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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-26674
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DATA DOCUMENTS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 47-0714942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4205 SOUTH 96TH STREET
OMAHA, NEBRASKA 68127
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (402) 339-0900
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON
STOCK, $.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant was $75,406,434 as of February 28, 1997.
The number of shares outstanding of the Registrant's Common Stock,
as of February 28, 1997, was 9,615,668 shares (excluding 269,607 treasury
shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Data Documents Incorporated definitive Proxy
Statement to be filed with the Securities and Exchange Commission within 120
days after the close of the fiscal year ended December 31, 1996 are incorporated
by reference into Part III hereof.
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DATA DOCUMENTS INCORPORATED
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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Page
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ITEM 1. BUSINESS............................................................1
ITEM 2. PROPERTIES..........................................................8
ITEM 3. LEGAL PROCEEDINGS...................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................8
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.............................................................9
ITEM 6. SELECTED FINANCIAL DATA.............................................9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..............................................11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...............................................16
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................16
ITEM 11. EXECUTIVE COMPENSATION.............................................16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................16
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K....17
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL
Data Documents Incorporated (the "Company") conducts all of its
consolidated operations through its one wholly-owned subsidiary, Data Documents,
Inc., a Nebraska corporation ("DDI"), and DDI's wholly-owned subsidiaries, PBF
Washington, Inc., a Washington corporation ("PBF"), and Cal Emblem Labels, Inc.,
a California corporation ("Cal Emblem"). DDI, PBF and Cal Emblem account for
100% of the consolidated revenues and net earnings of the Company. The Company's
sole assets are the investment in the stock of, and advances to, DDI. The
Company has no subsidiaries other than DDI and, indirectly, PBF and Cal Emblem,
and has no liabilities other than guarantees of indebtedness of DDI, PBF and Cal
Emblem. The Company's financial statements are prepared on a consolidated basis
and include the financial results of DDI, PBF and Cal Emblem. Unless the context
otherwise requires, the term "Company" includes Data Documents Incorporated and
its direct and indirect subsidiaries.
In August 1995, the Company purchased the capital stock of Cal
Emblem, expanding the Company's products to include prime labels and increasing
its market presence in California and Colorado.
In October 1995, the Company consummated an initial public offering
(the "Offering") of 3,400,000 shares of its common stock, par value $0.001 per
share (the "Common Stock"), to the public. The Offering was registered under the
Securities Act of 1933, as amended (the "Securities Act"), on a registration
Statement on Form S-1. The net proceeds to the Company of approximately $27.9
million were used by the Company to redeem $24,000,000 in aggregate principal
amount of the 13 1/2 % Senior Secured Notes of DDI due 2002 (the "Senior
Notes").
The Company was organized by management and an investor group in
Delaware in February 1988 to acquire DDI from Pitney Bowes, Inc. (the "1988
Management Acquisition").
The Company is a leading designer and provider of custom business
forms, pressure-sensitive label products and forms management systems that
enable its large corporate customers to enhance productivity and reduce costs
associated with managing information. A substantial portion of the Company's
forms sales are made in connection with its proprietary forms management
systems. In addition, the Company supplies specialized direct mail products and
services ("InteliMail(R)") and sells other computer services and products,
including laser printer supplies and software packages.
Within the pressure-sensitive label market, the Company has focused
on, among others, the thermal, laser and combination label/forms segments. The
Company has developed many label products, such as the Dual-Web(R) label/form
combination product and airline baggage tracking labels. Many of the Company's
products have been developed to satisfy customers' increasing needs for variable
information content, such as inventory control bar coding for manufacturing,
retailing and distribution customers.
Over the last five years, the business forms industry has been
affected by numerous factors, including changes in end-user requirements and
available technology. These changes have resulted in a shift towards certain
custom value-added products and systems in both the business forms and
pressure-sensitive label markets. Consequently, there has been a decline in the
stock forms segment and a reduction of the paper content of forms products. In
addition, end-users are increasingly seeking to outsource and single source
their forms management and pressure-sensitive label needs. The Company has
positioned itself as a provider of solutions-based approaches to information
collection and distribution and to focus its business on custom value-added
products that are tied to the Company's services. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Custom products
accounted for approximately 81% of the Company's net sales in 1996.
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The Company establishes strategic, long-term forms management
relationships with its core customers. The Company's forms management services
have been designed to respond to increased outsourcing by large corporations of
non-core operations, such as forms design and workflow analysis, inventory
management, warehousing and shipping. The Company's Odyssey Integrated
Services(R) program ("Program"), provides a selection of fully integrated
service modules, supported by proprietary software, offering comprehensive forms
management services and efficiency-enhancing tools.
INDUSTRY OVERVIEW
The Company has focused its product offerings in the business forms,
pressure-sensitive label and custom direct mail industries.
The U.S. market for business forms is divided into two primary
segments: custom forms and stock forms. The Company has targeted the
higher-margin custom forms segment. Based on industry analyses, the custom forms
segment generated approximately $6.4 billion of sales in 1995 and includes such
custom-made products as invoices, statements, purchase orders and checks. The
stock forms segment of the industry (excluding blank cut sheet laser printer
paper) generated approximately $1.5 billion of sales in 1995 and includes a wide
variety of more standard computer-output paper.
Advances in computer and laser technology have resulted in changes
in forms demands for some traditional products while creating new opportunities
for forms products and solutions that address the needs created by this new
technology. The installed base of laser printers has increased significantly
over the past few years and, as a result, custom laser form sales have been one
of the fastest-growing segments of the forms market.
In addition, larger companies have increased their outsourcing of
non-core operations such as forms management and have reduced the number of
vendors providing such products and services. The increase in outsourcing and in
the installed base of laser printers has resulted in an increase in the
customization of information flows. This trend towards outsourcing has also
increased the use of color and higher paper grades in print media. The Company
has worked to focus its business on custom value-added products and services and
has sought to develop solutions-based approaches to information collection and
distribution. See "-- Product Development."
The overall U.S. market for pressure-sensitive labels has grown
rapidly and was approximately $3.2 billion in 1995. Within this market, the
Company has historically focused its efforts on the EDP label segment. The
market for EDP pressure-sensitive labels was approximately $875 million in 1995.
With the acquisition of Cal Emblem in 1995, the Company added prime labels to
this product line. Evolving technologies are the catalysts for changes and
growth in the pressure-sensitive label market. The use of label products in
applications that are critical to the operations of business users is spurring
the development of new products and technologies, and end-users are demanding
reliable delivery and higher quality.
The direct mail product line comprises only approximately 7.9% of
the Company's sales.
FORMS MANAGEMENT/ODYSSEY INTEGRATED SERVICES
In 1983, the Company introduced its forms management program to
assist its larger customers in improving overall productivity and reducing the
costs associated with information management. For a typical customer, the
greatest portion of the total costs of forms usage is not the form itself, but
rather the costs of creating, procuring, managing, storing and using forms. By
developing programs tailored to each customer's requirements, the Company helps
to control these costs and improve efficiency in each phase of the customer's
forms usage. These programs also respond to the trend among large corporations
of outsourcing non-core operations such as forms management.
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In the second quarter of 1995, the Company announced the development
of its Odyssey Integrated Services program. The Program is a collection of
fully integrated service modules providing comprehensive forms management
services and efficiency-enhancing tools. As a package, the Program provides a
more extensive array of forms management services than the Company's standard
forms management programs. The Program incorporates proprietary software, the
Odyssey Networksm, that runs on the Microsoft Windows platform. The Odyssey
Network has been designed to operate on either a fully-outsourced basis or on
the customer's own file server. The Program was developed through the efforts of
the Company's marketing force, in close collaboration with the Company's
customers and the Company's in-house technical personnel. The Company's focus is
on attracting new customers whose businesses are large enough to generate
savings from the various service modules. Some of the Company's existing
customers may also be converted to the Program. During 1996, twenty-eight
customers were added to the Program for a total through December 1996 of
thirty-five customers having signed agreements. Implementation or
implementation planning is in process at all thirty-five sites. Of these
thirty-five customers, fourteen are new and twenty-one are conversions. Although
the Company believes that the Program can enable certain customers to realize
cost savings, there can be no assurances that the availability of the Program
will attract new customers or that it will be accepted by existing customers.
Forms management services offered by the Company (both in the
Odyssey Integrated Services program and the Company's standard forms management
programs) include: (i) forms and systems workflow analysis; (ii) forms design
services which utilize advanced design techniques, including DataLaser(R)
technology; (iii) forms control services; and (iv) inventory management
services. An example of a forms management service is a warehousing/storage
agreement whereby the Company receives an order for up to a year's supply of
forms which can be produced in economic lots throughout the year and delivered
to the customer on a just-in-time basis. As part of its traditional forms
management program, for its major customers the Company also provides on-line
direct computer access with software that enables the customer to determine the
production status of orders, check current inventory levels and place orders.
Additional services available under the Program modules include workflow
reengineering for improving employee productivity and disaster recovery
services. The Company also offers consolidated billing and the Company's "Pick
`n' Pack" forms warehousing/storage services on a selected basis. Through this
warehousing/storage service, the Company distributes products to various
locations in less than case lot quantities on an "as needed" basis.
The Company does not currently charge a separate fee for many of
these services offered as part of its traditional forms management program;
however, the Company does charge a fee for certain service modules. For example,
development of a forms database and subsequent analysis and maintenance of the
database in the Program's Forms Analysis Module, generate income for the
Company. Although the Company does not anticipate that the fees alone will be a
significant source of revenue for the Company, the goal of the forms management
programs, such as the Odyssey Integrated Services program, is to attract and
retain large customers with significant forms usage by enabling them to generate
cost savings and efficiencies in information management. As is the Company's
expectation for the Program, not all aspects of the Company's traditional forms
management program are offered to, or utilized by, all customers.
PRODUCTS
The Company's products consist primarily of business forms,
pressure-sensitive label products and InteliMail(R) custom direct mail products,
with aggregate sales of these products constituting 97%, 98% and 98% of the
Company's net sales for 1996, 1995 and 1994, respectively.
Business Forms. The Company primarily manufactures a complete line
of custom business forms produced to buyers' specifications for size, plies,
paper, inks and content. Products manufactured include invoices, statements,
purchase orders and receiving reports. These forms can be finished in a variety
of formats (fanfolded, roll-fed or cut-sheet) depending on the customer's
intended use. The Company also provides stock forms as a support product to its
custom forms and forms management
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accounts. These products are generally pre-printed, generic forms and blank or
green-bar forms for use on all types of computer printers.
Many major customers now employ high speed laser printers in a
centralized "print center." These customers are converting from fanfolded forms
to sheeted and/or jumbo roll (50") forms and the Company has developed processes
to manufacture high-quality, reliable roll and sheeted products for this new
printing environment. The Company's sales of custom laser forms represented
approximately 10.1% of its total net sales for 1996.
Pressure-Sensitive Labels. The Company's electronic data processing
pressure-sensitive labels are used in a wide range of retail, wholesale,
manufacturing, industrial and medical businesses and often relate to
applications that are critical to the operations of the Company's customers. The
Company produces bar code and other labels for a wide range of scanning systems,
which may be imprinted through the Company's plant or at the customer's
location. The uses of bar codes and other types of variable information
labeling, which uniquely identify individual products or transactions, are
growing, and customers are seeking to provide greater detail in packaging and
labeling, including hazardous materials notifications. In addition, government
regulations in various industries are increasing the demand for more informative
and extensive labels. The Company also serves as a value-added reseller of
certain of integrated label applications. See "-- Product Development."
The Company's custom label products include the following:
o Dual-Web(R) Labels. The Dual-Web product combines a custom-designed
business form and a pressure-sensitive label into a single unit.
Such label/form combination products are now used extensively in the
pharmacy and other industries.
o Laserprint(R) Labels. These labels, used primarily in retail and
distribution industries, are manufactured under strict
humidity-controlled conditions to ensure stability, with a
specially-coated surface for laser imaging of bar codes, pricing
information and other variable information.
o Airline Baggage Tracking Labels. On-demand printed bag tags. Label
stock is printed by the Company, and bar codes and other
variable-imaged information for baggage identification and routing
is added by airline personnel at ticket counters.
o Specialty Labels. Non-paper labels (vinyl, mylar, foils and other
films) with resistance to chemicals, heat and moisture for harsh
environments such as continuous rating plates for electric and gas
appliances, certain hazardous warning labels (used for applications
such as government-mandated chemical labeling) and bar coding
labels.
o Direct Thermal Labels. Custom labels that produce an image when
thermal-coated paper comes in contact with a heated printhead. These
labels, which the customer normally uses to identify specific items,
are used in a variety of applications, including parts
identification and inventory control.
o Thermal Transfer Labels. On-demand custom labels produced by
pressing a heated printhead against a film ribbon transferring the
image to the label surface. Applications include consumer product
tags, tickets, packaging, photo identification cards and inventory
control.
o Prime Labels. Pressure-sensitive labels that serve as the primary
product identification for the produce industry and other consumer
products industries.
InteliMail. InteliMail is a specialized single-source supplier of
custom direct mail services including printing, data processing and mailing
services offered to firms marketing their products and
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services through the mail. Direct mail users include companies in the
publishing, insurance, finance, communications, retail sales, non-profit and
automotive industries. In addition, federal, state and local governments,
agencies, political parties and lobbyists are large users for applications such
as ballots, voter registration, license renewal statements and payment coupons.
The InteliMail Division focuses on middle market customers and provides a
complete line of printed products, design capabilities, personalization and
mailing services.
Products of the InteliMail Division include a variety of different
mailer formats, processes and services for custom direct mail solicitations such
as: (i) production formats including promotional printing, imaged insert/window
envelopes, imaged envelope/generic insert, one-part folded/mailer, and
InteliMailer(R) and (ii) processes and services including data processing,
in-line finishing and variable imaging.
PRODUCT DEVELOPMENT
In 1985, the Company introduced the "Combo Label," a patented
three-part product used for picking, pricing and shipping and the "Dual-Web(R)"
label, a label/form combination. In 1987, the Company introduced the
"Laserprint(R) Label," a sheetfed label allowing customers to apply their own
variable imaging on-site. In 1989, in conjunction with airline industry
representatives, the Company developed a heat-sensitive label to upgrade baggage
tracking systems. In 1990, the Company released a new product line to provide
custom cut sheets and 50" rolls (custom and stock) to the growing laser forms
market. In 1995, the Company released a guaranteed matched mailer, a
personalized letter and matching envelope produced with video and computer
equipment.
In response to the increased use of laser printing technology and
the trend towards outsourcing by large corporations, the Company developed the
Odyssey Integrated Services program in 1995. The Program was developed through
the efforts of the Company's marketing force, in close collaboration with the
Company's customers and the Company's in-house technical personnel.
The Company has an internal team of electronic forms designers and
information specialists. This team works to provide electronic forms to the
Company's customers. In 1991, the Company entered into an agreement with a
software developer to market software for electronic forms design and to further
enhance the Company's photo-composition system by using personal computers to
generate copy/proofs on a local basis.
The Company over the last three years developed informal,
joint-venture type relationships with software and other technology-based
companies to provide integrated system solutions for commercial applications.
One application is Medi-Link, a prescription labeling package that provides
prescription labels, patient counseling documentation and point-of-sale coupons
and is marketed through the Company's sales force. The Medi-Link package, which
incorporates not only the Company's label products but also computer software
and hardware, has been adopted by a number of pharmacy companies. Another
application is an inventory compliance labeling system that is offered for sale
to vendors of Wal-Mart Stores. The system, which is called Compliance Plus,
includes software, hardware and label products that conform to Wal-Mart's
product identification requirements for its vendors.
CUSTOMERS
The Company's sales force targets large consumers of forms and
labels with revenue potential in excess of $50,000 per year and has historically
focused its sales efforts on its core geographic markets of mid-America, the
southwest and the northwest due to these regions' proximity to the Company's
manufacturing facilities and the impact of transportation costs on the Company's
margins. The Company also targets specific nationwide accounts where increased
volume and resulting efficiencies can offset delivery costs. The Company's five
largest customers accounted for 15.5%, 14.3% and 14.2% of net sales
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in 1996, 1995 and 1994 respectively. One customer accounted for 5.2% of the
Company's net sales in 1996 and no customer accounted for more than 5.0% of the
Company's net sales during 1995 or 1994.
BACKLOG
At December 31, 1996, the Company's backlog of unfilled customer
orders was $53.6 million, as compared to $54.6 million at December 31, 1995 and
$49.3 million at December 31, 1994. The Company expects that substantially all
of its current orders will ship within the next 180 days. The Company's typical
order to shipment cycles range from two to four weeks for custom products, while
stock products are sold "off the shelf."
DISTRIBUTION
Finished products produced by both the forms and labels operations
are normally distributed by truck either to warehouse facilities or directly to
the customer. Finished products generally are transported by outside trucking
services. However, the Company maintains and operates a fleet of trucks for
distribution within areas where the volume of shipments warrants ownership and
control.
Products are stored in all of the forms plants as well as in leased
or public warehouse facilities in outlying locations. The Company leases four of
its warehouses and uses 20 public warehouses across the country to decrease
delivery time and costs. Stock forms are stored in order to be readily available
to the sales force, while custom forms are stored for the convenience of the
customer, often pursuant to a forms management program. Warehouse storage is an
important part of the value-added services provided to customers. By producing
forms or labels required by a particular customer in advance and storing these
products, they are immediately available to the customer. The Company is
compensated for the expense of providing this warehousing function.
RAW MATERIALS
Paper is the Company's predominant raw material, accounting for
50% - 55% of the total cost of custom forms, 75% - 80% of the total cost of
stock forms and 67% - 74% of the total cost of pressure-sensitive labels. To
satisfy its paper requirements, the Company has entered into agreements with
major paper suppliers. The Company's paper supply contracts entitle the Company
to purchase paper at specified discounts to market prices. Purchases under these
agreements account for more than 80% of the Company's total paper requirements,
with the remainder purchased primarily from suppliers with which the Company has
long-standing relationships. Other raw materials used in the Company's
operations include carbon, ink and cartons.
COMPETITION
The business forms, pressure-sensitive label and direct mail
industries are very fragmented and highly competitive. The Company believes that
a relatively small number of companies account for a majority of the market for
business forms. Most other competitors are small local or regional companies
which often source from larger manufacturers. The Company's competitors include
manufacturers of all sizes, some of which have significantly greater financial,
distribution and marketing resources than the Company. In general, because the
business forms and prime label industries tend to be regional, different
competitive factors have greater influence in different areas. In particular,
the number of competitors in a region and their relative strengths and selling
tactics dictate the regional competitive environments. Competition in the
pressure-sensitive label and direct mail industries tends to be nationwide in
scope. The Company generally competes on the basis of price and service in the
stock forms and stock labels markets and on the basis of price, quality,
technical expertise and service, including speed of delivery, in the custom
forms and labels markets and in the customized direct mail market.
The Company's largest competitors in the business forms industry are
Moore Business Forms, Reynolds & Reynolds, Standard Register Co., Uarco (a
division of Settsu) and Wallace Computer
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Services, Inc. The Company's largest competitors in the pressure-sensitive label
market are Avery, Moore Business Forms and Uarco. The largest competitors in the
direct mail market are Colorforms (a division of Wallace), Communicolor (a
division of Standard Register Co.), Direct Marketing Corp. of America, InstaWeb
and Response Marketing Services (a division of Moore Business Forms).
EMPLOYEES
At December 31, 1996 the Company had approximately 1,200 full-time
and part-time employees at its various plants and facilities. The Company hires
temporary employees from time to time as needed. The Company considers its
employee relations to be excellent and has not experienced any significant work
disruptions due to labor difficulties. Approximately 10% of the Company's
employees, representing the hourly production work forces at the Bloomington,
Minnesota and Tacoma, Washington plants and one of the Denver, Colorado plants,
are covered by collective bargaining agreements with local units of the Graphic
Communications International Union. Wages and benefits at the union plant
locations do not differ materially from those of non-unionized employees in the
same labor markets. The remaining employees are not covered by collective
bargaining agreements.
TRADEMARKS
The Company owns and utilizes trademarks with respect to its name
and logo, the Cal Emblem name and logo, Dual-Web, InteliMail, Laserprint,
InteliMailer, and Odyssey Integrated Services. These trademarks (with the
exception of the Cal Emblem logo) are registered in the United States with the
U.S. Patent and Trademark Office. The Company believes that its trademarks and
other proprietary rights are significant assets and have value in the marketing
of its products.
MANUFACTURING
Manufacturing. Most of the Company's products are manufactured at
one of the Company's 11 facilities. With the exception of the pressure-sensitive
label plants in Dallas, Denver, Fresno and Kansas City and the Kansas City
InteliMail plant, each plant is multi-purpose so that regional locations can
offer a full range of business forms products.
The Company's forms manufacturing plants utilize rotary presses in
the production of business forms. The press configurations range from 14", 17",
20", 22" and 24" repeat sizes and provide from one- to six-color printing
capability. These presses, along with accessory equipment, provide broad
capability to satisfy the wide range of forms demand from the Company's
customers. The Company's multiple plants allow the Company to shift work during
periods of peak demands at one or more plants in order to maintain service
levels.
Subcontracting Program. The Company manufactures only those products
it can produce efficiently, complementing its production with a subcontracting
program focusing on very short-run quantities, extremely fast turnaround
products, electronic data processing supplies and mailers and envelopes. Sales
of purchased products totaled $37 million, or approximately 15% of net sales, in
1996. The Company's overall margins from those products it purchases from
subcontractors are generally at least as high as its margins from internally
manufactured products. Coordinated efforts among the Company's offices have led
to purchasing economies and higher margins.
ENVIRONMENTAL MATTERS
The Company's operations are subject to a variety of federal, state
and local environmental laws and regulations which have become increasingly
stringent. The Company believes its current operations are in material
compliance with current environmental laws and regulations. However, the scope
of environmental laws is very broad and is subject to change.
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ITEM 2. PROPERTIES.
PROPERTIES
The Company's 11 facilities are located in or near Fresno,
California; Chicago, Illinois; Dallas, Texas (2); Denver, Colorado (2); Kansas
City, Kansas (2); Minneapolis, Minnesota; Tacoma, Washington and Omaha,
Nebraska. The Company's executive and administrative offices are located in
Omaha, Nebraska, including its headquarters offices. The following table sets
forth function, location, size, ownership status and leasehold term of the
facilities and plants operated by the Company (excluding sales offices):
<TABLE>
<CAPTION>
APPROXIMATE PRIMARY
SQUARE OWNED/ LEASE FUNCTIONAL
FUNCTION/LOCATION FOOTAGE LEASED EXPIRATION USE
- -------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
CORPORATE OFFICE:
Omaha, Nebraska........... 35,000 Owned -- Office
MANUFACTURING:
Bloomington, Minnesota.... 81,000 Leased 1999 Forms
Crystal Lake, Illinois.... 79,000 Leased 2006 Forms
Hutchins (Dallas), Texas.. 104,000 Owned -- Forms
Dallas, Texas............. 98,000 Owned -- Labels
Denver, Colorado.......... 109,000 Owned -- Forms
Denver, Colorado.......... 35,000 Leased 1998 Labels
Fresno, California........ 52,000 Leased 1999 Labels
Lenexa (Kansas City), 15,000 Leased 1997 Labels
Kansas..................
Lenexa (Kansas City), 66,000 Owned -- InteliMail
Kansas....................
Omaha, Nebraska........... 130,000 Owned -- Forms
Tacoma, Washington........ 84,000 Owned -- Forms
COMPOSITION:
Kansas City, Kansas....... 6,000 Leased 1999 Composition
</TABLE>
The Company believes that its existing corporate and manufacturing
facilities will be adequate to meet its current and foreseeable requirements,
and that suitable additional or alternative space will be available as needed on
commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various lawsuits arising in the ordinary
course of business. In management's opinion, the outcome of these matters will
not have a material adverse effect on the Company's financial condition,
liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the stockholders of the Company during
the quarter ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock presently is traded on The Nasdaq
National Market ("NASDAQ") under the symbol "DDII." As of February 28, 1997,
there were approximately 98 record holders of its Common Stock. The Common Stock
was not listed on NASDAQ for a full quarterly period during the fiscal year
ended December 31, 1995. The following sets forth for the quarters indicated the
high and low sales price per share of Common Stock on NASDAQ from January 1,
1996 through December 31, 1996:
<TABLE>
<CAPTION>
1996
-----------------------------------
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
March 31 10 3/4 7 7/8
June 30 14 8 7/8
September 30 14 10 1/8
December 31 12 3/4 9 1/2
</TABLE>
The Company has not paid cash dividends on its Common Stock to date.
Because the Company currently intends to retain any earnings to provide funds
for the operation and expansion of its business and to repay any indebtedness,
the Company does not intend to pay cash dividends on the Common Stock in the
foreseeable future. Furthermore, as a holding company with no independent
operations, the ability of the Company to pay cash dividends will be dependent
upon the receipt of dividends or other payments from DDI. Under the terms of the
Indenture governing the Senior Notes, DDI is not permitted to pay any dividends
on DDI's common stock unless certain financial ratio tests are satisfied. In
addition, DDI's current revolving credit facility contains similar restrictions
on the payment of dividends by DDI. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Any determination to pay cash dividends on the Company's Common
Stock in the future will be at the sole discretion of the Company's Board of
Directors.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial data
of the Company as of and for each of the years in the five-year period ended
December 31, 1996. The consolidated financial data as of and for each of the
five years in the period ended December 31, 1996, have been derived from the
Company's audited Consolidated Financial Statements. The Company's Consolidated
Financial Statements as of December 31, 1996 and 1995, and for the years ended
December 31, 1996, 1995 and 1994 and Deloitte & Touche LLP's audit report with
respect thereto have been included in this Annual Report on Form 10-K. The
information below is qualified in its entirety by the detailed information
included elsewhere herein and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and the Consolidated Financial Statements and Notes thereto included
elsewhere in this Annual Report on Form 10-K.
9
<PAGE> 12
(Amounts in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales .................................... $ 246,496 $ 242,238 $ 193,626 $ 193,588 $ 184,400
Cost of Goods Sold ........................... 181,058 186,011 148,797 152,036 144,630
------------ ------------ ------------ ------------ ------------
Gross Profit ................................. 65,438 56,227 44,829 41,552 39,770
Selling, General and Administrative
Expenses ................................... 38,177 35,334 32,729 32,306 32,398
Stock Compensation Charge(1) ................. -- 156 -- -- --
Nonrecurring Charge(2) ....................... -- -- -- -- 4,208
------------ ------------ ------------ ------------ ------------
Operating Income ............................. 27,261 20,737 12,100 9,246 3,164
Debt Expense ................................. 9,751 13,335 8,735 8,063 8,160
------------ ------------ ------------ ------------ ------------
Income (Loss) Before Income Taxes ............ 17,510 7,402 3,365 1,183 (4,996)
Income Tax Expense (Benefit) ................. 7,086 3,127 1,533 212 (1,785)
------------ ------------ ------------ ------------ ------------
Income (Loss) Before Extraordinary
Item ....................................... $ 10,424 $ 4,275 $ 1,832 $ 971 $ (3,211)
============ ============ ============ ============ ============
Net Income (Loss)(3),(4),(5) ................. $ 10,370 $ 1,354 $ (963) $ 971 $ (3,211)
============ ============ ============ ============ ============
Net Income (Loss) Available for
Common Stock ............................... $ 10,370 $ 1,354 $ (1,583) $ 288 $ (3,898)
============ ============ ============ ============ ============
Earnings (Loss) Per Common Share:
Primary:
Income (Loss) Before Extraordinary
Item ................................... $ 1.05 $ 0.61 $ 0.13 $ 0.03 $ (0.71)
Extraordinary Item ....................... (0.01) (0.40) (0.30) -- --
============ ============ ============ ============ ============
Net Income (Loss) ........................ $ 1.04 $ 0.21 $ (0.17) $ 0.03 $ (0.71)
============ ============ ============ ============ ============
Fully Diluted:
Income (Loss) Before Extraordinary
Item ................................... $ 1.05 $ 0.61 $ 0.11 $ 0.05 $ (0.24)
Extraordinary Item ....................... (0.01) (0.40) (0.17) -- --
============ ============ ============ ============ ============
Net Income (Loss) ........................ $ 1.04 $ 0.21 $ (0.06) $ 0.05 $ (0.24)
============ ============ ============ ============ ============
Weighted Average Common and
Common Share
Equivalents Outstanding:
Primary .................................... 9,939,454 7,333,864 9,453,494 10,025,704 5,505,652
Fully Diluted .............................. 9,943,754 7,333,864 16,911,580 18,161,798 13,641,746
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital .............................. $ 53,445 $ 43,016 $ 37,231 $ 29,179 $ 28,691
Total Assets ................................. 133,977 125,725 116,221 104,534 105,289
Long-Term Obligations, Less
Current Maturities ......................... 63,965 65,212 86,719 68,569 71,298
Redeemable Preferred Stock ................... -- -- -- 6,829 6,829
Warrants ..................................... -- -- 2,771 -- --
Common Stockholders' Equity
(Deficit) .................................. 37,676 27,424 (5,143) (2,979) (3,267)
</TABLE>
10
<PAGE> 13
- --------------
(1) Reflects the difference between the fair value and the price paid for
Common Stock issued to an employee and a director in the second quarter
of 1995.
(2) Relates to $1,863 of plant consolidation costs in connection with the
cessation of operations at two of the Company's manufacturing
facilities and the $2,345 writedown of the carrying values of certain
real estate property in connection with the sale and leaseback of five
other manufacturing facilities.
(3) In November 1994, the Company incurred an extraordinary charge of
$2,795, net of income tax benefit of $1,787, for the write-off of
unamortized deferred financing costs and unamortized original issue
discount and certain termination fees and costs associated with the
early termination of debt in connection with the issuance of the Senior
Notes.
(4) In November 1995, the Company incurred an extraordinary charge of
$2,921, net of income tax benefit of $1,790, for the write-off of
unamortized deferred financing costs, unamortized original issue
discount and prepayment fees associated with the prepayment of $24,000
of Senior Notes.
(5) In June 1996, the Company incurred an extraordinary charge of $54, net
of income tax benefit of $34, for the write-off of unamoritized
deferred financing costs, unamortized original issue discount, and
certain premium on reacquisition associated with the repurchase of $500
of Senior Notes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The following discussion and analysis should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto appearing elsewhere in this Annual Report on Form 10-K.
When used in the following discussion, the words "believes,"
"estimates," "expects" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected, including, but not limited to, fluctuations in paper prices, cyclical
downturns in the economy and the effect of emerging technologies such as
electronic data interchange on the business forms industry as a whole. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The Company provides business forms, pressure-sensitive label
and direct mail products and software-based services to its customers to assist
them in managing their information collection and dissemination needs. The
Company was organized to purchase the stock of DDI from Pitney Bowes, Inc. in
February 1988. In September 1988, the Company extended its presence into the
northwest by purchasing the assets of Pioneer Business Forms, Inc. in Tacoma,
Washington. The Company was recapitalized in early 1993. In the
recapitalization, the Company mortgaged or sold and leased back six of its
manufacturing facilities and entered into a new revolving credit facility. The
Company used the proceeds from such transactions to pay off the lender which
provided the senior debt incurred in connection with the 1988 Management
Acquisition and to repay a material portion of the subordinated debt incurred in
connection with the 1988 Management Acquisition. In November 1994, the Company
completed the offering of the Senior Notes and Warrants (the "Warrants") and
used the proceeds to repurchase certain properties previously sold
11
<PAGE> 14
and leased back, to redeem its preferred stock, and to reduce its outstanding
bank debt and repay outstanding subordinated debt.
In August 1995, the Company purchased the capital stock of Cal
Emblem, expanding the Company's products to include prime labels and increasing
its market presence in California and Colorado. In October 1995, the Company
consummated the Offering of 3,400,000 shares of its Common Stock. The Offering
was registered under the Securities Act on a Registration Statement on Form S-1.
The net proceeds to the Company of approximately $27.9 million were used by the
Company to redeem $24,000,000 in aggregate principal amount of the Senior Notes.
Over recent years the business forms industry has been
affected by changes in paper prices, general economic conditions and changes in
end-user requirements. Paper has historically accounted for approximately 60% of
the Company's average cost of goods sold, although the paper content of each of
the Company's products varies, and as a result, the sales price, as well as the
cost of sales, of the Company's products have been directly affected by the
price of paper. From May 1989 to January 1992, the price of 20 pound bond paper
decreased 33% and, from January 1992 until mid-1994, the price fluctuated
(although remaining well under the high levels experienced during the spring of
1989). Historically, lower paper costs have not produced increased margins since
the Company and its competitors generally have passed any savings on to their
customers through price reductions. During the last half of 1994, prices
increased rapidly and, in December 1994, reached May 1989 levels. Through the
first six months of 1995, prices paid by the Company for paper continued to
increase steadily. During this period of increases, the Company was able to pass
on paper price increases to its customers due in part to the tight paper supply;
however, no assurance can be given that the Company will be able to pass on any
future increases to its customers. Beginning in the fourth quarter of 1995,
paper demand began to soften and price reductions have occurred throughout 1996.
While the Company does not yet know if this signals a new, continuing trend, if
these reduced prices continue or even decline further and are passed on to the
customers, the Company's revenues could be negatively affected. While no
assurances can be given, the Company does not currently anticipate that the
recent price decreases will have a material adverse impact on the Company's net
income since the Company's past experience is that declining prices also reduce
costs.
The general economic conditions of 1990-1992 began to affect
the business forms industry during the last six months of 1990. The reduced
level of business activity which accompanied these conditions led to reduced
demand for business forms in general and increased competition from suppliers.
The Company addressed these business conditions by reducing costs and by
instituting an aggressive sales effort to retain and add high-volume customers.
Cost reductions included restructuring the forms plant administrative and
production control departments and terminating manufacturing in the Los Angeles,
California and North Haven, Connecticut plants in April and October 1993,
respectively. Production was moved to other plants without any material loss of
business. The 1993 upturn in the economy, coupled with the Company's
restructuring actions, shift in product mix and increased sales volumes, led to
improved results of the Company for 1994 and continued through 1995 and 1996.
The Company's net forms sales have also come under pressure as
the amount of paper used in business forms has declined due to changes in
end-user requirements. During recent years, the Company's customers have been
shifting to laser forms, which are typically single-ply letter size (8-1/2" x
11") compared to the more traditional continuous form (14-7/8" x 11"), which
often had multiple pages. The effects on the Company's net forms sales of
declining paper prices from 1989 through mid-1994 and of declining forms sizes
during the six years have been substantially offset by increases in net sales of
higher-margin pressure-sensitive label and InteliMail products as well as
increased higher-margin custom business form sales.
During 1995, the Company introduced its new Odyssey Integrated
Services program which provides software tools to help customers manage the cost
of forms and supplies as well as related operating processes. This program
significantly broadens the Company's markets beyond the traditional business
forms industry. The Company has enjoyed favorable acceptance in the market and
has signed more than thirty multi-year agreements with large customers.
12
<PAGE> 15
In accordance with generally accepted accounting principles,
the Company used purchase accounting in recording the acquisition of certain
real and personal property from Pitney Bowes, Inc. in February 1988 and in the
1988 Management Acquisition and from Pioneer Business Forms, Inc. in September
1988. Depreciation of most of the fixed assets acquired in these transactions
(which were assigned a remaining useful life of eight years) was completed in
January 1996 and September 1996, respectively. Depreciation expenses with
respect to these assets was $4,600,000 in 1995 and approximately $600,000 in
1996.
RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 1996 and 1995
Net Sales. Net sales were $246.5 million for the year ended
December 31, 1996, an increase of 1.8% from $242.2 million in 1995. Paper price
decreases in 1996 over 1995 are estimated to have negatively impacted total
sales by approximately 3.8%, most of which related to business forms and
supplies. Net sales of business forms, supplies and services decreased 5.8% with
little change in custom forms sales and decreases of 12.6% in stock forms sales.
Sales to federal governmental units were $1.4 million, a decrease of $2.3
million from 1995. The decreases were partially offset by $3.9 million of
increased sales to Odyssey Integrated Services customers. Pressure-sensitive
label sales increased 13.8% and include revenues from Cal Emblem, which was
acquired in August 1995. The pressure-sensitive label market was soft throughout
the first nine months of 1996, partly due to the weaknesses in the retail
economy and the manufacturing sector, generally. While order activity and
backlogs for labels increased during the fourth quarter of 1996, shipments were
not affected. InteliMail sales increased 24.1% due to the addition of new
customers and growth from existing customers.
Gross Profit. Gross profit was $65.4 million for the year
ended December 31, 1996, an increase of $9.2 million, or 16.4% from $56.2
million in 1995. Gross profits in 1996 were favorably impacted by approximately
$4.0 million in reduced depreciation expense from fully-depreciated assets. As a
percentage of sales, gross profit was 26.5% compared with 23.2% in 1995. Gross
profit margins of business forms, supplies and services increased 5.0% for the
year ended December 31, 1996. Pressure-sensitive label gross profit margins
decreased 0.3% in the year ended December 31, 1996 primarily as a result of
sales mix. InteliMail gross profit margins increased 5.1%, primarily as a result
of operating levels from increased sales volume.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses were $38.2 million for the year ended December 31,
1996, an increase of $2.8 million over 1995. The increase in expenses resulted
from higher commissions and inclusion of the expenses of Cal Emblem. Total
expenses increased as a percentage of sales to 15.5% from 14.6% in 1995
primarily from the effect of lower paper prices in reducing total sales.
Debt Expense. The decrease in debt expense of $3.6 million is
primarily attributable to repayment of $24.0 million of the Senior Notes, as
well as the related reduction in amortization of debt issuance costs and
accretion of discount.
Extraordinary Expense. In June 1996, the Company repurchased
$500,000 of the Senior Notes at a price of $110. The premium along with the
related unamortized debt issuance cost and issuance discount resulted in a
charge of $54,000, net of income tax benefit of $34,000.
Comparison of Years Ended December 31, 1995 and 1994
Net Sales. Net sales were $242.2 million for the year ended
December 31, 1995, an increase of $48.6 million, or 25.1%, from $193.6 million
for the year ended December 31, 1994. Custom forms sales (excluding federal
government
13
<PAGE> 16
sales) increased 14.6%. The increase of custom forms sales was primarily a
result of higher prices due to higher paper prices in 1995. Stock forms sales
(excluding federal government sales) increased 47.9%, primarily from
significantly increased sales to existing accounts due in part to the Company's
long-term relationships with its paper vendors which helped ensure the Company's
reliability of supply in the generally tight paper market that prevailed during
1995 and, to a lesser extent, to higher paper prices. Based on the historical
and ongoing trend of stock forms sales, which have declined since 1989, the
Company does not anticipate that this trend will continue in future periods.
Pressure-sensitive label sales increased 40.0%, resulting from increased usage
of products by existing accounts as well as the addition of new customers and
the introduction of new applications. Sales of Cal Emblem, acquired on August
25, 1995, contributed to the increase in pressure sensitive label sales.
Pressure-sensitive label sales were also modestly affected by higher raw
material prices. InteliMail sales increased 0.3%. Sales to the federal
government increased to $3.8 million from $3.6 million.
Gross Profit. Gross profit was $56.2 million for the year
ended December 31, 1995, an increase of $11.4 million, or 25.4%, from $44.8
million for the year ended December 31, 1994. As a percentage of sales, gross
profit margins remained unchanged at 23.2% of net sales. Forms gross profit
margins increased slightly, while pressure-sensitive label gross profit margins
decreased slightly and InteliMail gross profit margins improved.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses were $35.3 million for the year ended December 31,
1995, an increase of $2.6 million. Commissions on increased sales and the
expenses of Cal Emblem, which was acquired on August 25, 1995, constituted most
of the increase. Total expenses declined as a percentage of sales to 14.6% in
1995 from 16.9% in 1994.
The Company recorded a non-recurring expense of $156,000 to
reflect the estimate of the difference in the fair value and the amount received
for capital stock sold in June 1995. (See Note N of Notes to Consolidated
Financial Statements.)
Debt Expense. The increase of $4.6 million in debt expense in
the year 1995 as compared to 1994 is primarily due to the higher interest rate
on the Senior Notes as well as the amortization of debt issuance cost and
accretion of the discount attributable to the Senior Notes and the outstanding
Warrants issued in connection with the issuance of the Senior Notes. See
"-- General"
Extraordinary Expense. On November 30, 1995, $24.0 million in
aggregate principal amount of the Senior Notes were called and retired. The
retirement of these Senior Notes resulted in a charge of $2.9 million, net of
$1.8 million in income tax benefit. The charge was comprised of the 11.4% cash
call premium and write-off of the unamortized original issue discount and debt
issuance costs related to the retired Senior Notes. (See Note P of Notes to
Consolidated Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon operating cash flow and
borrowings under its revolving credit facilities to finance capital
expenditures, increases in working capital and debt service. At December 31,
1996, working capital was $53.4 million, an increase of $10.4 million from the
working capital balance as of December 31, 1995. Operating activities generated
cash of approximately $18.2 million during the year ended December 31, 1996.
Cash provided by operations during the year of 1996 was primarily the result of
increased earnings. The Company had a net cash outflow of approximately $3.8
million from its investing activities during the year ended December 31, 1996,
for capital expenditures. The Company estimates that its capital expenditures
for fiscal 1997 will be approximately $6.0 to $7.0 million.
In connection with the acquisition of Cal Emblem, the Company
issued two five-year term promissory notes in the aggregate principle amount of
$2.2 million which accrue interest at the rate of 10% per annum. The remaining
principal and interest payments will be due in approximately equal installments
over the next four years.
14
<PAGE> 17
The tax-exempt industrial revenue bonds in the principal
amount of $170,000 bear an annual interest rate of 10.125% and are due on
October 1, 1997. Monthly sinking fund payments are required.
In January, 1997 DDI entered into a new revolving credit
facility (the "Revolving Credit Facility") that provides for borrowing of up to
$20 million. The Revolving Credit Facility is secured by the Company's accounts
receivable and the proceeds thereof and, subject to the first lien of the
holders of the Senior Notes, by the Company's inventory and proceeds thereof.
Outstanding indebtedness under the Revolving Credit Facility is limited to 80%
of eligible accounts receivable (subject to reduction by the lender under
certain circumstances). The facility will expire in July 1999. Under the terms
of the Indenture governing the Senior Notes, the Company is permitted to incur
additional revolving credit indebtedness in an amount equal to 85% of its
accounts receivable, and based upon accounts receivable balances at December 31,
1996, the Company was permitted to incur approximately $26.4 million of
revolving credit indebtedness. As of December 31, 1996, there was no amount
outstanding under the Company's prior revolving credit facility. The facility
restricts certain liens, the payment of dividends on, and redemption of, any
class of the capital stock of DDI (all of which is currently owned by Data
Documents Incorporated), PBF or Cal Emblem and certain other restricted
payments, among other things.
The Company expects to satisfy its obligations under the
Senior Notes, the promissory notes issued in connection with the Cal Emblem
acquisition and the industrial revenue bonds, as well as future capital
expenditures and working capital requirements, with cash flow from operations,
and believes that this source will provide sufficient liquidity to enable it to
meet its working capital requirements for at least the next 12 months.
The information in the immediately preceding paragraph is
forward-looking and involves risks and uncertainties that could significantly
impact the Company's expected liquidity requirements in the short and long term.
While it is impossible to itemize the many factors and specific events that
could affect the Company's outlook for its liquidity requirements, such factors
would include fluctuations in paper prices, cyclical downturns in the economy
and the effect of emerging technologies such as electronic data interchange on
the business forms industry as a whole. These factors could reduce the Company's
revenues and increase its expenses, resulting in a greater burden on the
Company's liquidity than that which the Company has described above.
INFLATION
Inflation has not had a significant negative impact on the
Company's operations during the periods presented. The Company has historically
been able to pass on to its customers increases in raw material prices caused by
inflation; however, no assurances can be given as to the extent of the Company's
ability to continue to pass on any future increases should they occur.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's results of operations may fluctuate between
quarterly periods due to the effect of possible future acquisitions, the number
of shipping dates in the quarter, the timing of significant contracts, changes
in raw material prices and other factors, many of which may be beyond the
control of the Company. Such variability in the Company's results of operations
could cause the Company's stock price to fluctuate following the interim results
of operations or other information and may have a material adverse effect on the
Company or its stock price.
SECURITIES LITIGATION REFORM ACT
Except for the historical information contained herein, the
matters discussed in this annual report are forward-looking statements which
involve risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting the Company's
operations, markets,
15
<PAGE> 18
products, services and prices, and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued
SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities which established accounting and reporting
standards for such transfers. The Company will adopt SFAS No. 125 effective
January 1, 1997 as required. The impact on the Company's financial position and
results of operations is not expected to be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Consolidated Financial Statements on page 17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item will be contained in the
Company's proxy statement to be filed within 120 days after the end of the
Company's most recent fiscal year and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item will be contained in the
Company's proxy statement to be filed within 120 days after the end of the
Company's most recent fiscal year and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item will be contained in the
Company's proxy statement to be filed within 120 days after the end of the
Company's most recent fiscal year and is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be contained in the
Company's proxy statement to be filed within 120 days after the end of the
Company's most recent fiscal year and is incorporated herein by this reference.
16
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) Index to Consolidated Financial Statements, Consolidated
Financial Statement Schedules and Exhibits:
1. Consolidated Financial Statements Index
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................................. F-1
Consolidated Balance Sheets at December 31, 1996 and 1995................................. F-2
Consolidated Statements of Operations for the Years Ended December 31, 1996,
1995 and 1994............................................................................ F-3
Consolidated Statements of Common Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994............................................................................ F-5
Notes to Consolidated Financial Statements for the Years Ended December 31,
1996, 1995 and 1994...................................................................... F-7
</TABLE>
2. Consolidated Financial Statement Schedules Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report S-1
I -- Condensed Financial Information S-2
II -- Valuation and Qualifying Accounts S-6
</TABLE>
All other schedules have been omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the Consolidated Financial Statements and related Notes.
3. Exhibit Index
The following exhibits are filed as part of this Annual Report
on Form 10-K, or are incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
3.1 Certificate of Incorporation of Data Documents Incorporated
(the "Company") (previously filed as Exhibit 3.3 to the
Company's Registration Statement on Form S-1 (Registration No.
33-82700) and incorporated herein by this reference).
3.2 Bylaws of the Company (previously filed as Exhibit 3.4 to the
Company's Registration Statement on Form S-1 (Registration No.
33-82700) and incorporated herein by this reference).
17
<PAGE> 20
3.3 Certificate of Amendment to Certificate of Incorporation of
the Company, filed November 23, 1994 (previously filed as
Exhibit 3.3 to the Company's Registration Statement on Form
S-1 (Registration No. 33-95804) and incorporated herein by
this reference).
3.4 Certificate of Amendment to Certificate of Incorporation of
the Company, filed August 31, 1995 (previously filed as
Exhibit 3.4 to the Company's Registration Statement on Form
S-1 (Registration No. 33-95804) and incorporated herein by
this reference).
3.5 Certificate of Amendment to Certificate of Incorporation of
the Company, filed October 3, 1995 (previously filed as
Exhibit 3.5 to the Company's Registration Statement on Form
S-1 (Registration No. 333-1340) and incorporated herein by
this reference).
4.1 Specimen certificate of Common Stock (previously filed as
Exhibit 4.1 to the Company's Registration Statement on Form
S-1 (Registration No. 33-95804) and incorporated herein by
this reference).
10.1 Employment Agreement dated November 28, 1994 by and between
Data Documents, Inc. ("DDI") and Walter J. Kearns (previously
filed as Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated
herein by this reference).
10.2 Termination Benefits Agreement dated November 28, 1994 by and
between DDI and each of Joseph Addison, Morris Caudle, Jeffrey
Holton, Allyn Plejdrup and William Rinehart (previously filed
as Exhibit 10.2 to the Company's Registration Statement on
Form S-1 (Registration No. 33-95804) and incorporated herein
by this reference).
10.3 Amended and Restated Stock Subscription Agreement dated as of
November 28, 1994 by and among the Company and the other
persons named therein (previously filed as Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by this reference).
10.4 Promissory Note Secured by Deed of Trust, dated December 8,
1992 in the principal amount of $2,600,000 made by DDI in
favor of the J. David Gladstone Institutes (previously filed
as Exhibit 10.5 to the Company's Registration Statement on
Form S-1 (Registration No. 33-82700) and incorporated herein
by this reference).
10.5 Deed of Trust with Assignment of Rents and Fixture filing,
dated as of December 8, 1992, by and among DDI, Pacific Title
Guaranty Company and the J. David Gladstone Institutes
(previously filed as Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (Registration No. 33-82700)
and incorporated herein by this reference).
10.6 Security Agreement dated December 8, 1992 by and between and
the J. David Gladstone Institutes (previously filed as Exhibit
10.7 to the Company's Registration Statement on Form S-1
(Registration No. 33-82700) and incorporated herein by this
reference).
10.7 Pension Plan, restated as of January 1, 1989 (previously filed
as Exhibit 10.8 to the Company's Registration Statement on
Form S-1 (Registration No. 33-82700) and incorporated herein
by this reference).
10.8 Warrant Agreement (Teachers) dated as of November 28, 1994 by
and between DDI and The Bank of New York ("BoNY"), the
successor-in-interest to NationsBank of Texas, N.A.
("NationsBank") (previously filed as Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by this reference).
18
<PAGE> 21
10.9 Termination Agreement dated November 28, 1994 by and between
DDI and Raebarn Corporation (previously filed as Exhibit 10.10
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by this reference).
10.10 Warrant Agreement (including form of warrant certificate)
dated as of November 28, 1994 by and between the Company and
BoNY, the successor-in-interest to NationsBank (previously
filed as Exhibit 10.11 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated
herein by this reference).
10.11 Security Agreement dated November 28, 1994 by and between the
Company and BoNY, the successor-in-interest to NationsBank
(previously filed as Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by this reference).
10.12 Security Agreement dated as of November 28, 1994 by and
between DDI and BoNY, the successor-in-interest to NationsBank
(previously filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by this reference).
10.13 Security Agreement dated as of November 28, 1994 by and
between PBF Washington, Inc. ("PBF") and BoNY, the
successor-in-interest to NationsBank (previously filed as
Exhibit 10.14 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein by
this reference).
10.14 Stock Purchase Agreement dated as of July 12, 1995 by and
among John E. Bailey, Jay W. Hunzeker and DDI (previously
filed as Exhibit 10.15 to the Company's Registration Statement
on Form S-1 (Registration No. 33-95804) and incorporated
herein by this reference).
10.15 Non-Qualified Stock Option Agreement dated as of August 25,
1995 by and between the Company and John E. Bailey (previously
filed as Exhibit 99.1 to the Company's Current Report on Form
8-K filed on September 6, 1995 and incorporated herein by this
reference).
10.16 Promissory Note dated August 25, 1995 in the principal amount
of $2,095,000 made by the Company in favor of John E. Bailey
(previously filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K filed on September 6, 1995 and incorporated
herein by this reference).
10.17 Form of Indemnity Agreement by and between the Company and its
directors and certain officers (previously filed as Exhibit
10.18 to the Company's Registration Statement on Form S-1
(Registration No. 33-95804) and incorporated herein by this
reference).
10.18 Amended and Restated 1995 Stock Incentive Plan of the Company.
10.19 Form of Incentive Stock Option Agreement.
10.20 Form of Non-Qualified Stock Option Agreement.
10.21 Form of Restricted Stock Agreement (previously filed as
Exhibit 10.22 to the Company's Registration Statement on Form
S-1 (Registration No. 33-95804) and incorporated herein by
this reference).
10.22 Indenture dated as of November 28, 1994 among DDI, the
Guarantors named therein and BoNY, the successor-in-interest
to NationsBank (previously filed as Exhibit 10.25 to the
Company's Registration Statement on Form S-1 (Registration No.
33-95804) and incorporated herein by this reference).
19
<PAGE> 22
10.23 Leasehold Mortgage, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to BoNY, the
successor-in-interest to NationsBank relating to Bloomington,
Minnesota property (previously filed as Exhibit 10.26 to the
Company's Registration Statement on Form S-1 (Registration No.
33-95804) and incorporated herein by this reference).
10.24 Leasehold Mortgage, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to BoNY, the
successor-in-interest to NationsBank relating to Crystal Lake,
Illinois property (previously filed as Exhibit 10.27 to the
Company's Registration Statement on Form S-1 (Registration No.
33-95804) and incorporated herein by this reference).
10.25 Deed of Trust, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to Jonathan Hooper
for BoNY, the successor-in-interest to NationsBank relating to
Dallas, Texas property (previously filed as Exhibit 10.28 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-95804) and incorporated herein by this reference).
10.26 Deed of Trust, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to the Public
Trustee of Denver, Colorado for BoNY, the
successor-in-interest to NationsBank relating to Denver,
Colorado property (previously filed as Exhibit 10.29 to the
Company's Registration Statement on Form S-1 (Registration No.
33-95804) and incorporated herein by this reference).
10.27 Mortgage, Assignment of Leases and Rents and Fixture Filing
dated as of November 18, 1994 by DDI for BoNY, the
successor-in-interest to NationsBank relating to Lenexa,
Kansas property (previously filed as Exhibit 10.20 to the
Company's Registration Statement on Form S-1 (Registration No.
33-95804) and incorporated herein by this reference).
10.28 Deed of Trust, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to Chicago Title
Insurance Company for BoNY, the successor-in-interest to
NationsBank relating to Los Angeles, California property
(previously filed as Exhibit 10.31 to the Company's
Registration Statement on Form S-1 (Registration No. 33-95804)
and incorporated herein by this reference).
10.29 Deed of Trust, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by DDI to Chicago Title
Insurance Company for BoNY, the successor-in-interest to
NationsBank relating to Omaha, Nebraska property (previously
filed as Exhibit 10.32 to the Company's Registration Statement
on Form S-1 (Registration No. 33-95804) and incorporated
herein by this reference).
10.30 Deed of Trust, Assignment of Leases and Rents and Fixture
Filing dated as of November 18, 1994 by PBF to Chicago Title
Insurance Company for BoNY, the successor-in-interest to
NationsBank relating to Tacoma, Washington property
(previously filed as Exhibit 10.33 to the Company's
Registration Statement on Form S-1 (Registration No. 33-95804)
and incorporated herein by this reference).
10.31 Security Agreement dated as of January 4, 1996 by and between
Cal Emblem Labels, Inc. ("Cal Emblem") and BoNY (previously
filed as Exhibit 10.34 to the Company's Registration Statement
on Form S-1 (Registration No. 333-1340) and incorporated
herein by this reference).
10.32 Supplemental Indenture dated as of January 4, 1996 among DDI,
the Guarantors named therein and BoNY (previously filed as
Exhibit 10.35 to the Company's Registration Statement on Form
S-1 (Registration No. 333-1340) and incorporated herein by
this reference).
10.33 Loan Agreement dated as of January 31, 1997 between DDI and
First Bank National Association (the "Bank").
10.34 Intercreditor Agreement dated as of January 31, 1997 among
BoNY and the Bank.
20
<PAGE> 23
11.1 Statement Regarding Computation of Per Share Earnings.
21.1 Subsidiaries of the Company (previously filed as Exhibit 21.1
to the Company's Registration Statement on Form S-1
(Registration No. 333-1340) and incorporated herein by this
reference).
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Deloitte & Touche LLP, independent auditors
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the last
quarter of the 1996 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Data Documents Incorporated
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Data Documents
Incorporated and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Data Documents Incorporated and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 6, 1997
Omaha, Nebraska
F-1
<PAGE> 25
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(COLUMNAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note G) $ 11,151 $ 2,024
Accounts receivable, net of allowances of
$311,000 and $458,000 (Note H) 31,459 31,569
Inventories (Note D) 37,979 36,048
Other current assets 898 1,788
------------ ------------
Total Current Assets 81,487 71,429
PROPERTY, PLANT AND EQUIPMENT, net (Notes E and H) 37,328 37,502
GOODWILL, net of accumulated amortization of $2,689,000 and $2,273,000 9,837 10,248
DEFERRED FINANCING COSTS AND OTHER ASSETS 5,325 6,546
------------ ------------
$ 133,977 $ 125,725
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note G) $ 18,566 $ 19,326
Accrued compensation 3,453 3,579
Accrued interest payable 4,072 3,877
Current maturities of long-term obligations (Note H) 934 1,169
Current and deferred income taxes (Note F) 1,017 462
------------ ------------
Total Current Liabilities 28,042 28,413
POST-RETIREMENT BENEFITS (Note M) 1,881 1,805
LONG-TERM OBLIGATIONS (Note H) 63,965 65,212
DEFERRED INCOME TAXES (Note F) 2,413 2,871
CONTINGENCIES (Notes H, K and L)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- --
Common stock, $0.001 par value; 15,000,000 shares authorized;
9,564,831 and 8,873,016 shares issued; 9,295,224 and 8,603,409 shares outstanding 10 9
Additional paid-in capital 32,020 32,162
Retained earnings (deficit) 5,881 (4,489)
Stockholder notes receivable (235) (258)
Treasury stock, acquired at no cost, 269,607 shares -- --
------------ ------------
Total Stockholders' Equity 37,676 27,424
------------ ------------
$ 133,977 $ 125,725
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 26
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $ 246,496 $ 242,238 $ 193,626
COST OF GOODS SOLD 181,058 186,011 148,797
------------ ------------ ------------
Gross Profit 65,438 56,227 44,829
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 38,177 35,334 32,729
STOCK COMPENSATION CHARGE (Note N) -- 156 --
------------ ------------ ------------
Operating Income 27,261 20,737 12,100
DEBT EXPENSE, Including amortization of
$828,000, $1,312,000 and $1,072,000 9,751 13,335 8,735
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 17,510 7,402 3,365
INCOME TAX EXPENSE (Note F) 7,086 3,127 1,533
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 10,424 4,275 1,832
EXTRAORDINARY ITEM, net of tax (Note P) (54) (2,921) (2,795)
------------ ------------ ------------
NET INCOME (LOSS) 10,370 1,354 (963)
LESS PREFERRED DIVIDENDS -- -- 620
------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE FOR COMMON STOCK $ 10,370 $ 1,354 $ (1,583)
============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE:
Primary:
Income before extraordinary item $ 1.05 $ 0.61 $ 0.13
Extraordinary item $ (0.01) $ (0.40) $ (0.30)
------------ ------------ ------------
Net Income (Loss) $ 1.04 $ 0.21 $ (0.17)
============ ============ ============
Fully diluted:
Income before extraordinary item $ 1.05 $ 0.61 $ 0.11
Extraordinary item (0.01) (0.04) (0.17)
------------ ------------ ------------
Net Income (Loss) $ 1.04 $ 0.21 $ (0.06)
============ ============ ============
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING:
Primary 9,939,454 7,333,864 9,453,494
============ ============ ============
Fully Diluted 9,943,754 7,333,864 16,911,580
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 27
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(COLUMNAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED STOCKHOLDER
COMMON PAID-IN EARNINGS NOTES
STOCK CAPITAL (DEFICIT) RECEIVABLE TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 $ 5 $ 1,276 $ (4,260) $ -- $ (2,979)
Acquisition of 710,190 shares of treasury stock
in exchange at no cost -- -- -- -- --
Preferred dividends -- -- (620) -- (620)
407,947 shares issued from treasury stock in
exchange for notes receivable -- 226 -- (226) --
Redemption of warrants (Note J) -- (581) -- -- (581)
Net loss -- -- (963) -- (963)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 5 921 (5,843) (226) (5,143)
48,954 shares issued for cash (Note N) -- 142 -- -- 142
32,636 shares issued from treasury stock in
exchange for note receivable (Note N) -- 95 -- (55) 40
Warrant reclassification (Note J) -- 3,087 -- -- 3,087
Payment on stockholders' notes -- -- -- 23 23
Issuance of 3,400,000 common shares (Note C) 4 27,917 -- -- 27,921
Net income -- -- 1,354 -- 1,354
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 9 32,162 (4,489) (258) 27,424
691,815 shares issued on 61,233 warrants
exercised (Note J) 1 -- -- -- 1
Warrant registration costs -- (142) -- -- (142)
Payment on stockholders' notes -- -- -- 23 23
Net income -- -- 10,370 -- 10,370
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 $ 10 $ 32,020 $ 5,881 $ (235) $ 37,676
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 28
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(COLUMNAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,370 $ 1,354 $ (963)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation 4,062 7,552 6,992
Amortization of intangibles 1,490 1,804 1,504
Stock compensation charge -- 156 --
Extraordinary item 37 1,975 2,941
Provision for deferred income taxes (296) (1,375) (1,743)
(Gain) loss on sale of property, plant and equipment (65) (4) 46
Changes in operating assets and liabilities:
Accounts receivable 110 (2,181) (3,695)
Inventories (1,931) (3,468) (1,545)
Other current assets 168 144 (265)
Accounts payable and accrued liabilities 2,579 (3,513) 3,291
Accrued interest 195 2,744 141
Current taxes on income and other 1,176 131 (445)
Other assets 259 (438) 96
----------- ----------- -----------
Net cash flows from operating activities 18,154 4,881 6,355
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,940) (3,955) (6,972)
Proceeds from the sale of property, plant and equipment 117 58 193
Investment in Cal Emblem -- (2,403) --
----------- ----------- -----------
Net cash flows from investing activities (3,823) (6,300) (6,779)
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 29
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(COLUMNAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt -- -- $ 85,000
Payment of debt $ (1,697) $ (30,227) (56,673)
Principal payments of lease finance obligation -- -- (12,608)
Change in liability for outstanding checks (3,389) 1,347 512
Dividends paid -- -- (620)
Preferred stock redemptions -- -- (6,829)
Debt issuance and related costs -- -- (4,651)
Payment for stock registration costs - net (141) -- --
Proceeds from sale of common stock -- 27,947 --
Principal receipts on stockholder notes receivable 23 23 --
----------- ----------- -----------
Net cash flows from financing activities (5,204) (910) 4,131
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 9,127 (2,329) 3,707
CASH AND CASH EQUIVALENTS, Beginning of period 2,024 4,353 646
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, End of period $ 11,151 $ 2,024 $ 4,353
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 9,031 $ 9,639 $ 7,522
=========== =========== ===========
Income taxes $ 6,084 $ 2,759 $ 1,941
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Termination agreement (Note H) $ 1,349
===========
Exchange of common stock purchase warrants with
exchangeable warrants (Note J) $ 581
===========
Issuance of 32,636 and 407,947 shares of common stock for
stockholder notes receivable $ 55 $ 226
=========== ===========
Acquisition of treasury stock at no cost in 1994 --
===========
Issuance of promissory notes to the former stockholders of
Cal Emblem Labels, Inc. (Note B) $ 2,245
==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 30
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Data Documents Incorporated (the "Company") was
formed for the purpose of acquiring Data Documents, Inc. The Company
designs, manufactures, and markets business forms, pressure-sensitive
label products and supplies, specialized direct mail products and
software-based services. A substantial portion of the Company's forms
sales are made in connection with its proprietary forms management system.
The principal markets for the business forms are primarily located in the
geographic markets of mid-America, the southwest and the northwest. The
principal markets for the labels and direct mail business are nationwide.
CONSOLIDATION - The consolidated financial statements of the Company
include the accounts of its wholly-owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated during
consolidation. All operating activities, assets and liabilities are those
of the Company's subsidiaries.
CASH AND CASH EQUIVALENTS - All highly liquid investments, purchased with
a maturity of three months or less are considered cash equivalents.
INVENTORIES - Inventories are valued at the lower of cost, determined by
the last-in, first-out (LIFO) method, or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated
at cost and are depreciated using the straight-line method over the
estimated useful life of the asset, which are as follows: buildings, 30
years; leased facilities and leasehold improvements, life of the lease;
machinery and equipment, 3 to 12 years; and furniture and fixtures, 4 to
10 years.
GOODWILL - Goodwill represents the excess of costs over the value of net
tangible assets acquired in the acquisition of Data Documents, Inc., PBF
Washington, Inc., and Cal Emblem Labels, Inc. This cost is being amortized
on a straight-line basis over 30 years. Recoverability of this asset is
evaluated periodically based on management's estimate of future
undiscounted operating income of the businesses acquired.
DEFERRED FINANCING COSTS - Deferred financing costs represents the cost of
securing debt financing. The cost is being amortized over the estimated
periods of outstanding principal amounts of the related obligations.
OTHER ASSETS - Subscriber installation costs for the Company's
software-based Odyssey Integrated Services program are capitalized and
amortized over the initial period of the subscriber agreement, generally 3
years.
REVENUE RECOGNITION - Sales and related cost of goods sold are recognized
upon shipment of products.
F-7
<PAGE> 31
INCOME TAXES - The Company and its wholly-owned subsidiaries file a
consolidated income tax return. The Company uses an asset and liability
approach for the financial reporting of income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109 - Accounting
for Income Taxes. Deferred income taxes arise from temporary differences
between financial and tax reporting.
OTHER POSTRETIREMENT BENEFITS - The Company accounts for postretirement
benefits in accordance with SFAS No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions. The Company has elected to
recognize the transition obligation relating to prior service cost in its
statement of operations over a 20-year period beginning in 1993.
STOCK SPLIT - The Company's Board of Directors declared a 6.52715097-to-1
stock split in August 1995 and the financial statements presented herein
reflect the split for all periods presented.
EARNINGS PER SHARE - The earnings per share calculation is based upon net
income less preferred dividends and the weighted average number of shares
of common stock outstanding and warrants and options when dilutive. The
calculation on a fully-diluted basis assumes conversion of the convertible
preferred stock at the beginning of the period.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1996, the Financial Accounting
Standards Board issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities which
established accounting and reporting standards for such transfers. The
Company will adopt SFAS No. 125 effective January 1, 1997 as required. The
impact on the Company's financial position and results of operations is
not expected to be material.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to the prior
year financial statements to conform to the 1996 presentation.
B. ACQUISITION
On August 25, 1995, the Company acquired all of the outstanding stock of
Cal Emblem Labels, Inc. ("Cal Emblem") for $4.5 million, plus replacement
of Cal Emblem's bank debt, which was funded through borrowings of
approximately $5.9 million under the Company's existing revolving credit
facility and the issuance of five-year term promissory notes in the
aggregate principal amount of $2.2 million to the former owners. The
acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities and results of operations of Cal
Emblem are included in the Company's consolidated financial statements
subsequent to the acquisition date. The purchase price has been allocated
to the underlying assets and liabilities of Cal Emblem based on their
respective fair values at the date of acquisition. The excess cost over
the fair market value of net assets acquired of $4,122,000 is being
amortized over a 30-year period on a straight-line basis.
F-8
<PAGE> 32
The following unaudited pro forma financial information shows the results
of operations of the Company as though the acquisition occurred as of
January 1, 1994.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1995 1994
(UNAUDITED)
<S> <C> <C>
Net sales $ 256,030 $ 216,244
Income from continuing operations 4,174 2,026
Net income (loss) available for common stock 1,253 (1,389)
Earnings per common share before
extraordinary item:
Primary $ 0.60 $ 0.15
Fully diluted 0.60 0.12
</TABLE>
C. INITIAL PUBLIC OFFERING
In October 1995, the Company completed an initial public offering (the
"Offering") of 3,400,000 shares of common stock of the Company at an
offering price of $9.00 per share. The net proceeds of the offering were
used to redeem approximately $24,000,000 in aggregate principal amount of
Data Documents, Inc.'s 13 1/2% Senior Notes.
D. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
<S> <C> <C>
Finished goods $ 28,739 $ 26,888
Work in process 1,264 1,287
Raw materials 7,032 6,860
Supplies and spare parts 944 1,013
----------- -----------
$ 37,979 $ 36,048
=========== ===========
</TABLE>
Substantially all inventories were valued using the LIFO method. If the
FIFO method of inventory accounting had been used, inventories at December
31, 1996 and 1995 would have been lower than reported by $3,500,000, and
$712,000, respectively. On a FIFO basis, operating income would have been
higher (lower) by $(2,788,000), $2,057,000, and $390,000, respectively,
for fiscal years 1996, 1995, 1994. The FIFO cost of inventories
approximates replacement cost.
F-9
<PAGE> 33
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
<S> <C> <C>
Land $ 5,336 $ 5,336
Buildings 18,835 18,517
Leasehold improvements 1,205 1,146
Machinery and equipment 57,790 57,531
Furniture and fixtures 1,608 1,572
----------- -----------
84,774 84,102
Less accumulated depreciation and amortization 47,446 46,600
----------- -----------
$ 37,328 $ 37,502
=========== ===========
</TABLE>
F. INCOME TAXES
The provision for income taxes on income from continuing operations
consists of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Current provision:
Federal $ 6,330 $ 3,792 $ 2,265
State 1,052 710 399
Deferred (296) (1,375) (1,131)
----------- ----------- -----------
$ 7,086 $ 3,127 $ 1,533
=========== =========== ===========
</TABLE>
The following represents a reconciliation between the actual income tax
expense and income taxes computed by applying the statutory Federal income
tax rate to income before income taxes from continuing operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
State income tax effect 3.8 4.0 5.0
Amortization of excess of purchase
price over net assets acquired 0.9 1.6 3.2
Other 0.8 1.5 3.3
Expense of change in estimate of
deferred income tax liabilities - 1.1 -
---- ---- ----
40.5% 42.2% 45.5%
==== ==== ====
</TABLE>
F-10
<PAGE> 34
Deferred income tax assets (liabilities) are comprised of the following
at:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
<S> <C> <C>
Deferred income tax assets:
Acquired net operating loss of Cal Emblem $ 506 $ 653
Non-deductible accrued liabilities 747 498
Non-deductible bad debt reserve 121 179
Other -- 167
--------- ---------
1,374 1,497
--------- ---------
Valuation allowance (506) (653)
--------- ---------
Deferred income tax liabilities:
Basis of property and equipment (2,534) (2,647)
Basis of inventory (1,108) (1,143)
Accrual for pension costs (129) (387)
Other (73) --
--------- ---------
(3,844) (4,177)
--------- ---------
Net deferred income tax liability ($ 2,976) ($ 3,333)
========= =========
</TABLE>
In connection with the Company's acquisition of Cal Emblem, the Company
acquired a net operating loss carryforward. At December 31, 1996, the loss
carryforward was $1,307,000 and expires through the year 2009. A valuation
allowance has been established for the deferred tax asset related to the
loss carryforward. If realized, the loss carryforward will result in a
decrease in goodwill.
G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
A cash management system is utilized under which deposits are made to
cover only those checks presented to the bank for payment. Checks not yet
presented to the bank for payment in the amounts of $3,946,000, and
$7,336,000 at December 31, 1996 and 1995, respectively, are included in
accounts payable and accrued liabilities.
F-11
<PAGE> 35
H. LONG-TERM OBLIGATIONS
Long-term obligations consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------- ----------
1996 1995
<S> <C> <C>
Senior Secured Notes, 13 1/2%, due 2002, less unamortized
discount of $1,128,000 and $1,343,000 $ 59,372 $ 59,657
Mortgage note, 10.5%, (due in monthly installments with balloon
payment in 2002) 2,414 2,469
Promissory notes, 10%, to former Cal Emblem stockholders
due in annual installments through August 2000 1,684 2,245
Obligation under termination agreement payable in monthly
installments through December 1, 2002, less unamortized
discount of $661,000 and $848,000 1,205 1,288
Note payable, 10.125%, Pierce County, Washington
(due in varying amounts through 1997) 170 570
Other 54 152
---------- ----------
64,899 66,381
Less current maturities of debt 934 1,169
---------- ----------
$ 63,965 $ 65,212
========== ==========
</TABLE>
In November 1994, the Company issued 85,000 units, each consisting of
$1,000 aggregate principal amount of 13 1/2% senior secured notes of Data
Documents, Inc. due 2002 (the "Senior Notes") and common stock purchase
warrants to purchase common stock of Data Documents Incorporated. Interest
is due semi-annually on January 15 and July 15. The Senior Notes are
guaranteed by the Company and its subsidiaries. On or after July 15, 1999,
the Senior Notes are redeemable, at the option of the Company, in whole or
in part at the redemption prices of 104.2% in 1999 decreasing to 100% in
2001. Upon the change of control, the Company is required to offer to
repurchase all outstanding Senior Notes at 101% of the principal amount
plus accrued interest to the date of redemption. The restrictions on
redemption do not limit the ability of the Company to purchase Senior
Notes on the open market.
In November 1995, the net proceeds of the Offering were used to redeem $24
million of the Company's Senior Notes at a redemption price of 111.4%.
In June 1996, the Company repurchased from the open market $500,000 of the
Senior Notes at a price of 110%.
The Senior Notes are collateralized by a first priority security interest
in substantially all assets other than accounts receivable. The Senior
Notes contain certain restrictive covenants which limit, subject to
certain exceptions; the incurrence of additional debt, the payment of
dividends on and redemption of stock of the Company, asset sales,
consolidations, mergers or transfers of all or substantially all of the
Company's assets, certain transactions with affiliates including
intercompany dividends, and liens, among other things.
F-12
<PAGE> 36
A surety agreement for the benefit of the holders of the Pierce County,
Washington debt obligation was allowed to expire in 1995 and payment of
$2,030,000 principal was made. The remaining principal of $170,000 will be
paid under scheduled maturities without the benefit of a surety agreement.
In November 1994, the Company terminated an agreement for management,
advisory and consulting services. The termination agreement is payable in
monthly installments of $21,667 (increasing each January 1 by 4%) to
December 1, 2002. The obligation has been recorded at its present value
using a 15% discount rate over the seven year term.
The Company has a revolving credit facility with a maximum credit line of
the lesser of $20,000,000 or 80% of eligible accounts receivables, which
are pledged as collateral. No amounts under this credit facility were
outstanding at December 31, 1996 or 1995. On February 5, 1997, the Company
replaced the previous revolving credit facility with a new revolving
facility which expires in July, 1999. Debt covenants under this revolving
credit facility require maintenance of minimum amounts of net worth.
Interest under the revolving facility is paid monthly at .75% above prime
and .25% per annum on the unused line available.
At December 31, 1996, a contingent liability to a financial institution
exists for outstanding letters of credit in the amount of $358,000.
FAIR VALUE - The fair value of the Company's long-term debt is based on
quoted market prices or on the current rates offered to the Company for
debt of similar maturities. At December 31, 1996, the carrying amount of
the Company's debt was $64,899,000 and the estimated fair value was
$73,590,000. At December 31, 1995, the carrying value was $66,381,000 and
estimated fair value was $71,871,000.
Aggregate maturities of long-term obligations in each of the next five
years are as follows:
<TABLE>
<S> <C>
1997 $ 934
1998 786
1999 808
2000 296
2001 352
</TABLE>
I. PREFERRED STOCK
On September 7, 1995, the Company amended its articles of incorporation to
authorize issuance of 5,000,000 shares of preferred stock having a par
value of $0.01 per share. None of the shares of the authorized preferred
stock have been issued. The Board of Directors, without further action by
the holders of common stock, may issue shares of preferred stock and may
fix or alter the voting rights, redemption provisions, dividend rights,
dividend rates, liquidation preferences, conversion rights and the
designation of and number of shares constituting any wholly-unissued
series of preferred stock.
F-13
<PAGE> 37
Prior to November 23, 1994, the two classes of preferred stock of the
Company were entitled to quarterly dividends at the rate of $10 per annum.
Dividends were cumulative, if not declared. In November 1994, all of the
outstanding preferred stock was repurchased at face value.
J. WARRANTS
In connection with the 1994 issuance of the Senior Notes, the Company
issued warrants to purchase its common stock (the "Warrants"). Each
Warrant, when exercised, entitles the holder thereof to receive the number
of shares of common stock as set forth on the Warrant at $.002 per share.
Prior to the completion of the Offering, the Warrants were exercisable at
any time on or after November 28, 1995 and unless exercised, automatically
expire on July 15, 2002. The Warrants entitle the holders to purchase in
the aggregate 960,344 shares of common stock, or approximately 10% of the
outstanding common stock on a fully-diluted basis. During 1996, 61,233
Warrants were exercised for 691,815 shares of common stock.
Also in 1994, upon the issuance of the Senior Notes, the Company canceled
all previously existing common stock purchase warrants outstanding at that
date and replaced them with additional Warrants to purchase in the
aggregate 320,111 shares of common stock or approximately 3% of the
outstanding common stock on a fully-diluted basis and which are
exchangeable under the same terms as described above. All these warrants
remain outstanding at December 31, 1996.
Under specified conditions the warrants were redeemable for cash or Senior
Notes. In 1995, the warrants became solely exchangeable for shares of
common stock, and the warrants were reclassified to additional paid in
capital.
K. CONTINGENCIES
The Company is subject to lawsuits and claims which arise out of the
normal course of its business. In the opinion of management, the
disposition of such claims will not have a material adverse effect on the
Company's financial position or results of operations.
L. LEASES
Sales offices, certain manufacturing facilities, certain transportation
and other equipment are leased under long-term noncancellable leases.
Substantially all of the leases are net leases which require payment of
property taxes, insurance and maintenance costs in addition to rental
payments.
At December 31, 1996, the future minimum lease payments under
noncancellable operating leases with rental terms of more than one year
amount to:
<TABLE>
<S> <C>
1997 $ 2,223
1998 1,790
1999 877
2000 380
2001 218
Later Years 812
-------
Total minimum obligation $ 6,300
=======
</TABLE>
F-14
<PAGE> 38
Rent expenses relating to all operating leases were $2,692,000,
$2,537,000, and $2,328,000 for the years ended December 31, 1996, 1995 and
1994, respectively.
M. EMPLOYEE BENEFIT PLANS
Pension Plans -- The Company and its subsidiaries have defined benefit
retirement plans for eligible salaried and hourly employees. Benefits are
based on years of credited service and average compensation for each year
of service. For 1996, 1995 and 1994, the Company's funding policy is to
contribute the minimum amount deductible for federal income tax purposes.
Plan assets are invested in common trust funds administered by a corporate
trustee.
Net periodic pension cost of the defined benefit plans includes the
following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 690 $ 571 $ 632
Interest cost on projected benefit obligation 1,015 881 800
Return on plan assets (1,906) (1,911) 180
Net amortization and deferral 866 892 (1,206)
------- ------- -------
Net periodic pension cost $ 665 $ 433 $ 406
======= ======= =======
</TABLE>
The following table sets forth the plan's funded status and the amount
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 12,592 $ 11,494
Nonvested benefit obligation 363 360
----------- -----------
Accumulated benefit obligation $ 12,955 $ 11,854
=========== ===========
Projected benefit obligation for services rendered to date $ 15,069 $ 13,690
Plan assets at fair value 14,170 11,734
----------- -----------
Plan assets less than projected benefit obligation (899) (1,956)
Unrecognized net loss 1,276 2,191
Unrecognized prior service cost (48) (74)
----------- -----------
Prepaid pension cost $ 329 $ 161
=========== ===========
</TABLE>
The projected benefit obligation is determined using a weighted average
discount rate of 7.5% for 1996 and 1995, and a 3.5% rate of increase in
future compensation levels for 1996 and 1995.
The Company and its subsidiaries are also participants in multi-employer
pension plans covering union employees. Costs associated with these plans
aggregate approximately $68,000, $66,000 and $62,000 for 1996, 1995 and
1994, respectively.
F-15
<PAGE> 39
SAVINGS PLAN - The Company has a Salary Deferral Savings Plan which
permits employees to make salary reduction contributions from 1% to 18%.
The Plan is a defined contribution pension plan which became effective
July 1, 1988. The administrative expenses related to the Plan are paid by
the Company.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company accounts for
postretirement benefits in accordance with SFAS No. 106. The Company
accrues the estimated cost of retiree benefit payments during the years
the employee provides services. The Company has elected to recognize the
initial obligation of approximately $1,637,000 over a period of twenty
years.
Certain medical and dental benefits are provided to qualifying employees.
The following table sets forth the medical and dental plans' funded
status:
Accumulated postretirement benefits obligation:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
<S> <C> <C>
Retirees $ 605 $ 741
Fully eligible plan participants 1,011 983
----------- -----------
Accumulated postretirement benefit obligations in excess
of plan assets (1,616) (1,724)
Unrecognized transition obligation (included in other assets) 1,310 1,391
Unrecognized net gain (265) (81)
----------- -----------
Accrued postretirement benefit cost $ (571) $ (414)
=========== ===========
</TABLE>
Net postretirement benefit cost consisted of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
<S> <C> <C> <C>
Service cost of benefits earned $ 127 $ 87 $ 115
Interest cost on accumulated postretirement benefit
obligation 129 131 116
Amortization of transition obligation 81 82 81
--------- --------- ---------
Net postretirement benefit cost $ 337 $ 300 $ 312
========= ========= =========
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation as of January 1, 1993 was 12% for 1993,
decreasing gradually to a 6% annual growth rate after 12 years and
remaining at a 6% annual rate thereafter. A one-percentage point increase
in the assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation by approximately $218,000 as of December
31, 1996 and would increase net postretirement health care cost by $10,000
for the year ended December 31, 1996. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.5% for
the years ended December 31, 1996 and 1995.
F-16
<PAGE> 40
N. STOCK COMPENSATION PLANS
The Company accounts for its stock-based compensation under the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, which utilizes the intrinsic value method. Compensation cost
related to stock-based compensation was $0 and $156,000 for the years
ended December 31, 1996 and 1995, respectively.
The Board of Directors of the Company adopted the 1995 Employee Stock
Incentive Plan (the "Plan") pursuant to which the Board may award options
to purchase, in aggregate, 500,000 shares of common stock. Options vest
and become exercisable over a one to three year period after date of grant
and generally expire no later than ten years from the date of grant. The
exercise price per share is no less than the fair market value on the date
each option is granted.
In connection with the Company's acquisition of Cal Emblem in August,
1995, the Company granted options for 195,815 shares to a former
stockholder of Cal Emblem at the initial public offering price of $9.00.
During the second quarter of 1995, the Company recorded a noncash expense
of $156,000 relating to the sale of common shares to a director and an
employee. The amount represents the excess of the estimated fair value of
the common shares over consideration received. Such shares have been
considered outstanding for all periods presented in the computation of
earnings per share.
If compensation cost for the Company's stock-based compensation plan had
been determined based on the fair value at the grant dates for awards
under the plan consistent with the method of SFAS No. 123, Accounting for
Stock-Based Compensation, the Company's net income (loss) and earnings
(loss) per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss) As reported $ 10,370 $ 1,354 $ (963)
Pro forma $ 10,190 $ 833 $ (963)
Primary earnings (loss) per share As reported $ 1.04 $ 0.21 $ (0.17)
Pro forma $ 1.02 $ 0.14 $ (0.17)
Fully Diluted earnings (loss) per share As reported $ 1.04 $ 0.21 $ (0.06)
Pro forma $ 1.02 $ 0.14 $ (0.06)
</TABLE>
The fair market value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995: dividend yield of
0.0 percent, expected volatility of 39.9 percent, risk-free interest rates of
6.3 percent and expected lives of 5 years for all the years presented.
F-17
<PAGE> 41
A summary of the status of the Company's stock option plans as of December
31, 1996 and 1995 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ---------------------------------
Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price
------------- ------ -------------- ------ --------------
<S> <C> <C> <C>
Outstanding at beginning of year 324,615 $ 9.03 0 N/A
Granted 187,650 $ 10.44 324,615 $ 9.03
Exercised 0 N/A 0 N/A
Forfeited (5,000) $ 10.43 0 N/A
------- -
Outstanding at end-of-year 507,265 $ 9.54 324,615 $ 9.03
======= =======
Options exerciseable at year-end 258,082 195,815
======= =======
Weighted-average fair value of options
granted during the year $ 4.68 $ 4.05
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exerciseable
-------------------------------------------------------------- ---------------------------------------
Range of Number Weighted-Average Number
Exercise Outstanding at Remaining Weighted-Average Exerciseable at Weighted-Average
Prices 12/31/96 Contractual Life Exercise Price 12/31/96 Exercise Price
------ -------- ---------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ 9.00 - $ 9.99 332,615 6.8 years $ 9.06 258,082 $ 9.01
$ 10.00 - $ 10.99 100,000 9.8 years $ 10.00 0 N/A
$ 11.00 - $ 11.99 74,650 9.7 years $ 11.07 0 N/A
------- -------
$ 9.00 - $ 11.99 507,265 7.8 years $ 9.54 258,082 $ 9.01
======= =======
</TABLE>
F-18
<PAGE> 42
O. RELATED PARTY TRANSACTIONS
In February 1988, the Company entered into an agreement for management,
advisory and consulting services through 1998 with Raebarn Corporation
whose principals are common stockholders and/or directors of the Company.
The agreement provided in the event that the Company, at any time during
the term of the agreement, engaged in certain transactions, Raebarn
Corporation had the right to act as the Company's financial advisors.
Payments to Raebarn totaled $250,000 in 1994. In November 1994, the
Company terminated its agreement with Raebarn in exchange for monthly
payments to Raebarn through December 2002 the present value of which has
been accrued (See Note H).
P. EXTRAORDINARY ITEMS
In June 1996, the Company incurred an extraordinary charge of $54,000, net
of income tax benefit of $34,000, for the write-off of unamortized
deferred financing costs, unamortized original issue discount, and certain
premium on reacquisition associated with the purchase and retirement of
$500,000 of Senior Notes.
In November 1995, the Company incurred an extraordinary charge of
$2,921,000 net of income tax benefit of $1,790,000, for the write-off of
unamortized deferred financing costs, unamortized original issue discount
and prepayment fees associated with the prepayment of $24,000,000 of
Senior Notes.
In November 1994, the Company incurred an extraordinary charge of
$2,795,000, net of income tax benefit of $1,787,000, for the write-off of
unamortized deferred financing costs, unamortized original issue discount
and certain termination fees and costs associated with the early
termination of debt.
Q. SUMMARIZED FINANCIAL INFORMATION
Following is the summarized financial information of Data Documents, Inc.
and subsidiaries:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
<S> <C> <C>
Current assets $81,487 $71,429
Noncurrent assets $52,490 $54,296
Current liabilities $28,042 $28,413
Noncurrent liabilities $68,259 $69,888
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales $246,496 $242,238 $193,626
Gross profit $ 65,438 $ 56,227 $ 44,829
Net income (loss) $ 10,370 $ 1,354 $ (963)
</TABLE>
Following is the summarized combined financial information of PBF
Washington, Inc. and Cal Emblem Labels, Inc. (wholly-owned subsidiaries of
Data Documents, Inc.), guarantors of the Senior Notes. The information
presented for Cal Emblem Labels, Inc. is as of December 31, 1996 and 1995
and for the year ended December 31, 1996 and from August 25, 1995 (date of
acquisition) through December 31, 1995:
F-19
<PAGE> 43
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
<S> <C> <C>
Current assets $ 6,849 $ 7,948
Noncurrent assets $ 8,813 $ 10,581
Current liabilities $ 7,474 $ 11,301
Noncurrent liabilities $ 883 $ 1,140
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 33,438 $ 23,455 $ 14,486
Gross profit $ 6,854 $ 4,204 $ 2,394
Net income $ 1,075 $ 608 $ 217
</TABLE>
[START HERE]
F-20
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Omaha, State of Nebraska, on the 21st day of March, 1997.
DATA DOCUMENTS INCORPORATED
(Registrant)
/s/ A. ROBERT THOMAS
-----------------------------------------
A. Robert Thomas, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WALTER J. KEARNS Chairman, President and March 21, 1997
- --------------------------------- Chief Executive Officer
Walter J. Kearns (Principal Executive
Officer)
/s/ A. ROBERT THOMAS Senior Vice President Finance and March 21, 1997
- --------------------------------- General Manager - Business Forms,
A. Robert Thomas Supplies and Services, Secrerary,
Treasurer, Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ JOSEPH C. ADDISON Director March 21, 1997
- ---------------------------------
Joseph C. Addison
/s/ THOMAS E. BLUMENTHAL Director March 21, 1997
- ---------------------------------
Thomas W. Blumenthal
/s/ ROBERT W. CRUICKSHANK Director March 21, 1997
- ---------------------------------
Robert W. Cruickshank
</TABLE>
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Data Documents Incorporated
Omaha, Nebraska
We have audited the consolidated financial statements of Data Documents
Incorporated as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, and have issued our report thereon dated
February 6, 1997; such report is included elsewhere in this Form 10-K. Our
audits also included the consolidated financial statement schedules of Data
Documents Incorporated and subsidiaries listed in Item 14. These consolidated
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 6, 1997
S-1
<PAGE> 46
DATA DOCUMENTS INCORPORATED Schedule I
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
ASSETS 1996 1995
<S> <C> <C>
INVESTMENT IN AND ADVANCES TO (FROM)
SUBSIDIARY (Note A) $ 37,676 $ 27,424
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
COMMITMENTS AND CONTINGENCIES (Note B)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- --
Common stock, $0.001 par value; 15,000,000 shares authorized;
9,295,224 and 8,873,016 shares issued; 9,564,831
and 8,603,409 shares outstanding 10 9
Additional paid-in capital 32,020 32,162
Retained earnings (deficit) 5,881 (4,489)
Stockholder notes receivable (235) (258)
Treasury stock, acquired at no cost, 269,607 shares -- --
----------- -----------
Total Stockholders' Equity 37,676 27,424
----------- -----------
$ 37,676 $ 27,424
=========== ===========
</TABLE>
See notes to financial statements.
S-2
<PAGE> 47
DATA DOCUMENTS INCORPORATED Schedule I
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY AND
NET INCOME (LOSS) $ 10,370 $ 1,354 $ (963)
CASH DIVIDENDS PAID TO PREFERRED STOCKHOLDERS -- -- (620)
ACCUMULATED DEFICIT - Beginning of year (4,489) (5,843) (4,260)
----------- ----------- -----------
RETAINED EARNINGS (DEFICIT) $ 5,881 $ (4,489) $ (5,843)
=========== =========== ===========
</TABLE>
See notes to financial statements.
S-3
<PAGE> 48
DATA DOCUMENTS INCORPORATED Schedule I
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,370 $ 1,354 $ (963)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Equity in (earnings) loss of subsidiary (10,370) (1,354) 963
----------- ----------- -----------
Net cash flows from operating activities -- -- --
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to preferred stockholders -- -- (620)
Preferred stock redemptions -- -- (6,829)
Advances from and payments on intercompany account
with subsidiary -- (27,970) 7,449
Proceeds from sale of stock -- 27,970 --
----------- ----------- -----------
Net cash flows from financing activities -- -- --
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH -- -- --
CASH, Beginning of year -- -- --
----------- ----------- -----------
CASH, End of year $ -- $ -- $ --
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Exchange of common stock purchase warrants with
exchangeable warrants $ 581
===========
Acquisition of treasury stock at no cost $ --
===========
Issuance of 32,636 and 407,947 shares of common stock
for stockholder notes receivable, respectively $ 55 $ 226
=========== ===========
</TABLE>
See notes to financial statements.
S-4
<PAGE> 49
SCHEDULE I
DATA DOCUMENTS INCORPORATED
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN AND ADVANCES TO (FROM) SUBSIDIARY - Data Documents
Incorporated (Incorporated) accounts for its investment in Data Documents,
Inc. (Company) under the equity method of accounting. Advances to (from)
the Company are included within the investment in subsidiaries. Certain
immaterial franchise taxes are paid by the Company for Incorporated and
are expensed in the operations of the Company.
B. COMMITMENTS AND CONTINGENCIES
Data Documents Incorporated has provided guarantees of the indebtedness of
its subsidiary Data Documents, Inc.
S-5
<PAGE> 50
Schedule II
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
DATA DOCUMENTS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning of Costs and Charged to Net at End of
Year Expenses Other Accounts Charge-offs Year
------------ ---------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts $ 457,501 $ 123,968 $ -- $ (270,427) $ 311,042
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts $ 199,964 $ 165,759(a) $ 125,000 $ (33,222) $ 457,501
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts $ 155,781 $ 138,756 $ -- $ (33,222) $ 199,964
</TABLE>
(a) Balance of allowance for doubtful accounts of Cal Emblem Labels, Inc. on
the date of acquisition.
S-6
<PAGE> 1
EXHIBIT 10.18
DATA DOCUMENTS INCORPORATED
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this 1995 Stock Incentive Plan ("Plan") of Data
Documents Incorporated, a Delaware corporation (the "Company"), is to enable the
Company to attract, retain and motivate its employees and consultants by
providing for or increasing the proprietary interests of such employees and
consultants in the Company, and to enable the Company to attract, retain and
motivate its nonemployee directors and further align their interest with those
of the stockholders of the Company by providing for or increasing the
proprietary interest of such directors in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Each of the following persons (each, a "Participant") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder: (1) any employee of the Company or any of its subsidiaries, including
any director who is also such an employee, and (2) any consultant of the Company
or any of its subsidiaries. Any director of the Company who is not a Participant
(a "Nonemployee Director") shall automatically receive Nonemployee Director
Options (as hereinafter defined) pursuant to Section 4 hereof, but shall not
otherwise participate in this Plan.
SECTION 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the
Company, is authorized under this Plan to enter into any type of arrangement
with a Participant that is not inconsistent with the provisions of this Plan and
that, by its terms, involves or might involve the issuance of (i) shares of
common stock, par value $0.001 per share, of the Company ("Common Shares") or
(ii) a Derivative Security (as such term is defined in Rule 16a-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
such rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived from
the value of the Common Shares. The entering into of any such arrangement is
referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, phantom stock, dividend equivalents, performance
units or performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.
<PAGE> 2
(c) Awards may be issued, and Common Shares may be issued,
pursuant to an Award, for any lawful consideration as determined by the
Committee, including, without limitation, services rendered by the recipient of
such Award.
(d) Subject to the provisions of this Plan, the Committee, in its
sole and absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may include,
among other things:
(i) a provision permitting the recipient of such Award, including
any recipient who is a director or officer of the Company, to pay the
purchase price of the Common Shares or other property issuable pursuant
to such Award, or such recipient's tax withholding obligation with
respect to such issuance, in whole or in part, by any one or more of the
following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by
the Committee;
(C) the delivery of previously owned shares of capital
stock of the Company (including "pyramiding") or other
property; or
(D) a reduction in the amount of Common Shares or other
property otherwise issuable pursuant to such Award.
(ii) a provision conditioning or accelerating the receipt of
benefits pursuant to such Award, either automatically or in the
discretion of the Committee, upon the occurrence of specified events,
including, without limitation, a change of control of the Company (as
defined by the Committee), an acquisition of a specified percentage of
the voting power of the Company, the dissolution or liquidation of the
Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 8 hereof; or
(iii) a provision required in order for such Award to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended (an "Incentive Stock Option"); provided, however, that
no Award issued to any consultant or any Nonemployee Director may
qualify as an Incentive Stock Option.
SECTION 4. NONEMPLOYEE DIRECTOR OPTIONS
(a) On the first business day following the date of the first
annual meeting of stockholders of the Company, or any adjournment thereof,
occurring after the adoption of this Plan at which directors are elected, any
person elected to serve as a Nonemployee Director shall be automatically granted
an option (an "Initial Nonemployee Director Option") to purchase 3,000 Common
Shares. If a person who has not previously served as a Nonemployee Director
shall
2
<PAGE> 3
become a Nonemployee Director at any time after such date and prior to the
annual meeting of stockholders of the Company immediately following such date,
and if any Initial Nonemployee Director Options may be granted under this Plan
on the day such person becomes a Nonemployee Director, such person shall
automatically be granted an Initial Nonemployee Director Option to purchase
3,000 Common Shares. The date on which an Initial Nonemployee Director Option is
thereby granted shall be the Date of Initial Option Grant for such option.
(b) Beginning with the third annual meeting after the Date of
Initial Option Grant with respect to a person, and each third successive annual
meeting thereafter, on the first business day following the date of such annual
meeting of stockholders of the Company, or any adjournment thereof, at which
directors are elected (the "Date of Subsequent Option Grant" and, collectively
with Dates of Initial Option Grants, the "Date of Option Grant"), if such person
is at such annual meeting reelected to serve as a Nonemployee Director, such
person shall be automatically granted an option (a "Subsequent Nonemployee
Director Option," and, collectively with Initial Nonemployee Director Options, a
"Nonemployee Director Option") to purchase 3,000 Common Shares.
(c) If, on any date upon which Nonemployee Director Options are
to be automatically granted pursuant to this Section 4, the number of Common
Shares remaining available for options under this Plan is insufficient for the
grant to each Nonemployee Director of a Nonemployee Director Option to purchase
the entire number of Common Shares specified in this Section 4, then a
Nonemployee Director Option to purchase a proportionate amount of such available
number of Common Shares (rounded to the nearest whole share) shall be granted to
each Nonemployee Director on such date.
(d) Each Nonemployee Director Option granted under this Plan
shall become exercisable for the first time to purchase 33-1/3% of the Common
Shares subject thereto (rounded to the nearest whole share) on each of the
first, second and third anniversaries of the Date of Option Grant; provided,
however, that any Nonemployee Director Option held by an optionee shall become
fully exercisable on the date upon which such optionee shall cease to be a
Nonemployee Director as a result of death or total disability.
(e) Each Nonemployee Director Option granted under this Plan
shall expire upon the first to occur of the following:
(i) The first anniversary of the date upon which the
optionee shall cease to be a Nonemployee Director for any reason other
than death or total disability; and
(ii) The fifth anniversary of the Date of Initial Option
Grant or the Date of Subsequent Option Grant, as applicable, of such
Nonemployee Director Option.
(f) Each Nonemployee Director Option shall have an exercise price
equal to the greater of (i) the aggregate Fair Market Value on the Date of Grant
of such option of the
3
<PAGE> 4
Common Shares subject thereto and (ii) the aggregate par value of such Common
Shares on such date.
(g) Payment of the exercise price of any Nonemployee Director
Option granted under this Plan shall be made in full in cash concurrently with
the exercise of such Nonemployee Director Option; provided, however, that, in
the discretion of the Board of Directors of the Company (the "Board"), the
payment of such exercise price may instead be made:
(i) in whole or in part, with Common Shares delivered
concurrently with such exercise (such shares to be valued on the basis
of the Fair Market Value of such shares on the date of such exercise),
provided that the Company is not then prohibited from purchasing or
acquiring Common Shares; and/or
(ii) in whole or in part, by the delivery, concurrently
with such exercise and in accordance with Section 220.3(e)(4) of
Regulation T promulgated under the Exchange Act, of a properly executed
exercise notice for such Nonemployee Director Option and irrevocable
instructions to a broker promptly to deliver to the Company a specified
dollar amount of the proceeds of a sale of or a loan secured by the
Common Shares issuable upon exercise of such Nonemployee Director
Option.
(h) For purposes of this Section 4, the "Fair Market Value" of a
Common Share or other security on any date (the "Determination Date") shall be
equal to the closing price per Common Share or unit of such other security on
the business day immediately preceding the Determination Date, as reported in
The Wall Street Journal, or, if no closing price was so reported for such
immediately preceding business day, the closing price for the next preceding
business day for which a closing price was so reported, or, if no closing price
was so reported for any of the 30 business days immediately preceding the
Determination Date, the average of the high bid and low asked prices per Common
Share or unit of such other security on the business day immediately preceding
the Determination Date in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if the Common Shares or such
other security were not quoted by any such organization on such immediately
preceding business day, the average of the closing bid and asked prices on such
day as furnished by a professional market maker making a market in the Common
Shares or such other security selected by the Board.
(i) All outstanding Nonemployee Director Options theretofore
granted under this Plan shall become fully exercisable upon the first to occur
of the following:
(i) the date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a
reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to this Plan
are exchanged for or converted into cash, property and/or securities not
issued by the Company, unless such reorganization, merger or
4
<PAGE> 5
consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board;
(ii) the first date upon which the directors of the
Company who were last nominated by the Board for election as directors
shall cease to constitute a majority of the authorized number of
directors of the Company; or
(iii) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined
by the Company) of the Company.
(j) All outstanding Nonemployee Director Options theretofore
granted under this Plan shall terminate upon the first to occur of the
following:
(i) the dissolution or liquidation of the Company; or
(ii) the sale of substantially all of the property
and assets of the Company;
provided that in connection with such transaction the Company shall pay,
with respect to each outstanding Nonemployee Director Option, an amount
in cash equal to the excess of the fair market value (on the date of the
applicable corporate transaction) of the shares subject to the
then-unexercised portion of such Nonemployee Director Option over the
exercise price of such portion of such Nonemployee Director Option, or,
in the event of a sale of substantially all of the property and assets
of the Company, the acquiring corporation has granted substitute options
to purchase its shares on such terms and conditions as shall
substantially preserve the rights and economic benefits of such
Nonemployee Director Option.
(k) Each Nonemployee Director Option shall be nontransferable by
the optionee other than by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.
(l) Nonemployee Director Options are not intended to
qualify as Incentive Stock Options.
SECTION 5. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted under this Plan shall not exceed
500,000 subject to adjustment as provided in Section 8 hereof.
5
<PAGE> 6
(b) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options) granted
under this Plan shall not exceed 500,000 subject to adjustment as provided in
Section 8 hereof.
(c) For purposes of Section 5(b) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such
time pursuant to Awards granted under this Plan, other than Common
Shares that were subsequently reacquired by the Company pursuant to the
terms and conditions of such Awards and with respect to which the holder
thereof received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares that were otherwise issuable
prior to such time pursuant to Awards granted under this Plan, but that
were withheld by the Company as payment of the purchase price of the
Common Shares issued pursuant to such Awards or as payment of the
recipient's tax withholding obligation with respect to such issuance;
plus
(iii) the maximum number of Common Shares that are or may be
issuable at or after such time pursuant to Awards granted under this
Plan prior to such time.
(d) Subject to adjustment as provided in Section 8 hereof, the
aggregate number of Common Shares subject to Awards granted during any calendar
year to any one Participant (including the number of shares involved in Awards
having a value derived from the value of Common Shares) shall not exceed 500,000
shares.
SECTION 6. DURATION OF PLAN
No Awards shall be made under this Plan after August 16, 2005.
Although Common Shares may be issued after August 16, 2005 pursuant to Awards
made on or prior to such date, no Common Shares shall be issued under this Plan
after August 15, 2015.
SECTION 7. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee (the
"Committee") of directors appointed by the Board of Directors of the Company
(the "Board").
(b) Subject to the provisions of this Plan, the Committee shall
be authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without limitation,
the following:
(i) adopt, amend and rescind rules and regulations relating to
this Plan;
6
<PAGE> 7
(ii) determine which persons are Participants and to which of
such Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable
pursuant thereto;
(iv) determine the terms and conditions of the Nonemployee
Director Options that are automatically granted hereunder, other
than the terms and conditions specified in Section 4 hereof;
(v) determine whether, and the extent to which adjustments are
required pursuant to Section 8 hereof; and
(vi) interpret and construe this Plan and the terms and
conditions of any Award granted hereunder.
SECTION 8. ADJUSTMENTS
If the outstanding securities of the class then subject to this
Plan are increased, decreased or exchanged for or converted into cash, property
or a different number or kind of securities, or if cash, property or securities
are distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options and other Awards theretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued pursuant to Incentive Stock Options and other
Awards thereafter granted under this Plan, and (c) the maximum number of Common
Shares for which options may be granted during any one calendar year; provided,
however, that no adjustment shall be made to the number of Common Shares that
may be acquired pursuant to outstanding Incentive Stock Options or the maximum
number of Common Shares with respect to which Incentive Stock Options may be
granted under this Plan to the extent such adjustment would result in such
options being treated as other than Incentive Stock Options; provided further
that no such adjustment shall be made to the extent the Committee determines
that such adjustment would result in the disallowance of a federal income tax
deduction for compensation attributable to Awards hereunder by causing such
compensation to be other than Performance-Based Compensation.
SECTION 9. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any
manner, subject to the following limitations:
7
<PAGE> 8
(a) No such amendment or termination shall deprive the recipient
of any Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and
(b) If an amendment to this Plan would (a) increase the maximum
number of Common Shares that may be issued pursuant to (i) all Awards granted
under this Plan, (ii) all Incentive Stock Options granted under this Plan, and
(iii) Awards granted under this Plan during any calendar year to any one
Employee, (b) change the class of persons eligible to receive Awards under this
Plan, (c) otherwise materially increase the benefits hereunder accruing to
participants who are subject to Section 16 of the Exchange Act in a manner not
specifically contemplated herein, or (d) affect this Plan's compliance with Rule
16b-3 or applicable provisions of the Code, as amended from time to time, the
amendment shall be approved by the Company's shareholders to the extent required
to comply with Rule 16b-3, Sections 422 and 162(m) of the Code, and other
applicable provisions of or rules under the Code, as amended from time to time.
SECTION 10. EFFECTIVE DATE OF PLAN
This plan shall be effective as of August 17, 1995, the date upon
which it was approved by the Board; provided, however, that no Common Shares may
be issued under this Plan until it has been approved, directly or indirectly, by
the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held or,
in lieu thereof, by action by written consent, in accordance with the laws of
the State of Delaware.
8
<PAGE> 1
EXHIBIT 10.19
DATA DOCUMENTS INCORPORATED
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of the Date of Grant indicated below by and between Data Documents
Incorporated, a Delaware corporation (the "Company"), and the person named below
as Grantee.
WHEREAS, Grantee is an employee or consultant of the Company
and/or one or more of its subsidiaries; and
WHEREAS, pursuant to the Company's Amended and Restated 1995
Stock Incentive Plan (the "Plan"), the committee of the Board of Directors of
the Company administering the Plan (the "Committee") has approved the grant to
Grantee of an option to purchase shares of the common stock, par value $0.001
per share, of the Company (the "Common Stock"), on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants set forth herein, the parties hereto hereby agree as follows:
1. Grant of Option; Certain Terms and Conditions. The Company
hereby grants to Grantee, and Grantee hereby accepts, as of the Date of Grant,
an option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 o'clock p.m., Nebraska time, on the Expiration Date
indicated below and shall be subject to all of the terms and conditions set
forth in this Agreement (the "Option"). On each anniversary of the Date of
Grant, the Option shall become exercisable to purchase, and shall vest with
respect to, that number of Option Shares (rounded to the nearest whole share)
equal to the total number of Option Shares multiplied by the Annual Vesting Rate
indicated below.
Grantee: _____________________________
Date of Grant: _____________________________
Number of shares purchasable: _____________________________
Exercise Price per share: $_____________________________
Expiration Date: _____________________________
Annual Vesting Rate: ____________________________%
<PAGE> 2
The Option is intended to qualify as an incentive stock option (an "Incentive
Stock Option") under Section 422 of the Internal Revenue Code (the "Code") and
consequently:
(a) the Expiration Date shall not be more than 10 years
after the Date of Grant and the Exercise Price per share shall not be
less than the Fair Market Value (as defined in the Plan) per share on
the Date of Grant; provided, however, that if, on the Date of Grant,
Grantee owns (after application of the family and other attribution
rules of Section 425(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, then the Expiration Date shall not be more than
five years after the Date of Grant and the Exercise Price per share
shall not be less than 110% of the Fair Market Value per share on the
Date of Grant; and
(b) the aggregate Fair Market Value (determined as of the
date such options are granted) of the shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by Grantee during any calendar year (under the Plan and all other
stock option plans of the Company and its parent and subsidiary
corporations) shall not exceed $100,000.
2. Acceleration and Termination of Option.
(a) Termination of Employment.
(i) Termination Within One Year After Change of Control.
In the event that Grantee shall cease to be an employee of the Company
or any of its subsidiaries (such event shall be referred to herein as
the "Termination" of Grantee's "Employment") for any reason, or for no
reason, within one year after a Change of Control (as hereinafter
defined), then (A) the portion of the Option that has not vested on or
prior to the date of such Termination of Employment shall fully vest on
such date and (B) the Option shall terminate upon the earlier of the
Expiration Date or the first anniversary of the date of such Termination
of Employment. "Change of Control" shall mean the first to occur of the
following events:
(X) any date upon which the directors of the Company who
were last nominated by the Board of Directors (the "Board") for
election as directors cease to constitute a majority of the
directors of the Company;
(Y) the date of the first public announcement that any
person or entity, together with all Affiliates and Associates (as
such capitalized terms are defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such person or entity, shall have become the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of voting securities of the Company representing
25% or more of the voting power of the Company (a "25%
Stockholder"); provided, however, that the terms "person" and
"entity," as used in this clause (Y), shall not include (1) the
Company or
2
<PAGE> 3
any of its subsidiaries, (2) any employee benefit plan of the
Company or any of its subsidiaries, (3) any entity holding voting
securities of the Company for or pursuant to the terms of any
such plan, (4) any person or entity if the transaction that
resulted in such person or entity becoming a 25% Stockholder was
approved in advance by the Board or (5) any person or entity who
was a 25% Stockholder on the date of adoption of the Plan by the
Board; or
(Z) a reorganization, merger or consolidation of the
Company (other than a reorganization, merger or consolidation the
sole purpose of which is to change the Company's domicile solely
within the United States) the consummation of which results in
the outstanding securities of any class then subject to the
Option being exchanged for or converted into cash, property
and/or a different kind of securities.
(ii) Retirement. If Grantee's Employment is Terminated by
reason of Grantee's retirement in accordance with the Company's
then-current retirement policy ("Retirement"), and a Change of Control
shall not have occurred within one year prior thereto, then (A) the
portion of the Option that has not vested on or prior to the date of
such Retirement shall terminate on such date and (B) the remaining
vested portion of the Option shall terminate 90 days after the date of
such Termination of Employment.
(iii) Death or Permanent Disability. If Grantee's
Employment is Terminated by reason of the death or Permanent Disability
(as hereinafter defined) of Grantee, and a Change of Control shall not
have occurred within one year prior thereto, then (A) the portion of the
Option that has not vested on or prior to the date of such Termination
of Employment shall terminate on such date and (B) the remaining vested
portion of the Option shall terminate upon the earlier of the Expiration
Date or the first anniversary of the date of such Termination of
Employment. "Permanent Disability" shall mean the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of
not less than 12 months. Grantee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been
furnished to the Board in such form and manner, and at such times, as
the Board may require. Any determination by the Board that Grantee does
or does not have a Permanent Disability shall be final and binding upon
the Company and Grantee.
(iv) Other Termination. If Grantee's Employment is
Terminated for no reason, or for any reason other than Retirement, death
or Permanent Disability, and a Change of Control shall not have occurred
within one year prior thereto, then the Option shall terminate upon the
date of such Termination of Employment.
(b) Death Following Termination of Employment. Notwithstanding
anything to the contrary in this Agreement, if Grantee shall die at any time
after the Termination of his or her Employment and prior to the Expiration Date,
then (i) the portion of the Option that has not
3
<PAGE> 4
vested on or prior to the date of such death shall terminate on such date and
(ii) the remaining vested portion of the Option shall terminate on the earlier
of the Expiration Date or the first anniversary of the date of such death.
(c) Other Events Causing Acceleration of Option.
(i) Notwithstanding the other terms of this Option, this Option
shall become fully exercisable with respect to all Shares covered hereby upon
the first to occur of the following:
(A) the date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a
reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to the Plan
are exchanged for or converted into cash, property and/or securities not
issued by the Company, unless such reorganization, merger or
consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board;
(B) the first date upon which the directors of the
Company who were last nominated by the Board for election as directors
shall cease to constitute a majority of the authorized number of
directors of the Company; or
(C) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined
by the Company) of the Company.
(ii) The Committee, in its sole discretion, may accelerate the
exercisability of the Option at any time and for any reason.
(d) Other Events Causing Termination of Option. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by both
the Board and the stockholders of the Company:
(i) the dissolution or liquidation of the Company; or
(ii) a sale of substantially all of the property and assets
of the Company, unless the terms of such sale shall provide
otherwise;
provided that in connection with such transaction the
Company shall pay to Optionee in cash an amount equal to the
excess of the fair market value (on the date of the applicable
corporate transaction) of the Option Shares subject to the
then-unexercised portion of the Option over the exercise price of
such portion of the Option, or, in the event of a sale of
substantially all of the property and assets of the Company, the
acquiring corporation has granted substitute options to purchase
it shares on such terms and conditions as shall substantially
preserve the rights and economic benefits of the Option.
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<PAGE> 5
3. Adjustments. Subject to the relevant provisions of the Plan,
in the event that the outstanding securities of the class then subject to the
Option are increased, decreased or exchanged for or converted into cash,
property and/or a different number or kind of securities, or cash, property
and/or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, reclassification, dividend (other than a regular, quarterly
cash dividend) or other distribution, stock split, reverse stock split or the
like, or in the event that substantially all of the property and assets of the
Company are sold, then, unless such event shall cause the Option to terminate
pursuant to Section 2(d) hereof, the Committee shall make appropriate and
proportionate adjustments in the number and type of shares or other securities
or cash or other property that may thereafter be acquired upon the exercise of
the Option; provided, however, that any such adjustments in the Option shall be
made without changing the aggregate Exercise Price of the then unexercised
portion of the Option; provided, further, that no adjustment shall be made to
the number of Option Shares that may be acquired pursuant to the Option or to
the extent such adjustment would result in the Option being treated as other
than an Incentive Stock Option or to the extent the Committee determines that
such adjustment would result in the disallowance of a federal income tax
deduction for compensation attributable to the Option by causing such
compensation to be other than Performance-Based Compensation (as defined in
Section 162(m) of the Code and the regulations related thereto).
4. Exercise.
(a) The Option shall be exercisable during Grantee's lifetime
only by Grantee or by his or her guardian or legal representative, and after
Grantee's death only by the person or entity entitled to do so under Grantee's
last will and testament or applicable intestate law. The Option may only be
exercised by the delivery to the Company of a written notice of such exercise,
which notice shall specify the number of Option Shares to be purchased (the
"Purchased Shares") and the aggregate Exercise Price for such shares (the
"Exercise Notice"), together with payment in full of such aggregate Exercise
Price in cash or by check payable to the Company; provided, however, that
payment of such aggregate Exercise Price may instead be made, in whole or in
part, by (i) the delivery to the Company of a certificate or certificates
representing shares of Common Stock, duly endorsed or accompanied by a duly
executed stock powers, which delivery effectively transfers to the Company good
and valid title to such shares, free and clear of any pledge, commitment, lien,
claim or other encumbrance (such shares to be valued on the basis of the
aggregate Fair Market Value (as defined in the Plan) thereof on the date of such
exercise), provided that the Company is not then prohibited from purchasing or
acquiring such shares of Common Stock or (ii) having Option Shares otherwise
issuable under the Option withheld by the Company (such shares to be valued on
the basis of the aggregate Fair Market Value thereof on the date of such
exercise).
5. Payment of Withholding Taxes. If the Company becomes obligated
to withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Grantee shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay
5
<PAGE> 6
such amount to the Company in any manner permitted in Section 4 hereof for
payment of the Exercise Price.
6. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company at
4205 South 96th Street, Omaha, Nebraska 68127, Attention: Chief Financial
Officer, or to Grantee at the address set forth beneath his or her signature on
the signature page hereto, or at such other addresses as they may designate by
written notice in the manner aforesaid.
7. Stock Exchange Requirements; Applicable Laws. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (a) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company.
8. Nontransferability. Neither the Option nor any interest
therein may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner other than by will or the laws of descent
and distribution
9. Plan. The Option is granted pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time; provided, however, that no
such amendment shall deprive Grantee, without his or her consent, of the Option
or of any of Grantee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, the Option and such
rules and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon Grantee. Until the Option
shall expire, terminate or be exercised in full, the Company shall, upon written
request therefor, send a copy of the Plan, in its then-current form, to Grantee
or any other person or entity then entitled to exercise the Option.
10. Stockholder Rights. No person or entity shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such Option
Shares in accordance with the provisions of this Agreement.
11. Employment Rights. No provision of this Agreement or of the
Option granted hereunder shall (a) confer upon Grantee any right to continue in
the employ of the Company or any of its subsidiaries, (b) affect the right of
the Company and each of its subsidiaries to terminate the employment of Grantee,
with or without cause, or (c) confer upon Grantee any right to participate in
any employee welfare or benefit plan or other program of the Company or any of
its subsidiaries other than the Plan. GRANTEE HEREBY ACKNOWLEDGES AND AGREES
THAT THE COMPANY AND EACH OF ITS SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OF
GRANTEE AT ANY TIME AND FOR ANY REASON, OR FOR NO REASON, UNLESS GRANTEE AND THE
COMPANY
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<PAGE> 7
OR SUCH SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT AGREEMENT THAT EXPRESSLY
PROVIDES OTHERWISE.
12. Governing Law. This Agreement and the
Option granted hereunder shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware without reference to choice
or conflict of law principles.
IN WITNESS WHEREOF, the Company and Grantee have duly executed
this Agreement as of the Date of Grant.
DATA DOCUMENTS INCORPORATED
By:_____________________________
Name:___________________________
Title:__________________________
GRANTEE:
________________________________
Signature
________________________________
Street Address
________________________________
City, State and Zip Code
________________________________
Social Security Number
7
<PAGE> 1
EXHIBIT 10.20
DATA DOCUMENTS INCORPORATED
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of the Date of Grant indicated below by and between Data Documents
Incorporated, a Delaware corporation (the "Company"), and the person named below
as Grantee.
WHEREAS, Grantee is an employee or consultant of the Company
and/or one or more of its subsidiaries; and
WHEREAS, pursuant to the Company's Amended and Restated 1995
Stock Incentive Plan (the "Plan"), the committee of the Board of Directors of
the Company administering the Plan (the "Committee") has approved the grant to
Grantee of an option to purchase shares of the common stock, par value $0.001
per share, of the Company (the "Common Stock"), on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants set forth herein, the parties hereto hereby agree as follows:
1. Grant of Option; Certain Terms and Conditions. The Company
hereby grants to Grantee, and Grantee hereby accepts, as of the Date of Grant,
an option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 o'clock p.m., Nebraska time, on the Expiration Date
indicated below and shall be subject to all of the terms and conditions set
forth in this Agreement (the "Option"). On each anniversary of the Date of
Grant, the Option shall become exercisable to purchase, and shall vest with
respect to, that number of Option Shares (rounded to the nearest whole share)
equal to the total number of Option Shares multiplied by the Annual Vesting Rate
indicated below.
Grantee: ______________________________
Date of Grant: ______________________________
Number of shares purchasable: ______________________________
Exercise Price per share: $______________________________
Expiration Date: ______________________________
Annual Vesting Rate: ______________________________%
The Option is not intended to qualify as an incentive stock option (an
"Incentive Stock Option") under Section 422 of the Internal Revenue Code (the
"Code").
<PAGE> 2
2. Acceleration and Termination of Option.
(a) Termination of Employment.
(i) Termination Within One Year After Change of Control.
In the event that Grantee shall cease to be an employee or independent
sales representative of the Company or any of its subsidiaries (such
event shall be referred to herein as the "Termination" of Grantee's
"Employment") for any reason, or for no reason, within one year after a
Change of Control (as hereinafter defined), then (A) the portion of the
Option that has not vested on or prior to the date of such Termination
of Employment shall fully vest on such date and (B) the Option shall
terminate upon the earlier of the Expiration Date or the first
anniversary of the date of such Termination of Employment. "Change of
Control" shall mean the first to occur of the following events:
(X) any date upon which the directors of the Company who
were last nominated by the Board of Directors (the "Board") for
election as directors cease to constitute a majority of the
directors of the Company;
(Y) the date of the first public announcement that any
person or entity, together with all Affiliates and Associates (as
such capitalized terms are defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such person or entity, shall have become the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of voting securities of the Company representing
25% or more of the voting power of the Company (a "25%
Stockholder"), provided, however, that the terms "person" and
"entity," as used in this clause (Y), shall not include (1) the
Company or any of its subsidiaries, (2) any employee benefit plan
of the Company or any of its subsidiaries, (3) any entity holding
voting securities of the Company for or pursuant to the terms of
any such plan, (4) any person or entity if the transaction that
resulted in such person or entity becoming a 25% Stockholder was
approved in advance by the Board or (5) any person or entity who
was a 25% Stockholder on the date of adoption of the Plan by the
Board; or
(Z) a reorganization, merger or consolidation of the
Company (other than a reorganization, merger or consolidation the
sole purpose of which is to change the Company's domicile solely
within the United States) the consummation of which results in
the outstanding securities of any class then subject to the
Option being exchanged for or converted into cash, property
and/or a different kind of securities.
(ii) Retirement. If Grantee's Employment is Terminated by
reason of Grantee's retirement in accordance with the Company's
then-current retirement policy ("Retirement"), and a Change of Control
shall not have occurred within one year prior thereto, then (A) the
portion of the Option that has not vested on or prior to the date of
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<PAGE> 3
such Retirement shall terminate on such date and (B) the remaining
vested portion of the Option shall terminate 90 days after the date of
such Termination of Employment.
(iii) Death or Permanent Disability. If Grantee's
Employment is Terminated by reason of the death or Permanent Disability
(as hereinafter defined) of Grantee, and a Change of Control shall not
have occurred within one year prior thereto, then (A) the portion of the
Option that has not vested on or prior to the date of such Termination
of Employment shall terminate on such date and (B) the remaining vested
portion of the Option shall terminate upon the earlier of the Expiration
Date or the first anniversary of the date of such Termination of
Employment. "Permanent Disability" shall mean the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of
not less than 12 months. Grantee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been
furnished to the Board in such form and manner, and at such times, as
the Board may require. Any determination by the Board that Grantee does
or does not have a Permanent Disability shall be final and binding upon
the Company and Grantee.
(iv) Other Termination. If Grantee's Employment is
Terminated for no reason, or for any reason other than Retirement, death
or Permanent Disability, and a Change of Control shall not have occurred
within one year prior thereto, then the Option shall terminate upon the
date of such Termination of Employment.
(b) Death Following Termination of Employment. Notwithstanding
anything to the contrary in this Agreement, if Grantee shall die at any time
after the Termination of his or her Employment and prior to the Expiration Date,
then (i) the portion of the Option that has not vested on or prior to the date
of such death shall terminate on such date and (ii) the remaining vested portion
of the Option shall terminate on the earlier of the Expiration Date or the first
anniversary of the date of such death.
(c) Other Events Causing Acceleration of Option.
(i) Notwithstanding the other terms of this Option, this Option
shall become fully exercisable with respect to all Shares covered hereby upon
the first to occur of the following:
(A) the date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a
reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to the Plan
are exchanged for or converted into cash, property and/or securities not
issued by the Company, unless such reorganization, merger or
consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board;
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<PAGE> 4
(B) the first date upon which the directors of the
Company who were last nominated by the Board for election as directors
shall cease to constitute a majority of the authorized number of
directors of the Company; or
(C) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined
by the Company) of the Company.
(ii) The Committee, in its sole discretion, may accelerate the
exercisability of the Option at any time and for any reason.
(d) Other Events Causing Termination of Option. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by both
the Board and the stockholders of the Company:
(i) the dissolution or liquidation of the Company; or
(ii) a sale of substantially all of the property and
assets of the Company, unless the terms of such sale shall provide
otherwise;
provided that in connection with such transaction the
Company shall pay to Optionee in cash an amount equal to the excess of
the fair market value (on the date of the applicable corporate
transaction) of the Option Shares subject to the then-unexercised
portion of the Option over the exercise price of such portion of the
Option, or, in the event of a sale of substantially all of the property
and assets of the Company, the acquiring corporation has granted
substitute options to purchase it shares on such terms and conditions as
shall substantially preserve the rights and economic benefits of the
Option.
3. Adjustments. Subject to the relevant provisions of the Plan,
in the event that the outstanding securities of the class then subject to the
Option are increased, decreased or exchanged for or converted into cash,
property and/or a different number or kind of securities, or cash, property
and/or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, reclassification, dividend (other than a regular, quarterly
cash dividend) or other distribution, stock split, reverse stock split or the
like, or in the event that substantially all of the property and assets of the
Company are sold, then, unless such event shall cause the Option to terminate
pursuant to Section 2(d) hereof, the Committee shall make appropriate and
proportionate adjustments in the number and type of shares or other securities
or cash or other property that may thereafter be acquired upon the exercise of
the Option; provided, however, that any such adjustments in the Option shall be
made without changing the aggregate Exercise Price of the then unexercised
portion of the Option; provided, further, that no adjustment shall be made to
the number of Option Shares that may be acquired pursuant to the Option or to
the extent such adjustment would result in the Option being treated as other
than an Incentive Stock Option or to the extent the Committee determines that
such adjustment would result in the disallowance of a federal
4
<PAGE> 5
income tax deduction for compensation attributable to the Option by causing such
compensation to be other than Performance-Based Compensation (as defined in
Section 162(m) of the Code and the regulations related thereto).
4. Exercise.
(a) The Option shall be exercisable during Grantee's
lifetime only by Grantee or by his or her guardian or legal representative, and
after Grantee's death only by the person or entity entitled to do so under
Grantee's last will and testament or applicable intestate law. The Option may
only be exercised by the delivery to the Company of a written notice of such
exercise, which notice shall specify the number of Option Shares to be purchased
(the "Purchased Shares") and the aggregate Exercise Price for such shares (the
"Exercise Notice"), together with payment in full of such aggregate Exercise
Price in cash or by check payable to the Company; provided, however, that
payment of such aggregate Exercise Price may instead be made, in whole or in
part, by (i) the delivery to the Company of a certificate or certificates
representing shares of Common Stock, duly endorsed or accompanied by a duly
executed stock powers, which delivery effectively transfers to the Company good
and valid title to such shares, free and clear of any pledge, commitment, lien,
claim or other encumbrance (such shares to be valued on the basis of the
aggregate Fair Market Value (as defined in the Plan) thereof on the date of such
exercise), provided that the Company is not then prohibited from purchasing or
acquiring such shares of Common Stock or (ii) having Option Shares otherwise
issuable under the Option withheld by the Company (such shares to be valued on
the basis of the aggregate Fair Market Value thereof on the date of such
exercise).
5. Payment of Withholding Taxes. If the Company becomes obligated
to withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Grantee shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in any manner permitted in Section 4 hereof for payment
of the Exercise Price.
6. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company at
4205 South 96th Street, Omaha, Nebraska 68127, Attention: Chief Financial
Officer, or to Grantee at the address set forth beneath his or her signature on
the signature page hereto, or at such other addresses as they may designate by
written notice in the manner aforesaid.
7. Stock Exchange Requirements; Applicable Laws. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (a) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange
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<PAGE> 6
listing agreement to which the Company is a party, or any other requirement of
law or of any administrative or regulatory body having jurisdiction over the
Company.
8. Nontransferability. Neither the Option nor any interest
therein may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner other than by will or the laws of descent
and distribution.
9. Plan. The Option is granted pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time; provided, however, that no
such amendment shall deprive Grantee, without his or her consent, of the Option
or of any of Grantee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, the Option and such
rules and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon Grantee. Until the Option
shall expire, terminate or be exercised in full, the Company shall, upon written
request therefor, send a copy of the Plan, in its then-current form, to Grantee
or any other person or entity then entitled to exercise the Option.
10. Stockholder Rights. No person or entity shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such Option
Shares in accordance with the provisions of this Agreement.
11. Employment or Contract Rights. No provision of this Agreement
or of the Option granted hereunder shall (a) confer upon Grantee any right to
continue in the employ of or contract with the Company or any of its
subsidiaries, (b) affect the right of the Company and each of its subsidiaries
to terminate the employment or contract of Grantee, with or without cause, or
(c) confer upon Grantee any right to participate in any employee welfare or
benefit plan or other program of the Company or any of its subsidiaries other
than the Plan. GRANTEE HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND EACH
OF ITS SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OR CONTRACT OF GRANTEE AT ANY
TIME AND FOR ANY REASON, OR FOR NO REASON, UNLESS GRANTEE AND THE COMPANY
OR SUCH SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT OR INDEPENDENT SALES
REPRESENTATIVE AGREEMENT THAT EXPRESSLY PROVIDES OTHERWISE.
12. Governing Law. This Agreement and the Option granted
hereunder shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware without reference to choice or conflict of law
principles.
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<PAGE> 7
IN WITNESS WHEREOF, the Company and Grantee have duly executed
this Agreement as of the Date of Grant.
DATA DOCUMENTS INCORPORATED
By:_____________________________
Name:___________________________
Title:__________________________
GRANTEE:
________________________________
Signature
________________________________
Street Address
________________________________
City, State and Zip Code
________________________________
Social Security Number
7
<PAGE> 1
EXHIBIT 10.33
LOAN AGREEMENT
DATED AS OF JANUARY 31, 1997
This Loan Agreement is entered into as of the 31st day of
January, 1997, by and between DATA DOCUMENTS, INC., a Nebraska corporation
("Borrower"), and FIRST BANK NATIONAL ASSOCIATION (the "Bank").
ARTICLE I
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 1.01. THE ADVANCES.
(a) The Bank agrees, on the terms and conditions hereinafter set
forth, to make advances (the "Advances") to Borrower from time to
time during the period from the date hereof to and including July
15, 1999 (the "Termination Date") in an aggregate amount not to
exceed at any time outstanding $20,000,000 (the "Commitment").
Each Advance shall be in an amount not less than $100,000 or an
integral multiple thereof.
(b) Letters of Credit. Upon the request of Borrower, an Advance may
be made by virtue of the Bank issuing letter(s) of credit for the
account of Borrower (each a "Letter of Credit"), provided,
however the aggregate undrawn face amount of all such Letters of
Credit shall not exceed $2,000,000. Any such Advance by virtue of
the issuance of a Letter of Credit shall be preconditioned upon
Borrower executing and delivering any and all documents or
instruments customarily required by Bank in connection with
letters of credit and paying any and all fees customarily imposed
by Bank and as a result of the issuance of any such Letter of
Credit, Borrower agrees to pay all continuing fees or charges as
provided in such documents or instruments. Any such Advance shall
not bear interest until, and then only to the extent, any draw
under any such Letter of Credit is not immediately reimbursed or
paid by Borrower, however, the outstanding amount of all Letters
of Credit shall be considered as Advances for purposes of
Sections 1.01(d) and 1.07.
(c) Recordation of Amount of Advances. The books and records of the
Bank shall be prima facia evidence of the principal balance of
the Advances outstanding at any time and the amount of accrued
interest.
(d) Limitation on Advances and Borrowing Base. The Advances
outstanding at any time shall not exceed the lesser of
$20,000,000 or the amount of the Borrowing Base (as defined in
Section 1.02).
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<PAGE> 2
SECTION 1.02. DEFINITIONS.
"Accounts" shall mean any right to payment for merchandise, goods or commodities
sold and delivered to any Person, which is not evidenced by an instrument or
chattel paper.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of any
other Person existing at the time such other Person merged with or into or
became a 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 Subsidiary of such specified Person.
"Acquisition Indebtedness" means Acquired Debt and Indebtedness incurred to
finance the acquisition by the Borrower or a Subsidiary thereof of another
entity, either through merger or acquisition of substantially all of its assets
or voting securities.
"Advances" is defined in Section 1.01(a).
"Annual Amount" is defined in Section 4.02(b).
"Asset Sale" means any sale, issuance, conveyance, transfer, lease, or voluntary
disposition, in one or a series of related transactions, of any assets of a Loan
Party; other than the sale of inventory or obsolete, damaged, worn-out or
unusable equipment in the ordinary course of business.
"Borrower Collateral" means the Collateral as defined in the Security Agreement.
"Borrowing Base" shall mean an amount equal to 80% of Borrower's and the
Guarantors' Eligible Accounts.
"Borrowing Base Certificate" shall mean a Borrowing Base Certificate in
substantially the form of Exhibit A attached hereto.
"Business Day" is defined in Section 1.09.
"Collateral" means the Borrower Collateral, the Incorporated Collateral, the
Emblem Collateral and the PBF Collateral.
"Commitment" is defined in Section 1.01(a).
"Default Rate" is defined in Section 1.05(b).
"Eligible Accounts" shall mean those Accounts which are part of the Collateral
and are the subject of a first perfected security interest in favor of the Bank
and are not Ineligible Accounts Receivable. Ineligible Accounts Receivable are
those Accounts which are: (i) in dispute or subject to an existing claim or set
off, to the extent of the dispute, claim or set off; (ii) owed
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<PAGE> 3
by an account debtor located outside the United States, and not secured by a
bank letter of credit satisfactory to the Bank in its sole discretion; (iii)
owed by an account debtor which is the subject of a bankruptcy or insolvency
proceeding or who is insolvent or has made an assignment for the benefit of
creditors or who has failed, suspended or gone out of business; (iv) owed by any
Person who is, directly or indirectly, owned by, controlled by or influenced by
Borrower; (v) owed by any Government; (vi) unpaid 90 days after date of invoice;
(vii) owed by any Person obligated to pay any Account deemed an Ineligible
Account Receivable under subparagraph (vi) above if the ineligible portion of
the account receivable is 50% or more of the total amount due from such Person.
"Emblem" is defined in Section 2.01(c).
"Emblem Collateral" means the Collateral as defined in the Emblem Security
Agreement.
"Emblem Security Agreement" is defined in Section 2.01(e).
"First Bank Reference Rate" is defined in Section 1.05(a).
"Fixed Charge Coverage Ratio" has the meaning ascribed to it in the Indenture.
"Guarantor(s)" is defined in Section 2.01(c).
"Government" shall mean the United States of America or any department or agency
thereof and any state or any agency or political subdivision thereof.
"Incorporated" is defined in Section 2.01(c).
"Incorporated Collateral" means the Collateral as defined in the Incorporated
Security Agreement.
"Incorporated Security Agreement" is defined in Section 2.01(f).
"Indebtedness" means, with respect to any Person (without duplication): (i) all
indebtedness of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade payables arising in the ordinary course of business
and not more than 90 days past due unless the same is being contested in good
faith); (iv) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property); (v) all obligations of such Person as lessee under capital leases;
(vi) all obligations, contingent or otherwise, of such Person under bankers'
acceptance and letter of credit facilities; and (vii) all Indebtedness of others
guaranteed by such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such
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date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date, provided that, in the case of each
of clauses (i), (ii) and (iii) above, the amount of such Indebtedness will be
the amount that would appear as a liability on the balance sheet of such Person
prepared in accordance with generally accepted accounting principles.
"Indenture" means the Indenture dated as of November 28, 1994 between Borrower
and the guarantors referred to therein and Nationsbank of Texas, N.A., as
trustee, as amended and supplemented to the date hereof.
"Ineligible Accounts Receivable" is defined in the definition of Eligible
Accounts.
"Intercreditor Agreement" is defined in Section 2.01(f).
"Letter of Credit" is defined in Section 1.01(b).
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Loan Document" is defined in Section 2.01(f).
"Loan Party" is defined in Section 2.01(c).
"Net Worth" is defined in Section 4.01(c).
"Note" is defined in Section 1.04.
"Outstanding Principal Amount" is defined in Section 1.04.
"PBF" is defined in Section 2.01(c).
"PBF Collateral" means the Collateral as defined in the PBF Security Agreement.
"PBF Security Agreement" is defined in Section 2.01(d).
"Permitted Liens" means: (i) Liens in favor of the Borrower and/or its
Subsidiaries; (ii) Liens on property of a Person existing at the time such
Person is acquired by, merged into or consolidated with the Borrower or any
Subsidiary of the Borrower; provided that such Liens were not created in
contemplation of, or as part of a transaction financing, such acquisition,
merger or consolidation; (iii) Liens on property existing at the time of
acquisition thereof by the
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Borrower or any Subsidiary of the Borrower; provided that such Liens were not
created in contemplation of such acquisition; (iv) Liens incurred in the
ordinary course of business to support hedging obligations or trade letters of
credit; (v) Liens to secure Indebtedness for borrowed money of a Loan Party to
another Loan Party; (vi) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary-course of business; (vii) Liens existing on
the date of this Agreement to the extent described in Exhibit B attached hereto;
(viii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested or remedied in good faith by
appropriate proceedings promptly instituted and diligently concluded; (ix) Liens
arising by reason of any judgment, decree or order of any court with respect to
which the Borrower or any of its Subsidiaries shall then in good faith be
prosecuting an appeal or other proceedings for review; (x) encumbrances
consisting of zoning restrictions, survey exceptions, utility easements,
licenses, rights of way, easements of ingress or egress over property of the
Borrower or any of its Subsidiaries, rights or restrictions of record on the use
of real property, minor defects in title, landlord's and lessor's liens under
leases on property located on the premises rented, and similar encumbrances,
rights or restrictions on personal or real property not interfering in any
material respect with the ordinary conduct of the business of the Borrower or
any of its Subsidiaries and any interest or title of a lessor in respect of any
capital lease; (xi) Liens and priority claims incidental to the conduct of
business or the ownership of properties incurred in the ordinary course of
business and not in connection with the borrowing of money or the obtaining of
advances or credit, including, without limitation, liens incurred or deposits
made in connection with mechanic's liens, workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, bids, government contracts and rights to assets of purchasers under
contracts to purchase such assets, entered into in the ordinary course of
business; and (xii) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien permitted under this Agreement and
which has been incurred in accordance with the provisions of this Agreement.
"Person" shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Government.
"Purchase Money Obligation" means Indebtedness representing, or incurred to
finance, the cost of acquiring or constructing any facilities or equipment in
the ordinary course of business of the Borrower or any of its Subsidiaries (or a
reasonably related business) (including Purchase Money Obligations of any other
Person at the time such other Person is merged with or into or is otherwise
acquired by the Borrower or any of the Subsidiaries of Borrower); provided that
(i) the principal amount of such Indebtedness does not exceed 100% of such cost
together with related transaction costs, (ii) any Lien securing such
Indebtedness does not extend to or cover any other asset or property other than
the asset or property being so acquired and (iii) such Indebtedness is incurred,
and any Liens with respect thereto are granted, within 180 days of the
acquisition of such property or asset by the Borrower or any of the Subsidiaries
of Borrower.
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"Purchase Money Liens" means (i) Liens to secure or securing Purchase Money
Obligations and (ii) Liens to secure Indebtedness incurred solely to refinance
Purchase Money Obligations.
"Security Agreement" is defined in Section 2.01(b).
"Subsidiary" means, with respect to any Person, any corporation, association or
other business entity of which more than 80% of the total voting power of shares
of capital stock entitled to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, but
such Person.
"Termination Date" is defined in Section 1.01(a).
SECTION 1.03. MAKING THE ADVANCES. Each Advance shall be made on notice from the
Borrower to the Bank no later than 12:00 noon on the date such Advance is
proposed to be made specifying the date (which shall be a Business Day, defined
herein) and amount of such Advance. Not later than 2:00 p.m. (Omaha, Nebraska
time) on the date of such Advance and upon fulfillment of the applicable
conditions set forth in Article II, the Bank will make such Advance available to
the Borrower in same day funds at the Bank's address referred to in Section
6.02.
SECTION 1.04. REPAYMENT. Borrower shall repay the aggregate unpaid principal
amount of all Advances outstanding on the Termination Date (the "Outstanding
Principal Amount") in accordance with the promissory note of Borrower, in
substantially the form of Exhibit C hereto (the "Note").
SECTION 1.05. INTEREST
(a) Interest Payments. Borrower shall pay interest on the unpaid
principal amount of each Advance from and including the date of
such Advance to but excluding the date such principal is paid in
full, payable on the first day of each month, at an interest rate
per annum equal to the First Bank Reference Rate (as defined
below) plus 0.75% with each change in the interest rate to take
effect simultaneously with the corresponding change in the First
Bank Reference Rate.
"First Bank Reference Rate," at the time of any determination
means the rate of interest per annum which has been publicly
announced by First Bank National Association in Minneapolis,
Minnesota ("FBNA") as its "reference rate", which may be a rate
at, above or below the rate or rates at which the Bank or FBNA
lends to other parties.
(b) Overdue Interest. On any overdue principal amount of any Advance,
the Borrower shall pay interest on demand at the Default Rate
from the date such amount becomes due until such amount is paid
in full. The "Default Rate" is a rate equal to the First Bank
Reference Rate plus 2.00%.
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SECTION 1.06. OPTIONAL PREPAYMENTS. Borrower may prepay the Note in whole or in
part at any time, provided, however, that each partial prepayment shall be in a
principal amount of not less than $100,000.
SECTION 1.07. COMMITMENT FEE. Borrower agrees to pay to Bank a commitment fee on
the average daily unused portion of the Commitment from the date hereof at the
rate of one-quarter (1/4) of 1% per annum payable in arrears on the last day of
each calendar quarter during the term of the Commitment.
SECTION 1.08. PAYMENTS AND COMPUTATIONS. Borrower shall make each payment under
any Loan Document (as hereinafter defined) not later than 2:00 p.m. (Omaha,
Nebraska time) on the day when due in lawful money of the United States of
America to the Bank at its address referred to in Section 6.02 in same day
funds. Borrower hereby authorizes the Bank, if and to the extent payment is not
made when due under any Loan Document, to charge from time to time against any
account of Borrower with the Bank any amount so due. All computations of
interest shall be made by the Bank on the basis of a year of 360 days, for the
actual number of days (including the first day but excluding the last day)
elapsed.
SECTION 1.09. PAYMENT ON NONBUSINESS DAYS. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a Saturday, Sunday or a
public or bank holiday or the equivalent for banks generally under the laws of
the State of Nebraska (any other day being a "Business Day"), such payment may
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest.
SECTION 1.10. EVIDENCE OF DEBT. The indebtedness of Borrower resulting from all
Advances made from time to time shall be evidenced by the Note delivered to the
Bank pursuant to Article II.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01. CONDITION PRECEDENT TO INITIAL ADVANCE. The obligation of the Bank
to make its initial Advance is subject to the condition precedent that the Bank
shall have received on or before the day of such Advance the following in form
and substance satisfactory to Bank:
(a) The Note.
(b) The Commercial Security Agreement of Borrower (the "Security
Agreement") covering the Collateral (as defined in the Security
Agreement) in form and substance satisfactory to Bank together
with:
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(i) executed copies of proper Financing statements (Form UCC-1)
to be filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the Bank's sole
discretion, desirable to perfect the security interests
created by the Security Agreement, and
(ii) certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports, of all effective
financing statements which name Borrower (under its present
name and any previous name) as debtor and which are filed
in the jurisdictions referred to in paragraph (i) above,
together with copies of such financing statements (none of
which shall cover the Collateral), other than (i) financing
statements naming Nationsbank of Texas, N.A. or the Bank of
New York as trustee for the holders of the Senior Secured
Notes (as defined in the Indenture) as secured party, (ii)
financing statements naming Congress Financial Corporation
(Western) as secured party that are to be terminated
reasonably promptly after the closing date, and (iii)
financing statements identified in the Uniform Commercial
Code search reports identified in Exhibit B which do not
cover the Collateral.
(c) The Commercial Guaranty (individually and collectively the
"Guaranty") of PBF Washington, Inc., a Washington corporation,
("PBF"), Cal Emblem Labels, Inc., a California corporation
("Emblem"), and Data Documents Incorporated, a Delaware
corporation ("Incorporated") (PBF, Emblem and Incorporated are
collectively sometimes hereinafter referred to as "Guarantors",
with each individually being a "Guarantor"; Borrower and
Guarantors are collectively referred to as "Loan Parties", with
each individually being a "Loan Party" each in form and
substance satisfactory to Bank.
(d) The Commercial Security Agreement of PBF (the "PBF Security
Agreement") covering the Collateral (as defined in the PBF
Security Agreement) in form and substance satisfactory to Bank
together with:
(i) executed copies of proper Financing statements (Form
UCC-1) to be filed under the Uniform Commercial Code of
all jurisdictions as may be necessary or, in the Bank's
sole discretion, desirable to perfect the security
interests created by the PBF Security Agreement, and
(ii) certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports, of all effective
financing statements which name PBF (under its present
name and any previous name) as debtor and which are
filed in the jurisdictions referred to in paragraph (i)
above, together with copies of such financing statements
(none of which shall cover the Collateral, other than
(i) financing statements naming Nationsbank of Texas,
N.A. or the Bank of New York as trustee for
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the holders of the Senior Secured Notes (as defined in
the Indenture) as secured party, (ii) financing
statements naming Congress Financial Corporation
(Western) as secured party that are to be terminated
reasonably promptly after the closing date, and (iii)
financing statements identified in the Uniform
Commercial Code search reports identified in Exhibit B
which do not cover the Collateral.
(e) The Commercial Security Agreement of Emblem (the "Emblem
Security Agreement") covering the Collateral (as defined in the
Emblem Security Agreement) in form and substance satisfactory to
Bank together with:
(i) executed copies of proper Financing statements (Form
UCC-1) to be filed under the Uniform Commercial Code of
all jurisdictions as may be necessary or, in the Bank's
sole discretion, desirable to perfect the security
interests created by the Emblem Security Agreement, and
(ii) certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports, of all effective
financing statements which name Emblem (under its
present name and any previous name) as debtor and which
are filed in the jurisdictions referred to in paragraph
(i) above, together with copies of such financing
statements (none of which shall cover the Collateral,
other than (i) financing statements naming Nationsbank
of Texas, N.A. or the Bank of New York as trustee for
the holders of the Senior Secured Notes (as defined in
the Indenture) as secured party, (ii) financing
statements naming Congress Financial Corporation
(Western) as secured party that are to be terminated
reasonably promptly after the closing date, and (iii)
financing statements identified in the Uniform
Commercial Code search reports identified in Exhibit B
which do not cover the Collateral.
(f) The Commercial Security Agreement of Incorporated (the
"Incorporated Security Agreement") covering the Collateral (as
defined in the Incorporated Security Agreement) in form and
substance satisfactory to Bank together with:
(i) executed copies of proper Financing statements (Form
UCC-1) to be filed under the Uniform Commercial Code of
all jurisdictions as may be necessary or, in the Bank's
sole discretion, desirable to perfect the security
interests created by the Incorporated Security
Agreement, and
(ii) certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports, of all effective
financing statements which name Incorporated (under its
present name and any previous name) as debtor and which
are filed in the jurisdictions referred to in paragraph
(i) above, together with copies of such financing
statements (none of which
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shall cover the Collateral), other than (i) financing
statements naming Nationsbank of Texas, N.A. or the Bank
of New York as trustee for the holders of the Senior
Secured Notes (as defined in the Indenture) as secured
party, (ii) financing statements naming Congress
Financial Corporation (Western) as secured party that
are to be terminated reasonably promptly after the
closing date, and (iii) financing statements identified
in the Uniform Commercial Code search reports identified
in Exhibit B which do not cover the Collateral.
(g) An Intercreditor Agreement (the "Intercreditor Agreement" and
collectively with this Agreement, the Note, the Security
Agreement, the Guaranty, the PBF Security Agreement, the Emblem
Security Agreement, the Incorporated Security Agreement, the
"Loan Documents" and individually a "Loan Document") executed by
the trustee under the Indenture and Borrower in form and
substance satisfactory to Bank.
(h) A Lock Box Agreement with First National Bank of Omaha in form
and substance satisfactory to Bank.
(i) Certified copies of the resolutions of the Board of Directors of
the corporate Loan Parties approving each Loan Document to which
it is a party, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to such Loan Document.
(j) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of the
officers of the Loan Party authorized to sign each Loan Document
to which it is a party and the other documents to be delivered
by it hereunder.
(k) A favorable opinion of the counsel for the Loan Parties, in form
and substance satisfactory to Bank and as to such matters as
Bank may reasonably request.
(l) A favorable opinion of Baird, Holm, McEachen, Pedersen, Hamann &
Strasheim, counsel for the Bank, as to such matters as the Bank
may reasonably request.
SECTION 2.02. CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Bank
to make each Advance (including the initial Advance) shall be subject to the
further conditions precedent on the date of such Advance that the following
statements shall be true and the Bank shall have received a certificate signed
by a duly authorized officer of the Borrower, dated the date of such Advance,
stating that:
(a) The representations and warranties contained in Section 3.01 of
this Agreement, and in the Security Agreement, are correct in
all material
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respects on and as of the date of such Advance as though made on
and as of such date, and
(b) No event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants as follows:
(a) Each Loan Party is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
indicated.
(b) The execution, delivery and performance by each Loan Party of
each Loan Document to which it is a party is within such Loan
Party's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) such Loan
Party's charter or by-laws or (ii) law or (iii) any contractual
restriction binding on such Loan Party the breach of which would
have a material adverse effect on the Loan Parties taken as a
whole, and do not result in or require the creation of any lien,
security interest or other charge or encumbrance (other than
pursuant hereto) upon or with respect to any of its properties.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by
any Loan Party of any Loan Document to which it is a party.
(d) This Agreement is, and each other Loan Document to which each
Loan Party will be a party when delivered hereunder will be,
legal, valid and binding obligations of the Loan Party
enforceable against the Loan Party in accordance with their
respective terms.
(e) The balance sheets of Incorporated as of September 30, 1996, and
the related statements of income and retained earnings of
Incorporated for the fiscal period then ended, copies of which
have been furnished to the Bank, fairly present the consolidated
financial condition of Incorporated and its Subsidiaries and the
results of the operations of Incorporated and its Subsidiaries
for the period ended on such date, all in accordance with
generally accepted accounting principles consistently
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applied, and since September 30, 1996, there has been no
material adverse change in such condition or operations.
(f) There is no pending or threatened action or proceeding against
the Borrower before any court, governmental agency or
arbitrator, which could reasonably be expected to materially
adversely affect the financial condition or operations of the
Borrower or any other Loan Party or which purports to affect the
legality, validity or enforceability of this Agreement or any
Loan Document.
(g) No proceeds of any Advance will be used to acquire any security
in any transaction which is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934.
(h) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Advance will
be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any
margin stock.
(i) The terms "hazardous waste," "hazardous substance," "disposal,"
"release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA,"
"SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., or other applicable state
or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by
Bank in writing: (i) during the period of any Loan Party's
ownership of any of its properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any
Person on, under, or from any of the properties in violation of
any applicable law, except any such use, generation,
manufacture, storage, treatment, disposal, release or threatened
release that could not be reasonably expected to have a material
adverse effect on the Loan Parties, taken as a whole; (ii)
Borrower has no knowledge of, or reason to believe that there
has been (a) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any
hazardous waste or substance on, under, about or from the
properties by any prior owners or occupants of any of the
properties in violation of any applicable law, or (b) any actual
or threatened litigation or claims of any kind by any Person
relating to such matters, except with respect to either clause
(a) or clause (b) above, with respect to such matters that could
not be reasonably expected to have a material adverse effect on
the Loan Parties, taken as a whole; (iii) neither Borrower, nor
any other Loan Party, nor any tenant, contractor, agent or other
authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous
waste or substance on, under, or from any of the properties in
any manner that is not in compliance with all applicable
federal, state, and local laws, regulations, and ordinances,
including
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without limitation those laws, regulations and ordinances
described above, except for any such matters that could not
reasonably expected to have a material adverse effect on the
Loan Parties, taken as a whole. The representations and
warranties contained herein are based on knowledge obtained by
Borrower and the other Loan Parties in the ordinary course of
operating their businesses.
(j) Each employee benefit plan as to which Borrower or any other
Loan Party may have any liability complies in all material
respects with all applicable requirements of law and
regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in the Employee Retirement Income
Security Act of 1974, as amended) has occurred with respect to
any such plan, (ii) neither Borrower nor any other Loan Party
has withdrawn from any such plan or initiated steps to do so,
(iii) no steps have been taken to terminate any such plan, and
(iv) there are no unfunded liabilities other than those
previously disclosed to Bank in writing.
(k) All information heretofore or contemporaneously herewith
furnished by Borrower or any other Loan Party to Bank for the
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower or any other
Loan Party to Bank will be, taken as a whole, true and accurate
in every material respect on the date as of which such
information is dated or certified; and such information is not
or will not be incomplete by omitting to state any material fact
necessary to make such information not misleading.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01. AFFIRMATIVE COVENANTS. So long as the Note shall remain unpaid or
the Bank shall have any Commitment hereunder, Borrower will and cause each other
Loan Party to, unless the Bank shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the
extent contested in good faith.
(b) Visitation Rights. At any reasonable time and from time to time,
permit the Bank or any agents or representatives thereof, to
examine and make copies of the abstracts from the records and
books of account of, and visit the properties of, the Borrower
or any other Loan Party, and to discuss the affairs, finances
and accounts of the Borrower or any other Loan Party with any of
its directors, officers or employees.
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(c) Net Worth. Have and maintain a Net Worth (as hereinafter
defined) of Incorporated on a consolidated basis of not less
than $27,000,000. "Net Worth" means the excess of total assets
over total liabilities, total assets and total liabilities each
to be determined in accordance with generally accepted
accounting principles consistently applied.
(d) Reporting Requirements. Furnish to the Bank: (i) as soon as
available and in any event within 45 days after the end of each
month of each fiscal year of Incorporated, balance sheets of
Incorporated as of the end of such month and statements of
income and retained earnings of Incorporated for the period
commencing at the end of the previous fiscal year and ending
with the end of such month certified by the chief financial
officer of Incorporated; (ii) as soon as available and in any
event within 120 days after the end of each fiscal year of
Incorporated, a copy of the annual report for such year for
Incorporated containing financial statements for such year
certified in a manner acceptable to the Bank by independent
public accountants acceptable to the Bank, as presenting fairly
the consolidated financial position of Incorporated and the
results of operations and the changes in financial position for
such year in conformity with generally accepted accounting
principles consistently applied; (iii) promptly after the
sending or filing thereof, copies of all reports which
Incorporated sends to any of its security holders, and copies of
all reports and registration statements which Incorporated files
with the Securities and Exchange Commission or any national
securities exchange; (iv) as soon as possible and in any event
within five days after the occurrence of each Event of Default
or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, continuing on the
date of such statement, a statement of the chief executive
officer of Incorporated setting forth details of such Event of
Default or event and the action which the Loan Parties propose
to take with respect thereto; (v) as soon as available but in no
event more than 90 days after the close of each of
Incorporated's fiscal years, a certificate of independent public
accountants to the effect that in making the examination
necessary for their audit they have obtained no knowledge of an
Event of Default or event, or if they have obtained knowledge of
any such Event of Default or event, disclosing the nature and
period of the existence of the same; (vi) monthly within (25)
days of the end of each month, a completed Borrowing Base
Certificate of Borrower executed by an Executive Officer of
Borrower; and (vii) such other information respecting the
current or expected condition or operations, financial or
otherwise, of the Borrower as the Bank may from time to time
reasonably request.
(e) Maintenance of Insurance. Maintain fire and other risk
insurance, public liability insurance, and such other insurance
as is customarily maintained by companies in the same business
as, or in businesses similar to the business of the Borrower. In
connection with all policies covering Collateral, Borrower will
provide Bank with such loss payable or other endorsements as
Bank may require.
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(f) Operations. Maintain executive personnel with substantially the
same qualifications and experience as the present executive
personnel; provide written notice to Bank of any change in
executive personnel; conduct its business affairs in a
reasonable and prudent manner and in material compliance with
all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters,
businesses and operations, including without limitation,
compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's or any other Loan Party's
employee benefit plans.
SECTION 4.02. NEGATIVE COVENANTS. So long as the Note shall remain unpaid or the
Bank shall have any Commitment hereunder, Borrower will not and will not allow
any other Loan Party to, without the written consent of the Bank:
(a) Liens. Create, incur, assume or suffer to exist any Lien with
respect to any of the Collateral, except (i) Purchase Money
Liens, (ii) Liens securing Acquisition Indebtedness in an
aggregate amount not to exceed Five Million Dollars ($5,000,000)
at any one time outstanding, provided that -------- such Lien
does not extend to or cover any asset or property other than the
asset or property being acquired, or owned by the entity being
acquired, (iii) Liens securing Borrower's and its Subsidiaries'
obligations under or relating to the Indenture, (iv) Permitted
Liens and (v) Liens the subject of and described in the
Intercreditor Agreement.
(b) Indebtedness. Create or suffer to exist (collectively, "incur")
any Indebtedness, other than Permitted Indebtedness (as defined
in the Indenture), provided, however, that Borrower may incur
Indebtedness if the Fixed Charge Coverage Ratio (as defined in
the Indenture) for Borrower's most recently ended four full
fiscal quarters for which internal financial statements are
available immediately preceding the date on which such
additional Indebtedness is incurred would have been at least
equal to 2.75:1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, as the case may be,
at the beginning of such four-quarter period. Notwithstanding
the foregoing, Borrower and its Subsidiaries may incur (x)
Acquisition Indebtedness in an aggregate amount outstanding at
any one time not to exceed Five Million Dollars ($5,000,000) and
(y) Indebtedness incurred in the ordinary course of business in
connection with Purchase Money Obligations, provided, that the
aggregate principal amount of Indebtedness incurred during any
period of twelve consecutive calendar months (a "12-month
period") pursuant to this clause (y) shall not exceed $4,000,000
(the "Annual Amount") except that Borrower may carry forward
from the previous 12-month period any unused portion of such
Annual Amount and may use all or a portion of the immediately
succeeding 12-month period's unused Annual Amount so long as the
aggregate principal amount of Indebtedness incurred in any
12-month period pursuant to this clause (y) shall not exceed
$6,000,000.
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(c) Dividends, Etc. Declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or
securities on account of any shares or any class of capital
stock of the Borrower or any other Loan Party, or purchase,
redeem or otherwise acquire for value (or permit any of its
Subsidiaries to do so) any shares of any class of capital stock
of the Borrower or any other Loan Party or any warrants, rights
or options to acquire any such shares, now or hereafter
outstanding, except that the Borrower or any other Loan Party
may make Restricted Payments as permitted under and in
accordance with Section 4.7 of the Indenture.
(d) Line of Business. Engage primarily in any line of business other
than (i) the business forms and labels business or (ii) lines of
business and services that are, in the reasonable judgment of
the Board of Directors of the Borrower, reasonably related to,
or complementary to and consistent with, the business forms and
labels business.
(e) Limitation on Fundamental Changes. Consolidate or merge with or
into (whether or not the Borrower is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or
more related transactions to another Person unless:
(i) the Borrower is the surviving Person or the Person
formed by or surviving any such consolidation or merger
(if other than the Borrower) or to which such sale,
assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized or
existing under the laws of the United States, any state
thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Borrower or
to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made (A)
assumes all the obligations of the Borrower, as
applicable, under this Agreement, and (B) takes all
action that may be necessary or reasonably requested by
the Bank to grant the Bank a valid, enforceable and
perfected first priority Lien on its assets, subject
only to liens permitted under this Agreement;
(iii) immediately after such transaction no Event of Default
exists;
(iv) the Borrower or any corporation formed by or surviving
any such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or other
disposition has been made, as applicable, will, at the
time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at
the beginning of the
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<PAGE> 17
applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section
4.02(b) hereof.
(f) Limitation on Asset Sales. Neither Borrower nor any other Loan
Party will, or will permit any of its Subsidiaries to, make any
Asset Sale (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the
Borrower shall be governed by the provisions of Section 4.02(e)
hereof), unless the Borrower (or the Subsidiary, as the case may
be) receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or
otherwise disposed of.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of principal of,
or interest on, the Note within three (3) days of the date when
due; or
(b) Any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when
made; or
(c) Any Loan Party shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part
to be performed or observed and any such failure shall remain
unremedied and unwaived for 10 days after written notice thereof
shall have been given to the Borrower by the Bank; or
(d) Any event or condition shall occur which results in the
acceleration of the maturity of any Indebtedness (other than
Indebtedness evidenced by the Note) of any Loan Party or enables
the holder of such Indebtedness to accelerate the maturity
thereof, if the aggregate principal amount of Indebtedness
(regardless of whether such Indebtedness arises in one or more
related or unrelated transactions) with respect to which such
events or conditions shall have occurred exceeds Two Hundred
Fifty Thousand Dollars ($250,000); or
(e) Any Loan Party shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by
or against any Loan Party seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief,
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<PAGE> 18
or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or for
any substantial part of its property if such proceeding is not
dismissed within 90 days of its institution; or any Loan Party
shall take any corporate action to authorize any of the actions
set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against any Loan Party or any of its
subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or
(ii) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect;
(g) The Security Agreement or any other collateral document after
delivery thereof shall for any reason, except to the extent
permitted by the terms thereof, cease to create a valid and
perfected first priority security interest in any of the
Collateral purported to be covered thereby;
(h) Any event of default under any other agreement between any Loan
Party and the Bank shall occur; or
(i) Any event of default under and as defined in the Security
Agreement shall have occurred and be continuing after the grace
period, if any, therefor;
then, and in any such event, the Bank (i) may, by notice to the Borrower,
declare its obligation to make Advances suspended or to be terminated, whereupon
the same shall forthwith terminate, (ii) may, by notice to the Borrower, declare
the Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Note, all such interest
and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower, (iii) may make demand upon the Borrower
to and forthwith upon such demand, the Borrower shall, pay to the Bank, in same
day funds at the Bank's office, for deposit in a special non-interest bearing
cash collateral account to be maintained at such office of the Bank, an amount
equal to the unused portion of all Letters of Credit, such cash collateral
account to be held for the benefit of the Bank for payment or reimbursement of
any and all draws under any Letter of Credit; and (iv) proceed to enforce all
its rights and remedies as provided in any Loan Document or by applicable law.
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<PAGE> 19
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. AMENDMENTS, ETC. No amendment or waiver of any provision of any
Loan Document nor consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Bank and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 6.02. NOTICES, ETC. All notices and other communications provided for
hereunder or any other Loan Document shall be in writing (including telegraphic
communication) and mailed, telegraphed, faxed or delivered, if to the Borrower,
at its address at 4205 South 96th Street, Omaha, Nebraska, Attention: Chief
Financial Officer; and if to the Bank, at its address at 1700 Farnam Street,
Omaha, Nebraska 68102, Attention: Business Banking, or as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. If notices or other communications are mailed, then they shall be
mailed by registered or certified mail, return receipt requested, or if sent by
telegraph, then receipt by the other party confirmed by the telegraph company.
All such notices and communications shall, when mailed, telegraphed or faxed, be
effective at the earlier of receipt or 3 days after deposit in the mails or
delivered to the telegraph company or transmitted by fax, respectively,
addressed as aforesaid, except that notices to the Bank pursuant to the
provisions of Article I hereof shall not be effective until received by the
Bank.
SECTION 6.03. NO WAIVER; REMEDIES. No failure on the part of the Bank to
exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under any Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
SECTION 6.04. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles as in effect on the date of this Agreement, except as otherwise
stated herein.
SECTION 6.05. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all
reasonable costs and expenses in connection with the preparation, execution,
delivery, filing, recording and administration of the Loan Documents and the
other documents to be delivered under the Loan Documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Bank, and local counsel who may be retained by said counsel, with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities under the Loan Documents, and all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents; provided, however, that Borrower's maximum responsibility
with respect to the reasonable fees and out-of-pocket expenses of counsel for
the Bank in connection with the preparation of the Loan Documents shall be
limited to an amount equal to $15,000. In addition, the Borrower shall pay any
and all stamp and other taxes and fees payable or determined
19
<PAGE> 20
to be payable in connection with the execution, delivery, filing and recording
of the Loan Documents and the other documents to be delivered under the Loan
Documents, and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
SECTION 6.06 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, the Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Loan Parties against any and all of the obligations of the
Loan Parties now or hereafter existing under any Loan Document, irrespective of
whether or not the Bank shall have made any demand under such Loan Document and
although such obligations may be unmatured. The Bank agrees promptly to notify
the Loan Parties after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.
SECTION 6.07. BINDING EFFECT; GOVERNING LAW. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. This Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the State of Nebraska.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
DATA DOCUMENTS, INC., a Nebraska
corporation
By:____________________________
Title:_________________________
FIRST BANK NATIONAL ASSOCIATION
By:____________________________
Title:_________________________
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<PAGE> 1
to be payable in connection with the execution, delivery, filing and recording
of the Loan Documents and the other documents to be delivered under the Loan
Documents, and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
SECTION 6.06 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, the Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Loan Parties against any and all of the obligations of the
Loan Parties now or hereafter existing under any Loan Document, irrespective of
whether or not the Bank shall have made any demand under such Loan Document and
although such obligations may be unmatured. The Bank agrees promptly to notify
the Loan Parties after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.
SECTION 6.07. BINDING EFFECT; GOVERNING LAW. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. This Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the State of Nebraska.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
DATA DOCUMENTS, INC., a Nebraska
corporation
By:____________________________
Title:_________________________
FIRST BANK NATIONAL ASSOCIATION
By:____________________________
Title:_________________________
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<PAGE> 2
EXHIBIT 10.34
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is made and entered into
as of this 31st day of January, 1997, by and among BANK OF NEW YORK (together
with any successors pursuant to the terms of the Indenture referred to below,
the "Trustee"), as trustee for the holders of the Senior Secured Notes (as
defined below) (together with their successors and assigns and any other holder
of Note Indebtedness (as defined below), the "Noteholders"), and FIRST BANK
NATIONAL ASSOCIATION, a National banking association (together with its
successors and assigns and any other holder of any First Bank Indebtedness (as
defined below), "First Bank").
R E C I T A L S
I. DDI and First Bank propose to enter into that certain Loan Agreement,
dated as of January 31, 1997 (the "Financing Agreement"), pursuant to which
First Bank granted DDI a maximum credit line of Twenty Million Dollars
($20,000,000), payment of which is guaranteed by PBF Washington, Inc., a
Washington corporation ("PBF), Cal Emblem Labels, Inc., a California corporation
("Emblem") and Data Documents Incorporated, a Delaware corporation
("Incorporated"), by virtue of Commercial Guaranty Agreements dated January 31,
1997 (collectively the "Guaranty Agreements") with DDI's, PBF's, Emblem's and
Incorporated's obligations and liabilities to First Bank being secured by a
first priority security interest in, among other things, all of DDI's, PBF's,
Emblem's and Incorporated's accounts, and the proceeds thereof and all of DDI's,
PBF's, Emblem's and Incorporated's inventory by virtue of Commercial Security
Agreements each dated December 15, 1996 between each of DDI, PBF, Emblem and
Incorporated with First Bank (collectively the "Security Agreements")(the
Financing Agreement, the Guaranty Agreements and the Security Agreements and the
documents ancillary thereto are collectively referred to herein as the "Facility
Documents").
II. DDI has issued thirteen and one-half percent (13-1/2%) senior
secured notes of DDI in the aggregate principal amount of Eighty-Five Million
Dollars ($85,000,000), due 2002 (the "Senior Secured Notes"), pursuant to the
terms of that certain Indenture, dated as of November 28, 1994, between Data and
Trustee (the "Indenture" and together with the Senior Secured Notes and the
documents ancillary thereto are collectively referred to herein as the "Note
Documents").
III. Pursuant to the terms of the Note Documents, the Senior Secured
Notes are secured by a security interest in substantially all of the assets of
DDI and PBF (including accounts, contract rights, deposit accounts, real estate,
fixed assets, inventory, intellectual property rights and other intangible
assets), and all proceeds of the foregoing, then in existence or thereafter
acquired.
IV. First Bank's obligation to lend to DDI is conditioned upon First
Bank and the Trustee entering into this Agreement to define the relative rights
of First Bank and the Trustee in the Collateral (as defined below) with respect
to one another.
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<PAGE> 3
A G R E E M E N T
NOW, THEREFORE, the parties hereto agree as follows:
A. Certain Definitions.
1. Accounts. The term "Accounts" shall mean any and all accounts
of Borrower, and in any event includes all accounts, contract rights, rights to
payment and other obligations of any sale or lease of merchandise, goods or
commodities, including, but not limited to, reclaimed or returned goods or
merchandise, or the rendering of services or arising from any other transaction,
however evidenced (including, without limitation, chattel paper, documents and
instruments (as such terms are defined in the Uniform Commercial Code), but only
if and to the extent that they evidence such accounts, contract rights, rights
to payment and other obligations described above), and whether or not earned by
performance, all guaranties, indemnities and security with respect to the
foregoing, and all letters of credit relating thereto, in each case whether now
existing or hereafter acquired or arising.
2. Borrower, Guarantors and Loan Parties. The term "Borrower"
shall mean DDI. The term "Guarantors" shall mean, collectively, Emblem, PBF and
Incorporated. The term "Loan Parties" shall mean, collectively, Borrower and the
Guarantors.
3. Collateral. The term "Collateral" shall mean the First Bank
Primary Collateral and the Noteholders' Primary Collateral.
4. First Bank Indebtedness. The term "First Bank Indebtedness"
shall mean the sum of Twenty Million Dollars ($20,000,000) or such other
principal amount as is advanced and outstanding under the Facility Documents and
all other obligations of the Loan Parties to First Bank, whether arising under
the Facility Documents or otherwise, including, without limitation, all interest
and all fees, expenses and other amounts owing to First Bank under the Facility
Documents or otherwise (including any interest thereon), whether presently
existing or outstanding or arising in the future.
5. First Bank Primary Collateral. The term "First Bank Primary
Collateral" shall mean the Accounts of Borrower and the Guarantors and the
proceeds thereof, including without limitation proceeds in one or more lock
boxes or deposit accounts held at First Bank or elsewhere, but specifically
excluding the Post-Event Accounts.
6. Indebtedness. The term "Indebtedness" shall mean the First
Bank Indebtedness and the Note Indebtedness.
7. Inventory. The term "Inventory" shall mean all of the Loan
Parties' raw materials, work in process, finished goods, and all other inventory
of whatsoever kind and nature, wherever located, whether now owned or hereafter
existing or acquired by Borrower, including without limitation, all wrapping,
packaging, advertising, shipping materials, and all other goods consumed in our
business, all labels and other devices, names or marks affixed or to be affixed
thereto for purposes of selling or of identifying the same or the seller or
manufacturer thereof and all of the Loan Parties' right, title and interest
therein and thereto.
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<PAGE> 4
8. Liquidating, Event. The term "Liquidating Event" shall have
the meaning set forth in Section F.1 herein.
9. Note Indebtedness. The term "Note Indebtedness" shall mean the
sum of Eighty-Five Million Dollars ($85,000,000) or such lesser principal amount
as is advanced and outstanding under the Note Documents and all other
obligations of the Loan Parties to the Noteholders, whether arising under the
Note Documents or otherwise, including, without limitation, all interest and all
fees, expenses and other amounts owing to the Noteholders under the Note
Documents or otherwise (including any interest thereon), whether presently
existing or outstanding or arising in the future.
10. Noteholders' Primary Collateral. The term "Noteholders'
Primary Collateral" shall mean all collateral in which the Trustee, for an on
behalf of the Noteholders, has a security interest, other than the First Bank
Primary Collateral.
11. Post-Event Accounts. The term "Post-Event Accounts" shall
have the meaning set forth in Section F.1(b) herein.
12. Post-Event Accounts Database. The term "Post-Event Accounts
Database" shall have the meaning set forth in Section F.1(b) herein.
B. Relative Priorities of Parties. The provisions hereof as to
subordination are solely for the purpose of defining the relative rights of the
holders of the First Bank Indebtedness and the Note Indebtedness and none of
such provisions shall impair, as between the Loan Parties, on the one hand, and
the holders of the First Bank Indebtedness or the Note Indebtedness, on the
other hand, the obligations of the Loan Parties, which are unconditional and
absolute, to pay to such holders of the First Bank Indebtedness and the Note
Indebtedness in accordance with the terms thereof, nor shall any such provisions
prevent any holder of any of the First Bank Indebtedness or the Note
Indebtedness from exercising all remedies otherwise permitted by applicable law
or under the terms of such First Bank Indebtedness or Note Indebtedness upon a
default thereunder, subject to the rights, if any, of the holders of the First
Bank Indebtedness and the Note Indebtedness under the provisions of this
Agreement.
C. Requirement of Notice. To the extent that either the Trustee
or First Bank desire to declare a Liquidating Event as provided in Section F
herein, each of the Trustee and First Bank agrees to notify the other and the
Loan Parties promptly upon the occurrence of such Liquidating Event.
D. Junior Security.
1. First Banks' Junior Security. First Bank hereby confirms that,
regardless of the relative times of attachment or perfection thereof or the
order of filing of financing statements, mortgages or other security documents,
or anything in the Facility Documents to the contrary, any security interests
and liens granted or that may be granted from time to time by Loan Parties to
the Trustee for and on behalf of the Noteholders in the Noteholders' Primary
Collateral, shall in all respects be first and senior security interests and
liens, superior to any security interests and liens in the Noteholders' Primary
Collateral granted or to be granted to First Bank pursuant to the Facility
Documents or otherwise. The Trustee on behalf of the Noteholders may proceed to
foreclose on the Noteholders' security interests and liens in the Noteholders'
Primary Collateral in
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<PAGE> 5
any manner (including, but not limited to the collection and compromise thereof)
which the Trustee may choose, even though a higher price or recovery might have
been realized if the Trustee had proceeded to foreclose on the Noteholders'
security interests in the Noteholders' Primary Collateral in another manner.
2. Noteholders' Junior Security. The Trustee, on behalf of the
Noteholders, hereby confirms that, regardless of the relative times of
attachment or perfection thereof or the order of filing of financing statements,
mortgages or other security documents, or anything in the Note Documents to the
contrary, any security interests and liens granted or that may be granted from
time to time by the Loan Parties to First Bank with respect to the First Bank
Primary Collateral, shall in all respects be first and senior security interests
and liens, superior to any security interests and liens in the First Bank
Primary Collateral granted or to be granted to the Noteholders pursuant to the
Note Documents or otherwise. Except as otherwise provided herein, First Bank may
proceed to foreclose on its security interest and lien in the First Bank Primary
Collateral in any manner (including, but not limited to the collection and
compromise thereof) which First Bank may choose, subject to the provisions of
Section F hereof, even though a higher price might have been realized if such
party had proceeded to foreclose on its security interests in another manner.
E. Limitation on Exercise of Remedies.
1. First Banks' Remedies. Notwithstanding any provision of the
Facility Documents to the contrary, First Bank will not, without the prior
written consent of the Trustee, take any action to exercise or enforce any
remedy that it may have with respect to the Inventory, the Post-Event Accounts
or any other Noteholders' Primary Collateral, including, without limitation,
notifying account debtors or instituting any proceedings or action to realize on
such Collateral, provided, however, First Bank shall, upon written consent of
Trustee, notify all account debtors with respect to the Post-Event Accounts.
2. Noteholders' Remedies. Notwithstanding any provision of the
Noteholders Documents to the contrary, the Trustee will not, without the prior
written consent of First Bank, take any action to enforce any remedy that it may
have with respect to the Accounts or the Post-Event Accounts, including, without
limitation, notifying account debtors or instituting any proceedings or action
to realize on such Collateral.
F. Liquidating Event: Post-Event Receivables Database.
1. Liquidating Event. The occurrence of (a) an Event of Default
under the Facility Documents which results in the maturity of the First Bank
Indebtedness being accelerated (whether by declaration or otherwise) or (b) an
Event of Default under the Note Documents (i) which results in the maturity of
the Note Indebtedness being accelerated (whether by declaration or otherwise);
(ii) which Event of Default is an Event of Default pursuant to clause (2), (5)
(if the Indebtedness referred to in such clause (5) is secured by Accounts and
the default with respect to such Indebtedness either (x) arises from the failure
to pay principal thereunder or (y) has resulted in acceleration of such
Indebtedness), (8) or (9) of Section 6.1 of the Indenture; or (iii) such Event
of Default is and Event of Default pursuant to clause (1) or (5) (if the
Indebtedness referred to in such clause (5) is secured by Accounts and the
default with respect to such Indebtedness arises solely from the failure to pay
interest thereunder) of Section 6.1 of the Indenture and the Trustee, pursuant
to the Indenture, has prohibited any release or disposition of Collateral
otherwise permitted
<PAGE> 6
by clauses (a) or (b) of Section 10.4 of the Indenture, shall be a "Liquidating
Event" hereunder. Upon delivery by First Bank (if the Liquidating Event is
described in clause (a) above) or the Trustee (if the Liquidating Event is
described in clause (b) above) of a notice to the Loan Parties of a Liquidating
Event pursuant to Section C above, and unless an Event of Default described in
clause (8) or (9) of Section 6.1 of the Indenture shall have occurred, the Loan
Parties may continue to sell Inventory but only on the following terms and
conditions:
(a) The Inventory shall be sold at a price equal to at least its
book value (determined in accordance with GAAP), or as otherwise agreed by the
parties hereto, and otherwise in the ordinary course of the Loan Parties'
business;
(b) The Loan Parties shall have established a separate database
(the "Post-Event Accounts Database") and shall maintain in the Post-Event
Accounts Database all books and records relating to Accounts arising from the
sale of Inventory after the occurrence of a Liquidating Event (the "Post-Event
Accounts"), and the Loan Parties shall provide to First Bank and the Trustee on
a daily basis with a listing of all Post-Event Accounts, together with copies of
all shipping receipts, invoices, credits, collections and other adjustments
issued in connection with Post-Event Accounts;
(c) Regardless of the relative times of attachment or perfection
thereof or the order of filing of financing statements or other security
documents, the liens and security interests of the Trustee for and on behalf of
the Noteholders in the Post-Event Accounts shall at all times be first priority
liens, senior to the liens and security interests of First Bank in the
Post-Event Accounts; and
(d) The Loan Parties' right to sell Inventory pursuant to this
Section F.1 shall be automatically terminated upon an Event of Default described
in clause (8) or (9) of Section 6.1 of the Indenture and may be terminated at
any time by the Trustee upon written notice by the Trustee to the Loan Parties
and First Bank given no earlier than ninety (90) days following the occurrence
of a Liquidating, Event.
2. Application of Payments and Proceeds.
(a) Proceeds of Accounts; Daily Reports. The Trustee hereby
acknowledges that in accordance with the Facility Documents, the proceeds of
Accounts shall be remitted directly to one or more lock boxes or deposit
accounts maintained at a location or locations acceptable to First Bank or
elsewhere in First Bank's dominion and control. The proceeds of all Accounts,
other than the Post-Event Accounts, and other First Bank Primary Collateral may
be remitted to or retained by First Bank and shall be applied to the First Bank
Indebtedness, until all obligation under the First Bank Indebtedness shall have
been paid in full and any amounts remaining thereafter shall be paid to the
Trustee and applied to the Note Indebtedness. The proceeds of all Post-Event
Accounts shall be paid by the Loan Parties to the Trustee daily, in accordance
with the terms of the Note Documents, if received by the Loan Parties, or turned
over by First Bank to the Trustee daily as collected, if received by First Bank,
and shall be applied to the Note Indebtedness, until all obligations under the
Note Indebtedness shall have been paid in full, and thereafter shall be paid to
or retained by First Bank and applied to the First Bank Indebtedness (unless
otherwise required by law), until all obligations under the First Bank
Indebtedness shall have been paid in full.
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<PAGE> 7
(b) Determination of Application of Accounts and Post-Event
Accounts. Any payment on an Account that specifically identifies an Account (by
reference to the applicable invoice number or other identifying information,
such as the name of the account debtor, date, amount or otherwise) shall be
applied to such Account. If such identifying information is lacking and the Loan
Parties, First Bank and the Trustee are unable to agree as to whether any
particular payment is to be applied on a Post-Event Account or on any other
Account, then each payment by an account debtor shall be applied to such account
debtor's outstanding Accounts in the order of the invoice dates shown on the
invoices issued to such account debtor, beginning with the invoice showing the
oldest invoice date for purposes of determining sharing of proceeds.
(c) Proceeds of Other Collateral. The proceeds of the First Bank
Primary Collateral shall be applied in the following order: (1) to the First
Bank Indebtedness until all obligations thereunder have been paid in full and
the Facility Documents have been terminated; and (2) to the Note Indebtedness
until all obligations thereunder shall have been paid in full and the Note
Documents have been terminated. The proceeds of the Noteholders' Primary
Collateral shall be applied in the following order: (1) to the Note Indebtedness
until all obligations thereunder have been paid in full; and (2) to the extent
consisting of proceeds of Inventory, to the First Bank Indebtedness until all
obligations thereunder shall have been paid in full. All amounts remaining after
the indefeasible payment in full of the First Bank Indebtedness and the Note
Indebtedness shall be paid to the Loan Parties, their successors and assigns, or
to whoever may be lawfully entitled to receive the same.
G. Collateral Agents.
1. First Bank as Bailee and Collateral Agent. First Bank hereby
agrees that it will hold each item of First Bank Primary Collateral coming into
its possession (including any lock boxes or deposit accounts within its dominion
and control) on its own behalf and on behalf of the Trustee and the Noteholders
as bailee or as agent to perfect the security interest of the Trustee on behalf
of each Noteholder therein, subject to this Agreement, and further acknowledges
receipt of notification of the Trustee's and each Noteholder's interest, as a
secured party, in the First Bank Primary Collateral, as required by Section
9-305 of the Uniform Commercial Code as in effect in any applicable
jurisdiction. Except as expressly provided or required by any of the terms,
conditions or provisions of this Agreement, the Note Documents, First Bank shall
not voluntarily take any action to release, or voluntarily execute any document
for the purpose of releasing, all or any portion of the security interest of the
Trustee on behalf of the Noteholders in any First Bank Primary Collateral. Upon
the occurrence of Liquidating Event, the Trustee shall have the right, but not
the obligation, at any time to (a) require the Loan Parties and First Bank to
deliver to the Trustee all documents, instruments and chattel paper relating to
any Post-Event Account the possession of which is required to perfect a security
interest therein and (b) take such additional action as may be required under
applicable law to perfect its security interest in any lock boxes or deposit
accounts containing the proceeds of Post-Event Accounts.
2. Trustee as Bailee and Collateral Agent. Should any First Bank
Primary Collateral come into the possession of the Trustee, the Trustee hereby
agrees that it will hold each such item of First Bank Primary Collateral coming
into its possession (including any lock boxes or deposit accounts within its
dominion and control) on its own behalf and on behalf of First Bank as bailee or
as agent to perfect the security interest of First Bank, therein, subject to
this Agreement, and further acknowledges receipt of notification of First Bank's
interest, as a secured party, in the First Bank Primary Collateral, as required
by Section 9-305 of the Uniform Commercial Code as
6
<PAGE> 8
in effect in any applicable jurisdiction. Except as expressly provided or
required by any of the terms, conditions or provisions of this Agreement or the
Facility Documents, the Trustee shall not voluntarily take any action to
release, or voluntarily execute any document for the purpose of releasing, all
or any portion of the security interest of First Bank in any First Bank Primary
Collateral. Upon the occurrence of Liquidating Event, First Bank shall have the
right, but not the obligation, at any time to (a) require the Loan Parties and
the Trustee to deliver to First Bank all documents, instruments and chattel
paper relating to any Accounts, other than Post-Event Accounts, the possession
of which is required to perfect a security interest therein and (b) take such
additional action as may be required under applicable law to perfect its
security interest in any lock boxes or deposit accounts containing the proceeds
of such Accounts.
H. Continuing Agreement. This Agreement and the obligations of
First Bank and the Trustee hereunder shall continue absolute and undiminished
and remain in full force and effect notwithstanding, and each of First Bank and
the Trustee in its sole discretion and without notice to the other may take, any
or all of the following actions: (a) retain or obtain a lien on or security
interest in any property of the Loan Parties in addition to the Collateral to
secure any of the Indebtedness to the extent (i) in the case of First Bank, not
prohibited by the Note Documents, and (ii) in the case of the Trustee, not
prohibited by the Facility Documents; (b) retain or obtain the primary or
secondary obligation of any obligor, in addition to those now obligated to pay
the Indebtedness, for payment of all or any part of such Indebtedness; (c)
extend, substitute or renew for one or more periods (whether or not longer than
the original period) any of the Indebtedness; (d) release or compromise any
obligations of any person or entity to pay the Indebtedness; (e) subject to
Section G above, release any lien, encumbrance or security interest on or in,
surrender, release or permit any substitution or exchange of, or extend, renew,
release, compromise, alter or exchange all or any part of the Collateral or any
other property) which may from time to time secure any Indebtedness; (f) make
additional loans, advances or other financial accommodations to the Loan Parties
or (g) modify, amend, waive or release any of the terms of their respective loan
or note documents.
I. No Warranties. Neither First Bank nor the Trustee makes to the
other any representation or assumes any responsibility in respect to the
execution, construction, or enforcement of any obligation, agreement, or
instrument of security, or other document executed by the Loan Parties. Neither
First Bank nor the Trustee shall be liable or answerable to the other for
anything whatsoever in connection with this Agreement except for its willful
misconduct or gross negligence, and neither First Bank nor the Trustee shall
have duties or obligations other than those provided herein. First Bank and the
Trustee shall each be entitled to rely on an opinion of counsel in relation to
this Agreement and upon statements and communications believed by it to be
authentic received from the Loan Parties or from any other person and shall not
be liable for any action taken or omitted in good faith on such reliance.
J. Cooperation. In the event of a foreclosure or other
realization on the Collateral by First Bank or the Trustee in accordance with
the terms of this Agreement and the Facility Documents or the Note Documents, as
the case may be, each party agrees to cooperate with the other and to take such
action so that any purchaser of the Collateral shall take such Collateral free
and clear of each party's interest therein.
K. Further Assurances. Each of the Loan Parties, First Bank and
the Trustee, for itself and its successors and assigns as holders of any First
Bank Indebtedness or Note Indebtedness, as applicable, covenants to execute and
deliver to the others, in each case at Borrower's expense, such
7
<PAGE> 9
further instruments and to take such further action as First Bank or the Trustee
may at any time or times reasonably request in order to carry out the provisions
and intent of this Agreement.
L. Notices. Any notice or other communication in connection with
this Agreement shall be in writing and shall be hand delivered or sent by
certified mail, return receipt requested, express, courier service or telecopier
or facsimile, in all cases with postage or other charges paid by the sender, and
shall be addressed as provided below:
If to Borrower or any Guarantor, at the following address:
Data Documents, Inc.
4205 South 96th Street
Omaha, Nebraska 68127-1290
Attention: Mr. Joseph C. Addison, Vice President
Telecopier: (402) 339-9270
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Ave.
Los Angeles, California 90071
Attention: Kenneth M. Doran, Esq.
Telecopier: (213) 229-7520
If to First Bank, at the following address:
First Bank National Association
17th and Farnam Streets
Omaha, Nebraska 68102
Attention: Mr. Lawrence F. Uebner, Vice President
Telecopier: (402) 348-6841
with a copy to:
Baird, Holm, McEachen, Pedersen, Hamann & Strasheim
1500 Woodmen Tower
Omaha, Nebraska 68102
Attention: Charles J. Addy, Esq.
Telecopier: (402) 231-8554
If to the Trustee, at the following address:
Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporation Trust Administration
8
<PAGE> 10
or at such other addresses as the addressee shall have
specified by notice given in compliance with this Section. Notices shall be
deemed given upon receipt by the party to whom such notice is directed.
M. Successors; Continuing Effect etc. This Agreement is being
entered into for the benefit of the holders of the First Bank Indebtedness and
the Note Indebtedness, and their respective successors and assigns. This
Agreement shall be a continuing agreement and shall be irrevocable and shall
remain in full force and effect so long as there is any indebtedness outstanding
or any obligation to fund or advance any funds with respect to the First Bank
Indebtedness and the Note Indebtedness.
N. Miscellaneous. This Agreement, which may be executed in any
number of counterparts, shall be governed by and construed in accordance with
the internal laws of the State of Nebraska without regard to conflict of laws.
The headings in this Agreement are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof. Borrower shall reimburse each
of the holders of the First Bank Indebtedness and the Note Indebtedness upon
demand for all costs and expenses (including attorneys' fees, paralegal charges
and appellate fees, expenses and costs (including, without limitation, a
reasonable estimate of the allocable cost of in-house counsel and staff)) paid
or incurred by such holder of the First Bank Indebtedness or of the Note
Indebtedness in connection with any enforcement of this Agreement against
Borrower. First Bank and the Noteholders each hereby acknowledges and agrees
that its respective obligations to the other hereunder and the rights and
benefits of each hereunder do not give rise to any suretyship rights or duties
as among First Bank and the Noteholders, and each of First Bank and the
Noteholders hereby waives and renounces with respect to the other, any such
rights, defenses, or claims which it may have, whether at law or in equity,
including, without limitation, any rights to require marshalling of any
collateral or to otherwise seek satisfaction from any particular assets of
Borrower or from any third party.
O. Jurisdiction and Venue; Waiver of Jury Trial;
Arbitration.
1. Consent to Jurisdiction and Venue; Service of Process.
First Bank and the Noteholders each agrees that, in addition to any other courts
that may have jurisdiction under applicable laws or rules, any action or
proceeding to enforce or arising out of or relating to this Agreement may be
commenced in the District Court of Douglas County in the State of Nebraska or in
the United States District Court for the District of Nebraska, and First Bank
and the Trustee on behalf of the Noteholders each consents and submits in
advance to such jurisdiction and agrees that venue will be proper in such courts
on any such matter. First Bank and the Trustee on behalf of the Noteholders each
hereby waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and shall confer personal jurisdiction if served by registered or
certified mail to First Bank and the Trustee at the address and in the manner
specified in this Agreement or as otherwise provided by the laws of the State of
Nebraska or the United States. Should First Bank or the Trustee fall to appear
or answer any summons, complaint, process, or papers so served within thirty
(30) days after the mailing or other service thereof, it shall be deemed in
default and an order or judgment may be entered against it as demanded or prayed
for in such summons, complaint, process, or papers. The choice of forum set
forth in this Section shall not be deemed to preclude the enforcement of any
judgment obtained in such forum, or the taking of any action under this
Agreement to enforce the same, in any appropriate jurisdiction.
9
<PAGE> 11
2. WAIVER OF JURY TRIAL, ETC. FIRST BANK AND THE TRUSTEE ON
BEHALF OF THE NOTEHOLDERS EACH HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SETOFF,
AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN FIRST BANK AND THE TRUSTEE. FIRST BANK AND THE
TRUSTEE EACH CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
P. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed to be an original. All such
counterparts, taken together, shall constitute but one and the same Agreement.
This Agreement shall become effective upon the execution of a counterpart of the
Agreement by each of the parties hereto.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed and delivered as of the date first above written.
FIRST BANK:
FIRST BANK NATIONAL ASSOCIATION,
a National banking association
By:_____________________________
Name:________________________
Title:_______________________
TRUSTEE:
BANK OF NEW YORK
By:_____________________________
Name:________________________
Title:_______________________
10
<PAGE> 12
Data Documents, Inc., a Nebraska corporation, PBF Washington, Inc., a Washington
corporation, Cal Emblem Labels, Inc., a California corporation, and Data
Documents, Incorporated, a Delaware corporation, collectively referred to in the
foregoing Intercreditor Agreement (the "Agreement") as the Loan Parties, each
hereby acknowledges that it has received a copy of the Agreement and consents
thereto, and agrees to recognize all priorities and other rights granted thereby
to the parties thereto, and will do no act and will perform no obligation that
is not in accordance with the priorities and agreements set forth in the
Agreement. Each of the Loan Parties further agrees that upon receipt of notice
of a Liquidating Event from either of First Bank or the Trustee, each of the
Loan Parties shall create and maintain the Post-Event Accounts Database, as well
as provide First Bank and the Trustee with daily listings of the Post- Event
Accounts (together with all shipping receipts and invoices issued in connection
with those Post-Event Accounts), all as provided for in Section F of the
Agreement.
DATA DOCUMENTS, INC.,
a Nebraska corporation
By: ____________________________
Name: ______________________
Title: _____________________
PBF WASHINGTON, INC.,
a Washington corporation
By: ____________________________
Name: __________________________
Title: _________________________
CAL EMBLEM LABELS, INC.,
a California corporation
By: ____________________________
Name: __________________________
Title: _________________________
DATA DOCUMENTS, INCORPORATED,
a Delaware corporation
By: ____________________________
Name: __________________________
Title: _________________________
11
<PAGE> 1
EXHIBIT 11.1
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Common stock outstanding 9,295,224 6,053,409 5,203,409
Common stock equivalents 644,230 1,280,455 4,250,085
------------ ------------ ------------
Weighted average shares outstanding 9,939,454 7,333,864 9,453,494
============ ============ ============
Net income (loss), as adjusted:
Before extraordinary item $ 10,424 $ 4,468 $ 1,233
Extraordinary item (54) (2,921) (2,795)
------------ ------------ ------------
Net income (loss) per common share $ 10,370 $ 1,547 $ (1,562)
============ ============ ============
Primary earnings per share:
Before extraordinary item $ 1.05 $ 0.61 $ 0.13
Extraordinary item $ (0.01) $ (0.40) $ (0.30)
------------ ------------ ------------
Net income (loss) per common share $ 1.04 $ 0.21 $ (0.17)
============ ============ ============
FULLY DILUTED EARNINGS PER SHARE
Common stock outstanding 9,295,224 6,053,409 5,203,409
Common stock equivalents 648,530 1,280,455 4,250,085
Convertible preferred stock -- -- 7,458,086
------------ ------------ ------------
Weighted average shares outstanding
on fully diluted earnings per share 9,943,754 7,333,864 16,911,580
============ ============ ============
Net income (loss), as adjusted:
Before extraordinary item $ 10,424 $ 4,468 $ 1,805
Extraordinary item (54) (2,921) (2,795)
------------ ------------ ------------
Net income (loss) available for common stock $ 10,370 $ 1,547 $ (990)
============ ============ ============
Fully diluted earnings per share:
Before extraordinary item $ 1.05 $ 0.61 $ 0.11
Extraordinary item $ (0.01) $ (0.40) $ (0.17)
------------ ------------ ------------
Net income (loss) per common share $ 1.04 $ 0.21 $ (0.06)
============ ============ ============
NET INCOME AS ADJUSTED PRIMARY
EARNINGS PER SHARE:
Net income before extraordinary item $ 10,424 $ 4,275 $ 1,832
Less: dividends on preferred stock -- -- (620)
Add: amortization of original issue
discount of exchangeable warrants -- 193 21
------------ ------------ ------------
Net income before extraordinary item as adjusted $ 10,424 $ 4,468 $ 1,233
============ ============ ============
FULLY DILUTED EARNINGS PER SHARE:
Net income before extraordinary item $ 10,424 $ 4,275 $ 1,832
Less: dividends on preferred stock -- -- (48)
Add: amortization of original issue
discount of exchangeable warrants -- 193 21
------------ ------------ ------------
Net income before extraordinary item as adjusted $ 10,424 $ 4,468 $ 1,805
============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-1340 of Data Documents Incorporated on Form S-3 of our reports dated
February 6, 1997, appearing in this Annual Report on Form 10-K of Data Documents
Incorporated for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 21, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-2714 of Data Documents Incorporated on Form S-8 of our reports dated
February 6, 1997, appearing in this Annual Report on Form 10-K of Data Documents
Incorporated for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,151
<SECURITIES> 0
<RECEIVABLES> 31,770
<ALLOWANCES> 311
<INVENTORY> 37,979
<CURRENT-ASSETS> 81,487
<PP&E> 84,774
<DEPRECIATION> 47,446
<TOTAL-ASSETS> 133,977
<CURRENT-LIABILITIES> 25,042
<BONDS> 63,965
0
0
<COMMON> 10
<OTHER-SE> 37,666
<TOTAL-LIABILITY-AND-EQUITY> 133,977
<SALES> 246,496
<TOTAL-REVENUES> 246,496
<CGS> 181,058
<TOTAL-COSTS> 181,058
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,751
<INCOME-PRETAX> 17,510
<INCOME-TAX> 7,086
<INCOME-CONTINUING> 10,424
<DISCONTINUED> 0
<EXTRAORDINARY> (54)
<CHANGES> 0
<NET-INCOME> 10,370
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
