to Agent and Purchaser.
SECTION 6. BORROWERS' NEGATIVE COVENANTS:
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Borrowers covenant that until all of the Loan Obligations are paid and
satisfied in full and the Revolving Credit has been terminated, that:
6.1 Merger, Consolidation, Dissolution or Liquidation:
(a) No Borrower shall engage in any Asset Sale other than (i)
Inventory sold in the ordinary course of such Borrower's business; (ii)
equipment that is replaced by other equipment of comparable or superior quality
and value within ninety (90) days of such sale, lease, license, transfer or
other disposition; and (iii) sale of the Connecticut Facility no later than
December 31, 1998, for a gross purchase price of no less than Two Hundred
Seventy Five Thousand Dollars ($275,000.00).
(b) No Borrower shall merge or consolidate with any other Person
except with another Borrower or commence a dissolution or liquidation.
6.2 Acquisitions: No Borrower shall acquire all or a material portion of
the Capital Stock or assets of any Person in any transaction or in any series of
related transactions or enter into any sale and leaseback transaction.
6.3 Liens and Encumbrances: No Borrower shall: (i) execute a negative
pledge agreement with any Person covering any of its Property, or (ii) cause or
permit or agree or consent to cause or permit in the future (upon the happening
of a contingency or otherwise), its Property (including, without limitation, the
Collateral), whether now owned or hereafter acquired, to be subject to a Lien or
be subject to any claim except for Permitted Liens.
As used herein, "Permitted Liens" means:
(a) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like persons, provided the payment thereof is
not at the time required by Section 5.1;
(b) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance,
social security and other like laws;
(c) Existing Liens shown on Schedule "4.4";
(d) Liens under the Security Documents securing the
Bridge Note Obligations and Exchange Obligations; and
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(e) Liens constituting purchase money security interests hereafter
created by a Borrower to Persons providing financing for Capital Expenditures
permitted under this Agreement so long as each obligation secured by a Lien
permitted by this subparagraph (d) is limited to the Property so acquired and
does not exceed 100% of the lower of the cost or fair market value of the
Property acquired with such financing.
6.4 Transactions With Affiliates or Subsidiaries:
(a) No Borrower shall enter into any transaction with any Subsidiary
or other Affiliate including, without limitation, the purchase, sale, or
exchange of Property, or the loaning or giving of funds to any Affiliate or any
Subsidiary unless (i) such Subsidiary or Affiliate is engaged in a business
substantially related to the business conducted by Borrowers, is a Borrower
hereunder and the transaction is in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's business and upon terms substantially
the same and no less favorable to such Borrower as it would obtain in a
comparable arm's-length trans actions with any Person not an Affiliate or a
Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii)
such transaction is intended for incidental administrative purposes.
(b) No Borrower shall create or acquire any Subsidiary.
6.5 Guarantees: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection and any Guaranty
issued in connection with the Bridge Notes, Exchange Notes or Subordinated Notes
or any Guaranty issued in connection with any Indebtedness shown on Schedule
6.7, no Borrower shall become or be liable, directly or indirectly, primary or
secondary, matured or contingent, in any manner, whether as guarantor, surety,
accommodation maker, or otherwise, for the existing or future Indebtedness of
any kind of any Person.
6.6 Distributions and Bonuses: No Borrower shall: (a) declare or pay or
make any forms of Distribution to its share holders, their successors or assigns
other than (i) dividends to Phoenix by a Subsidiary of Phoenix; (ii) a
redemption of the warrant issued in favor of Purchaser pursuant to the Purchase
Agreement provided that no Default or Event of Default has occurred and is
continuing, or after giving effect to such redemption, a Default or Event of
Default would occur; and (iii) loans or advances to any shareholder that is also
an employee which loans or advances do not exceed in the aggregate as to all
shareholders at any one time Two Hundred Thousand Dollars ($200,000); or (b)
with respect to any fiscal year, declare or pay any bonus compensation
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to its shareholders, officers or directors other than the Permitted Bonus;
provided that Borrowers shall not pay the Permitted Bonus if (i) a Default or
Event of Default has occurred and is continuing (or would occur after giving
effect to the payment of the Permitted Bonus) or (ii) the Bridge Notes and/or
Exchange Notes have not been redeemed with proceeds of the Subordinated Notes or
pursuant to an issuance of equity; provided further, however, that the Permitted
Bonus in any fiscal year cannot exceed One Million Five Hundred Thousand Dollars
($1,500,000).
6.7 Other Indebtedness: No Borrower shall hereafter incur or become liable
for any Indebtedness other than from Lenders hereunder except (a) Indebtedness,
not to exceed at any given time the aggregate amount of Ten Million Dollars
($10,000,000) giving rise to a Permitted Lien under Section 6.3(d); (b)
Indebtedness in connection with the Bridge Notes, Exchange Notes and
Subordinated Notes; and (c) Indebtedness existing as of the date of this
Agreement and shown on Schedule "6.7" attached hereto and made a part hereof.
6.8 Loans and Investments: Except as expressly permitted in Section 6.7,
no Borrower shall make or have outstanding loans, advances, extensions of credit
or capital contributions to, investments in, any Person.
6.9 Use of Lenders' Name: No Borrower shall use any Lender's name (or the
name of any Lender's Affiliates) or Agent's name in connection with any of its
business operations. Nothing herein contained is intended to permit or authorize
any Borrower to make any contract on behalf of any Lender or Agent.
6.10 Miscellaneous Covenants:
(a) No Borrower shall become or be a party to any contract or
agreement which at the time of becoming a party to such contract or agreement
materially impairs such Borrower's ability to perform under this Agreement, or
under any other instrument, agreement or document to which such Borrower is a
party or by which it is or may be bound.
(b) No Borrower shall carry or purchase any "margin stock" within
the meaning of Regulations U, T or X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II.
6.11 Certain Restrictions: No Borrower shall (a) make any prepayments or
redemptions of any nature whatsoever on any Indebtedness (other than the
redemption of the Bridge Notes with the Exchange Notes), except Borrower may
prepay or redeem the Bridge Notes and Exchange Notes either pursuant to the
mandatory
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redemption provisions of the Purchase Agreement or with proceeds of the
Subordinated Notes, in either case, provided that no Event of Default has
occurred and is continuing, or upon giving effect to such redemption, no Event
of Default would occur; (b) make any payments (whether principal or interest) in
connection with any of the loans to shareholders, officers or directors listed
on Schedule "6.7" if a Default or Event of Default has occurred, has not been
waived and is continuing or, after giving effect to any such payment, a Default
or Event of Default would occur; or (c) amend or modify any of the terms of the
Bridge Notes or Exchange Notes to shorten the maturity or prepayment and
redemption provisions thereof or amend or modify any of the terms of the
Subordinated Notes, or take any action that would impair the subordination
provisions thereof.
SECTION 7. DEFAULT
7.1 Events of Default: Each of the following events shall constitute an
event of default ("Event of Default"):
(a) Payments - if any Borrower fails to make any payment of
principal or interest, including any Overadvance, under the Revolving Credit on
the due date of such payment; or
(b) Other Charges - if any Borrower fails to pay any other charges,
fees, Expenses or other monetary obligations owing to any Lender or Agent
arising out of or incurred in connection with this Agreement within five (5)
Business Days after the date such payment is due and payable; or
(c) Particular Covenant Defaults - if any Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement
and (other than with respect to the covenants contained in Section 5.8 and
Section 6 for which no cure period shall exist) such failure continues for
thirty (30) days after Agent has given Borrowers notice thereof; or
(d) Financial Information - if any statement, report, financial
statement, or certificate made or delivered by any Bor rower or any of its
officers, employees or agents, to Agent or any Lender is not true and correct,
in all material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage to or
loss, theft, or destruction in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) in the aggregate with respect to any portion of any Property of
any Borrower; or
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(f) Warranties or Representations - if any warranty, representation
or other statement by or on behalf of any Borrower contained in or pursuant to
this Agreement, the other Loan Documents or in any document, agreement or
instrument furnished in compliance with, relating to, or in reference to this
Agreement, is false, erroneous, or misleading in any material respect when made;
or
(g) Agreements with Others - if an event of default (or similar
term) shall occur under the Bridge Notes or Subordinated Notes or if any
Borrower shall default beyond any grace period under any agreement with any
third party creditor for the payment of principal or interest of any
Indebtedness from such Borrower, or if any Borrower shall otherwise default
beyond any grace period under any agreement with respect to any Indebtedness if
the effect of such default is to cause such Borrower's obligations which are the
subject thereof to become due prior to its maturity date or prior to its
regularly scheduled date of payment; or
(h) Other Agreements with Lenders - if any Borrower breaches or
violates the terms of, or if a default or an Event of Default, occurs under any
Interest Hedging Instrument or any other existing or future agreement (related
or unrelated) (including, without limitation, the other Loan Documents) between
any Borrower or among Borrowers and Agent or any Lender or all Lenders; or
(i) Judgments - if any final judgment for the payment of money in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate (i)
which is not fully and unconditionally covered by insurance or (ii) for which
such Borrowers have not established a cash or cash equivalent reserve in the
full amount of such judgment shall be rendered by a court of record against any
Borrower and such judgment shall continue unsatisfied and in effect for a period
of thirty (30) consecutive days without being vacated, discharged, satisfied or
bonded pending appeal;
(j) Assignment for Benefit of Creditors, etc. - if any Borrower
makes or proposes, in writing, an assignment for the benefit of creditors
generally, offers a composition or extension to creditors, or makes or sends
notice of an intended bulk sale of any business or assets now or hereafter owned
or conducted by any Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of any
action for the dissolution or liquidation of any Borrower, or the commencement
of any proceeding to avoid any transaction entered into by any Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of any
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Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against such Borrower; provided, however, that such Borrower shall have ninety
(90) days to obtain the dismissal or discharge of involuntary proceedings filed
against it, it being understood that during such ninety (90) day period, no
Lender shall be obligated to make Advances hereunder and Agent may seek adequate
protection in any bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for any Borrower or for any
Borrower's Property; or
(m) Execution Process, etc. - the issuance of any execution or
distraint process against any Collateral or, with respect to any judgments
seeking in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate, any other Property of any Borrower; or
(n) Termination of Business - if any Borrower ceases any material
portion of its business operations as presently conducted; or
(o) Pension Benefits, etc. - if any Borrower fails to comply with
ERISA so that proceedings are commenced to appoint a trustee under ERISA to
administer such Borrower's employee plans or the PBGC institutes proceedings to
appoint a trustee to administer such plan(s), or a Lien is entered to secure any
deficiency or claim or a "reportable event" as defined under ERISA occurs; or
(p) Investigations - any indication or evidence received by Agent or
any Lender that reasonably leads it to believe any Borrower may have directly or
indirectly been engaged in any type of activity which, would be reasonably
likely to result in the forfeiture of any material property of any Borrower to
any governmental entity, federal, state or local; or
(q) Change of Control - if there shall occur a Change of Control; or
(r) Liens - any lien in favor of Collateral Agent shall cease to be
valid, enforceable and perfected and prior to all other Liens other than
Permitted Liens, or if Borrower or any Governmental Authority shall assert any
of the foregoing.
7.2 Cure - Intentionally Omitted.
7.3 Rights and Remedies on Default:
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(a) In addition to all other rights, options and remedies granted or
available to Agent or Lenders under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), or otherwise available at law or in
equity, upon or at any time after the occurrence and during the continuance of a
Default or an Event of Default, Agent may, in its discretion, and Majority
Lenders shall have the right to cause Agent to, (by written notice to Agent) to
withhold or cease making Advances under the Revolving Credit.
(b) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the Loan Documents (each of which is
also then exercisable by Agent), Agent may, in its discretion, and the Majority
Lenders shall have the right to cause Agent (by written notice to Agent), upon
or at any time after the occurrence and during the continuance of an Event of
Default to terminate the Revolving Credit and to declare the Loan Obligations
immediately due and payable, all without demand, notice, presentment or protest
or further action of any kind (it also being understood that the occurrence of
any of the events or conditions set forth in Sections 7.1(j),(k) or (l) shall
automatically cause an acceleration of the Loan Obligations).
(c) In addition to all other rights, options and remedies granted or
available to Agent, under this Agreement or the Loan Documents (each of which is
also then exercisable by Agent), upon or at any time after the occurrence and
during the continuance of an Event of Default, Borrowers shall be obligated to
deliver and pledge to Agent, on behalf of all Lenders, cash collateral in the
amount of all outstanding Letters of Credit.
(d) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the Loan Documents (each of which is
also then exercisable by Agent), Agent may, or at the direction of Majority
Lenders, shall, upon or at any time after an Event of Default reduce or modify
the Maximum Revolving Credit Amount, Borrowing Base or any portion thereof or
the advance rates or to modify the terms and conditions upon which Lenders may
be willing to consider making Advances under the Revolving Credit or to take
additional reserves in the Borrowing Base for any reason.
(e) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the Loan Documents (each of which is
also then exercisable by Agent) Agent may, or at the direction of Majority
Lenders shall, issue directions to Collateral Agent under the Collateral Agency
Agreement.
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7.4 Nature of Remedies: All rights and remedies granted Agent hereunder
and under the Loan Documents, or otherwise available at law or in equity, shall
be deemed concurrent and cumulative, and not alternative remedies, and Agent may
proceed with any number of remedies at the same time until all Loan Obligations
are satisfied in full. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and Agent, upon or at
any time after the occurrence of an Event of Default, may proceed against any
Borrower, at any time, under any agreement, with any available remedy and in any
order.
7.5 Set-Off: Subject to the Collateral Agency Agreement, if any bank
account of any Borrower with Agent, any Lender or any participant is attached or
otherwise liened or levied upon by any third party, such Lender (and such
participant) as agent for the ratable benefit of all Lenders shall have and be
deemed to have, without notice to Borrowers or any of them, the immediate right
of set-off and may apply the funds or amount thus set-off against any of the
Loan Obligations hereunder.
SECTION 8. AGENT
As between Agent, on one hand, and Lenders, on the other hand, Agent and
each Lender, who are now or shall become parties to this Agreement, agree as
follows (with the consent and approval of Borrowers):
8.1 Appointment and Authorization. Each Lender, and each subsequent holder
of any of the Revolving Credit Notes by its acceptance thereof, hereby
irrevocably appoints and authorizes Agent to take such action on its behalf and
to exercise such powers under this Agreement as are delegated to Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
Subject to the provisions of this Agreement, Agent will handle all transactions
relating to the Loans and all other Loan Obligations, including, without
limitation, all transactions with respect to Letters of Credit, this Agreement,
the Loan Documents and all related documents in accordance with its usual
banking practices. Except as otherwise expressly provided herein, Borrowers are
hereby authorized by Lenders to deal solely with Agent in all transactions which
affect Lenders under this Agreement and the Loan Documents. The rights,
privileges and remedies accorded to Agent hereunder shall be exercised by Agent
on behalf of all of Lenders.
8.2 General Immunity. In performing its duties as Agent hereunder, Agent
will take the same care as it takes in connection with loans in which it alone
is interested. Subject to Section 8.6
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of this Agreement, neither Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith except as such action or omission are
caused solely from its or their own gross negligence or willful misconduct
unless such action was taken or omitted to be taken by Agent at the direction of
Majority Lenders.
8.3 Consultation with Counsel. Agent may consult with legal counsel and
any other professional advisors or consultants deemed necessary or appropriate
and selected by Agent and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel.
8.4 Documents. Agent shall not be under a duty to examine into or pass
upon the effectiveness, genuineness or validity of this Agreement or any of the
Revolving Credit Notes or any other instrument or document furnished pursuant
hereto or in connection herewith, and Agent shall be entitled to assume that the
same are valid, effective and genuine and what they purport to be. In addition
Agent shall not be liable for failing to make any inquiry concerning the
accuracy, performance or observance of any of the terms, provisions or
conditions of such instrument or document. Subject to Section 9.18, Agent shall
furnish to Lenders copies of all notices and financial statements received from
Borrowers hereunder.
8.5 Rights as a Lender. With respect to its applicable Pro Rata Share,
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Subject to the provisions of this Agreement, Agent may
accept deposits from, lend money to and generally engage in any kind of banking
or trust business with Borrowers and their Affiliates and Subsidiaries as if it
were not Agent.
8.6 Responsibility of Agent. It is expressly understood and agreed that
the obligations of Agent hereunder are only those expressly set forth in this
Agreement and that Agent shall be entitled to assume that no Default or Event of
Default, has occurred and is continuing, unless Agent has actual knowledge of
such fact. Except to the extent Agent is required by Lenders pursuant to the
express terms hereof to take a specific action, Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, or with respect to taking or refraining
from taking any action or actions that it may be able to take under or
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in respect of, this Agreement and the Loan Documents. Agent shall incur no
liability under or in respect of this Agreement and the Loan Documents by acting
upon any notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything that it may do or refrain from doing in the
reasonable exercise of its judgment, or that may seem to it to be necessary or
desirable under the circumstances. It is agreed among Agent and Lenders that
Agent shall have no responsibility to carry out audits or otherwise examine the
books and records or properties of Borrowers, except as Agent in its sole
discretion deems appropriate or as otherwise expressly required hereunder. The
relationship between Agent and each Lender is and shall be that of agent and
principal only and nothing herein shall be construed to constitute Agent a joint
venturer with any Lender, a trustee or fiduciary for any of Lenders or for the
holder of a participation therein nor impose on Agent duties and obligations
other than those set forth herein.
8.7 Collections and Disbursements.
(a) Agent will have the right to collect and receive all payments of
the Loan Obligations, and to collect and receive all reimbursements for draws
made under the Letters of Credit, together with all fees, charges or other
amounts due under this Agreement and the Loan Documents, and Agent will remit to
each Lender, according to its applicable Pro Rata Percentage, all such payments
actually received by Agent (subject to any required clearance procedures) in
accordance with the settlement procedures established by Agent from time to
time.
(b) If any such payment received by Agent is rescinded or otherwise
required to be returned for any reason at any time, whether before or after
termination of this Agreement and the Loan Documents, each Lender will, upon
written notice from Agent, promptly pay over to Agent its Pro Rata Percentage of
the amount so rescinded or returned, together with interest and other fees
thereon if also required to be rescinded or returned.
(c) All payments by Agent and Lenders to each other hereunder shall
be in immediately available funds. Agent will at all times maintain proper books
of account and records reflecting the interest of each Lender in the Revolving
Credit and the Letters of Credit, in a manner customary to Agent's keeping of
such records, which books and records shall be available for inspection by each
Lender at reasonable times during normal business hours, at such Lender's sole
expense. Agent may treat the payees of any Revolving Credit Note as the holder
thereof until written notice of
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the transfer thereof shall have been received by Agent. In the event that any
Lender shall receive any payments in reduction of the Revolving Credit in an
amount greater than its applicable Pro Rata Percentage in respect of
indebtedness to Lenders evidenced hereby (including, without limitation amounts
obtained by reason of setoffs), such Lender shall hold such excess in trust for
Agent (on behalf of all other Lenders) and shall promptly remit to Agent such
excess amount so that the amounts received by each Lender hereunder shall at all
times be in accordance with its applicable Pro Rata Percentage. To the extent
necessary for each Lender's actual percentage of all outstanding Loans to equal
its applicable Pro Rata Percentage, any Lender having a greater share of any
payment(s) than its applicable Pro Rata Percentage shall acquire a participation
in the applicable Pro Rata Shares of the other Lenders as determined by Agent.
8.8 Indemnification. Lenders hereby each indemnify Agent (and Issuer with
respect to Letters of Credit) ratably according to each Lender's Pro Rata
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against Agent (or Issuer, as the case may be) in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by Agent (or Issuer, as the case may be) under or related to this Agreement or
the Loans, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from Agent's (or Issuer's, as
the case may be) gross negligence or willful misconduct unless such action was
taken or omitted by Agent (or Issuer, as the case may be) at the direction of
Majority Lenders. Agent shall have the right to deduct, from any amounts to be
paid by Agent to any Lender hereunder, any amounts owing to Agent by such Lender
by virtue of this paragraph.
8.9 Expenses.
(a) All out-of-pocket costs and out-of-pocket expenses incurred by
Agent and not reimbursed on demand by Borrowers, in connection with the
analysis, negotiation, preparation, consummation, creation, amendment,
administration, termination, work-out, forbearance and enforcement of the Loans
(including, without limitation, audit expenses, counsel fees and expenditures to
protect, preserve and defend Agent's and each Lender's rights and interest under
the Loan Documents) shall be shared and paid on demand by Lenders pro rata based
on their applicable Pro Rata Percentage.
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(b) Agent may deduct from payments or distributions to be made to
Lenders such funds as may be necessary to pay or reimburse Agent for such costs
or expenses.
8.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of Borrowers. Agent makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower, any obligor or any Account Debtor of any
Borrower; the accuracy, sufficiency or currency of any information concerning
the financial condition, prospects or results of operations of any Borrower; or
for sufficiency, authenticity, legal effect, validity or enforceability of the
Loan Documents. Agent assumes no responsibility or liability with respect to the
collectibility of the Loan Obligations or the performance by Borrowers of any
obligation under the Loan Documents.
8.11 Reporting. During the term of this Agreement, and subject to Section
9.18, Agent will promptly furnish each Lender with copies of all financial
statements of Borrowers to be delivered or obtained hereunder and such other
financial statements and reports as any Lender may reasonably request. Agent
will immediately notify Lenders when it receives actual knowledge of any Event
of Default under the Loan Documents.
8.12 Removal of Agent. Agent may resign at any time upon giving thirty
(30) days prior written notice thereof to Lenders and Borrowers. Agent may be
removed as Agent hereunder upon the written consent of all Lenders exclusive of
Agent upon the following: (i) wilful misconduct in the performance of Agent's
duties or responsibilities under this Agreement; or (ii) if a receiver, trustee
or conservator is appointed for Agent or any state or federal regulatory
authority assumes management or control of Agent or if, under applicable law,
the administrative or discretionary duties and responsibilities of Agent
hereunder become controlled by or subject to the approval of any state or
federal regulatory authority. Upon any resignation or permitted removal of
Agent, Lenders (exclusive of Agent) shall have the right to appoint a successor
agent by majority vote of the other Lenders (based upon the Pro Rata Percentages
of the other Lenders). Upon the acceptance of the appointment as a successor
agent hereunder by such successor agent, such successor agent shall thereupon
succeed to and become vested with all rights, powers, obligations and
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duties of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder.
8.13 Action on Instructions of Lenders. With respect to any provision of
this Agreement, or any issue arising thereunder, concerning which Agent is
authorized to act or withhold action by direction of Lenders, Agent shall in all
cases be fully protected in so acting, or in so refraining from acting,
hereunder in accordance with written instructions signed by Lenders. Such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all Lenders and on all holders of the Revolving Credit Notes.
8.14 Several Obligations. The obligation of each Lender is several, and
neither Agent nor any other Lender shall be responsible for the obligation and
commitment of any other Lender.
8.15 Consent of Lenders.
(a) Except as expressly provided herein, Agent shall have the sole
and exclusive right to service, administer and monitor the Loans and the Loan
Documents, including without limitation, the right to exercise all rights,
remedies, privileges and options under the Loan Documents, including without
limitation the credit judgment with respect to the making of Advances and the
determination as to the basis on which and extent to which Advances may be made
and the determination as to whether draws should be honored for Letters of
Credit.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
all Lenders: (i) extend any payment date under the Revolving Credit Notes or the
Revolving Credit Maturity Date, (ii) except as contemplated under this
Agreement, reduce any interest rate applicable to the Revolving Credit any fee
payable hereunder or any fee for any Letter of Credit, (iii) increase the
Facility Limit, (iv) compromise or settle all or a portion of the Obligations,
(v) release any obligor from the Loan Obligations except in connection with
termination of the Revolving Credit and full payment and satisfaction of all
Loan Obligations, (vi) amend the definition of Majority Lenders, or (vii) amend
this Section 8.15(b).
(c) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
Majority Lenders: (i) enter into any written amendment to any of the Loan
Documents; (ii) waive any Borrower's compliance with the terms and conditions of
the Loan Documents or
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any Event of Default hereunder or thereunder; or (iii) consent to any Borrower's
taking any action which, if taken, would constitute an Event of Default under
this Agreement or under any of the Loan Documents.
(d) After an acceleration of the Loan Obligations, Agent shall have
the sole and exclusive right, after consultation (to the extent reasonably
practicable under the circumstances) with all Lenders, and, unless otherwise
directed by the Majority Lenders, to exercise or refrain from exercising any and
all right, remedies, privileges and options under the Loan Documents and
actions, including, without limitation, instituting and pursuing all legal
actions brought against any Borrower or to collect the Obligations, or defending
any and all actions brought by any Borrower or other Person; or incurring
Expenses or otherwise making expenditures to protect the Loans, the Collateral
or Lenders' rights or remedies.
(e) To the extent Agent is required to obtain or otherwise elects to
seek the consent of Lenders to an action Agent desires to take, if any Lender
fails to notify Agent, in writing, of its consent or dissent to any request of
Agent hereunder within five (5) days of such Lender's receipt of such request,
such Lender shall be deemed to have given its consent thereto.
8.16 Participation and Assignments. Borrowers hereby acknowledge and agree
that a Lender may at any time: (a) grant any participation(s) in up to
forty-nine percent (49%) of its Pro Rata Share and of its right, title and
interest therein and in or to this Agreement (collectively, "Participation") to
any other lending office of such Lender (but in no event for an amount less than
$5,000,000) or to any other bank, lending institution or other entity which the
granting Lender reasonably determines has the requisite sophistication to
evaluate the merits and risks of investments in Participation ("Participants");
provided, however, that: (i) all amounts payable by Borrowers to each Lender
hereunder shall be determined as if such Lender had not granted such
Participation; and (ii) any agreement pursuant to which any Lender may grant a
Participation: (A) shall provide that such Lender shall retain the sole right
and responsibility to enforce the obligations of Borrowers hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provisions of this Agreement; (B) such participation agreement may
provide that such Lender will not agree to any modification, amendment or waiver
of this Agreement without the consent of Participant if such amendment,
modification or waiver would reduce the principal of or, except as contemplated
in this Agreement, the rate of interest on the Loans, increase the amount of the
Facility Limit, postpone the date fixed for any scheduled
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payment of principal of or interest on the Loans, subject to Section 8.15
hereof; and (C) shall not relieve such Lender from any of its obligations under
this Agreement, which shall remain absolute (including without limitation its
obligation to make Advances hereunder); and (b) assign, pursuant to an
Assignment and Acceptance substantially in the form of Exhibit "D", attached
hereto and made a part hereof (the "Assignment") (i) all or any percent of its
Pro Rata Share or any right, title and interest therein or in and to this
Agreement to Agent (in its capacity as a "Lender") or any Affiliate of Agent; or
(ii) up to forty nine percent (49%) of its Pro Rata Share (but in no event less
than Five Million Dollars ($5,000,000.00)) and any right, title and interest
therein and in and to this Agreement to another financial institution, with the
prior written consent of Agent and, provided no Event of Default is outstanding,
Borrowers, which consent shall not be unreasonably withheld, which assignment
shall in the case of (i) or (ii) above shall be accompanied by payment to the
Agent of a $2,500 transfer fee. Upon the execution by the assignor or assignee
of the Assignment, and delivery to Agent of such Assignment for acceptance, the
assigning Lender shall, to the extent provided in such Assignment, be released
from its obligations under this Agreement and the assignee thereunder shall be a
party hereto and, to the extent provided in such Agreement, have the rights and
obligations of a Lender hereunder.
SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO ITS OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. THE PROVISIONS OF THIS AGREEMENT AND
ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED
SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT
AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND
EFFECT.
9.2 Integrated Agreement: The Revolving Credit Notes, the other Loan
Documents, all related agreements, and this Agreement shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Lender's rights and remedies. If, after applying the foregoing, an
inconsistency still exists, the provisions of this Agreement shall constitute an
amendment thereto and shall control.
9.3 Waiver: No omission or delay by Agent in exercising any right or power
under this Agreement or any related agreements and documents will impair such
right or power or be construed to be a
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waiver of any Default, or Event of Default or an acquiescence therein, and any
single or partial exercise of any such right or power will not preclude other or
further exercise thereof or the exercise of any other right, and as to Borrowers
no waiver will be valid unless in writing and signed by Agent and then only to
the extent specified.
9.4 Indemnity:
(a) Each Borrower releases and shall indemnify, defend and hold
harmless Agent and Lenders, and their respective officers, employees and agents,
of and from any claims, demands, liabilities, obligations, judgments, injuries,
losses, damages and costs and expenses (including, without limitation,
reasonable legal fees) resulting from (i) acts or conduct of any Borrower or all
Borrowers under, pursuant or related to this Agreement and the other Loan
Documents, (ii) Borrowers' breach or violation of any representation, warranty,
covenant or undertaking contained in this Agreement or the other Loan Documents,
and (iii) Borrowers' failure to comply with any or all laws, statutes,
ordinances, governmental rules, regulations or standards, whether federal, state
or local, or court or administrative orders or decrees, (including without
limitation Environmental Laws, etc.) and all costs, expenses, fines, penalties
or other damages resulting therefrom, unless resulting solely from acts or
conduct of Agent or Lenders constituting wilful misconduct or gross negligence.
(b) Promptly after receipt by an indemnified party under subsection
(a) above of notice of the commencement of any action by a third party, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof. The omission so to notify the indemnifying
party shall relieve the indemnifying party from any liability which it may have
to any indemnified party under such subsection only if the indemnifying party is
unable to defend such actions as a result of such failure to so notify. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnified party), and, after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such
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indemnified party, in connection with the defense thereof other than reasonable
costs of investigation.
9.5 Time: Whenever any Borrower shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day. Time is of
the essence in Borrowers' performance under all provisions of this Agreement and
all related agreements and documents.
9.6 Expenses of Agent and Lenders: At Closing and from time to time
thereafter, Borrowers will pay promptly upon demand of Agent all reasonable
costs, fees and expenses (a) of Agent in connection with the analysis,
negotiation, preparation, execution, administration and delivery of this
Agreement and other Loan Documents and the documents and instruments referred to
herein and therein and any amendment, amendment and restatement, supplement,
waiver or consent relating hereto or thereto, whether or not any such amendment,
amendment and restatement, supplement, waiver or consent is executed or becomes
effective (including, without limitation, audit fees for two (2) audits per year
provided no Default or Event of Default has occurred in which case there shall
be no limitation on the number of audits for which Agent shall be reimbursed,
search costs, the reasonable fees, expenses and disbursements of counsel for
Agent and reasonable charges of any expert consultant to Agent) and (b) of Agent
and Lenders in connection with the enforcement of any Obligations of, or the
collection of any payments owing from, Borrowers under this Agreement and/or the
other Loan Documents or protection or defense of the rights of Lenders and/or
Agent under the Loan Documents, following the occurrence of any Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement and other Loan Documents in the
nature of a "work-out" or of any insolvency or bankruptcy proceedings, or
otherwise (including the reasonable fees and disbursements of counsel for Agent
and Lenders and reasonable allocated costs of internal counsel) (collectively,
the "Expenses");
9.7 Brokerage: This transaction was brought about and entered into by
Agent, Lenders and Borrowers acting as principals and without any brokers,
agents or finders being the effective procuring cause hereof. Each Borrower
represents that it has not committed Agent or any Lender to the payment of any
brokerage fee, commission or charge in connection with this transaction. If any
such claim is made on Agent or any Lender by any broker, finder or agent or
other person, Borrowers hereby indemnify, defend and save such party harmless
against such claim and further will defend,
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with counsel satisfactory to Agent, any action or actions to recover on such
claim, at Borrowers' own cost and expense, including such party's reasonable
counsel fees. Borrowers further agree that until any such claim or demand is
adjudicated in such party's favor, the amount demanded shall be deemed a
liability of Borrowers under this Agreement.
9.8 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, as
follows, unless such address is changed by written notice hereunder:
If to Agent to: First Union Capital Markets
1345 Chestnut Street
Philadelphia, PA 19107-4843
Attn: John D. Brady
Director/Vice President
Fax No. 215-786-2877
and
First Union National Bank
2240 Butler Pike
Plymouth Meeting, PA 19046
Attn: Margaret Byrne
Vice President
Fax No. 610-941-3138
With copies to: Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attn: Steven M. Miller, Esquire
Fax No. 215-569-5522
If to Borrowers to: Phoenix Color Corp.
101 Tandy Drive
Hagerstown, MD 21740
Attn: Chief Financial Officer
Fax No. 301 733-1733
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With copies to: Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
Attn: Andrew J. Goodman, Esquire
Fax No. 212-949-6131
If to Lenders: To the addresses set forth on Schedule A.
(b) Any notice sent by Agent, any Lender or Borrowers by any of
the above methods shall be deemed to be given when so received.
(c) Agent shall be fully entitled to rely upon any telecopy
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
9.9 Headings: The headings of any paragraph or Section of this Agreement
are for convenience only and shall not be used to interpret any provision of
this Agreement.
9.10 Survival: All indemnities, warranties, representations, and covenants
made by Borrowers herein, or in any agreement referred to herein or on any
certificate, document or other instru ment delivered by it or on its behalf
under this Agreement, shall be considered to have been relied upon by Agent and
Lenders, and shall survive the delivery to Lenders of the Revolving Credit
Notes, regardless of any investigation made by Lenders or on their behalf. All
statements in any such certificate or other instrument prepared and/or delivered
for the benefit of Agent and any and all Lenders shall constitute warranties and
representations by Borrowers hereunder. Except as otherwise expressly provided
herein, all covenants made by Borrowers hereunder or under any other agreement
or instrument shall be deemed continuing until all Loan Obligations are
satisfied in full. All indemnification obligations of Borrowers under this
Agreement, including, without limitation, under Sections 2.2(h), 2.8, 2.9, 2.10,
5.5, 9.4 and 9.7 shall survive payment of the Loan Obligations.
9.11 Successors and Assigns: This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties. No
Borrower may transfer, assign or delegate any of its duties or obligations
hereunder.
9.12 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in counterpart,
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all of which counterparts taken together shall constitute one completed fully
executed document.
9.13 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by
Borrowers, Agent and Lenders or, if applicable, Majority Lenders.
9.14 Signatories: Each individual signatory hereto repre sents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
9.15 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental bene ficiary of any Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Agent or any Lender of
Borrowers' duty of performance, including, without limitation, Borrowers' duties
under any account or contract with any other Person.
9.16 Discharge of Taxes, Borrowers' Obligations, Etc.: Agent, in its sole
discretion, shall have the right at any time, and from time to time, with prior
notice to Borrowers if Borrowers fail to do so five (5) Business Days after
requested in writing to do so by Agent, to: (a) pay for the performance of any
of Borrowers' obligations hereunder, and (b) discharge Taxes or Liens, at any
time levied or placed on any of any Borrower's Property in violation of this
Agreement unless such Borrower is in good faith with due diligence by
appropriate proceedings contesting such taxes or Liens and maintaining proper
reserves therefor in accordance with GAAP. Expenses and advances shall be added
to the Revolving Credit, bear interest at the same rate applied to Base Rate
Loans, until reimbursed to Agent. Such payments and advances made by Agent shall
not be construed as a waiver by Agent or Lenders of an Event of Default under
this Agreement.
9.17 Withholding and Other Tax Liabilities: Each Lender shall have the
right to refuse to make any Advances from time to time unless Borrowers shall,
at Agent's request, have given to Agent evidence, reasonably satisfactory to
Agent, that Borrowers have properly deposited or paid, as required by law, all
withholding taxes and all federal, state, city, county or other taxes due up to
and including the date of the requested Advance. Copies of deposit slips showing
payment shall likewise constitute satisfactory evidence for such purpose. In the
event that any lien, assessment or tax liability against any Borrower shall
arise in favor of any taxing authority, whether or not notice thereof
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shall be filed or recorded as may be required by law, Agent shall have the right
(but shall not be obligated, nor shall Agent or any Lender hereby assume the
duty) to pay any such lien, assessment or tax liability by virtue of which such
charge shall have arisen; provided, however, that Agent shall not pay any such
tax, assessment or lien if the amount, applicability or validity thereof is
being contested in good faith and by appropriate proceedings by Borrowers. In
order to pay any such lien, assessment or tax liability, Agent shall not be
obliged to wait until said lien, assessment or tax liability is filed before
taking such action as hereinabove set forth. Any sum or sums which Agent (shared
ratably by Lenders) shall have paid for the discharge of any such lien shall be
added to the Revolving Credit and shall be paid by Borrowers to Agent with
interest thereon at the interest rate applicable to Base Rate Loans, upon
demand, and Agent shall be sub rogated to all rights of such taxing authority
against Borrowers.
9.18 Confidential Information: Agent and each Lender (and any prospective
Lender or Participant) agree to hold in confidence all confidential material or
proprietary information obtained by them with respect to Borrowers' business
operations that is plainly marked by the provider of such material or
information as confidential or proprietary except (a) to the extent that the
production of such information is required pursuant to any statute, ordinance,
regulation, rule or order or any subpoena or any Governmental Authority or by
reason of any bank regulation in connection with any bank examination, (b) to
the extent already publicly disclosed and (c) that any Lender shall not be
prohibited from disclosing any such information to any of their agents,
attorneys, accountants, consultants, participants, assignees, prospective
participants, who are aware of such Lender's covenant in this Section 9.18 and
who have agreed with such Lender, for the benefit of the Borrowers, to comply
with such covenant. Nothing contained in this Section shall in any way restrict,
limit or impair the rights of Agent or Lenders to sell any Collateral or
otherwise enforce their Liens in any Collateral following the occurrence of any
Event of Default.
9.19 Consent to Jurisdiction: Without limiting the effect of Section 9.20,
each Borrower, Agent and Lender hereby irrevocably consents to the jurisdiction
of the Courts of Common Pleas of the Commonwealth of Pennsylvania or the United
States District Court for the Eastern District of Pennsylvania in any and all
actions and proceedings whether arising under this Agreement, under any other
Loan Document or any other undertaking and irrevocably agree to service of
process by certified mail, return receipt requested to the address of the
appropriate party set forth herein.
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9.20 Arbitration; Preservation and Limitation of Remedies:
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement and/or any other
Loan Document ("Disputes") between or among parties to this Agreement and/or any
other Loan Documents shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising from
Loan Documents executed in the future or claims arising out of or connected with
the transactions contemplated by this Agreement and the other Loan Documents.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Philadelphia, Pennsylvania. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000.00. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction as provided in this Agreement. The panel from which all arbitrators
are selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to an Interest Hedging
Instrument.
(b) Notwithstanding the preceding binding arbitration provisions,
Agent, Lenders and Borrowers agree to preserve, without diminution, certain
remedies that any party hereto may employ or exercise freely, independently or
in connection with an arbitration proceeding or after an arbitration action is
brought. Agent, Lenders and Borrowers shall have the right to proceed in any
court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any
property or other security by exercising a power of sale granted under the Loan
Documents or under applicable law or by judicial foreclosure and sale, including
a proceeding to confirm the sale; (ii) all rights of self-help including but not
limited to set-off and peaceful possession of personal property; and (iii)
obtaining provisional or ancillary remedies including injunctive
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relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding. Preservation of these remedies does
not limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute. Agent, Lenders and Borrowers agree that they
shall not have a remedy of punitive or exemplary damages against the other in
any Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially.
9.21 Waiver of Jury Trial: TO THE EXTENT THAT ANY DISPUTE IS NOT SUBMITTED
TO ARBITRATION UNDER SECTION 9.20, BORROWERS, AGENT, ISSUER AND EACH LENDER EACH
HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH
ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO
ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS
INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT,
MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
PHOENIX COLOR CORP. PCC EXPRESS, INC.
By: /s/ Edward Lieberman By: /s/ Edward Lieberman
------------------------ ------------------------
Title:Executive Vice President Title:Executive Vice President
PHOENIX (MD.) REALTY, LLC FIRST UNION NATIONAL BANK, as Agent,
as Issuer and as Lender
By: /s/ Edward Lieberman By: /s/ Margaret A. Byrne
------------------------ ------------------------
Title:Executive Vice President Title: Vice President
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EXHIBIT 10.5
REVOLVING CREDIT NOTE
$20,000,000.00
September 15, 1998
FOR VALUE RECEIVED and intending to be legally bound, the undersigned,
PHOENIX COLOR CORP., a Delaware corporation, PCC EXPRESS, INC., a Delaware
corporation and PHOENIX (MD.) REALTY, LLC a Maryland limited liability company
(collectively, "Borrowers" and singly, a "Borrower"), jointly and severally
promise to pay, in lawful money of the United States of America, to the order of
FIRST UNION NATIONAL BANK ("Lender"), at the offices of FIRST UNION NATIONAL
BANK ("Agent") at Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19107,
the maximum aggregate principal sum of Twenty Million Dollars ($20,000,000) or
such lesser sum which represents Lender's Pro Rata Percentage of the principal
balance outstanding under the Revolving Credit established pursuant to the
provisions of that certain Credit Agreement dated of even date herewith, among
Borrowers, Agent, Issuer and Lenders (as it may be amended, modified, restated
or supplemented from time to time, "Credit Agreement"). The outstanding
principal balance hereunder shall, absent earlier acceleration, be payable on
the Revolving Credit Maturity Date. The actual amount due and owing from time to
time hereunder shall be evidenced by Agent's records of receipts and
disbursements with respect to the Revolving Credit, which shall, in the absence
of manifest error, be conclusive evidence of the amount. All capitalized terms
used herein without further definition shall have the respective meanings
ascribed thereto in the Credit Agreement.
Borrowers shall pay interest on the outstanding principal balance
hereunder from time to time at the per annum rates set forth in the Credit
Agreement. Interest shall be calculated on the basis of a year of 360 days but
charged for the actual number of days elapsed, and shall be due and payable as
set forth in the Credit Agreement.
This Revolving Credit Note is one of those certain Revolving Credit Notes
referred to in the Credit Agreement.
If an Event of Default occurs and is continuing under the Credit
Agreement, Agent may exercise the rights and remedies set forth in the Credit
Agreement. The obligations evidenced by this Revolving Credit Note are secured
by the real and personal property Collateral described in the Credit Agreement.
This Revolving Credit Note may be prepaid only in accordance with the
terms and conditions of the Credit Agreement.
Each Borrower hereby waives protest, demand, notice of nonpayment and all
other notices in connection with the delivery, acceptance, performance or
enforcement of this Revolving Credit Note.
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This Revolving Credit Note shall be construed and governed by the laws of
the Commonwealth of Pennsylvania without regard to otherwise applicable
principles of conflicts of laws. The provisions of this Revolving Credit Note
are severable and the invalidity or unenforceability of any provision shall not
alter or impair the remaining provisions of this Revolving Credit Note.
This Revolving Credit Note amends and restates (but does not extinguish
the absolute and unconditional obligation to repay the indebtedness evidenced
by) that certain Revolving Credit Note issues by Borrowers in favor of Lender
dated February 1, 1995, as amended and modified from time to time.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers
have executed these presents the day and year first above written.
PCC EXPRESS, INC. PHOENIX COLOR CORP.
By: /s/ Edward Lieberman By: /s/ Edward Lieberman
------------------------ ------------------------
PHOENIX (MD.) REALTY LLC
By: /s/ Edward Lieberman
------------------------
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<PAGE>
EXHIBIT 10.7
MASTER PLEDGE AGREEMENT
This Master Pledge Agreement ("Agreement") dated this 15th day of
September, 1998, is made by each of the individuals listed on Schedule 1
attached hereto (each, a "Pledgor" and, collectively, "Pledgors") in favor of
First Union National Bank, a national banking association, as collateral agent
(in such capacity "Collateral Agent") for (i) First Union National Bank, as
agent (in such capacity "Bank Agent"), for the lenders ("Lenders") and issuer
("Issuer") parties to the Credit Agreement, dated as of the date hereof (as
amended, modified, restated or supplemented from time to time, "Credit
Agreement"), among the borrowers ("Borrowers"), Bank Agent, Issuer, and Lenders
and (ii) First Union Investors, Inc., ("Purchaser") as purchaser of, and any
other holder of the Bridge Notes or Exchange Notes as defined in, and issued
under, the Bridge Securities Purchase Agreement (as amended, modified, restated
or supplemented from time to time, "Purchase Agreement"), among Phoenix, PCC,
Realty and Purchaser.
BACKGROUND
A. Borrowers, Issuer, Lenders and Bank Agent have entered into the Credit
Agreement which, as set forth in the Background thereto (which Background is
incorporated by reference as if fully set forth herein), inter alia, confirms
and preserves the continued effect and operation of liens and security interests
granted under the Existing Loan Agreement (as defined in the Credit Agreement)
and certain documents related thereto.
B. Phoenix and Purchaser have entered into the Purchase Agreement pursuant
to which Phoenix may issue from time to time the Bridge Notes and Exchange Notes
(as defined in the Purchase Agreement) and PCC and Realty have guaranteed, in
accordance with the terms of the Purchase Agreement, the payment and performance
of Phoenix's obligations under the Purchase Agreement.
C. It is a condition precedent to the effectiveness of the Credit
Agreement that each Pledgor pledge the Collateral as provided herein in order to
secure the Loan Obligations under, and as defined in, the Credit Agreement.
D. It is a condition precedent to the effectiveness of the Purchase
Agreement that each Pledgor pledge the Collateral as herein provided in order to
secure the Bridge Note Obligations and Exchange Note Obligations, each as
defined in the Credit Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
<PAGE>
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement or by reference therein.
(b) The following terms shall have the following meanings:
Bridge Note Majority Holders - The holders of more than fifty
percent (50%) of the outstanding principal amount of the Bridge Notes.
Collateral - Collectively, all of the Pledged Stock and all
additions, exchanges, replacements and substitutions therefor and all dividends
and distributions with respect thereto and the proceeds thereof (whether cash,
securities or other property).
Default - Any Default under and as defined in the Credit
Agreement or any Default under and as defined in the Purchase Agreement.
Event of Default - Any Event of Default under and as defined
in the Credit Agreement or any Event of Default under and as defined in the
Purchase Agreement.
Exchange Note Holders - Any holders of the Exchange Notes.
Obligations - The collective reference to (i) the Loan
Obligations, (ii) the Bridge Note Obligations and (iii) the Exchange Note
Obligations, in each case whether on account of principal, interest, fees,
indemnities, costs, expenses or otherwise.
Pledged Stock - As to any Pledgor, the shares of Capital Stock
in Phoenix listed opposite such Pledgor's name on Schedule 1 hereto, together
with all stock certificates, options or rights issued or granted in connection
therewith.
Secured Parties - Collectively, Bank Agent, Lenders, Issuer,
Purchaser, Trustee, holders of the Bridge Notes and Exchange Note Holders and
any successors or assigns thereto.
Trustee - the trustee under the Exchange Indenture.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. (a) Each Pledgor, intending to be legally bound hereby, and for other
good and sufficient consideration, the receipt of which is hereby acknowledged,
does hereby assign, pledge, hypothecate, deliver and set over to Collateral
Agent, for the benefit of Secured Parties,
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the Collateral and each Pledgor hereby grants to Collateral Agent, for the
benefit of Secured Parties, a continuing lien and security interest in the
Collateral as collateral security for the payment and complete performance
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) Each Pledgor has delivered, or is contemporaneously with the
execution hereof, delivering to Collateral Agent all certificates representing
or evidencing the Collateral, accompanied by duly executed instruments of
transfer or assignments in blank, to be held by Collateral Agent in accordance
with the terms hereof.
3. Each Pledgor hereby represents and warrants that:
(a) Except as pledged herein, such Pledgor has not sold, assigned,
transferred, pledged or granted any option or security interest in or otherwise
hypothecated the Collateral in any manner whatsoever and the Collateral is
pledged herewith free and clear of any and all liens, security interests,
encumbrances, claims, pledges, restrictions, legends, and options.
(b) Such Pledgor has the full power and authority to execute,
deliver, and perform under this Agreement and to pledge the Collateral
hereunder.
(c) This Agreement constitutes the valid and binding obligation of
such Pledgor, enforceable in accordance with its terms, and the pledge of the
Collateral referred to herein is not in violation of and shall not create any
default under any agreement, undertaking or obligation of such Pledgor.
(d) The Collateral has been duly and validly authorized and issued
by Phoenix and such Collateral is fully paid for and non-assessable.
(e) Such Pledgor is pledging hereunder one hundred percent (100%) of
such Pledgor's interest and ownership in the Collateral.
4. Collateral Agent may (but without any obligation to do so), after an
acceleration of the Loan Obligations, Bridge Note Obligations or Exchange Note
Obligations following the occurrence of an Event of Default, exercise from time
to time with respect to the Collateral any and/or all rights and remedies
available to it hereunder, under the UCC, or otherwise available to it, at law
or in equity, including without limitation the right to dispose of the
Collateral at public or private sale(s) or other proceedings, and each Pledgor
agrees that Collateral Agent, Bank Agent, Lenders, Issuer, Purchaser, Trustee
and any holder of the Bridge Notes or Exchange Note Holders shall have the right
upon any such public sale or sales and, to the extent permitted by law, upon any
private sale or sales purchase the whole or any part of the Collateral so sold
free of any equity or right of redemption which each Pledgor waives.
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<PAGE>
5. (a) In addition to all other rights granted to Collateral Agent herein
or otherwise available at law or in equity, Collateral Agent shall have the
following rights, each of which may be exercised (but without any obligation to
do so) at any time after an acceleration of the Loan Obligations, Bridge Note
Obligations or Exchange Note Obligations following the occurrence of an Event of
Default, without further consent of any Pledgor: (i) to transfer the whole or
any part of the Collateral into the name of itself or its nominee; (ii) to vote
the Collateral; (iii) to notify any Persons obligated on any of the Collateral
to make payment to Collateral Agent (for application in accordance with the
terms of the Collateral Agency Agreement) of any amounts due or to become due
thereon; and (iv) to release, surrender or exchange any of the Collateral at any
time, or to compromise any dispute with respect to the same. Collateral Agent
may proceed against the Collateral, or any other collateral securing the
Obligations, in any order, and against any Pledgor and any other obligors
(including, without limitation, Borrowers), jointly and/or severally, in any
order, to satisfy the Obligations. Each Pledgor waives and releases any right to
require Collateral Agent to first collect any of the Obligations secured hereby
from any other collateral of such Pledgor or any other party (including, without
limitation, Borrowers) securing the Obligations under any theory of marshaling
of assets, or otherwise. All rights and remedies of Collateral Agent are
cumulative, not alternative.
(b) Each Pledgor hereby irrevocably appoints each of the officers of
Collateral Agent or its representative as its attorney-in-fact, subject to the
terms hereof, to arrange, at Collateral Agent's option to, (i) after an
acceleration of the Loan Obligations, the Bridge Note Obligations or the
Exchange Note Obligations following the occurrence of an Event of Default,
effectuate the transfer of the Collateral on the books of the issuer thereof to
the name of Collateral Agent or to the name of Collateral Agent's nominee,
designee or assignee, (ii) endorse and collect checks payable to such Pledgor
representing Distributions or other payments on the Collateral that are not
permitted under the Credit Agreement, and (iii) carry out the terms and
provisions hereof.
6. The proceeds of any Collateral received by Collateral Agent (or any
other Secured Party) at any time, whether from the sale of Collateral or
otherwise, shall be applied in accordance with the Collateral Agency Agreement.
7. Each Pledgor recognizes that Collateral Agent may be unable to effect,
or may effect only after such delay which would adversely affect the value that
might be realized from the Collateral, a public sale of all or part of the
Collateral by reason of certain prohibitions contained in the Securities Act of
1933, as amended, and may be compelled to resort to one or more private sales to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor agrees that any
such private sale may be at prices and on terms less favorable to Collateral
Agent or the seller than if sold at public sales, and therefore recognizes and
confirms that such private sales shall not be deemed to have been made in a
commercially unreasonable manner solely because they were made privately. Each
Pledgor
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<PAGE>
agrees that Collateral Agent has no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act
of 1933, as amended.
8. In the event that any stock dividend, reclassification, readjustment or
other change is made or declared in the capital structure of, or any Pledgor
acquires or in any other manner receives additional shares of Capital Stock in,
Phoenix, or any option included within the Collateral is exercised, or both, all
new, substituted and additional shares, or other securities, issued by reason of
any such change or exercise shall be deemed Collateral hereunder and shall be
delivered to and held by Collateral Agent under the terms hereof in the same
manner as the Collateral originally pledged hereunder. No cash Distribution may
be paid to or retained by any Pledgor unless expressly permitted under the
Credit Agreement.
9. So long as no Event of Default has occurred and is continuing and,
until Collateral Agent notifies each Pledgor in writing of the exercise of its
rights hereunder, each Pledgor shall retain the sole right to vote the
Collateral and exercise all rights of ownership with respect to all governance
questions for all purposes; provided no Pledgor shall vote the Collateral in a
manner which would, in Collateral Agent's reasonable judgment, impair the
Collateral or which would be inconsistent with or result in a violation of any
provision of the Credit Agreement or Purchase Agreement.
10. (a) Collateral Agent's sole duty to any Pledgor with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9207 of the UCC or otherwise, shall be to deal with it
in the same manner as Collateral Agent deals with similar property for its own
account. Neither Collateral Agent nor any other Secured Party nor any of their
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on Collateral Agent and the other Secured Parties hereunder are
solely to protect such parties' interests in the Collateral and shall not impose
any duty upon any of such parties to exercise any such powers. Such parties
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Pledgor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
(b) Collateral Agent shall release the Liens on the Collateral
granted hereunder only upon receipt of notice from Bank Agent, Bridge Note
Majority Holders and Trustee, which notices, taken together, confirm the
satisfaction in full of all of the Obligations and termination of the Revolving
Credit.
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<PAGE>
11. To the extent Collateral Agent is required by law to give any Pledgor
prior notice of any public or private sale, or other disposition of the
Collateral, each Pledgor agrees that ten (10) days' prior written notice to each
Pledgor shall be a commercially reasonable and sufficient notice of such sale or
other intended disposition. Each Pledgor further recognizes and agrees that if
the Collateral, or a portion thereof, threatens to decline speedily in value or
is of a type customarily sold on a recognized market, no Pledgor shall be
entitled to any prior notice of sale or other intended disposition.
12. In addition to any other indemnity obligations in favor of Collateral
Agent, each Pledgor shall indemnify, defend and hold harmless Collateral Agent
from and against any and all claims, losses and liabilities resulting from a)
any breach by such Pledgor of such Pledgor's representations and covenants under
this Agreement and b) any stamp, excise, sales or other tax which may be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
13. Each Pledgor hereby waives notice of (a) acceptance of this Agreement,
(b) the existence and incurrence from time to time of any Obligations, (c) the
existence of any Event of Default, the making of demand, or the taking of any
action by Collateral Agent under any Security Document or by Bank Agent or any
holder of the Bridge Notes or Exchange Note Holders under the Loan Documents or
Bridge Note Documents, respectively, and (d) demand and default hereunder.
14. Each Pledgor hereby consents and agrees that Collateral Agent, Bank
Agent and Bridge Note Agent (as the case may be) may at any time or from time to
time in its sole discretion (a) extend or change the time of payment and/or the
manner, place or terms of payment of any and all Obligations, (b) supplement,
amend, restate, supersede, or replace the Credit Agreement or Purchase Agreement
or any other Loan Documents, (c) renew, extend, modify, increase or decrease
loans and extensions of credit under the Credit Agreement or Purchase Agreement,
(d) modify the terms and conditions under which loans and extensions of credit
may be made under the Credit Agreement or notes or securities purchased under
the Purchase Agreement, (e) settle, compromise or grant releases for any
Obligations and/or any Person or Persons liable for payment of any Obligations,
(f) exchange, release, surrender, sell, subordinate or compromise any collateral
of any party now or hereafter securing any of the Obligations and (g) apply any
and all payments received from any source by Collateral Agent at any time
against the Obligations in the order and manner prescribed in the Collateral
Agency Agreement, all of the foregoing in such manner and upon such terms as
Bank Agent, or any holder of the Bridge Notes or Exchange Note Holders or
Collateral Agent may determine and without notice to or further consent from any
Pledgor and without impairing or modifying the terms and conditions of this
Agreement which shall remain in full force and effect.
15. This Agreement shall remain in full force and effect and shall not be
limited, impaired or otherwise affected in any way by reason of (a) any delay in
making demand on Borrowers, Pledgor or any other obligor for or delay in
enforcing or failure to enforce,
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performance or payment of Borrowers', Pledgor's or any other obligor's
obligations, or (b) any failure, neglect or omission on Collateral Agent's part
to perfect any lien upon, protect, exercise rights against, or realize on, any
property of Borrowers, any Pledgor or any other party securing the Obligations.
16. Each Pledgor covenants and agrees that such Pledgor shall not, without
the prior written consent of Collateral Agent, sell, assign, transfer, encumber
or grant any lien, security interest or option on or with respect to any of the
Collateral or enter into any agreement restricting the ability of such Pledgor
or Collateral Agent to sell, assign or transfer any of the Collateral.
17. Each Pledgor hereby authorizes and instructs each issuer of the
Collateral to comply with any instruction received by it from Collateral Agent
in writing that (a) states that an Event of Default has occurred and (b) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Pledgor, and such Pledgor agrees that each such
issuer shall be fully protected in so complying.
18. Each Pledgor acknowledges that the rights and responsibilities of
Collateral Agent under this Agreement with respect to any action taken by
Collateral Agent or the exercise or non-exercise by Collateral Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between Bank
Agent and Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them; and
as among the holders of the Bridge Notes be governed by the Purchase Agreement
and such other agreements with respect thereto as may exist from time to time
among them; and as among the holders of the Exchange Notes be governed by the
Exchange Indenture and such other agreements with respect thereto as may exist
from time to time among them; but, as between Collateral Agent and Pledgors,
Collateral Agent shall be conclusively presumed to be acting as agent for
Secured Parties with full and valid authority so to act or refrain from acting,
and neither Pledgors nor any issuer of Collateral shall be under any obligation,
or entitlement, to make any inquiry respecting such authority. All references
herein to any rights or remedies of Collateral Agent, or to any obligations
owing to Collateral Agent hereunder, shall be deemed to refer to such rights and
remedies as Collateral Agent may exercise on behalf of itself and Secured
Parties for the benefit of Secured Parties.
19. This Agreement, shall be governed by and construed in accordance with
the substantive laws of the Commonwealth of Pennsylvania without regard to its
otherwise applicable principles of conflict of law. The provisions of this
Agreement and all other agreements and documents referred to herein are to be
deemed severable, and the invalidity or unenforceability of any provision shall
not affect or impair the remaining provisions which shall continue in full force
and effect.
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20. No omission or delay by Collateral Agent in exercising any right or
power under this Agreement or any related agreements and documents will impair
such right or power or be construed to be a waiver of any default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Pledgors no waiver will be valid unless
in writing and signed by Collateral Agent and then only to the extent specified.
21. Any notices or consents required or permitted by this Agreement shall
be in writing and shall be deemed given to Pledgors at the respective addresses
set forth on Schedule 1 if effected in the manner set forth in Section 9.8 of
the Credit Agreement and, as to Collateral Agent, if effected in the manner set
forth in the Collateral Agency Agreement.
22. The headings of any paragraph or Section of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.
23. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. No Pledgor may transfer, assign
or delegate any of its duties or obligations hereunder.
24. Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in
counterpart, all of which counterparts taken together shall constitute one fully
completed fully executed document.
25. No modification hereof or any agreement referred to herein shall be
binding or enforceable unless in writing and signed by each Pledgor, Collateral
Agent, Bank Agent, Majority Bridge Note Holders and, if appointed, Trustee.
26. Without limiting the effect of Section 27, each Pledgor and Collateral
Agent hereby irrevocably consent to the jurisdiction of the Courts of Common
Pleas of the Commonwealth of Pennsylvania or the United States District Court
for the Eastern District of Pennsylvania in any and all actions and proceedings
arising under this Agreement, or any other undertaking between the parties
hereto and irrevocably agree to service of process by certified mail, return
receipt requested to the address of the appropriate party set forth herein.
27. (a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement or any other
undertaking between the parties hereto ("Disputes") between or among parties to
this Agreement, shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from this
Agreement, any document executed in the future or claims
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arising out of or connected with the transactions contemplated by this
Agreement. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Philadelphia, Pennsylvania. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction as provided in this Agreement. The panel from
which all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney.
(b) Notwithstanding the preceding binding arbitration provisions,
each Pledgor and Collateral Agent, agree to preserve, without diminution,
certain remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or after an
arbitration action is brought. Each Pledgor and Collateral Agent, shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any property or other security by exercising a power of sale granted
under this Agreement or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help
including but not limited to set-off and peaceful possession of personal
property; and (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute. Each Pledgor and Collateral Agent
agree that they shall not have a remedy of punitive or exemplary damages against
the other in any Dispute and hereby waive any right or claim to punitive or
exemplary damages they have now or which may arise in the future in connection
with any Dispute whether the Dispute is resolved by arbitration or judicially.
28. TO THE EXTENT THAT ANY DISPUTE IS NOT SUBMITTED TO ARBITRATION UNDER
SECTION 27, EACH PLEDGOR AND COLLATERAL AGENT, HEREBY WAIVE ANY AND ALL RIGHTS
IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR
COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS OR BRIDGE NOTE DOCUMENTS OR WITH RESPECT TO
ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS
INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT,
MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS OR BRIDGE NOTE DOCUMENTS.
9
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[SIGNATURES ON NEXT PAGE]
10
<PAGE>
SIGNATURE PAGE: MASTER PLEDGE AGREEMENT
/s/ Edward Lieberman /s/ Louis LaSorsa [Seal]
- --------------------------- --------------------------
Witness Louis Lasorsa
/s/ Louis LaSorsa /s/ Edward Lieberman [Seal]
- --------------------------- --------------------------
Witness Edward Lieberman
/s/ Edward Lieberman /s/ John Biancolli [Seal]
- --------------------------- --------------------------
Witness John Biancolli
/s/ Maria F. Wilkins /s/ Ronald Burk [Seal]
- --------------------------- --------------------------
Witness Ronald Burk
/s/ Henry Burk [Seal]
- --------------------------- --------------------------
Witness Henry Burk
[Seal]
- --------------------------- --------------------------
Witness Anthony DiMartino
/s/ Thomas Newell [Seal]
- --------------------------- --------------------------
Witness Thomas Newell
/s/ Edward Lieberman /s/ John Blum [Seal]
- --------------------------- --------------------------
Witness John Blum
/s/ Edward Lieberman /s/ John Carbone [Seal]
- --------------------------- --------------------------
Witness John Carbone
/s/ Mitchell Weiss [Seal]
- --------------------------- --------------------------
Witness Mitchell Weiss
/s/ Dion von der Lieth [Seal]
- --------------------------- --------------------------
Witness Dion von der Lieth
/s/ Edward Lieberman /s/ Bruno Jung [Seal]
- --------------------------- --------------------------
Witness Bruno Jung
S-1
<PAGE>
EXHIBIT 10.8
SUBSIDIARY PLEDGE AGREEMENT
This Subsidiary Pledge Agreement ("Agreement") dated this 15th day of
September, 1998, is made by Phoenix Color Corp., a Delaware corporation
("Pledgor") in favor of First Union National Bank, a national banking
association, as collateral agent (in such capacity "Collateral Agent") for (i)
First Union National Bank, as agent (in such capacity "Bank Agent"), for the
lenders ("Lenders") and issuer ("Issuer") parties to the Credit Agreement, dated
as of the date hereof (as amended, modified, restated or supplemented from time
to time, "Credit Agreement"), among the borrowers ("Borrowers"), Bank Agent,
Issuer, and Lenders and (ii) First Union Investors, Inc., ("Purchaser") as
purchaser of, and any other holder of the Bridge Notes or Exchange Notes as
defined in, and issued under, the Bridge Securities Purchase Agreement (as
amended, modified, restated or supplemented from time to time, "Purchase
Agreement"), among Phoenix, PCC, Realty and Purchaser.
BACKGROUND
A. Borrowers, Issuer, Lenders and Bank Agent have entered into the Credit
Agreement which, as set forth in the Background thereto (which Background is
incorporated by reference as if fully set forth herein), inter alia, confirms
and preserves the continued effect and operation of liens and security interests
granted under the Existing Loan Agreement (as defined in the Credit Agreement)
and certain documents related thereto.
B. Phoenix and Purchaser have entered into the Purchase Agreement pursuant
to which Phoenix may issue from time to time the Bridge Notes and Exchange Notes
(as defined in the Purchase Agreement) and PCC and Realty have guaranteed, in
accordance with the terms of the Purchase Agreement, the payment and performance
of Phoenix's obligations under the Purchase Agreement.
C. It is a condition precedent to the effectiveness of the Credit
Agreement that Pledgor pledge the Collateral as provided herein in order to
secure the Loan Obligations under, and as defined in, the Credit Agreement.
D. It is a condition precedent to the effectiveness of the Purchase
Agreement that Pledgor pledge the Collateral as herein provided in order to
secure the Bridge Note Obligations and Exchange Note Obligations, each as
defined in the Credit Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
<PAGE>
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement or by reference therein.
(b) The following terms shall have the following meanings:
Bridge Note Majority Holders - The holders of more than fifty
percent (50%) of the outstanding principal amount of the Bridge Notes.
Collateral - Collectively, all of the Pledged Stock and all of
the Pledged Membership Interests and, in each case, all additions, exchanges,
replacements and substitutions therefor and all dividends and distributions with
respect thereto and the proceeds thereof (whether cash, securities or other
property).
Default - Any Default under and as defined in the Credit
Agreement or any Default under and as defined in the Purchase Agreement.
Event of Default - Any Event of Default under and as defined
in the Credit Agreement or any Event of Default under and as defined in the
Purchase Agreement.
Exchange Note Holders - Any holders of the Exchange Notes.
Obligations - The collective reference to (i) the Loan
Obligations, (ii) the Bridge Note Obligations and (iii) the Exchange Note
Obligations, in each case whether on account of principal, interest, fees,
indemnities, costs, expenses or otherwise.
Pledged Membership Interests - The membership interests in
Realty listed opposite Pledgor's name on Schedule 1 hereto, together with all
membership certificates, options or rights issued or granted in connection
therewith.
Pledged Stock - The shares of Capital Stock in PCC listed
opposite Pledgor's name on Schedule 1 hereto, together with all stock
certificates, options or rights issued or granted in connection therewith.
Secured Parties - Collectively, Bank Agent, Lenders, Issuer,
Purchaser, Trustee, holders of the Bridge Notes and Exchange Note Holders, and
any successors or assigns thereto.
Trustee - the trustee under the Exchange Indenture.
2
<PAGE>
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. (a) Pledgor, intending to be legally bound hereby, and for other good
and sufficient consideration, the receipt of which is hereby acknowledged, does
hereby assign, pledge, hypothecate, deliver and set over to Collateral Agent,
for the benefit of Secured Parties, the Collateral and Pledgor hereby grants to
Collateral Agent, for the benefit of Secured Parties, a continuing lien and
security interest in the Collateral as collateral security for the payment and
complete performance (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
(b) Pledgor has delivered, or is contemporaneously with the
execution hereof, delivering to Collateral Agent all certificates representing
or evidencing the Collateral, accompanied by duly executed instruments of
transfer or assignments in blank, to be held by Collateral Agent in accordance
with the terms hereof.
3. Pledgor hereby represents and warrants that:
(a) Except as pledged herein, Pledgor has not sold, assigned,
transferred, pledged or granted any option or security interest in or otherwise
hypothecated the Collateral in any manner whatsoever and the Collateral is
pledged herewith free and clear of any and all liens, security interests,
encumbrances, claims, pledges, restrictions, legends, and options.
(b) Pledgor has the full power and authority to execute, deliver,
and perform under this Agreement and to pledge the Collateral hereunder.
(c) This Agreement constitutes the valid and binding obligation of
Pledgor, enforceable in accordance with its terms, and the pledge of the
Collateral referred to herein is not in violation of and shall not create any
default under any agreement, undertaking or obligation of Pledgor.
(d) The Collateral has been duly and validly authorized and issued
by the issuer thereof and such Collateral is fully paid for and non-assessable.
(e) Pledgor is pledging hereunder one hundred percent (100%) of
Pledgor's interest and ownership in the Collateral.
4. Collateral Agent may (but without any obligation to do so), after an
acceleration of the Loan Obligations, Bridge Note Obligations or Exchange Note
Obligations following the occurrence of an Event of Default, exercise from time
to time with respect to the Collateral any and/or all rights and remedies
available to it hereunder, under the UCC, or otherwise available to it, at law
or in equity, including without limitation the right to dispose of the
Collateral at public or private sale(s) or other proceedings, and Pledgor agrees
that Collateral Agent, Bank Agent,
3
<PAGE>
Lenders, Issuer, Purchaser, Trustee and any holder of the Bridge Notes or any
Exchange Note Holders shall have the right upon any such public sale or sales
and, to the extent permitted by law, upon any private sale or sales purchase the
whole or any part of the Collateral so sold free of any equity or right of
redemption which Pledgor waives.
5. (a) In addition to all other rights granted to Collateral Agent herein
or otherwise available at law or in equity, Collateral Agent shall have the
following rights, each of which may be exercised (but without any obligation to
do so) at any time after an acceleration of the Loan Obligations, Bridge Note
Obligations or Exchange Note Obligations following the occurrence of an Event of
Default, without further consent of Pledgor: (i) to transfer the whole or any
part of the Collateral into the name of itself or its nominee; (ii) to vote the
Collateral; (iii) to notify any Persons obligated on any of the Collateral to
make payment to Collateral Agent (for application in accordance with the terms
of the Collateral Agency Agreement) of any amounts due or to become due thereon;
and (iv) to release, surrender or exchange any of the Collateral at any time, or
to compromise any dispute with respect to the same. Collateral Agent may proceed
against the Collateral, or any other collateral securing the Obligations, in any
order, and against Pledgor and any other obligors (including, without
limitation, Borrowers), jointly and/or severally, in any order, to satisfy the
Obligations. Pledgor waives and releases any right to require Collateral Agent
to first collect any of the Obligations secured hereby from any other collateral
of Pledgor or any other party (including, without limitation, Borrowers)
securing the Obligations under any theory of marshaling of assets, or otherwise.
All rights and remedies of Collateral Agent are cumulative, not alternative.
(b) Pledgor hereby irrevocably appoints each of the officers of
Collateral Agent or its representative as its attorney-in-fact, subject to the
terms hereof, to arrange, at Collateral Agent's option to, (i) after an
acceleration of the Loan Obligations, the Bridge Note Obligations or Exchange
Note Obligations following the occurrence of an Event of Default, effectuate the
transfer of the Collateral on the books of the issuer thereof to the name of
Collateral Agent or to the name of Collateral Agent's nominee, designee or
assignee, (ii) endorse and collect checks payable to Pledgor representing
Distributions or other payments on the Collateral that are not permitted under
the Credit Agreement, and (iii) carry out the terms and provisions hereof.
6. The proceeds of any Collateral received by Collateral Agent (or any
other Secured Party) at any time, whether from the sale of Collateral or
otherwise, shall be applied in accordance with the Collateral Agency Agreement.
7. Pledgor recognizes that Collateral Agent may be unable to effect, or
may effect only after such delay which would adversely affect the value that
might be realized from the Collateral, a public sale of all or part of the
Collateral by reason of certain prohibitions contained in the Securities Act of
1933, as amended, and may be compelled to resort to one or more private sales to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the
4
<PAGE>
distribution or resale thereof. Pledgor agrees that any such private sale may be
at prices and on terms less favorable to Collateral Agent or the seller than if
sold at public sales, and therefore recognizes and confirms that such private
sales shall not be deemed to have been made in a commercially unreasonable
manner solely because they were made privately. Pledgor agrees that Collateral
Agent has no obligation to delay the sale of any such securities for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act of 1933, as amended.
8. In the event that any stock dividend, reclassification, readjustment or
other change is made or declared in the capital structure of, or Pledgor
acquires or in any other manner receives additional shares of Capital Stock or
membership interests in, any issuer, or any option included within the
Collateral is exercised, or both, all new, substituted and additional shares, or
other securities, issued by reason of any such change or exercise shall be
deemed Collateral hereunder and shall be delivered to and held by Collateral
Agent under the terms hereof in the same manner as the Collateral originally
pledged hereunder. No cash Distribution may be paid to or retained by Pledgor
unless expressly permitted under the Credit Agreement.
9. So long as no Event of Default has occurred and is continuing and,
until Collateral Agent notifies Pledgor in writing of the exercise of its rights
hereunder, Pledgor shall retain the sole right to vote the Collateral and
exercise all rights of ownership with respect to all governance questions for
all purposes; provided Pledgor shall not vote the Collateral in a manner which
would, in Collateral Agent's reasonable judgment, impair the Collateral or which
would be inconsistent with or result in a violation of any provision of the
Credit Agreement or Purchase Agreement.
10. (a) Collateral Agent's sole duty to Pledgor with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9207 of the UCC or otherwise, shall be to deal with it
in the same manner as Collateral Agent deals with similar property for its own
account. Neither Collateral Agent nor any other Secured Party nor any of their
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Pledgor or any other Person or to take any other
action whatsoever with regard to the Collateral or any part thereof. The powers
conferred on Collateral Agent and the other Secured Parties hereunder are solely
to protect such parties' interests in the Collateral and shall not impose any
duty upon any of such parties to exercise any such powers. Such parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to Pledgor for any act or failure to
act hereunder, except for their own gross negligence or willful misconduct.
(b) Collateral Agent shall release the Liens on the Collateral
granted hereunder only upon receipt of notice from Bank Agent, Bridge Note
Majority Holders and
5
<PAGE>
Trustee, which notices, taken together, confirm the satisfaction in full of all
of the Obligations and termination of the Revolving Credit.
11. To the extent Collateral Agent is required by law to give Pledgor
prior notice of any public or private sale, or other disposition of the
Collateral, each Pledgor agrees that ten (10) days' prior written notice to
Pledgor shall be a commercially reasonable and sufficient notice of such sale or
other intended disposition. Pledgor further recognizes and agrees that if the
Collateral, or a portion thereof, threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Pledgor shall not be entitled
to any prior notice of sale or other intended disposition.
12. In addition to any other indemnity obligations in favor of Collateral
Agent, Pledgor shall indemnify, defend and hold harmless Collateral Agent from
and against any and all claims, losses and liabilities resulting from a) any
breach by Pledgor of Pledgor's representations and covenants under this
Agreement and b) any stamp, excise, sales or other tax which may be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
13. Pledgor hereby waives notice of (a) acceptance of this Agreement, (b)
the existence and incurrence from time to time of any Obligations, (c) the
existence of any Event of Default, the making of demand, or the taking of any
action by Collateral Agent under any Security Document or by Bank Agent or any
holder of the Bridge Notes or Exchange Note Holders under the Loan Documents or
Bridge Note Documents, respectively, and (d) demand and default hereunder.
14. Pledgor hereby consents and agrees that Collateral Agent, Bank Agent
and Bridge Note Agent (as the case may be) may at any time or from time to time
in its sole discretion (a) extend or change the time of payment and/or the
manner, place or terms of payment of any and all Obligations, (b) supplement,
amend, restate, supersede, or replace the Credit Agreement or Purchase Agreement
or any other Loan Documents, (c) renew, extend, modify, increase or decrease
loans and extensions of credit under the Credit Agreement or Purchase Agreement,
(d) modify the terms and conditions under which loans and extensions of credit
may be made under the Credit Agreement or notes or securities purchased under
the Purchase Agreement, (e) settle, compromise or grant releases for any
Obligations and/or any Person or Persons liable for payment of any Obligations,
(f) exchange, release, surrender, sell, subordinate or compromise any collateral
of any party now or hereafter securing any of the Obligations and (g) apply any
and all payments received from any source by Collateral Agent at any time
against the Obligations in the order and manner prescribed in the Collateral
Agency Agreement, all of the foregoing in such manner and upon such terms as
Bank Agent, or any holder of the Bridge Notes or Exchange Note Holders or
Collateral Agent may determine and without notice to or further consent from
Pledgor and without impairing or modifying the terms and conditions of this
Agreement which shall remain in full force and effect.
6
<PAGE>
15. This Agreement shall remain in full force and effect and shall not be
limited, impaired or otherwise affected in any way by reason of (a) any delay in
making demand on Borrowers, Pledgor or any other obligor for or delay in
enforcing or failure to enforce, performance or payment of Borrowers', Pledgor's
or any other obligor's obligations, or (b) any failure, neglect or omission on
Collateral Agent's part to perfect any lien upon, protect, exercise rights
against, or realize on, any property of Borrowers, any Pledgor or any other
party securing the Obligations.
16. Pledgor covenants and agrees that Pledgor shall not, without the prior
written consent of Collateral Agent, sell, assign, transfer, encumber or grant
any lien, security interest or option on or with respect to any of the
Collateral or enter into any agreement restricting the ability of Pledgor or
Collateral Agent to sell, assign or transfer any of the Collateral.
17. Pledgor hereby authorizes and instructs each issuer of the Collateral
to comply with any instruction received by it from Collateral Agent in writing
that (a) states that an Event of Default has occurred and (b) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from Pledgor, and Pledgor agrees that each such issuer shall be
fully protected in so complying.
18. Pledgor acknowledges that the rights and responsibilities of
Collateral Agent under this Agreement with respect to any action taken by
Collateral Agent or the exercise or non-exercise by Collateral Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between Bank
Agent and Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them; and
as among holders of the Bridge Notes, be governed by the Purchase Agreement and
such other agreements with respect thereto as may exist from time to time among
them; and as among Exchange Note Holders, be governed by the Exchange Indenture
and such other agreements with respect thereto as may exist from time to time
among them; but, as between Collateral Agent and Pledgor, Collateral Agent shall
be conclusively presumed to be acting as agent for Secured Parties with full and
valid authority so to act or refrain from acting, and neither Pledgor nor any
issuer of Collateral shall be under any obligation, or entitlement, to make any
inquiry respecting such authority. All references herein to any rights or
remedies of Collateral Agent, or to any obligations owing to Collateral Agent
hereunder, shall be deemed to refer to such rights and remedies as Collateral
Agent may exercise on behalf of itself and Secured Parties for the benefit of
Secured Parties.
19. This Agreement, shall be governed by and construed in accordance with
the substantive laws of the Commonwealth of Pennsylvania without regard to its
otherwise applicable principles of conflict of law. The provisions of this
Agreement and all other agreements and documents referred to herein are to be
deemed severable, and the invalidity or unenforceability of any provision shall
not affect or impair the remaining provisions which shall continue in full force
and effect.
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<PAGE>
20. No omission or delay by Collateral Agent in exercising any right or
power under this Agreement or any related agreements and documents will impair
such right or power or be construed to be a waiver of any default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Pledgor no waiver will be valid unless in
writing and signed by Collateral Agent and then only to the extent specified.
21. Any notices or consents required or permitted by this Agreement shall
be in writing and shall be deemed given to Pledgor at the respective address and
in the manner set forth in Section 9.8 of the Credit Agreement and, as to
Collateral Agent, if effected in the manner set forth in the Collateral Agency
Agreement.
22. The headings of any paragraph or Section of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.
23. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. Pledgor may not transfer, assign
or delegate any of its duties or obligations hereunder.
24. Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in
counterpart, all of which counterparts taken together shall constitute one fully
completed fully executed document.
25. No modification hereof or any agreement referred to herein shall be
binding or enforceable unless in writing and signed by Pledgor, Collateral
Agent, Bank Agent, Majority Bridge Note Holders and, if appointed, Trustee.
26. Without limiting the effect of Section 27, Pledgor and Collateral
Agent hereby irrevocably consent to the jurisdiction of the Courts of Common
Pleas of the Commonwealth of Pennsylvania or the United States District Court
for the Eastern District of Pennsylvania in any and all actions and proceedings
arising under this Agreement, or any other undertaking between the parties
hereto and irrevocably agree to service of process by certified mail, return
receipt requested to the address of the appropriate party set forth herein.
27. (a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement or any other
undertaking between the parties hereto ("Disputes") between or among parties to
this Agreement, shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from this
Agreement, any document executed in the future or claims
8
<PAGE>
arising out of or connected with the transactions contemplated by this
Agreement. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Philadelphia, Pennsylvania. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction as provided in this Agreement. The panel from
which all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney.
(b) Notwithstanding the preceding binding arbitration provisions,
Pledgor and Collateral Agent, agree to preserve, without diminution, certain
remedies that any party hereto may employ or exercise freely, independently or
in connection with an arbitration proceeding or after an arbitration action is
brought. Pledgor and Collateral Agent, shall have the right to proceed in any
court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any
property or other security by exercising a power of sale granted under this
Agreement or under applicable law or by judicial foreclosure and sale, including
a proceeding to confirm the sale; (ii) all rights of self-help including but not
limited to set-off and peaceful possession of personal property; and (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may be requested by a
party in a Dispute. Pledgor and Collateral Agent agree that they shall not have
a remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
28. TO THE EXTENT THAT ANY DISPUTE IS NOT SUBMITTED TO ARBITRATION UNDER
SECTION 27, PLEDGOR AND COLLATERAL AGENT, HEREBY WAIVE ANY AND ALL RIGHTS IT MAY
HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR
COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS OR BRIDGE NOTE DOCUMENTS OR WITH RESPECT TO
ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS
INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT,
MODIFICATION, RESTRUCTURE, FORBEARANCE,
9
<PAGE>
WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS
OR BRIDGE NOTE DOCUMENTS.
PHOENIX COLOR CORP.
By: /s/ Edward Lieberman
------------------------------
Title: Executive Vice President
10
<PAGE>
Exhibit 10.12
INDUSTRIAL BUILDING LEASE
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 - Grant of Leased Premises 1
ARTICLE 2 - Term; Possession 1
ARTICLE 3 - Base Rent 1
ARTICLE 4 - Additional Rent 2
ARTICLE 5 - Premises 4
ARTICLE 6 - Utilities and Services 5
ARTICLE 7 - Condition and Care of Premises 5
ARTICLE 8 - Return of Premises 7
ARTICLE 9 - Holding Over 8
ARTICLE 10 - Rules and Regulations 8
ARTICLE 11 - Rights Reserved to Landlord 8
ARTICLE 12 - Alterations 9
ARTICLE 13 - Assignment and Subletting 10
ARTICLE 14 - Waiver of Certain Claims; Indemnity 14
ARTICLE 15 - Damage or Destruction by Casualty 14
ARTICLE 16 - Eminent Domain 16
ARTICLE 17 - Default 16
ARTICLE 18 - Subordination 23
-2-
<PAGE>
ARTICLE 19 - Mortgagee Protection 25
ARTICLE 20 - Estoppel Certificate 25
-3-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 21 - Subrogation and Insurance 26
ARTICLE 22 - Nonwaiver 28
ARTICLE 23 - Due Authority 28
ARTICLE 24 - Notices 28
ARTICLE 25 - Hazardous Substances 29
ARTICLE 26 - Tenant Signage 32
ARTICLE 27 - Title and Covenant Against Liens 33
ARTICLE 28 - Miscellaneous 33
ARTICLE 29 - Exculpatory Provisions 36
Exhibit
-------
Leased Premises A
-4-
<PAGE>
INDUSTRIAL BUILDING LEASE
THIS INDUSTRIAL BUILDING LEASE (this "Lease"), is made this 4th day of
January, 1999, by and between LAUREL LIMITED PARTNERSHIP, an Illinois Limited
Partnership, whose office is located at c/o Wayne L. Sorensen, 955 Walden Lane,
Lake Forest, Illinois 60045, ("Landlord"), and PHOENIX COLOR CORP., a Delaware
corporation, whose office is located at 540 Western Maryland Parkway,
Hagerstown, Maryland 21740,("Tenant"), who hereby mutually covenant and agree as
follows:
ARTICLE 1
Grant of Leased Premises
1.1 Grant. Landlord, for and in consideration of the rents herein set
forth and of the covenants and agreements herein contained on the part of Tenant
to be performed, hereby leases to Tenant, and Tenant hereby leases from
Landlord, the real estate, commonly known as 13825 Laurel Drive, Lake Forest,
Illinois 60045 and legally described on an exhibit which is attached hereto,
identified as Exhibit A, together with all improvements now located thereon, or
to be located thereon during the term of this Lease, together with all
appurtenances belonging to or in any way pertaining to the said premises (such
real estate, improvements and appurtenances hereinafter sometimes jointly or
severally, as the context requires, referred to as "Leased Premises").
ARTICLE 2
Term; Possession
2.1 Term. The term of this Lease, (the "Lease Term"), shall commence on
January 4, 1999, (the "Commencement Date"), and shall end on December 31, 1999,
(the "Expiration Date").
2.2 Possession. Landlord shall deliver possession of the Leased Premises
to Tenant on the Commencement Date.
ARTICLE 3
Base Rent
3.1 Base Rent. Beginning with the Commencement Date, Tenant shall pay to
Landlord as monthly base rent ("Base Rent"), Twenty-Eight Thousand Four Hundred
Twelve Dollars and Eighty Cents ($28,412.80) per month for the Lease Term of
January 4, 1999 to December 31, 1999.
The Base Rent shall be payable in advance and received by Landlord without
any prior demand therefor, on the first day of each and every calendar month,
except that the Base Rent for January, 1999 shall be payable no later than
January 10, 1999, and shall be calculated as if the Tenant had been in occupancy
since January 1, 1999. The "Additional Rent" shall consist of all other sums of
money payable by Tenant, whether payable on a regular, periodic, intermediate or
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other basis and regardless of whether paid directly to Landlord or to another
party or entity in fulfillment of Tenant's obligation under this Lease. It is
acknowledged and agreed that all Rent, as defined in Section 3.2, payable under
this Section 3.1 relate to the value of the Leased Premises leased by Tenant
hereunder.
3.2 Manner of Payment. Base Rent and the Additional Rent and all other
amounts becoming due from Tenant to Landlord hereunder (collectively, "Rent")
shall be paid in lawful money of the United States of America to Landlord,
Laurel Limited Partnership, c/o Wayne L. Sorensen, 955 Walden Lane, Lake Forest,
Illinois 60045, or as otherwise designated from time to time by written notice
from Landlord to Tenant. The payment of Rent hereunder is independent of each
and every other covenant and agreement contained in this Lease, and Rent shall
be paid without any set off, abatement, counterclaim or deduction whatsoever
except as may be expressly provided herein.
3.3 Late Charge. In the event that any payment of Base Rent, or the
Additional Rent, shall be received by Landlord after the fifth business day of
each calendar month during the Lease Term and any holdover period, other than
January, 1999 as provided in Section 3.1, then Tenant shall pay Landlord a late
charge equal to the greater of (i) Four Percent (4%) of the full amount then due
Landlord without regard to source, or (ii) the late charge amount or other fee
charged to Landlord by the applicable vendor(s) or authority(s) in order to
reimburse Landlord for Landlord's costs, damages, and all other expenses for
such late payment. The imposition of such late charge shall be in addition to,
and shall not limit, any other remedy available to Landlord under this Lease.
ARTICLE 4
Additional Rent
4.1 Payment by Tenant. Tenant shall pay, as Additional Rent for the Leased
Premises, all taxes and assessments, general and special, water rates, the cost
of certain Landlord's insurance as set forth under Section 21.4, and all other
impositions, ordinary and extraordinary, of every kind and nature whatsoever,
which may be levied, assessed, charged or imposed during the Lease Term upon the
Leased Premises, or any part thereof, or upon any improvements at any time
situated thereon, including without limitation, any assessment by any
association of owners of property in the complex of which the Leased Premises
are a part as "Additional Rent"; provided, however, that Additional Rent levied
against the Leased Premises shall be prorated between Landlord and Tenant as of
the Commencement Date for the first year of the Lease Term and as of the
expiration of the Lease Term for the last year of the Lease Term (and shall be
paid by Tenant upon such expiration based on Landlord's reasonable estimate
thereof). Additional Rent shall also include fees and costs incurred by Landlord
during or prior to the Lease Term for the purpose of contesting or protesting
tax assessments or rates, to the extent such fees and costs relate to savings
realized during the Lease Term provided that Tenant's pro-rata share of any
refunds or reductions of such taxes or assessments are paid or credited to
Tenant. Tenant may take the benefit of the provisions of any statute or
ordinance permitting any assessment to be paid over a period of years, and
Tenant shall be obligated to pay only those installments falling due during the
Lease Term.
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4.2 Alternative Taxes. If at any time during the Lease Term the method of
taxation prevailing at the commencement of the term hereof shall be altered so
that any new tax, assessment, levy, imposition or charge, or any part thereof,
shall be measured by or be based in whole or in part upon the Lease or the
Leased Premises or the Base Rent, Additional Rent or other income therefrom and
shall be imposed upon the Landlord, then all such taxes, assessments, levies,
impositions, or charges, or the part thereof to the extent that they are so
measured or based, shall be deemed to be included within the term Additional
Rent for the purposes hereof to the extent that such Additional Rent would be
payable if the Leased Premises were the only property of Landlord subject to
such Additional Rent and Tenant shall pay and discharge the same as herein
provided in respect of the payment of Additional Rent. There shall be excluded
from Additional Rent all federal income taxes, state and local net income taxes,
federal excess profit taxes, franchise, capital stock and federal or state
estate or inheritance taxes of Landlord.
4.3 (intentionally omitted)
4.4 Evidence of Payment. Tenant shall deliver to Landlord duplicate
receipts and canceled checks, or photocopies thereof showing the payment of all
expenses, taxes or premiums paid directly by Tenant, within Ten (10) days after
respective payments evidenced thereby.
4.5 Right to Contest. Tenant shall not be required to pay any expenses,
taxes or premiums or charge upon or against the Leased Premises, or any part
thereof, or the improvements at any time situated thereon, so long as the Tenant
shall, in good faith and with due diligence, contest the same or the validity
thereof by appropriate legal proceedings which shall have the effect of
preventing the collection of the expenses, taxes, premiums or charges so
contested; provided that pending any such legal proceedings Tenant shall give
Landlord such security as may be deemed satisfactory to Landlord to insure
payment of the amount of the expenses, taxes, premiums or charges, and all
interest and penalties thereon. If, at any time during the continuance of such
contest, the Leased Premises or any part thereof is, in the judgment of the
Landlord, in imminent danger of being forfeited or lost, Landlord may use such
security for the payment of such expenses, taxes, premiums or charge.
ARTICLE 5
Premises
5.1 Permitted Uses. Tenant shall use and occupy the Leased Premises as a
printing plant and distribution facility and general office purposes incidental
thereto, and for other warehousing and light manufacturing uses reasonably
approved by Landlord in writing ("Permitted Uses").
5.2 Prohibited Uses. Tenant shall not use or permit the Leased Premises to
be used in any manner other than the Permitted Uses. Notwithstanding anything
contained herein to the contrary, Tenant shall not use or permit the Leased
Premises to be used in any manner which would (a) be contrary to any statute,
rule, order, ordinance, requirement or regulation applicable or Tenant's use
thereof including, but in no way limited to the Environmental Laws, as such term
is hereafter defined; (b) cause injury to the Leased Premises; (c) constitute a
public or private
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nuisance or waste or constitute or create any noise, vibration or other sound
that is not within industry standards for the machinery or equipment causing
such noise, vibration or sound; (d) render the insurance on the Leased Premises
void or the insurance risk more hazardous or create any defense to payment; (e)
require any additional retrofitting or improvements to Leased Premises to fully
comply with any applicable laws, rules or regulations of any governmental
authority or body, including, but in no way limited to, any requirements of the
Occupational Safety and Health Act and the Americans with Disabilities Act; and
(f) be inconsistent with the general tone and tenor of the operations of the
neighboring buildings, facilities or neighborhood uses in the general area of
the Leased Premises ("Prohibited Use"). Tenant agrees that it will promptly,
upon discovery of any such Prohibited Use, take all necessary steps to compel
the discontinuance of such use. Landlord shall be entitled to and shall have the
right and authority, as part of the rules and regulations that may be imposed
from time to time, to fully or partially restrict, regulate and/or dictate areas
of the Leased Premises in which smoking may or may not take place or be
permitted including, without limitations, imposing regulations that would
prohibit smoking in any confined area.
5.3 Adverse Possession. Tenant shall not use, suffer or permit the Leased
Premises or any portion thereof to be used by Tenant, any third party or the
public, in a manner as might reasonably tend to impair Landlord's title to the
Leased Premises or any portion thereof, or in such manner as might reasonably
make possible a claim or claims of adverse usage or adverse possession by the
public, as such, or third persons, or of implied dedication of the Leased
Premises or any portion thereof or which might create the basis for a claim for
prescriptive easement or right of way on or through the Leased Premises by the
public, as such, or any third party. Nothing contained herein and no action or
inaction by Landlord shall be deemed or construed to mean that Landlord has
granted to Tenant any right, power or permission to do any act or make any
agreement that may create, give rise to or be the foundation for any such right,
title, interest, lien, charge or other encumbrance upon the estate of Landlord
in the Leased Premises.
ARTICLE 6
Utilities and Services
6.1 Utilities and Services. During the Lease Term, Tenant shall purchase
all utility services and shall pay, when due, all charges, including hook-up
charges and security deposits, for separately-metered utilities furnished to the
Leased Premises or chargeable against the Leased Premises, including, but not
limited to, all charges for water, sewage, heat, gas, light, electricity,
telephone, steam or other public or private utility services.
6.2 Failure to Furnish Utilities or Services. Tenant agrees that Landlord
and its agents shall not be liable in damages, by abatement of Rent or
otherwise, for failure, delay or interruption of any utility services. No such
failure, delay or interruption shall ever be deemed to constitute an eviction or
disturbance of Tenant's use and possession of the Leased Premises or relieve
Tenant from paying Rent or performing any of its obligations under this Lease.
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6.3 Regulations Regarding Utilities and Services. Tenant agrees to
cooperate fully, at all times, with Landlord in abiding by all reasonable
regulations and requirements which Landlord may prescribe for the proper
functioning and protection of all utilities and services reasonably necessary
for the operation of the Leased Premises.
ARTICLE 7
Condition and Care of Premises
7.1 Condition of the Leased Premises. No promises of Landlord to alter,
remodel, improve, repair, decorate or clean the Leased Premises or any part
thereof have been made, and no representation respecting the condition of the
Leased Premises or the Land has been made to Tenant by or on behalf of Landlord,
except as expressly set forth herein.
7.2 Tenant Obligations. At its sole cost and expense throughout the Lease
Term, Tenant shall, (a) keep the Leased Premises (including improvements, if
any,) in good order and condition of repair and (b) make and perform all
maintenance thereof and all interior repairs thereto, ordinary and
extraordinary, foreseen and unforeseen, of every nature, kind and description.
All repairs made by Tenant shall be at least equal in quality to the work
performed in constructing the Leased Premises and shall be made by Tenant in
accordance with all laws, ordinances and regulations, whether heretofore or
hereafter enacted. The necessity for or adequacy of maintenance and repairs
shall be measured by the standards which are appropriate for improvements of
similar construction and class.
7.3 Landlord Obligations. Landlord shall not be required to furnish any
services or facilities or to make any repairs or alterations in, about, or to
the Leased Premises. If the Tenant does not perform any of the repairs required
of it under Section 7.2, the Landlord will proceed with such repairs. The costs
and expenses attributable to Landlord hereunder shall be included as Additional
Rent as described in Article 4 above.
7.4 Compliance With Laws, Rules and Regulations. Tenant shall, at its sole
cost and expense, comply with (a) all federal, state, county, municipal and
other governmental and quasi-governmental statutes, laws, rules, orders,
regulations and ordinances affecting the Leased Premises or any part thereof, or
the use thereof, including those which require the making of any unforeseen or
extraordinary changes (the "Legal Requirements"), including but in no way
limited to, the Environmental Laws, as such term is defined in Article 25.1(b)
hereof, and the Americans with Disabilities Act of 1990, whether or not any such
statutes, laws, rules, orders, regulations or ordinances which may be hereafter
enacted involve a change of policy on the part of the governmental body enacting
the same, and (b) all rules, orders and regulations of the National Board of
Fire Underwriters or other bodies exercising similar functions in connection
with the prevention of fire or the correction of hazardous conditions (the "Fire
Underwriters Requirements"), which apply to the Leased Premises. Tenant shall
comply with the requirement of all policies of public liability, fire and other
insurance which at any time may be in force with respect to the Leased Premises.
In the event that Tenant's, or any subtenant or assignee of Tenant's, use of the
Leased Premises results in the Leased Premises constituting a "place of public
accommodation" for purposes of the Americans with Disabilities Act of 1990, the
Tenant shall
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give notice thereof to Landlord and, to the extent that there are any signage
requirements or additions or deletions of, or improvements, or modifications to,
any barriers to accessibility, or other accommodations necessary for compliance
with such law, then Tenant shall be responsible for the cost of all such
modifications, additions, deletions, improvements or accommodations. Tenant
acknowledges that any such requirements may require permanent replacements and
capital improvements to the Leased Premises which (i) have expected useful lives
extending beyond the Lease Term and (ii) would otherwise be the responsibility
of Landlord. Any alterations performed by Tenant hereunder shall be subject to
the terms of Article 12 regarding Tenants right to construct improvements on the
Leased Premises. Tenant agrees to indemnify, hold harmless and defend Landlord
from any claim, demand, damage, costs, assessment, fee, penalty or any other
charge or expense, including attorneys' fees, arising out of or related to any
failure or alleged failure by Tenant to fully comply with any provision of this
section. Tenant further acknowledges and agrees that a failure by Tenant to
comply with the terms hereof, with the giving of the applicable notice,
constitutes a Default under Section 17.1 hereof.
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ARTICLE 8
Return of Premises
8.1 Surrender of Possession. At the termination of this Lease, whether by
lapse of time or otherwise, or upon termination of Tenant's right of possession
without termination of this Lease, Tenant shall surrender possession of the
Leased Premises to Landlord and deliver all keys to the Leased Premises to
Landlord and make known to Landlord the combination of all locks of vaults then
remaining in the Leased Premises. Tenant agrees and acknowledges that Tenant
shall return and surrender the Leased Premises and all equipment, improvements,
personal property and fixtures of Landlord therein to Landlord as aforesaid in
as good condition as when the Lease commenced, ordinary wear and tear and loss
or damage by fire or other insured casualty, condemnation and damage resulting
from the acts of Landlord or its employees and agents excepted, failing which,
Landlord may restore the Leased Premises and such equipment and fixtures to such
condition, and Tenant shall pay the cost thereof to Landlord promptly upon
demand. Except as specifically set forth in this Section or any other Article of
this Lease, Tenant shall have no right or ability to cancel, surrender or
abandon this Lease or the Leased Premises.
8.2 Installations and Additions. All installations, additions, partitions,
hardware, light fixtures, non-trade fixtures and improvements, temporary or
permanent, except printing, finishing, and other movable equipment, machinery,
and furniture, furnishings, and trade fixtures belonging to Tenant, in or upon
the Leased Premises, whether placed thereon by Tenant or Landlord, shall be and
are hereby transferred by Tenant to Landlord to remain Landlord's property and
shall remain on the Leased Premises, all without compensation, allowance or
credit to Tenant; provided however, if prior to the termination of this Lease,
or within Ten (10) days thereafter, Landlord directs Tenant by written notice to
remove any installations or additions installed in the Leased Premises by
Tenant, Tenant, at Tenant's sole cost and expense, shall promptly remove such of
the installations, additions, partitions, hardware, light fixtures, non-trade
fixtures and improvements placed in the Leased Premises by Tenant as are
designated in such notice and repair any damage to the Leased Premises, and
Tenant shall pay the cost thereof to Landlord on demand. At the sole option of
Landlord, Tenant shall leave in place any floor covering without compensation to
Tenant, or Tenant shall remove any floor covering and shall remove all
fastenings, paper, glue, bases or other vestiges and restore the floor surface
to its previous condition or shall pay to Landlord upon demand the cost of
restoring the floor surface to such condition.
8.3 Trade Fixtures and Personal Property. Tenant shall also remove
Tenant's furniture, machinery, safes, trade fixtures, and other items of movable
personal property and equipment of every kind and description from the Leased
Premises and restore any damage to the Leased Premises caused thereby, such
removal and restoration to be performed prior to the end of the Leased Term or
Ten (10) days following termination of this Lease or Tenant's right of
possession, whichever might be earlier. If Tenant fails to remove such items,
Landlord may do so and thereupon the provisions of Section 17.6 shall apply, and
Tenant shall pay to Landlord upon demand the cost of removal and of restoring
the Leased Premises.
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8.4 Survival. All obligations of Tenant under this Article 8 shall survive
the expiration of the Lease Term or sooner termination of this Lease.
ARTICLE 9
Holding Over
9.1 Holding Over. Tenant shall pay Landlord for each day Tenant retains
possession of the Leased Premises or any part thereof after termination of this
Lease, by lapse of time or otherwise, or of Tenant's right to possession of the
Leased Premises, an amount which is equal to the Base Rent, plus twice the
increase in the consumer price index, CPI-U, over the most recent available
twelve month period ending before the beginning of the holdover period, or if
the Landlord has a new lease outstanding with a tenant for the lease premises,
then the Base Rent should be equal to the rent which the Landlord would be
receiving from the new tenant but for the holdover, plus any damages, penalty,
and reasonable attorney fees, the Landlord may incur as a result of the
holdover. Nothing contained in this Section shall be construed or operate as a
waiver of Landlord's right of reentry or any other right or remedy of Landlord.
ARTICLE 10
Rules and Regulations
10.1 Rules and Regulations. Tenant agrees to observe and not to interfere
with the rights reserved to Landlord contained in Article 11 hereof and agrees,
for itself, its employees, agents, contractors, invitees and licensees, to
comply with such reasonable rules and regulations as may be adopted by Landlord
pursuant to Section 11.1 hereof. Any violation by Tenant of any of such
reasonable rules and regulations as may hereafter be adopted by Landlord
pursuant to Section 11.1 of this Lease, may be restrained; but, whether or not
so restrained, Tenant acknowledges and agrees that it shall be and remain liable
for all damages, loss, costs and expenses resulting from any violation by Tenant
of any of said rules and regulations.
ARTICLE 11
Rights Reserved to Landlord
11.1 Rights Reserved to Landlord. Without limiting any other rights
reserved or available to Landlord under this Lease, at law or in equity,
Landlord reserves the following rights to be exercised at Landlord's election
without notice to Tenant (except as otherwise provided herein) and without
liability:
(a) To change the Street address of the Leased Premises;
(b) To retain at all times and to use in emergency situations, pass keys
to the Leased Premises and for the purposes of this Article, Tenant shall
provide Landlord with any keys, security codes, access codes and related
security or entry information necessary for the Landlord to obtain entry
to the Leased Premises and all rooms, offices and facilities in the Leased
Premises;
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(c) To inspect the Leased Premises upon at least Forty-Eight (48) hours
advance notice to Tenant and to make repairs, additions or alterations to
the Leased Premises (in making such repairs, additions or alterations,
Landlord shall use reasonable effort not to interfere with Tenant's
business operations), if Tenant fails to make such repairs, additions, or
alterations and to take all steps necessary for the safety, protection or
preservation of the Leased Premises;
(d) To show the Leased Premises to prospective purchasers, mortgagees, or
other persons having a legitimate interest in viewing the same, at any
time prior to the expiration of the Lease Term;
(e) During the Lease Term, to place and maintain a "For Rent" sign in or
on the Leased Premises;
(f) From time to time, to make and adopt such reasonable rules and
regulations, in addition to, or other than, or by way of amendment or
modification of the rules or regulations contained in other Sections of
this Lease;
(g) If Tenant shall theretofore have vacated or abandoned the Leased
Premises, to decorate, remodel, repair, alter or otherwise prepare the
Leased Premises for new occupancy; and,
(h) To place and maintain "For Sale" signs on the Leased Premises and on
the exterior of the building on the Leased Premises.
ARTICLE 12
Alterations
12.1 Alterations. Tenant shall not, without the prior written consent of
Landlord, which consent may be granted or withheld in Landlord's sole and
unfettered discretion, make any alterations, additions or improvements to the
Leased Premises. If the estimated cost of any such requested alterations,
additions or improvements exceeds Twenty Five Thousand Dollars ($25,000.00) in
any single instance, and Landlord consents thereto, before commencement of the
work or delivery of any materials onto the Leased Premises, Tenant shall furnish
to Landlord for approval plans and specifications, names and addresses of
contractors, copies of contracts, necessary permits and licenses, and
instruments of indemnification against any and all claims, costs, expenses,
damages and liabilities which may arise in connection with such work, all in
such form, substance and amount as may be satisfactory to Landlord. In addition,
prior to commencement of any such work or delivery of any materials onto the
Leased Premises, Tenant shall provide Landlord with appropriate evidence of
Tenant's ability to pay for such work and materials in full and provide Landlord
with adequate assurance of payment for such work and materials. All alterations,
additions and improvements shall be installed in a good, worklike manner, and
only new (or like new) materials shall be used. All such work shall be done only
by licensed contractors reasonably approved by Landlord and shall be subject to
Landlord's scheduling requirements and regulations. Tenant further agrees to
indemnify, defend and hold
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Landlord harmless from any and all liabilities of every kind and description
which may arise out of or be connected in any way with said alterations,
additions or improvements and shall, at its sole and exclusive expense, promptly
pay all bills for such work and/or delivery of goods, removing any materialman
and mechanic notices and/or liens associated therewith. Before commencing any
work in connection with such alterations, additions or improvements, Tenant
shall furnish Landlord with certificates of insurance from all contractors
performing labor or furnishing materials insuring Landlord against any and all
liabilities which may arise out of or be connected in any way with said
alterations, additions or improvements. If Tenant does not use a licensed
qualified contractor for such alterations, additions or improvements, Tenant
shall permit Landlord to supervise construction operations in connection with
the foregoing work if Landlord reasonably requests to do so, provided that in
any event Tenant will provide Landlord with access to such individuals and
documents as Landlord may reasonably request. Tenant shall pay the cost of all
such alterations, additions and improvements and also the cost of restoring the
Leased Premises occasioned by such alterations, additions and improvements;
including the cost of labor and materials, contractor's profit, overhead and
general conditions and a reasonable fee to Landlord. Upon completing any
alterations, additions or improvements, Tenant shall furnish Landlord with
contractor's affidavits, in form required by law, and full and final waivers of
lien and receipts and bills covering all labor and materials expended and used.
All alterations, additions and improvements shall comply with all insurance
requirements and with all city and county ordinances and regulations, with the
requirements of all state and federal statutes and regulations and with the
requirements of Section 7.4 above.
ARTICLE 13
Assignment and Subletting
13.1 Assignment and Subletting. Tenant shall not, without the prior
written consent of Landlord in each instance, (a) assign, transfer, license,
mortgage, pledge, hypothecate or in any way encumber, or subject to or permit to
exist upon or be subjected to any lien or charge, this Lease or any interest
under it; (b) allow to exist or occur any transfer of or lien upon this Lease or
Tenant's interest herein by operation of law; (c) sublet the Leased Premises or
any part thereof; or (d) permit the use or occupancy of the Leased Premises or
any part thereof for any purpose not provided for under Section 5.1 of the Lease
or by anyone other than Tenant and Tenant's employees. Except in connection with
a "Transfer of Business Assignment" (as such term is hereinafter defined),
Landlord shall have exclusive, arbitrary and unfettered discretion to grant or
withhold its consent, without the need or necessity of giving Tenant any reason
therefor. In no event shall this Lease be assigned or assignable by or as part
of voluntary or involuntary bankruptcy proceedings or otherwise, and in no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings. In the event
Tenant requests an assignment of this Lease in connection with the sale of the
majority of the shares of stock of Tenant in one transaction to a single entity
or in connection with the sale of the majority of the assets of Tenant in a
single transaction to a single entity ("Transfer of Business Assignment"),
Landlord shall not unreasonably withhold its consent to Tenant's request. Among
other reasonable criteria, Landlord shall consider whether the assignee will use
the Leased Premises in the same manner as Tenant, whether the assignee has net
assets equal to or in excess of those of Tenant at the time of the requested
assignment and whether the assignee
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is of a good business reputation and capable of fulfilling the obligations of
Tenant pursuant to this Lease.
13.2 Rentals Based on Net Income. Without thereby limiting the generality
of the foregoing provisions of this Article 13, Tenant expressly covenants and
agrees not to enter into any lease, sublease or license, concession or other
agreement for use, occupancy or utilization of the Leased Premises which
provides for rental or other payment for such use, occupancy or utilization
based in whole or in part on the net income or profits derived by any person
from the property leased, used, occupied or utilized (other than an amount based
on a fixed percentage or percentages of receipts or sales), and that any such
purported lease, sublease or license, concession or other agreement shall be
absolutely void and ineffective as a conveyance of any right to or interest in
the possession, use, occupancy or utilization of any part of the Leased
Premises.
13.3 Tenant to Remain Obligated. Consent by Landlord to any assignment,
subletting, use, occupancy or transfer shall not operate to relieve Tenant from
any covenant or obligation hereunder, except to the extent, if any, expressly
provided for in such prior written consent, or be deemed to be a consent to or
relieve Tenant from obtaining Landlord's consent to any subsequent assignment,
transfer, lien, charge, subletting, use or occupancy. Tenant shall pay all of
Landlord's costs, charges and expenses, including attorneys' fees, incurred in
connection with any assignment, transfer, lien, charge, subletting, use or
occupancy made or requested by Tenant, including, without limitation, costs and
expenses of attorneys employed in such assignment, subletting or other transfer
process. Tenant agrees that any and all advertising by Tenant or on Tenant's
behalf with respect to the assignment of this Lease or the subletting of the
Leased Premises must be submitted to, and approved in writing by, Landlord prior
to any publication.
13.4 Tenant's Notice: Landlord's Right to Terminate. Tenant shall, by
notice in writing, advise Landlord of its intention from, on and after a stated
date (which shall not be less than Sixty (60) days after the date of Tenant's
notice) to assign this Lease or sublet any part or all of the Leased Premises
for the balance of any part of the Lease Term to any person or party other than
Tenant (whether a related or affiliated entity or person, or not) in each and
every instance, and in such event, except with respect to a proposed Transfer of
Business Assignment, Landlord shall have the right, to be exercised by giving
written notice to Tenant within Thirty (30) days after receipt of Tenant's
notice, to recapture the space described in Tenant's notice, and such recapture
notice shall, if given, terminate this Lease with respect to the space therein
described as of the date stated in Tenant's notice (Tenant shall have the right
to negate Landlord's recapture of space by withdrawing such assignment or
subletting request within Five (5) business days after the date of Landlord's
notice of recapture whereupon this Lease and Tenant's occupancy hereunder shall
continue unchanged and in full force and effect for the then remaining Lease
Term). Tenant's notice of proposed assignment or subletting shall (i) state the
name and address of the proposed subtenant and assignee, (ii) include a true and
complete copy of the proposed sublease or assignment, (iii) contain sufficient
information to permit Landlord, in its sole discretion, to determine the
financial responsibility and character of the proposed subtenant or assignee,
(iv) state who is responsible for the costs of physically separating the Leased
Premises and the component systems serving same, and (v) shall state whether the
proposed assignment is
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a Transfer of Business Assignment. If Tenant's notice shall cover all of the
space hereby demised and if Landlord shall give the aforesaid recapture notice
with respect thereto (and Tenant shall not have withdrawn same on a timely
basis) then, the Lease Term shall expire on the date stated in Tenant's notice
as fully and completely as if that date had been the Expiration Date. If,
however, this Lease shall be assigned pursuant to the foregoing with respect to
less than the entire Leased Premises, the Base Rent and Additional Rent shall be
adjusted on the basis of the number of rentable square feet retained by Tenant,
and this Lease, as so amended, shall continue thereafter in full force and
effect.
13.5 Landlord's Consent. As described above, except in connection with a
Transfer of Business Assignment (which Landlord shall reasonably consider),
Landlord may grant or withhold its consent to any requested assignment or
sublease requested by Tenant in its exclusive, arbitrary and unfettered
discretion, without the need or necessity of giving Tenant any reason therefor.
If Landlord, upon receiving Tenant's notice of proposed assignment or subletting
with respect to any such space, shall not exercise its right to terminate as
aforesaid, Landlord will not unreasonably withhold its consent to Tenant's
assignment of this Lease or subletting the space covered by its notice. Landlord
shall not be deemed to have unreasonably withheld its consent to a sublease of
all or part of the Leased Premises or an assignment of this Lease if its consent
is withheld because: (a) Tenant is then subject to a notice of Default from
Landlord hereunder; (b) any notice of termination of this Lease or termination
of Tenant's possession shall have been given under Article 17 hereof; (c) the
portion of the Leased Premises which Tenant proposes to sublease, including the
means of ingress to and egress from and the proposed use thereof, and the
remaining portion of the Leased Premises will violate or in any way conflict
with any city, state or federal law, ordinance or regulation, including, without
limitation, any applicable building code or zoning ordinances, or may require
any retrofitting or substantial alteration or modification of the Leased
Premises for purposes of compliance with any law, statute or regulation,
including, but not limited to, the Occupational Safety and Health Act, the
Americans with Disabilities Act or Environmental Laws requirements; (d) the
proposed use of the Leased Premises by the subtenant or assignee does not
conform with the Permitted Use or in any way amounts to a Prohibited Use; (e) in
the reasonable judgment of Landlord, the proposed subtenant or assignee is of a
character or is engaged in a business which would be deleterious to the
reputation of the Leased Premises; or (f) the subtenant or assignee is not, in
the reasonable judgment of Landlord, sufficiently financially responsible to
perform its obligations under the proposed sublease or assignment, such
financial responsibility shall, at a minimum, require the subtenant or assignee
to have a financial status and capability at least equal to the financial status
and financial capability of the Tenant as of the Commencement Date, or the
effective date of the proposed sublease or assignment, whichever standard shall
be greater and of more benefit to Landlord; provided, however, that the
foregoing are merely examples of reasons for which Landlord will withhold its
consent and shall not be deemed exclusive of any permitted reasons for
withholding consent, whether similar to or dissimilar from the foregoing
examples.
13.6 Profits. If Tenant, having first obtained Landlord's consent to any
sublease or assignment, or if Tenant or a trustee-in-bankruptcy for Tenant
pursuant to the Bankruptcy Code, shall assign this Lease or sublet the Leased
Premises, or any part thereof, at a rental or for other consideration in excess
of the Rent payable by Tenant under this Lease, then, to the extent
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permitted by law, except with respect to a Transfer of Business Assignment,
Tenant shall pay to Landlord as Additional Rent (a) in the case of an
assignment, One Hundred Percent (100%) of any such excess rent or other monetary
consideration immediately upon receipt thereof, or (b) in the case of a
sublease, (i) on the first day of each month during the term of any sublease,
One Hundred Percent (100%) of the excess of all rent or other consideration due
from the subtenant for such month over the Rent then payable to Landlord
pursuant to the provisions of this Lease for said month (or if only a portion of
the Leased Premises is being sublet, One Hundred Percent (100%) of any excess of
all rent and other consideration due from the subtenant for such month over the
portion of the Rent then payable to Landlord pursuant to the provisions of this
Lease for said month which is allocable on a square footage basis to the space
sublet), and (ii) immediately upon receipt thereof One Hundred Percent (100%)
all other consideration realized by Tenant from such assignment or subletting;
it being agreed, however, that Landlord shall not be responsible for any
deficiency if Tenant shall assign this Lease or sublet the Leased Premises or
any part thereof at a rental less than that provided for herein. Further, in the
case of any assignment or sublease to an Affiliate (as hereinafter defined) or
an assignment or sublease by a trustee in bankruptcy for Tenant pursuant to the
Bankruptcy Code, One Hundred Percent (100%) of any such excess rent or other
consideration shall be paid to Landlord as Additional Rent hereunder. In the
instance of any approved Transfer of Business Assignment, Tenant may retain all
consideration paid in connection with such assignment.
13.7 Assignee to Assume Obligations. If Tenant shall assign this Lease as
permitted herein, the assignee shall expressly assume all of the obligations of
Tenant hereunder in a written instrument satisfactory to Landlord and furnished
to Landlord not later than Fifteen (15) days prior to the effective date of the
assignment. If Tenant shall sublease the Leased Premises as permitted herein,
Tenant shall (i) obtain and furnish to Landlord, not later than Fifteen (15)
days prior to the effective date of such sublease and in form satisfactory to
Landlord, the written agreement of such subtenant stating that the subtenant
will attorn to Landlord, at Landlord's option and written request, in the event
this Lease terminates before the expiration of the sublease and (ii) be
obligated to collect and pay any and all applicable taxes, assessments or other
imposed costs or collection obligations associated with Base Rent and Additional
Rent, and Tenant shall and does hereby release, and agree to indemnify, defend
and hold Landlord harmless from any such amounts (including penalties and
interest thereon). Any failure to comply with the requirements of this Section
13.7 shall, without further act of any party to this Lease or related assignment
or sublease, terminate any such agreement, but in any event, Tenant's
obligations under this Lease shall remain in full force and effect.
13.8 Change of Control. Notwithstanding anything to the contrary in this
Article 13, if Tenant is a corporation (other than a corporation the stock or
debt obligations of which is publicly traded), and if during the Lease Term, the
ownership of the shares of stock which constitute control of Tenant changes
other than by reason of placement in a trust for the benefit of first level
immediate family members, gift to first level immediate family members or death,
Tenant shall notify Landlord of such change within Five (5) days thereof, and,
except in connection with a change in control pursuant to an approved Transfer
of Business Assignment, Landlord, at its option, may at any time thereafter
terminate this Lease by giving Tenant written notice of said termination at
least Sixty (60) days prior to the date of termination stated in the
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notice. The term "control" as used herein means the power to directly or
indirectly, direct or cause the direction of the management or policies of
Tenant. If Tenant is a partnership (general or limited) or any other type of
entity and if, during the Lease Term, the ownership of the partnership or other
type of interest which constitute control of Tenant changes other than by reason
of gift to immediate family members or death, then the provisions hereinabove
set forth relating to a Tenant which is a corporation which is not publicly
traded shall apply and references to ownership of stock shall be deemed to refer
to ownership of partnership interest or any other type of entity in said
partnership or entity.
13.9 Assignment to Affiliate. Notwithstanding anything to the contrary in
this Article 13, Tenant may assign or sublet the Leased Premises, or any portion
thereof, with written notice to Landlord but without requiring Landlord's
consent, to any corporation, limited liability company, partnership or other
form of business enterprise which controls, is controlled by or is under common
control with Tenant as long as such entity remains in control of, controlled by
or under common control with Tenant (an "Affiliate"). Tenant shall be required
to obtain the prior written consent of Landlord for an assignment by operation
of law to any corporation, limited liability company, partnership or other form
of business enterprise resulting from the merger or consolidation with Tenant,
or a sublet or assignment to any person or entity which acquires all of the
assets of Tenant as a going concern of the business that is being conducted on
the Leased Premises; provided that, in any such case, said assignee shall
assume, in full, the obligations of the Tenant under this Lease. Landlord shall
have the right to withhold its consent in either case only if: (a) the financial
strength of the proposed assignee/subtenant is not equal to or greater than that
of Tenant; or (b) the use of the Leased Premises by the proposed
assignee/subtenant is not permitted by this Lease, or violates any laws, rules,
codes or regulations, or violates any other agreements affecting the Leased
Premises. Any such consented to assignment shall not in any way affect or limit
the liability of Tenant under the terms of this Lease even if after such
assignment or subletting the terms of this lease are materially changed or
altered without the consent of Tenant, the consent of whom shall not be
necessary.
ARTICLE 14
Waiver of Certain Claims: Indemnity
14.1 Waiver of Certain Claims; Indemnity by Tenant. To the extent not
expressly prohibited by law, Tenant releases Landlord, and its members, agents,
servants and employees, from and waives all claims as against such persons for
damages to person or property sustained by Tenant or by any occupant of the
Leased Premises, resulting directly or indirectly from fire or other casualty,
cause or any existing or future condition, defect, matter or thing in or about
the Leased Premises, or from any equipment or appurtenance therein, or from any
accident in or about the Leased Premises, or from any act or neglect of any
other person, including Landlord's agents and servants. This Section 14 shall
apply especially, but not exclusively, to damage caused by water, snow, frost,
steam, excessive heat or cold, sewerage, gas, odors or noise, or the bursting or
leaking of pipes or plumbing fixtures, broken glass, sprinkling or air
conditioning devices or equipment, or flooding of basements, and shall apply
whether the damage was due to any of the acts specifically enumerated above or
from any other thing or circumstance, whether of a like nature or of a wholly
different nature.
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14.2 Damage Caused by Tenant's Neglect. If any damage to the Leased
Premises or any equipment or appurtenance therein, belonging to Landlord,
results from any act or neglect of Tenant, its employees, agents, contractors,
licensees or invitees, Tenant shall be liable therefor and Landlord may, at its
option repair such damage and Tenant shall, upon demand by Landlord, reimburse
Landlord for all costs of repairing such damage in excess of amounts, if any,
paid to Landlord under insurance covering such damage.
ARTICLE 15
Damage or Destruction by Casualty
15.1 Tenant's Obligation to Rebuild. In the event of damage to, or
destruction of, any improvements on the Leased Premises, or of the fixtures and
equipment therein, by fire or other casualty, Tenant shall promptly, at its
expense, repair, restore or rebuild the same to the condition existing prior to
the happening of such fire or other casualty; provided, however, that if the
damage or destruction is material and substantial, Landlord shall have the
right, subject to the consent of any First Mortgagee whose consent thereto is
required, to terminate this Lease, effective on the date of such damage or
destruction, by giving written notice thereof to Tenant within Sixty (60) days
after the event causing the damage or destruction. Rent shall not be reduced or
abated during the period of such repair, restoration or rebuilding even if the
improvements are not tenantable.
15.2 Preconditions to Rebuilding. Before Tenant commences such repairing,
restoration or rebuilding involving an estimated cost of more than Twenty-Five
Thousand Dollars ($25,000.00), plans and specifications therefor, prepared by a
licensed architect satisfactory to Landlord shall be submitted to Landlord for
approval and Tenant shall furnish to Landlord (a) an estimate of the cost of
proposed work, certified to by said architect; (b) satisfactory evidence of
sufficient contractor's commercial general liability insurance covering
Landlord, builder's risk insurance, and worker's compensation insurance, (c) a
performance and payment bond satisfactory in form and substance to Landlord;
and, (d) such other security as Landlord may require to insure payment for the
completion of work free and clear of liens.
15.3 Payment for Rebuilding. Provided that the insurer does not deny
liability as to the insureds, and provided Tenant is not then in Default
hereunder, all sums arising by reason of loss under the insurance shall be
deposited with Landlord to be available to Tenant for the work. Tenant shall
deposit with the Landlord any excess cost of the work over the amount held by
the Landlord as proceeds of the insurance within Thirty (30) days after the date
of the determination of the cost of the work by the architect or, if the insurer
has denied liability as to the insureds, or if Tenant is then in Default
hereunder, then Tenant shall deposit the full amount of the cost of the work
with the Landlord. Tenant shall diligently pursue the repair or rebuilding of
the improvements in a good and workmanlike manner using only high quality union
workers and materials. The Landlord shall pay out construction funds from time
to time on the written direction of the architect provided that the Landlord
shall first be furnished with waivers of lien, contractors' and subcontractors'
sworn statements, and other evidence of cost and payments so that the Landlord
can verify that the amounts disbursed from time to time are represented by
completed and in-place work, and that said work is free and clear of possible
mechanics liens.
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No payment made prior to the final completion of the work shall exceed Ninety
Percent (90%) of the value of the work completed and in place from time to time.
At all times the undisbursed balance remaining in the hands of Landlord shall be
at least sufficient to pay for the cost of completion of the work free and clear
of liens. Any deficiency shall be paid Landlord by Tenant. At Tenant's request,
Landlord shall place the funds with a national title company who will handle the
Landlord's duties under this section.
15.4 Excess Receipts by Landlord. Any excess of money received from
insurance remaining with the Landlord after the repair or rebuilding of
improvements, if there be no Default by Tenant in the performance of the
Tenant's covenants and agreements hereunder, shall be paid to Tenant.
15.5 Failure to Rebuild. If Tenant shall not begin the repair or
rebuilding of the improvements within a period of Sixty (60) days after damage
or destruction by fire or otherwise, and prosecute the same thereafter with such
dispatch as may be necessary to complete the same within a reasonable period
after said damage or destruction occurs, not to exceed One Hundred Eighty (180)
days after the date of commencement of such repair or rebuilding, then, in
addition to whatever other remedies Landlord may have either under this Lease,
at law or in equity, the money received by and then remaining in the hands of
the Landlord shall be paid to and retained by Landlord as security for the
continued performance and observance by Tenant of the Tenant's covenants and
agreements hereunder, or Landlord may terminate this Lease and retain the amount
so held as liquidated damages resulting from the failure on the part of Tenant
to comply with the provisions of this Article.
ARTICLE 16
Eminent Domain
16.1 Eminent Domain. If the entire Leased Premises, or a substantial part
thereof, or any part thereof which includes all or a substantial part of the
Leased Premises, shall be taken or condemned by any competent authority for any
public or quasi-public use or purpose, the Lease Term shall end upon and not
before the earlier of (a) the date when the possession of the part so taken
shall be required for such use or purpose or (b) the effective date of the
taking, and without apportionment of the award to or for the benefit of Tenant.
If any condemnation proceeding shall be instituted in which it is sought to take
or damage any part of the Leased Premises, the taking of which would, in
Landlord's opinion, prevent the economical operation of the Leased Premises, and
such taking or damage makes it necessary or desirable to remodel the Leased
Premises to conform to the taking or damage, Landlord shall have the right to
terminate this Lease upon not less than Ninety (90) days' notice prior to the
date of termination designated in the notice. In such event, the Rent at the
then current rate shall be apportioned as of the date of the termination. No
money or other consideration shall be payable by Landlord to Tenant for the
right of termination. Landlord shall be entitled to all of the condemnation
award for the Leased Premises and surrounding land, provided that if such a
claim will not reduce the condemnation award to Landlord in any way, Tenant
shall be entitled to make a claim for loss or damage to Tenant's trade fixtures,
equipment, machinery and removable personal property and for actual,
out-of-pocket costs incurred in relocating, but not for the value of the
leasehold estate.
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ARTICLE 17
Default
17.1 Events of Default. The occurrence of any one or more of the following
matters constitutes a default ("Default") by Tenant under this Lease:
(a) failure by Tenant to pay any Base Rent within Five (5) days after the
due date thereof;
(b) failure by Tenant to pay, within Ten (10) days after written notice of
failure to pay on the due date from Landlord to Tenant, any other moneys
required to be paid by Tenant under this Lease including, but not limited
to Additional Rent;
(c) failure by Tenant to observe or perform any of the covenants with
respect to assignment and subletting set forth in Article 13.
(d) failure by Tenant to immediately commence to cure upon receipt of
notice from Landlord, and to continuously prosecute said cure to
completion, any hazardous condition which Tenant has created in violation
of law or of this Lease;
(e) failure by Tenant to observe or perform any other covenant, agreement,
condition or provision of this Lease, if such failure shall continue for
Thirty (30) days after written notice thereof from Landlord to Tenant (or
such longer period as is necessary so long as Tenant commences to cure
such Default within said Thirty (30) day period and diligently and
continuously prosecutes said cure to completion);
(f) the levy upon under writ of execution or the attachment by legal
process of the leasehold interest of Tenant, or the filing or creation of
a lien with respect to such leasehold interest, which writ, attachment or
lien shall not be bonded-over, released or discharged within Fifteen (15)
days from the date of such filing;
(g) Tenant vacates or abandons the Leased Premises (the transfer of a
substantial part of the operation, business and personnel of Tenant to
some other location being deemed, without limiting the meaning of the
phrase "vacates or abandons", to be a vacation or abandonment within the
meaning of this clause) whether or not Tenant thereafter continues to pay
the Base Rent, Additional Rent or any other amounts due under this Lease;
(h) Tenant becomes insolvent or bankrupt, or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors, or applies for or consents to the appointment of a
trustee or receiver for Tenant or for the major part of its property;
(i) a trustee or receiver is appointed for Tenant or for the major part of
its property and is not discharged within Sixty (60) days after such
appointment; or
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(j) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings seeking relief under any bankruptcy law
or similar law for the relief of debtors, are instituted (i) by Tenant or
(ii) against Tenant and are allowed against it or are consented to by it
or are not dismissed within Sixty (60) days after such institution.
17.2 Rights and Remedies of Landlord. If a Default occurs, Landlord shall
have the rights and remedies hereinafter set forth, which shall be distinct,
separate and cumulative and shall not operate to exclude or deprive Landlord of
any other right or remedy allowed it by law or in equity and the decision by
Landlord to pursue any one or more of such remedies shall not be treated as an
election to only pursue any such remedies to the exclusion of any others:
(a) Landlord may terminate this Lease by giving to Tenant notice of
Landlord's election to do so, in which event the Lease Term shall end and
all right, title and interest of Tenant hereunder shall expire on the date
stated in such notice;
(b) Landlord may terminate the right of Tenant to possession of the Leased
Premises without terminating this Lease by giving notice to Tenant that
Tenant's right of possession shall end on the date stated in such notice,
whereupon the right of the Tenant to possession of the Leased Premises or
any part thereof shall cease on the date stated in such notice; and
(c) Landlord may enforce the provisions of this Lease and may enforce and
protect the rights of the Landlord hereunder by a suit or suits in equity
or at law for the specific performance of any covenant or agreement
contained herein, or for the enforcement of any other appropriate legal or
equitable remedy, including recovery of all moneys due or to become due
from Tenant under any of the provisions of this Lease.
17.3 Right to Re-Enter. If Landlord exercises either of the remedies
provided for in subparagraphs (a) and (b) of the foregoing Section 17.2, Tenant
shall surrender possession and vacate the Leased Premises and immediately
deliver possession thereof to Landlord, and Landlord may re-enter and take
complete and peaceful possession of the Leased Premises, with or without process
of law, full and complete license so to do being hereby granted to Landlord, and
Landlord may remove all occupants and property therefrom, using such force as
may be necessary, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without relinquishing Landlord's
right to Rent or any other right given to Landlord hereunder or by operation of
law. In conjunction with any such re-entry Landlord shall, in the event that
there are any subtenants occupying or having rights in and to the Leased
Premises, be entitled to either terminate any such subtenancies or assume the
Tenant's rights thereunder, provided, however, that no such assumption shall,
unless otherwise expressly agreed to by Landlord, obligate Landlord to perform
or fulfill Tenant's obligations thereunder.
17.4 Periodic Damages. If Landlord terminates the right of Tenant to
possession of the Leased Premises without terminating this Lease, Landlord may,
at its election, proceed under this Section or under Section 17.5. Under this
Section, Landlord shall have the right to immediate recovery of all amounts then
due hereunder. Such termination of possession shall not release
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Tenant, in whole or in part, from Tenant's obligation to pay any amounts due
Landlord hereunder for the full Lease Term, and Landlord shall have the right,
from time to time, to recover from Tenant, and Tenant shall remain liable for,
all Base Rent, Additional Rent, and any other sums accruing as they become due
under this Lease during the period from the date of such notice of termination
of possession to the stated end of the Lease Term. In any such case, Landlord
may relet the Leased Premises or any part thereof for the account of Tenant for
such rent, for such time (which may be for a term extending beyond the Lease
Term) and upon such terms as Landlord shall determine and collect the rents from
such reletting. Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant relative to such
reletting. Also, in any such case, Landlord may make repairs, alterations and
additions in or to the Leased Premises and redecorate the same to the extent
deemed by Landlord necessary or desirable and, in connection therewith, change
the locks to the Leased Premises, and Tenant shall upon demand pay the cost of
all the foregoing together with Landlord's expenses of reletting. The rents from
any such reletting shall be applied first to the payment of the expenses of
reconditioning the Leased Premises to a condition suitable for leasing such
Leased Premises, re-entry, redecoration, repair and alterations and the expenses
of reletting (including any brokerage fees or commissions and the customary
management fee of Landlord), and second to the payment of Additional Rent then
due from Tenant, and third to the payment of Base Rent herein provided to be
paid by Tenant. Any excess or residue shall operate only as an offsetting credit
against the amount of Base Rent and Additional Rent, due and owing or which
thereafter may become due and owing as the same thereafter becomes due and
payable hereunder, and the use of such offsetting credit to reduce the amount of
Base Rent and Additional Rent, due Landlord, if any, shall not be deemed to give
Tenant any right, title or interest in or to such excess or residue, and any
such excess or residue shall belong to Landlord solely, and in no event shall
Tenant be entitled to a credit on its indebtedness to Landlord in excess of the
aggregate sum (including Base Rent and Additional Rent) which would have been
paid by Tenant to the stated end of the Term, had no Default occurred. No such
re-entry or possession, repairs, alterations and additions or reletting shall be
construed as an eviction or ouster of Tenant or as an election on Landlord's
part to terminate this Lease, unless a written notice of such intention shall be
given to Tenant, nor shall it operate to release Tenant in whole or in part from
any of the Tenant's obligations hereunder, and Landlord may, at any time and
from time to time, sue and recover judgment for any deficiencies from time to
time remaining after the application from time to time of the proceeds of any
such reletting.
17.5 Liquidated and Associated Damages. If this Lease is terminated by
Landlord as provided for by subparagraph (a) of Section 17.2, or if Landlord
does not terminate the Lease, but elects to proceed under this Section instead
of Section 17.4, Landlord shall be entitled to recover from Tenant all Base Rent
and Additional Rent, accrued and unpaid for the period up to and including such
termination date or election date, as applicable (such applicable termination or
election date hereafter "Calculation Date"), as well as all other additional
sums payable by Tenant or for which Tenant is liable or in respect of which
Tenant has agreed to indemnify Landlord under any of the provisions of this
Lease, which may be then owing and unpaid, and all costs, assessments, fines,
fees and expenses, including court costs and reasonable attorneys' fees,
incurred by Landlord in the enforcement of its rights and remedies hereunder,
and, in addition, Landlord shall be entitled to recover as damages for loss of
the bargain and not as a
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penalty; (a) the aggregate sum which at the time of such termination or election
represents the excess, if any, of the present value of the aggregate rents which
would have been otherwise payable under this Lease after the Calculation Date
(including, without limitation, Base Rent at the annual rate or respective
annual rates for the remainder of the Lease Term and the amount reasonably
projected by Landlord to represent Additional Rent for the remainder of the
Lease Term) over the then-present value of the then-aggregate fair rental value
of the Leased Premises for the balance of the Lease Term, such present worth to
be computed in each case on the basis of an Eight Percent (8%) per annum
discount from the respective dates upon which such rentals or other amounts
would have been otherwise payable under this Lease; and (b) any damages in
addition thereto, including reasonable attorneys' fees and court costs, which
Landlord shall have sustained by reason of the breach of any of the covenants of
this Lease other than for the payment of Rent. For purposes of calculating
damages for the loss of bargain under this section, such calculation will, for
purposes of calculating the fair rental value offset, take into account the
estimated average period of time necessary for Landlord to locate an acceptable
tenant and negotiate and complete a lease with such replacement tenant. The
parties hereto agree that such period of time shall be conclusively deemed to be
a calendar month from the Calculation Date, and, therefore, there shall be no
amount attributable to fair rental value of the Leased Premises to be offset
against amounts otherwise due under the Lease for the initial period after the
Calculation Date.
17.6 Storage Removal and Sale of Personal Property. Pursuant to any
statutory lien benefiting Landlord, all property of Tenant which is stored by
Landlord or removed from the Leased Premises by Landlord pursuant to any
provisions of this Lease or law may be handled, removed or stored by Landlord at
the cost and expense of Tenant and Landlord shall in no event be responsible for
the value, preservation or safekeeping thereof. Tenant shall pay Landlord for
all expenses incurred by Landlord in such removal and storage and all reasonable
charges requested by Landlord for any storage of such property, so long as the
same shall be in Landlord's possession or under Landlord's control. All such
property not removed from the Leased Premises or retaken from storage by Tenant
within Sixty (60) days after the end of the Lease Term, however terminated,
shall, at Landlord's option, either (1) be conclusively deemed to have been
conveyed by Tenant to Landlord as by bill of sale without further payment or
credit by Landlord to Tenant, or (2) sold by Landlord in accordance with
Illinois statutory law whereby all costs and expenses incurred by Landlord in
such sale will be added to any amounts owed Landlord.
17.7 Attorneys' Fees. Tenant shall pay all of Landlord's reasonable costs,
charges and expenses, including court costs and reasonable attorneys' fees,
incurred by Landlord in collecting any amounts owed, or enforcing any rights or
terms under this Lease or to declare or confirm rights whether or not any action
of judicial proceeding is involved, including, but not limited to those costs,
charges and expenses incurred by Landlord in any action brought by Landlord or
against Landlord in which Landlord is the Prevailing Party, or incurred by
Landlord in any litigation, negotiation or transaction in which Tenant causes
Landlord, without its fault, to become involved or concerned. Nothing in this
Section 17.7 shall interfere with Landlord's rights and remedies against Tenant
and/or Guarantors of this Lease to receive the benefit of Tenant's agreements to
defend and/or indemnify Landlord as is variously set forth herein. Attorneys'
fees available to Landlord hereunder may include, without limitation, all fees
and costs incurred by
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Landlord associated with filing a claim or otherwise requesting relief or
appearing in or with respect to Bankruptcy or insolvency proceedings involving
the Tenant, any Guarantor of this Lease or any successor or assign thereto. In
this Section 17.7, the term "Prevailing Party" shall include, without
limitation, a party who substantially obtains or defeats the relief sought, as
the case may be, whether by compromise, settlement, judgment or the abandonment
by the other party of its claim or defense and shall also include a party filing
a claim or otherwise requesting relief in bankruptcy or insolvency proceedings
involving the other party to this Lease. The attorneys' fees and costs awarded
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees and costs reasonably incurred.
17.8 Remedies in Event of Bankruptcy or Other Proceeding.
(a) Anything contained herein to the contrary notwithstanding, if
termination of this Lease shall be stayed by order of any court having
jurisdiction over any proceeding described in Section 17.1, or by federal
or state statute, then, following the expiration of any such stay, or if
Tenant or Tenant as debtor-in-possession or the trustee appointed in any
such proceeding (being collectively referred to as "Tenant" only for the
purposes of this Section) shall fail to assume Tenant's obligations under
this Lease within the period prescribed therefor by law or within Fifteen
(15) days after entry of the order for relief or as may be allowed by the
court, or if Tenant shall fail to provide adequate protection of
Landlord's right, title and interest in and to the Leased Premises or
adequate assurance of the complete and continuous future performance of
Tenant's obligations under this Lease, Landlord, to the extent permitted
by law or by leave of the court having jurisdiction over such proceeding,
shall have the right, at its election, to terminate this Lease on Fifteen
(15) days' written notice to Tenant and upon the expiration of said
Fifteen (15) day period, this Lease shall cease and expire as aforesaid
and Tenant shall immediately quit and surrender the Leased Premises as
aforesaid. Upon the termination of this Lease as provided above, Landlord,
without notice, may re-enter and repossess the Leased Premises using such
force for that purpose as may be necessary without being liable to
indictment, prosecution or damages therefor and may dispossess Tenant by
summary proceedings or otherwise.
(b) For the purposes of the preceding paragraph (a), adequate protection
of Landlord's right, title and interest in and to the Leased Premises, and
adequate assurance of the complete and continuous future performance of
Tenant's obligations under this Lease, shall include, without limitation,
the following requirements:
(i) that Tenant comply with all of its obligations under this Lease;
(ii) that Tenant pay to Landlord, on the first day of each month
occurring subsequent to the entry of such order, or the effective
date of such stay, the aggregate Base Rent and Additional Rent
payable for such monthly period;
(iii) that Tenant continue to use the Leased Premises only for a
Permitted Use in the manner originally required by this Lease;
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(iv) that Landlord be permitted to periodically inspect the Leased
Premises;
(v) that Tenant pay to Landlord within Fifteen (15) days after entry
of such order or the effective date of such stay, as partial
adequate protection against future diminution in value of the Leased
Premises and adequate assurance of the complete and continuous
future performance of Tenant's obligations under this Lease, a
security deposit in an amount equal to the sum of two (2)
installments of monthly Base Rent and Additional Rent (including
Rent Adjustment) to Landlord;
(vi) that if Tenant assumes this Lease and proposes to assign the
same (pursuant to Title 11 U.S.C. 365, or as the same may be
amended) to any person who shall have made a bona fide offer to
accept an assignment of this Lease on terms acceptable to such court
having competent jurisdiction over Tenant's estate, then notice of
such proposed assignment, setting forth (x) the name and address of
such person, (y) all of the terms and conditions of such offer, and
(z) the adequate assurance to be provided Landlord to assure such
person's future performance under this Lease, including, without
limitation, the assurances referred to in Title 11 U.S.C.
ss.365(b)(3), as it may be amended, shall be given to Landlord by
Tenant no later than Fifteen (15) days after receipt by Tenant of
such offer, but in any event no later than Thirty (30) days prior to
the date that Tenant shall make application to such court for
authority and approval to enter into such assignment and assumption,
and Landlord shall thereupon have the prior right and exclusive
option, to be exercised by notice to Tenant given at any time prior
to the effective date of such proposed assignment, to accept, or to
cause Landlord's designee to accept, an assignment of this Lease
upon the same terms and conditions for the same consideration, if
any, as the bona fide offer made by such person, less any brokerage
commissions which may be payable out of the consideration to be paid
by such person for the assignment of this Lease; and
(vii) that if Tenant assumes this Lease and proposes to assign the
same, and Landlord does not exercise its option pursuant to
paragraph (vi) of this Section 17.8, Tenant hereby agrees that:
(A) the assignee shall have a net worth not less than the
aggregate net worth of Tenant and each guarantor of its obligation
hereunder during the period initiating with the Commencement Date
and ending with the date at which Landlord is entitled to exercise
its option under Section 17.8(b)(vi) ("Landlord Option Date"), or
such Tenant's obligations under this Lease shall be unconditionally
guaranteed by a person having a net worth equal to the greatest of
the Tenant and each guarantor as aforesaid;
(B) such assignee shall assume in writing and be bound by all
of the terms, covenants and conditions of this Lease including,
without limitation, all of such terms, covenants and conditions
respecting the Permitted Use and repayment of Base Rent and
Additional Rent, and said assignee shall fully cure all then
existing
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Defaults which Tenant or any party to this Lease shall have been
notified of up to and including the Landlord Option Date;
(C) such assignee shall indemnify Landlord against, and pay to
Landlord the amount of, any payments which Landlord may be obligated
to make to any Mortgagee by virtue of such assignment; and
(D) if such assignee makes any payment to Tenant, or for
Tenant's account, for the right to assume this Lease (including,
without limitation, any lump sum payment, installment payment or
payment in the nature of rent over and above the Rent payable under
this Lease), Tenant shall pay over to Landlord one-half of any such
payment.
(c) In the event that Tenant (i) shall be required to either (y) provide
adequate protection of Landlord's rights, title and interest in and to the
Leased Premises or (z) provide adequate assurances of performance of its
obligations hereunder in each case pursuant to Section 17.8(b) hereof,
then in addition to the requirement of Tenant and other persons
participating in each such action to comply with Section 17.8(b) hereof,
Tenant and/or an assignee proposed by Tenant shall pay Landlord, without
limitation, all fees and costs of Landlord to employ or consult with an
attorney concerning, or to enforce or defend any of Landlord's rights or
remedies arising under the Lease and in relation to any Bankruptcy
proceeding involving Tenant, including but not limited to, all fees and
costs incurred by Landlord, its successors or assigns, associated with the
filing of a claim or otherwise requesting relief with respect to
Bankruptcy or insolvency proceedings involving the Tenant, any guarantor
of this Lease, or any party to this Lease.
17.9 Tenant's Right to Cure Defaults. If, for any reason, it is determined
in an action or proceeding interpreting the terms of this Lease that Tenant is
to be granted a right to cure an incurable or non-monetary Default, it is
expressly agreed that such cure will not be deemed to be effected unless and
until Landlord receives full monetary compensation as reasonably calculated by
Landlord for the breach or Default that occurred.
17.10 Landlord Default. Except as specifically set forth in this Lease,
Tenant shall have no, and hereby expressly disclaims and waives any, right to
cancel or terminate this Lease in the event of any non-performance or default of
Landlord in performing any of its obligations under this Lease, Tenant's rights
being hereby expressly limited to an action for damages, specific performance or
other equitable remedies.
ARTICLE 18
Subordination
18.1 Subordination. Landlord has heretofore and may hereafter from time to
time execute and deliver one or more first mortgages or trust deeds in the
nature of a mortgage (collectively or singularly, a "First Mortgage") against
the Leased Premises or any interest therein. In any such case, Tenant's interest
in this Lease shall be automatically and without any
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notice from Landlord or act on the part of the Tenant or any other person
subordinate to the First Mortgage and to any and all advances made thereunder,
to the interest thereon and to all renewals, replacements, supplements,
amendments, modifications and extensions thereof. In the event that the holder
of a First Mortgage does not require or desire Tenant's interest in this Lease
to be subordinate to the First Mortgage, Landlord will deliver written notice to
Tenant stating as such and, in such case, the lease shall not be subject to that
particular First Mortgage. Notwithstanding the fact that Tenant's interest in
the Lease will be automatically subordinate to such First Mortgage, Tenant will
promptly, but in no event later than Ten (10) days after receipt thereof,
execute and deliver such agreement or agreements as may be reasonably required
by such mortgagee or trustee under any First Mortgage, provided such agreements
also contain a provision recognizing Tenant's tenancy and agreeing that Tenant's
quiet possession shall not be disturbed if Tenant is not in Default. Tenant
covenants it will not subordinate this Lease to any mortgage or trust deed other
than a First Mortgage without the prior written consent of the holder of the
First Mortgage. Notwithstanding such subordination, Tenant's right to quiet
possession of the Leased Premises shall be recognized by the First Mortgage and
shall not be disturbed if Tenant is not in Default under this Lease.
18.2 Liability of Holder of First Mortgage: Attornment. It is further
agreed that (a) if any First Mortgage shall be foreclosed, (i) the holder of the
First Mortgage, ground lessor (or their respective grantees) or purchaser at any
foreclosure sale (or grantee in a deed in lieu of foreclosure), as the case may
be, shall be (x) liable for any act or omission of any prior landlord (including
Landlord), (y) subject to any offsets or counterclaims which Tenant may have
against a prior landlord (including Landlord), and (z) bound by any prepayment
of Base Rent or Additional Rent which Tenant may have in excess of the amounts
then due, or estimated by Landlord to be due, for the next succeeding month;
(ii) the liability of the mortgagee or trustee hereunder or the purchaser at
such foreclosure sale or the liability of a subsequent owner designated as
Landlord under this Lease shall exist only so long as such trustee, mortgagee,
purchaser or owner is the owner of the Leased Premises, and such liability shall
not continue or survive after further transfer of ownership; and (iii) upon
request of the ground lessor, mortgagee or trustee, if the First Mortgage shall
be foreclosed, Tenant will attorn as Tenant under this Lease, to the purchaser
at any foreclosure sale under any First Mortgage, and Tenant will promptly, but
in no event later than Ten (10) days after receipt thereof, execute such
instruments as may be necessary or appropriate to evidence such attornment,
provided such instruments also contain a provision recognizing Tenant's tenancy
and agreeing that Tenant's quiet possession shall not be disturbed if Tenant is
not in Default; and (b) this Lease may not be modified or amended so as to
reduce the Base Rent or Additional Rent or shorten the Lease Term or so as to
adversely affect in any other respect to any material extent the rights of
Landlord, nor shall this Lease be canceled or surrendered, without the prior
written consent of the Landlord.
18.3 Modification Required by First Mortgagee. Should any prospective
first mortgagee require a modification or modifications of this Lease, which
modification or modifications will not cause an increased cost or expense to
Tenant or in any other way materially change the rights and obligations of
Tenant hereunder, Tenant agrees that this Lease may be so modified and agrees to
promptly, but in no event later than Ten (10) days after receipt thereof,
execute and deliver to Landlord whatever documents are reasonably required
therefor.
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18.4 Short Form Lease. Should any prospective mortgagee require execution
of a memorandum of lease for recording (containing the names of the parties, a
description of the Leased Premises and the Lease Term) or a certification from
Tenant concerning this Lease in such form as may be required by a prospective
mortgagee, Tenant agrees to promptly execute such memorandum of lease or
certificate and deliver the same to Landlord within Ten (10) days following the
request therefor.
18.5 Power of Attorney. In the event that Tenant has not executed and
delivered to Landlord any of the documentation required by this Article within
the applicable Ten (10) day period referenced above, Tenant hereby irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, without any liability therefor, any and all such documents.
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ARTICLE 19
Mortgagee Protection
19.1 Mortgagee Protection. Tenant agrees to give any ground lessor or any
holder of any First Mortgage (as defined in Article 18 hereof) against the
Leased Premises, or any interest therein, by registered or certified mail, a
copy of any notice or claim of default served upon Landlord by Tenant, provided
that prior to such notice Tenant has been notified in writing (by way of service
on Tenant of a copy of an assignment of Landlord's interest in leases, or
otherwise) of the name and address of such ground lessor or First Mortgage
holder. Tenant further agrees that if Landlord shall have failed to cure such
default within Thirty (30) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional time
as may be necessary if Landlord has commenced within such Thirty (30) days and
is diligently pursuing the remedies or steps necessary to cure or correct such
default), then the ground lessor or holder of the First Mortgage shall have an
additional Thirty (30) days within which to cure or correct such default (or if
such default cannot be cured or corrected within that time, then such additional
time as may be necessary if such ground lessor or holder of the First Mortgage
has commenced within such Thirty (30) days and is diligently pursuing the
remedies or steps necessary to cure or correct such default, including the time
necessary to obtain possession if possession is necessary to cure or correct
such default).
ARTICLE 20
Estoppel Certificate
20.1 Estoppel Certificate. Each party agrees that, from time to time upon
not less than Ten (10) days prior written request by the other party or the
holder of any First Mortgage or any ground lessor, the party receiving the
written request (or any permitted assignee, subtenant, licensee, concessionaire
or other occupant of the Leased Premises claiming by, through or under Tenant)
will deliver to the party making the written request, a statement in writing
signed by the party receiving the written request certifying certain terms,
conditions and status of the relationship between Landlord and Tenant arising
out of this Lease including, but in no way limited to: (a) that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that this Lease as modified is in full force and effect and identifying the
modifications); (b) the date upon which Tenant began paying Rent and the dates
to which the Rent and other charges have been paid; (c) that no party to this
Lease, the First Mortgage or any associated agreements are in default under any
provision thereof, or, if in default, the nature thereof in detail; (d) that the
Tenant is in occupancy and paying all Base Rent and Additional Rent, on a
current basis with no rental offsets or claims; (e) that there has been no
prepayment of Base Rent other than that provided for in this Lease; (f) that
there are no actions, whether voluntary or otherwise, pending against any party
to this Lease, the First Mortgage or any associated agreements under the
bankruptcy laws of the United States or any state thereof; (g) that except as
specifically set forth in this Lease, there are no options or rights regarding
renewal of this Lease, acquisition of the Leased Premises or any portion
thereof, expansion or diminution of the Lease Premises or other rights or
options similar to the foregoing; and (h) such other matters as may be
reasonably required by the party making the written request, the holder of the
First Mortgage or any ground lessor. Tenant hereby appoints Landlord as its
irrevocable attorney-in-
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fact, coupled with an interest, to execute and deliver on Tenant's behalf,
without liability, any Estoppel Certificates submitted to Tenant which are not
signed or returned by Tenant within the Ten (10) day period set forth above.
ARTICLE 21
Subrogation and Insurance
21.1 Waiver of Subrogation. Landlord and Tenant agree to have all fire and
extended coverage and other property damage insurance which may be carried by
either of them endorsed with a clause providing that any release from liability
of, or waiver of claim for, recovery from, the other party entered into in
writing by the insured thereunder prior to any loss or damage shall not affect
the validity of said policy or the right of the insured to recover thereunder,
and providing further that the insurer waives all rights of subrogation which
such insurer might have against the other party. Without limiting any release or
waiver of liability or recovery set forth elsewhere in this Lease, and
notwithstanding anything in this Lease which may appear to be to the contrary,
each of the parties hereto waives all claims for recovery from the other party
for any loss or damage to any of its property insured under valid and
collectible insurance policies to the extent of any recovery actually collected
under such insurance policies. Notwithstanding the foregoing or anything
contained in this Lease to the contrary, any release or any waiver of claims
shall not be operative, nor shall the foregoing endorsements be required, in any
case where the effect of such release or waiver is to invalidate insurance
coverage or invalidate the right of the insured to recover thereunder or to
increase the cost thereof (provided that in the case of increased cost the other
party shall have the right, within Ten (10) days following written notice, to
pay such increased cost of keeping such release or waiver in full force and
effect).
21.2 Tenant's Insurance. Tenant shall procure and maintain policies of
insurance, at its sole cost and expense, during the Term with terms, coverages
and companies satisfactory to Landlord and with such reasonable increases in
limits as Landlord may from time to time request, but initially Tenant shall
maintain the following coverages insuring:
(a) Tenant and Landlord from all claims, demands or actions made by, or on
behalf of, any person or persons, firm or corporation and arising from,
related to or connected with the Leased Premises, for injury to or death
of any person and for damage to property in an amount of not less than One
Million Dollars ($1,000,000.00) per claim and not less than Five Million
Dollars ($5,000,000.00) in the aggregate. Tenant's insurance will include
contractual liability coverage recognizing this Lease and products and
completed operations liability.
(b) Insurance against loss or damage from external explosion or breakdown
of boilers, air conditioning equipment and miscellaneous electrical
apparatus, if any, in the Leased Premises, in an amount not less than One
Million Dollars ($1,000,000.00), with loss or damage payable to Landlord
and Tenant as their interests may appear.
(c) Full coverage for breakage of all plate glass, including but not
limited to, doors, windows, transoms and all lettering applied thereon.
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(d) Insurance against all worker's compensation claims.
(e) All leasehold improvements, contents and Tenant's trade fixtures,
machinery, equipment, furniture and furnishings, in the Leased Premises to
the extent of at least One Hundred Percent (100%) of their replacement
cost against loss or damage by fire, lightning, wind storm, aircraft,
vehicles, smoke, explosion, riot or civil commotion as provided by the
standard fire and extended coverage insurance, including, without
limitation, vandalism and malicious mischief, special extended coverage
and sprinkler leakage endorsements.
21.3 Evidence of Insurance. Prior to the commencement of the Lease Term,
Tenant shall furnish to Landlord certificates evidencing such coverage, which
policies shall state that such insurance coverage may not be reduced, canceled
or not renewed without at least Thirty (30) days' prior written notice to
Landlord and Tenant (unless such cancellation is due to nonpayment of premium,
and, in that case, only Ten (10) days' prior written notice shall be
sufficient).
21.4 Landlord's Insurance. Tenant shall, at its sole expense, maintain at
all times during the Lease Term and any holdover period, the following types of
insurance coverage, subject to the reasonable review by Landlord's insurance
advisor, under which the Landlord shall be a designated loss payee:
(a) All-risk physical damage insurance covering the Leased Premises in an
amount not less than One Hundred Percent (100%) of the full replacement
cost which is ordinarily to be $2,500.000 (exclusive of the cost of
excavations, foundations and footings) providing protection against perils
that are covered under standard insurance industry practices within the
classification of all-risk insurance, including, but not limited to, loss
or damage from fire, lightning, windstorm, hail, explosion, riot, civil
commotion, aircraft, vehicles, smoke, domestic water damage, collapse,
sprinkler damage, vandalism, malicious mischief and such other risks as
Landlord may, from time to time, reasonably determine, with deductibles
equal to those included in similar insurance policies maintained by Tenant
for other manufacturing properties owned by it. Tenant's property located
at the Leased Premises, including, without limitation, equipment,
machinery, furnishings and furniture, may be insured under separate
policies for the benefit of the Tenant.
(b) Tenant shall furnish Landlord with certificates that the foregoing
insurance is in full force and effect, within thirty (30) days after the
Commencement Date of this Lease and at each anniversary thereafter during
any period for which this Lease remains in effect.
21.5 Compliance with Requirements. Tenant shall comply with all applicable
laws and ordinances, all orders and decrees of court and all requirements of
other governmental authorities, and shall not, directly or indirectly, make any
use of the Leased Premises which may thereby be prohibited or be dangerous to
person or property, or which may jeopardize any insurance coverage or increase
the cost of such insurance or require additional insurance coverage.
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ARTICLE 22
Nonwaiver
22.1 Nonwaiver. No waiver of any condition expressed in this Lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such condition, whether or not such violation be continued or
repeated subsequently, and no express waiver shall affect any condition other
than the one specified in such waiver and that one only for the time and in the
manner specifically stated. Without limiting Landlord's rights under Article 9,
no receipt of moneys by Landlord from Tenant after the termination in any way of
the Lease Term or of Tenant's right of possession hereunder or after the giving
of any notice shall reinstate, continue or extend the Lease Term or affect any
notice given to Tenant prior to the receipt of such moneys. After the service of
notice or the commencement of a suit or after final judgment for possession of
the Leased Premises, Landlord may receive and collect any moneys due, and the
payment of said moneys shall not waive or affect said notice, suit or judgment.
ARTICLE 23
Due Authority
23.1 Due Authority. Tenant (a) represents and warrants that this Lease has
been duly authorized, executed and delivered by and on behalf of Tenant and
constitutes the valid and binding agreement of Tenant in accordance with the
terms hereof, and (b) if requested by Landlord, shall deliver to Landlord,
concurrently with the delivery of this Lease executed by Tenant, and at Tenant's
sole expense, certified resolutions of the board of directors (and shareholders,
if required) authorizing Tenant's execution and delivery of this Lease and the
performance of Tenant's obligations hereunder, a Certificate of Good Standing
for the State of Delaware and any and all similar documentation evidencing
Tenant's authority and existence as may be reasonably requested by Landlord.
ARTICLE 24
Notices
24.1 Notices. All notices and demands required or desired to be given by
either party to the other with respect to this Lease or the Leased Premises
shall be in writing and shall be delivered personally, sent by overnight courier
service, prepaid, or sent by United States registered or certified mail, return
receipt requested, postage prepaid, and addressed as herein provided. Notices to
or demands upon Tenant shall be addressed to Tenant after the Commencement Date,
at Phoenix Color Corp., 540 Western Maryland Parkway, Hagerstown, Maryland
21740, attention Louis LaSorsa, President, with a copy to Andrew J. Goodman,
Bresler, Goodman & Unterman, L.L.P., 521 Fifth Avenue, New York, NY 10175.
Notices to or demands upon Landlord shall be addressed to Landlord, Laurel
Limited Partnership, c/o Wayne L. Sorensen, 955 Walden Lane, Lake Forest, IL
60045, with a copy to Robert A. Huntington, Goedert & Huntington, 1011 Lake
Street, Suite 303, Oak Park, IL 60301. Notices and demands shall be deemed given
and served (a) upon receipt or refusal, if delivered personally, (b) One (1)
business day after deposit with an overnight courier service, (c) Three (3)
business days after deposit in the United States mails, if mailed. Either party
may change its address for
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receipt of notices by giving notice of such change to the other party in
accordance herewith. Notices and demands from Landlord to Tenant may be signed
by Landlord.
ARTICLE 25
Hazardous Substances
25.1 Defined Terms.
(a) "Claim" shall mean and include any demand, cause of action, proceeding
or suit (i) for damages (whether designated as, or otherwise encompassing,
actual, punitive, foreseeable, unforeseeable, consequential, incidental or
direct damages), losses, liabilities, judgments, injuries to person or
property, damages to natural resources, fines, penalties, interest,
contribution or settlement, (ii) for the costs of site investigations,
feasibility studies, information requests, health or risk assessments or
Response actions, and (iii) for enforcing insurance, contribution or
indemnification agreements, and shall include any actual or claimed
liability arising out of the same, including all costs, expenses, experts'
and consultants' fees and attorneys' fees, expended in the investigation,
defense or resolution thereof.
(b) "Environmental Laws" shall mean and include all federal, state and
local statutes, ordinances, regulations and rules relating to
environmental quality, occupational safety, health, safety contamination
and clean-up, including, without limitation, the Clean Air Act, 42 U.S.C.
Section 7401 et seq. ("CAA"); the Clean Water Act, 33 U.S.C. Section 1251
et seq. and the Water Quality Act of 1987; the Federal Insecticide,
Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. Section 136 et seq.;
the Marine Protection, Research, and Sanctuaries Act, 33 U.S.C. Section
1401 et seq.; the National Environmental Policy Act, 41 U.S.C. Section
4321 et seq; the Noise Control Act, 42 U.S.C. Section 4901 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., as amended by the Hazardous and Solid Waste Amendments Act of 1984;
the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Solid
Waste Disposal Act, 42 U.S.C. Section 1801 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq.
("FWPCA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq. ("HMTA"); the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.,
as amended by the Superfund Amendments and Reauthorization Act, the
Emergency Planning and Community Right-to-Know Act, and the Radon Gas and
Indoor Air Quality Research Act; the Toxic Substances Control Act
("TSCA"), 15 U.S.C. Section 2601 et seq.; the Atomic Energy Act, 42 U.S.C.
Section 2011 et seq., and the Nuclear Waste Policy Act of 1982, 42 U.S.C.
Section 10101 et seq.; and any similar laws of the State of Illinois; and
any successor statutes and regulations to the foregoing and state
superlien and environmental clean-up statutes, with implementing
regulations and guidelines. Environmental Laws shall also include all
state, regional, county, municipal and other local laws, regulations and
ordinances insofar as they are equivalent or similar to the federal laws
recited above or purport to regulate Hazardous Materials.
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(c) "Hazardous Materials" shall mean any waste, substance or material the
exposure to which is classified, limited, regulated or prohibited by any
governmental authority (federal, state or local) or which may or could
pose a hazard to the health or safety of the occupants of the Leased
Premises or adjacent or surrounding property or which could pose a threat
to the environment including, but in no way limited to the following,
including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product or constituent regulated under CERCLA; oil
and petroleum products and natural gas, natural gas liquids, liquefied
natural gas usable for fuel; pesticide regulated under the FIFRA; asbestos
and asbestos materials, PCBs and other substances regulated under the
TSCA; source material, special nuclear material, by-product material and
any other radioactive materials or radioactive wastes, however produced,
regulated under the Atomic Energy Act or the Nuclear Waste Policy Act;
chemicals subject to the OSHA Hazard Communication Standard, 29 C.F.R.
ss.1910.1200 et seq.; and industrial process and pollution control wastes,
whether or not hazardous within the meaning of RCRA; "hazardous materials"
under the HMTA; "hazardous air pollutants" under the CAA; a "hazardous
substance" or "toxic pollutant" under the FWPCA and any and all toxic or
hazardous materials addressed by regulations promulgated now or hereafter
under the above referenced laws, related or similar laws, whether the same
be presently in existence or hereafter promulgated.
(d) "Manage" means to generate, manufacture, process, treat, store, use,
misuse, refine, recycle, reclaim, blend or burn for energy recovery,
incinerate, accumulate speculatively, transport, transfer, dispose of or
abandon Hazardous Materials.
(e) "Release" or "Released" shall mean any actual or threatened spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of Hazardous Materials into the
environment, as "environment" is defined in CERCLA.
(f) "Response" or "Responded" shall mean action taken in compliance with
Environmental Laws to correct, remove, remediate, clean-up, prevent,
mitigate, monitor, evaluate, investigate, assess or abate the Release of a
Hazardous Material.
25.2 Tenant's Obligations with Respect to Environmental Matters. During
the Lease Term (a) Tenant shall at its own cost comply with all Environmental
Laws and, to the extent required thereby, obtain all appropriate permits; (b)
except for the proper and legal use of Hazardous Materials in quantities that do
not require reporting pursuant to the Community Right to Know Act, incident to
operating a printing plant, Tenant shall not conduct, allow, permit or authorize
the Management of any Hazardous Materials on the Leased Premises, including
installation of any underground storage tanks, without prior written disclosure
to and approval by Landlord, such approval to be given or withheld in Landlord's
sole and unfettered discretion; (c) except for the proper and legal use of
Hazardous Materials in quantities that do not require reporting pursuant to the
Community Right to Know Act, incident to operating a printing plant, Tenant
shall not take any action that would subject the Leased Premises to permit
requirements under RCRA or any other Environmental Laws for storage, treatment
or disposal of Hazardous
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Materials; (d) Tenant shall not dispose of Hazardous Materials in dumpsters; (e)
Tenant shall not discharge Hazardous Materials on or about the Leased Premises,
including, but not limited to, into drains or sewers; (f) Tenant shall not
cause, permit or allow the Release of any Hazardous Materials on, to or from the
Leased Premises; and (g) Tenant shall at its own cost arrange for the lawful
transportation and offsite disposal of all Hazardous Materials that it generates
or which, for any reason, are present on the Leased Premises during the Lease
Term. Notwithstanding the foregoing, Tenant may use on the Leased Premises, in
de minimis amounts, those Hazardous Materials normally used in connection with
general distribution and delivery operations or office usage so long as Tenant's
use, storage and transportation thereof complies in all respects with all
applicable Environmental Laws. However, notwithstanding anything to the contrary
contained in this section or elsewhere in this Lease, Tenant shall not be
required to obtain, and does not furnish any assurance that it will obtain, any
permit applied for prior to the Lease Term in connection with the operation of
the Leased Premises, but not issued as of the Commencement Date; the Tenant will
use good faith efforts to complete the application for such permit and obtain
its issuance, but does not guarantee it will be successful in doing so.
25.3 Copies of Notices. During the Lease Term, Tenant shall promptly
provide Landlord with copies of all summons, citations, directives, information
inquiries or requests, notices of potential responsibility, notices of violation
or deficiency, orders or decrees, Claims, complaints, investigations, judgments,
letters, notices of environmental liens or Response actions in progress and
other communications, written or oral, actual or threatened, from the United
States Environmental Protection Agency, Occupational Safety and Health
Administration or other federal, state or local agency or authority, or any
other entity or individual, concerning (a) any Release of a Hazardous Material
on, to or from the Leased Premises; (b) the imposition of any lien on the Leased
Premises; or (c) any alleged violation of or responsibility under Environmental
Laws. Landlord and Landlord's employees shall have the right to enter the Leased
Premises and conduct appropriate inspections or tests in order to determine
Tenant's compliance with Environmental Laws.
25.4 Tests and Reports. Upon written request by Landlord, Tenant shall
provide Landlord with the results of appropriate reports and tests, with
transportation and disposal contracts for Hazardous Materials, with any permits
issued under Environmental Laws, and with any other applicable documents to
demonstrate that Tenant complies with all Environmental Laws relating to the
Leased Premises.
25.5 Access and Inspection. In addition to any other rights of entry or
access to the Leased Premises pursuant to this Lease and applicable laws,
Landlord and its agents and representatives shall have access to the Leased
Premises and to the books and records of Tenant (and any occupant of the Leased
Premises claiming by, through or under Tenant) relating to Hazardous Materials
for the purpose of ascertaining the nature of the activities being conducted
thereon and to determine the type, kind and quantity of all products, materials
and substances brought onto the Leased Premises or made or produced thereon.
Landlord and its agents and representatives shall have the right to take samples
in quantity sufficient for scientific analysis of all products, materials and
substances present on the Leased Premises, including, but not limited to,
samples of products, materials or substances brought onto or made or produced on
the Leased
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Premises by Tenant or an occupant claiming by, through or under Tenant or
otherwise present on the Leased Premises. And, further, notwithstanding any
provision of this Lease or applicable statutes or judicial decisions to the
contrary, with respect to any assignment, subletting, grant of license or
concession or any other permission to the Leased Premises by any person other
than Tenant, Landlord shall have the right to withhold Landlord's consent
thereto if, in Landlord's sole and unfettered judgment, the assignee, subtenant,
licensee, concessionaire or such other person is not capable, either financially
or operationally, of performing or is not sufficiently qualified to perform in
accordance with the requirements of this Article 25. Any assignment, sublease,
license or other permission to use the Leased Premises from which Landlord
withholds its consent as provided in this Section 25.5 shall be voidable at the
Landlord's sole option.
25.6 Obligation to Respond. If during Tenant's Management of Hazardous
Materials at the Leased Premises, any Release occurs thereon or on any adjacent
or contiguous property, or in the event that the existence or presence of any
Hazardous Substance, (i) gives rise to liability or to a Claim under any
Environmental Law, (ii) causes a significant public health effect, or (iii)
creates a nuisance, Tenant shall promptly, but in no event later than Fifteen
(15) days thereafter, notify Landlord and take all applicable action in
Response. In the event that Landlord does not want the Response to be undertaken
by Tenant, Landlord shall have the right and option (but in no event shall this
right and option imply or create any obligation on the part of Landlord) upon
the giving of reasonable notice to Tenant, to undertake the Response, and any
costs or expenses incurred by Landlord in pursuing such Response shall be paid
by Tenant.
25.7 Indemnification. Tenant shall indemnify, defend (with counsel
satisfactory to Landlord) and hold harmless Landlord, its lenders, any managing
agents and leasing agents of the Leased Premises, and their respective agents,
partners, officers, contractors, directors, members and employees, from all
Claims arising from or attributable to: (a) the Release of any Hazardous
Materials on the Leased Premises during or after the Lease Term (including any
holdover periods) of, or otherwise arising out of, Tenant's, and its agent's,
employees' and invitees' use of the Leased Premises pursuant to, this Lease or
the presence, whether or not due to Tenant's Management, of Hazardous Materials
in or on the Leased Premises or the subsurface thereof or the violation of any
Environmental Laws by Tenant, its agents, employees or invitees, whether or not
due to Tenant's Management (including, without limiting the generality thereof,
any cost, claim, liability or defense expended in remediation required by a
governmental authority); (b) any federal, state or local governmental
investigation or inquiry relating to the Tenant's use or occupancy of the Leased
Premises, or occurring during the Lease Term, whether the same be justified or
caused by the Tenant or its actions; or (c) any breach by Tenant of any of its
warranties, representations or covenants in this Section or, to the extent the
same relate to or impact any Environmental Laws, any other Section of this
Lease. Tenant's obligations hereunder shall survive the termination or
expiration of this Lease and shall further survive any transfer of all or any
portion of the Leased Premises, whether by Landlord or Tenant. The foregoing
notwithstanding, Tenant shall have no liability pursuant to the foregoing
indemnity for any environmental condition or related inquiry that arises out of
actual physical events (including any Management or Release) occurring entirely
after the termination of this Lease and to which Tenant, its agents, employees
and contractors have not contributed.
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<PAGE>
ARTICLE 26
Tenant Signage
26.1 Tenant Signage. Tenant may, at its sole cost and expense, erect one
(1) ground mounted monument sign on the landscaped area adjacent to the building
in a location designated by Landlord, provided that (a) such sign does not
violate applicable governmental laws, ordinances, rules or regulations; (b) such
sign does not violate any covenants, conditions or restrictions affecting the
Leased Premises; (c) such monument sign is compatible with the architecture of
the Leased Premises, the landscaped area adjacent thereto and the surrounding
properties (including other monument signs); and (d) the design of the monument
sign has been approved by Landlord which approval shall not be unreasonably
withheld or delayed. Tenant shall be solely responsible for the construction,
installation, maintenance and expense of the sign. Except as expressly provided
herein, Tenant shall not erect or attach any sign to the exterior of the Leased
Premises. Upon the expiration or earlier termination of the Lease Term, Tenant
shall, at its sole cost and expense, remove the sign and repair any damage or
injury to the Leased Premises or landscaped areas adjacent thereto caused
thereby.
ARTICLE 27
Title and Covenant Against Liens
27.1 Title and Covenant Against Liens. Landlord's title is and always
shall be paramount to the title of Tenant, and nothing in this Lease contained
shall empower Tenant to do any act which can, shall or may encumber the title of
Landlord. Tenant covenants and agrees not to suffer or permit any lien of
mechanics or materialmen to be placed upon or against the Leased Premises, the
Land or Tenant's leasehold interest in the Leased Premises and, in case of any
such lien attaching, to immediately bond over or pay and remove same. Tenant has
no authority or power to cause or permit any lien or encumbrance of any kind
whatsoever, whether created by act of Tenant, operation of law or otherwise, to
attach to or be placed upon the Leased Premises, or the Land, and any and all
liens and encumbrances created by Tenant shall attach only to Tenant's interest
in the Leased Premises. If any such liens so attach and Tenant fails to bond
over or pay and remove same within Ten (10) days, then Landlord, at its
election, may pay and satisfy the same, and in such event the sums so paid by
Landlord shall accrue with interest from the date of payment at the rate set
forth in Section 28.8 hereof for amounts owed Landlord by Tenant. Such sums
shall be deemed to be Additional Rent.
ARTICLE 28
Miscellaneous
28.1 Successors and Assigns. Subject to the provisions of Article 13, each
provision of this Lease shall extend to and shall bind and inure to the benefit
not only of Landlord and Tenant, but also their respective heirs, legal
representatives, successors and assigns, but this provision shall not operate to
permit any transfer, assignment, mortgage, encumbrance, lien, charge or
subletting contrary to the provisions of this Lease.
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<PAGE>
28.2 Modifications in Writing. No modification, waiver or amendment of
this Lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing signed by Landlord.
28.3 No Option; Irrevocable Offer. Submission of this instrument for
examination shall not constitute a reservation of or option for the Leased
Premises or in any manner bind Landlord or Tenant, and no lease or obligation of
Landlord or Tenant shall arise until this instrument is signed and delivered by
Landlord and Tenant.
28.4 Definition of Tenant. The word "Tenant" whenever used herein shall be
construed to mean Tenants or any one or more of them in all cases where there is
more than one Tenant; and the necessary grammatical changes required to make the
provisions hereof apply either to corporations or other organizations,
partnerships or other entities, or individuals, shall in all cases be assumed as
though in each case fully expressed herein. In all cases where there is more
than one Tenant, the liability of each shall be joint and several.
28.5 Definition of Landlord. The term "Landlord" as used in this Lease
means only the owner or owners at the time being of the Leased Premises so that
in the event of any assignment, conveyance or sale, once or successively, of
said Leased Premises, or any assignment of this Lease by Landlord, said Landlord
making such sale, conveyance or assignment shall be and hereby is entirely freed
and relieved of all covenants and obligations of Landlord hereunder accruing
after such sale, conveyance or assignment, and Tenant agrees to look solely to
such purchaser, grantee or assignee with respect thereto. This Lease shall not
be affected by any such assignment, conveyance or sale, and Tenant agrees to
attorn to the purchaser, grantee or assignee.
28.6 Headings. The headings of Articles and Sections are for convenience
only and do not limit, expand or construe the contents of the Sections.
28.7 Time of Essence. Time is of the essence of this Lease and of all
provisions hereof.
28.8 Default Rate of Interest. All amounts (including, without limitation,
Base Rent, and Additional Rent, and any damages, costs, expenses, penalties,
fines, indemnity claims and related or similar accounts due under this Lease,
including, but not limited to those amounts under Article 17 hereof, whether the
same be stipulated or otherwise) owed by Tenant to Landlord pursuant to any
provision of this Lease shall bear interest from the date due until paid at the
annual rate of Four Percent (4%) in excess of the rate of interest announced
from time to time by The First National Bank of Chicago at Chicago, Illinois, or
its successor bank, as its prime, reference or corporate base rate, changing as
and when said prime rate changes, unless a lesser rate shall then be the maximum
rate permissible by law with respect thereto in which event said lesser rate
shall be charged. Any such interest shall be in addition to any late charges
incurred by Tenant under Section 3.3 hereof.
28.9 Severability. The invalidity of any provision of this Lease shall not
impair or affect in any manner the validity, enforceability or effect of the
rest of this Lease.
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28.10 Entire Agreement. All understandings and agreements, oral or
written, heretofore made between the parties hereto are merged in this Lease,
which alone fully and completely expresses the agreement between Landlord (and
its agents) and Tenant.
28.11 Force Majeure. If Landlord fails to perform any of its obligations
hereunder, and such failure is due in whole or in part to any strike, lockout,
labor trouble, civil disorder, inability to procure materials, failure of power,
restrictive governmental laws and regulations, riots, insurrections, war, fuel
shortages, accidents, casualties, acts of God, acts caused directly or
indirectly by Tenant (or its agents, employees, contractors, licensees or
invitees) or any other cause beyond the reasonable control of Landlord, then
Landlord shall not be deemed in default under this Lease as a result of such
failure and the time for performance by Landlord provided for herein shall be
extended by the period of delay resulting from such cause. If Tenant fails to
perform any of its obligations hereunder, except for the payment of Base Rent
and Additional Rent, and such failure is due in whole or in part to any strike,
lockout, labor trouble, civil disorder, restrictive governmental laws and
regulations, riots, insurrections, war, acts of God or any other cause beyond
the reasonable control of Tenant, then Tenant shall not be deemed in Default
under this Lease as a result of such failure and the time for performance by
Tenant provided for herein shall be extended by the period of delay resulting
from such cause.
28.12 Payments by Landlord. Landlord shall, in the event Tenant fails to
pay the same, have the right, but not the obligation, to make payment of any
sums or amounts due to any third party by Tenant which arise out of, are
associated with, or relate to, Tenant's obligations under this Lease. Any such
payments made by Landlord on Tenant's behalf shall be deemed Additional Rent and
be due and payable to Landlord promptly upon submission of a notice regarding
the same. Such amounts shall expressly include any payments made by or on behalf
of Landlord to third parties, including payment of attorneys' fees, related to
or arising out of claims for which Tenant is obligated, pursuant to the terms of
this Lease or otherwise, to defend, indemnify and hold Landlord harmless.
Tenant's failure to pay such amounts upon demand by Landlord after payment by
Landlord shall constitute, with the required notice, a Default under Section
17.1(b), which Default shall be in addition to any Default resulting from
Tenant's failure to abide by its obligations hereunder to indemnify, hold
harmless and defend Landlord in the first place.
28.13 Survival. All obligations, monetary or otherwise, accruing prior to
expiration of the Lease Term shall survive the expiration or earlier termination
of this Lease.
28.14 Relationship of Parties. This Lease does not create the relationship
of principal and agent, or of partnership, joint venture or of any association
or relationship between Landlord and Tenant, the sole relationship between
Landlord and Tenant being that of landlord and tenant.
28.15 Surrender. No surrender to Landlord of this Lease or of the Leased
Premises, or any portion thereof, or any interest therein, prior to the
expiration of the Lease Term shall be valid or effective unless agreed to and
accepted in writing by Landlord and consented to in writing by all ground
lessors and the holders of all mortgages and deeds of trust, and no act or
omission by Landlord or any representative or agent of Landlord, other than such
a written acceptance by
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<PAGE>
Landlord consented to by all such ground lessors and/or mortgagees, as
aforesaid, shall constitute an acceptance of any such surrender.
28.16 No Merger. There shall be no merger of this Lease or the leasehold
estate created by this Lease with any other estate or interest in the Leased
Premises by reason of the fact that the same person, firm, corporation or other
entity may acquire, hold or own directly or indirectly, (a) this Lease or the
leasehold interest created by this Lease or any interest therein, and (b) any
such other estate or interest in the Leased Premises or any portion thereof. No
such merger shall occur unless and until all persons, firms, corporations or
other entities having an interest (including a security interest) in (1) this
Lease or the leasehold estate created hereby, and (2) any such other estate or
interest in the Leased Premises or any portion thereof, shall join in a written
instrument expressly effecting such merger and shall duly record the same.
28.17 Governing Law. This Lease shall be governed in all respects by the
laws of the State of Illinois. Should either party institute legal suit or
action for enforcement of any obligation contained herein, it is agreed that the
venue of such suit or action shall be, at Landlord's option, in Lake County,
Illinois. Tenant expressly consents to Landlord's designation of the venue of
any such suit or action and each party waives the right to a jury in any action,
proceeding or counterclaim brought by either of them against the other on any
matters whatsoever arising under or out of this Lease. Although the provisions
of this Lease were initially drawn by the Landlord, this Lease shall not be
construed either for or against Landlord or Tenant, but this Lease shall be
interpreted in accordance with the general terms of the language in an effort to
reach an equitable result.
28.18 Quiet Possession. Upon Tenant paying the Rent for the premises and
observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Leased Premises for the entire term hereof subject to all of
the provisions of this Lease.
28.19 Tenant's Statement. Tenant shall furnish to Landlord, within Ten
(10) business days after written request therefor from Landlord, a copy of the
then most recent audited and certified financial statements of Tenant, if any.
It is mutually agreed that Landlord may deliver a copy of such statements to any
mortgagee or prospective mortgagee of Landlord, or any prospective purchaser of
the Leased Premises, but otherwise Landlord shall treat such statements and
information contained therein as confidential.
28.20 Intent - Triple Net Lease. Anything to the contrary notwithstanding
contained herein or otherwise, this Lease shall be construed as a triple net
lease and any and all expenses and obligations in connection with the Leased
Premises and the operation thereof, except where the same are expressly the
obligation of Landlord, also will be the obligation of the Tenant.
28.21 Usury. Notwithstanding any provision contained herein to the
contrary, if any interest rate specified in this Lease is higher than the rate
permitted by law, such interest rate specified herein shall automatically be
adjusted from time to time to the maximum rate permitted by law.
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ARTICLE 29
Exculpatory Provisions
29.1 Exculpatory Provisions. It is expressly understood and agreed by and
between the parties hereto, anything to the contrary notwithstanding, that each
and all of the representations, warranties, covenants, undertakings and
agreements herein made on the part of Landlord which in form purporting to be
the representations, warranties, covenants, undertakings and agreements of
Landlord are nevertheless each and every one of them made and intended, not as
personal representations, warranties, covenants, undertakings and agreements by
Landlord or for the purpose or with the intention of binding Landlord
personally, but are made and intended for the purpose only of subjecting
Landlord's interest in the Leased Premises to the terms of this Lease and for no
other purpose whatsoever, and in the case of default hereunder by Landlord,
Tenant shall look solely to the interests of Landlord in the Leased Premises;
that Landlord shall not have any personal liability to pay any indebtedness
accruing hereunder or to perform any covenant, either express or implied, herein
contained, and no liability or duty shall rest upon Landlord to sequester the
rents, issues and profits arising therefrom, or the proceeds arising from any
sale or other disposition thereof; and that no personal liability or personal
responsibility of any sort is assumed by, nor shall at any time be asserted or
enforceable against said Landlord, individually or personally, on account of
this Lease or on account of any representation, warranty, covenant, undertaking
or agreement of Landlord in this Lease contained, either express or implied, all
such personal liability, if any, being expressly waived and released by Tenant
and by all persons claiming by, through or under Tenant. In furtherance of the
foregoing, Tenant agrees that (a) the sole and exclusive remedy in the event of
any Landlord default shall be against Landlord's estate in the Leased Premises;
(b) no partner, member, or shareholder of Landlord shall be sued or named as a
party in any suit or action (except as may be necessary to secure jurisdiction);
(c) no service of process shall be made against any partner, member, or
shareholder of Landlord (except as may be necessary to secure jurisdiction); (d)
no partner, member, or shareholder of Landlord shall be required to answer or
otherwise plead to any service of process; (e) no judgment will be taken against
any partner, member, or shareholder of Landlord; (f) any judgment taken against
any partner, member, or shareholder of Landlord may be vacated and set aside at
any time nunc pro tunc; (g) no writ of execution will ever be levied against the
assets of any partner, member or shareholder of Landlord; and (h) these
covenants and agreements are enforceable both by Landlord and also by any
partner, member or shareholder of Landlord.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the date first written above.
LANDLORD: LAUREL LIMITED PARTNERSHIP,
an Illinois Limited Partnership
By: Viking II, L.L.C., its General
Partner
By: /s/Carl E. Carlson
-------------------------
Carl E. Carlson, Member
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<PAGE>
By: /s/ Wayne L. Sorensen
-------------------------
Wayne L. Sorensen, Member
and
TENANT: PHOENIX COLOR CORP.
a Delaware Corporation
By: /s/ Edward Lieberman
----------------------------
Authorized Officer
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<PAGE>
EXHIBIT A
Leased Premises
LOTS 15, 16, AND 17 IN BRADLEY ROAD INDUSTRIAL PARK UNIT 1, BEING A
SUBDIVISION OF PART OF THE SOUTHWEST QUARTER OF SECTION 24, TOWNSHIP 44 NORTH,
RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF
RECORDED MAY 24, 1979 AS DOCUMENT 1996467, IN BOOK 70 OF PLATS, PAGES 31 TO 33
AND CORRECTED BY LETTER OF CORRECTION RECORDED JUNE 14, 1979 AS DOCUMENT
2000534, IN LAKE COUNTY, ILLINOIS.
Permanent Index Number(s): 11-24-303-008
11-24-303-009
11-24-303-010
Street Address: 13825 Laurel Drive
Lake Forest, Illinois
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
PCC Express, Inc.
540 Western Maryland Parkway
Hagerstown, MD 21740
Phoenix (MD.) Realty, LLC
540 Western Maryland Parkway
Hagerstown, MD 21740
TechniGraphix, Inc.
22977 Eaglewood Court
Sterling, VA 20166
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 on Form S-4 to registration
statement on Form S-1 of Phoenix Color Corp. (File No. 333-50995), of our report
dated February 12, 1999, on our audits of the consolidated financial statements
of Phoenix Color Corp. and Subsidiaries as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998. We also consent
to the references to our firm under the capitions "Experts" and "Selected
Financial Data."
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
March 8, 1999
<PAGE>
Exhibit 25.1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____X___
----------------------------------------
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
29-2933369
(State of incorporation (I.R.S. employer
if not a national bank) identificaion No.)
UNION TRUST BUILDING, SUITE 325
501 GRANT STREET, PITTSBURGH, PA 15219
(Address of principal executive offices) (Zip Code)
WILLIAM H. MCDAVID
THE CHASE MANHATTAN BANK
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
PHOENIX COLOR CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 22-2269911
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
540 WESTERN MARYLAND PARKWAY
HAGERSTOWN, MD 21740
(Address of principal executive offices) (Zip Code)
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
---------------------------------------------------
(Title of the indenture securities)
<PAGE>
---------------------------------------------------
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of Eligibility.
1. EXHIBIT T1A(a) A copy of the Articles of Association of the Trustee as now
in effect.
2. EXHIBIT T1A(b) A copy of the Certificate of Authority of the Trustee
(previously known as New Trust Company, National Association,) to commence
business. Also included in Exhibit TIA (b) are letters dated November 24,
1997 from the Comptroller of the Currency authorizing the exercise of
fiduciary powers by the Trustee and acknowledging the name change of the
Trustee.
3. EXHIBIT T1A(c) The Authorization of the Trustee to exercise corporate trust
powers is contained in Exhibit T1A(b).
4. EXHIBIT T1B A copy of the By-Laws of the Trustee as now in effect.
5. EXHIBIT T1C Not applicable
6. EXHIBIT T1D The Trustee's consent required by Section 321(b) of the Act.
7. EXHIBIT T1E A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.
8. EXHIBIT T1F Not applicable
9. EXHIBIT T1G Not applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
Philadelphia and State of Pennsylvania, on the 7th day of August, 1998.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By
-----------------
J. C. Progar
Vice President
<PAGE>
EXHIBIT T1A(a)
[GRAPHIC]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
CHARTER NO. 23548
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to perform any lawful activities of
a national bank, the undersigned do enter into the following Articles of
Association:
FIRST. The title of this Association shall be Chase Manhattan Trust Company,
National Association (the "Association").
SECOND. The main office of the Association shall be in the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania. The business of the
Association shall be limited to the fiduciary powers and the support of
activities incidental to the exercise of those powers. The Association will
obtain the prior written approval of the Office of the Comptroller of the
Currency before amending these Articles of Association to expand the scope of
its activities and services.
THIRD. The board of directors of this Association shall consist of not less than
five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his
directorship, shall own common or preferred stock of the Association or of a
holding company owning the Association, with an aggregate par, fair market or
equity value of not less than $1,000. Any vacancy in the board of directors may
be filled by action of the shareholders or a majority of the remaining
directors.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It shall
be held at the main office or any other convenient place the board of directors
may designate, on the day of each year specified therefore in the by-laws, or if
that day falls on a legal holiday in the state in which the Association is
located, on the next following banking day. If no election is held on the day
fixed or in event of a legal holiday, on the following banking day, an election
may be held on any subsequent day within 60 days of the day fixed, to be
designated by the board of directors, or, if the directors fail to fix the day,
by shareholders representing two-thirds of the shares issued and outstanding.
Advance notice of the meeting may be duly waived by the sole shareholder in
accordance with 12 C.F.R. 7.2001.
A director may resign at any time by delivering written notice to the board of
directors, its Chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause.
FIFTH. The authorized amount of capital stock of this Association shall be five
million dollars ($5,000,000), divided into fifty thousand (50,000) shares of
common stock of the par value of one hundred dollars ($ 100) each; but said
capital stock may be increased or decreased from time to time, according to the
provisions of the laws of the United States.
<PAGE>
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right to subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors may appoint one of its members President of this
Association, and one of its members Chairperson of the board or two of its
members as Co-Chairpersons of the board, and shall have the power to appoint one
or more Vice Presidents, a Secretary who shall keep minutes of the directors'
and shareholders' meetings and be responsible for authenticating the records of
the Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the by-laws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with applicable
law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and fix the penalty thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of the
Association shall be made, provided that nothing herein shall restrict the power
of shareholders to increase or decrease the capital of the Association in
accordance with law.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial by-laws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of the
Association.
(10) Amend or repeal by-laws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
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SEVENTH. The board of directors shall have the power to change the location of
the main office to any other location permitted under applicable law, without
the approval of the shareholders, and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location permitted under applicable law, without the approval of the
shareholders subject to approval by the Office of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's board of directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE>
EXHIBIT T1B
[GRAPHIC]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders
to elect directors and transact whatever other business may properly come
before the meeting, shall be held at the main office of the Association, or
such other place as the board may designate, and at such time in each year as
may be designated by the board of directors. Unless otherwise provided by
law, notice of the meeting may be waived by the Association's sole
shareholder in accordance with 12 C.F.R. Section 7.2001. If, for any cause,
an election of directors is not made on that date, or in the event of a legal
holiday, on the next following banking day, an election may be held on any
subsequent day within 60 days of the date fixed, to be designated by the
board, or, if the directors fail to fix the date, by shareholders
representing two thirds of the shares issued and outstanding.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by a majority of the board of directors or by any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of the Association or by the Chairperson of the board of directors or the
President. Unless otherwise provided by law, advance notice of a special meeting
may be waived by the Association's Sole Shareholder in accordance with 12 C.F.R.
Section 7.2001.
SECTION 1.3. NOMINATIONS OF DIRECTORS. Nominations for election to the board of
directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the Association, shall be made in writing and shall be
delivered or mailed to the President of the Association and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
PROVIDED, HOWEVER, that if less than 21 days' notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Association and to the Comptroller of the Currency not later than the close
of business on the seventh (7th) day following the day on which the notice of
meeting was mailed. Such notification shall contain the following information to
the extent known to the notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Association that
will be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned by the
notifying shareholder. Nominations not made in accordance herewith may, in
his/her discretion, be disregarded by the Chairperson of the meeting, and upon
his/her instructions, the vote tellers may disregard all votes cast for each
such nominee.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing, but no officer or employee of this
Association shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting above
requirements submitted at any time during a meeting shall be accepted.
SECTION 1.5 QUORUM. A majority of the outstanding capital stock, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 10.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association, or by the shareholders or directors pursuant to Section
10.2. Any action required or
<PAGE>
permitted to be taken by the shareholders may be taken without a meeting by
unanimous written consent of the shareholders to a resolution authorizing the
action. The resolution and the written consent shall be filed with the minutes
of the proceedings of the shareholders.
ARTICLE II. DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors ("board") shall have the
power to manage and administer the business and affairs of the Association.
Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the board.
SECTION 2.2. NUMBER. The board shall consist of not less than five nor more than
twenty-five persons, the exact number within such minimum and maximum limits to
be fixed and determined from time to time by resolution of a majority of the
full board or by resolution of a majority of the shareholders at any meeting
thereof; PROVIDED, HOWEVER, that a majority of the full board may not increase
the number of directors to a number which: (1) exceeds by more than two the
number of directors last elected by shareholders where such number was 15 or
less; and (2) exceeds by more than four the number of directors last elected by
shareholders where such number was 16 or more, but in no event shall the number
of directors exceed 25.
SECTION 2.3. ORGANIZATION MEETING. The Secretary shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the Association to organize the new board and elect
and appoint officers of the Association for the succeeding year. Such meeting
shall be held on the day of the election or as soon thereafter as practicable,
and, in any event, within 30 days thereof. If, at the time fixed for such
meeting, there shall not be a quorum, the directors present may adjourn the
meeting, from time to time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The time and location of regular meetings of the
board shall be set by the board. Such meetings may be held without notice. Any
business may be transacted at any regular meeting. The board may adopt any
procedures for the notice and conduct of any meetings as are not prohibited by
law.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board may be called at
the request of the Chairperson or Co-Chairperson of the board, the President, or
three or more directors. Each member of the board shall be given notice stating
the time and place, by telegram, telephone, letter or in person, of each such
special meeting at least one day prior to such meeting. Any business may be
transacted at any special meeting.
SECTION 2.6. ACTION BY THE BOARD. Except as otherwise provided by law, corporate
action to be taken by the board shall mean such action at a meeting of the
board. Any action required or permitted to be taken by the board or any
committee of the board may be taken without a meeting if all members of the
board or the committee consent in writing to a resolution authorizing the
action. The resolution and the written consents thereto shall be filed with the
minutes of the proceedings of the board or committee. Any one or more members of
the board or any committee may participate in a meeting of the board or
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such
meeting.
SECTION 2.7. WAIVER OF NOTICE. Notice of a special meeting need not be given to
any director who submits a signed waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him or her.
SECTION 2.8. QUORUM AND MANNER OF ACTING. Except as otherwise required by law,
the Articles of Association or these by-laws, a majority of the directors shall
constitute a quorum for the transaction of any business at any meeting of the
board and the act of a majority of the directors present and voting at a meeting
at which a quorum is present shall be the act of the board. In the absence of a
quorum, a majority of the directors present may adjourn any meeting, from time
to time, until a quorum is present and no notice of any adjourned meeting need
be given. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.9. VACANCIES. In the event a majority of the full board increases the
number of directors to a number which exceeds the number of directors last
elected by shareholders, as permitted by Section 2.2, directors may be appointed
to fill the resulting vacancies by vote of such majority of the full board. In
the event of a vacancy
<PAGE>
in the board for any other cause, a director may be appointed to fill such
vacancy by vote of a majority of the remaining directors then in office.
SECTION 2.10. REMOVAL OF DIRECTORS. The vacancy created by the removal of a
director pursuant to this Section may be filled by the board in accordance with
Section 2.9 of these by-laws or by the shareholders.
ARTICLE III. COMMITTEES
SECTION 3.1. EXECUTIVE COMMITTEE. There may be an executive committee consisting
of the Chairperson or Co-Chairperson of the board and not less than two other
directors appointed by the board annually or more often. Subject to the
limitations in Section 3.4(g) of these by-laws, the executive committee shall
have the maximum authority permitted by law.
SECTION 3.2. AUDIT COMMITTEE. There may be an audit committee composed of not
less than two directors, exclusive of any active officers, appointed by the
board annually or more often, whose duty it shall be to make an examination at
least once during each calendar year and within fifteen months of the last
examination into the affairs of the Association, or cause continuous suitable
examinations to be made, by auditors responsible only to the board, and to
report the results of any such examinations in writing to the board from time to
time. Such examinations shall include audits of the fiduciary business of the
Association as may be required by law or regulation.
SECTION 3.3. OTHER COMMITTEES. The board may appoint, from time to time, other
committees of one or more persons, for such purposes and with such powers as the
board may determine.
SECTION 3.4. GENERAL. (a) Each committee shall elect a Chairperson from among
the members thereof and shall also designate a Secretary of the committee, who
shall keep a record of its proceedings.
(b) Vacancies occurring from time to time in the membership of any
committee shall be filled by the board for the unexpired term of the member
whose departure causes such vacancy. The board may designate one or more
alternate members of any committee, who may replace any absent member or members
at any meeting of such committee.
(c) Each committee shall adopt its own rules of procedure and shall meet at
such stated times as it may, by resolution, appoint. It shall also meet whenever
called together by its Chairperson or the Chairperson of the board.
(d) No notice of regular meetings of any committee need be given. Notice of
every special meeting shall be given either by mailing such notice to each
member of such committee at his or her address, as the same appears in the
records of the Association, at least two days before the day of such meeting, or
by notifying each member on or before the day of such meeting by telephone or by
personal notice, or by leaving a written notice at his or her residence or place
of business on or before the day of such meeting. Waiver of notice in writing of
any meeting, whether prior or subsequent to such meeting, or attendance at such
meeting, shall be equivalent to notice of such meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at any
special meeting.
(e) All committees shall, with respect to all matters, be subject to the
authority and direction of the board and shall report to it when required.
(f) Unless otherwise required by law, the Articles of Association or these
by-laws, a quorum at any meeting of any committee shall be one-third of the full
membership and present shall be the act of the committee.
(g) No committee shall have authority to take any action which is expressly
required by law or regulation to be taken at a meeting of the board or by a
specified proportion of directors.
ARTICLE IV. OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRPERSON OF THE BOARD. The board shall appoint one of its
members to be the Chairperson of the board, or two persons to serve as
Co-Chairperson of the board to serve at its pleasure. Such person shall preside
at all meetings of the board. The Chairperson or Co-Chairpersons of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these by-laws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board.
<PAGE>
SECTION 4.2. PRESIDENT. The board may appoint one of its members to be the
President of the Association. In the absence of the Chairperson or
Co-Chairpersons, the President shall preside at any meeting of the board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of President, or imposed by these by-laws. The President shall
also have and may exercise such further powers and duties as from time to time
may be conferred, or assigned by the board.
SECTION 4.3. VICE PRESIDENT. The board may appoint one or more Vice Presidents.
Each Vice President shall have such powers and duties as may be assigned by the
board.
SECTION 4.4. SECRETARY. The board shall appoint a Secretary, Cashier, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these by-laws; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Cashier, or imposed by these by-laws;
and shall also perform such other duties as may be assigned from time to time,
by the board.
SECTION 4.5. OTHER OFFICERS. The board may appoint one or more Assistant Vice
Presidents, one or more Trust Officers, one or more Assistant Secretaries, one
or more Assistant Cashiers, one or more Managers and Assistant Managers of
branches and such other officers and attorneys in fact as from time to time may
appear to the board to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the board, the Chairperson or Co-Chairpersons of the board,
or the President. The board may authorize an officer to appoint one or more
officers or assistant officers.
SECTION 4.6. RESIGNATION. An officer may resign at any time by delivering notice
to the Association. A resignation is effective when the notice is given unless
the notice specifies a later effective date.
ARTICLE V. FIDUCIARY ACTIVITIES
SECTION 5.1. TRUST COMMITTEE. There shall be a Trust Committee of this
Association composed of four or more members, who shall be capable and
experienced officers or directors of the Association. The Committee is charged
with the responsibility for the investment, retention, or disposition of assets
held in accounts with respect to which the Association has investment authority;
for the review of the assets of accounts for which the Association has
investment authority promptly after the acceptance of such an account and at
least once during every calendar year thereafter to determine the advisability
of retaining or disposing of such assets; for the determination of the manner in
which proxies received for accounts for which the Association has responsibility
for the voting of proxies shall be voted; for the determination of all
substantial questions involving discretionary authority of the Association of a
non-investment nature, including, but not limited to, distribution of principal
and/or income in respect of any account; for providing advice as to the
investment, retention, or disposition of assets in investment advisory accounts
maintained by the Association; for the making of such reports as this board
shall require; and for such other responsibilities as may be assigned by this
board. The Trust Committee, in discharging its aforementioned responsibilities,
may authorize officers of the Association to exercise such powers and under such
conditions as the Committee may from time to time prescribe.
SECTION 5.2. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the Association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under applicable law.
SECTION 5.3. TRUST AUDIT COMMITTEE. The board shall appoint a committee of at
least two directors, exclusive of any active officer of the association, which
shall, at least once during each calendar year make suitable audits of the
association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the board, and at such time shall ascertain whether
fiduciary powers have been administered according to law, Part 9 of the
Regulations of the Comptroller of the Currency, and sound fiduciary principles.
SECTION 5.4. FIDUCIARY FILES. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
<PAGE>
ARTICLE VI. STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights of the prior
holder of such shares. The board may impose conditions upon the transfer of the
stock reasonably calculated to simplify the work of the Association with respect
to stock transfers, voting at shareholder meetings, and related matters and to
protect it against fraudulent transfers.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the signature
of the Chairperson or Co-Chairpersons of the board or President (which may be
engraved, printed or impressed), and shall be signed manually or by facsimile
process by the Secretary, Assistant Secretary, Cashier, Assistant Cashier, or
any other officer appointed by the board for that purpose, to be known as an
authorized officer, and the seal of the Association shall be engraved thereon.
Each certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Association properly endorsed. In case
any such officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such before such certificate is
issued, it may be issued by the Association with the same effect as if such
officer had not ceased to be such at the time of its issue. The corporate seal
may be a facsimile, engraved or printed.
ARTICLE VII. CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The Chairperson, the President, the Cashier, the
Secretary or any Assistant Cashier or Assistant Secretary, or other officer
thereunto designated by the board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such seal
shall be substantially in the following form: A circle, with the words "Chase
Manhattan Trust Company, National Association" within such circle.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
SECTION 8.1. FISCAL YEAR. The fiscal year of the Association shall be the
calendar year.
SECTION 8.2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Association by the Chairperson or Co-Chairpersons of the board, or the
President, or any Vice Chairperson, or any Managing Director, or any Vice
President, or any Assistant Vice President, or the Chief Financial Officer, or
the Controller, or the Secretary, or the Cashier, or, if in connection with
exercise of fiduciary powers of the Association, by any of those officers or by
any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the Association in such other
manner and by such other officers as the board may from time to time direct. The
provisions of this Section 8.2 are supplementary to any other provision of these
by-laws.
SECTION 8.3. RECORDS. The Articles of Association, the by-laws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the Secretary,
Cashier or other officer appointed to act as Secretary of the meeting.
SECTION 8.4. CORPORATE GOVERNANCE PROCEDURES. To the extent not inconsistent
with applicable Federal banking law, bank safety and soundness or these by-laws,
the corporate governance procedures found in the Delaware General Corporation
Law shall be followed by the Association.
ARTICLE IX. INDEMNIFICATION
<PAGE>
SECTION 9.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Association or is or was serving at the request of
the Association as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Association to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Association to provide broader indemnification rights than such law permitted
the Association to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 9.3 of these by-laws with respect to proceedings
to enforce rights to indemnification, the Association shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
board.
SECTION 9.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 9.1 of these by-laws shall include the right to be paid by
the Association the expenses (including attorney's fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Association of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 9.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 9.1 and 9.2 of these by-laws shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 9.3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 9.1 or
9.2 of these by-laws is not paid in full by the Association within sixty (60)
days after a written claim has been received by the Association except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Association to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Association to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (1) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) any suit brought by the Association to recover an
advancement of expenses pursuant to the terms of an undertaking, the Association
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Association
(including the board, the Association's independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Association (including the board, the Association's independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Association to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article IX or otherwise shall be on the Association.
SECTION 9.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the
advancement of expenses conferred in this Article IX shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Association's Articles of Association, by-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
<PAGE>
SECTION 9.5. INSURANCE. The Association may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Association or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Association would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 9.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE ASSOCIATION. The
Association may, to the extent authorized from time to time by the board, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Association to the fullest extent of the provisions of this Article
IX with respect to the indemnification and advancement of expenses of directors
and officers of the Association.
ARTICLE X. BY-LAWS
SECTION 10.1. INSPECTION. A copy of the by-laws, with all amendments, shall at
all times be kept in a convenient place at the main office of the Association,
and shall be open for inspection to all shareholders during banking hours.
SECTION 10.2. AMENDMENTS. The by-laws may be amended, altered or repealed, at
any regular meeting of the board by a vote of a majority of the total number of
the directors except as provided below. The Association's shareholders may amend
or repeal the by-laws even though the by-laws may be amended or repealed by its
board.
<PAGE>
EXHIBIT T1D
Consent for Records of Governmental Agencies
to be Made Available to the Commission
---------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association,
pursuant to Section 321(b) of The Trust Indenture Act of 1939, hereby authorizes
the Board of Governors of the Federal Reserve System, the Federal Reserve Banks,
the Treasury Department, the Comptroller of the Currency and the Federal Deposit
Insurance Corporation, under such conditions as they may prescribe, to make
available to the Commission such reports, records or other information as they
may have available with respect to the undersigned as a prospective trustee
under an indenture to be qualified under the aforesaid Trustee Indenture Act of
1939 and to make through their examiners or other employees for the use of the
Commission, examinations of the undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust Indenture
Act of 1939, consents that reports of examination by the Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Commission upon request therefor.
Dated this _________________.
Chase Manhattan Trust Company,
National Association
By:
-----------------
J. C. Progar
Vice President
<PAGE>
Exhibit T1E
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
STATEMENT OF CONDITION
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
($000)
------
<S> <C>
ASSETS
Cash and Due From Banks $ 15,946
Securities Available for Sale 3,072
Premises and Fixed Assets 586
Intangible Assets 88,275
-------------
Total Assets $107,879
-------------
-------------
LIABILITIES
Sundry Liabilities and Accrued Expenses $ 3,917
-------------
STOCKHOLDER'S EQUITY
Common Stock $ 5,000
Surplus 95,000
Retained Earnings 3,962
-------------
Total Stockholder's Equity $103,962
-------------
Total Liabilities and Stockholder's Equity $107,879
-------------
-------------
</TABLE>
